-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C5QuT4wVRs5dHO55HrSuTpL9OMvEUNn9CK1ppsK7CgccbudzPE6L+CJ6+FlqaBsa 8K+XCGdVlSY0h+0Wp1/WUw== 0000891618-98-005374.txt : 19981218 0000891618-98-005374.hdr.sgml : 19981218 ACCESSION NUMBER: 0000891618-98-005374 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981210 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GERON CORPORATION CENTRAL INDEX KEY: 0000886744 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 752287752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20859 FILM NUMBER: 98771142 BUSINESS ADDRESS: STREET 1: 230 CONSTITUTION DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 BUSINESS PHONE: 4154737700 MAIL ADDRESS: STREET 1: 200 CONSTITUTION DRIVE CITY: MENLO PARK STATE: CA ZIP: 94025 8-K 1 FORM 8-K DATED DECEMBER 10, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): DECEMBER 10, 1998 GERON CORPORATION (Exact name of registrant as specified in its charter) 0-20859 (Commission File Number) DELAWARE 75-2287752 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation) 230 CONSTITUTION DRIVE, MENLO PARK, CA, 94025 (Address of principal executive offices, with zip code) (650) 473-7700 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) 1 2 ITEM 5. OTHER EVENTS. On December 10, 1998, Geron Corporation, a Delaware Corporation (the "Company") entered into an agreement to sell $15 million in convertible zero coupon debentures to investment funds managed by three institutional investors (the "Purchasers"). The debentures are convertible by the holders at a fixed conversion price of $10.00 per share. The debentures convert at the Company's option when the Company's common stock has traded at a certain premium to the fixed conversion price for five (5) consecutive trading days. For a period of eighteen (18) months, the Purchasers hold a right to purchase up to $15,000,000 of additional Common Stock at a premium to the fixed conversion price. The Company's press release announcing the sale of the convertible zero coupon debentures, as well as the Securities Purchase Agreement, Form of Debenture, Form of Warrant, and Registration Rights Agreement are filed as exhibits to this Current Report on Form 8-K. This summary description of the transaction is qualified in its entirety by reference to the documents filed as exhibits hereto. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. The following are filed as exhibits to this Current Report on Form 8-K: 4.1 Form of Debenture. 4.2 Form of Warrant. 10.40 Securities Purchase Agreement dated as of December 10, 1998 among Geron Corporation and certain investors. 10.41 Registration Rights Agreement dated as of December 10, 1998 among Geron Corporation and certain investors. 99.1 Press Release dated December 10, 1998. 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GERON CORPORATION Date: DECEMBER 16, 1998 By: /s/ DAVID L. GREENWOOD -------------------------------------- DAVID L. GREENWOOD CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 3 4 INDEX TO EXHIBITS
Exhibit No. - ----------- 4.1 Form of Debenture. 4.2 Form of Warrant. 10.40 Securities Purchase Agreement dated as of December 10, 1998 among Geron Corporation and certain investors. 10.41 Registration Rights Agreement dated as of December 10, 1998 among Geron Corporation and certain investors. 99.1 Press Release dated December 10, 1998.
4 EX-4.1 2 FORM OF DEBENTURE 1 EXHIBIT 4.1 SERIES [A] [B] [___%] [ZERO COUPON] CONVERTIBLE DEBENTURES THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. No. __ $ ________________ GERON CORPORATION SERIES [A] [B] ZERO COUPON CONVERTIBLE DEBENTURES GERON CORPORATION, A DELAWARE CORPORATION (THE "ISSUER"), FOR VALUE RECEIVED HEREBY PROMISES TO PAY TO ____________OR ITS REGISTERED ASSIGNS THE PRINCIPAL SUM OF ____________DOLLARS AT THE ISSUER'S OFFICE OR AGENCY FOR SAID PURPOSE IN NEW YORK, NEW YORK ON DECEMBER 10, 2001 IN SUCH COIN OR CURRENCY OF THE UNITED STATES OF AMERICA AS AT THE TIME OF PAYMENT SHALL BE LEGAL TENDER FOR THE PAYMENT OF PUBLIC AND PRIVATE DEBTS AT THE LAST ADDRESS OF THE HOLDER (AS DEFINED HEREIN) LAST APPEARING ON THE REGISTER (AS DEFINED HEREIN). This Security is one of a duly authorized issue of Series A zero-coupon convertible debentures of the Issuer (the "Security") referred to in the Securities Purchase Agreement (the "Purchase Agreement") dated as of December 10, 1998 by and among the Issuer, Brown Simpson Strategic Growth Fund, L.P., a Cayman Islands exempt issuer, Brown Simpson Strategic Growth Fund, L.P., a New York limited partnership, LB I Group Inc., a Delaware corporation and RGC International Investors, LDC, a Cayman Islands limited duration company. The Securities are subject to the terms and conditions of the Purchase Agreement. The Issuer agrees to issue from time to time replacement Securities in the form hereof to facilitate any transfers and assignments. In addition, after delivery of an indemnity in form and substance satisfactory to the Issuer, the Issuer also agrees to issue replacement Securities for securities which have been lost, stolen, mutilated or destroyed. The Issuer shall keep at its principal office a register (the "Register") in which shall be entered the names and addresses of the registered holders of the Securities and particulars of the respective Securities held by them and of all transfers of such Securities. 5 2 References to the "Holder" or "Holders" shall mean the Person listed in the Register as the payee of any Security unless the payee shall have presented such Security to the Issuer for transfer and the transferee shall have been entered in the Register as a subsequent holder, in which case the term shall mean such subsequent holder. The ownership of the Securities shall be proven by the Register. For the purpose of paying interest and principal on the Securities, the Issuer shall be entitled to rely on the names and addresses in the Register and notwithstanding anything to the contrary contained in this Security, no Event of Default shall occur under Section 3.1 if payment of principal is made in accordance with the names and addresses and particulars contained in the Register. No provision of this Security shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and accrued interest on this Security at the place, times, rate, and in the currency, herein prescribed. THE PRINCIPAL OF THIS SECURITY SHALL NOT BEAR INTEREST, EXCEPT IN THE CASE OF A DEFAULT OF PRINCIPAL UPON ACCELERATION, REDEMPTION OR AT MATURITY AND IN SUCH CASE THE OVERDUE PRINCIPAL OF THIS SECURITY SHALL BEAR INTEREST AT THE RATE OF 15% PER ANNUM (TO THE EXTENT THAT THE PAYMENT OF SUCH INTEREST SHALL BE LEGALLY ENFORCEABLE), WHICH SHALL ACCRUE FROM THE DATE OF SUCH DEFAULT IN PAYMENT TO THE DATE PAYMENT OF SUCH OVERDUE PRINCIPAL HAS BEEN MADE OR DULY PROVIDED FOR. SUCH INTEREST WILL BE COMPUTED ON THE BASIS OF A 365-DAY YEAR (OR 366 DAYS IN THE CASE OF A LEAP YEAR). INTEREST ON ANY OVERDUE PRINCIPAL SHALL BE PAYABLE ON DEMAND. PAYMENT OF THE PRINCIPAL OF AND ANY SUCH INTEREST ON THIS SECURITY WILL BE IN NEW YORK, NEW YORK. The payment obligations evidenced by this Security shall rank senior to all other Debt of the Issuer. The Issuer shall not issue directly or indirectly any Debt for Money Borrowed which is senior to the indebtedness evidenced by this Security. ARTICLE I DEFINITIONS I.1. CERTAIN TERMS DEFINED. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Security shall have the respective meanings specified below. All accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" shall mean such accounting principles which are generally accepted as of the date hereof. The terms defined in this Section 1.1 include the plural as well as the singular. "Acceleration Notice" shall have the meaning set forth in section 3.1. "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such 6 3 Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Average Price" on any date means (x) the sum of the Per Share Market Value for the ten (10) Trading Days immediately preceding such date minus (y) the highest and lowest Per Share Market Values during the ten (10) Trading Days immediately preceding such date, divided by (z) eight. "Board of Directors" means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act hereunder. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the original Issue Date, including, without limitation, all Common Stock and all Preferred stock. "Change of Control" means the occurrence of one or more of the following events: the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or any of their Affiliates, of in excess of 50% of the voting securities of the Issuer, (ii) a replacement of more than one-half of the members of the Issuer's Board of Directors which is not approved by those individuals who are members of the Board of Directors on the date hereof in one or a series of related transactions, (iii) the merger of the Issuer with or into another entity, consolidation or sale of all or substantially all of the assets of the Issuer in one or a series of related transactions or (iv) the execution by the Issuer of an agreement to which the Issuer is a party or by which it is bound, providing for any of the events set forth in (i), (ii) or (iii). "Common Stock" means the common stock, par value $.001 per share, of the Issuer. "Conversion Price" shall have the meaning set forth in Section 4.2. "Debt" of any Person means, at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or bankers' acceptance or other similar instruments (or reimbursement obligations with respect thereto), (iv) all obligations of such Person to pay the deferred purchase price of property or services, (v) all obligations of such Person as lessee under capitalized leases, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, provided that for purposes of determining the amount of any Debt of the type described in this clause, if recourse with respect to such Debt is limited to such asset, the amount of such Debt shall be limited to the fair market value of such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all redeemable stock valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends. 7 4 "Debt for Money Borrowed" of any Person means at any date, without duplication, Debt of the type referred to in clauses (i) and (ii) of the definition of "Debt" set forth herein. "GAAP" or "generally accepted accounting principles" means generally accepted accounting principles in the United States, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. "Holder", "Holder of Securities", "Securityholder" or other similar terms means the registered holder of any Security. "Incurrence" means the incurrence, creation, assumption or in any other manner becoming liable with respect to, or the extension of the maturity of or becoming responsible for the payment of, any Debt. "Incur" shall have a comparable meaning. "Issuer" shall have the meaning set forth in the first paragraph hereof. "Issuer Conversion Notice" shall have the meaning set forth in Section 4.7. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Security, the Issuer shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Mandatory Prepayment Amount" for any Security means the greater of (i) the sum of (x) 115% of the principal amount of the Security to be prepaid and (y) all other amounts, costs, interest, expenses and liquidated damages due in respect of such principal amount and (ii) the sum of (x) at the option of the Holder, either (I) the principal amount of the Security to be repaid, plus all accrued and unpaid interest thereon, divided by the Conversion Price on the date the Mandatory Prepayment Amount is demanded or otherwise due, multiplied by the Average Price on the date the Mandatory Prepayment Amount is demanded or otherwise due or (II) the principal amount of the Security to be prepaid, plus all accrued and unpaid interest thereon, divided by the Conversion Price on the Trading Day immediately prior to the date the Mandatory Prepayment Amount is paid in full, multiplied by the Average Price on the Trading Day immediately prior to the date the Mandatory Prepayment Amount is paid in full, and (y) all other amounts, costs, interest, expenses and liquidated damages due in respect of such principal amount. "Nasdaq" means the Nasdaq National Market. "Original Issue Date" of any Security (or portion thereof) means the earlier of (i) the date of such Security and (ii) the date of any Security (or portion thereof) for which such security was issued (directly or indirectly) on registration of transfer, exchange or substitution. "Per Share Market Value" means (i) on any particular date the closing bid price per share of the Common Stock on such date on Nasdaq or any Subsequent Market on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price 8 5 on such exchange or quotation system on the date nearest preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or any Subsequent Market, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (iii) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an appraiser selected in good faith by the holder of this Security; provided, however, that the Issuer, after receipt of the determination by such appraiser, shall have the right to select an additional appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding or issued after the date of this Security, and includes, without limitation, all classes and series of preferred or preference stock. "Principal", wherever used with reference to the Securities or any Security or any portion thereof, shall be deemed to include "and premium, if any." "Property" of any Person means all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person under generally accepted accounting principles. "Purchase Price" means, with respect to any Security, the purchase price paid to the Issuer upon issuance of such Security. "Purchasers" shall have the meaning ascribed thereto in the Purchase Agreement. "Registration Rights Agreement" means that Registration Rights Agreement dated as of December 10, 1998 by and among the Issuer and the Purchasers. "Security" or "Securities" shall have the meaning set forth in the second paragraph hereof. "Series A Convertible Preferred Stock" means the Series A Convertible Preferred Stock of the Issuer. "Stated Maturity Date" means December 10, 2001. "Stock Option Plan" means any contract, plan or agreement which has been approved by the Board of Directors of the Issuer, pursuant to which the Issuer's securities may be issued to any employee, officer, director or consultant. "Subsidiary" means, with respect to any Person, any corporation or other entity of which a majority of the Capital Stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. 9 6 "Subsequent Market" means the New York Stock Exchange, American Stock Exchange or Nasdaq Smallcap Market. "Trading Day" means (a) a day on which the Common Stock is traded on Nasdaq or on such Subsequent Market on which the Common Stock is then listed or quoted or (b) if the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter Market, as reported by the OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions or reporting prices) provided, however that in any event that the Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business Day. "Tranche A Closing Date" has the meaning set forth in the Purchase Agreement. "Tranche B Closing Date" has the meaning set forth in the Purchase Agreement. "Warrants" has the meaning set forth in the Purchase Agreement. "Wholly-Owned Subsidiary" means with respect to any Person a Subsidiary the voting stock of which is more than 90% owned by such Person. ARTICLE II PAYMENT; THE SECURITIES II.1. