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UNITED STATES
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): March 27, 1998
GERON CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-20859 75-2287752
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(Commission File Number) (IRS Employer Identification No.)
230 Constitution Drive, Menlo Park, CA 94025
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 473-7700
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On March 27, 1998, Geron Corporation, a Delaware corporation (the
"Company") issued 15,000 shares of Series A Convertible Preferred Stock with a
stated value of $1,000 per share (the "Preferred Stock"), for aggregate proceeds
of $15,000,000. The shares were sold to two institutional investors in a private
equity offering pursuant to Regulation D of the Securities Act of 1933, as
amended.
Each share of Preferred Stock is convertible into the number of shares
of the Company's common stock, par value $0.001 per share (the "Common Stock"),
equal to (i) the stated value ($1,000) plus a premium of 6% per annum of the
stated value from the date of issuance of the Preferred Stock (the "Issue
Date"), divided by (ii) the Conversion Price. The Conversion Price is equal to
the lesser of (i) 95% of the average closing bid prices of the Common Stock for
any five consecutive trading days during the twenty consecutive trading day
period ending on the day prior to the date of conversion (the "Market Price")
and (ii) $16.88. However, for conversions taking place prior to December 27,
1998, if any, the Conversion Price is equal to the lesser of (i) (a) 100% of the
Market Price, if the Market Price is greater than $12.50 or (b) 105% of the
Market Price, if the Market Price is less than $12.50 and (ii) $16.88.
Subject to certain limited exceptions, the holders of the Preferred
Stock are subject to limits on the number of shares they can convert at any one
time. Unless the price at which the Common Stock trades on the Nasdaq National
Market ("Nasdaq") on the date of conversion is greater than or equal to either
(i) 120% of the Market Price or (ii) $15.00, the following limits apply: Prior
to 270 days from the Issue Date, the Preferred Stock may not be converted;
beginning 271 days from the Issue Date, each holder of the Preferred Stock may
only convert up to 33.3% of its initial holding of the Preferred Stock;
beginning 301 days from the Issue Date, each holder of the Preferred Stock may
only convert up to 66.6% of its initial holding of the Preferred Stock and
beginning 331 days from the Issue Date, all of the Preferred Stock may be
converted. The conversion price of the Preferred Stock is based on the market
price of the Common Stock during a pricing period preceding conversion, up to a
conversion price of $16.88. The Preferred Stock is subject to redemption at the
Company's option if the market price of the Common Stock exceeds or falls below
certain thresholds. The Company has agreed to register the underlying Common
Stock for resale.
The Company's press release announcing the sale of the Series A
Preferred Stock as well as the Certificate of Designations, Preferences, and
Rights of Series A Convertible Preferred Stock, a Securities Purchase Agreement
and a 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, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following are filed as exhibits to this Current Report on Form 8-K:
3.3 Certificate of Designations, Preferences, and Rights of Series A
Convertible Preferred Stock.
10.38 Securities Purchase Agreement dated as of March 27, 1998 between
Geron Corporation and certain investors.
10.39 Registration Rights Agreement dated as of March 27, 1998 between
Geron Corporation and certain investors.
99.1 Press Release dated March 30, 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 thereunto duly authorized.
GERON CORPORATION
(Registrant)
Dated: April 1, 1998 By: /s/ David L. Greenwood
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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.
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<S> <C>
3.3 Certificate of Designations, Preferences, and Rights of Series
A Convertible Preferred Stock.
10.38 Securities Purchase Agreement dated as of March 27, 1998
between Geron Corporation and certain investors.
10.39 Registration Rights Agreement dated as of March 27, 1998
between Geron Corporation and certain investors.
99.1 Press Release dated March 30, 1998.
</TABLE>
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EXHIBIT 3.3
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GERON CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Geron Corporation, a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Corporation
on March 27, 1998 pursuant to authority of the Board of Directors as required by
Section 151(g) of the Delaware General Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Articles of Incorporation, the
Board of Directors hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $0.001 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series A Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 15,000 shares
of Preferred Stock, is Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
II. Rank
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The Series A Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $0.001 per share (the "Common Stock");
(ii) prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof (or, solely with respect to Pari
Passu Securities (as defined below), if such consent is not required), such
class or series of capital stock specifically, by its terms, ranks senior to or
pari passu with the Series A Preferred Stock) (collectively, with the Common
Stock, "Junior Securities"); (iii) pari passu with any class or series of
capital stock of the Corporation hereafter created (with the consent of the
holders of Series A Preferred Stock obtained in accordance with Article IX
hereof, unless the average Closing Bid Price (as defined below) for the ten (10)
Trading Days ending one (1) Trading Day prior to the date on which the Board of
Directors approve of the issuance of such class or series of capital stock is
above $12.50, in which case such consent will not be required, specifically
ranking, by its terms, on parity with the Series A Preferred Stock ("Pari Passu
Securities "); and (iv) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series A
Preferred Stock obtained in accordance with Article IX hereof) specifically
ranking, by its terms, senior to the Series A Preferred Stock ("Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
III. Dividends
The Series A Preferred Stock shall not bear any dividends. In no
event, so long as any Series A Preferred Stock shall remain outstanding, shall
any dividend whatsoever be declared or paid upon, nor shall any distribution be
made upon, any Junior Securities, nor shall any shares of Junior Securities be
purchased or redeemed by the Corporation (other than pursuant to stock
repurchase rights in existence prior to the date of issuance of the Series A
Preferred Stock) nor shall any moneys be paid to or made available for a sinking
fund for the purchase or redemption of any Junior Securities (other than a
distribution of Junior Securities), without, in each such case, the written
consent of the holders of a majority of the outstanding shares of Series A
Preferred Stock, voting together as a class.
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IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto, the holders of
shares of Series A Preferred Stock, subject to Article VI, shall have received
the Liquidation Preference (as defined in Article IV.C) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series A Preferred Stock and
holders of Pari Passu Securities (including any dividends or distribution paid
on any Pari Passu Securities after the date of filing of this Certificate of
Designation) shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series A Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
Any prior dividends or distribution made after the date of filing of this
Certificate of Designation shall offset, dollar for dollar, the amount payable
to the class or series to which such distribution was made.
B. At the option of any holder of Series A Preferred Stock, the
sale, conveyance or disposition of all or substantially all of the assets of the
Corporation, the effectuation by the Corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person (as defined below)
or Persons when the Corporation is not the survivor (other than a merger or
other business combination soley for purposes of reincorporating to a new
jurisdiction) shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute upon consummation of such transaction an amount equal to
115% of the Liquidation Preference with respect to each outstanding share of
Series A Preferred Stock in accordance with and subject to the terms of this
Article IV or (ii) be treated pursuant to Article VI.C(b) hereof. "Person" shall
mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
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C. For purposes hereof, the "Liquidation Preference" with respect
to a share of the Series A Preferred Stock shall mean an amount equal to the sum
of (i) the Stated Value thereof plus (ii) and amount equal to six percent (6%)
per annum of such Stated Value for the period beginning on the date of issuance
of the Series A Preferred Stock (the "Issue Date") and ending on the date of
final distribution to the holder thereof (prorated for any portion of such
period). The liquidation preference with respect to any Pari Passu Securities
shall be as set forth in the Certificate of Designation filed in respect
thereof.
