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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1999
GERON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-20859 75-2287752
(State of jurisdiction) (Commission File No.) (IRS Employer Identification No.)
230 Constitution Drive
Menlo Park, CA 94025
(Address of principal executive offices and zip code)
(650) 473-7700
(Registrant's telephone number, including area code)
NA
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On September 30, 1999, Geron Corporation, a Delaware corporation (the
"Company") entered into an agreement to sell $12.5 million in Series C Two
Percent (2%) Convertible Debentures and warrants to purchase 1.1 million shares
of the Company's common stock to RGC International Investors, LDC, a Cayman
Islands limited duration company (the "Purchaser").
The Company's press release announcing the issuance and sale of the
debentures and warrants, as well as the Securities Purchase Agreement,
Registration Rights Agreement, Series C 2% Debenture and Warrants 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 8-K:
<TABLE>
<CAPTION>
<S> <C>
4.1 Series C 2% Convertible Debenture.
4.2 Warrant to purchase 1,000,000 shares of common stock.
4.3 Warrant to purchase 100,000 shares of common stock.
99.1 Securities Purchase Agreement dated as of September 30, 1999
between Geron Corporation and RGC International Investors,
LDC.
99.2 Registration Rights Agreement dated as of September 30, 1999
by and between Geron Corporation and RGC International
Investors, LDC.
99.3 Press Release dated September 30, 1999.
</TABLE>
2.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GERON CORPORATION
Dated: October 5, 1999 /s/ David L. Greenwood
----------------------
David L. Greenwood
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
3.
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
4.1 Series C 2% Debenture.
4.2 Warrant to purchase 1,000,000 shares of common stock.
4.3 Warrant to purchase 100,000 shares of common stock.
99.1 Securities Purchase Agreement dated as of September 30, 1999
between Geron Corporation and RGC International Investors, LDC.
99.2 Registration Rights Agreement dated as of September 30, 1999 by
and between Geron Corporation and RGC International Investors, LDC.
99.3 Press Release issued September 30, 1999.
</TABLE>
4.
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EXHIBIT 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT.
September 30, 1999 $12,500,000
GERON CORPORATION
SERIES C TWO PERCENT (2%) CONVERTIBLE DEBENTURES
Geron Corporation, a Delaware corporation (the "Issuer"), for value
received hereby promises to pay to RGC International Investors, LDC or its
registered assigns the principal sum of Twelve Million Five Hundred Thousand
Dollars ($12,500,000), together with all accrued but unpaid interest thereon, on
September 30, 2002 in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts at the last address of the Holder (as defined herein) last
appearing on the Register (as defined herein).
This Security is one of a duly authorized issue of Series C two percent
(2%) convertible debentures of the Issuer (the "Security") referred to in the
Securities Purchase Agreement (the "Purchase Agreement") dated as of September
30, 1999 by and between the Issuer and the Purchaser (as defined in the Purchase
Agreement). The Securities are subject to the terms and conditions of the
Purchase Agreement, a copy of which is on file at and may be obtained from the
Issuer at its principal office at the address set forth in Section 4.5 hereof.
The Issuer agrees to issue from time to time replacement Securities in the form
hereof to facilitate any transfers and assignments. In addition, after delivery
of an indemnity in form and substance satisfactory to the Issuer, the Issuer
also agrees to issue replacement Securities for securities which have been lost,
stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Securities and particulars of the respective Securities held by
them and of all transfers of such Securities. References to the "Holder" or
"Holders" shall mean the Person listed in the Register as the payee of any
Security unless the payee shall have presented such Security to the Issuer for
transfer and the transferee shall have been entered in the Register as a
subsequent holder, in which case the term shall mean such subsequent holder. The
ownership of the Securities shall be proven by the Register. For the purpose of
paying
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interest and principal on the Securities, the Issuer shall been titled to rely
on the names and addresses in the Register and notwithstanding anything to the
contrary contained in this Security, no Event of Default shall occur under
Section 3.1 if payment of principal is made in accordance with the names and
addresses and particulars contained in the Register.
No provision of this Security shall alter or impair the obligations of
the Issuer, which are absolute and unconditional, to pay the principal of and
accrued interest on this Security at the place, times, rate, and in the
currency, herein prescribed.
The principal of this Security shall bear interest at the rate (the
"Interest Rate") of two percent (2%) per annum, except in the case of an Event
of Default (as defined in Article III hereof), in which case the Interest Rate
of this Security shall thereafter be seven percent (7%) per annum (to the extent
that the payment of such interest shall be legally enforceable), which shall
accrue from the date of such Event of Default to the date such default has been
cured or waived and overdue principal, if any, has been paid or duly provided
for. Such interest will be computed on the basis of a 365-day year (or 366 days
in the case of a leap year). Interest on any overdue principal shall be payable
on demand. Payment of the principal of and any such interest on this Security
will be at the offices of the Holder of this Security.
Interest will be computed on the basis of a fraction, the denominator of
which is 365 (or 366 for any leap year)and the numerator of which is the actual
number of days elapsed from the date such interest becomes due and payable.
The applicable Interest Rate shall be effective both before and after
any judgment may be rendered in a court of competent jurisdiction, provided,
however, that if the applicable Interest Rate is deemed to be in excess of the
amount permitted to be charged by the Issuer under applicable laws, the Holder
shall be entitled to collect an Interest Rate only at the highest rate permitted
by law, and any interest collected by the Holder in excess of such lawful amount
shall be deemed a payment in reduction of the Principal Amount then outstanding
under this Security and shall be so applied.
The payment obligations evidenced by this Security shall rank senior to
all other Debt of the Issuer in existence as of the date of issuance of this
Security except that it shall rank junior to the Series A Zero-Coupon
Convertible Debentures issued December 10, 1998 and the Series B Zero-Coupon
Convertible Debentures issued June 17, 1999. The Issuer shall not hereafter and
while this Security is outstanding issue directly or indirectly any Debt for
Money Borrowed which is senior to the indebtedness evidenced by this Security.
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ARTICLE I
DEFINITIONS
1.1 CERTAIN TERMS DEFINED. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Security shall have the respective meanings specified below.
All accounting terms used herein and not expressly defined shall have the
meanings given to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" shall mean
such accounting principles which are generally accepted as of the date hereof.
The terms defined in this Section 1.1 include the plural as well as the
singular.
"Acceleration Notice" shall have the meaning set forth in Section 3.1.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition,"control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling"and "controlled" have meanings correlative to the
foregoing.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Values during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight.
"Board of Directors" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act hereunder.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the original
Issue Date, including, without limitation, all Common Stock and all Preferred
stock.
"Change of Control" means the occurrence of one or more of the following
events: the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Buyers or any of their
Affiliates, of in excess of 50% of the voting securities of the Issuer, (ii) a
replacement of more than one-half of the members of the Issuer's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
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transactions, (iii) the merger of the Issuer with or into another entity,
consolidation or sale of all or substantially all of the assets of the Issuer in
one or a series of related transactions or (iv) the execution by the Issuer of
an agreement to which the Issuer is a party or by which it is bound, providing
for any of the events set forth in (i), (ii) or (iii).
"Common Stock" means the common stock, par value $.001 per share, of the
Issuer.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Conversion Price" shall have the meaning set forth in Section 4.2.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee undercapitalized leases, (vi) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"Debt for Money Borrowed" of any Person means at any date, without
duplication, Debt of the type referred to in clauses (i) and (ii) of the
definition of "Debt" set forth herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" or "generally accepted accounting principles" means generally
accepted accounting principles in the United States, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession.
"Holder", "Holder of Securities", "Securityholder" or other similar
terms means the registered holder of any Security.
"Incurrence" means the incurrence, creation, assumption or in any other
manner becoming liable with respect to, or the extension of the maturity of or
becoming responsible for the payment of, any Debt. "Incur" shall have a
comparable meaning.
<PAGE> 5
"Issuer" shall have the meaning set forth in the first paragraph hereof.
"Issuer Conversion Notice" shall have the meaning set forth in Section
4.8.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Security, the Issuer shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Mandatory Prepayment Amount" for any Security means the greater of (i)
the sum of (x) 115% of the principal amount of the Security to be prepaid plus
all accrued and unpaid interest thereon and (y) all other amounts, costs,
interest, expenses and liquidated damages due in respect of such principal
amount and (ii) the sum of (x) at the option of the Holder, either (I) the
principal amount of the Security to be repaid, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on the date the Mandatory
Prepayment Amount is demanded or otherwise due, multiplied by the Average Price
on the date the Mandatory Prepayment Amount is demanded or otherwise due or (II)
the principal amount of the Security to be prepaid, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on the Trading Day immediately
prior to the date the Mandatory Prepayment Amount is paid in full, multiplied by
the Average Price on the Trading Day immediately prior to the date the Mandatory
Prepayment Amount is paid in full, and (y) all other amounts, costs, interest,
expenses and liquidated damages due in respect of such principal amount.
"Nasdaq" means the Nasdaq National Market.
"Original Issue Date" of any Security (or portion thereof) means the
earlier of (i) the date of such Security and (ii) the date of any Security (or
portion thereof) for which such security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Per Share Market Value" means (i) on any particular date the closing
bid price per share of the Common Stock on such date on Nasdaq or any Subsequent
Market on which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date or (ii) if the Common Stock is not listed
then on Nasdaq or any Subsequent Market, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good faith by
the holder of this Security; provided, however, that the Issuer, after receipt
of the determination by such appraiser, shall have the right to select an
additional appraiser, in
<PAGE> 6
which case, the fair market value shall be equal to the average of the
determinations by each such appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Security, and includes, without limitation, all classes and
series of preferred or preference stock.
"Principal", wherever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include "and premium, if
any."
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under generally accepted
accounting principles.
"Purchase Price" means, with respect to any Security, the purchase price
paid to the Issuer upon issuance of such Security.
"Purchaser" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Registration Rights Agreement" means that Registration Rights Agreement
dated as of September 30, 1999 by and between the Issuer and the Initial
Investor (as defined in the Registration Rights Agreement).
"Security" or "Securities" shall have the meaning set forth in the
second paragraph hereof.
"Stated Maturity Date" means September 30, 2002.
"Stock Plan" means any stock or compensation plan pursuant to which
Common Stock may be issued to any employee, officer, director or consultant of
the Issuer which is either (a) approved by the stockholders of the Issuer or (b)
approved by the compensation committee of the Issuer's Board of Directors for
legitimate compensation purposes which provides for the purchase of the Common
Stock at a purchase price of no less than 85% of the market price of the Common
Stock on the date of issuance of such option, warrant or security.
<PAGE> 7
"Subsidiary" means any corporation or other organization, whether
incorporated or unincorporated, in which the Issuer owns, directly or
indirectly, any equity or other ownership interest and which would be deemed to
be a "significant subsidiary" (as such term is defined in Rule 1-02(w) of
Regulation S-X promulgated under the Securities Act of 1933, as amended (the
"Securities Act")).
"Subsequent Market" means the New York Stock Exchange, American Stock
Exchange or Nasdaq SmallCap Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq or on such Subsequent Market on which the Common Stock is then listed or
quoted or (b) if the Common Stock is not listed on Nasdaq or a Subsequent
Market, a day on which the Common Stock is traded in the over-the-counter
Market, as reported by the OTC Bulletin Board, or (c) if the Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-countermarket as reported by the National Quotation Bureau Incorporated
(or any similar organization or agency succeeding its functions or reporting
prices) provided, however that in any event that the Common Stock is not listed
or quoted as set forth in (a), (b), or (c) hereof, then a Trading Day shall mean
any Business Day.
"Warrants" has the meaning set forth in the Purchase Agreement.
"Wholly-Owned Subsidiary" means with respect to any Person a Subsidiary
the voting stock of which is more than 90% owned by such Person.
ARTICLE II
PAYMENT; THE SECURITIES
2.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants and agrees
that it will duly and punctually pay or cause to be paid the principal and
interest (to the extent enforceable under applicable law), with respect to each
of the Securities at the place or places, at the respective times and in the
manner provided in the Securities.
2.2 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case
any temporary or definitive Security shall become mutilated, defaced or be
apparently destroyed, lost or stolen, the Issuer shall execute and deliver a new
Security, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security. In every case the applicant
for a substitute Security shall furnish to the Issuer such security or indemnity
as it may require to indemnify and defend and to save it harmless and, in every
case of destruction, loss or theft evidence to the Issuer's satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be
<PAGE> 8
imposed in relation thereto and any other expenses connected therewith. In case
any Security which has matured or is about to mature, or has been called for
redemption in full, or is being surrendered for conversion in full shall become
mutilated or defaced or be apparently destroyed, lost or stolen, the Issuer may,
instead of issuing a substitute Security, with the holder's consent, pay or
authorize the payment or conversion of the same (without surrender thereof
except in the case of a mutilated or defaced Security), if the applicant for
such payment shall furnish to the Issuer such security or indemnity as it may
require to save it harmless from all risks, however remote, and, in every case
of apparent destruction, loss or theft, the applicant shall also furnish to the
Issuer evidence to the Issuer's satisfaction of the apparent destruction, loss
or theft of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed, lost or
stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the apparently destroyed, lost or stolen Security shall be at any
time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Security
equally and proportionately with any and all other Securities duly authenticated
and delivered hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
defaced, or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.
2.3 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All Securities
surrendered for payment, redemption, registration of transfer or exchange shall
be delivered to the Issuer for cancellation and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Security. If the Issuer shall acquire any of the Securities, such acquisition
alone shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF
DEFAULT. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
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(a) default in the payment of all or any part of the principal
of or interest on any of the Securities as and when the same shall become due
and payable either at maturity, upon any redemption, by declaration or
otherwise; or
(b) failure on the part of the Issuer duly to observe or perform
any other of the covenants or agreements on the part of the Issuer contained in
this Security or the Purchase Agreement or the Registration Rights Agreement for
a period of five (5) Business Days after the date on which any officer of the
Issuer shall have obtained actual knowledge of such failure or after written
notice thereof has been given to the Issuer by the holders of at least a
majority in aggregate principal amount of the Securities then outstanding; or
(c) there shall have occurred with respect to any issue or
issues of Debt of the Issuer and/or one or more Subsidiaries having an
outstanding principal amount of $1,000,000 or more in the aggregate for all such
issues of all such Persons, whether such Debt now exists or shall hereafter be
created, an event of default which has caused the holder thereof to declare such
debt to be due and payable prior to its stated maturity and such Debt has not
been discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration; or
(d) a judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Issuer or any Subsidiary of the
Issuer in excess of $500,000 in the aggregate for all such judgments or orders
against all such Persons (treating any deductibles, self insurance or retention
as not so covered) that shall not be discharged, and all such judgments and
orders remain outstanding and there shall be any period of 30 consecutive days
following entry of the judgment or order in excess of $500,000 or the judgment
or order which causes the aggregate amount described above to exceed $500,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Issuer or any of its subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Issuer
or any of its Subsidiaries or for any substantial part of the property of the
Issuer or any of its Subsidiaries or ordering the winding up or liquidation of
the affairs of the Issuer or any of its Subsidiaries, and such decree or order
shall remain unstayed and in effect for a period of 30 consecutive days; or
(f) the Issuer or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Issuer or any of its Subsidiaries or for any
substantial part of the property of the Issuer or any of its
<PAGE> 10
Subsidiaries, or the Issuer or any of its Subsidiaries shall make any general
assignment for the benefit of creditors; or
(g) any representation, warranty, certification or statement
made by the Issuer in the Purchase Agreement or in any certificate, financial
statement or other document delivered pursuant to the Purchase Agreement shall
prove to have been incorrect in any material respect when made; or
(h) the Common Stock shall be delisted from Nasdaq or shall be
suspended from trading on Nasdaq without resuming trading and/or being relisted
thereon or on a Subsequent Market or having such suspension lifted, as the case
may be, within three Business Days; or
(i) (X) a Registration Statement for the Registrable Securities
(as defined in the Registration Rights Agreement) shall not have been declared
effective by the Securities and Exchange Commission (the "SEC") on or prior to
the 180th day after the Closing Date (as defined in the Purchase Agreement), or
(Y) the Issuer fails to obtain the effectiveness of any additional Registration
Statement (required to be filed pursuant to Section 3(b) of the Registration
Rights Agreement) within ninety (90) days after the Registration Trigger Date
(as defined in the Registration Rights Agreement), or (Z) any such Registration
Statement, after its initial effectiveness and during the Registration Period
(as defined in the Registration Rights Agreement), lapses in effect or sales of
all of the Registrable Securities (as defined in the Registration Rights
Agreement, the "REGISTRABLE SECURITIES") otherwise cannot be made thereunder
(whether by reason of the Issuer's failure to amend or supplement the prospectus
included therein in accordance with the Registration Rights Agreement, the
Issuer's failure to file and obtain effectiveness with the SEC of an additional
Registration Statement required to be filed pursuant to Section 3(b) of the
Registration Rights Agreement or otherwise) for more than thirty (30)
consecutive days or more than sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective, excluding for purposes of
clause (Z) above only, days during the Allowed Delay period (as defined in the
Registration Rights Agreement) and excluding for purposes of clauses (X) and (Y)
above only, a delay caused by Purchaser's failure to comply with Sections 3(h)
and 4(a) of the Registration Rights Agreement; or
(j) a Change of Control shall occur; or
(k) the Issuer shall fail to obtain the Authorization Approval
contemplated by Section 3.17 of the Purchase Agreement prior to March 31, 2000.
then, in each and every such case (other than an Event of Default specified in
Section 3.1(e) or 3.1(f)hereof), unless the principal shall have already become
due and payable, by notice in writing to the Issuer (the "Acceleration Notice"),
a Holder may declare the entire principal amount of the Securities and any
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default specified in Section 3.1(e) or 3.1(f) occurs, the principal
<PAGE> 11
of and any accrued interest on the Securities shall become and be immediately
due and payable without any declaration or other act on the part of any Holder.