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid the principal and interest on overdue principal (to the extent enforceable under applicable law), with respect to each of the Securities at the place or places, at the respective times and in the manner provided in the Securities. II.2. MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case any temporary or definitive Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Issuer shall execute and deliver a new Security, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security. In every case the applicant for a substitute Security shall furnish to the Issuer such security or indemnity as it may require to indemnify and defend and to save it harmless and, in every case of destruction, loss or theft evidence to the Issuer's satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Upon the issuance of any substitute Security, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Security which has matured or is about to mature, or has been called for redemption in full, or is being surrendered for conversion in full shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Issuer may, instead of issuing a substitute Security, with the holder's consent, pay or authorize the payment or conversion of the same (without surrender thereof except in the case of a mutilated or defaced Security), if the applicant for such payment shall furnish to the Issuer such 10 7 security or indemnity as it may require to save it harmless from all risks, however remote, and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Issuer evidence to the Issuer's satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Security equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment or conversion of mutilated, defaced, or apparently destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. II.3. CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All Securities surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Issuer for cancellation and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Security. If the Issuer shall acquire any of the Securities, such acquisition alone shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until such indebtedness is satisfied. ARTICLE III DEFAULTS III.1. EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF DEFAULT. In case one or more of the following events ("Events of Default") (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing: (a) default in the payment of all or any part of the principal of or interest on overdue principal on, any of the Securities as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise; or (b) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer contained in this Security or the Purchase Agreement or the Registration Rights Agreement for a period of five (5) Business Days after the date on which any officer of the Issuer shall have obtained actual knowledge of such failure or after written notice thereof has been given to the Issuer by the holders of at least a 11 8 majority in aggregate principal amount of the Securities then outstanding; or (c) there shall have occurred with respect to any issue or issues of Debt of the Issuer and/or one or more Subsidiaries having an outstanding principal amount of $1,000,000 or more in the aggregate for all such issues of all such Persons, whether such Debt now exists or shall hereafter be created, an event of default which has caused the holder thereof to declare such. debt to be due and payable prior to its stated maturity and such Debt has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; or (d) a judgment or order (not covered by insurance) for the payment of money shall be rendered against the Issuer or any Subsidiary of the Issuer in excess of $500,000 in the aggregate for all such judgments or orders against all such Persons (treating any deductibles, self insurance or retention as not so covered) that shall not be discharged, and all such judgments and orders remain outstanding and there shall be any period of 30 consecutive days following entry of the judgment or order in excess of $500,000 or the judgment or order which causes the aggregate amount described above to exceed $500,000 during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer or any of its subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Issuer or any of its Subsidiaries or for any substantial part of the property of the Issuer or any of its Subsidiaries or ordering the winding up or liquidation of the affairs of the Issuer or any of its Subsidiaries, and such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; or (f) the Issuer or any of its Subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Issuer or any of its Subsidiaries or for any substantial part of the property of the Issuer or any of its Subsidiaries, or the Issuer or any of its Subsidiaries shall make any general assignment for the benefit of creditors; or 12 9 (g) any representation, warranty, certification or statement made by the Issuer in the Purchase Agreement or in any certificate, financial statement or other document delivered pursuant to the Purchase Agreement shall prove to have been incorrect in any material respect when made; or (h) the Common Stock shall be delisted from Nasdaq or shall be suspended from trading on Nasdaq without resuming trading and/or being relisted thereon or on a Subsequent Market or having such suspension lifted, as the case may be, within three Business Days; or (i) a Registration Statement for the Underlying Securities (each as defined in the Purchase Agreement) shall not have been declared by the Securities and Exchange Commission on or prior to the 180th day after the Series A Closing Date (as defined in the Purchase Agreement); or (j) (x) a Change of Control shall occur and (y) the obligations incurred by this Security shall not have been fully assumed by the controlling entity or otherwise fully accounted for; then, in each and every such case (other than an Event of Default specified in Section 3.1(e) or 3.1(f) hereof), unless the principal shall have already become due and payable, by notice in writing to the Issuer (the "Acceleration Notice"), a Holder may declare the entire principal amount of the Securities and any interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default specified in section 3.1(e) or 3.1(f) occurs, the principal of and any accrued interest on the Securities shall become and be immediately due and payable without any declaration or other act on the part of any Securityholder. In the event that the Issuer shall not have promptly, but in any event within five (5) Business Days upon receipt of an Acceleration Notice, paid the Holder the principal of and any accrued interest on this Security, the Conversion Price shall automatically be adjusted to equal the average Per Share Market Value of the Common Stock during the preceding 30 consecutive Trading Days; provided, that the Per Share Market Value is lower than the Conversion Price. The aggregate amount payable upon an Event of Default described in Section 3.1(a), (e), (f) and (i) shall be equal to the sum of (I) the Mandatory Prepayment Amount plus (II) the Mandatory Prepayment Amount for the principal amount of the Securities (the "Converted Debentures") that would then be held by such Holder had the principal amount of Securities converted into Underlying Shares that are then held by the Holder not been so converted; provided, that the Holder shall not be entitled to a Mandatory Prepayment Amount with respect to Converted Debentures if both the following have occurred: (i) prior to the occurrence of an Event of Default, the Underlying Shares into which the Converted Debentures were converted had been held by the Holder for more than thirty (30) days (which period shall be extended at the 13 10 time of occurrence of the Event of Default for the number of Trading Days during such 30-day period that an Allowable Grace Period (as defined in the Registration Rights Agreement) is in effect) and (ii) prior to the occurrence of the Event of Default and after receipt by the Holder of the Underlying Shares that are held by the Holder at the time of the occurrence of the Event of Default, the Registration Statement with respect to such Underlying Shares had been continuously effective for thirty (30) Trading Days. The aggregate principal amount payable on each Event of Default other than as described in Section 3.1(a), (e), (f) and (i) shall be equal to the sum of (I) the Mandatory Prepayment Amount plus (II) the Mandatory Prepayment Amount for the Converted Debentures that would then be held by such Holder had the principal amount of Securities converted into Underlying Shares (as defined herein) that are then held by the Holder not been so converted; provided, that the Holder shall not be entitled to a Mandatory Prepayment Amount with respect to Converted Debentures if prior to the occurrence of an Event of Default, the Underlying Shares into which the Converted Debentures were converted had been held by the Holder for more than three Trading Days (which period shall be extended at the time of occurrence of the Event of Default for the number of Trading Days during such 3-day period that an Allowable Grace Period is in effect). For purposes of this Section 3.1, principal amount of the Securities are outstanding until such date as the Holder shall have Underlying Shares upon a conversion (or attempted conversion) thereof. Interest shall accrue on the prepayment amount hereunder from the day after such amount is due (being the date of an Event of Default) through the date of payment in full thereof at the rate of 15.0% per annum, accruing daily from the date of conversion until such amount, plus any interest thereon, if any, is paid in full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1 shall be in addition to any other amounts that may be due to the Holder pursuant to this Security. Within five (5) Business Days of receipt by the Holder of payments of amounts due to the Holder, (i) the Holder shall return the Securities to the Issuer and (ii) in the event the Mandatory Prepayment Amount relates to the Converted Debentures, the Holder shall return the Underlying Shares into which such Converted Debentures were converted. In the event of the occurrence of an Event of Default, the Holder need not provide and the Issuer hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Any demand for payment may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon delivery of any Acceleration Notice to the Issuer, the Issuer shall provide a copy of such notice to the other Holders, if any. Failure to deliver such notice shall not affect the validity of the notice delivered by the Holders in accordance with the provisions referred to above. III.2. POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF DEFAULT. No right or remedy herein conferred upon or reserved to the Holders is intended to be 14 11 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. 15 12 ARTICLE IV EXCHANGE; CONVERSION IV.1. RIGHT OF SECURITYHOLDERS TO EXCHANGE SECURITIES. Subject to and upon compliance with the provisions of this Section, this Security is exchangeable for an equal principal amount of debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange. IV.2. RIGHT OF SECURITYHOLDERS TO CONVERT SECURITIES INTO COMMON STOCK. Subject to and upon compliance with the provisions of this Section, the principal amount of this Security, or any portion thereof may, at any time and at or before the close of business on December 10, 2001, be converted into duly authorized, validly issued, fully-paid and nonassesable shares of Common Stock at $10.00 per share (the "Conversion Price"), or, in case an adjustment in the Conversion Price and the securities or other property issuable upon conversion has taken place pursuant to Article III or IV hereof, then at the applicable Conversion Price and in such securities or other property as so adjusted, upon surrender of the Security or Securities, the principal amount of which is so to be converted, to the Issuer at any time during usual business hours at the Issuer's offices, accompanied by a written notice of election to convert as provided in the form attached hereto as Exhibit A and, if so required by the Issuer, by a written instrument or instruments of transfer in form satisfactory to the Issuer duly executed by the registered holder or his attorney duly authorized in writing. IV.3. ADJUSTMENT FOR DIVIDENDS. No payment or adjustment will be made for dividends on any Common Stock except as provided herein. On conversion of a Security, that portion of interest accrued and unpaid interest attributable to the period from the Original Issuance Date to the Conversion Date with respect to the converted Security shall not be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock, in exchange for the Security being converted pursuant to the provisions hereof. If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total principal amount of the Securities converted. IV.4. ISSUANCE OF SHARES UPON CONVERSION. As promptly as practicable after the surrender, as herein provided, of any Security or securities for conversion, but in any event no later than three Trading Days, the Issuer shall deliver or cause to be delivered at its said office or agency to or upon the written order of the holder of the Security or securities so surrendered a certificate or certificates representing the number of duly authorized, validly issued, fully-paid and nonassesable shares of Common Stock, into which such Security or Securities may be converted in accordance with the provisions of this Article IV. Prior to delivery of such certificate or certificates, the Issuer shall require a written notice at its said office or agency from the Holder of the Security or securities so surrendered stating that the holder irrevocably elects to convert such Security or Securities, or, if less than the entire principal amount thereof is to be converted, stating the portion thereof to be converted. Such notice shall also state the name or names (with address and social security or other taxpayer identification number) in which said 16 13 certificate or certificates are to be issued. Such conversion shall be deemed to have been made at the time that such Security or Securities shall have been surrendered for conversion and such notice shall have been received by the Issuer, the rights of the holder of such Security or Securities as a Securityholder shall cease at such time, the person or persons entitled to receive the shares of Common Stock, upon conversion of such Security or Securities shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time and such conversion shall be at the Conversion Price in effect at such time. In the case of any Security which is converted in part only, upon such conversion, the Issuer shall execute and deliver to the holder thereof, as requested by such holder, a new Security or securities of authorized denominations in aggregate principal amount equal to the unconverted portion of such Security. IV.5. ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the occurrence of an Event of Default as set forth in Article III and upon the happening of certain events, as follows: (a) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Security is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Issuer, the Conversion Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this paragraph 4.5(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (b) Rights; Warrants. If the Issuer, during the period commencing on the date of issuance of this Security through the date which is 15 months from the date of issuance of this Security, shall issue rights or warrants to all of the holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, the Conversion Price shall be multiplied by a fraction, the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this paragraph (b), if any such right or warrant shall expire and all or any portion thereof shall not have been exercised, the Conversion Price shall immediately upon such expiration be re-computed and 17 14 effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of section (g) after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock (if any) actually purchased upon the exercise of such rights or warrants actually exercised; provided, however, that if (X) the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is greater than 150% of the Conversion Price as of the date of issuance of this Security for five (5) consecutive Trading Days, then this provision shall expire automatically on the 180th day following the date of issuance of this Security. (c) Subscription Rights. If the Issuer, during the period commencing on the date of issuance of this Security through the date which is 15 months from the date of issuance of this Security, shall distribute to all of the holders of Common Stock evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in paragraphs 6(a) and (b) above), then in each such case the Conversion Price at which this Security shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction the denominator of which shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and the numerator of which shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Issuer, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (an "Appraiser") selected in good faith by the Holder of the Security; and provided, further, that the Issuer, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser meeting the same qualifications, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above; provided, however, that if (X) the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is greater than 150% of the Conversion Price as of the date of issuance of this Security for five (5) consecutive Trading Days, then this provision shall expire automatically on the 180th day following the date of issuance of this Security. (d) Rounding. All calculations under this section 4.5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (e) Notice of Adjustment. Whenever the Conversion Price is adjusted pursuant to paragraphs 4.5(a), (b) or (c), the Issuer shall promptly mail to the holder of this 18 15 Security, a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (f) Reclassification, Etc. If: A. the Issuer shall declare a dividend (or any other distribution) on its Common Stock; or B. the Issuer shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or C. the Issuer shall authorize the granting to all the holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or D. the approval of any shareholders of the Issuer shall be required in connection with any reclassification of the Common Stock of the Issuer, any consolidation or merger to which the Issuer is a party, any sale or transfer of all or substantially all of the assets of the Issuer, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or E. the Issuer shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Issuer; then the Issuer shall cause to be filed at each office or agency maintained for the purpose of conversion of this Security, and shall cause to be mailed to the holder of this Security, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice (provided such notice shall not include any material non-public information) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (g) Adjustment to Conversion Price. In order to prevent dilution of the rights granted under this Security, during the period commencing on the date of issuance of this Security through the date which is 15 months from the date of issuance of this Security, the Conversion Price will be subject to adjustment from time to time as provided in this Section 4.5(g); provided, however, that if (X) the Registration Statement (as defined in the Registration Rights Agreement) 19 16 has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is greater than 150% of the Conversion Price as of the date of issuance of this Security for five (5) consecutive Trading Days, then this provision shall expire automatically on the 180th day following the date of issuance of this Security: (i) Adjustment of Conversion Price upon Issuance of Common Stock. If at any time the Issuer issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than the shares of Common Stock underlying the Warrants or the Securities or shares issued upon exercise of the Warrants or conversion of the Securities (collectively, the "Underlying Shares") or shares of Common Stock deemed to have been issued by the Issuer in connection with a Stock Option Plan, shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued or deemed to have been issued in a Strategic Venture (as defined below), or shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Issuer of a division, assets or business (or stock constituting any portion thereof) from another person) for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale, then immediately after such issue or sale, the Conversion Price then in effect shall be reduced to an amount equal to the consideration per share of Common Stock in such issuance or sale. A "Strategic Venture" shall mean a venture between the Issuer and a pharmaceutical or biotechnology company or an Affiliate thereof, the primary purpose of which is not to raise capital in the form of equity (including without limitation through the issuance of warrants, convertible securities, phantom stock rights, stock appreciation rights or other rights with equity features) and pursuant to which the Issuer contributes to or issues securities of the Issuer valued at less than 50% of the entire contribution of the Issuer. If the Holder and the Issuer cannot agree on the value of the components of such contribution, the last two sentences of subsection (E)(I) entitled "Calculation of Consideration" shall apply. For purposes of determining the adjusted Conversion Price under this Section 4.5(g), the following shall be applicable: (A) Issuance of Options. If at any time the Issuer in any manner grants any rights or options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than the Underlying Shares or shares of Common Stock deemed to have been issued by the Company in connection with a Stock Option Plan, shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Issuer of a division, assets or business (or stock constituting any portion thereof) from another person or shares of Common Stock issued or deemed to have been issued in a Strategic Venture) (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities") and the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such 20 17 Convertible Securities is less than the Conversion Price in effect immediately prior to such grant, then the Conversion Price shall be adjusted to equal the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities. No adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (B) Issuance of Convertible Securities. If at any time the Issuer in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon such conversion or exchange (other than the Underlying Shares or shares of Common Stock deemed to have been issued by the Company in connection with a Stock Option Plan, shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Issuer of a division, assets or business (or stock constituting any portion thereof) from another person or shares of Common Stock issued or deemed to have been issued in a Strategic Venture) is less than the Conversion Price in effect immediately prior to issuance or sale, then the Conversion Price shall be adjusted to equal the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities. (C) Change in Option Price or Rate of Conversion. If there is a change at any time in (i) the purchase price provided for in any Options, (ii) the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock, then the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold; provided that no adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (D) Certain Definitions. For purposes of determining the adjusted Conversion Price under this Section 4.5(g)(i), "Common Stock Deemed Outstanding" means, at any given time, the number of shares of Common Stock issued and outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 4.5(g)(i)(A) and 4.5(g)(i)(B) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock issuable upon conversion of the Securities or exercise of the Warrants. 21 18 (E) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Conversion Price under this Section 4.5(g)(i), the following shall be applicable: (I) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Issuer therefor. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Issuer will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Issuer will be the arithmetic average of the Per Share Market Values of such security for the five (5) consecutive Trading Days immediately preceding the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Issuer is the surviving entity the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Issuer and the holders of a majority of the Underlying Shares of the Securities then outstanding. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within forty-eight (48) hours of the tenth (10th) day following the Valuation Event by an Appraiser selected by the Issuer. The determination of such Appraiser shall be binding upon all parties absent manifest error. (II) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Issuer, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for an aggregate consideration of $.001. (III) Treasury Shares. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Issuer, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock. (IV) Record Date. If the Issuer takes a record of the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the 22 19 making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Certain Events. If any event occurs of the type contemplated by the provisions of Section 4.5(g)(i) (subject to the exceptions stated therein) but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Issuer's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder, or assigns, of this Security; provided, however, that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 4.5(g). Notwithstanding anything to the contrary contained in this Section 4.5, those shares of Common Stock issued pursuant to the transactions contemplated by the Issuer and Rose Glen Capital Management, L.P. and certain other investors pursuant to which the Issuer intends to complete a private placement of Common Stock (as described in Schedule 2.1(c) to the Purchase Agreement) shall be excluded from any adjustments provided for herein. Additionally, in no event shall any provision in this Section 4.5 cause the Conversion Price to be greater than the Conversion Price on the date of issuance of this Security. IV.6. NASDAQ LIMITATION. If on any date (the "Determination Date") (a) the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market, (b) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock (x) that would then be issuable upon conversion in full of the then outstanding principal amount of the Securities and as payment of interest thereon, as would equal or exceed 20% of the number of shares of the Common Stock outstanding immediately prior to the later of (A) the Tranche A Closing Date and (B) the Tranche B Closing Date (such number of shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and (c) the Issuer shall not have previously obtained the vote of the shareholders of the Issuer (the "Shareholder Approval"), if any, as may be required by the applicable rules and regulations of Nasdaq (or any successor entity) to approve the issuance of shares of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book value or fair market value of the Common Stock, then with respect to the aggregate principal amount of the Securities then held by the Holders for which a conversion in accordance with the Conversion Price would result in an issuance of shares of Common Stock in excess of the Issuable Maximum (the "Excess Principal") the Issuer may elect to prepay cash to the Holders in an amount equal to the Mandatory Prepayment Amount. Any such election by the Issuer must be made in writing to the Holders within two Trading Days after the Determination Date and the payment of such Mandatory Prepayment Amount applicable to such prepayment must be made in full to the Holders with ten (10) Business Days after the date such notice is delivered. If the Issuer does not deliver timely a notice of its election to prepay under this Section or shall, if it shall have delivered such a notice, fail to pay the prepayment amount hereunder within ten (10) Business Days thereafter, then the Holders of a majority of the aggregate principal 23 20 amount of the Securities then outstanding shall have the option by written notice to the Issuer, to declare any such notice given by the Issuer, if given, to be null and void and require the Issuer to pay cash to each Holder in an amount equal to the Mandatory Prepayment Amount for such Holder's portion of the Excess Principal. The payment of the Mandatory Prepayment Amount to each Holder pursuant to this Section shall be determined on a pro rata basis upon the principal amount of the Securities held by such Holder on the Determination Date. If the Issuer fails to pay the Mandatory Prepayment Amount in full pursuant to this Section within five Business Days after the date payable, the Issuer will pay interest thereon at a rate of 15% per annum to the converting Holder, accruing interest daily from the date of conversion until such amount, plus all such interest thereon, if any, is paid in full. In no event shall the Issuer be required to issue shares of Common Stock upon conversion of the Securities if such issuance would violate the rules of Nasdaq. IV.7. CONVERSION AT THE OPTION OF THE ISSUER. Subject to the provisions of this paragraph, this Security shall, upon ten (10) days' prior notice to the Holders, be convertible into shares of Common Stock at the option of the Issuer, in whole or in part, at any time and from time to time during the 45 days following a period of 5 consecutive Trading Days that the average of the Per Share Market Value of the Common Stock equals or exceeds an amount equal to 175% of the Conversion Price as of the Original Issuance Date of this Security. Any conversion of this Security pursuant to this Section 4.7 shall be made on a pro rata basis with the conversion of the Securities held by other Persons. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by dividing the outstanding principal amount of this Security to be converted, plus all accrued but unpaid interest thereon (to the extent such interest is not being paid in cash), by the Conversion Price on the Issuer Conversion Date (as defined herein). Notwithstanding the foregoing, the Issuer shall not be permitted to deliver requests for the conversion of a Holder's Securities if (a) both (1) a Registration Statement for the Underlying Securities is not then effective and (2) such Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k) under the Act, without volume restrictions, as evidenced by an opinion letter of counsel to the Issuer and acceptable to the Holder and transfer agent for the Common Stock; (b) there are not sufficient shares of Common Stock authorized and reserved for issuance upon such conversion; or (c) the Issuer shall have defaulted on its material covenants and obligations hereunder or under the Purchase Agreement or Registration Rights Agreement, which default has not been cured in full to the reasonable satisfaction of the Holder. The Issuer shall exercise its right to require conversion by delivering to the Holder a form of conversion notice attached hereto as Exhibit B (the "Issuer Conversion Notice"). Each Issuer Conversion Notice shall specify the principal amount of Securities to be converted and the date on which such conversion is to be effected, which date may not be prior to the date such Issuer Conversion Notice is deemed to have been delivered hereunder (the "Issuer Conversion Date"), as well as the other information set forth on Exhibit B. If no Issuer Conversion Date is specified in an Issuer Conversion Notice, the Issuer Conversion Date shall be the date that such Issuer Conversion Notice is deemed delivered hereunder. Subject to the provisions hereof, each Issuer Conversion Notice, 24 21 once given, shall be irrevocable. If the Issuer is requiring conversion of less than all of the principal amount represented by the Securities tendered by the Holder in response to an Issuer Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Issuer shall honor such conversion to the extent permissible hereunder and pro rata with all other Holders of the Securities and shall promptly deliver to such Holder a new Security for such principal amount as has not yet been converted. IV.8. RESTRICTION ON CONVERSION BY EITHER THE HOLDER OR THE ISSUER. Notwithstanding anything herein to the contrary, in no event shall any Holder or the Issuer have the right or be required to convert any or all of the aggregate principal amount and interest accrued thereon of this Security if the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates would exceed 9.9% of the outstanding shares of the Common Stock following such conversion. For purposes of this Section 4.8, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. IV.9. OFFICER'S CERTIFICATE. Whenever the number of shares purchasable upon conversion shall be adjusted as required by the provisions of Section 4.5, the Issuer shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted number of shares determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be signed by the chairman, president or chief financial officer of the Issuer and by the secretary or any assistant secretary of the Issuer. Each such officer's certificate shall be made available at all reasonable times for inspection by any holder of the Securities and the Issuer shall, forthwith after each such adjustment, mail a copy, by first class mail, of such certificate to the each of the Holders. IV.10. RESERVATION OF SHARES. The Issuer covenants that it will at all times reserve and keep available out of its authorized shares of Common Stock, free from preemptive rights, solely for the purpose of issue upon conversion of the Securities as herein provided, such number of shares of the Common Stock as shall then be issuable upon the conversion of all outstanding Securities into Common Stock. The Issuer covenants that all shares of the Common Stock issued upon conversion of the Security which shall be so issuable shall, when issued, be duly and validly issued and fully paid and non-assessable. IV.11. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Issuer covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Securities hereunder require registration with or approval of any governmental authority under any Federal or state law, or any national securities exchange, before such shares may be issued upon conversion, the Issuer will use its best efforts to cause such shares to be duly registered or approved, as the case may be. IV.12. FRACTIONAL SHARES. Upon a conversion hereunder, the Issuer shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Issuer elects not, or is unable, to make such a cash payment, the holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. 25 22 IV.13. PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of certificates for shares of the Common Stock on conversion of the Securities shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Issuer shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Securities so converted and the Issuer shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Issuer the amount of such tax or shall have established to the satisfaction of the Issuer that such tax has been paid. IV.14. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 8:00 p.m. EST where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Issuer to Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David Greenwood, fax no. (650) 473-7701 and (ii) if to any Holder to the address set forth on Schedule II to the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. ARTICLE V MISCELLANEOUS V.1. MODIFICATION OF SECURITIES. The Securities may be modified without prior notice to any Holder upon the written consent of the Holders of a majority in principal amount of the Securities then outstanding. The Holders of a majority in principal amount of the Securities then outstanding may waive compliance by the Issuer with any provision of the Securities without prior notice to any Holder. However, without the consent of each Holder affected, an amendment, supplement or waiver may not (1) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver, (2) reduce the principal amount of or extend the fixed maturity of any Security or (3) make any Security payable in money or property other than as stated in the Securities. V.2. MISCELLANEOUS. This Security shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State, except as may otherwise be required by mandatory provisions of law. The parties hereto, including all guarantors or endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Security, except as specifically provided herein, and assent to extensions of the time of payment, or forbearance or other 26 23 indulgence without notice. The Holder of this Security by acceptance of this Security agrees to be bound by the provisions of this Security which are expressly binding on such Holder. V.3. SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Securities have concurred in any direction, consent or waiver under this Security, Securities which are owned by the Issuer or any other obligor on the Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that any Securities owned by the Purchasers shall be deemed outstanding for purposes of making such a determination. Securities so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Issuer the pledgers right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the securities or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities. V.4. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. V.5. NO RIGHTS AS STOCKHOLDER. This Security shall not entitle the Holder to any rights as a stockholder of the Issuer, including without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or to attend, meetings of stockholders or any other proceedings of the Issuer, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof. 27 24 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed under its corporate seal. GERON CORPORATION [Seal] By --------------------------------- Name: Title: Dated: Attest: - -------------------------- 28 25 EXHIBIT A (FORM OF CONVERSION NOTICE] To: Geron Corporation The undersigned owner of this Security hereby: (i) irrevocably exercises the option to convert this Security, or the portion hereof below designated, for shares of Common Stock, par value $.001 per share ("Common Stock"), of Geron Corporation in accordance with the terms of this Security and (ii) directs that such shares of Common Stock deliverable upon the conversion, together with any check in payment for fractional shares and any Security(ies) representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares are to be delivered registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ------------------- Name: -------------------------------------- Signature: --------------------------------- Principal Amount to be Converted: (if less than all) $ -------------------------- Fill in for registration of shares if to be delivered, and of Securities if to be issued, otherwise than to and in the name of the registered holder. ---------------------------------- Social Security or Other Taxpayer Identifying Number ---------------------------------- (Name) ---------------------------------- (Street Address) ---------------------------------- (City, State and Zip Code) 26 EXHIBIT B NOTICE OF CONVERSION AT THE ELECTION OF THE ISSUER The undersigned in the name and on behalf of Geron Corporation (the "Issuer") hereby notifies the addressee hereof that the Issuer hereby elects to exercise its right to convert Series A Zero Coupon Convertible Debentures (the "Debentures") held by the Holder into shares of Common Stock, par value $.001 per share (the "Common Stock") of the Issuer according to the terms hereof, as of the date written below. No fee will be charged to the Holder for any conversion hereunder, except for such transfer taxes, if any which may be incurred by the Issuer if shares are to be issued in the name of a person other than the person to whom this notice is addressed. Conversion Calculations: Date to Effect Conversion Principal Amount of Debentures to be Converted Number of shares of Common Stock to be Issued Applicable Conversion Price Please issue the shares of Common Stock indicated above. GERON CORPORATION By: -------------------------------- Name: Title: 30 EX-4.2 3 FORM OF WARRANT 1 EXHIBIT 4.2 Form of Warrant THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. December 10, 1998 ___________ shares Warrant No. [A] [B]-_____ GERON CORPORATION STOCK PURCHASE WARRANT Registered Owner: This certifies that, for value received, Geron Corporation, a Delaware corporation, the ("Company") grants the following rights to the Registered Owner, or assigns, of this Warrant: 1. ISSUE. Upon tender (as defined in section 5 hereof) to the Company, the Company shall issue to the Registered Owner, ______________, or assigns, up to the number of shares specified in paragraph 2 hereof of fully paid and non-assessable shares of Common Stock, par value $.001 per share ("Common Stock"), that the Registered Owner, or assigns, is otherwise entitled to purchase. 2. NUMBER OF SHARES. The total number of shares of Common Stock that the Registered Owner, or assigns, of this Warrant is entitled to receive upon exercise of this Warrant is ________ shares of Common Stock, subject to adjustment from time to time as set forth in paragraph 6 below. The Company shall at all times reserve and hold available sufficient shares of Common Stock to satisfy all conversion and purchase rights represented by outstanding convertible securities, options and warrants, including this Warrant. The Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the purchase and the issuance of the shares. 31 2 3. EXERCISE PRICE. The initial exercise price of this Warrant, the price at which the shares of stock issuable upon exercise of this Warrant may be purchased, is $12.00 and subject to adjustment from time to time pursuant to the provisions of paragraph 6 below (the "Exercise Price"). 3A. PAYMENT OF EXERCISE PRICE. The Registered Owner may pay the Exercise Price in one of the following manners: (i) Cash Exercise. The Registered Owner shall deliver immediately available funds or a check payable to the Company; or (ii) Cashless Exercise. At such time as, but only at such time as, after the 180th day after the date of issuance of this Warrant, all of the Underlying Shares are not registered pursuant to an effective registration statement, the Registered Owner shall have the right to surrender this Warrant to the Company together with a notice of cashless exercise, in which event the Company shall issue to the Registered Owner the number of Warrant Shares determined as follows: where: X = Y (A-B)/A X = the number of Warrant Shares (as defined in the Purchase Agreement) to be issued to the Registered Owner Y = the number of Warrant Shares with respect to which this Warrant is being exercised A = the average of the Per Share Market Value of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the date of exercise B = the Exercise Price For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Registered Owner, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the issue date to the extent permitted by Rule 144. 4. EXERCISE PERIOD. This Warrant may only be exercised beginning on December 10, 1998 and up to and including June 10, 2000 (the "Exercise Period"). If not exercised during this period, this Warrant and all rights granted under this Warrant shall expire and lapse. 5. TENDER. This Warrant may be exercised, in whole or in part, by actual delivery of (i) the Exercise Price in cash, (ii) a duly executed Warrant Exercise Form, a copy of which is 32 3 attached to this Warrant as Exhibit A, properly executed by the Registered Owner, or assigns, of this Warrant, and (iii) by surrender of this Warrant. The payment and Warrant Exercise Form must be delivered, personally or by mail, to the registered office of the Company. Documents sent by mail shall be deemed to be delivered when they are received by the Company. 6. ADJUSTMENT OF EXERCISE PRICE. (a) Common Stock Dividends; Common Stock Splits; Reverse Common Stock Splits. If the Company, at any time while this Warrant is outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Exercise Price shall be multiplied by a fraction the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this paragraph (6)(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. (b) Rights; Options; Warrants. If the Company, during the period commencing on the date of issuance of this Warrant through the date which is 12 months from the date of issuance of this Warrant, shall issue rights or warrants to all of the holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Exercise Price, the Exercise Price shall be multiplied by a fraction, the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the numerator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Exercise Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Exercise Price pursuant to this paragraph (6)(b), if any such right or warrant shall expire and all or any portion thereof shall not have been exercised, the Exercise Price shall immediately upon such expiration be re-computed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Exercise Price made pursuant to the provisions of section 6(g) after the issuance of such rights or warrants) had the adjustment of the Exercise Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock (if any) actually purchased upon the exercise of such rights or warrants actually exercised. If (X) the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is 33 4 greater than 150% of the Exercise Price as of the date of this Warrant for five consecutive Trading Days, then this Section 6 (b) shall expire automatically on the 180th day following the date of issuance of this Warrant. (c) Subscription Rights. If the Company, during the period commencing on the date of issuance of this Warrant through the date which is 12 months from the date of issuance of this Warrant, shall distribute to all of the holders of Common Stock evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in paragraphs 6(a) and (b) above), then in each such case the Exercise Price at which the Warrant shall thereafter be exercisable shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of shareholders entitled to receive such distribution by a fraction the denominator of which shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and the numerator of which shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (an "Appraiser") selected in good faith by the Registered Owner of the Warrant; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser meeting the same qualifications, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. If (X) the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is greater than 150% of the Exercise Price as of the date of this Warrant for five consecutive Trading Days, then this Section 6 (c) shall expire automatically on the 180th day following the date of issuance of this Warrant. (d) Rounding. All calculations under this section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (e) Notice of Adjustment. Whenever the Exercise Price is adjusted pursuant to paragraphs 6(a), (b) or (c), the Company shall promptly mail to the holder of the Warrant, a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. (f) Redemption Events. In case of (A) any reclassification of the Common Stock, (B) any consolidation or merger of the Company with or into another person pursuant to which (i) a majority of the Company's Board of Directors will not constitute a majority of the board of directors of the surviving entity or (ii) less than 51% of the outstanding shares of the capital stock of the surviving entity will be held by the same shareholders of the Company prior to such reclassification, consolidation or merger, (C) the sale or transfer of all or substantially all 34 5 of the assets of the Company, (D) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, (E) suspension from listing or delisting of the Common Stock from the National Market System of the Nasdaq Stock Market ("Nasdaq") or any other exchange on which the Common Stock is listed for a period of five (5) consecutive Trading Days, (F) the Company's notice to any registered owner of the Tranche A Warrants or the Tranche B Warrants, including by way of public announcement, at any time, of its intention, for any reason, not to comply with proper requests for the exercise of any such warrants, or (G) a breach by the Company of any representation, warranty, covenant or other term or condition of the Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby or hereby, except to the extent that such breach would not have a Material Adverse Effect (as defined in Section 2.1(a) of the Purchase Agreement) and except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least ten days after the Company knows or reasonably should have known of the existence of such breach (clauses (A) through (G) above referred to as a "Redemption Event"), the holder of the Warrant shall have the right thereafter to exercise the Warrant within ten (10) Business Days of the Redemption Event for the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Redemption Event, and the holder of the Warrant shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the Warrant could have been converted immediately prior to such Redemption Event would have been entitled. (g) Reclassification, Etc. If: A. the Company shall declare a dividend (or any other distribution) on its Common Stock; or B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or C. the Company shall authorize the granting to all of the holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or D. the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; 35 6 then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be mailed to the holder of this Warrant at its address as it shall appear below, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice (provided such notice shall not include any material non-public information) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (h) Adjustment to Exercise Price. If the Company, during the period commencing on the date of issuance of this Warrant through the date which is 12 months following the date of issuance of this Warrant takes any of the actions described in this Section 6 (h), then, in order to prevent dilution of the rights granted under this Warrant, the Exercise Price will be subject to adjustment from time to time as provided in this Section 6(h); provided, however, that if (X) the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective by the Securities and Exchange Commission and (Y) the Per Share Market Value is greater than 150% of the Exercise Price as of the date of issuance of this Warrant for five consecutive Trading Days, then this provision shall expire automatically on the 180th day following the date of issuance of this Warrant. (i) Adjustment of Exercise Price upon Issuance of Common Stock. If at any time during the Exercise Period, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than the Underlying Shares (as defined in the Purchase Agreement) or shares of Common Stock deemed to have been issued by the Company in connection with an Approved Stock Plan (as defined below), shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement (as defined below), shares of Common Stock issued or deemed to have been issued in a Strategic Venture (as defined below), or shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Company of a division, assets or business (or stock constituting any portion thereof) from another person) for a consideration per share (the "New Issuance Price") less than the Conversion Price (as defined in the Debenture issued on the Tranche A Closing Date in connection with the transactions contemplated by the Purchase Agreement) in effect immediately prior to such issuance or sale, then immediately after such issue or sale, the Exercise Price then in effect shall be reduced to an amount equal to 120% of the New Issuance Price. A "Strategic Venture" shall mean a venture between the Company and a pharmaceutical or biotechnology company or an Affiliate thereof, the primary purpose of which is not to raise capital in the form of equity (including without limitation through the issuance of warrants, convertible securities, phantom stock rights, stock appreciation rights or other rights with equity features) and pursuant to which the Company contributes or 36 7 issues securities of the Company valued at less than 50% of the entire contribution of the Company. If the Registered Holder and the Company cannot agree on the value of the components of such contribution, the last two sentences of subsection (F)(I) entitled "Calculation of Consideration" shall apply. If at any time during the Exercise Period, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than Underlying Shares, shares of Common Stock deemed to have been issued by the Company in connection with an Approved Stock Plan or shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement then, for purposes of determining the adjusted Exercise Price under this Section 6(h)(i), the following shall be applicable: (A) Issuance of Options. If at any time during the Exercise Period, the Company in any manner grants any rights or options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than the Underlying Shares or shares of Common Stock deemed to have been issued by the Company in connection with an Approved Stock Plan, shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Company of a division, assets or business (or stock constituting any portion thereof) from another person or shares of Common Stock issued or deemed to have been issued in a Strategic Venture) (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities") and the price per share (the "New Option Price") for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities is less than the Conversion Price in effect immediately prior to such grant, then the Exercise Price shall be reduced to an amount to equal 120% of the New Option Price. No adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (B) Issuance of Convertible Securities. If at any time during the Exercise Period, the Company in any manner issues or sells any Convertible Securities and the price per share (the "New Convertible Price") for which Common Stock is issuable upon such conversion or exchange (other than the Underlying Shares or shares of Common Stock deemed to have been issued by the Company in connection with an Approved Stock Plan, shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Company of a division, assets or business (or stock constituting any portion thereof) from another person or shares of Common Stock issued or deemed to have been issued in a Strategic Venture) is less than the Conversion Price in effect immediately prior to issuance or sale, then the Exercise Price shall be reduced to equal 120% the New Convertible Price. 