V. Redemption
A. If any of the following events (each, a "Mandatory Redemption
Event") shall occur:
(i) The Corporation fails to issue shares of Common Stock
to the holders of Series A Preferred Stock upon exercise by the holders of their
conversion rights in accordance with the terms of this Certificate of
Designation (for a period of at least ninety (90) days if such failure is solely
as a result of the circumstances governed by the second paragraph of Article
VI.F below and the Corporation is using all commercially reasonable efforts to
authorize a sufficient number of shares of Common Stock as soon as practicable),
fails to transfer or to cause its transfer agent to transfer (electronically or
in certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series A Preferred Stock as and when required by
this Certificate of Designation or the Registration Rights Agreement, dated as
of March 27, 1998, by and among the Corporation and the other signatories
thereto (the "Registration Rights Agreement"), fails to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the holders of Series A
Preferred Stock upon conversion of the Series A Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
dated as of March 27, 1998, by and between the Corporation and the other
signatories thereto (the "Purchase Agreement") or the Registration Rights
Agreement, or fails to fulfill its obligations pursuant to Sections 4(e), 4(h),
4(j) or 5 of the Purchase Agreement (or makes any announcement, statement or
threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any announcement,
statement or threat not to honor its obligations shall not be rescinded in
writing) for ten (10) business days;
(ii) The Corporation fails to obtain effectiveness with
the Securities and Exchange Commission (the "SEC") of the Registration Statement
(as defined in the Registration Rights Agreement) prior to October 31, 1998 or
such Registration Statement lapses in effect (or sales otherwise cannot be made
thereunder, whether by reason of the Company's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise, but excluding when such sales cannot be made solely by
reason of any act or omission solely attributable to the holders of the Series A
Preferred Stock) for more than forty-five (45) consecutive days or more than
seventy-five (75) days in any twelve (12) month period after such Registration
Statement becomes effective;
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(iii) The Corporation shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for all or substantially all of its property or business;
or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the listing of
the Common Stock on the Nasdaq National Market ("Nasdaq"), the Nasdaq SmallCap
Market, the New York Stock Exchange or the American Stock Exchange and such
failure shall remain uncured for at least five (5) days, then, upon the
occurrence and during the continuation of any Mandatory Redemption Event
specified in subparagraphs (i), (ii) or (v) at the option of the holders of at
least 50% of the then outstanding shares of Series A Preferred Stock by written
notice (the "Mandatory Redemption Notice") to the Corporation of such Mandatory
Redemption Event, or upon the occurrence of any Mandatory Redemption Event
specified in subparagraphs (iii) or (iv), the Corporation shall purchase each
holder's shares of Series A Preferred Stock for an amount per share equal to the
greater of (1) the Default Percentage (as defined below) multiplied by the sum
of (a) the Stated Value of the shares to be redeemed plus (b) an amount equal to
six percent (6%) per annum of such Stated Value for the period beginning on the
Issue Date and ending on the date of payment of the Mandatory Redemption Amount
(the "Mandatory Redemption Date"), and (2) the "parity value" of the shares to
be redeemed, where parity value means the product of (a) the highest number of
shares of Common Stock issuable upon conversion of such shares in accordance
with Article VI below (without giving any effect to any limitations on
conversions of shares set forth in Article VI.A(b) below, and treating the
Trading Day (as defined in Article VI.B.) immediately preceding the Mandatory
Redemption Date as the "Conversion Date" (as defined in Article VI.B(a)) for
purposes of determining the lowest applicable Conversion Price unless the
Mandatory Redemption Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the Closing Price (as defined below) for the
Common Stock on such "Conversion Date" (the greater of such amounts being
referred to as the "Mandatory Redemption Amount"). The "Default Percentage"
shall mean 110% for a Mandatory Redemption Event specified in subparagraph (ii)
and 115% for all other purposes. "Closing Price," as of any date, means the last
sale price of the Common Stock on the Nasdaq as reported by Bloomberg Financial
Markets or an equivalent reliable reporting service mutually acceptable to and
hereafter designated by the holders of a majority in interest of the shares of
Series A Preferred Stock and the Corporation ("Bloomberg") or, if Nasdaq is not
the principal trading market for such security, the last sale price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last sale price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no last sale price of such security or in the over-the-counter market on the
electronic bulletin board for such security in any of the foregoing manners the
average of the bid prices of any market makers for such or security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Price
cannot be calculated for such
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security on such date in the manner provided above, the Closing Price shall be
the fair market value as mutually determined by the Corporation and the holders
of a majority in interest of shares of Series A Preferred Stock being converted
for which the calculation of the Closing Price is required in order to determine
the Conversion Price of such Series A Preferred Stock.
In the case of a Mandatory Redemption Event, if the Corporation
fails to pay the Mandatory Redemption Amount for each share within five (5)
business days of written notice that such amount is due and payable, then
(assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series A Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, to require the
Corporation, upon written notice, to immediately issue (in accordance with and
subject to the terms of Article VI below), in lieu of the Mandatory Redemption
Amount, with respect to each outstanding share of Series A Preferred Stock held
by such holder, the number of shares of Common Stock of the Corporation equal to
the Mandatory Redemption Amount divided by the Conversion Price then in effect.
B. If the Series A Preferred Stock ceases to be convertible as a
result of the limitations described in the second paragraph of Article VI.A
below (a "19.99% Redemption Event"), and the Corporation has not prior to, or
within thirty (30) days of, the date that such 19.99% Redemption Event arises,
(i) obtained approval of the issuance of the additional shares of Common Stock
by the requisite vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
A Preferred Stock that were issued upon conversion of Series A Preferred Stock)
or (ii) received other permission pursuant to Nasdaq Rule 4460(i) allowing the
Corporation to resume issuances of shares of Common Stock upon conversion of
Series A Preferred Stock, then the Corporation shall be obligated to redeem
immediately all of the then outstanding Series A Preferred Stock, in accordance
with this Article V.B. An irrevocable redemption notice (the "Redemption
Notice") shall be delivered promptly to the holders of Series A Preferred Stock
at their registered address appearing on the records of the Corporation and
shall state (1) that 19.99% of the Outstanding Common Amount (as defined in
Article VI.A) has been issued upon exercise of the Series A Preferred Stock, (2)
that the Corporation is obligated to redeem all of the outstanding Series A
Preferred Stock and (3) the Mandatory Redemption Date, which shall be a date
within five (5) business days of the earlier of (i) the date of the Redemption
Notice or (ii) the date on which the holders of the Series A Preferred Stock
notify the Corporation of the occurrence of a 19.99% Redemption Event. On the
Mandatory Redemption Date, the Corporation shall make payment in cash of an
amount per share of Series A Preferred Stock equal to the sum of (a) the Stated
Value of the shares to be redeemed plus (b) an amount equal to six percent (6%)
per annum of such Stated Value for the period beginning on the Issue Date and
ending on the date of payment of the redemption amount pursuant to this Article
V.B.
C. Notwithstanding anything to the contrary contained in this
Article V, so long as (i) no Mandatory Redemption Event shall have occurred and
be continuing and (ii) the Registration Statement is then in effect and has been
in effect and sales can be made thereunder for at least twenty (20) days prior
to the Optional Redemption Date (as defined below), then (a) at any time after
the one (1) year anniversary of the date the Registration Statement is declared
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effective by the Securities and Exchange Commission (subject to extension for
each Trading Day that sales cannot be made pursuant to the Registration
Statement (whether by reason of the Company's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of the
Registration Rights Agreement, during an Allowed Delay or otherwise, but
excluding any delays that arise solely as a result of any act or omission solely
attributable to the holders of the Series A Preferred Stock), if the Closing Bid
Price (as defined below) of the Common Stock for fifteen (15) consecutive
Trading Days is greater than $30.38 or (b) at any time after the Issue Date if
the Closing Bid Price of the Common Stock for fifteen (15) consecutive Trading
Days is below the Redemption Threshold (as defined below) or (c) at any time on
or after the consummation of a merger or other business combination of the
Corporation with or into any other Person when the Corporation is not the
survivor, and so long as there is a valid business purpose to the merger or
other business combination (other than reincorporation to a new jurisdiction)
and so long as the merger is not consummated for purposes of allowing a
redemption hereunder, the Corporation shall have the right, exercisable on not
less than ten (10) Trading Days prior written notice, in the case of clauses (a)
and (b) above, and twenty (20) Trading Days prior written notice, in the case of
clause (c) above, to the holders of Series A Preferred Stock (which notice may
not be sent to the holders of the Series A Preferred Stock until the Corporation
is permitted to redeem the Series A Preferred Stock pursuant to this Article
V.C.), to redeem all of the outstanding shares of Series A Preferred Stock in
accordance with this Article V. Any notice of redemption hereunder (an "Optional
Redemption") shall be delivered to the holders of Series A Preferred Stock at
their registered addresses appearing on the books and records of the Corporation
and shall state (1) that the Corporation is exercising its right to redeem all
of the outstanding shares of Series A Preferred Stock issued on the Issue Date
and (2) the date of redemption (the "Optional Redemption Notice"). On the date
fixed for redemption (the "Optional Redemption Date"), the Corporation shall
make payment of the Optional Redemption Amount (as defined below) to or upon the
order of the holders as specified by the holders in writing to the Corporation
on the Optional Redemption Date. If the Corporation exercises its right to
redeem the Series A Preferred Stock, the Corporation shall make payment to the
holders of an amount in cash (the "Optional Redemption Amount") equal to (i)
115% multiplied by the Stated Value of the shares of Series A Preferred Stock to
be redeemed plus (ii) an amount equal to six percent (6%) per annum of such
Stated Value for the period beginning on the Issue Date and ending on the
Optional Redemption Date, for each share of Series A Preferred Stock then held.
Notwithstanding notice of an Optional Redemption, the holders shall at all times
prior to the Optional Redemption Date maintain the right to convert all or any
shares of Series A Preferred Stock in accordance with Article VI and any shares
of Series A Preferred Stock so converted after receipt of an Optional Redemption
Notice and prior to the Optional Redemption Date set forth in such notice and
payment of the aggregate Optional Redemption Amount shall be deducted from the
shares of Series A Preferred Stock which are otherwise subject to redemption
pursuant to such notice. The "Redemption Threshold" shall mean $7.13.