In the event that the Issuer shall not have promptly, but in any event within
five (5) Business Days of receipt of an Acceleration Notice, paid the Holder the
amount specified herein as due and payable in respect of such Event of Default,
the Conversion Price shall automatically be adjusted to equal the average Per
Share Market Value of the Common Stock during the preceding thirty (30)
consecutive Trading Days; provided, that the Per Share Market Value is lower
than the Conversion Price.
The aggregate amount payable upon an Event of Default described in
Section 3.1(a), (e), (f) and (i) shall be equal to the sum of (I) the Mandatory
Prepayment Amount plus (II) the Mandatory Prepayment Amount for the principal
amount of the Securities (the "Converted Debentures") that would then be held by
such Holder had the principal amount of Securities converted into Debenture
Shares (as defined in the Purchase Agreement) that are then held by the Holder
not been so converted; provided, that the Holder shall not be entitled to a
Mandatory Prepayment Amount with respect to Converted Debentures if both the
following have occurred: (i) prior to the occurrence of an Event of Default, the
Debenture Shares into which the Converted Debentures were converted had been
held by the Holder for more than thirty (30) days (which period shall be
extended at the time of occurrence of the Event of Default for the number of
Trading Days during such 30-day period that an Allowed Delay (as defined in the
Registration Rights Agreement) is in effect) and (ii) prior to the occurrence of
the Event of Default and after receipt by the Holder of the Debenture Shares
that are held by the holder at the time of the occurrence of the Event of
Default, the Registration Statement with respect to such Conversion Shares had
been continuously effective for thirty (30) Trading Days.
The aggregate principal amount payable on each Event of Default other
than as described in Section 3.1(a), (e),(f) and (i) shall be equal to the sum
of (I) the Mandatory Prepayment Amount plus (II) the Mandatory Prepayment Amount
for the Converted Debentures that would then be held by such Holder had the
principal amount of Securities converted into Debenture Shares that are then
held by the Holder not been so converted; provided, that the holder shall not be
entitled to a Mandatory Prepayment Amount with respect to Converted Debentures
if prior to the occurrence of an Event of Default, the Debenture Shares into
which the Converted Debentures were converted had been held by the Holder for
more than three Trading Days (which period shall be extended at the time of
occurrence of the Event of Default for the number of Trading Days during such
3-day period that an Allowed Delay is in effect).
For purposes of this Section 3.1, principal amount of the Securities are
outstanding until such date as the holder shall have received Debenture Shares
upon a conversion (or attempted conversion) thereof. Interest shall accrue on
the prepayment amount hereunder from the day after such amount is due (being the
date of an Event of Default) through the date of payment in full thereof at the
rate of seven percent (7%) per annum, accruing daily from the date of conversion
until such amount, plus any interest thereon, if any, is paid in full. Payment
of the Mandatory Prepayment Amount pursuant to this Section 3.1 shall be in
addition to any other amounts that may be due to the Holder
<PAGE> 12
pursuant to this Security. Within five (5) Business Days of receipt by the
Holder of payments of amounts due to the Holder, (i) the Holder shall return the
Securities to the Issuer and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Issuer
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any demand for payment may be rescinded
and annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Upon delivery of any Acceleration Notice to the Issuer, the
Issuer shall provide a copy of such notice to the other Holders, if any. Failure
to deliver such notice shall not affect the validity of the notice delivered by
the Holders in accordance with the provisions referred to above.
3.2 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF
DEFAULT. No right or remedy herein conferred upon or reserved to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Securities or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1 RIGHT OF SECURITYHOLDERS TO EXCHANGE SECURITIES. Subject to and upon
compliance with the provisions of this Section, this Security is exchangeable
for an equal principal amount of debentures of different authorized
denominations, as requested by the holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
4.2 RIGHT OF SECURITYHOLDERS TO CONVERT SECURITIES INTO COMMON STOCK.
Subject to and upon compliance with the provisions of this Section, the
principal amount of this Security, or any portion thereof, together with accrued
but unpaid interest thereon,
<PAGE> 13
may, at any time and at or before the close of business on September 30, 2002,
be converted into duly authorized, validly issued, fully-paid and non-assessable
shares of Common Stock at $10.25 per share (the "Conversion Price"), or, in case
an adjustment in the Conversion Price and the securities or other property
issuable upon conversion has taken place pursuant to Article III or IV hereof,
then at the applicable Conversion Price, as adjusted, and in such securities or
other property as so adjusted, upon surrender to the Issuer at any time prior to
8:00 p.m., New York City time, on any Business Day at the Issuer's offices, of a
written notice of election to convert as provided in the form attached hereto as
Exhibit A (a "Conversion Notice"); provided, however, until the earlier of the
Authorization Date and March 31, 2000, the Holder of the Security shall not,
without the prior written consent of the Company, convert the Security into a
number of shares of Common Stock in excess of the number of shares of Common
Stock the Company has reserved for issuance pursuant to the terms of the
Security (but in no event shall such number of shares reserved be less than
1,189,009).
4.3 SURRENDER OF SECURITY UPON CONVERSION. Notwithstanding anything to
the contrary set forth herein, upon conversion of this Security in accordance
with the terms thereof, the Holder of this Security shall not be required to
physically surrender the Security to the Issuer unless the entire unpaid
principal amount of the Security is so converted. The Holder and the Issuer
shall maintain records showing the principal amount so converted and the dates
of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Issuer, so as not to require physical surrender of the
Security upon each such conversion. In the event of any dispute or discrepancy,
such records of the Issuer shall be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if any portion of the Security
is converted as aforesaid, the Holder may not transfer the Security unless the
Holder first physically surrenders the Security to the Issuer, whereupon the
Issuer will forthwith issue and deliver upon the order of the Holder a new
Security of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of the Security. The Holder and any assignee,
by acceptance of the Security, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of a Security,
the unpaid and unconverted principal amount of such Security represented by such
Security may be less than the amount stated on the face thereof.
4.4 ADJUSTMENT FOR DIVIDENDS. No payment or adjustment will be made for
dividends on any Common Stock except as provided herein. On conversion of a
Security, that portion of interest accrued and unpaid interest attributable to
the period from the Original Issuance Date to the Conversion Date with respect
to the converted Security shall not be canceled, extinguished or forfeited, but
rather shall be deemed to be paid in full to the Holder thereof through delivery
of the Common Stock, in exchange for the Security being converted pursuant to
the provisions hereof. If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of the Securities converted.
4.5 ISSUANCE OF SHARES UPON CONVERSION.
<PAGE> 14
(a) As promptly as practicable after the delivery of a
Conversion Notice, as herein provided, but in any event within three Trading
Days of the date of such Conversion Notice (so long as the Conversion Notice was
sent and confirmed via facsimile to the Issuer prior to 8:00 p.m., New York City
time, on the date specified therein as the conversion date), the Issuer shall
deliver or cause to be delivered at its said office or agency to or upon the
written order of the holder of the Security or Securities so converted a
certificate or certificates representing the number of duly authorized, validly
issued, fully-paid and non-assessable shares of Common Stock, into which such
Security or Securities may be converted in accordance with the provisions of
this Article IV. The Conversion Notice shall state that the holder irrevocably
elects to convert such Security or Securities, or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. Such notice shall also state the name or names (with address and
social security or other taxpayer identification number) in which said
certificate or certificates are to be issued. Such conversion shall be deemed to
have been made on the date specified in the Conversion Notice as the date of
conversion, the rights of the holder of such Security or Securities as a Holder
shall cease at such time, the person or persons entitled to receive the shares
of Common Stock upon conversion of such Security or Securities shall be treated
for all purposes as having become the record holder or holders of such shares of
Common Stock at such time and such conversion shall be at the Conversion Price
in effect at such time. In the case of any Security which is converted in part
only, upon such conversion, the Issuer shall execute and deliver to the holder
thereof, as requested by such holder, a new Security or securities of authorized
denominations in aggregate principal amount equal to the unconverted portion of
such Security.
(b) In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion of this Security, provided the Issuer'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 this Section 4.5, the Issuer
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 (to the extent not inconsistent with any
provisions of the Purchase Agreement).
4.6 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at
any time shall be subject to adjustment from time to time upon the occurrence of
an Event of Default as set forth in Article III and upon the happening of
certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Issuer, at any time while this Security is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Issuer, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common
<PAGE> 15
Stock (excluding treasury shares, if any) outstanding before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this paragraph 4.6(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Rights; Warrants. If the Issuer, during the period
commencing on the Closing Date through and including the date which is 15 months
from the Closing Date, shall issue rights or warrants to all of the holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than $10.00, the Conversion Price shall be multiplied
by a fraction, the denominator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at $10.00 per share. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this paragraph (b), if any such right or warrant
shall expire and all or any portion thereof shall not have been exercised, the
Conversion Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of section (g) after the issuance of such rights
or warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for subscription
or purchase only that number of shares of Common Stock (if any) actually
purchased upon the exercise of such rights or warrants actually exercised;
provided, however, that if (X) (1) the Registration Statement (as defined in the
Registration Rights Agreement) is then in effect and has been in effect and
sales of all of the Registrable Securities can be made thereunder for at least
twenty (20) Trading Days prior to a Trigger Date (as defined below); (2) the
Issuer has, at all times prior to the Trigger Date, a sufficient number of
authorized shares of Common Stock reserved for issuance upon full conversion of
all of the Securities issued pursuant to the Purchase Agreement; and (3) no
Event of Default shall have occurred and be continuing; and (Y) the Per Share
Market Value is greater than 150% of the Conversion Price in effect on the
Closing Date for any five (5) consecutive Trading Days prior to the 180th day
following the Closing Date (the last day of such five (5) consecutive Trading
Day period being referred to herein as the "Trigger Date"), then this provision
shall expire automatically on the 180th day following the Closing Date.
(c) Subscription Rights. If the Issuer, during the period
commencing on the Closing Date through and including the date which is 15 months
from the Closing
<PAGE> 16
Date, shall distribute to all of the holders of Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in paragraphs 6(a) and (b) above), then in
each such case the Conversion Price at which this Security shall thereafter be
exercisable shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction the denominator of which
shall be the Per Share Market Value of Common Stock determined as of the record
date mentioned above, and the numerator of which shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Issuer, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (an "Appraiser") selected in good faith by
the Holder of the Security; and provided, further, that the Issuer, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser meeting the same qualifications, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above; provided, however, that if (X) (1) the Registration
Statement (as defined in the Registration Rights Agreement) is then in effect
and has been in effect and sales of all of the Registrable Securities can be
made thereunder for at least twenty (20) Trading Days prior to a Trigger Date;
(2) the Issuer has, at all times prior to the Trigger Date, a sufficient number
of authorized shares of Common Stock reserved for issuance upon full conversion
of all of the Securities issued pursuant to the Purchase Agreement; and (3) no
Event of Default shall have occurred and be continuing; and (Y) the Per Share
Market Value is greater than 150% of the Conversion Price in effect on the
Closing Date for any five (5) consecutive Trading Days prior to the 180th day
following the Closing Date, then this provision shall expire automatically on
the 180th day following the Closing Date.
(d) Rounding. All calculations under this section 4.6 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case maybe.
(e) Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to paragraphs 4.6(a), (b), (c) or (g), the Issuer shall
promptly mail to the holder of this Security, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(f) Reclassification, Etc. If:
A. the Issuer shall declare a dividend (or any other
distribution) on its Common Stock; or
<PAGE> 17
B. the Issuer shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
C. the Issuer shall authorize the granting to all the holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
D. the approval of any shareholders of the Issuer shall be
required in connection with any reclassification of the
Common Stock of the Issuer, any consolidation or merger to
which the Issuer is a party, any sale or transfer of all or
substantially all of the assets of the Issuer, of any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
E. the Issuer shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Issuer;
then the Issuer shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Security, and shall cause to be mailed to the
holder of this Security, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
(g) Adjustment to Conversion Price. In order to prevent dilution
of the rights granted under this Security, during the period commencing on the
Closing Date through and including the date which is 15 months from the Closing
Date, the Conversion Price will be subject to adjustment from time to time as
provided in this Section 4.6(g); provided, however, that if (X) (1) the
Registration Statement (as defined in the Registration Rights Agreement) is then
in effect and has been in effect and sales of all of the Registrable Securities
can be made thereunder for at least twenty (20) Trading Days prior to a Trigger
Date; (2) the Issuer has, at all times prior to the Trigger Date, a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of all of the Securities issued pursuant to the Purchase Agreement;
and (3) no Event of Default shall have occurred and be continuing; and (Y) the
Per Share Market Value is greater than 150% of the Conversion Price in effect on
the Closing Date for any
<PAGE> 18
five (5) consecutive Trading Days prior to the 180th day following the Closing
Date, then this provision shall expire automatically on the 180th day following
the Closing Date:
(i) Adjustment of Conversion Price upon Issuance of
Common Stock. If, during the period commencing on the Closing Date through and
including the date which is 15 months from the Closing Date, the Issuer issues
or sells, or is deemed to have issued or sold, any shares of Common Stock (other
than the Debenture Shares and the Warrant Shares (each as defined in the
Purchase Agreement) or shares of Common Stock deemed to have been issued by the
Issuer in connection with a Stock Plan, shares of Common Stock issuable upon the
exercise of any options or warrants outstanding on the date hereof or upon
conversion of convertible securities outstanding on the date hereof, in each
case as listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued in a Strategic Venture (as defined
below), or shares of Common Stock issued or deemed to have been issued as
consideration for an acquisition by the Issuer of a division, assets or business
(or stock constituting any portion thereof) from another person) for a
consideration per share less than $10.00, then immediately after such issue or
sale, the Conversion Price then in effect shall be reduced to an amount equal to
the consideration per share of Common Stock in such issuance or sale. A
"Strategic Venture" shall mean a venture between the Issuer and a pharmaceutical
or biotechnology company or an Affiliate thereof, the primary purpose of which
is not to raise capital in the form of equity (including without limitation
through the issuance of warrants, convertible securities, phantom stock rights,
stock appreciation rights or other rights with equity features) and pursuant to
which the Issuer contributes to or issues securities of the Issuer valued at
less than 50% of the entire contribution of the Issuer. If the Holder and the
Issuer cannot agree on the value of the components of such contribution, the
last two sentences of subsection (E)(I) entitled "Calculation of Consideration"
shall apply.
For purposes of determining the adjusted Conversion Price under this
Section 4.6(g), the following shall be applicable:
(A) Issuance of Options. If, during the period commencing on the
Closing Date through and including the date which is 15 months from the
Closing Date, the Issuer in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (other than
the Debenture Shares or Warrant Shares or shares of Common Stock deemed
to have been issued by the Issuer in connection with a Stock Plan,
shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person or shares of
Common Stock issued or deemed to have been issued in a Strategic
Venture) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
<PAGE> 19
"Convertible Securities") and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than $10.00, then the
Conversion Price shall be adjusted to equal the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities. No adjustment
of the Conversion Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If, during the period
commencing on the Closing Date through and including the date which is
15 months from the Closing Date, the Issuer in any manner issues or
sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange (other than
the Debenture Shares or Warrant Shares or shares of Common Stock deemed
to have been issued by the Issuer in connection with a Stock Plan,
shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person or shares of
Common Stock issued or deemed to have been issued in a Strategic
Venture) is less than $10.00, then the Conversion Price shall be
adjusted to equal the price per share for which Common Stock is issuable
upon the conversion or exchange of such Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there is a
change during the period commencing on the Closing Date through and
including the date which is 15 months from the Closing Date in (i) the
purchase price provided for in any Options, (ii) the additional
consideration, if any, payable upon the issue, conversion or exchange of
any Convertible Securities or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock, then
the Conversion Price in effect at the time of such change shall be
readjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially
granted, issued or sold; provided that no adjustment shall be made if
such adjustment would result in an increase of the Conversion Price then
in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Conversion Price under this Section 4.6(g)(i), "Common Stock
Deemed Outstanding" means, at any given time, the number of shares of
Common Stock issued and outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections
4.6(g)(i)(A) and 4.6(g)(i)(B) hereof
<PAGE> 20
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock
issuable upon conversion of the Securities or exercise of the Warrants.
(E) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Conversion Price under this Section 4.6(g)(i),
the following shall be applicable:
(I) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor
will be deemed to be the net amount received by the Issuer therefor. In
case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Issuer will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Issuer will be the arithmetic average of the Per Share Market Values of
such security for the five (5) consecutive Trading Days immediately
preceding the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Issuer is the
surviving entity, the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly
by the Issuer and the holders of a majority of the Underlying Shares of
the Securities then outstanding. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an Appraiser selected
by the Issuer. The determination of such Appraiser shall be binding upon
all parties absent manifest error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Issuer, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or
held by or for the account of the Issuer, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Issuer takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or
<PAGE> 21
(2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Certain events. If any event occurs of the type
contemplated by the provisions of Section 4.6(g)(i) (subject to the exceptions
stated therein) but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features other than pursuant to a Stock
Plan), then the Issuer's Board of Directors will make an appropriate adjustment
in the Conversion Price so as to protect the rights of the Holder, or assigns,
of this Security; provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 4.6(g).
In no event shall any provision in this Section 4.6 cause the Conversion
Price to be greater than the Conversion Price on the date of issuance of this
Security.