37 8 (C) Change in Option Price or Rate of Conversion. If there is a change at any time in (i) the purchase price provided for in any Options, (ii) the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock, then the Exercise Price in effect at the time of such change shall be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold; provided that no adjustment shall be made if such adjustment would result in an increase of the Exercise Price then in effect. (D) Certain Definitions. For purposes of determining the adjusted Exercise Price under this Section 6(h)(i), the following terms have meanings set forth below: (I) "Approved Stock Plan" shall mean any contract, plan or agreement which has been approved by the Board of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer, director or consultant. (II) "Common Stock Deemed Outstanding" means, at any given time, the number of shares of Common Stock issued and outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 6(h)(i)(A) and 6(h)(i)(B) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock issuable upon exercise of the Warrants. (F) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under this Section 6(h)(i), the following shall be applicable: (I) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the arithmetic average of the Per Share Market Values of such security for the five (5) consecutive Trading Days immediately preceding the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of 38 9 the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the registered owners of a majority of the Underlying Shares of Tranche A Warrants and the Tranche B Warrants then outstanding. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within forty-eight (48) hours of the tenth (10th) day following the Valuation Event by an Appraiser selected by the Company. The determination of such Appraiser shall be binding upon all parties absent manifest error. (II) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for an aggregate consideration of $.001. (III) Treasury Shares. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock. (IV) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (V) Certain Events. If any event occurs of the type contemplated by the provisions of Section 6(h)(i) (subject to the exceptions stated therein) but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Exercise Price so as to protect the rights of the Registered Owner, or assigns, of this Warrant; provided, however, that no such adjustment will increase the Exercise Price as otherwise determined pursuant to this Section 6(h). Notwithstanding anything to the contrary contained in this Section 6, those shares of Common Stock issued pursuant to the transactions contemplated by the Company and Rose Glen Capital Management, L.P. and certain other investors pursuant to which the Company intends to complete a private placement of Common Stock (as described in Schedule 2.1(c) to the Purchase Agreement) shall be excluded from any adjustments provided for herein. Additionally, 39 10 in no event shall any provision in this Section 6 cause the Exercise Price to be greater than the Exercise Price on the date of issuance of this Warrant. 7. LIMITATIONS. (a) Nasdaq Limitation. If on any date (the "Determination Date") (a) the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market, (b) the Exercise Price then in effect is such that the aggregate number of shares of Common Stock (x) that would then be issuable upon exercise in full of this Warrant, would equal or exceed 20% of the number of shares of the Common Stock outstanding immediately prior to the later of (A) the Tranche A Closing Date (as defined in the Purchase Agreement) and (B) the Tranche B Closing Date (as defined in the Purchase Agreement) (such number of shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and (c) the Company shall not have previously obtained the vote of the shareholders of the Company (the "Shareholder Approval"), if any, as may be required by the applicable rules and regulations of Nasdaq (or any successor entity) to approve the issuance of shares of Common Stock in excess of the Issuable Maximum in a private placement whereby shares of Common Stock are deemed to have been issued at a price that is less than the greater of book value or fair market value of the Common Stock, then with respect to the aggregate shares of Common Stock underlying this Warrant then held by the Registered Owners for which an exercise in accordance with the Exercise Price would result in an issuance of shares of Common Stock in excess of the Issuable Maximum (the "Excess Share Amount") the Company may elect to prepay cash to the Registered Owners in an amount equal to the Per Share Market Value. Any such election by the Company must be made in writing to the Registered Owners within two Trading Days after the Determination Date and the payment of such Per Share Market Value must be made in full to the Registered Owners with ten (10) Business Days after the date such notice is delivered. If the Company does not deliver timely a notice of its election to pay under this Section or shall, if it shall have delivered such a notice, fail to pay the payment amount hereunder within ten (10) Business Days thereafter, then the Registered Owners of a majority of shares underlying the Warrants then outstanding shall have the option by written notice to the Company, to declare any such notice given by the Company, if given, to be null and void and require the Company to pay cash to each Registered Owner in an amount equal to the Per Share Market Value for such Registered Owner's portion of the Excess Share Amount. The payment of the Per Share Market Value to each Registered Owner pursuant to this Section shall be determined on a pro rata basis upon the number of shares underlying this Warrant held by such Registered Owner on the Determination Date. If the Company fails to pay the Per Share Market Value in full pursuant to this Section within five Business Days after the date payable, the Company will pay interest thereon at a rate of 15% per annum to the exercising Registered Owner, accruing interest daily from the date of exercise until such amount, plus all such interest thereon, if any, is paid in full. (b) Restriction on Exercise by the Registered Owner. Notwithstanding anything herein to the contrary, in no event shall any Registered Owner have the right or be required to exercise any portion or all of this Warrant if the aggregate number of shares of Common Stock beneficially owned by such Registered Owner and its Affiliates would exceed 40 11 9.9% of the outstanding shares of the Common Stock following such exercise. For purposes of this Section 7(b), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. 8. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Purchase Agreement. As used in this Warrant, the following terms have the following meanings: "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," controlling" and "controlled" have meanings correlative to the foregoing. "Appraiser" has the meaning assigned to it in section 6(c) hereof. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "Common Stock" means the shares of the Company's common stock, par value $.001 per share. "Company" means Geron Corporation, a Delaware corporation. "Convertible Securities" has the meaning assigned to it in section 6(h)(i)(A) hereof. "Exercise Period" has the meaning assigned to it the section 4 hereof. "Exercise Price" has the meaning assigned to it in section 3 hereof. "Market Price" has the meaning assigned to it in section 6(h)(i) hereof. "Options" has the meaning assigned to it in section 6(h)(i)(A) hereof. "Per Share Market Value" means on any particular date (i) the closing bid price per share of the Common Stock on such date on Nasdaq or another registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (ii) if the Common Stock is not listed then on the National Market System of the Nasdaq Stock Market or any registered national stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (iii) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the holder of this Warrant; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair 41 12 market value shall be equal to the average of the determinations by each such Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Purchase Agreement" means that certain Securities Purchase Agreement, dated December 10, 1998, among the Company, Brown Simpson Strategic Growth Fund, Ltd., Brown Simpson Strategic Growth Fund, L.P., LB I Group Inc. and RGC International Investors, LDC. "Redemption Event" has the meaning assigned to it in section 6(f) hereof. "Registered Owner" means ________, or such other Person as shown on the records of the Company as being the registered owner of this Warrant. "Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of December 10, 1998, among the Company, Brown Simpson Strategic Growth Fund, Ltd., Brown Simpson Strategic Growth Fund, L.P., LB I Group Inc. and RGC International Investors, LDC. "Trading Day(s)" means any day on which the primary market on which shares of Common Stock are listed is open for trading. "Tranche A Warrants" means the warrants issuable at the Tranche A Closing. "Tranche B Warrants" means the warrants issuable at the Tranche B Closing. 9. REGISTRATION RIGHTS. The Company will undertake the registration of the Common Stock into which this Warrant is exercisable at such times and upon such terms pursuant to the provisions of the Registration Rights Agreement. 10. RESERVATION OF UNDERLYING SHARES. The Underlying Shares are and will at all times hereafter continue to be duly authorized and reserved for issuance pursuant to this Warrant. 11. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 8:00 p.m. EST where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David Greenwood, fax no. (650) 473-7701 and (ii) if to any Registered Owner to the address set forth on Schedule II to the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, fax no. 42 13 (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. [signature page follows] 43 14 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above. GERON CORPORATION By: --------------------------------- Name: ------------------------------- Title: ------------------------------ 44 15 EXHIBIT A Warrant Exercise Form TO: GERON CORPORATION The undersigned hereby: (1) irrevocably subscribes for and offers to purchase _______ shares of Common Stock of Geron Corporation, pursuant to Warrant No. ___ heretofore issued to ___________________ on December 10, 1998; (2) encloses a payment of $__________ for these shares at a price of $12.00 per share (as adjusted pursuant to the provisions of the Warrant); and (3) requests that a certificate for the shares be issued in the name of the undersigned and delivered to the undersigned at the address specified below. Date: -------------------------------- Investor Name: -------------------------------- Taxpayer Identification Number: -------------------------------- By: -------------------------------- Printed Name: -------------------------------- Title: -------------------------------- Address: -------------------------------- -------------------------------- -------------------------------- Note: The above signature should correspond exactly with the name on the face of this Warrant Certificate or with the name of assignee appearing in assignment form below. AND, if said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder less any fraction of a share paid in cash and delivered to the address stated above. EX-10.40 4 SECURITIES PURCHASE AGREEMENT DATED 12/10/1998 1 EXHIBIT 10.40 ================================================================================ SECURITIES PURCHASE AGREEMENT Among GERON CORPORATION, BROWN SIMPSON STRATEGIC GROWTH FUND, LTD., BROWN SIMPSON STRATEGIC GROWTH FUND, L.P., LB I GROUP INC. and RGC INTERNATIONAL INVESTORS, LDC Dated as of December 10, 1998 ================================================================================ 46 2 SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of December 10, 1998, among Geron Corporation, a Delaware corporation (the "Company"), Brown Simpson Strategic Growth Fund, Ltd., a Cayman Islands exempt company ("Brown Simpson Limited"), Brown Simpson Strategic Growth Fund, L.P., a New York limited partnership ("Brown Simpson LP"), LB I Group Inc., a Delaware corporation ("LB Group") and RGC International Investors, LDC, a Cayman Islands limited duration company ("RGC"). Brown Simpson Limited, Brown Simpson LP, LB Group and RGC are each referred to herein as a "Purchaser" and are collectively referred to herein as the "Purchasers." WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to acquire from the Company, an aggregate of seven million five hundred thousand dollars ($7,500,000) principal amount of Series A Zero-Coupon Convertible Debentures (the "Tranche A Debentures"), and warrants (the "Tranche A Warrants") to purchase up to $7,500,000 of the Company's common stock, par value $.001 per share (the "Common Stock"); and WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to acquire from the Company, an aggregate of seven million five hundred thousand dollars ($7,500,000) principal amount of Series B Zero-Coupon Convertible Debentures (the "Tranche B Debentures" and, together with the Tranche A Debentures, the "Debentures"), and warrants (the "Tranche B Warrants", and together with the Tranche A Warrants, the "Warrants") to purchase up to $7,500,000 of the Company's Common Stock. IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and each Purchaser agree as follows: ARTICLE I. PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS I.1 Purchase and Sale. (a) Subject to the terms and conditions set forth herein, the Company shall issue and sell to each Purchaser, and each Purchaser, severally and not jointly, shall purchase from the Company: (i) On the Tranche A Closing Date (as defined below), the principal amount of Tranche A Debentures as set forth for such Purchaser on Schedule I; and (ii) On the Tranche B Closing Date (as defined below), the principal amount of Tranche B Debentures as set forth for such Purchaser on Schedule I. (b) Each Purchaser shall purchase that principal amount of Debentures set forth opposite such Purchaser's name on Schedule I attached hereto and each Purchaser shall deliver to the Company the portion of the purchase price for each 3 of the Tranche A Debentures and the Tranche B Debentures as set forth next to its name on Schedule I. I.2 The Closings. (a) The Tranche A Closing. The closing of the purchase and sale of the Tranche A Debentures (the "Tranche A Closing") shall take place at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, or by transmission by facsimile and overnight courier, immediately following the execution hereof or such later date or different location as the parties shall agree, but not prior to the date that the conditions set forth in Section 4.1 have been satisfied or waived by the appropriate party (the "Tranche A Closing Date"). At the Tranche A Closing: (i) Each Purchaser shall deliver to the Company its portion of the purchase price as set forth next to its name on Schedule I in United States dollars in immediately available funds to an account designated in writing by the Company; (ii) The Company shall deliver to each Purchaser a Debenture, substantially in the form of Exhibit A hereto, representing the principal amount purchased by such Purchaser as set forth on Schedule I hereto; (iii) The Company shall deliver to each Purchaser a Warrant, substantially in the form of Exhibit B hereto, representing the number of Tranche A Warrants purchased by such Purchaser as set forth on Schedule I hereto; (iv) The parties shall execute and deliver each of the documents referred to in Section 4.1 hereof; and (v) The Company shall pay to Brown Simpson Asset Management, LLC ("Brown Simpson Asset") a fee of $25,000 (the "Brown Simpson Asset Fee") in United States dollars in immediately available funds to an account designated in writing by Brown Simpson Asset. (b) The Tranche B Closing. Subject to the terms and conditions set forth in Section 4.2 and elsewhere in this Agreement, the closing of the purchase and sale of the Tranche B Debentures (the "Tranche B Closing") shall take place in the same manner as the Tranche A Closing, on the date after the Company fulfills the conditions set forth in Section 4.2 (the "Tranche B Closing Date"); provided that in no case shall the Tranche B Closing take place unless and until the conditions listed in Section 4.2 have been satisfied or waived by the appropriate party. At the Tranche B Closing: (i) Each Purchaser shall deliver to the Company its portion of the purchase price as set forth next to its name on Schedule I in United States dollars in immediately available funds to an account designated in writing by the Company; (ii) The Company shall deliver to each Purchaser a Debenture, substantially in the form of Exhibit A hereto, representing the principal amount of Tranche B Debentures purchased by such Purchaser as set forth on Schedule I hereto; (iii) The Company shall deliver to each Purchaser a Warrant, substantially in the form of Exhibit B hereto, representing the number of 2 4 Tranche B Warrants purchased by such Purchaser as set forth on Schedule I hereto; and (iv) The parties shall execute and deliver each of the documents referred to in Section 4.2 hereof. With respect to the Tranche B Debentures and Tranche B Warrants, in no event shall any Purchaser have the right or be required to purchase Tranche B Debentures or Tranche B Warrants if the aggregate number of shares of Common Stock beneficially owned by such Purchaser and its affiliates exceeds 9.9% of the outstanding shares of the Common Stock following such conversion. For purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). ARTICLE II. REPRESENTATIONS AND WARRANTIES II.