D. Notwithstanding anything to the contrary contained in this
Article V, subject to the terms of this Article V.D. if the Closing Price (as
defined below) of the Common Stock is below the Redemption Threshold on any day
a Notice of Conversion (as defined in Article VI below) is given, the
Corporation shall have the option, in lieu of issuing shares of Common Stock to
the holders upon conversion in accordance with the terms of Article VI below,
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to redeem all or any portion of the shares of Series A Preferred Stock submitted
for conversion for an amount in cash equal to the number of shares of Common
Stock that would have otherwise been issued upon conversion of the Series A
Preferred Stock at the applicable Conversion Price (as defined in Article VI)
multiplied by the Redemption Market Price (as defined herein). "Redemption
Market Price" shall be equal to the Closing Price of the Common Stock on the
Conversion Date. From time to time following the Issue Date, the holders of the
Series A Preferred Stock may request in writing advance notice as to whether the
Corporation will issue shares of Common Stock, deliver cash in redemption or any
combination thereof in respect of the shares of Series A Preferred Stock
submitted for conversion pursuant to Article VI. Such request shall be made in
writing and the Corporation shall respond in writing as promptly as practicable
but prior to 5:00 p.m. New York City time one (1) business day after receipt of
the request. The Corporation will be bound by such response for a period of
twenty (20) Trading Days (the "Term") from the date of its response. A failure
to respond within one (1) business day shall be deemed to be an election to
issue Common Stock on conversion during the Term. Any redemption amounts payable
hereunder shall be paid to the converting holder within two (2) Trading Days of
the Conversion Date.
VI. Conversion at the Option of the Holder
A. (a) Subject to the conversion schedule set forth in Article
VI.A(b) below, each holder of shares of Series A Preferred Stock may, at its
option at any time and from time to time, upon surrender of the certificates
therefor, convert any or all of its shares of Series A Preferred Stock into
Common Stock as follows (an "Optional Conversion"). Each share of Series A
Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (1) the sum of
(a) the Stated Value thereof plus (b) the Premium Amount (as defined below), by
(2) the then effective Conversion Price (as defined below); provided, however,
that, unless the holder delivers a waiver in accordance with the immediately
following sentence, in no event (other than pursuant to the Automatic Conversion
(as defined herein)) shall a holder of shares of Series A Preferred Stock be
entitled to convert any such shares in excess of that number of shares upon
conversion of which the sum of (x) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the shares of Series A Preferred Stock) and (y) the
number of shares of Common Stock issuable upon the conversion of the shares of
Series A Preferred Stock with respect to which the determination of this proviso
is being made, would result in beneficial ownership by a holder and such
holder's affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, (i)
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (x) of such proviso and (ii) a holder may
waive the limitations set forth therein by written notice to the Corporation
upon not less than sixty-one (61) days prior written notice (with such waiver
taking effect only upon the expiration of such sixty-one (61) day notice
period). The "Premium Amount" means the product of the Stated Value, multiplied
by
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.06, multiplied by (N/365), where "N" equals the number of days elapsed from
the Issue Date to and including the Conversion Date (as defined in Article VI.B,
below).
(b) Each holder of shares of Series A Preferred Stock
(together with any permitted transferees) may convert only up to that percentage
of the aggregate Stated Value of all shares of Series A Preferred Stock received
by such holder on the Issue Date specified below during the time period set
forth opposite such percentage.
<TABLE>
<CAPTION>
Percentage Time Period
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<S> <C> <C>
0% 0-270 days following the Issue Date
33.3% 271-300 days following the Issue Date
66.6% 301-330 days following the Issue Date
100% 331 days following the Issue Date
</TABLE>
; provided, however, that the restrictions on conversion set forth above shall
not apply to conversions taking place on any Conversion Date (i) that the Common
Stock trades on Nasdaq or the principal trading market on which the Common Stock
is then listed as reported by Bloomberg greater than or equal to (a) 120% of the
Market Price (as defined below) or (b) $15.00 or (ii) occurring on or after the
date the Corporation makes a public announcement that it intends to merge or
consolidate with any other corporation or sell or transfer substantially all of
the assets of the Corporation or (iii) occurring on or after the date any
person, group or entity (including the Corporation) publicly announces a tender
offer to purchase 50% or more of the Corporation's Common Stock or otherwise
publicly announces an intention to replace a majority of the Corporation's Board
of Directors by waging a proxy battle or otherwise or (iv) occurring on or after
there is a material adverse change in the business, operation, assets, financial
condition or prospects of the Corporation or its subsidiaries, taken as a whole
(other than due solely to a decrease in the price of the Common Stock).
(c) So long as the Common Stock is listed for trading on
Nasdaq or an exchange or quotation system with a rule substantially similar to
Rule 4460(i) then, notwithstanding anything to the contrary contained herein if,
at any time, the aggregate number of shares of Common Stock then issued upon
conversion of the Series A Preferred Stock (including any shares of capital
stock or rights to acquire shares of capital stock issued by the Corporation
which are aggregated or integrated with the Common Stock issued or issuable upon
conversion of the Series A Preferred Stock for purposes of such rule) equals
19.99% of the "Outstanding Common Amount" (as hereinafter defined), the Series A
Preferred Stock shall, from that time forward, cease to be convertible into
Common Stock in accordance with the terms of this Article VI and Article VII
below, unless the Corporation (i) has obtained approval of the issuance of the
Common Stock upon conversion of the Series A Preferred Stock by a majority of
the total votes cast on such proposal, in person or by proxy, by the holders of
the then-outstanding Common Stock (not including any shares of Common Stock held
by present or former holders of Series A Preferred Stock that were issued upon
conversion of Series A Preferred Stock) (the "Stockholder Approval"), or (ii)
shall have otherwise obtained permission to allow such issuances from Nasdaq in
accordance with Nasdaq Rule 4460(i). If the
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Corporation's Common Stock is not then listed on Nasdaq or an exchange or
quotation system that has a rule substantially similar to Rule 4460(i) then the
limitations set forth herein shall be inapplicable and of no force and effect.
For purposes of this paragraph, "Outstanding Common Amount" means (i) the number
of shares of the Common Stock outstanding on the date of issuance of the Series
A Preferred Stock pursuant to the Purchase Agreement plus (ii) any additional
shares of Common Stock issued thereafter in respect of such shares pursuant to a
stock dividend, stock split or similar event. The maximum number of shares of
Common Stock issuable as a result of the 19.99% limitation set forth herein is
hereinafter referred to as the "Maximum Share Amount." With respect to each
holder of Series A Preferred Stock, the Maximum Share Amount shall refer to such
holder's pro rata share thereof determined in accordance with Article X below.
In the event that Corporation obtains Stockholder Approval or the approval of
Nasdaq, by reason of the inapplicability of the rules of Nasdaq or otherwise and
concludes that it is able to increase the number of shares to be issued above
the Maximum Share Amount (such increased number being the "New Maximum Share
Amount"), the references to Maximum Share Amount, above, shall be deemed to be,
instead, references to the greater New Maximum Share Amount. In the event that
Stockholder Approval is obtained, there are insufficient reserved or authorized
shares or a registration statement covering the additional shares of Common
Stock which constitute the New Maximum Share Amount is not effective prior to
the Maximum Share Amount being issued (if such registration statement is
necessary to allow for the public resale of such securities), the Maximum Share
Amount shall remain unchanged; provided, however, that the holders of Series A
Preferred Stock may grant an extension to obtain a sufficient reserved or
authorized amount of shares or of the effective date of such registration
statement. In the event that (a) the aggregate number of shares of Common Stock
actually issued upon conversion of the outstanding Series A Preferred Stock
represents at least twenty percent (20%) of the Maximum Share Amount and (b) the
sum of (x) the aggregate number of shares of Common Stock issued upon conversion
of Series A Preferred Stock plus (y) the aggregate number of shares of Common
Stock that remain issuable upon conversion of Series A Preferred Stock (without
giving effect to the conversion limitations set forth in Article VI.A(b) and
based on the Conversion Price then in effect), represents at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"), the
Corporation will use its best efforts to seek and obtain Stockholder Approval
(or obtain such other relief as will allow conversions hereunder in excess of
the Maximum Share Amount) as soon as practicable following the Triggering Event
and before the Mandatory Redemption Date.
B. (a) Subject to subparagraph (b) below, the "Conversion Price"
shall be the lesser of (i) the Applicable Percentage (as defined below)
multiplied by the Market Price (as defined herein) and (ii) the Fixed Conversion
Price (as defined herein), subject to adjustments pursuant to the provisions of
Article VI.C below. "Market Price" shall mean the average Closing Bid Prices
during any five (5) consecutive Trading Days (the "Market Price Days") during
the twenty (20) consecutive Trading Day period ending one (1) Trading Day prior
to the date (the "Conversion Date") the Notice of Conversion is sent by a holder
to the Corporation via facsimile (the "Pricing Period"). The Market Price Days
shall be designated by the converting holder at the time of conversion (from
among the days comprising the Pricing Period) and such designation shall be set
forth in the Notice of Conversion. "Fixed Conversion Price" shall mean $16.88.