4.7 NASDAQ LIMITATION. If on any date (the "Determination Date") (a) the
Common Stock is listed for trading on Nasdaq or the Nasdaq Small Cap Market, (b)
the Conversion Price then in effect is such that the sum of (x) the aggregate
number of shares of Common Stock that would then be issuable upon conversion in
full of the then outstanding principal amount of the Securities and as payment
of interest thereon, plus (y) the aggregate number of shares of Common Stock
that have previously been issued upon conversion of the Securities, plus (z) any
shares of Common Stock issued or issuable upon conversion of any other
securities of the Issuer (excluding the warrants issued by the Issuer pursuant
to that certain Securities Purchase Agreement, dated as of December 10, 1998,
and the warrants issued pursuant to the Purchase Agreement) which would be
aggregated with the Common Stock issuable upon conversion of the Securities as
required by the applicable rules and regulations of Nasdaq (or any successor
entity), would equal or exceed 20% of the number of shares of the Common Stock
outstanding immediately prior to the Closing Date (as defined in the Purchase
Agreement) (such number of shares as would not equal or exceed such 20% limit,
the "Issuable Maximum"), and (c) the Issuer shall not have previously obtained
the vote of the stockholders of the Issuer (the "Stockholder Approval"), if any,
as may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common Stock are
deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
aggregate principal amount of the Securities then held by the Holders for which
a conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of the Issuable Maximum (the "Excess
Principal") the Issuer may elect to prepay cash to the holders in an amount
equal to the Mandatory Prepayment Amount. Any such election by the Issuer must
be made in writing to the Holders within two Trading Days after the
Determination Date and the payment of such Mandatory Prepayment Amount
applicable to such prepayment must be
<PAGE> 22
made in full to the Holders with ten (10) Business Days after the date such
notice is delivered. If the Issuer does not deliver timely a notice of its
election to prepay under this Section or shall, if it shall have delivered such
a notice, fail to pay the prepayment amount hereunder within ten (10) Business
Days thereafter, then the Holders of a majority of the aggregate principal
amount of the Securities then outstanding shall have the option by written
notice to the Issuer, to declare any such notice given by the Issuer, if given,
to be null and void and require the Issuer to pay cash to each Holder in an
amount equal to the Mandatory Prepayment Amount for such Holder's portion of the
Excess Principal. The payment of the Mandatory Prepayment Amount to each Holder
pursuant to this Section shall be determined on a pro rata basis upon the
principal amount of the Securities held by such Holder on the determination
Date. If the Issuer fails to pay the Mandatory Prepayment Amount in full
pursuant to this Section within five Business Days after the date payable, the
Issuer will pay interest thereon at a rate of seven percent (7%) per annum to
the converting Holder, accruing interest daily from the date of conversion until
such amount, plus all such interest thereon, if any, is paid in full.
In no event shall the Issuer be required to issue shares of
Common Stock upon conversion of the Securities if such issuance would violate
the rules of the Nasdaq Stock Market.
4.8 CONVERSION AT THE OPTION OF THE ISSUER. Subject to the provisions of
this paragraph, this Security shall, upon ten (10) days' prior written notice to
the Holders, be convertible into shares of Common Stock at the option of the
Issuer, in whole or in part, which option may be exercised at any time during
the five business days following the date on which the Per Share Market Value of
the Common Stock equals or exceeds an amount equal to 175% of the Conversion
Price as of the Original Issuance Date of this Security for a period of ten (10)
consecutive Trading Days. Any conversion of this Security pursuant to this
Section 4.8 shall be made on a pro rata basis with the conversion of the
Securities held by other Persons. The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by dividing the outstanding
principal amount of this Security to be converted, plus all accrued but unpaid
interest thereon (to the extent such interest is not being paid in cash), by the
Conversion Price on the Issuer Conversion Date (as defined herein).
Notwithstanding the foregoing, the Issuer shall not be permitted to deliver
requests for the conversion of a Holder's Securities if (a) both (1) a
Registration Statement for the Registrable Securities is not then effective and
has not been effective for a period of at least ninety (90) consecutive Trading
Days prior to such date and (2) such Holder is not permitted to resell
Registrable Securities pursuant to Rule 144(k) under the Act, without volume
restrictions, as evidenced by an opinion letter of counsel to the Issuer and
reasonably acceptable to the Holder and transfer agent for the Common Stock; (b)
there are not sufficient shares of Common Stock authorized and reserved for
issuance upon such conversion; or (c) the Issuer shall have defaulted on its
material covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement, which default has not been cured in full to the
reasonable satisfaction of the Holder. The Issuer shall exercise its right to
require conversion by delivering to the Holder a form of conversion notice
attached hereto as Exhibit B (the "Issuer Conversion Notice"). Each issuer
Conversion Notice shall specify the principal
<PAGE> 23
amount of Securities to be converted and the date on which such conversion is to
be effected, which date may not be prior to the tenth day after the date such
Issuer Conversion Notice is deemed to have been delivered hereunder (the "Issuer
Conversion Date"), as well as the other information set forth on Exhibit B.
Subject to the provisions hereof, each Issuer Conversion Notice, once given,
shall be irrevocable. If the Issuer is requiring conversion of less than all of
the principal amount represented by the Securities tendered by the Holder in
response to an Issuer Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Issuer shall honor such conversion to the
extent permissible hereunder and pro rata with all other Holders of the
Securities and shall promptly deliver to such Holder a new Security for such
principal amount as has not yet been converted.
4.9 RESTRICTION ON CONVERSION BY THE HOLDER. Notwithstanding anything in
this Security to the contrary, in no event shall the Holder of this Security be
entitled to convert an amount of Securities in excess of that amount of
Securities upon conversion of which the sum of (i) 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 unexercised Securities and the unexercised or unconverted
portion of any other securities of the Issuer (including the Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise of
the Securities (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 9.9% of the outstanding shares of Common
Stock following such conversion. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13D-G thereunder, except as otherwise
provided in clause (i) hereof.
4.10 OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 4.6,
the Issuer shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Issuer and by the secretary or any assistant secretary of the Issuer. Each such
officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first class mail, of such certificate to
the each of the Holders.
4.11 RESERVATION OF SHARES. The Issuer covenants that it will (i) from
the Closing Date to the Authorization Date (as defined in the Purchase
Agreement) reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of this Security and the exercise of the Warrants, a minimum of
1,189,009 shares of the Common Stock and (ii) at all times after the
Authorization Date, reserve and keep available out of its authorized shares of
<PAGE> 24
Common Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of the Securities as herein provided, such number of shares of the
Common Stock as shall be equal to 125% of the shares then issuable upon the
conversion of all the Securities into Common Stock. The Issuer covenants that
all shares of the Common Stock issued upon conversion of the Security which
shall be so issuable shall, when issued, be duly and validly issued and fully
paid and non-assessable.
4.12 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Issuer covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Securities hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Issuer will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
4.13 FRACTIONAL SHARES. Upon a conversion hereunder, the Issuer shall
not be required to issue stock certificates representing fractions of shares of
the Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market value at such
time. If the Issuer elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
4.14 PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of certificates
for shares of the Common Stock on conversion of the Securities shall be made
without charge to the Holders thereof for any documentary stamp or similar taxes
that maybe payable in respect of the issue or delivery of such certificate,
provided that the Issuer shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of such
Securities so converted and the Issuer shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
4.15 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Issuer to Geron
Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David
Greenwood, fax no. (650) 473-7701 with copies to Cooley Godward LLP, 5 Palo Alto
Square, 3000 El Camino Real, Palo Alto, CA 94306 attn: Alan C. Mendelson, Esq.,
fax no. (650) 857-0663 and (ii) if to any Holder to the address set forth
immediately below
<PAGE> 25
such Holder's name on the signature pages to the Purchase Agreement or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
ARTICLE V
MISCELLANEOUS
5.1 MODIFICATION OF SECURITIES. The Securities may be modified without
prior notice to any Holder upon the written consent of the Holders of a majority
in principal amount of the Securities then outstanding. The Holders of a
majority in principal amount of the Securities then outstanding may waive
compliance by the Issuer with any provision of the Securities without prior
notice to any Holder. However, without the consent of each Holder affected, an
amendment, supplement or waiver may not (1) reduce the amount of Securities
whose Holders must consent to an amendment, supplement or waiver, (2) reduce the
principal amount of or extend the fixed maturity of any Security or (3) make any
Security payable in money or property other than as stated in the Securities.
5.2 MISCELLANEOUS. This Security shall be deemed to be a contract under
the laws of the State of Delaware, and for all purposes shall be construed in
accordance with the laws of said State, except as may otherwise be required by
mandatory provisions of law. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Security, except as specifically provided herein, and assent
to extensions of the time of payment, or forbearance or other indulgence without
notice. The Holder of this Security by acceptance of this Security agrees to be
bound by the provisions of this Security which are expressly binding on such
Holder.
5.3 SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In determining
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any direction, consent or waiver under this Security,
Securities which are owned by the Issuer or any other obligor on the Securities
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided that any Securities owned by any Purchaser shall be
deemed outstanding for purposes of making such a determination. Securities so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Issuer the pledgers right so
to act with respect to such Securities and that the pledgee is not the Issuer or
any other obligor upon the securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer or any other obligor on the Securities.
5.4 EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
5.5 NO RIGHTS AS STOCKHOLDER. This Security shall not entitle the Holder
to any rights as a stockholder of the Issuer, including without limitation, the
right to vote, to
<PAGE> 26
receive dividends and other distributions, or to receive notice of, or to
attend, meetings of stockholders or any other proceedings of the Issuer, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
5.6 REMEDIES. The Issuer acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, or assigns, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Issuer acknowledges that the remedy at law for breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened breach by the Issuer of any of the provisions hereunder, that the
Holder, or assigns, shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure
breaches of the provisions of this Security and to enforce specifically the
terms and provisions hereof, without the necessity of showing economic loss and
without any bond or other security being required.
5.7 ALLOCATION OF RESERVED SHARES. Prior to the Authorization Date, the
holder of this Security shall not transfer this Security, or any portion
thereof, without obtaining a prior written agreement with such transferee as to
the allocation of shares of Common Stock reserved for issuance upon conversion
of this Security and upon exercise of the Warrants and providing notice to the
Issuer thereof.
<PAGE> 27
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
GERON CORPORATION
[Seal]
By
/s/ David L. Greenwood
------------------------------------
Name: David L. Greenwood
Title: Chief Financial Officer
Dated:
Attest:
/s/ Olivia Bloom
<PAGE> 28
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Two Percent (2%) Convertible Debentures)
Pursuant to the terms of the Series C Two Percent (2%) Convertible
Debenture (the "Security"), the undersigned hereby irrevocably elects to convert
$ __________ principal amount of the Security into shares of Common Stock of
Geron Corporation, a Delaware corporation (the "ISSUER"). Capitalized terms used
herein and not otherwise defined herein have the respective meanings provided in
the Security. 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 the Security is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned hereby irrevocably elects to convert $___________ in
accrued but unpaid interest on the Security and/or $___________ in payments
pursuant to Section 2(c) of the Registration Rights Agreement at the Conversion
Price, as adjusted, set forth below.
[ ] The undersigned hereby requests that the Issuer electronically transmit the
Common Stock issuable pursuant to this Notice of Conversion to the account of
the undersigned or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DWAC Transfer").
Name of DTC Prime Broker: _________________________________
Account Number: ___________________________________________
[ ] In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Issuer issue a certificate or certificates for the
number of shares of Common Stock set forth above (which numbers are
based on the Holder's calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto:
Name: _____________________________________________________
Address: __________________________________________________
__________________________________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Security 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: _______________________________________
Applicable Conversion Price: ______________________________
<PAGE> 29
Number of Shares of Common Stock to be Issued pursuant to:
(i) Conversion of principal amount of the Security:
___________________________________________________________
(ii) Conversion of accrued but unpaid interest on the
Security and/or payments pursuant to Section 2(c) of the
Registration Rights Agreement:
Signature: ________________________________________________
Name: _____________________________________________________
Address: __________________________________________________
*If the entire unpaid principal amount of the Security is to be converted, the
Issuer is not required to issue shares of Common Stock until the original
Security (or evidence of loss, theft or destruction thereof) to be converted is
received by the Issuer or its Transfer Agent. The Issuer shall issue and deliver
shares of Common Stock to an overnight courier not later than three (3) Trading
Days following receipt of the original Security to be converted, and interest
shall accrue at the applicable Interest Rate pursuant to the Security for the
number of Trading Days such issuance and delivery is late.
<PAGE> 1
EXHIBIT 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE ACT.
September 30, 1999 Right to
Purchase
1,000,000 Shares
of Common Stock,
par value $0.001
per share
GERON CORPORATION
STOCK PURCHASE WARRANT
Registered Owner:
This warrant is a duly authorized warrant (the "Warrant") of Geron
Corporation, a Delaware corporation (the "Company") referred to in the
Securities Purchase Agreement (the "Purchase Agreement") dated as of September
30, 1999 by and between the Company and the Purchaser (as defined in the
Purchase Agreement). This Warrant is subject to the terms and conditions of the
Purchase Agreement, a copy of which is on file at and may be obtained from the
Company at its principal office at the address set forth in Section 11 hereof.
This certifies that, for value received the Company grants the following rights
to the Registered Owner, or assigns, of this Warrant:
1. ISSUE. Upon tender (as defined in section 5 hereof) to the Company, the
Company shall issue to the Registered Owner, RGC International Investors, LDC,
or assigns, up to the number of shares specified in paragraph 2 hereof of fully
paid and non-assessable shares of Common Stock, par value $.001 per share
("Common Stock"), that the Registered Owner, or assigns, is otherwise entitled
to purchase.
2. NUMBER OF SHARES. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is 1,000,000 shares of common Stock, subject to
adjustment from time to time as set forth in paragraph 6 below. Until the
earlier of the Authorization Date and March 31, 2000, the Registered Owner of
the Warrant shall not, without the prior written consent of the Company, convert
the Warrant into a number of shares of Common Stock in excess of the number of
shares of Common Stock the Company has reserved for issuance pursuant to the
terms of the Warrant (but in no event shall such number of shares reserved be
less than 1,189,009). The Company shall at all times (i) from the Closing Date
(as defined in the Purchase Agreement) through and including the Authorization
Date (as defined in the Purchase Agreement), reserve a minimum of
1
<PAGE> 2
1,189,009 shares of its authorized but unissued Common Stock to satisfy the
exercise or purchase rights under this Warrant and the conversion or purchase
rights under the Debentures (as defined below) and (ii) after the Authorization
Date, reserve and hold available such number of shares of Common Stock
sufficient to satisfy all conversion and purchase rights represented by
outstanding convertible securities, options and warrants, including this
Warrant. For this Warrant, such number of shares shall be equal to 125% of the
shares for which it may then be exercised. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of this Warrant
shall, upon issuance, be duly and validly issued, fully paid and non-assessable,
and free from all taxes, liens and charges with respect to the purchase and the
issuance of the shares.
3. EXERCISE PRICE. The initial exercise price of this Warrant, the price at
which the shares of stock issuable upon exercise of this Warrant may be
purchased, is $12.50 and subject to adjustment from time to time pursuant to the
provisions of paragraph 6 below (the "Exercise Price").
3A. PAYMENT OF EXERCISE PRICE. The Registered Owner may pay the Exercise
Price in one of the following manners:
(i) Cash Exercise. The Registered Owner shall deliver immediately
available funds or a check payable to the Company; or
(ii) Cashless Exercise. At such time as, but only at such time as,
after the 120th day after the date of issuance of this Warrant, all of the
Registerable Securities (as defined in the Registration Rights Agreement)
are not registered pursuant to an effective registration statement, the
Registered Owner shall have the right to surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Registered Owner the number of Warrant Shares
determined as follows:
where: X = Y (A-B)/A
X = the number of Warrant Shares (as defined in
the Purchase Agreement) to be issued to the
Registered Owner
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised
A = the average of the Per Share Market Value of
the Common Stock for the five (5) Trading Days
immediately prior to (but not including) the date
of exercise
B = the Exercise Price
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Registered
Owner, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date to the extent permitted by Rule 144.
2
<PAGE> 3
4. EXERCISE PERIOD. This Warrant may be exercised at any time and from time
to time during the period beginning on September 30, 1999 and up to and
including the date which is 540 days after the Authorization Date (the "Exercise
Period"). If not exercised during this period, this Warrant and all rights
granted under this Warrant shall expire and lapse.
5. TENDER. This Warrant may be exercised, in whole or in part, by actual
delivery of (i) the Exercise Price in cash, (ii) a duly executed Warrant
Exercise Form, a copy of which is attached to this Warrant as Exhibit A,
properly executed by the Registered Owner, or assigns, of this Warrant, and
(iii) by surrender of This Warrant. The payment and Warrant Exercise Form must
be delivered, personally or by mail, to the registered office of the Company.
Documents sent by mail shall be deemed to be delivered when they are received by
the Company. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
6. ADJUSTMENT OF EXERCISE PRICE.
(a) Common Stock Dividends; Common stock Splits; Reverse Common Stock
Splits. If the Company, at any time while this Warrant is outstanding, (a) shall
pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company, the
Exercise Price shall be multiplied by a fraction the numerator of which shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this paragraph (6)(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rights; Options; Warrants. If the Company, during the period
commencing on the Closing Date (as defined in the Purchase Agreement) through
and including the date which is 12 months from the Authorization Date, shall
issue rights or warrants to all of the holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
$10.00, the Exercise Price shall be multiplied by a fraction, the denominator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at $10.00 per
share. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Exercise Price pursuant
to this paragraph
3
<PAGE> 4
(6)(b), if any such right or warrant shall expire and all or any portion thereof
shall not have been exercised, the Exercise Price shall immediately upon such
expiration be re-computed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the provisions of Section
6(g) after the issuance of such rights or warrants) had the adjustment of the
Exercise Price made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that number of shares of
Common Stock (if any) actually purchased upon the exercise of such rights or
warrants actually exercised; provided, however, that if (X) (1) the Registration
Statement (as defined in the Registration Rights Agreement) is then in effect
and has been in effect and sales of all of the Registrable Securities (as
defined in the Registration Rights Agreement) can be made thereunder for at
least twenty (20) Trading Days prior to a Trigger Date (as defined below); (2)
the Company has, at all times prior to the Trigger Date, a sufficient number of
authorized shares of Common Stock reserved for issuance upon full conversion of
all of the Securities (as defined in the Purchase Agreement) issued pursuant to
the Purchase Agreement; and (3) no Event of Default shall have occurred and be
continuing; and (Y) the Per Share Market Value is greater than 150% of the
Conversion Price (as defined in the debentures issued pursuant to the Purchase
Agreement (the "Debentures")) in effect on the Closing Date for any five (5)
consecutive Trading Days prior to the 180th day following the Authorization Date
(the last day of such five (5) consecutive Trading Day period being referred to
herein as the "Trigger Date"), then this provision shall expire automatically on
the 180th day following the Authorization Date.