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to each of the Purchasers: (a) Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Except as set forth on Schedule 2.1(a), the Company has no subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of any of this Agreement or the Transaction Documents (as defined below) or any of the transactions contemplated thereby, (y) have or result in a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and its Subsidiaries, taken as a whole or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under any Transaction Document (any of (x), (y) or (z), being a "Material Adverse Effect"). (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and the Debentures, the Warrants and the Registration Rights Agreement (as defined below) (collectively, the "Transaction Documents"), and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of this Agreement and the Transaction 3 5 Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further action is required by the Company, its Board of Directors or its stockholders. Each of this Agreement and the Transaction Documents has been duly executed by the Company and when delivered in accordance with the terms hereof will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) Capitalization. As of the date hereof and immediately prior to the Tranche A Closing Date, the authorized capital stock of the Company is as set forth on Schedule 2.1(c). The issuance and sale of all interests in such capital stock have been in compliance with all applicable federal and state securities laws. No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of any of this Agreement or the Transaction Documents. Except as disclosed on Schedule 2.1(c), other than the Debentures and the Warrants, there are no outstanding options, warrants, rights to subscribe to, calls or commitments of any character whatsoever relating to securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. No anti-dilution or similar adjustment provision of securities of the Company will be triggered by the issuance of the Debentures or the Warrants, except as described on Schedule 2.1(c). The Company is not subject (contingent or otherwise) to repurchase or otherwise acquire or retire any units of its capital stock or any security convertible into or exchangeable for any of its capital stock. Except as specifically disclosed in the SEC Documents (as defined below), to the Company's best knowledge, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or has the right to acquire by agreement with or by obligation binding upon the Company beneficial ownership of in excess of 5% of the Common Stock. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (d) Authorization and Validity; Issuance of Shares. All of the Debentures and the Warrants have been duly authorized, and when delivered against payment therefor as contemplated hereby, will be validly issued, fully paid and non-assessable, free and clear of all liens, encumbrances and Company rights of first refusal, other than liens and encumbrances created by the Purchasers (collectively, 4 6 "Liens") and will not be subject to any preemptive or similar rights. The shares of Common Stock issuable upon exercise of the Debentures and the Warrants (collectively, the "Underlying Shares") are and will at all times hereafter continue to be duly authorized and reserved for issuance and the shares of Common Stock issued upon conversion of the Debentures (the "Debenture Shares") and exercise of the Warrants (the "Warrant Shares") will be validly issued, fully paid and non-assessable, free and clear of all Liens. (e) No Conflicts. The execution, delivery and performance of this Agreement and the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the certificate of incorporation, bylaws or other charter documents of the Company or any of the Subsidiaries, (ii) subject to obtaining the consents referred to in Section 2.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument (evidencing a Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any Subsidiary is subject (including Federal and state securities laws and regulations), or by which any material property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations or cancellations that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect). (f) Consents and Approvals. Except as specifically set forth on Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by the Company of this Agreement or the Transaction Documents, other than (i) the filing of a registration statement with the Securities and Exchange Commission (the "Commission"), which shall be filed in accordance with and in the time periods set forth in the Registration Rights Agreement, (ii) the application(s) or any letter(s) acceptable to the National Market System of Nasdaq Stock Market ("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with any other national securities exchange or market on which the Common Stock is then listed), and (iii) any filings, notices or registrations under applicable state securities laws (together with the consents, waivers, authorizations, orders, notices and filings referred to on Schedule 2.1(f), the "Required Approvals"). (g) Litigation; Proceedings. Except as specifically set forth on Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the 5 7 Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Transaction Documents or (ii) would individually or in the aggregate, have a Material Adverse Effect. (h) No Default or Violation. Neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound except for such defaults or violations that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body applicable to it, or (iii) is in violation of any statute, rule or regulation of any governmental authority to which it is subject. (i) Disclosure; Absence of Certain Changes. Neither this Agreement, the Schedules to this Agreement, the Transaction Documents nor the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements made herein and therein, in light of the circumstances under which they were made, not misleading. Except as disclosed on Schedule 2.1(i) or the SEC Documents filed on EDGAR at least five business days prior to the date hereof, since December 31, 1997, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, liabilities or results of operations or, insofar as can reasonably be foreseen, prospects of the Company or the Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. No event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company or its Subsidiaries or their respective businesses, properties, operations or financial condition or, insofar as can reasonably be foreseen, prospects, that would be required to be disclosed by the Company under applicable securities laws on a registration statement (including by way of incorporation by reference) filed with the SEC, on the date this representation is made or deemed to be made, relating to an issuance and sale by the Company of its Common Stock and which has not been publicly disclosed. (j) Private Offering. The Company and all Persons acting on its behalf have not directly or indirectly made, and will not make, offers or sales of any securities or solicited any offers to buy any security under circumstances that would require registration of the Debentures, the Warrants, the Debentures Shares, the Warrant Shares or the Underlying Shares or the issuance of such securities under the Securities Act of 1933, as amended (the "Act"). The issuance of the Debentures, the Warrants, the Debenture Shares and the Warrant Shares to the Purchasers will not be integrated with any other issuance of the Company's securities (past, current, or future). Subject to the accuracy and completeness of the 6 8 representations and warranties of the respective Purchasers contained in Section 2.2 hereof, the offer and sale by the Company to the Purchasers of the Debentures and the Warrants is exempt from the registration requirements of the Act. (k) SEC Documents; Financial Statements. The Common Stock of the Company is registered pursuant to Section 12(g) of the Exchange Act. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials being collectively referred to herein as the "SEC Documents"), on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject have been filed as exhibits to the SEC Documents as required; neither the Company nor any of its Subsidiaries is in breach of any agreement where such breach, individually or in the aggregate, would have a Material Adverse Effect. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments. (l) Investment Company. The Company is not, and is not controlled by or under common control with an affiliate (an "Affiliate") of an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) Broker's Fees. Except for a $25,000 fee paid to Brown Simpson Asset upon execution of that certain letter agreement dated November 25, 1998 between the Company and Brown Simpson Asset and an additional fee of $25,000 payable by the Company to Brown Simpson Asset at the Tranche A Closing, no fees or commissions or similar payments with respect to the transactions contemplated by this Agreement or the Transaction Documents have been paid or will be payable by the Company to any broker, financial advisor, finder, investment banker, or bank. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type 7 9 contemplated in this Section 2.1(m) that may be due in connection with the transactions contemplated by this Agreement and the Transaction Documents. (n) Form S-3 Eligibility. The Company is, and at the Tranche A Closing Date and the Tranche B Closing Date will be, eligible to register securities (including the Underlying Shares) for resale with the Commission under Form S-3 (or any successor form) promulgated under the Securities Act. (o) Listing and Maintenance Requirements Compliance. The principal market on which the Common Stock is currently traded is Nasdaq. Except as disclosed on Schedule 2.1(o), the Company has not in the three years preceding the date hereof received notice (written or oral) from Nasdaq (or any stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted)) to the effect that the Company is not in compliance with the listing or maintenance requirements of such market or exchange. The Company is not aware of any facts which would reasonably lead to delisting or suspension of the Common Stock by Nasdaq. After giving effect to the transactions contemplated by this Agreement and the Transaction Documents, the Company believes that it is and will be in compliance with all such maintenance requirements. (p) Patents and Trademarks. To the Company's best knowledge, the Company or its Subsidiaries has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights (collectively, the "Intellectual Property Rights") which are necessary for use in connection with its business, as currently conducted and as described in the SEC Documents. To the best knowledge of the Company, there is no existing infringement by another Person of any of the Intellectual Property Rights which are necessary for use in connection with the Company's business which would, individually or in the aggregate, have a Material Adverse Effect and the Company is not infringing on any other person's Intellectual Property Rights. (q) Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. Except as set forth on Schedule 2.1(q), no executive officer (as defined in Rule 501(f) of the Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. (r) Registration Rights; Rights of Participation. Except as described on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied and (ii) no Person, including, but not limited to, current or former stockholders of the Company, underwriters, brokers or agents, has any right of first refusal, preemptive right, right of 8 10 participation, or any similar right to participate in the transactions contemplated by this Agreement or any Transaction Document. (s) Title. Except as disclosed on Schedule 2.1(s), the Company and the Subsidiaries have good and marketable title in fee simple to all real property and personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all Liens, except for Liens that do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and, to the Company's best knowledge, enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries. (t) Permits. The Company and the Subsidiaries possess all certificates, authorizations, licenses, easements, consents, approvals, orders and permits necessary to own, lease and operate their respective properties and to conduct their respective businesses as currently conducted except where the failure to possess such permits would not, individually or in the aggregate, have a Material Adverse Effect ("Material Permits"), and there is no proceeding pending, or, to the knowledge of the Company, threatened relating to the revocation, modification, suspension or cancellation of any Material Permit. Neither the Company nor any of the Subsidiaries is in conflict with or default or violation of any Material Permit. (u) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverages as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business. (v) Internal Accounting Controls. The Company and each of the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (w) Tax Status; Firpta. The Company and each of the Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books 9 11 provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on it books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company is not a "United States real property holding corporation" within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986, as amended. (x) Transactions With Affiliates. Except as set forth on Schedule 2.1(c) or Schedule 2.1(x), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (y) [Intentionally omitted.] (z) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permits, licenses or other approvals except where the failure of any of the foregoing would not result in a Material Adverse Effect. (aa) Foreign Corrupt Practices. To the Company's best knowledge, neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee form corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. (bb) Solicitation Materials. The Company has not (i) distributed any offering materials in connection with the offering and sale of the Debentures or the Warrants, other than the SEC Documents, the Schedules to this Agreement, any 10 12 amendments and supplements thereto and the materials listed on Schedule 2.1(bb), or (ii) solicited any offer to buy or sell the Debentures or the Warrants by means of any form of general solicitation or advertising. 