"Applicable Percentage" shall mean 95%; provided, however, that for conversions
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taking place prior to December 27, 1998, the Applicable Percentage shall mean
(i) 100%, if the Market Price is $12.50 or greater and (ii) 105%, if the Market
Price is less than $12.50. "Closing Bid Price" means, for any security as of any
date, the closing bid price on Nasdaq as reported by Bloomberg or, if Nasdaq is
not the principal trading market for such security, the closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the closing bid price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price of such security in the over-the-counter market on the
electronic bulletin board for such security or in any of the foregoing manners,
the average of the bid prices of any market makers for such security or as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date in the
manner provided above, the Closing Bid Price shall be the fair market value as
mutually determined by the Corporation and the holders of a majority in interest
of shares of Series A Preferred Stock being converted for which the calculation
of the Closing Bid Price is required in order to determine the Conversion Price
of such Series A Preferred Stock. "Trading Day" shall mean any day on which the
Common Stock is traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(b) Notwithstanding anything contained in subparagraph (a)
of this Paragraph B to the contrary, in the event the Corporation (i) makes a
public announcement that it intends to consolidate or merge with any other
corporation (other than a merger in which the Corporation is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Corporation or (ii) any person,
group or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the corporation's Board of
Directors by waging a proxy battle or otherwise (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price that would otherwise be in
effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in subparagraph (a) of this
Article VI.B. For purposes hereof, "Adjusted Conversion Price Termination Date"
shall mean, with respect to any proposed transaction, tender offer or removal of
the majority of the Board of Directors which a public announcement as
contemplated by this subparagraph (b) has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the consummation, termination
or abandonment of the proposed transaction or tender offer which caused this
subparagraph (b) to become operative.
C. The Conversion Price shall be subject to adjustment from time
to time as follows:
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(a) Adjustment to Conversion Price Due to Stock Split,
Stock Dividend, Etc. If at any time when Series A Preferred Stock is issued and
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Prevailing Trading Price (as defined below) to all
holders of Common Stock or other similar event, which event shall have taken
place during the reference period for determination of the Conversion Price for
any Optional Conversion or Automatic Conversion of the Series A Preferred Stock,
then the Conversion Price shall be calculated giving appropriate effect to the
stock split, stock dividend, combination, reclassification or other similar
event. In such event, the Corporation shall notify the Transfer Agent of such
change on or before the effective date thereof.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at
any time when Series A Preferred Stock is issued and outstanding and prior to
the conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation, then the holders of Series A Preferred Stock shall thereafter have
the right to receive upon conversion of the Series A Preferred Stock, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the holders of Series A Preferred Stock would
have been entitled to receive in such transaction had the Series A Preferred
Stock been converted in full (without regard to any limitations on conversion
contained herein) immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares of Common Stock issuable upon conversion of
the Series A Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities or assets thereafter deliverable
upon the conversion of Series A Preferred Stock. The Corporation shall not
effect any transaction described in this subsection (b) unless (a) it first
gives, to the extent practical, thirty (30) days' prior written notice (but in
any event at least fifteen (15) business days prior written notice) of such
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event or sale of assets (during which time the holders of Series A
Preferred Stock shall be entitled to convert the Series A Preferred Stock) and
(b) the resulting successor or acquiring entity (if not the Corporation) assumes
by written instrument the obligations of this subsection (b). The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c) Adjustment Due to Distribution. Subject to Article
III, if the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a
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"Distribution"), then the holders of Series A Preferred Stock shall be entitled,
upon any conversion of shares of Series A Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(d) Purchase Rights. Subject to Article III, if at any
time when any Series A Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the holders of Series A
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series A Preferred Stock (without regard to any
limitations on conversion contained herein) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Adjustment for Restricted Periods. In the event that
(1) the Corporation fails to obtain effectiveness with the Securities and
Exchange Commission of the Registration Statement (as defined in the
Registration Rights Agreement) on or prior to one hundred twenty (120) days
following the Issue Date, or (2) such Registration Statement lapses in effect,
or sales otherwise cannot be made thereunder, whether by reason of the
Corporation's failure or inability to amend or supplement the prospectus (the
"Prospectus") included therein in accordance with the Registration Rights
Agreement or otherwise, after such Registration Statement becomes effective
(including, without limitation, during an Allowed Delay (as defined in Section
3(f) of the Registration Rights Agreement) but excluding any delays that arise
solely as a result of any act or omission solely attributable to the holders of
the Series A Preferred Stock), then the Pricing Period shall be comprised of,
(i) in the case of an event described in clause (1), the twenty (20) Trading
Days preceding the 120th day following the Issue Date plus all Trading Days
through and including the third Trading Day following the date of effectiveness
of the Registration Statement; and (ii) in the case of an event described in
clause (2), the twenty (20) Trading Days preceding the date on which the holder
of the Series A Preferred Stock is first notified that sales may not be made
under the Prospectus, plus all Trading Days through and including the third
Trading Day following the date on which the Holder is first notified that such
sales may again be made under the Prospectus. If a holder of Series A Preferred
Stock determines that sales may not be made pursuant to the Prospectus (whether
by reason of the Corporation's failure or inability to amend or supplement the
Prospectus or otherwise) it shall so notify the Corporation in writing and,
unless the Corporation provides such holder with a written opinion of the
Corporation's counsel to the contrary, such determination shall be binding for
purposes of this paragraph.
D. For purposes of Article VI.C(a) above, "Prevailing Trading
Price," which shall be measured as of the record date in respect of the rights
offering means (i) the average of
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the last reported sale prices for the shares of Common Stock on Nasdaq as
reported by Bloomberg, as applicable, for the five (5) Trading Days immediately
preceding such date, or (ii) if Nasdaq is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Trading Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, (b) at the option of a majority-in-interest of the holders of
the outstanding Series A Preferred Stock by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Corporation.
E. In order to convert Series A Preferred Stock into full shares
of Common Stock, a holder of Series A Preferred Stock shall: (i) submit a copy
of the fully executed notice of conversion in the form attached hereto as
Exhibit A ("Notice of Conversion") to the Corporation by facsimile dispatched on
the Conversion Date (or by other means resulting in, or reasonably expected to
result in, notice to the Corporation on the Conversion Date) at the office of
the Corporation or, at the Corporation's request, its designated Transfer Agent
for the Series A Preferred Stock that the holder elects to convert the same,
which notice shall specify the number of shares of Series A Preferred Stock to
be converted, the applicable Conversion Price and a calculation of the number of
shares of Common Stock issuable upon such conversion (together with a copy of
the first page of each certificate to be converted) prior to Midnight, New York
City time (the "Notice of Conversion Deadline") on the date of conversion
specified on the Notice of Conversion; and (ii) surrender the original
certificates representing the Series A Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice
of Conversion to the office of the Corporation or, at the Corporation's request,
the Transfer Agent for the Series A Preferred Stock as soon as practicable
thereafter. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion, unless
either the Preferred Stock Certificates are delivered to the Corporation or, at
the Corporation's request, its Transfer Agent as provided above, or the holder
notifies the Corporation or, at the Corporation's request, its Transfer Agent
that such certificates have been lost, stolen or destroyed (subject to the
requirements of subparagraph (a) below). In the case of a dispute as to the
calculation of the Conversion Price, the Corporation shall promptly issue such
number of shares of Common Stock that are not disputed in accordance with
subparagraph (b) below. The Corporation shall submit the disputed calculations
to its outside accountant via facsimile within two (2) business days of receipt
of the Notice of Conversion. The accountant shall audit the calculations and
notify the Corporation and the holder of the results no later than 48 hours from
the time it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series A Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
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(b) Delivery of Common Stock Upon Conversion. Upon the
surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (a) above)
(the "Delivery Period"), deliver (or cause its Transfer Agent to so issue and
deliver) to or upon the order of the holder (i) that number of shares of Common
Stock for the portion of the shares of Series A Preferred Stock converted as
shall be determined in accordance herewith and (ii) a certificate representing
the balance of the shares of Series A Preferred Stock not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Corporation shall pay to a holder $1,500 per day in
cash for each day beyond a two (2) day grace period following the Delivery
Period that the Corporation fails to deliver Common Stock (a "Conversion
Default") issuable upon surrender of shares of Series A Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock (the "Conversion Default Payments"). Such cash amount shall be paid
to such holder by the fifth day of the month following the month in which it has
accrued or, at the option of the holder (by written notice to the Corporation by
the first day of the month following the month in which it has accrued), shall
be convertible into Common Stock in accordance with the terms of this Article
VI.
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer Agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A. and in this Article
VI.E., the Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of Series A
Preferred Stock would result in a fractional share of Common Stock or the right
to acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon Conversion of
the Series A Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be the
date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in, or
reasonably expected to result in, notice) to the Corporation or its Transfer
Agent before Midnight, New York City time, on the Conversion Date. The person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such
securities as of the Conversion Date and all rights with respect to the shares
of Series A Preferred Stock surrendered shall forthwith terminate except the
right to receive the shares of Common Stock or other securities or property
issuable on such conversion and except that the holders preferential
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rights as a holder of Series A Preferred Stock shall survive to the extent the
Corporation fails to deliver such securities.
F. A number of shares of the authorized but unissued Common Stock
sufficient to provide for the conversion of the Series A Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series A Preferred Stock, 1,836,735
authorized and unissued shares of Common Stock have been duly reserved for
issuance upon conversion of the Series A Preferred Stock (the "Reserved
Amount"). The Reserved Amount shall be increased from time to time in accordance
with the Company's obligations pursuant to Section 4(h) of the Purchase
Agreement. In addition, if the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Series A Preferred Stock shall be
convertible at the then current Conversion Price, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series A Preferred Stock.