(c) Subscription Rights. If the Company, during the period commencing
on the Closing Date (as defined in the Purchase Agreement) through and including
the date which is 12 months from the Authorization Date, shall distribute to all
of the holders of Common Stock evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security (excluding those referred
to in paragraphs 6(a) and (b) above), then in each such case the Exercise Price
at which the Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing (an
"Appraiser") selected in good faith by the Registered Owner of the Warrant; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser meeting the
same qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above; provided, however,
that if (X) (1) the Registration Statement (as defined in the Registration
Rights Agreement) is then in
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<PAGE> 5
effect and has been in effect and sales of all of the Registrable Securities (as
defined in the Registration Rights Agreement) can be made thereunder for at
least twenty (20) Trading Days prior to a Trigger Date; (2) the Company has, at
all times prior to the Trigger Date, a sufficient number of authorized shares of
Common Stock reserved for issuance upon full conversion of all of the Securities
(as defined in the Purchase Agreement) issued pursuant to the Purchase
Agreement; and (3) no Event of Default shall have occurred and be continuing;
and (Y) the Per Share Market Value is greater than 150% of the Conversion Price
(as defined in the Debentures) in effect on the Closing Date for any five (5)
consecutive Trading Days prior to the 180th day following the Authorization
Date, then this provision shall expire automatically on the 180th day following
the Authorization Date.
(d) Rounding. All calculations under this section 6 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Exercise Price is adjusted
pursuant to paragraphs 6(a), (b), (c) or (h), the Company shall promptly mail to
the holder of the Warrant, a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Upon each adjustment of the Exercise Price pursuant paragraphs 6(a),
(b), (c) or (h), the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(f) Redemption Events. In case of (A) any reclassification of the
Common Stock, (B) any consolidation or merger of the Company with or into
another person pursuant to which (i) a majority of the Company's Board of
Directors will not constitute a majority of the board of directors of the
surviving entity or (ii) less than 51% of the outstanding shares of the capital
stock of the surviving entity will be held by the same shareholders of the
Company prior to such reclassification, consolidation or merger, (C) the sale or
transfer of all or substantially all of the assets of the Company, (D) any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, (E) suspension from listing or delisting of
the Common Stock from the National Market System of the Nasdaq Stock Market
("Nasdaq") or any other exchange on which the Common Stock is listed for a
period of five (5) consecutive Trading Days, (F) the Company's notice to any
Registered Owner, including by way of public announcement, at any time, of its
intention, for any reason, not to comply with proper requests for the exercise
of any such warrants, or (G) a breach by the Company of any representation,
warranty, covenant or other term or condition of the Purchase Agreement, the
Registration Rights Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
thereby or hereby, except to the extent that such breach would not have a
Material Adverse Effect (as defined in Section 3(a) of the Purchase Agreement)
and except, in the case of a breach of a covenant which is curable, only if such
breach continues for a period of at least ten (10) days after the Company knows
or reasonably should have known of the existence of such breach (clauses (A)
through (G) above referred to as a "Redemption Event"), the holder of the
Warrant shall have the right thereafter to exercise the Warrant within ten (10)
Business Days of the Redemption Event for the shares of stock and other
5
<PAGE> 6
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Redemption Event, and the holder of the Warrant
shall be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the Warrant
could have been converted immediately prior to such Redemption Event would have
been entitled.
(g) Reclassification, Etc. If:
A. the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
B. the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all of the holders of
the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; or
D. the approval of any shareholders of the Company shall be required
in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be mailed to the
holder of this Warrant at its address as it shall appear below, at least thirty
(30) calendar days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any material
non-public information) stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to betaken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(h) Adjustment to Exercise Price. If the Company, during the period
commencing on the Closing Date (as defined in the Purchase Agreement) through
and including the date which is 12 months from the Authorization Date, takes any
of the actions described in this Section 6(h), then, in order to prevent
dilution of the rights granted under this Warrant, the
6
<PAGE> 7
Exercise Price will be subject to adjustment from time to time as provided in
this Section 6(h); provided, however, that if (X) (1) the Registration Statement
(as defined in the Registration Rights Agreement) is then in effect and has been
in effect and sales of all of the Registrable Securities (as defined in the
Registration Rights Agreement) can be made thereunder for at least twenty (20)
Trading Days prior to a Trigger Date; (2) the Company has, at all times prior to
the Trigger Date, a sufficient number of authorized shares of Common Stock
reserved for issuance upon full conversion of all of the Securities (as defined
in the Purchase Agreement) issued pursuant to the Purchase Agreement; and (3) no
Event of Default shall have occurred and be continuing; and (Y) the Per Share
Market Value is greater than 150% of the Conversion Price (as defined in the
Debentures) in effect on the Closing Date for any five (5) consecutive Trading
Days prior to the 180th day following the Authorization Date, then this
provision shall expire automatically on the 180th day following the
Authorization Date:
(i) Adjustment of Exercise Price upon Issuance of Common Stock. If,
during the period commencing on the Closing Date (as defined in the
Purchase Agreement) through and including the date which is 12 months from
the Authorization Date, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock (other than the Debenture Shares
or Warrant Shares (each as defined in the Purchase Agreement) or shares of
Common Stock deemed to have been issued by the Company in connection with a
Stock Plan (as defined below), shares of Common Stock issuable upon the
exercise of any options or warrants outstanding on the date hereof or upon
conversion of convertible securities outstanding on the date hereof, in
each case as listed in Schedule 2.1(c) of the Purchase Agreement (as
defined below), shares of Common Stock issued or deemed to have been issued
in a Strategic Venture (as defined below), or shares of common Stock issued
or deemed to have been issued as consideration for an acquisition by the
Company of a division, assets or business (or stock constituting any
portion thereof) from another person) for a consideration per share (the
"New Issuance Price") less than $10.00, then immediately after such issue
or sale, the Exercise Price then in effect shall be reduced to an amount
equal to 120% of the New Issuance Price. A "Strategic Venture" shall mean a
venture between the Company and a pharmaceutical or biotechnology company
or an Affiliate thereof, the primary purpose of which is not to raise
capital in the form of equity (including without limitation through the
issuance of warrants, convertible securities, phantom stock rights, stock
appreciation rights or other rights with equity features) and pursuant to
which the Company contributes or issues securities of the Company valued at
less than 50% of the entire contribution of the Company. If the Registered
Holder and the Company cannot agree on the value of the components of such
contribution, the last two sentences of subsection (F)(I) entitled
"Calculation of Consideration" shall apply.
If, during the period commencing on the Closing Date (as defined in
the Purchase Agreement) through and including the date which is 12 months from
the Authorization Date, the Company issues or sells, or is deemed to have issued
or sold, any shares of Common Stock (other than Debenture Shares or Warrant
Shares, shares of Common Stock deemed to have been issued by the Company in
connection with a Stock Plan or shares of Common Stock issuable upon the
exercise of any options or warrants outstanding on the date hereof and listed in
Schedule 2.1(c) of the Purchase Agreement) then, for purposes of determining the
adjusted Exercise Price
7
<PAGE> 8
under this Section 6(h)(i), the following shall be applicable:
(A) Issuance of Options. If, during the period commencing on the
Closing Date (as defined in the Purchase Agreement) through and including
the date which is 12 months from the Authorization Date, the Company in any
manner grants any rights or options to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock (other than the Debenture Shares or Warrant Shares or shares
of Common Stock deemed to have been issued by the Company in connection
with a Stock Plan, shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock
issued or deemed to have been issued as consideration for an acquisition by
the Company of a division, assets or business (or stock constituting any
portion thereof) from another person or shares of Common Stock issued or
deemed to have been issued in a Strategic Venture) (such rights or options
being herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") and the price per
share (the "New Option Price") for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than $10.00, then the Exercise Price shall be reduced to
an amount to equal 120% of the New Option Price. No adjustment of the
Exercise Price shall be made upon the actual issuance of such Common Stock
or of such Convertible Securities upon the exercise of such Options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Issuance of Convertible Securities. If, during the period
commencing on the Closing Date (as defined in the Purchase Agreement)
through and including the date which is 12 months from the Authorization
Date, the Company in any manner issues or sells any Convertible Securities
and the price per share (the "New Convertible Price") for which Common
Stock is issuable upon such conversion or exchange (other than the
Debenture Shares or Warrant Shares or shares of Common Stock deemed to have
been issued by the Company in connection with a Stock Plan, shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof or upon conversion of convertible securities
outstanding on the date hereof, in each case as listed in Schedule 2.1(c)
of the Purchase Agreement, shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a
division, assets or business (or stock constituting any portion thereof)
from another person or shares of Common Stock issued or deemed to have been
issued in a Strategic Venture) is less than $10.00, then the Exercise Price
shall be reduced to equal 120% of the New Convertible Price.
(C) Change in Option Price or Rate of Conversion. If there is a change
during the period commencing on the Closing Date (as defined in the
Purchase Agreement) through and including the date which is 12 months from
the Authorization Date in (i) the purchase price provided for in any
Options, (ii) the additional consideration, if any, payable upon the issue,
conversion or exchange of any Convertible Securities or
8
<PAGE> 9
(iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock, then the Exercise Price in effect at the
time of such change shall be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold; provided that no adjustment shall be
made if such adjustment would result in an increase of the Exercise Price
then in effect.
(D) Certain Definitions. For purposes of determining the adjusted
Exercise Price under this Section 6(h)(i), the following terms have
meanings set forth below:
(I) "Stock Plan" means any stock or compensation plan pursuant to
which Common Stock may be issued to any employee, officer, director or
consultant of the Company which is either (a) approved by the stockholders
of the Company or (b) approved by the compensation committee of the
Company's Board of Directors for legitimate compensation purposes which
provides for the purchase of the Common Stock at a purchase price of no
less than 85% of the market price of the Common Stock on the date of
issuance of such option, warrant or security.
(II) "Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock issued and outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant
to Sections 6(h)(i)(A) and 6(h)(i)(B) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at such time,
but excluding any shares of Common Stock issuable upon exercise of the
Warrants.
(E) [INTENTIONALLY OMITTED]
(F) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under this Section 6(h)(i), the
following shall be applicable:
(I) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the arithmetic
average of the Per Share Market Values of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business
9
<PAGE> 10
of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined jointly
by the Company and the Registered Owners of a majority of the Warrant
Shares then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation
(the "Valuation Event"), the fair value of such consideration will be
determined within forty-eight (48) hours of the tenth (10th) day following
the Valuation Event by an Appraiser selected by the Company. The
determination of such Appraiser shall be binding upon all parties absent
manifest error.
(II) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for an aggregate consideration
of $.001.
(III) Treasury Shares. The number of shares of Common stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company, and the disposition of any shares so owned
or held will be considered an issue or sale of Common Stock.
(IV) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common stock,
Options or Convertible Securities, then such record date will be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(V) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6(h)(i)(subject to the exceptions
stated therein) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the
Exercise Price so as to protect the rights of the Registered Owner, or
assigns, of this Warrant; provided, however, that no such adjustment will
increase the Exercise Price as otherwise determined pursuant to this
Section 6(h).
In no event shall any provision in this Section 6 cause the Exercise
Price to be greater than the Exercise Price on the date of issuance of this
Warrant.
7. RESTRICTION ON EXERCISE BY THE REGISTERED OWNER. Notwithstanding
anything in this Warrant to the contrary, in no event shall the Holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof) in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially
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<PAGE> 11
owned by the Holder and its affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the ownership of the unexercised
Warrants and the unexercised or unconverted portion of any other securities of
the Company (including the Debentures) subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 9.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, 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
(i) hereof.
8. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" has the meaning assigned to it in Section 6(c)hereof.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Common Stock" means the shares of the Company's common stock, par value
$.001 per share.
"Company" means Geron Corporation, a Delaware corporation.
"Convertible Securities" has the meaning assigned to it in Section
6(h)(i)(A) hereof.
"Exercise Period" has the meaning assigned to it the Section 4 hereof.
"Exercise Price" has the meaning assigned to it in Section 3 hereof.
"Market Price" has the meaning assigned to it in Section 6(h)(i) hereof.
"Options" has the meaning assigned to it in Section 6(h)(i)(A) hereof.
"Per Share Market Value" means on any particular date (i) the closing bid price
per share of the Common Stock on such date on Nasdaq or another registered
national stock exchange on which the Common Stock is then listed or if there is
no such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the Common
Stock is not listed then on the National Market System of the Nasdaq Stock
Market
11
<PAGE> 12
or any registered national stock exchange, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the holder of this Warrant; provided, however, that the Company, after receipt
of the determination by such Appraiser, shall have the right to select an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated September 30, 1999, by and between the Company and the Purchaser (as
defined in the Purchase Agreement).
"Redemption Event" has the meaning assigned to it in Section 6(f) hereof.
"Registered Owner" means RGC International Investors, LDC, or such other
Person as shown on the records of the Company as being the registered owner of
this Warrant.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of September 30, 1999, by and between the Company and the
Initial Investor (as defined in the Registration Rights Agreement).
"Trading Day(s)" means any day on which the primary market on which shares
of Common Stock are listed is open for trading.
9. REGISTRATION RIGHTS. The Company will undertake the registration of the
Common Stock into which this Warrant is exercisable at such times and upon such
terms pursuant to the provisions of the Registration Rights Agreement.
10. [INTENTIONALLY OMITTED]
11. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to Geron
Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David
Greenwood, fax no. (650) 473-7701 with copies to Cooley Godward LLP, 5 Palo Alto
Square, 3000 El Camino Real, Palo Alto, CA 94306 attn: Alan C. Mendelson, Esq.,
fax no. (650) 857-0663 and (ii) if to any Registered Owner to the address set
forth immediately below such Registered Owner's name on the signature pages to
the Purchase Agreement or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
12. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Registered Owner, or
assigns, by vitiating the intent
12
<PAGE> 13
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations hereunder will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that the Registered Owner, or
assigns, shall be entitled, in addition to all other available remedies in law
or in equity, to an injunction or injunctions to prevent or cure breaches of the
provisions of this Security and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or
other security being required.
13. ALLOCATION OF RESERVED SHARES. Prior to the Authorization Date, the
holder of this Warrant shall not transfer this Warrant, or any portion thereof,
without obtaining a prior written agreement with such transferee as to the
allocation of shares of Common Stock reserved for issuance upon exercise of this
Warrant and upon conversion of the Debentures and providing notice to the
Company thereof.
[signature page follows]
13
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
GERON CORPORATION
By: /s/ David L. Greenwood
----------------------------
Name: David L. Greenwood
Title: Vice President, Finance
14
<PAGE> 15
EXHIBIT A
Warrant Exercise Form
TO: GERON CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Geron Corporation, pursuant to
Warrant No. ___ heretofore issued to ___________________ on September 30, 1999;
(2) encloses a payment of $__________ for these shares at a price of $12.50 per
share (as adjusted pursuant to the provisions of the Warrant); and (3) requests
that a certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address specified below. The undersigned
represents that it is an accredited investor within the meaning of Regulation D
under the Securities Act.
Date:
Investor Name:
Taxpayer Identification
Number:
By:
Printed Name:
Title:
Address:
Note: The above signature should correspond exactly with
the name on the face of this Warrant Certificate or
with the name of assignee appearing in assignment
form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
15
<PAGE> 1
EXHIBIT 4.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT.
September 30, 1999 Right to Purchase
100,000 Shares
of Common Stock,
par value $0.001
per share
GERON CORPORATION
STOCK PURCHASE WARRANT
Registered Owner:
This warrant is a duly authorized warrant (the "Warrant") of Geron
Corporation, a Delaware corporation (the "Company") referred to in the
Securities Purchase Agreement (the "Purchase Agreement") dated as of September
30, 1999 by and between the Company and the Purchaser (as defined in the
Purchase Agreement). This Warrant is subject to the terms and conditions of the
Purchase Agreement, a copy of which is on file at and may be obtained from the
Company at its principal office at the address set forth in Section 11 hereof.
This certifies that, for value received, the Company grants the following rights
to the Registered Owner, or assigns, of this Warrant:
1. ISSUE. Upon tender (as defined in section 5 hereof) to the Company,
the Company shall issue to the Registered Owner, RGC International Investors,
LDC, or assigns, up to the number of shares specified in paragraph 2 hereof of
fully paid and non-assessable shares of Common Stock, par value $.001 per share
("Common Stock"), that the Registered Owner, or assigns, is otherwise entitled
to purchase.