11 13 II.2 Representations and Warranties of the Purchasers. Each of the Purchasers, severally and not jointly, hereby represents and warrants to the Company as follows: (a) Organization; Authority. Such Purchaser is a corporation or a limited duration company duly incorporated or a limited liability company or limited partnership duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with the requisite power and authority, corporate or otherwise, to enter into and to consummate the transactions contemplated hereby and by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of the Debentures and the Warrants hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and legally binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. (b) Investment Intent. Such Purchaser is acquiring the Debentures and the Warrants for its own account for investment purposes only and not with a view to or for distributing or reselling the Debentures, the Warrants, the Debentures Shares or the Warrant Shares or any part thereof or interest therein in violation of any securities laws; provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Debentures, the Warrants, the Debentures Shares or the Warrant Shares for any minimum or other specific term and reserves the right to dispose of the securities at any time in accordance with or pursuant to a registration statement or an exemption under the Act. (c) Purchaser Status. At the time such Purchaser was offered the Debentures and the Warrants, and at the Tranche A Closing Date and the Tranche B Closing Date, (i) it was and will be an "accredited investor" as defined in Rule 501 under the Act or (ii) such Purchaser, either alone or together with its representatives, had and will have such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Debentures and the Warrants. (d) Reliance. Each Purchaser understands and acknowledges that (i) the Debentures and the Warrants are being offered and sold to the Purchaser without registration under the Act in a private placement that is exempt from the registration provisions of the Act under Section 4(2) of the Act or Regulation D promulgated thereunder and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy and truthfulness of, the representations set forth in this Section 2.2 and such Purchaser hereby consents to such reliance. (e) Information. Each Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Debentures and Warrants which have been requested by the Purchaser or its advisors. The Purchaser and its 12 14 advisors, if any, have been afforded the opportunity to ask questions of the Company and have received what the Purchaser believes to be satisfactory answer to any such inquiries. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its advisors or representatives shall modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in Section 2.1 above. The Purchaser understands that its investment in the Debentures and Warrants involves a significant degree of risk. (f) Governmental Review. The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Debentures or Warrants. (g) Residency. Each Purchaser is a resident of the jurisdiction set forth immediately below such Purchaser's name on the signature pages hereto. The Company acknowledges and agrees that the Purchasers make no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 2.2. 13 15 ARTICLE III. OTHER AGREEMENTS III.1 Transfer Restrictions. (a) If any Purchaser should decide to dispose of the Debentures, the Warrants, the Debentures Shares or the Warrant Shares held by it, each Purchaser understands and agrees that it may do so only pursuant to an effective registration statement under the Act, to the Company or pursuant to an available exemption from the registration requirements of the Act. In connection with any transfer of any Debentures, Warrants, Debenture Shares or Warrant Shares other than pursuant to an effective registration statement or to the Company, the Company may require the transferor thereof to provide to the Company a written opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Act; provided, however, that if the Debentures, Warrants, Debenture Shares or Warrant Shares may be sold pursuant to Rule 144(k), no written opinion of counsel shall be required unless a written opinion of counsel is required by any transfer agent. Notwithstanding the foregoing, the Company hereby consents to and agrees to register any transfer by any Purchaser to an Affiliate of such Purchaser, provided that the transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Act. Any such transferee shall be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. (b) Each Purchaser agrees to the imprinting, so long as is required by this Section 3.1(b), of the following legend on the Debentures, the Warrants, the Debenture Shares and the Warrant Shares: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. Neither the Debentures, the Warrants, the Debenture Shares, nor the Warrant Shares shall contain the legend set forth above if (i) the issuance of any of such securities occurs at any time while the Registration Statement (as defined in the Registration Rights Agreement) is effective under the Act, (ii) in the written opinion of counsel to the Company experienced in the area of United States securities laws such legend is not required under applicable requirements of the Act (including judicial interpretations and pronouncements issued by the staff of the Commission) or (iii) such Debentures, Warrants, Debenture Shares or Warrant Shares may be 14 16 sold pursuant to Rule 144. The Company agrees that it will provide each Purchaser, upon request, with a certificate or certificates representing Debentures, Warrants, Debenture Shares or Warrant Shares, free from such legend at such time as such legend is no longer required hereunder. III.2 Stop Transfer Instruction. The Company may make notations on its records or give instructions to any transfer agent with regard to the restrictions on transfer set forth in Section 3.1; provided, however, the Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions on transfer set forth in Section 3.1. III.3 Furnishing of Information. As long as any Purchaser owns the Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the Company will cause the Common Stock to continue at all times to be registered under 12(g) of the Exchange Act, will timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act and will not take any action or file any document (whether or not permitted by the Exchange Act or the rules thereunder) to terminate or suspend such reporting and filing obligations. The Company further covenants that it will take such further action as any holder of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares may reasonably request, all to the extent required from time to time to enable such Person to sell the Debentures, the Warrants, the Debenture Shares, or the Warrant Shares without registration under the Act within the limitation of the exemptions provided by Rule 144 promulgated under the Act. III.4 Blue Sky Laws. In accordance with the Registration Rights Agreement, the Company shall qualify the Debentures Shares and the Warrant Shares under the securities or Blue Sky laws of such jurisdictions as the Purchasers may request and shall continue such qualification at all times through the third anniversary of the Tranche B Closing Date. III.5 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Act) that would be integrated with the offer or sale of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares in a manner that would require the registration under the Act of the sale of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to any Purchaser. III.6 Listing and Reservation of Debenture Shares and Warrant Shares. (a) The Company shall (i) not later than 5 days after the Tranche A Closing Date prepare and file with Nasdaq (as well as any other national securities exchange or market on which the Common Stock is then listed) an additional shares listing application or a letter acceptable to Nasdaq covering and listing a number of shares of Common Stock which is at least equal to the aggregate amount of Underlying Shares sold or to be sold in the Tranche A Closing and Tranche B Closing, (ii) take all steps necessary to cause the Underlying Shares to be approved for listing on Nasdaq (as well as on any other national securities exchange or market on which the Common Stock is then listed) as soon as possible thereafter and (iii) provide to the Purchasers evidence of such listing. 15 17 Neither the Company nor any of its Subsidiaries shall take any action which may result in the delisting or suspension of the Common Stock on Nasdaq. The Company shall promptly provide to each Purchaser copies of any notices it receives from Nasdaq regarding the continued eligibility of the Common Stock for listing on such automated quotation system. (b) The Company at all times shall reserve the number of shares of its authorized but unissued Common Stock which would be issuable upon conversion of the Debentures and exercise of the Warrants. Shares of Common Stock reserved for issuance upon conversion of the Debentures and the exercise of the Warrants shall be allocated pro rata to each of the Purchasers in accordance with the amount of Debentures and Warrants issued and delivered to such Purchaser at the Tranche A Closing and Tranche B Closing, as applicable. III.7 Notice of Breaches. (a) The Company and each Purchaser shall give prompt written notice to the other of any breach by it of any representation, warranty or other agreement contained in this Agreement or in the Registration Rights Agreement, as well as any events or occurrences arising after the date hereof and prior to the Tranche A Closing Date or the Tranche B Closing Date, as applicable, which would reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained herein to be incorrect or breached as of such Closing Date provided such notice will not constitute material non-public information. However, no disclosure by either party pursuant to this Section 3.7 shall be deemed to cure any breach of any representation, warranty or other agreement contained herein or in the Registration Rights Agreement. (b) Notwithstanding the generality of Section 3.7(a), the Company shall promptly notify, provided such notification will not constitute material non-public information, each Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company or any Subsidiary to the effect that the consummation of the transactions contemplated hereby and by the Registration Rights Agreement violates or would violate any written agreement or understanding between such lender and the Company or any Subsidiary, and the Company shall promptly furnish by facsimile to the Purchasers a copy of any written statement in support of or relating to such claim or notice. (c) The default by any Purchaser of any of its obligations, representations or warranties under this Agreement or the Registration Rights Agreement shall not be imputed to, and shall have no effect upon, any other Purchaser or affect the Company's obligations under this Agreement or any Transaction Document to any non-defaulting Purchaser. III.8 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Debentures and Warrants as required by Rule 506 under Regulation D and to provide a copy thereof to each Purchaser promptly after such filing. The Company shall, on or before the applicable closing, take such action as the Company shall reasonably determine is necessary to qualify the Debentures and Warrants for sale to the Purchasers at the applicable closing pursuant to this Agreement under applicable securities or "blue sky" laws of the states of the United States (or to obtain an exemption from such 16 18 qualification), and shall provide evidence of any such action so taken to each Purchaser on or prior to the applicable closing. III.9 Future Financings. Except for (i) those transactions contemplated by the Company and Rose Glen Capital Management, L.P. and certain other investors pursuant to which the Company intends to complete a private placement of Common Stock (as described in Schedule 2.1(c) hereto); (ii) issuance of the Underlying Shares; (iii) shares of Common Stock deemed to have been issued by the Company in connection with any contract, plan or agreement which has been approved by the Board of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer, director or consultant of the Company; (iv) shares of Common Stock issuable upon the exercise of any options or warrants outstanding on the date hereof and listed in Schedule 2.1(c) hereto; (v) shares of Common Stock issued or deemed to have been issued in a Strategic Venture (as defined below); or (vi) shares of Common Stock issued or deemed to have been issued as consideration for an acquisition by the Company of a division, assets or business (or stock constituting any portion thereof) from another person, if the Company agrees to issue Securities prior to the first anniversary of the Tranche A Closing Date at an effective price per share of less than an amount equal to the Conversion Price (as defined in the Debentures) of the Debentures as of the date hereof and Debentures are still then outstanding (a "Future Financing"), the Company shall provide by 5:00 p.m. (New York time) on the third (3rd) Trading Day after the decision to issue the Securities has been made, written notice of the Future Financing containing in reasonable detail (i) the proposed terms of the Future Financing, (ii) the amount of the proceeds that will be raised and (iii) the Person with whom such Future Financing shall be effected, and attached to which shall be a term sheet or similar document relating thereto (the "Future Financing Notice"). Upon receiving the Future Financing Notice, each Purchaser shall have the pro rata right to purchase, on the same terms as the Future Financing, an amount of Securities not to exceed the sum of (i) the number of Securities which may be purchased by the amount of the then outstanding principal amount of and any interest owing on such Purchaser's Debenture and (ii) the number of Securities which is the product of the Exercise Price (as defined in the Warrants) multiplied by that number of shares of Common Stock underlying the Warrant. In the event a Purchaser desires to exercise the right granted under this Section 3.9, such Purchaser must notify the Company on or prior to the fifth (5th) Trading Day after the Purchaser has received the Future Financing Notice. In the event one or more Purchasers elects not to exercise its rights granted hereby, the Company shall permit those Purchasers electing to exercise the right granted under this Section 3.9 to purchase, on a basis equal to its percentage ownership of the then aggregate outstanding principal of the Debentures, the sum of the number of Securities that the other Purchaser(s) were eligible to Purchase, if they had exercised their right hereunder. Those Purchasers desiring to purchase additional Securities must notify the Company of their intention to do so within three (3) Trading Days after the Company has informed the Purchasers of their right to purchase additional Securities. Within five (5) Trading Days of the termination of the final notice period, the transactions contemplated by this Section 3.9 shall close and the Company shall tender to each Purchaser certificates representing that number of the Securities that it agreed to purchase and the Purchasers shall make payment for the entire purchase price in 17 19 immediately available funds at the closing of such sale; provided, however, that each Purchaser, in lieu of providing cash as consideration for the purchase price, may retire all or a portion of the outstanding principal amount of and any interest owing on the Debentures as payment of the purchase price for the Securities that it desires to purchase pursuant to this Section 3.9. "Strategic Venture" shall mean a venture between the Company and a pharmaceutical or biotechnology company or an Affiliate thereof, the primary purpose of which is not to raise capital in the form of equity (including without limitation through the issuance of warrants, convertible securities, phantom stock rights, stock appreciation rights or other rights with equity features) and pursuant to which the Company contributes or issues securities of the Company valued at less than 50% of the entire contribution of the Company. III.10 Use of Proceeds. The Company shall use the proceeds from the sale of the Debentures and the exercise of the Warrants for general corporate purposes and shall not, directly or indirectly, other than in connection with a strategic or research collaboration, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other Person. III.11 Reimbursement. In the event that any Purchaser, other than by reason of its gross negligence or willful misconduct, becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including shareholders of the Company, in connection with or as a result of (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Transaction Documents or any other certificate, instrument or document hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Purchaser and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, the Company will reimburse such Purchaser for its legal and other actual out-of-pocket expenses (including the cost of any investigation and preparation) incurred in connection therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of the Purchasers and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such affiliate and any such Person. The Company also agrees that neither the Purchasers or any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of this Agreement or any of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of such Purchaser or entity in connection with the transactions contemplated by this Agreement or the Registration 18 20 Rights Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of its obligations hereunder which is permissible under applicable law. III.12 [Reserved.] III.13 Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Debenture Shares and the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company in a form acceptable to the Purchasers (the "Irrevocable Transfer Agent Instructions"). Prior to registration of the Debenture Shares and Warrant Shares under the Act, all such certificates shall bear the restrictive legend