If at any time a holder of shares of Series A Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series A
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series A Preferred
Stock included in the Notice of Conversion which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof until (and at
the holder's option at any time after) the date additional shares of Common
Stock are authorized by the Corporation to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date elected by the holder in respect
thereof. The Corporation shall use its best efforts to effect an increase in the
authorized number of shares of Common Stock as soon as possible following a
Conversion Default. In addition, the Corporation shall pay to the holder
payments ("Conversion Default Payments") for a Conversion Default in the amount
of (a) (N/365), multiplied by (b) the sum of the Stated Value plus the Premium
Amount per share of Series A Preferred Stock through the Authorization Date (as
defined below), multiplied by (c) the Excess Amount on the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date"), multiplied by (d) .24, where (i) N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Corporation authorizes a sufficient number of shares of Common Stock to
effect conversion of the full number of shares of Series A Preferred Stock. The
Corporation shall send notice to the holder of the authorization of additional
shares of Common Stock, the Authorization Date and
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the amount of holder's accrued Conversion Default Payments. The accrued
Conversion Default Payment for each calendar month shall be paid in cash or
shall be convertible into Common Stock at the Conversion Price, at the holder's
option, as follows:
(a) In the event the holder elects to take such payment in
cash, cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and
(b) In the event the holder elects to take such payment in
Common Stock, the holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of Conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article VI (so long as there is then a
sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this Article VI, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series A Preferred Stock.
H. Upon submission of a Notice of Conversion by a holder of
Series A Preferred Stock, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such holder's
allocated portion of the Reserved Amount) shall be deemed converted into shares
of Common Stock and (ii) the holder's rights as a holder of such converted
shares of Series A Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of this
Certificate of Designation. Notwithstanding the foregoing, if a holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of shares of Series A Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series A Preferred Stock with respect to such unconverted shares
of Series A Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series A Preferred Stock to the holder or, if
such shares of
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Series A Preferred Stock have not been surrendered, adjust its records to
reflect that such shares of Series A Preferred Stock have not been converted. In
all cases, the holder shall retain all of its rights and remedies (including,
without limitation, the right to receive Conversion Default Payments pursuant to
Article IV.E. to the extent required thereby for such Conversion Default and any
subsequent Conversion Default).
VII. Automatic Conversion
So long as there is not then a continuing Mandatory Redemption
Event, each share of Series A Preferred Stock issued and outstanding on March
27, 2001, subject to any adjustment pursuant to Article V.A.(ii) (the "Automatic
Conversion Date"), automatically shall be converted into shares of Common Stock
on such date at the then effective Conversion Price in accordance with, and
subject to, the provisions of Article VI hereof (the "Automatic Conversion").
The Automatic Conversion Date shall be delayed by one (1) Trading Day each for
each Trading Day occurring prior thereto and prior to the full conversion of the
Series A Preferred Stock that (i) sales cannot be made pursuant to the
Registration Statement (whether by reason of the Company's failure to properly
supplement or amend the prospectus included therein in accordance with the terms
of the Registration Rights Agreement or otherwise, including any Allowed Delays
(as defined in Section 3(f) of the Registration Rights Agreement), but excluding
any delays that arise solely as a result of any act or omission solely
attributable to the holders of the Series A Preferred Stock) or Rule 144(k)
under the Securities Act of 1933, as amended (or a successor rule) or (ii) any
Default Event (as defined in Article V.A.) exists, without regard to whether any
cure periods shall have run. The Automatic Conversion Date shall be the
Conversion Date for purposes of determining the Conversion Price and the time
within which certificates representing the Common Stock must be delivered to the
holder.
VIII. Voting Rights
The holders of the Series A Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
("DGCL"), in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each
holder of Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation
shall, to the extent legally permissible, mail a notice to each holder, at least
ten (10) days prior to the record
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date specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the
Series A Preferred Stock, voting separately as a class or series as applicable,
is required to authorize a given action of the Corporation, the affirmative vote
or consent of the holders of at least a majority of the shares of the Series A
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series A Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL holders
of the Series A Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series A Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated. Holders of the Series A Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents (and copies of proxy
materials and other information sent to shareholders) with respect to which they
would be entitled to vote, which notice would be provided pursuant to the
Corporation's bylaws and the DGCL.
IX. Protective Provisions
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the DGCL) of the holders of at least a majority
of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges
of the Series A Preferred Stock or any Senior Securities so as to affect
adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock having
a preference over the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article II hereof, "Senior Securities");
(c) create any new class or series of capital stock
ranking pari passu with the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, unless
the average Closing Bid Price for the ten (10) Trading Days ending one (1)
Trading Day prior to the date on which the Board of Directors approve the
issuance of such class or series of capital stock is above $12.50, in which case
such consent will not be required (as previously defined in Article II hereof,
"Pari Passu Securities");
(d) increase the authorized number of shares of Series A
Preferred Stock; or
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(e) do any act or thing not authorized or contemplated by
this Certificate of Designation which would result in taxation of the holders of
shares of the Series A Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event holders of at least a majority of the then
outstanding shares of Series A Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series A
Preferred Stock, pursuant to subsection (a) above, so as to affect the Series A
Preferred Stock, then the Corporation will deliver notice of such approved
change to the holders of the Series A Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to the terms
of this Certificate of Designation as they exist prior to such alteration or
change or continue to hold their shares of Series A Preferred Stock.
X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount (including any
increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series A Preferred Stock based on the number of shares of Series A
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series A Preferred Stock then outstanding.
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<PAGE> 21
IN WITNESS WHEREOF, this Certificate of Designation is executed
on behalf of the Corporation this ___ day of March, 1998.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
-------------------------------------
David L. Greenwood
Vice President, Finance
and Secretary
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series A Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of _______________________ (the "Corporation") according to the
conditions of the Certificate of Designation of Series A Preferred Stock, as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales
by the undersigned of the securities issuable to the undersigned upon conversion
of the Series A Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Act"), or pursuant
to an exemption from registration under the Act.
Date of Conversion:____________________________
Market Price Days:_____________________________
Applicable Conversion Price:___________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:_____________________________________
Name:__________________________________________
Address:_______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be
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converted, and shall make payments pursuant to the Certificate of Designation
for the number of business days such issuance and delivery is late.
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<PAGE> 1
EXHIBIT 10.38
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 27,
1998, by and among Geron Corporation, a Delaware corporation, with headquarters
located at 230 Constitution Drive, Menlo Park, California 94025 ("COMPANY"), and
each of the purchasers set forth on the signature pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock,
designated as Series A Convertible Preferred Stock (the "PREFERRED STOCK"),
having the rights, preferences and privileges set forth in the Certificate of
Designations, Rights and Preferences attached hereto as EXHIBIT "A" (the
"CERTIFICATE OF DESIGNATION");
C. The Preferred Stock is convertible into shares of common stock,
$0.001 par value per share, of the Company (the "COMMON STOCK"), upon the terms
and subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, an aggregate of
Fifteen Thousand (15,000) shares of Preferred Stock, for an aggregate purchase
price of Fifteen Million One Hundred Fifty Thousand Dollars ($15,150,000).
E. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of shares of Preferred Stock is set forth
immediately below its name on the signature pages hereto;
F. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "B" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws; and
<PAGE> 2
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall issue
and sell to each Buyer and each Buyer severally agrees to purchase from the
Company such number of shares of Series A Preferred Stock (collectively,
together with any Preferred Stock issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "PREFERRED SHARES") for the aggregate purchase price (the "PURCHASE PRICE")
as is set forth immediately below such Buyer's name on the signature pages
hereto. The aggregate number of Preferred Shares to be issued at the Closing (as
defined below) is Fifteen Thousand (15,000), for an aggregate purchase price of
Fifteen Million One Hundred Fifty Thousand Dollars ($15,150,000).
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares to
be issued and sold to it at the Closing (as defined below) by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of duly executed certificates
representing such number of Preferred Shares which such Buyer is purchasing and
(ii) the Company shall deliver such certificates duly executed on behalf of the
Company, to the Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver)
of the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Preferred Shares pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon Eastern Standard Time on
March 27, 1998 or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall occur on the
Closing Date at the offices of Venture Law Group, 2800 Sand Hill Road, Menlo
Park, CA 94025, or at such other location as may be agreed to be the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally
(and not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. Investment Purpose. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES" and, collectively with the Preferred
Shares, the "Securities") for its own account for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representation herein, the Buyer does not agree to
hold any of the Securities 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 1993 Act.