2. NUMBER OF SHARES. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is 100,000 shares of common Stock, subject to
adjustment from time to time as set forth in paragraph 6 below. Until the
earlier of the Authorization Date and March 31, 2000, the Registered Owner of
the Warrant shall not, without the prior written consent of the Company, convert
the Warrant into a number of shares of Common Stock in excess of the number of
shares of Common Stock the Company has reserved for issuance pursuant to the
terms of the Warrant (but in no event shall such number of shares reserved be
less than 1,189,009). The Company shall
<PAGE> 2
at all times (i) from the Closing Date (as defined in the Purchase Agreement)
through and including the Authorization Date (as defined in the Purchase
Agreement), reserve a minimum of 1,189,009 shares of its authorized but unissued
Common Stock to satisfy the exercise or purchase rights under this Warrant and
the conversion or purchase rights under the Debentures (as defined below) and
(ii) after the Authorization Date, reserve and hold available such number of
shares of Common Stock sufficient to satisfy all conversion and purchase rights
represented by outstanding convertible securities, options and warrants,
including this Warrant. For this Warrant, such number of shares shall be equal
to 125% of the shares for which it may then be exercised. The Company covenants
and agrees that all shares of Common Stock that may be issued upon the exercise
of this Warrant shall, upon issuance, be duly and validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
purchase and the issuance of the shares.
3. EXERCISE PRICE. The initial exercise price of this Warrant, the price
at which the shares of stock issuable upon exercise of this Warrant may be
purchased, is $12.75 and subject to adjustment from time to time pursuant to the
provisions of paragraph 6 below (the "Exercise Price").
3.A. PAYMENT OF EXERCISE PRICE. The Registered Owner may pay the
Exercise Price in one of the following manners:
(i) Cash Exercise. The Registered Owner shall deliver
immediately available funds or a check payable to the Company; or
(ii) Cashless Exercise. At such time as, but only at such time
as, after the 120th day after the date of issuance of this Warrant, all
of the Registerable Securities (as defined in the Registration Rights
Agreement) are not registered pursuant to an effective registration
statement, the Registered Owner shall have the right to surrender this
Warrant to the Company together with a notice of cashless exercise, in
which event the Company shall issue to the Registered Owner the number
of Warrant Shares determined as follows:
where: X = Y (A-B)/A
X = the number of Warrant Shares (as defined in the
Purchase Agreement) to be issued to the Registered Owner
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised
A = the average of the Per Share Market Value of the
Common Stock for the five (5) Trading Days immediately
prior to (but not including) the date of exercise
B = the Exercise Price
<PAGE> 3
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Registered
Owner, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date to the extent permitted by Rule 144.
4. EXERCISE PERIOD. This Warrant may be exercised at any time and from
time to time during the period beginning on September 30, 1999 and up to and
including the date which is 540 days after the Authorization Date (the "Exercise
Period"). If not exercised during this period, this Warrant and all rights
granted under this Warrant shall expire and lapse.
5. TENDER. This Warrant may be exercised, in whole or in part, by actual
delivery of (i) the Exercise Price in cash, (ii) a duly executed Warrant
Exercise Form, a copy of which is attached to this Warrant as Exhibit A,
properly executed by the Registered Owner, or assigns, of this Warrant, and
(iii) by surrender of This Warrant. The payment and Warrant Exercise Form must
be delivered, personally or by mail, to the registered office of the Company.
Documents sent by mail shall be deemed to be delivered when they are received by
the Company. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
6. ADJUSTMENT OF EXERCISE PRICE.
(a) Common Stock Dividends; Common stock Splits; Reverse Common
Stock Splits. If the Company, at any time while this Warrant is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Exercise Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph (6)(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rights; Options; Warrants. If the Company, during the period
commencing on the Closing Date (as defined in the Purchase Agreement) through
and including the date which is 12 months from the Authorization Date, shall
issue rights or warrants to all of the holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
$10.00, the Exercise Price shall be multiplied by a fraction, the denominator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price
<PAGE> 4
of the total number of shares so offered would purchase at $10.00 per share.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Exercise Price pursuant to this paragraph
(6)(b), if any such right or warrant shall expire and all or any portion thereof
shall not have been exercised, the Exercise Price shall immediately upon such
expiration be re-computed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the provisions of Section
6(g) after the issuance of such rights or warrants) had the adjustment of the
Exercise Price made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that number of shares of
Common Stock (if any) actually purchased upon the exercise of such rights or
warrants actually exercised; provided, however, that if (X) (1) the Registration
Statement (as defined in the Registration Rights Agreement) is then in effect
and has been in effect and sales of all of the Registrable Securities (as
defined in the Registration Rights Agreement) can be made thereunder for at
least twenty (20) Trading Days prior to a Trigger Date (as defined below); (2)
the Company has, at all times prior to the Trigger Date, a sufficient number of
authorized shares of Common Stock reserved for issuance upon full conversion of
all of the Securities (as defined in the Purchase Agreement) issued pursuant to
the Purchase Agreement; and (3) no Event of Default shall have occurred and be
continuing; and (Y) the Per Share Market Value is greater than 150% of the
Conversion Price (as defined in the debentures issued pursuant to the Purchase
Agreement (the "Debentures")) in effect on the Closing Date for any five (5)
consecutive Trading Days prior to the 180th day following the Authorization Date
(the last day of such five (5) consecutive Trading Day period being referred to
herein as the "Trigger Date"), then this provision shall expire automatically on
the 180th day following the Authorization Date.
(c) Subscription Rights. If the Company, during the period commencing on
the Closing Date (as defined in the Purchase Agreement) through and including
the date which is 12 months from the Authorization Date, shall distribute to all
of the holders of Common Stock evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security (excluding those referred
to in paragraphs 6(a) and (b) above), then in each such case the Exercise Price
at which the Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of shareholders entitled to receive such distribution by
a fraction the denominator of which shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and the numerator
of which shall be such Per Share Market Value of the Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing (an
"Appraiser") selected in good faith by the Registered Owner of the Warrant; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall
<PAGE> 5
have the right to select an additional Appraiser meeting the same
qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above; provided, however,
that if (X) (1) the Registration Statement (as defined in the Registration
Rights Agreement) is then in effect and has been in effect and sales of all of
the Registrable Securities (as defined in the Registration Rights Agreement) can
be made thereunder for at least twenty (20) Trading Days prior to a Trigger
Date; (2) the Company has, at all times prior to the Trigger Date, a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of all of the Securities (as defined in the Purchase Agreement)
issued pursuant to the Purchase Agreement; and (3) no Event of Default shall
have occurred and be continuing; and (Y) the Per Share Market Value is greater
than 150% of the Conversion Price (as defined in the Debentures) in effect on
the Closing Date for any five (5) consecutive Trading Days prior to the 180th
day following the Authorization Date, then this provision shall expire
automatically on the 180th day following the Authorization Date.
(d) Rounding. All calculations under this section 6 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case may be.
(e) Notice of Adjustment. Whenever the Exercise Price is
adjusted pursuant to paragraphs 6(a), (b), (c) or (h), the Company shall
promptly mail to the holder of the Warrant, a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Upon each adjustment of the Exercise Price pursuant
paragraphs 6(a), (b), (c) or (h), the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the number
of shares of Common Stock issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(f) Redemption Events. In case of (A) any reclassification of
the Common Stock, (B) any consolidation or merger of the Company with or into
another person pursuant to which (i) a majority of the Company's Board of
Directors will not constitute a majority of the board of directors of the
surviving entity or (ii) less than 51% of the outstanding shares of the capital
stock of the surviving entity will be held by the same shareholders of the
Company prior to such reclassification, consolidation or merger, (C) the sale or
transfer of all or substantially all of the assets of the Company, (D) any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, (E) suspension from listing or delisting of
the Common Stock from the National Market System of the Nasdaq Stock Market
("Nasdaq") or any other exchange on which the Common Stock is listed for a
period of five (5) consecutive Trading Days, (F) the Company's notice to any
Registered Owner, including by way of public announcement, at any time, of its
intention, for any reason, not to comply with proper requests for the exercise
of any such warrants, or (G) a breach by the Company of any representation,
warranty, covenant or other term or condition of the Purchase Agreement, the
Registration Rights Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
thereby or hereby, except to the extent that such breach would not have a
Material Adverse Effect (as defined in Section 3(a) of the Purchase
<PAGE> 6
Agreement) and except, in the case of a breach of a covenant which is curable,
only if such breach continues for a period of at least ten (10) days after the
Company knows or reasonably should have known of the existence of such breach
(clauses (A) through (G) above referred to as a "Redemption Event"), the holder
of the Warrant shall have the right thereafter to exercise the Warrant within
ten (10) Business Days of the Redemption Event for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Redemption Event, and the holder of the Warrant
shall be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the Warrant
could have been converted immediately prior to such Redemption Event would have
been entitled.
(g) Reclassification, Etc. If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all of the
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of
any class or of any rights; or
D. the approval of any shareholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company,
of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be mailed to the
holder of this Warrant at its address as it shall appear below, at least thirty
(30) calendar days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any material
non-public information) stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to betaken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing
<PAGE> 7
thereof shall not affect the validity of the corporate action required to be
specified in such notice.
(h) Adjustment to Exercise Price. If the Company, during the
period commencing on the Closing Date (as defined in the Purchase Agreement)
through and including the date which is 12 months from the Authorization Date,
takes any of the actions described in this Section 6(h), then, in order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
will be subject to adjustment from time to time as provided in this Section
6(h); provided, however, that if (X) (1) the Registration Statement (as defined
in the Registration Rights Agreement) is then in effect and has been in effect
and sales of all of the Registrable Securities (as defined in the Registration
Rights Agreement) can be made thereunder for at least twenty (20) Trading Days
prior to a Trigger Date; (2) the Company has, at all times prior to the Trigger
Date, a sufficient number of authorized shares of Common Stock reserved for
issuance upon full conversion of all of the Securities (as defined in the
Purchase Agreement) issued pursuant to the Purchase Agreement; and (3) no Event
of Default shall have occurred and be continuing; and (Y) the Per Share Market
Value is greater than 150% of the Conversion Price (as defined in the
Debentures) in effect on the Closing Date for any five (5) consecutive Trading
Days prior to the 180th day following the Authorization Date, then this
provision shall expire automatically on the 180th day following the
Authorization Date:
(i) Adjustment of Exercise Price upon Issuance of Common Stock.
If, during the period commencing on the Closing Date (as defined in the
Purchase Agreement) through and including the date which is 12 months
from the Authorization Date, the Company issues or sells, or is deemed
to have issued or sold, any shares of Common Stock (other than the
Debenture Shares or Warrant Shares (each as defined in the Purchase
Agreement) or shares of Common Stock deemed to have been issued by the
Company in connection with a Stock Plan (as defined below), shares of
Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof or upon conversion of convertible
securities outstanding on the date hereof, in each case as listed in
Schedule 2.1(c) of the Purchase Agreement (as defined below), shares of
Common Stock issued or deemed to have been issued in a Strategic Venture
(as defined below), or shares of common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a
division, assets or business (or stock constituting any portion thereof)
from another person) for a consideration per share (the "New Issuance
Price") less than $10.00, then immediately after such issue or sale, the
Exercise Price then in effect shall be reduced to an amount equal to
120% of the New Issuance Price. A "Strategic Venture" shall mean a
venture between the Company and a pharmaceutical or biotechnology
company or an Affiliate thereof, the primary purpose of which is not to
raise capital in the form of equity (including without limitation
through the issuance of warrants, convertible securities, phantom stock
rights, stock appreciation rights or other rights with equity features)
and pursuant to which the Company contributes or issues securities of
the Company valued at less than 50% of the entire contribution of the
Company. If the Registered Holder and the Company cannot agree on the
value of the components of such contribution, the last two sentences of
subsection (F)(I) entitled "Calculation of Consideration" shall apply.
If, during the period commencing on the Closing Date (as defined
in the
<PAGE> 8
Purchase Agreement) through and including the date which is 12 months from the
Authorization Date, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock (other than Debenture Shares or Warrant Shares,
shares of Common Stock deemed to have been issued by the Company in connection
with a Stock Plan or shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in Schedule 2.1(c)
of the Purchase Agreement) then, for purposes of determining the adjusted
Exercise Price under this Section 6(h)(i), the following shall be applicable:
(A) Issuance of Options. If, during the period commencing on the
Closing Date (as defined in the Purchase Agreement) through and
including the date which is 12 months from the Authorization Date, the
Company in any manner grants any rights or options to subscribe for or
to purchase Common Stock or any stock or other securities convertible
into or exchangeable for Common Stock (other than the Debenture Shares
or Warrant Shares or shares of Common Stock deemed to have been issued
by the Company in connection with a Stock Plan, shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the
date hereof or upon conversion of convertible securities outstanding on
the date hereof, in each case as listed in Schedule 2.1(c) of the
Purchase Agreement, shares of Common Stock issued or deemed to have been
issued as consideration for an acquisition by the Company of a division,
assets or business (or stock constituting any portion thereof) from
another person or shares of Common Stock issued or deemed to have been
issued in a Strategic Venture) (such rights or options being herein
called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") and the price
per share (the "New Option Price") for which Common Stock is issuable
upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities is less than $10.00, then the Exercise Price
shall be reduced to an amount to equal 120% of the New Option Price. No
adjustment of the Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If, during the period
commencing on the Closing Date (as defined in the Purchase Agreement)
through and including the date which is 12 months from the Authorization
Date, the Company in any manner issues or sells any Convertible
Securities and the price per share (the "New Convertible Price") for
which Common Stock is issuable upon such conversion or exchange (other
than the Debenture Shares or Warrant Shares or shares of Common Stock
deemed to have been issued by the Company in connection with a Stock
Plan, shares of Common Stock issuable upon the exercise of any options
or warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another person or shares of
Common Stock issued or deemed to have been issued in a Strategic
Venture) is less than $10.00, then the Exercise Price shall be reduced
to equal 120% of the New Convertible Price.
<PAGE> 9
(C) Change in Option Price or Rate of Conversion. If there is a
change during the period commencing on the Closing Date (as defined in
the Purchase Agreement) through and including the date which is 12
months from the Authorization Date in (i) the purchase price provided
for in any Options, (ii) the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities or
(iii) the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock, then the Exercise Price in effect at
the time of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold; provided that no
adjustment shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Exercise Price under this Section 6(h)(i), the following terms
have meanings set forth below:
(I) "Stock Plan" means any stock or compensation plan
pursuant to which Common Stock may be issued to any employee, officer,
director or consultant of the Company which is either (a) approved by
the stockholders of the Company or (b) approved by the compensation
committee of the Company's Board of Directors for legitimate
compensation purposes which provides for the purchase of the Common
Stock at a purchase price of no less than 85% of the market price of the
Common Stock on the date of issuance of such option, warrant or
security.
(II) "Common Stock Deemed Outstanding" means, at any
given time, the number of shares of Common Stock issued and outstanding
at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 6(h)(i)(A) and 6(h)(i)(B) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the Warrants.
(E) [INTENTIONALLY OMITTED]
(F) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under this Section 6(h)(i), the
following shall be applicable:
(I) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor
will be deemed to be the net amount received by the Company therefor. In
case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the arithmetic average of the
<PAGE> 10
Per Share Market Values of such security for the five (5) consecutive
Trading Days immediately preceding the date of receipt. In case any
Common Stock, Options or Convertible Securities are issued to the owners
of the non-surviving entity in connection with any merger in which the
Company is the surviving entity the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such
Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be
determined jointly by the Company and the Registered Owners of a
majority of the Warrant Shares then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "Valuation Event"), the fair value of
such consideration will be determined within forty-eight (48) hours of
the tenth (10th) day following the Valuation Event by an Appraiser
selected by the Company. The determination of such Appraiser shall be
binding upon all parties absent manifest error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(III) Treasury Shares. The number of shares of Common
stock outstanding at any given time does not include shares owned or
held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common stock,
Options or Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(V) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6(h)(i)(subject to the
exceptions stated therein) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price so as to protect the rights
of the Registered Owner, or assigns, of this Warrant; provided, however,
that no such adjustment will increase the Exercise Price as otherwise
determined pursuant to this Section 6(h).
In no event shall any provision in this Section 6 cause the Exercise
Price to be greater than the Exercise Price on the date of issuance of this
Warrant.
<PAGE> 11
7. RESTRICTION ON EXERCISE BY THE REGISTERED OWNER. Notwithstanding
anything in this Warrant to the contrary, in no event shall the Holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof) in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) 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 unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Debentures) subject to a limitation on conversion or exercise
analogous to the limitation contained herein) and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrants (or portions thereof) with
respect to which the determination described herein is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 9.9% of
the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, 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 (i) hereof.
8. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" has the meaning assigned to it in Section 6(c)hereof.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Common Stock" means the shares of the Company's common stock, par value
$.001 per share.
"Company" means Geron Corporation, a Delaware corporation.
"Convertible Securities" has the meaning assigned to it in Section
6(h)(i)(A) hereof.
"Exercise Period" has the meaning assigned to it the Section 4 hereof.
"Exercise Price" has the meaning assigned to it in Section 3 hereof.
"Market Price" has the meaning assigned to it in Section 6(h)(i) hereof.
"Options" has the meaning assigned to it in Section 6(h)(i)(A) hereof.
<PAGE> 12
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on Nasdaq or another
registered national stock exchange on which the Common Stock is then listed or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (ii) if
the Common Stock is not listed then on the National Market System of the Nasdaq
Stock Market or any registered national stock exchange, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (iii) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the holder of this Warrant; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated September 30, 1999, by and between the Company and the Purchaser (as
defined in the Purchase Agreement).
"Redemption Event" has the meaning assigned to it in Section 6(f)
hereof.
"Registered Owner" means RGC International Investors, LDC, or such other
Person as shown on the records of the Company as being the registered owner of
this Warrant.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of September 30, 1999, by and between the Company and the
Initial Investor (as defined in the Registration Rights Agreement).
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
9. REGISTRATION RIGHTS. The Company will undertake the registration of
the Common Stock into which this Warrant is exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement.
10. [INTENTIONALLY OMITTED]
11. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such
<PAGE> 13
mailing, whichever shall first occur. The addresses for such communications are
(i) if to the Company to Geron Corporation, 230 Constitution Drive, Menlo Park,
California 94025 attn: David Greenwood, fax no. (650) 473-7701 with copies to
Cooley Godward LLP, 5 Palo Alto Square, 3000 El Camino Real, Palo Alto, CA 94306
attn: Alan C. Mendelson, Esq., fax no. (650) 857-0663 and (ii) if to any
Registered Owner to the address set forth immediately below such Registered
Owner's name on the signature pages to the Purchase Agreement or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
12. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Registered Owner, or
assigns, by vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for breach
of its obligations hereunder will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of any of the provisions hereunder,
that the Registered Owner, or assigns, shall be entitled, in addition to all
other available remedies in law or in equity, to an injunction or injunctions to
prevent or cure breaches of the provisions of this Security and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
13. ALLOCATION OF RESERVED SHARES. Prior to the Authorization Date, the
holder of this Warrant shall not transfer this Warrant, or any portion thereof,
without obtaining a prior written agreement with such transferee as to the
allocation of shares of Common Stock reserved for issuance upon exercise of this
Warrant and upon conversion of the Debentures and providing notice to the
Company thereof.
[signature page follows]
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of the date first set forth above.
GERON CORPORATION
By: /s/ THOMAS B. OKARMA
-------------------------
Name: Thomas B. Okarma
-----------------------
Title: President and CEO
----------------------
<PAGE> 15
EXHIBIT A
Warrant Exercise Form
TO: GERON CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Geron Corporation, pursuant to
Warrant No. ___ heretofore issued to ___________________ on September 30, 1999;
(2) encloses a payment of $__________ for these shares at a price of $12.50 per
share (as adjusted pursuant to the provisions of the Warrant); and (3) requests
that a certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address specified below. The undersigned
represents that it is an accredited investor within the meaning of Regulation D
under the Securities Act.
Date:
Investor Name:
Taxpayer Identification
Number:
By:
Printed Name:
Title:
Address:
Note: The above signature should correspond exactly with
the name on the face of this Warrant Certificate or
with the name of assignee appearing in assignment
form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
<PAGE> 1
EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
Between
GERON CORPORATION
and
RGC INTERNATIONAL INVESTORS, LDC
Dated as of September 30, 1999
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is dated
as of September 30, 1999, between Geron Corporation, a Delaware corporation (the
"COMPANY") and RGC INTERNATIONAL INVESTORS, LDC, a Cayman Islands limited
duration company (together with its affiliates to which rights hereunder may be
transferred pursuant to Section 5.6 hereof and any other assignee or transferee
of its rights hereunder in accordance with Section 5.6 hereof, the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to acquire from the Company, an aggregate of Twelve Million
Five Hundred Thousand Dollars ($12,500,000) in principal amount of Series C Two
Percent (2%) Convertible Debentures, in the form attached hereto as EXHIBIT "A"
(the "DEBENTURES"), and warrants, in the forms attached hereto as EXHIBITS "B-1"
and "B-2" (the "WARRANTS"), to purchase up to One Million One Hundred Thousand
(1,100,000) shares of the Company's common stock, par value $.001 per share (the
"COMMON STOCK").
WHEREAS, 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 "C" (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the
"SECURITIES ACT") and the rules and regulations promulgated thereunder, and
applicable state securities laws.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS
1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company on the Closing Date (as defined below), the
Debentures and the Warrants for an aggregate purchase price of $12,500,000 (the
"PURCHASE PRICE").
1.2 THE CLOSING. The closing of the purchase and sale of the Debentures
and Warrants (the "CLOSING") shall take place at the offices of Morgan, Lewis &
Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103 immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "CLOSING
DATE"). At the Closing Date:
(a) The Purchaser shall deliver to the Company the Purchase Price
in United States dollars in immediately available funds to an account designated
in writing by the Company;
2.
<PAGE> 3
(b) The Company shall deliver to the Purchaser the Debentures;
(c) The Company shall deliver to the Purchaser the Warrants;
(d) The parties shall execute and deliver each of the documents
referred to in Section 4.1 hereof; and
(e) The Company shall reimburse Rose Glen Capital Management, L.P.
("Rose Glen") for all expenses reasonably 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 and travel
expenses. The Company's obligation to reimburse Rose Glen's expenses under this
Section 1.2(e) shall be limited to Twenty-Five Thousand Dollars ($25,000).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own,
lease, use and operate its properties and assets and to carry on its business as
currently conducted. Except as set forth on Schedule 2.1(a) (which, with the
other schedules referenced herein, have been delivered separately to the
Purchaser), the Company has no subsidiaries (collectively, the "SUBSIDIARIES"
(as defined below)). Each of the Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the full corporate power and authority
to own, lease, use and operate its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not have a Material
Adverse Effect (as defined below). "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Securities (as defined below), (ii) the business,
operations, assets, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, (iii) on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith, or (iv) the authority or the ability of the Company to perform its
obligation under this Agreement, the Registration Rights Agreement, the
Debentures or the Warrants. "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 and which would
be deemed to be a "significant subsidiary" (as such term is defined in Rule
1-02(w) of Regulation S-X promulgated under the Securities Act).
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this
3.
<PAGE> 4
Agreement and the Debentures, the Warrants and the Registration Rights Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and otherwise to carry out its
obligations hereunder and thereunder including issuance of the Securities (as
defined in Section 2(d) below). The execution and delivery of each of this
Agreement and the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Debentures and the Warrants and the issuance and
reservation for issuance of the Debenture Shares (as defined in Section 2(d)
below) issuable upon conversion of or otherwise pursuant to the Debentures and
the Warrant Shares (as defined in Section 2(d) below) issuable upon exercise of
or otherwise pursuant to the Warrants) have been duly authorized by all
necessary corporate action and no further action is required by the Company, its
Board of Directors or its stockholders. Each of this Agreement and the
Transaction Documents has been duly executed by the Company and when delivered
in accordance with the terms hereof will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. As of the date hereof and immediately prior to
the Closing Date, the authorized and outstanding capital stock and all shares of
capital stock reserved for issuance pursuant to securities (other than the
Debentures and the Warrants) exercisable for, or convertible into or
exchangeable for shares of any of the capital stock of the Company is, and will
be, as set forth on Schedule 2.1(c). The issuance and sale of all interests in
such capital stock have been in compliance with all applicable federal and state
securities laws. No shares of capital stock are entitled to preemptive or
similar rights, nor is any holder of the capital stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company by
virtue of any of this Agreement or the Transaction Documents. Except as
disclosed on Schedule 2.1(c), other than the Debentures and the Warrants, there
are no outstanding options, warrants, scrip, rights to subscribe to, calls, puts
or commitments of any character whatsoever relating to securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of capital stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of capital stock,
or securities or rights convertible or exchangeable into shares of capital
stock. No anti-dilution or similar adjustment provision of securities of the
Company will be triggered by the issuance of the Debentures, the Warrants, the
Debenture Shares or the Warrant Shares except as described on Schedule 2.1(c).
The Company is not subject (contingent or otherwise) to repurchase or otherwise
acquire or retire any units of its capital stock or any security convertible
into or exchangeable for any of its capital stock. Except as specifically
disclosed in the SEC Documents (as defined below), to the Company's best
knowledge, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock. "PERSON" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
4.
<PAGE> 5
(d) AUTHORIZATION AND VALIDITY; ISSUANCE OF SHARES. All of the
Debentures and the Warrants have been duly authorized, and when delivered
against payment therefor as contemplated hereby, will be validly issued, fully
paid and non-assessable, free and clear of all liens, encumbrances and Company
rights of first refusal, other than liens and encumbrances created by the
Purchaser (collectively, "LIENS") and will not be subject to any preemptive or
similar rights. The shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Debentures (including, without limitation, such
additional shares of Common Stock, if any, as are issuable as a result of the
events described in Section 2(c) of the Registration Rights Agreement) (such
shares of Common Stock being collectively referred to herein as the "DEBENTURE
SHARES") and the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants (the "WARRANT SHARES" and, collectively with the
Debenture Shares, the "UNDERLYING SHARES") are and will at all times hereafter
continue to be duly authorized and reserved for issuance and the shares of
Common Stock, when issued upon conversion of or otherwise pursuant to the
Debentures and upon exercise of or otherwise pursuant to the Warrants in
accordance with their respective terms, will be validly issued, fully paid and
non-assessable, free and clear of all Liens. The Debentures, Warrants, Debenture
Shares and Warrant Shares are collectively referred to herein as the
"SECURITIES."
(e) ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon issuance
of the Debenture Shares upon conversion of or otherwise pursuant to the
Debentures and upon issuance of the Warrant Shares upon exercise of or otherwise
pursuant to the Warrants. The Company's directors and executive officers have
studied and fully understand the nature of the Securities being sold hereunder.
The Company further acknowledges that its obligation to issue Debenture Shares
and Warrant Shares upon conversion of the Debentures or exercise of the Warrants
in accordance with this Agreement, the Debentures and the Warrants is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in its
good faith business judgement, that the issuance of the Securities hereunder and
the consummation of the transactions contemplated hereby and thereby in the best
interests of the Company and its stockholders.
(f) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of the Debenture
Shares and Warrant Shares) do not and will not (i) conflict with or violate any
provision of the certificate of incorporation, bylaws or other charter documents
of the Company or any of the Subsidiaries (other than the issuance of additional
authorized shares of Common Stock pursuant to Section 3.17 of this Agreement),
(ii) subject to obtaining the consents referred to in Section 2.1(g), violate or
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, license or instrument (evidencing a Company or Subsidiary
debt or otherwise) to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or any Subsidiary is subject (including Federal
5.
<PAGE> 6
and state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject), or by which
any material property or asset of the Company or any Subsidiary is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations or cancellations that are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect).
(g) CONSENTS AND APPROVALS. Except as specifically set forth on
Schedule 2.1(g), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory agency, self-regulatory organization or stock
market or other person in connection with the execution, delivery and
performance by the Company of this Agreement or the Transaction Documents or to
issue and sell the Debentures and Warrants in accordance with the terms hereof
and to issue the Debenture Shares upon conversion of or otherwise pursuant to
the Debentures and the Warrant Shares upon exercise of or otherwise pursuant to
the Warrants, other than (i) the filing of a registration statement with the
Securities and Exchange Commission (the "COMMISSION"), which shall be filed in
accordance with and in the time periods set forth in the Registration Rights
Agreement, (ii) the notification(s) or any letter(s) acceptable to the Nasdaq
Stock Market ("NASDAQ") for the listing of the Underlying Shares on the Nasdaq
National Market (and with any other national securities exchange or market on
which the Common Stock is then listed), and (iii) any filings, notices or
registrations under applicable state securities laws (together with the
consents, waivers, authorizations, orders, notices and filings referred to on
Schedule 2.1(g), the "REQUIRED APPROVALS"). The Company is not in violation of
the listing requirements of the Nasdaq and does not reasonably anticipate that
the Common Stock will be delisted by the Nasdaq in the foreseeable future. The
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
(h) LITIGATION; PROCEEDINGS. Except as specifically set forth on
Schedule 2.1(h), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction Documents or (ii) would individually or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the
foregoing. Schedule 2.1(h) contains a complete list and summary description of
any pending or, to the knowledge of the Company, threatened proceeding against
or affecting the Company or any of its Subsidiaries, without regard to whether
it would have a Material Adverse Effect.
(i) NO DEFAULT OR VIOLATION. Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation or bylaws and
neither the Company nor any of its Subsidiaries is in default (and, to the
Company's knowledge, no event has occurred which with notice or lapse of time or
both could put the Company or any of its Subsidiaries in default) under, and
neither the Company nor any of its Subsidiaries has 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 or any of its Subsidiaries is a party or by
which any property or assets of the Company or any of its
6.
<PAGE> 7
Subsidiaries is bound or affected, except for such defaults and events as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as the Purchaser owns any of the Securities,
in violation of any law, ordinance or regulation of any governmental entity
where such violation would cause a Material Adverse Effect.
(j) DISCLOSURE; ABSENCE OF CERTAIN CHANGES. Neither this Agreement,
the Schedules to this Agreement, the Transaction Documents or any other
information provided to the Purchaser by the Company in connection with the
transactions contemplated hereby contain, nor did the SEC Documents (as defined
below), when filed, or if amended, when amended, contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made herein and therein, in light of the circumstances under
which they were made, not misleading. Except as disclosed on Schedule 2.1(j) or
the SEC Documents filed on EDGAR at least five business days prior to the date
hereof, since December 31, 1998, there has been no material adverse change and
no material adverse development in the business, properties, operations,
financial condition, liabilities or results of operations or, insofar as can
reasonably be foreseen, prospects of the Company or the Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings. No event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition or, insofar
as can reasonably be foreseen, prospects, which has not been publicly announced
or disclosed but 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 purpose that the Company's reports
filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act.)
(k) PRIVATE OFFERING. Except for the issuance of those certain
Series A Zero-Coupon Convertible Debentures and Series B Zero-Coupon
Convertible Debentures issued pursuant to the Securities Purchase Agreement,
dated as of December 10, 1998, 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 of any security or solicited any offers to buy any security
under circumstances that would require registration under the Securities Act of
the issuance of the Securities to the Purchaser. The issuance of the Securities
to the Purchaser will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of any stockholder approval
provisions applicable to the Company or its securities, except for the issuance
of those certain Series A Zero-Coupon Convertible Debentures and Series B
Zero-Coupon Convertible Debentures issued pursuant to the Securities Purchase
Agreement, dated as of December 10, 1998.
(l) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act. The
Company has filed all reports schedules, forms, statements and other documents
required to be filed by it under the Exchange Act, including pursuant to Section
13, 14 or 15(d) thereof (all of the foregoing filed
7.
<PAGE> 8
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being collectively referred to
herein as the "SEC DOCUMENTS"), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. The Company has made available to each
Purchaser true and complete copies of the SEC Documents, except for such
exhibits and incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior to the
date hereof). All material agreements to which the Company or any Subsidiary is
a party or to which the property or assets of the Company or any Subsidiary are
subject have been filed as exhibits to the SEC Documents to the extent required;
neither the Company nor any of its Subsidiaries is in breach of any agreement
where such breach, individually or in the aggregate, would have a Material
Adverse Effect. The financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments. 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, 1998 and (ii)
obligations under contracts and commitments incurred 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.
(m) INVESTMENT COMPANY. The Company is not, and is not controlled
by or under common control with an affiliate (as defined in Rule 144 promulgated
under the Securities Act (or a successor rule ("RULE 144")) (an "AFFILIATE") of
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) BROKER'S FEES. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank. The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
2.1(n) that may be due in connection with the transactions contemplated by this
Agreement and the Transaction Documents.
8.
<PAGE> 9
(o) FORM S-3 ELIGIBILITY. The Company is, and at the Closing Date
will be, eligible to register securities (including the Underlying Shares) for
resale with the Commission on Form S-3 (or any successor form) promulgated under
the Securities Act.
(p) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The principal
market on which the Common Stock is currently traded is the Nasdaq National
Market. Except as disclosed on Schedule 2.1(p), the Company has not in the three
years preceding the date hereof received notice (written or oral) from Nasdaq
(or any stock exchange, market or trading facility on which the Common Stock is
or has been listed (or on which it has been quoted)) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such market or exchange. The Company is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq. After
giving effect to the transactions contemplated by this Agreement and the
Transaction Documents, the Company believes that it is and will be in compliance
with all such maintenance requirements.
(q) PATENTS AND TRADEMARKS, ETC.
(i) To the Company's best knowledge, the Company or its
Subsidiaries has, or has rights to use, all patents, patent applications,
inventions, know-how, trade secrets, trademarks, trademark applications, service
marks, service names, trade names, copyrights, licenses and rights
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") which are necessary for use
in connection with its business, as currently conducted and as described in the
SEC Documents. To the best knowledge of the Company, there is no existing
infringement by another Person of any of the Intellectual Property Rights which
are necessary for use in connection with the Company's business which would,
individually or in the aggregate, have a Material Adverse Effect, and the
Company is not infringing on any other person's Intellectual Property Rights.
The Company and each of its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of their Intellectual Property
Rights.
(ii) To the Company's best knowledge, all of the Company's and
all of its Subsidiaries' computer software and computer hardware, and other
similar or related items of automated, computerized or software systems that are
used or relied on by the Company or any Subsidiary in the conduct of its
business (collectively, "INFORMATION TECHNOLOGY"), are Year 2000 Compliant,
except where a failure to be Year 2000 Compliant would not cause a Material
Adverse Effect. For purposes of this Agreement, the term "YEAR 2000 COMPLIANT"
means, with respect to the Company's and all of its Subsidiaries' Information
Technology, that the Information Technology is designed to be used prior to,
during and after the calendar Year 2000 A.D., and the Information Technology
used during each such time period will accurately receive, provide and process
date and time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations, and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of the date or
time data, to the extent that other information technology, used in combination
with the Information Technology, properly exchanges date and time data with it.
(r) EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its
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Subsidiaries, is any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good.
Except as set forth on Schedule 2.1(r), no executive officer (as defined in Rule
501(f) of the Securities Act) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer's employment with the
Company.
(s) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
described on Schedule 2.1(s) hereto, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
(t) TITLE. Except as disclosed on Schedule 2.1(t), the Company and
the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and, to the Company's best knowledge, enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and the Subsidiaries.
(u) PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
(v) INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverages as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business.
(w) INTERNAL ACCOUNTING CONTROLS. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific
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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.
(x) TAX STATUS; FIRPTA. The Company and each of the Subsidiaries
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on it books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
is not a "United States real property holding corporation" within the meaning of
Section 847(c)(2) of the Internal Revenue Code of 1986, as amended.
(y) TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
2.1(c) or Schedule 2.1(y), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(z) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Purchaser is not 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 that any statement made by the Purchaser or any of its
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchaser's purchase of the Securities and has not been relied
upon by the Company, its officers or directors in any way. The Company further
represents to the Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives and the representations and warranties of the Purchaser set
forth herein.