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<PAGE> 3
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer 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
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer 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
Securities.
f. Transfer or Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement thereunder, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, (c) sold or transferred to an "affiliate" (as defined in Rule
144 promulgated under the 1933 Act (or a successor rule) ("RULE 144")) or (d)
sold pursuant to Rule 144; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement;
provided that the terms of such pledge do not restrict the ability of the Buyer
to sell such Securities. Except for transfers by a Buyer (i)
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<PAGE> 4
to its "affiliates" (as defined under the 1934 Act (as defined herein)) or (ii)
to the holders of interests in a Buyer upon a liquidation of a Buyer's assets in
accordance with its governing documents, the Preferred Shares may be transferred
by a Buyer only with the prior written consent of the Company, which consent
will not be unreasonably withheld.
g. Legends. The Buyer understands that the Preferred
Shares and, until such time as the Conversion Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the
Conversion Shares, may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an
opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such sale or transfer is
effected or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. The Buyer
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the jurisdiction
set forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
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<PAGE> 5
a. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company has no Subsidiaries (as defined below). The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
on the transactions contemplated hereby or by the agreements or instruments to
be entered into in connection herewith. "SUBSIDIARIES" means any corporation or
other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Preferred Shares and the
issuance and reservation for issuance of the Conversion Shares issuable upon
conversion thereof) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its shareholders is required, (iii) this Agreement has been duly
executed and delivered and the Certificate of Designation has been duly filed by
the Company, and (iv) each of this Agreement and the Certificate of Designation
constitutes, and upon execution and delivery by the Company of the Registration
Rights Agreement such instrument will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
c. Capitalization. As of March 25, 1998, the authorized
capital stock of the Company consists of (i) 25,000,000 shares of Common Stock
of which 10,887,568 shares are issued and outstanding, 3,328,032 shares are
reserved for issuance pursuant to the Company's stock option plans (including
the 1996 Employee Stock Purchase Plan), 75,311 shares are reserved for issuance
pursuant to securities (other than the Preferred Shares and the shares reserved
in the preceding clause) exercisable for, or convertible into or exchangeable
for shares of Common Stock and 1,836,735 shares are reserved for issuance upon
conversion of the Preferred Shares (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(h) below); and (ii) 3,000,000 shares
of preferred stock, none of which shares are issued and outstanding. All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
SCHEDULE 3(c), as of the effective date of this Agreement, (i)
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<PAGE> 6
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or arrangements by which the Company is or may become bound
to issue additional shares of capital stock of the Company, (ii) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of its or their securities under the 1933 Act (except the
Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares or the Conversion Shares. The Company has
furnished to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
d. Issuance of Shares. The Preferred Shares and Conversion
Shares are duly authorized and, upon issuance in accordance with the terms of
this Agreement (including the issuance of the Conversion Shares upon conversion
of the Preferred Shares in accordance with the Certificate of Designation) will
be validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
term Conversion Shares includes the shares of Common Stock issuable upon
conversion of the Preferred Shares, including without limitation, such
additional shares, if any, as are issuable as a result of the events described
in Article V, Article VI.E(b) or Article VI.F of the Certificate of Designation
and Section 2(c) of the Registration Rights Agreement. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of the Preferred Shares. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Designation is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
e. No Conflicts. The execution, delivery and performance
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designation and
the issuance and reservation for issuance of the Conversion Shares) will not (i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both is reasonably likely to become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party, or
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by
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<PAGE> 7
which any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations that are not reasonably likely to, individually or in the aggregate,
have a Material Adverse Effect). The Company is not in violation of its
Certificate of Incorporation, By-laws or other organizational documents and the
Company is not in default (and no event has occurred which with notice or lapse
of time or both is reasonably likely to put the Company in default) under, and
the Company has not taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party or by which any property or assets of the Company is bound or affected,
except for possible defaults that are not reasonably likely to, individually or
in the aggregate, have a Material Adverse Effect. To the Company's knowledge,
the businesses of the Company is not being conducted, and shall not be conducted
so long as a Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as disclosed in SCHEDULE 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Nasdaq National Market ("NASDAQ") and does not reasonably
anticipate that the Common Stock will be delisted by the Nasdaq in the
foreseeable future.
f. SEC Documents, Financial Statements. The Company has
delivered to each Buyer a copy of its draft Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "1997 FORM 10-K") dated March 26, 1998.
The Company shall file the 1997 Form 10-K with the SEC no later than March 31,
1998. Other than additional disclosures relating to the transactions
contemplated by this Agreement, the draft of the 1997 Form 10-K provided to the
Buyers is a true, complete and final copy (other than minor editorial changes)
of the 1997 Form 10-K to be filed with the Company with the SEC. Since July 30,
1996, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof, together with the 1997
Form 10-K and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference
therein, being hereinafter referred to herein as the "SEC DOCUMENTS"). Except as
disclosed in SCHEDULE 3(f), as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, 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. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all
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<PAGE> 8
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
December 31, 1997 and (ii) liabilities in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since December 31, 1997,
there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company.
h. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, or its
officers or directors in their capacity as such, that is reasonably likely to
have a Material Adverse Effect. SCHEDULE 3(h) contains a complete list and
summary description of any pending or threatened proceeding against or affecting
the Company, without regard to whether it would have a Material Adverse Effect.
i. Patents, Copyrights, etc. To the Company's knowledge,
the Company owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks, service
marks, service names, trade names and copyrights ("INTELLECTUAL PROPERTY")
necessary to enable it to conduct its business as now operated (and, except as
set forth in SCHEDULE 3(I) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge, threatened which challenges the right of the Company with respect to
any Intellectual Property necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(i) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future); to
the best of the Company's knowledge, the Company's, current and intended
products, services and processes do not infringe on any Intellectual Property or
other rights held by any person. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of their Intellectual
Property.
j. [Intentionally Omitted]
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k. Tax Status. Except as set forth on SCHEDULE 3(k), the
Company 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 has set aside on its
books 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 its 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.
l. Certain Transactions. Except as set forth on SCHEDULE
3(l) and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties and other than the grant of
stock options disclosed on SCHEDULE 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, consultants, 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 other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
m. Disclosure. All information relating to or concerning
the Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or its business, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed (assuming for this purposes that the
Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act as of
the date hereof).
n. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Securities. The Company further
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represents to each Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
o. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) which requires stockholder
approval under the rules of The Nasdaq Stock Market.
p. No Brokers. Except as set forth in SCHEDULE 3(p), the
Company has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
q. Permits; Compliance. The Company is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted the failure of which to possess would not have a Material Adverse
Effect (collectively, the "COMPANY PERMITS"), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or cancellation
of any of the Company Permits. The Company is not in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect. Since December 31,
1997, the Company has not received any notification with respect to possible
conflicts, defaults or violations of the Company Permits, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
r. Environmental Matters. Except as set forth in SCHEDULE
3(R), there are, to the Company's knowledge, with respect to the Company or any
predecessor of the Company, no past or present violations of Environmental Laws
(as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations that are reasonably likely to give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws that is reasonably likely to have a Material Adverse
Effect and the Company has not received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge, threatened
in connection with any of the foregoing. The term "ENVIRONMENTAL LAWS" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "HAZARDOUS MATERIALS") into the environment,
or otherwise
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relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
s. Insurance. The Company is 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 is engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that is reasonably likely to
have a Material Adverse Effect.
t. Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, 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.
u. Foreign Corrupt Practices. To the knowledge of the
Company, neither the Company, nor any director, officer, agent, employee or
other person acting on behalf of the Company or any Subsidiary has, in the
course of his 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 from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
v. No General Solicitation. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of
Securities.
w. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
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<PAGE> 12
x. Employee Relations. No executive officer (as defined in
Rule 501(f) of the 1933 Act) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer's employment with the
Company.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts
to satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers 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 qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds
from the sale of the Preferred Shares 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.
e. Additional Equity Capital; Right of First Offer.
Subject to the exceptions described below, the Company will not, without the
prior written consent of Rose Glen Capital Management, L.P. ("RGC") negotiate or
contract with any party to obtain additional equity financing (including debt
financing with an equity component) that (i) involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance (taking into account the value of any warrants or options to acquire
Common Stock issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock and (ii) allows for the public resale of such Common Stock (or the Common
Stock issuable upon conversion or exercise of such securities), during the
period (the "LOCK-UP PERIOD") beginning on the Closing Date and ending two
hundred seventy (270) days from the date the Registration Statement (as defined
in the Registration Rights Agreement) is declared effective (plus any days in
which sales cannot be made thereunder). In addition, subject to the exceptions
described below, the
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<PAGE> 13
Company will not offer any equity financing (including debt with an equity
component) ("FUTURE OFFERINGS") during the period beginning on the Closing Date
and ending one hundred eighty (180) days from the date the Registration
Statement is declared effective (plus any days in which sales cannot be made
thereunder), unless it shall have first delivered to RGC written notice (the
"NOTICE") stating its bona fide intention to offer such Future Offering,
describing the proposed Future Offering, including the material terms and
conditions thereof, and providing RGC an option during the ten (10) day period
following delivery of such Notice (the "OFFER PERIOD") to purchase the
securities to be offered in the Future Offering on the same terms as set forth
in the Notice (the limitations referred to in this sentence and the preceding
sentence are collectively referred to as the "CAPITAL RAISING LIMITATIONS"). The
Company may, during the 60-day period following the expiration of the Offer
Period, offer any portion of such Future Offering which have not been subscribed
for by RGC pursuant to the preceding sentence, to any person or persons on terms
no more favorable to the offeree than those specified in the Notice. If the
Company does not enter into a definitive agreement for the proposed Future
Offering set forth in the Notice within such 60-day period, the right provided
hereunder shall be deemed to be revived and such Future Offering shall not be
offered unless first re-offered to RGC in accordance herewith. In the event the
terms and conditions of a proposed Future Offering are amended in any material
respect after delivery of the Notice to RGC concerning the proposed Future
Offering, the Company shall deliver a new Notice to RGC describing the amended
terms and conditions of the proposed Future Offering and RGC thereafter shall
have an option during the ten (10) day period following delivery of such new
notice to purchase the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by a majority of the Company's disinterested directors.
f. Expenses. The Company shall reimburse RGC for all
expenses incurred by it in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, attorneys'
and consultants' fees and expenses. The Company's obligation to reimburse RGC's
expenses under this Section 4(f) shall be limited to Thirty Thousand Dollars
($30,000) of which Five Thousand Dollars ($5,000) was advanced previously.
g. Financial Information. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its
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Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within
one (1) day after release, copies of all press releases issued by the Company or
any of its Subsidiaries; and (iii) contemporaneously with the making available
or giving to the stockholders of the Company, copies of any notices or other
information the Company makes available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time). The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Preferred Shares without the consent of
each Buyer. The Company shall use its best efforts at all times to maintain the
number of shares of Common Stock so reserved for issuance at no less than one
and one-half (1 1/2) times the number that is then actually issuable upon full
conversion of the Preferred Shares (based on the Conversion Price of the
Preferred Shares in effect from time to time). If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the number
of Conversion Shares issued and issuable upon conversion of the Preferred Shares
(based on the Conversion Price of the Preferred Shares then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain shareholder
approval of an increase in such authorized number of shares.
i. Listing. The Company shall promptly, but no later than
ten (10) business days from the Closing Date, secure the listing of the
Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Conversion Shares from time
to time issuable upon conversion of the Preferred Shares. The Company will
obtain and maintain the listing and trading of its Common Stock on Nasdaq, the
Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock Exchange
("NYSE"), or the American Stock Exchange ("AMEX") and will comply in all
material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable. The Company shall promptly provide
to each Buyer copies of any notices it receives from Nasdaq and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
j. Corporate Existence. So long as a Buyer beneficially
owns any Preferred Shares, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and
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<PAGE> 15
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on Nasdaq, Nasdaq SmallCap,
NYSE or AMEX.
k. No Integration. The Company will not conduct any future
offering that will be integrated with the issuance of the Securities solely for
purposes of Rule 4460(i) of the Nasdaq Stock Market.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares in accordance with the terms thereof (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior
to registration of the Conversion Shares under the 1933 Act), will be given by
the Company to its transfer agent and that the Securities 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. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Securities. Subject to Section 2(f), if
a Buyer provides the Company with an opinion of counsel, reasonably satisfactory
to the Company in form, substance and scope, that registration of a resale by
such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation
of the Company hereunder to issue and sell the Preferred Shares to a Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The applicable Buyer shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
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<PAGE> 16
b. The applicable Buyer shall have delivered the Purchase
Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Delaware.
d. The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted
for filing with the Secretary of Sate of the State of Delaware, and a copy
thereof certified by such Secretary of State shall have been delivered to such
Buyer.
d. The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
e. The representations and warranties of the Company shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or
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<PAGE> 17
complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief financial
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Certificate of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
g. Trading in the Common Stock on Nasdaq shall not have
been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "D" attached hereto.
i. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement
may be executed in two or more counterparts, all of which 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. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity
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<PAGE> 18
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Geron Corporation
200 Constitution Drive
Menlo Park, CA 94025
Attention: David Greenwood, Chief Financial Officer
Facsimile: (650) 473-7701
With copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Joshua L. Green, Esq.
Facsimile: (650) 233-8386
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change
in address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the
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<PAGE> 19
consent of the Company. Notwithstanding the foregoing, subject to Section 4(j)
and the limitations set forth in the Certificate of Designation, the Company may
assign its rights hereunder in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets, without the consent of the
Buyers.
h. 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.
i. Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers.
j. Publicity. The Company and each of the Buyers shall
have the right to review a reasonable period of time before issuance of any
press releases, SEC, Nasdaq or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
k. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have
caused this Agreement to be duly executed as of the date first above written.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
------------------------------------
David L. Greenwood
Vice President, Finance
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ WAYNE D. BLOCH
------------------------------------
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 12,000
Aggregate Purchase Price: $12,120,000
</TABLE>
-20-
<PAGE> 21
CCG INVESTMENT FUND LTD.
By: /s/ KENNETH A. SIMPLER
------------------------------------
Kenneth A. Simpler
Vice President
RESIDENCE: Cayman Islands
ADDRESS:
c/o Citidel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Facsimile: (312) 338-0780
Telephone: (312) 338-7800
Attention: Kenneth A. Simpler
with a copy to:
Robert J. Brantman, Esq.
Katten, Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Facsimile: (312) 902-1061
Telephone: (312) 902-5289
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 120
Aggregate Purchase Price: $121,200
</TABLE>
-21-
<PAGE> 22
CCG CAPITAL LTD.
By: /s/ KENNETH A. SIMPLER
------------------------------------
Kenneth A. Simpler
Vice President
RESIDENCE: Cayman Islands
ADDRESS:
c/o Citidel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Facsimile: (312) 338-0780
Telephone: (312) 338-7800
Attention: Kenneth A. Simpler
with a copy to:
Robert J. Brantman, Esq.
Katten, Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Facsimile: (312) 902-1061
Telephone: (312) 902-5289
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 120
Aggregate Purchase Price: $121,200
</TABLE>
-22-
<PAGE> 23
FISHER CAPITAL LTD.
By: /s/ KENNETH A. SIMPLER
------------------------------------
Kenneth A. Simpler
Vice President
RESIDENCE: Cayman Islands
ADDRESS:
c/o Citidel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Facsimile: (312) 338-0780
Telephone: (312) 338-7800
Attention: Kenneth A. Simpler
with a copy to:
Robert J. Brantman, Esq.
Katten, Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Facsimile: (312) 902-1061
Telephone: (312) 902-5289
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 1,794
Aggregate Purchase Price: $1,811,940
</TABLE>
-23-
<PAGE> 24
WINGATE CAPITAL LTD.
By: /s/ KENNETH A. SIMPLER
------------------------------------
Kenneth A. Simpler
Vice President
RESIDENCE: Cayman Islands
ADDRESS:
c/o Citidel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Facsimile: (312) 338-0780
Telephone: (312) 338-7800
Attention: Kenneth A. Simpler
with a copy to:
Robert J. Brantman, Esq.
Katten, Muchin & Zavis
525 W. Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Facsimile: (312) 902-1061
Telephone: (312) 902-5289
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 966
Aggregate Purchase Price: $975,660
</TABLE>
-24-
<PAGE> 1
EXHIBIT 10.39
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 27,
1998, by and among Geron Corporation, a Delaware corporation, with its
headquarters located at 230 Constitution Drive, Menlo Park, California 94025
(the "COMPANY"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their Registrable Securities
and their respective rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors shares of its Series A
Convertible Preferred Stock (the "PREFERRED STOCK") that are convertible into
shares (the "CONVERSION SHARES") of the Company's common stock, par value $.001
per share (the "COMMON STOCK"), upon the terms and subject to the limitations
and conditions set forth in the Certificate of Designations, Rights,
Preferences, Privileges and Restrictions with respect to the Preferred Stock
(the "CERTIFICATE OF DESIGNATION"); and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
<PAGE> 2
(i) "INVESTORS" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to
a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
(including any shares issued pursuant to Articles V, VI.E(b) and VI.F of the
Certificate of Designation) issued or issuable and any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise with respect
to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
prior to the date which is twenty (20) business days after the date of the
Closing under the Securities Purchase Agreement (the "CLOSING DATE"), file with
the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities underlying the Preferred Stock issued or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the Rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Stock (i) to prevent
dilution resulting from stock splits, stock dividends or similar transactions or
(ii) by reason of changes in the Conversion Price of the Preferred Stock in
accordance with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than one and
one-half ( 1 1/2) times the sum of the number of Conversion Shares that are then
issuable upon conversion of the Preferred Stock, without regard to any
limitation on the Investor's ability to convert the Preferred Stock. The Company
acknowledges that the number of shares initially included in the Registration
Statement represents a good faith estimate of the maximum number of shares
issuable upon conversion of the Preferred Stock.