(aa) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic
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substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permits, licenses or
other approvals except where the failure of any of the foregoing would not
result in a Material Adverse Effect.
(bb) FOREIGN CORRUPT PRACTICES. To the Company's best knowledge,
neither the Company, nor any of its Subsidiaries, nor any director, officer,
agent, employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee form corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(cc) SOLICITATION MATERIALS. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Debentures or the Warrants, other than the SEC Documents, the Schedules to this
Agreement, any amendments and supplements thereto and the materials listed on
Schedule 2.1(cc), or (ii) solicited any offer to buy or sell the Debentures or
the Warrants by means of any form of general solicitation or advertising.
(dd) SOLVENCY. The Company (both before and after giving effect to
the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company as follows:
(a) ORGANIZATION; AUTHORITY. The Purchaser is a limited duration
company duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation with the requisite power and authority, corporate
or otherwise, to enter into and to consummate the transactions contemplated
hereby and by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by the Purchaser of the
Debentures and the Warrants hereunder has been duly authorized by all necessary
action on the part of the Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Purchaser and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
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(b) INVESTMENT INTENT. As of the date hereof, the Purchaser is
acquiring the Debentures and the Warrants for its own account and not with a
present view to or for distributing or reselling the Debentures, the Warrants,
the Debentures Shares or the Warrant Shares or any part thereof or interest
therein except pursuant to sales registered or exempted from registration under
the Securities Act; provided however, that by making the representations herein,
Purchaser 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 Securities Act.
(c) PURCHASER STATUS. At the time the Purchaser was offered the
Debentures and the Warrants, and at the Closing Date, it was and will be an
"accredited investor" as defined in Rule 501 under the Securities Act.
(d) RELIANCE. The Purchaser understands and acknowledges that (i)
the Debentures and the Warrants are being offered and sold to the Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2, and the Purchaser hereby consents to such reliance.
(e) INFORMATION. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Debentures
and Warrants which have been requested by the Purchaser or its advisors. The
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and receive responses to such questions. Neither such
inquiries nor any other due diligence investigation conducted by the Purchaser
or any of its advisors or representatives shall modify, amend or affect the
Purchaser's right to rely on the Company's representations and warranties
contained in Section 2.1 above. The Purchaser understands that its investment in
the Debentures and Warrants involves a significant degree of risk.
(f) GOVERNMENTAL REVIEW. The Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Debentures or
Warrants.
(g) RESIDENCY. The Purchaser is a resident of the jurisdiction set
forth immediately below the Purchaser's name on the signature pages hereto.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE 3
OTHER AGREEMENTS
3.1 TRANSFER RESTRICTIONS.
(a) If the Purchaser should decide to dispose of the Debentures,
the Warrants, the Debentures Shares or the Warrant Shares held by it, the
Purchaser understands and agrees that it may do so only (i) pursuant to an
effective registration statement under the Securities Act, (ii) to the Company,
(iii) pursuant to an available exemption from the registration requirements of
the Securities Act, or (iv) pursuant to Rule 144. In connection with any
transfer of any Debentures, Warrants, Debenture Shares or Warrant Shares
pursuant to clause (iii) of the preceding sentence, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that such transfer
does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register any transfer by the Purchaser to an Affiliate of the
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act and
agrees to be bound by the terms of this Agreement and the Registration Rights
Agreement. Such transferee shall have the rights and obligations of the
Purchaser under this Agreement and 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, however, that upon
execution on any such pledge, the pledgee shall be subject to the restrictions
on transfer of the Securities contained in this Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Debentures, the Warrants,
the Debenture Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
Neither the Debentures, the Warrants, the Debenture Shares, nor the
Warrant Shares shall contain the legend set forth above if (i) the issuance of
any of such Securities occurs at any time while a Registration Statement (as
defined in the Registration Rights Agreement) covering such Securities is
effective under the Securities Act, (ii) in the written opinion of
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counsel to the Company experienced in the area of United States securities laws
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission), (iii) such holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 and such security
is sold pursuant to Rule 144, or (iv) such Debentures, Warrants, Debenture
Shares or Warrant Shares may be sold pursuant to Rule 144(k). The Company agrees
that it will provide each Purchaser, upon request, with a certificate or
certificates representing Debentures, Warrants, Debenture Shares or Warrant
Shares, free from such legend at such time as such legend is no longer required
hereunder. Purchaser agrees to sell all Debentures, Warrants and Underlying
Shares, including those from which the legend set forth in this Section 3.1(b)
has been removed, in compliance with all applicable prospectus delivery
requirements under the Securities Act pursuant to Rule 144 or pursuant to
another available exemption under the Securities Act.
(c) STOP TRANSFER INSTRUCTION. The Company may make notations on
its records or give instructions to any transfer agent with regard to the
restrictions on transfer set forth in Section 3.1; provided, however, the
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions on transfer set
forth in Section 3.1.
3.2 FURNISHING OF INFORMATION; ELIGIBILITY TO USE FORM S-3. As long as
the Purchaser owns the Debentures, the Warrants, the Debenture Shares or the
Warrant Shares, the Company will cause the Common Stock to continue at all times
to be registered under 12(g) of the Exchange Act, will timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13, 14 or 15(d) of the Exchange Act and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. The
Company further covenants that it will take such further action as any holder of
the Debentures, the Warrants, the Debenture Shares or the Warrant Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Debentures, the Warrants, the Debenture Shares, or the
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act. The Company will take all necessary action to continue to meet,
the "registrant eligibility" requirements set forth in the general instructions
to Form S-3.
3.3 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, the Company shall qualify the Debentures Shares and the Warrant
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchasers may request and shall continue such qualification at all times while
the Purchaser owns any such Debenture Shares or Warrant Shares.
3.4 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares (i)
in a manner that would require the registration under the Securities Act of the
sale of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares
to any
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Purchaser or (ii) so as to require approval of the Company's stockholders for
the issuance of the Securities.
3.5 LISTING AND RESERVATION OF DEBENTURE SHARES AND WARRANT SHARES.
(a) The Company shall promptly prepare and file with Nasdaq (as
well as any other national securities exchange or market on which the Common
Stock is then listed) a Notification Form(s) for Listing of Additional Shares or
a letter(s) acceptable to Nasdaq covering and listing a number of shares of
Common Stock which is at least equal to the aggregate amount of Underlying
Shares sold or to be sold hereunder, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing on Nasdaq (as well as on any other
national securities exchange or market on which the Common Stock is then listed)
as soon as possible thereafter and (iii) provide to the Purchaser evidence of
such filing(s). So long as any Purchaser owns any of the Securities, the Company
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Debenture Shares and Warrant Shares from time to time
issuable upon conversion of the Debentures or exercise of the Warrants. Neither
the Company nor any of its Subsidiaries shall take any action which may result
in the delisting or suspension of the Common Stock on Nasdaq. The Company will
obtain and, so long as any Purchaser owns any of the Securities, 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 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 the Purchaser copies of any notices it
receives from Nasdaq regarding the continued eligibility of the Common Stock for
listing on such automated quotation system.
(b) The Company (i) at all times from the Closing Date to the
Authorization Date (as defined in Section 3.17) shall reserve a minimum of
1,189,009 shares of its authorized but unissued Common Stock for issuance upon
conversion of the Debentures and exercise of the Warrants and (ii) at all times
after the Authorization Date shall reserve 125% of the number of shares of its
authorized but unissued Common Stock which would be issuable upon full
conversion of the Debentures and full exercise of the Warrants. Shares of Common
Stock reserved for issuance upon conversion of the Debentures and exercise of
the Warrants shall be allocated pro rata to each Purchaser in accordance with
the amount of Debentures and Warrants held by such Purchaser. The Company shall
not reduce the number of shares of Common Stock reserved for issuance upon
conversion of or otherwise pursuant to the Debentures and exercise of or
otherwise pursuant to the Warrants without the consent of each such Purchaser.
If at any time after the Authorization Date the number of shares of Common Stock
authorized and reserved for issuance is below 125% of the sum of (x) the number
of Debenture Shares issuable upon conversion of or otherwise pursuant to the
Debentures (based on the Conversion Price (as defined in the Debentures) in
effect from time to time) and (y) the aggregate number of Warrant Shares issued
and issuable upon exercise of or otherwise pursuant to the Warrants (based on
the Exercise Price (as defined in the Warrants) of the Warrants in effect from
time to time), 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 stockholders to authorize additional
shares to meet the Company's obligations under this Section 3.6(b), in the
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case of an insufficient number of authorized shares, and using its best efforts
to obtain stockholder approval of an increase in such authorized number of
shares.
3.6 NOTICE OF BREACHES.
(a) The Company and the Purchaser shall give prompt written notice
to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Registration Rights Agreement,
as well as any events or occurrences arising after the date hereof and prior to
the Closing Date which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of such Closing Date provided such notice will
not constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
3.7 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Debentures and Warrants as required by Rule 506 under Regulation
D and to provide a copy thereof to the Purchaser promptly after such filing. The
Company shall, at or before the Closing, take such action as the Company shall
reasonably determine is necessary to qualify the Debentures and Warrants for
sale to the Purchaser 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 Purchaser at or prior to the Closing.
3.8 FUTURE FINANCINGS. Except for (i) issuance of the Underlying
Shares; (ii) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof and listed on Schedule 2(c); (iii) the grant of additional
options or warrants, or the issuance of additional securities, under any Company
stock or compensation plan pursuant to which Common Stock may be issued to any
employee, officer, director or consultant of the Company which is either (a)
approved by the stockholders of the Company or (b) approved by the compensation
committee of the Company's Board of Directors for legitimate compensation
purposes which provides for the purchase of the Common Stock at a purchase price
of no less than 85% of the market price of the Common Stock on the date of
issuance of such option, warrant, or other security; (iv) shares of Common Stock
issued or deemed to have been issued in a Strategic Venture (as defined below);
(v) shares of Common Stock issued or deemed to have been issued as consideration
for an acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another person; (vi) securities sold by
the Company in a firm commitment underwritten public offering
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(excluding a continuous offering pursuant to Rule 415 under the Securities Act);
or (vii) the issuance of up to an aggregate of Two Million Dollars ($2,000,000)
of Common Stock pursuant to an equity line of credit arrangement, the Company
will not, without the prior written consent of Rose Glen, negotiate or contract
with any party to obtain additional equity financing (including debt financing
with an equity component) that involves (A) the issuance of Common Stock
(whether upon conversion or exercise of a security convertible into or
exercisable for Common Stock ("Convertible Securities") or otherwise) at a
discount to the market price of the Common Stock on the date of issuance thereof
or, in the case of Convertible Securities, the date of issuance of such
Convertible Securities (in each case taking into account the value of any
warrants or options to acquire Common Stock issued in connection therewith) or
where the issuance price of such Common Stock is subject to reduction in the
future or (B) the issuance of Convertible Securities that are convertible into
an indeterminate number of shares of Common Stock or where the issuance price of
the Common Stock upon conversion or exercise of such Convertible Securities
(including, based upon any conversion, exchange or reset formula) changes at any
time after the date of issuance of such Convertible Securities, during the
period (the "LOCK-UP PERIOD") beginning on the Closing Date and ending one
hundred eighty (180) 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 in clauses (i) through (vii) of the first sentence of this Section
3.9, the Company will not conduct any equity financing (including debt with an
equity component) ("FUTURE OFFERINGS") during the period beginning on the
Closing Date and ending one hundred eighty-five (185) days after the end of the
Lock-up Period unless it shall have first delivered to Rose Glen, at least
fifteen (15) business days prior to the closing of such Future Offering, written
notice describing the proposed Future Offering, including the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith, and providing Rose Glen an option during the ten (10) day
period following delivery of such notice to purchase up to Fifty percent (50%)
of the securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). In the event the terms and conditions of a proposed
Future Offering are amended in any respect after delivery of the notice to Rose
Glen concerning the proposed Future Offering, the Company shall deliver a new
notice to Rose Glen describing the amended terms and conditions of the proposed
Future Offering and Rose Glen thereafter shall have an option during the ten
(10) day period following delivery of such new notice to purchase up to Fifty
percent (50%) of 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. "STRATEGIC VENTURE" shall mean a venture between the Company and a
pharmaceutical or biotechnology company or an Affiliate thereof, the primary
purpose of which is not to raise capital in the form of equity (including
without limitation through the issuance of warrants, convertible securities,
phantom stock rights, stock appreciation rights or other rights with equity
features) and pursuant to which the Company contributes or issues securities of
the Company valued at less than 50% of the entire contribution of the Company.
3.9 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Debentures and the exercise of the Warrants for general corporate
purposes and shall not, directly or indirectly, other than in connection with a
strategic or research collaboration, use such
18.
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proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other Person.
3.10 REIMBURSEMENT. In the event that the Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
person, including any Purchaser or stockholders of the Company, in connection
with or as a result of (a) any misrepresentation or breach of any representation
or warranty made by the Company in this Agreement or the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or the Transaction Documents or any other certificate,
instrument or document hereby or thereby, or (c) any cause of action, suit or
claim brought or made against the Purchaser and arising out of or resulting from
the execution, delivery, performance or enforcement of this Agreement or the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, the Company will reimburse such Purchaser for
its legal and other actual out-of-pocket expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchaser and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchaser and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchaser and any such affiliate and any
such Person. The Company also agrees that neither the Purchaser or any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or any of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company result
from the gross negligence or willful misconduct of the Purchaser or entity in
connection with the transactions contemplated by this Agreement or the
Registration Rights Agreement. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of its obligations
hereunder which is permissible under applicable law.
3.11 [RESERVED].
3.12 TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of the Purchaser or its nominee(s), for the
Debenture Shares and the Warrant Shares in such amounts as specified from time
to time by each Purchaser to the Company in a form acceptable to the Purchaser
(the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Debenture Shares and Warrant Shares under the Securities Act or the date on
which the Debenture Shares and Warrant Shares may be sold without limitation or
restriction as to volume pursuant to Rule 144(k), all such certificates shall
bear the restrictive legend specified in Section 3.1(b) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.13, and stop transfer instructions to
give effect to Section 3.1 hereof, prior to registration of the Debenture Shares
and the Warrant Shares under the Securities Act or the date on which the
Debenture Shares and
19.
<PAGE> 20
Warrant shares may be sold without limitation or restriction as to volume
pursuant to Rule 144(k), will be given by the Company to its transfer agent and
that the Debenture Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 3.13 shall affect the Purchaser's obligation and agreement set
forth in Section 3.1(b). If the Purchaser provides the Company with an opinion
of counsel, in form and substance customary for opinions in comparable
transactions, to the effect that a public sale, assignment or transfer of the
Debentures, the Debenture Shares, the Warrants and the Warrant Shares may be
made without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the Debentures, Warrants, the Debenture
Shares and the Warrant Shares can be sold without limitation or restriction as
to volume pursuant to Rule 144(k), the Company shall permit the transfer, and,
in the case of the Debenture Shares and the Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Purchaser and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Purchasers by violating the intent and purpose of
the transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.13 will
be inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.13, that the Purchaser shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.13 FILING OF FORM 8-K. On or before the fourth business day following
the Closing Date, the Company shall file a Form 8-K with the Commission
describing the terms of the 34. transaction contemplated by this Agreement and
the Transaction Documents in the form required by the Exchange Act.
3.14 FINANCIAL INFORMATION. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns, or sells all
of the Securities: (i) within one (1) day after release, copies of all press
releases issued by the Company or any of its Subsidiaries; and (ii)
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. In addition, the Company agrees to make available
to each Purchaser, until such Purchaser transfers, assigns, or sells all of the
Securities, within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current
Reports on Form 8-K.
3.15 CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Debentures or Warrants, 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 successor or acquiring entity and, if an entity
different from the successor or acquiring entity, the entity whose capital stock
or assets the holders of the Common Stock are entitled to receive as a result of
such transaction, in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith (including, but not limited to, the Debentures,
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<PAGE> 21
the Warrants and the Registration Rights Agreement) and (ii) is a publicly
traded corporation whose Common Stock is listed for trading on Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
3.16 STOCKHOLDER APPROVAL. The Company shall call a special meeting
(the "SPECIAL MEETING") of its stockholders prior to March 31, 2000 for the
purpose of allowing its stockholders to vote to approve an increase in the
authorized shares of Common Stock of the Company to at least 30,000,000 shares
(the "AUTHORIZATION APPROVAL"). The date of the Authorization Approval shall be
referred to as the "AUTHORIZATION DATE." The Company shall comply with the
filing and the disclosure requirements of Section 14 under the Exchange Act in
connection with the solicitation, acquisition and disclosure of the
Authorization Approval. The Company represents and warrants that its Board of
Directors has approved, and will recommend that the Company's stockholders
approve, the proposal contemplated by this Section 3.17 and shall so indicate
such recommendation in the proxy statement used to solicit the Authorization
Approval. The Company shall use its best efforts to obtain the Authorization
Approval. The Company shall use its best efforts to cause its officers and
directors to vote in favor of, and to cause its stockholders to approve, the
Authorization Approval contemplated by this Section 3.17.
ARTICLE 4
CONDITIONS
4.1 (a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL
THE DEBENTURES AND WARRANTS. The obligation of the Company to sell the
Debentures and Warrants hereunder is subject to the satisfaction or waiver (with
prior written notice to the Purchaser) by the Company, at or before the Closing,
of each of the following conditions:
(i) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
Closing Date;
(ii) PERFORMANCE BY THE PURCHASER. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing; and
(iii) NO INJUNCTION. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction 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 or the Transaction Documents.
(b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
PURCHASE THE DEBENTURES AND WARRANTS. The obligation of the Purchaser hereunder
to acquire and pay for the Debentures and Warrants is subject to the
satisfaction or waiver (with prior written notice to the Company) by the
Purchaser, at or before the Closing, of each of the following conditions:
21.
<PAGE> 22
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects as of the date when made and
as of the Closing Date;
(ii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing;
(iii) NO INJUNCTION. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction 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 and the Transaction Documents;
(iv) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission or on Nasdaq
which suspension shall remain in effect;
(v) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the date hereof, and on the Closing Date shall be, listed for
trading on Nasdaq;
(vi) REQUIRED APPROVALS. All Required Approvals shall have been
obtained;
(vii) SHARES OF COMMON STOCK. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved for issuance upon conversion of the
Debentures and the exercise of the Warrants;
(viii) CHANGE OF CONTROL. No Change of Control shall have
occurred between the date hereof and the Closing Date. "CHANGE OF CONTROL" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchaser or any of its
Affiliates, of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (iv) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii); and
(ix) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer
Agent Instructions, in a form acceptable to the Purchaser, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
22.
<PAGE> 23
(c) DOCUMENTS AND CERTIFICATES. At the Closing, the Company shall
have delivered to the Purchaser the following in form and substance reasonably
satisfactory to the Purchasers:
(i) An opinion of the Company's legal counsel in the form
attached hereto as "EXHIBIT D" dated as of the Closing Date;
(ii) A Debenture(s) representing the principal amount of
Debentures purchased by the Purchaser, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser;
(iii) A Warrant(s) representing the Warrants purchased by the
Purchaser, registered in the name of the Purchaser;
(iv) The Company shall have executed and delivered the
Registration Rights Agreement;
(v) OFFICER'S CERTIFICATE. An Officer's Certificate dated the
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of such
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.1 as of the Closing Date.
(vi) SECRETARY'S CERTIFICATE. A Secretary's Certificate dated
the Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance this
Agreement and of the Transaction Documents, and that such resolutions have not
been modified, rescinded or revoked.
ARTICLE 5
MISCELLANEOUS
5.1 FEES AND EXPENSES. Except as set forth in the Registration Rights
Agreement and as otherwise set forth in this Agreement, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Debenture Shares and the Warrant Shares pursuant hereto.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto and the Transaction Documents contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
23.
<PAGE> 24
5.3 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or on the first business day following
such delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to Geron
Corporation, 230 Constitution Drive, Menlo Park, California 94025 attention:
David Greenwood, fax no. (650) 473-7701 with copies to Cooley Godward LLP, 5
Palo Alto Square, 3000 El Camino Real, Palo Alto, CA 94306 attention: Alan C.
Mendelson, Esq., fax no. (650) 857-0663 and (ii) if to the Purchaser to the
address as set forth on Schedule II hereto with copies to Morgan Lewis & Bockius
LLP, 1701 Market Street, Philadelphia, PA 19103 attention: James W. McKenzie,
Esq., fax no. (215) 963-5299, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and a majority-in-interest of the Purchasers or, in the case
of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Notwithstanding
the foregoing, no such amendment shall be effective to the extent that it
applies to less than all of the holders of the Securities. The Company shall not
offer or pay any consideration to any Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
5.5 HEADINGS; INTERPRETIVE MATTERS. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. No provision of this
Agreement will be interpreted in favor of, or against, any of the parties hereto
by reason of the extent to which any such party or its counsel participated in
the drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. The Purchaser may assign
this Agreement or any rights or obligations hereunder to any Affiliate thereof
without the prior written consent of the Company. All assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit the Purchaser's right to transfer the Securities in
accordance with all of the terms of this Agreement or under the Registration
Rights Agreement. Prior to the Authorization Date, the Purchaser,
24.
<PAGE> 25
shall not transfer the Securities, or any portion thereof, without obtaining a
prior written agreement with such transferee as to the allocation of shares of
Common Stock reserved for issuance upon conversion of the Debentures and upon
exercise of the Warrants and providing notice to the Company thereof.
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 GOVERNING LAW. This Agreement and the Transaction Documents shall
be governed by and interpreted in accordance with the laws of the State of
Delaware applicable to agreements made and to be performed in the State of
Delaware (without regard to principles of conflict laws). Both parties
irrevocably consent to the jurisdiction of the United States federal courts and
the state courts located in Delaware with respect to any suit or proceeding
based on or arising under this Agreement, the Transaction Documents, the
agreements entered into in connection herewith and therewith and the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgement or in any other
lawful manner.
5.9 SURVIVAL. The agreements, covenants, representations, warranties
and provisions contained in this Agreement shall survive the delivery of the
Debentures and the Warrants pursuant to this Agreement and the Closing hereunder
and any conversion of the Debentures or exercise of the Warrants.
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 PUBLICITY. The Company and the Purchaser shall consult with each
other in issuing any press releases, filings with the SEC, NASD or any stock
exchange or interdealer quotation system or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release, filings with the SEC, NASD or any stock exchange
or interdealer quotation system or otherwise make any such public statement
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, rule or regulation, in which such case
the disclosing party shall provide the other party
25.
<PAGE> 26
with prior notice of such public statement. The Company shall not otherwise
publicly disclose the names of any of the Purchaser without the Purchaser's
prior written consent.
5.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.13 REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for breach of its obligations
hereunder will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of any of the provisions hereunder, that each Purchaser
shall be entitled, in addition to all other available remedies in law or in
equity, to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss and without
any bond or other security being required.
5.14 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to the Purchaser hereunder or pursuant to the Registration Rights
Agreement or the Purchaser enforces or exercises their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
5.15 FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request to the extent necessary to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.16 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.
26.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
GERON CORPORATION
By: /s/ David L. Greenwood
-----------------------------------------------------
Name: David L. Greenwood
Title: Chief Financial Officer, Treasurer and Secretary
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
--------------------------------------------------
Name: Wayne D. Bloch
Title: Managing Director
Residence: Grand Cayman, Cayman Islands
27.
<PAGE> 1
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
30, 1999, by and between Geron Corporation, a Delaware corporation, with its
headquarters located at 230 Constitution Drive, Menlo Park, California 94025
(the "COMPANY"), and the undersigned (together with its affiliates, the "INITIAL
INVESTOR").
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 Investor (i) convertible debentures
(the "DEBENTURES") that are convertible into shares of the Company's common
stock (the "COMMON STOCK"), upon the terms and subject to the limitations and
conditions set forth in such Debentures and (ii) warrants (the "WARRANTS") to
acquire 1,100,000 shares of Common Stock, upon the terms and conditions and
subject to the limitations and conditions set forth in the Warrants dated
September 30, 1999; and
B. To induce the Initial Investor 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 the
Initial Investor hereby agree as follows:
<PAGE> 2
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investor 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 (A) the Debenture
Shares issued or issuable upon conversion or otherwise pursuant to the
Debentures (including, without limitation, shares of Common Stock issued or
issuable in respect of interest or in redemption of the Debentures in accordance
with the terms of the Debentures and Section 2(c) herein); (B) the Warrant
Shares issued or issuable upon exercise of or otherwise pursuant to the
Warrants; and (C) 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(S)" means a registration
statement(s) 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 (the "FILING 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 Investor, which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities, which Registration
Statement, to the extent allowable under the 1933 Act and the rules and
regulations 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 Debentures
and exercise of the Warrants to prevent dilution resulting from stock splits,
stock dividends or similar transactions. The number of shares of Common Stock
initially included in such Registration Statement shall be
<PAGE> 3
no less than 125% of the sum of the number of Debenture Shares and Warrant
Shares that are then issuable upon conversion of the Debentures (based on the
Conversion Price as would then be in effect) and the exercise of the Warrants,
without regard to any limitation on the Investor's ability to convert the
Debentures or exercise the Warrants. 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
Debentures and exercise of the Warrants. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the reasonable
approval of) the Initial Investor and its counsel prior to its filing or other
submission.
b. UNDERWRITTEN OFFERING. [Intentionally Omitted]
c. PAYMENTS BY THE COMPANY. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable but in any event not later than one hundred twenty (120) days after
the Closing Date (the "REGISTRATION DEADLINE"). 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
Registration Deadline, or (ii) after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement, or (iii) 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 Debentures or Registerable
Securities an amount equal to the then outstanding principal amount of the
Debentures (and, in the case of holders of Registrable Securities, the principal
amount of Debentures from which such Registrable Securities were converted)
("OUTSTANDING PRINCIPAL AMOUNT"), multiplied by the Applicable Percentage (as
defined below), multiplied by the sum of: (i) the number of months (prorated for
partial months) after the Registration Deadline 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 or to provide information in
accordance with Section 4(a) below; (ii) the number of months (prorated for
partial months) during the Registration Period (as defined below) that sales of
all of the Registrable Securities 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 (including Section 3(b)
hereof or otherwise), but 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
<PAGE> 4
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. The term "APPLICABLE PERCENTAGE" means two hundredths
(.020). (For example, if the Registration Statement becomes effective one (1)
month after the Registration Deadline, the Company would pay $20,000 for each
$1,000,000 of Outstanding Principal Amount. 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
Outstanding Principal Amount.) Such amounts shall be paid in cash; provided,
however, that if such amounts are not paid to the Investors by the Payment
Deadline (as defined below), at each Investor's option, such amounts may be
added to the principal amount of the Debentures and thereafter be convertible
into Common Stock at the "CONVERSION PRICE" (as defined in the Debentures) in
accordance with the terms of the Debentures. Any shares of Common Stock issued
upon conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities, it
shall so notify the Company in writing within two (2) business days of the
Payment Deadline (as defined below) and such amounts shall be so convertible
(pursuant to the mechanics set forth under the Debentures), beginning upon the
expiration of the Payment Deadline (as defined below) for 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 (the "PAYMENT DEADLINE"), 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 determine to 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 any party 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
by contract to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the
<PAGE> 5
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
contractual 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
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 the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
any Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement. Furthermore, in the event the Company files a
"shelf" Registration Statement contemplating future offerings thereunder for its
own account, the obligations of the Company and the rights of the Investors
under this Section 2(d) shall not commence until such time as the Company
determines to first commence an offering under such Registration Statement (i.e.
"take down" shares from such "shelf" Registration Statement).
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 Investor 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 as
soon as practicable after the Closing Date (but in no event later than the
Filing 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 (but in no event later than the
Registration Deadline), 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 opinion of counsel to the Initial
Investor) may be immediately sold to the public without registration or
restriction (including without limitation as to volume by each holder thereof)
under the 1933 Act (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or
<PAGE> 6
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 Statements and the prospectus or prospectuses used in connection
with the Registration Statements as may be necessary to keep the Registration
Statements effective at all times during the Registration Period, and, during
such 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 Statements 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 Statements. In
the event that on any Trading Day (as defined in the Debentures) (the
"REGISTRATION TRIGGER DATE") the number of shares available under all
Registration Statements filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities issued or issuable upon conversion of or
otherwise pursuant to the Debentures (based on the Conversion Price (as defined
in the Debentures) then in effect) and upon exercise of or otherwise pursuant to
the Warrants (based on the Exercise Price (as defined in the Warrants) then in
effect) in each case without giving effect to any limitations on the Investors'
ability to convert the Debentures or exercise the Warrants, 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 125% of
the Registrable Securities so issued or issuable (without giving effect to any
limitations on conversion or exercise contained in the Debentures or the
Warrants, as applicable), in each case, as soon as practicable, but in any event
within twenty (20) business days after the Registration Trigger Date. 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 but in any event within sixty (60) days of the Registration
Trigger Date. The provisions of Section 2(c) above shall be applicable with
respect to the Company's obligations under this Section 3(b).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in a 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 each 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 each Registration
<PAGE> 7
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 each
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 any such 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 Statements 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 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
any 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 an amendment to any Registration Statement or
supplement to the prospectus contained therein necessary 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 thirty (30) consecutive trading days (or a total of not
more than sixty (60) trading days in any twelve (12) 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, in 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
such 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.
<PAGE> 8
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
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 Investor to review such Registration Statement and all amendments
and supplements 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 such Registration Statement without
prior notice to such counsel. The sections of such Registration Statement
covering information with respect to the Investors, the Investors' 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 the Investors.
i. The Company shall make generally available to its security
holders as soon as practicable, 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 at its
corporate offices during regular business hours by (i) any Investor, (ii) one
firm of attorneys and one firm of accountants or other agents retained by the
Initial Investor 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
<PAGE> 9
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.
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, rules or regulations, or the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject
(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) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on Nasdaq or, if not eligible
for 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 holders of 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 a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as such
holders 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
<PAGE> 10
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 any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement. In addition, the Company
shall not offer any securities for its own account or the account of others 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
majority-in-interest of the Registrable Securities.
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.
r. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
s. The Company shall comply with all applicable laws related to
a Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the 1934 Act and the rules and
regulations promulgated by the SEC).
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 and each Investor will provide such information
to the Company within 48 hours of receipt of such notice.
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 Statements hereunder, unless such Investor has
<PAGE> 11
notified the Company in writing of such Investor's election to exclude all of
such Investor's Registrable Securities from the Registration Statements.
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.
e. Each Investor agrees to sell the Registrable Securities in
compliance with all applicable prospectus delivery requirements under the
Securities Act, pursuant to Rule 144 or pursuant to another available exemption
under the Securities Act.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, 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, subject to Section
1.2(e) of the Securities Purchase Agreement, the reasonable fees and
disbursements of one counsel selected by the Initial Investor pursuant to
Sections 2(b) and 3(h) hereof 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
<PAGE> 12
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
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
such Registration Statement or any such amendment thereof or supplement thereto;
(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; (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; and (iv) shall not apply to any Claim
solely arising from an Investor's failure to satisfy its prospectus delivery
obligations under the 1933 Act, if any, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof. 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
<PAGE> 13
1933 Act, the 1934 Act or otherwise, insofar as such Claim (i) arises out of or
is based upon any Violation by such Investor, 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 or (ii) arises
solely from an Investor's failure to satisfy its prospectus delivery obligations
under the 1933 Act, if any, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; 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 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 the Initial
Investor), 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
<PAGE> 14
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.
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.
<PAGE> 15
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. Any
transferee of Registrable Securities under this Section 9 shall have all the
rights and obligations of the Investors under this Agreement.
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, the
Initial Investor (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 United States 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:
<PAGE> 16
Geron Corporation
230 Constitution Drive
Menlo Park, California 94025
Attention: David Greenwood, Chief Financial Officer
Facsimile: (650) 473-7701
With a copy to:
Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Alan C. Mendelson, Esquire
Facsimile: (650) 857-0663
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
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 in the State of Delaware (without regard to principles
of conflict of laws). Both parties irrevocably consent to the jurisdiction of
the United States federal courts and the state courts located in Delaware with
respect to any suit or proceeding based on or arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby and thereby and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. Both parties irrevocably waive
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. Both parties further agree that service of process upon a party
mailed by first class mail shall be deemed in every respect effective service of
process upon the party in any such suit or proceeding. Nothing herein shall
affect either party's right to serve process in any other manner permitted by
law. Both parties agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
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
<PAGE> 17
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. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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 Debentures then outstanding have been converted into for
Registrable Securities.
k. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Investor by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for breach of its obligations
hereunder will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of any of the provisions hereunder, that each Investor
shall be entitled, in addition to all other available remedies in law or in
equity, to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss and without
any bond or other security being required.
l. 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.
m. 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.
n. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among Investors based on the number
of Registrable Securities held by each
<PAGE> 18
Investor at the time of such establishment or increase, as the case may be. In
the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the number of Registrable Securities included on a Registration Statement for
such transferor. Any shares of Common Stock included on a Registration Statement
and which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Investors, pro rata
based on the number of shares of Registrable Securities then held by such
investors. For the avoidance of doubt, the number of Registrable Securities held
by an Investor shall be determined as if all Debentures and Warrants then
outstanding and held by an Investor were converted into or exercised for
Registrable Securities.
<PAGE> 19
IN WITNESS WHEREOF, the Company and the undersigned Initial Investor
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
<PAGE> 1
EXHIBIT 99.3
GERON ANNOUNCES $12.5 MILLION IN FINANCING
MENLO PARK, CA -- September 30, 1999 -- Geron Corporation (NASDAQ:GERN)
announced today that it has entered into an agreement to sell $12.5 million in
convertible debentures to one of its largest existing institutional investors.
"This financing, together with cash on the balance sheet and committed funding
from partners, brings our total cash available to $51 million, which will allow
Geron to continue investment in our stem cell and telomerase programs, and fund
our new investment in nuclear transfer technology at the Roslin Institute,"
stated David L. Greenwood, Geron chief financial officer and senior vice
president of corporate development.
The debentures are convertible by the investor at a fixed conversion price of
$10.25 per share. The debentures convert at the company's option when the common
stock has traded at a certain premium to the fixed conversion price for five (5)
consecutive trading days. In addition, the investor will receive warrants to
purchase up to 1.1 million shares of Geron common stock at a significant premium
to the current market price. The warrants expire approximately eighteen (18)
months following the closing.
Geron Corporation is a biopharmaceutical company focusing on discovering,
developing and commercializing therapeutic and diagnostic products to treat
cancer and other age-related chronic degenerative diseases. Geron's technology
platform includes the discovery of small molecule inhibitors of telomerase for
cancer therapy; telomere and telomerase-based research and diagnostic tools;
telomerase activation to extend the replicative lifespan of normal cells; and
complementary stem cell, gene therapy and nuclear transfer approaches to restore
the function of degenerating organs.
Contact
Geron Corporation Investor Inquiries
Nancy Robinson John Nugent
Investor and Media Relations Burns McClellan
650-473-7700 212-213-0006
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 financial results is included in the company's
Quarterly Report on Form 10-Q for the year quarter ended June 30, 1999.
Further information on Geron Corporation can be obtained at
http://www.geron.com. To receive an index and copies of recent press releases,
call Geron's news on Demand toll-free fax service, 1-800-782-3279.
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