b. Underwritten Offering. [Intentionally Omitted]
<PAGE> 3
c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within one hundred twenty (120) days after
the Closing Date or if, after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement, or (ii) the Common Stock is not listed or included for quotation on
the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for quotation, then the
Company will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
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 of the Preferred Stock or Registerable Securities an amount equal to
the then outstanding principal amount of the Preferred Stock (and, in the case
of holders of Registerable Securities, the principal amount of Preferred Stock
from which such Registerable Securities were converted) ("AGGREGATE SHARE
PRICE") multiplied by two hundredths (.020) times the sum of: (i) the number of
months (prorated for partial months) after the end of such 120-day period and
prior to the date the Registration Statement is declared effective by the SEC;
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the Registration Statement
pursuant to Section 3(h) below in a reasonably prompt manner; (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 included
therein 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 Investors and excluding any days during an Allowed
Delay (as defined in Section 3(f)); and (iii) the number of months (prorated for
partial months) that the Common Stock is not listed or included for quotation on
the Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted
after the Registration Statement has been declared effective. (For example, if
the Registration Statement becomes effective one (1) month after the end of such
120-day period, the Company would pay $20,000 for each $1,000,000 of Aggregate
Share Price. If thereafter, sales could not be made pursuant to the Registration
Statement for an additional period of one (1) month, the Company would pay an
additional $20,000 for each $1,000,000 of Aggregate Share Price.) Such amounts
shall be paid in cash or, at the Company's option, may be added to the Stated
Value of the Preferred Stock and thereafter be convertible into Common Stock at
the "CONVERSION PRICE" (as defined in the Certificate of Designation) in
accordance with the terms of the Preferred Stock. If the Company elects to have
such amounts added to the Stated Value of the Preferred Stock, such election
shall be binding if, and only if, the Registration
-2-
<PAGE> 4
Statement is effective and sales can be made pursuant to such Registration
Statement and the Common Stock is then listed and trading on Nasdaq, Nasdaq
SmallCap, NYSE or AMEX for twenty (20) days from the date the Company makes such
election. If such option becomes invalid because the conditions set forth in the
preceding sentence are not met, the Company shall pay such amounts in cash
unless the Investors elect to have such amounts added to the Stated Value of the
Preferred Stock. Any shares of Common Stock issued upon conversion of such
amounts shall be Registrable Securities. If the Company desires to convert the
amounts due hereunder into Registrable Securities, it shall so notify the
Investors in writing within two (2) business days of the date on which such
amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth in the Certificate of Designation),
beginning on the last day upon which the cash amount would otherwise be due in
accordance with the following sentence. Payments of cash pursuant hereto shall
be made within five (5) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day period.
d. Piggy-Back Registrations. Subject to the last sentence of this
Section 2(d), if at any time prior to the expiration of the Registration Period
(as hereinafter defined) the Company shall file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities (other than on Form S-4 or
Form S-8 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 Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination and, if
within fifteen (15) days after the effective date of such notice, such Investor
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor requests
to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities shall
be made pro rata among the Investors seeking to include Registrable Securities
in proportion to the number of Registrable Securities sought to be included by
such Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
-3-
<PAGE> 5
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(d) shall only be available in the event
that (i) the Company fails to timely file, obtain effectiveness or maintain
effectiveness of the Registration Statement to be filed pursuant to Section 2(a)
in accordance with the terms of this Agreement and (ii) an Investor is unable to
sell the Registrable Securities without restriction (including, but not limited
to, volume limitations) in a public transaction pursuant to an exemption from
the registration requirement of the 1933 Act.
e. Eligibility for Form S-3. The Company represents and warrants
that it meets the registrant eligibility and transaction requirements for the
use of Form S-3 for registration of the sale by the Initial Investors and any
other Investors of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not
later than twenty (20) business days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which the Registrable Securities (in the reasonable opinion of counsel to the
Initial Investors) may be immediately sold without restriction (including
without limitation as to volume by each holder thereof) without registration
under the 1933 Act (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such
-4-
<PAGE> 6
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement. In the
event the number of shares available under a Registration Statement filed
pursuant to this Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Preferred Stock, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. The provisions of Section 2(c) above shall be applicable with
respect to such obligation, with the one hundred twenty (120) days running from
the day after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile of the effectiveness of the Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing any Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall promptly file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that the Registration Statement or
any amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness
-5-
<PAGE> 7
thereof during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. [Intentionally Omitted]
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than twenty (20) consecutive
trading days (or a total of not more than forty-five (45) trading days in any
twelve (12) month period or thirty (30) trading days in any three month period),
the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, the best interests of the Company (an "Allowed Delay");
provided, further, that the Company shall promptly (i) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales under
the Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
h. The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements
-6-
<PAGE> 8
thereto (as well as all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects and will not request
acceleration of the Registration Statement without prior notice to such counsel.
The sections of the Registration Statement covering information with respect to
the Investors, the Investor's beneficial ownership of securities of the Company
or the Investors intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. [Intentionally Omitted]
k. The Company shall make available for inspection by (i) any
Investor, (ii) one firm of attorneys and one firm of accountants or other agents
retained by the Initial Investors, and (iii) one firm of attorneys and one firm
of accountants or other agents retained by all other Investors, (collectively,
the "INSPECTORS") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
-7-
<PAGE> 9
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure the designation and
quotation, of all the Registrable Securities covered by the Registration
Statement on the Nasdaq or, if not eligible for the Nasdaq on the Nasdaq
SmallCap and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.
p. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in
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<PAGE> 10
connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
q. From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
to include any of their securities in any Registration Statement under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the holders of a majority-in-interest of the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's binding and perpetual election to exclude all of
such Investor's Registrable Securities from the Registration Statement.
c. [Intentionally Omitted]
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
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<PAGE> 11
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualification fees, printers and
accounting fees, the fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel selected by the Initial
Investors pursuant to Sections 2(b) and 3(h) hereof (with such fees and
disbursements of counsel to the Investors being included in calculating the
aggregate cap on expenses set forth in Section 4(f) of the Securities Purchase
Agreement) shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any
underwriter (as defined in the 1933 Act) for the Investors, and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this
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<PAGE> 12
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not
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<PAGE> 13
inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
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<PAGE> 14
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor 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 assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
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<PAGE> 15
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Geron Corporation
200 Constitution Drive
Menlo Park, CA 94025
Attention: David Greenwood, Chief Financial Officer
Facsimile: (650) 473-7701
With copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Joshua L. Green, Esq.
Facsimile: (650) 233-8386
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
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<PAGE> 16
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Delaware with
respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. [Intentionally Omitted]
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the shares of Preferred Stock then outstanding have been
converted into for Registrable Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
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<PAGE> 17
IN WITNESS WHEREOF, the Company and the undersigned Initial
Investors have caused this Agreement to be duly executed as of the date first
above written.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
----------------------------------
David L. Greenwood
Vice President, Finance
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ WAYNE D. BLOCH
----------------------------------
Wayne D. Bloch
Managing Director
CCG INVESTMENT FUND LTD.
By: /s/ KENNETH A. SIMPLER
----------------------------------
Kenneth A. Simpler
Vice President
CCG CAPITAL LTD.
By: /s/ KENNETH A. SIMPLER
----------------------------------
Kenneth A. Simpler
Vice President
FISHER CAPITAL LTD.
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<PAGE> 18
By: /s/ KENNETH A. SIMPLER
----------------------------------
Kenneth A. Simpler
Vice President
WINGATE CAPITAL LTD.
By: /s/ KENNETH A. SIMPLER
----------------------------------
Kenneth A. Simpler
Vice President
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<PAGE> 1
EXHIBIT 99.1
GERON RAISES EQUITY IN $15 MILLION PRIVATE PLACEMENT AND
$4 MILLION INVESTMENT FROM PHARMACIA & UPJOHN
MENLO PARK, CA -- March 30, 1997 -- Geron Corporation (NASDAQ:GERN) announced
today that it has raised $15 million in equity capital through a sale of
convertible preferred stock to investment funds managed by two institutional
investors.
"This funding, together with cash on the balance sheet and committed funding
from partners, brings our total cash available to $50 million, which will allow
Geron to accelerate programs stemming from our recent discoveries in controlling
cell life-span," stated Ronald Eastman, Geron president and chief executive
officer. "The extension of normal cell replicative capacity through telomerase
expression or activation is a breakthrough in the biology of aging that presents
opportunities for Geron across our product development programs for treating
age-related diseases such as cancer, macular degeneration and various conditions
affecting the skin and immune systems."
The financing was led by an investment fund managed by Rose Glen Capital
Management L.P., Bala Cynwyd, Pennsylvania. The financing consist of $15,000,000
face value Series A Convertible Preferred Stock, yielding 6% per annum. With
limited exceptions, during the nine month period following issuance, the
preferred stock is convertible only after the market price of the common stock
equals to exceeds $15 per share. The conversion price of the preferred stock is
based on the market price of the common stock during a pricing period preceding
conversion, up to a conversion price of $16.88. The preferred stock is subject
to redemption at the Company's option if the market price of the common stock
exceeds or falls below certain thresholds. Geron has agreed to register the
underlying common stock for resale.
Additionally, in accordance with the partnership agreement for Geron's
telomerase inhibition program signed in 1997, Pharmacia & Upjohn purchased $4
million of Geron common stock at a premium.
Geron Corporation is a biopharmaceutical company focused on discovering and
developing therapeutic and diagnostic products based upon the company's
understanding of telomeres and telomerase in cells -- fundamental biological
mechanisms underlying cancer and other age-related diseases.
###
<TABLE>
<S> <C> <C>
Contact:
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>
<PAGE> 2
Note: This release moved over Business Wire March 30, 1998.
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 http://www.geron.com.
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 are included in the company's annual
report on Form 10-K for the year ended December 31, 1997.
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