specified in Section 3.1(b) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 3.13, and stop transfer instructions to give effect to Section 3.1 hereof, prior to registration of the Debenture Shares and the Warrant Shares under the Act, will be given by the Company to its transfer agent and that the Debentures, the Warrants, the Debenture Shares and the Warrant Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. If a Purchaser provides the Company with an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that a public sale, assignment or transfer of the Debentures, the Debenture Shares, the Warrants and the Warrant Shares may be made without registration under the Act or the Purchaser provides the Company with reasonable assurances that the Warrants, the Debenture Shares and the Warrant Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Debenture Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser and without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers by violating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.13 will be inadequate and agrees, in the event of a beach or threatened breach by the Company of the provisions of this Section 3.13, that the Purchasers, shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. III.14 Filing of Form 8-K. On or before the 10th business day following each of the Tranche A Closing Date and the Tranche B Closing Date, the Company shall file a Form 8-K with the Commission describing the terms of the transaction contemplated by this Agreement and the Transaction Documents in the form required by the Exchange Act. III.15 Ordinary Course Brokerage and Trading. Subject to compliance with all applicable securities laws and Nasdaq regulations, no Purchaser shall be prohibited from engaging in its ordinary course brokerage and trading activities in respect of the 19 21 Company's Common Stock (including establishing short positions); provided that the personnel engaged in such activities have not been involved with the transactions contemplated hereby and have not been provided with confidential information with respect to the Company. ARTICLE IV. CONDITIONS IV.1 (a) Conditions Precedent to the Obligation of the Company to Sell the Tranche A Debentures and Tranche A Warrants. The obligation of the Company to sell the Tranche A Debentures and Tranche A Warrants (and to pay the Brown Simpson Asset Fee) hereunder is subject to the satisfaction or waiver (with prior written notice to each Purchaser) by the Company, at or before the Tranche A Closing, of each of the following conditions: (i) Accuracy of the Purchasers' Representations and Warranties. The representations and warranties of each Purchaser in this Agreement shall be true and correct in all material respects as of the date when made and as of the Tranche A Closing Date; (ii) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Tranche A Closing; and (iii) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement or the Transaction Documents. (a) Conditions Precedent to the Obligation of the Purchasers to Purchase the Tranche A Debentures and Tranche A Warrants. The obligation of each Purchaser hereunder to acquire and pay for the Tranche A Debentures and Tranche A Warrants is subject to the satisfaction or waiver (with prior written notice to the Company) by such Purchaser, at or before the Tranche A Closing, of each of the following conditions: (i) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of the date when made and as of the Tranche A Closing Date; (ii) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Tranche A Closing; (iii) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or 20 22 endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement and the Transaction Documents; (iv) No Suspensions of Trading in Common Stock. The trading in the Common Stock shall not have been suspended by the Commission or on Nasdaq which suspension shall remain in effect; (v) Listing of Common Stock. The Common Stock shall have been at all times since the date hereof, and on the Tranche A Closing Date shall be, listed for trading on Nasdaq; (vi) Required Approvals. All Required Approvals shall have been obtained other than those relating solely to the Tranche B Debentures and Tranche B Warrants; (vii) Shares of Common Stock. The Company shall have duly reserved the number of Underlying Shares required by this Agreement and the Transaction Documents to be reserved for issuance upon conversion of the Tranche A Debentures and the exercise of the Tranche A Warrants; (viii) Change of Control. No Change of Control shall have occurred between the date hereof and the Tranche A Closing Date. "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the Purchasers or any of their Affiliates, of in excess of 50% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's Board of Directors which is not approved by those individuals who are members of the Board of Directors on the date hereof in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii); and (ix) Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in a form acceptable to the Purchasers, shall have been delivered to and acknowledged in writing by the Company's transfer agent. (b) Documents and Certificates. At the Tranche A Closing, the Company shall have delivered to the Purchasers the following in form and substance reasonably satisfactory to the Purchasers: (i) An opinion of the Company's legal counsel in the form attached hereto as Exhibit C dated as of the Tranche A Closing Date; (ii) A Debenture(s) representing the principal amount of Tranche A Debentures purchased by such Purchaser as set forth next to such Purchaser's name on Schedule I, registered in the name of such Purchaser, each in form satisfactory to the Purchaser; 21 23 (iii) A Warrant(s) representing the Tranche A Warrants purchased by such Purchaser as set forth next to such Purchaser's name on Schedule I, registered in the name of such Purchaser; (iv) The Company shall have executed and delivered the Registration Rights Agreement; (v) Officer's Certificate. An Officer's Certificate dated the Tranche A Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of such Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.1 as of the Tranche A Closing Date. (vi) Secretary's Certificate. A Secretary's Certificate dated the Tranche A Closing Date and signed by the Secretary or Assistant Secretary of the Company certifying (A) that attached thereto is a true and complete copy of the Certificate of Incorporation of the Company, as in effect on the Tranche A Closing Date, (B) that attached thereto is a true and complete copy of the by-laws of the Company, as in effect on the Tranche A Closing Date and (C) that attached thereto is a true and complete copy of the resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance this Agreement and of the Transaction Documents, and that such resolutions have not been modified, rescinded or revoked. IV.2 (a) Conditions Precedent to the Obligation of the Company to Sell the Tranche B Debentures and Tranche B Warrants. The obligation of the Company to sell the Tranche B Debentures and Tranche B Warrants hereunder is subject to the satisfaction or waiver (with prior written notice to each Purchaser) by the Company, at or before the Tranche B Closing, of each of the following conditions: (i) Accuracy of the Purchasers' Representations and Warranties. The representations and warranties of each Purchaser in this Agreement shall be true and correct in all material respects as of the date when made and as of the Tranche B Closing Date (except for representations and warranties that speak as of a specific date); (ii) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Tranche B Closing; and (iii) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement and the Transaction Documents. (a) Conditions Precedent to the Obligation of the Purchasers to Purchase the Tranche B Debentures and Tranche B Warrants. The obligation of each Purchaser hereunder to acquire and pay for the Tranche B Debentures and Tranche B 22 24 Warrants is subject to the satisfaction or waiver (with prior written notice to the Company) by each Purchaser, at or before the Tranche B Closing, of each of the following conditions: (i) Tranche A Closing. The Tranche A Closing shall have occurred; (ii) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and in all material respects as of the Tranche B Closing Date (except for representations and warranties that speak as of a specific date); (iii) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Transfer Documents to be performed, satisfied or complied with by the Company at or prior to the Tranche B Closing Date; (iv) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement and the Transaction Documents; (v) Effective Registration Statement. The Registration Statement with respect to the Underlying Shares shall have been declared and shall be effective under the Act by the Commission; not subject to any stop order and not be subject to any suspension pursuant to Section 3(p) of the Registration Rights Agreement, and shall have been effective and shall not have been subject to any stop order for the thirty (30) business days prior to such Closing Date and no stop order shall be pending or threatened as at such Closing Date; (vi) No Suspensions of Trading in Common Stock. The trading in the Common Stock shall not have been suspended by the Commission or on Nasdaq (except for any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company); (vii) Listing of Common Stock. The Common Stock shall have been at all times since the date hereof and, on the Tranche B Closing Date the Common Stock, including the Underlying Shares, shall be listed for trading on Nasdaq; (viii) Required Approvals. All Required Approvals shall have been obtained; (ix) Shares of Common Stock. The Company shall have duly reserved the number of Underlying Shares required by this Agreement to be reserved for issuance upon conversion of the Tranche B Debentures and exercise of the Tranche B Warrants; (x) Change of Control. No Change of Control in the Company shall have occurred; and (xi) Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in a form acceptable to the Purchasers, shall have been 23 25 delivered to and acknowledged in writing by the Company's transfer agent. (b) Documents and Certificates. At the Tranche B Closing, the Company shall have delivered to the Purchasers the following in form and substance reasonably satisfactory to the Purchasers: (i) An opinion of the Company's legal counsel, in substantially the form attached hereto as Exhibit C dated as of the Tranche B Closing Date; (ii) A Debenture(s) representing the principal amount of Tranche B Debentures purchased by such Purchaser as set forth next to such Purchaser's name on Schedule I, registered in the name of such Purchaser, each in form satisfactory to the Purchaser; (iii) a Warrant(s) representing the Tranche B Warrants being purchased by such Purchaser as set forth next to such Purchaser's name on Schedule I, registered in the name of such Purchaser; (iv) Officer's Certificate. The Company shall deliver to the Purchasers an Officer's Certificate dated the Tranche B Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of the Tranche B Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Tranche B Closing Date; and (v) Secretary's Certificate. A Secretary's Certificate dated the Tranche B Closing Date and signed by the Secretary or Assistant Secretary of the Company certifying (A) that attached thereto is a true and complete copy of the Certificate of Incorporation of the Company, as in effect on the Tranche B Closing Date, (B) that attached thereto is a true and complete copy of the bylaws of the Company, as in effect on the Tranche B Closing Date and (C) that attached thereto is a true and complete copy of the resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of the Agreement and the Transaction Documents and that such resolutions have not been modified, rescinded or revoked. ARTICLE V. MISCELLANEOUS V.1 Fees and Expenses. Except as set forth in the Registration Rights Agreement and as otherwise set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Debenture Shares and the Warrant Shares pursuant hereto. V.2 Entire Agreement; Amendments. This Agreement, together with the Exhibits and Schedules hereto and the Registration Rights Agreement contain the entire understanding 24 26 of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. V.3 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if received by 8:00 p.m. EST where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David Greenwood, fax no. (650) 473-7701 and (ii) if to any Purchaser to the address as set forth on Schedule II hereto with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002, or such other address as may be designated in writing hereafter, in the same manner, by such Person. V.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Notwithstanding the foregoing, no such amendment shall be effective to the extent that it applies to less than all of the holders of the Debentures outstanding. The Company shall not offer or pay any consideration to a Purchaser for consenting to such an amendment or waiver unless the same consideration is offered to each Purchaser and the same consideration is paid to each Purchaser which consents to such amendment or waiver. V.5 Headings; Interpretive Matters. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof or thereof. V.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each of the Purchasers. The Purchasers may assign this Agreement or any rights or obligations hereunder to any Affiliate thereof without the prior written consent of the Company, except that any assignees must make the representations and warranties set forth in Section 2.2 and otherwise comply with the terms of this Agreement otherwise applicable to its assignor. This provision shall not limit a Purchaser's right to transfer 25 27 securities in accordance with all of the terms of this Agreement or under the Registration Rights Agreement. V.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. V.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. V.9 Survival. The agreements, covenants, representations, warranties and provisions contained in this Agreement shall survive the delivery of the Debentures and the Warrants pursuant to this Agreement and each closing hereunder and any conversion of the Debentures or exercise of the Warrants. V.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. V.11 Publicity. The Company and each Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Company shall not publicly or otherwise disclose the names of any of the Purchasers without each such Purchaser's prior written consent. V.12 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision 26 28 which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. V.13 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchasers will be entitled to specific performance of the obligations of the Company under this Agreement or the Transaction Documents without the showing of economic loss and without any bond or other security being required. Each of the Company and the Purchasers (severally and not jointly) agree that monetary damages would not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. V.14 Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser hereunder is several and not joint with the obligations of the other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. V.15 Payment Set Aside. To the extent that the Company makes a payment or payments to the Purchasers hereunder or pursuant to the Registration Rights Agreement or the Purchasers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 27 29 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized persons as of the date first indicated above. GERON CORPORATION By: --------------------------------------- Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: --------------------------------------- Name: Mitchell Kaye Title: Principal Residence: Grand Cayman, Cayman Islands BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: --------------------------------------- Name: Mitchell Kaye Title: Principal Residence: New York, New York LB I GROUP INC. By: --------------------------------------- Name: Steven Berkenfeld Title: Senior Vice President Residence: New York, New York 30 RGC INTERNATIONAL INVESTORS, LDC By: Rose Glen Capital Management, L.P., Investment Manager BY: RGC GENERAL PARTNER CORP., AS GENERAL PARTNER By: ----------------------------------- Name: Wayne D. Bloch Title: Managing Director Residence: Grand Cayman, Cayman Islands 29 31 Schedule I
Principal Amount of Principal Amount Convertible of Convertible Debentures at Debentures at Tranche A No. of Tranche A Tranche B No. of Tranche B Name of Purchaser Closing Date Warrants Closing Date Warrants - ----------------- ------------ ---------------- ---------------- ---------------- Brown Simpson Strategic Growth Fund, Ltd. $1,400,000 116,667 [$2,000,000 to be allocated between Brown Simpson Strategic Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P.] Brown Simpson Strategic Growth Fund, L.P. $600,000 50,000 LB I Group Inc. $3,000,000 250,000 $3,000,000 RGC International $2,500,000 208,333 $2,500,000 Investors, LDC
- -------- (1) As may be adjusted from time to time in accordance with and subject to paragraph 6 of the Warrant. 30 32 Schedule II
Name of Purchaser Address - ----------------- ------- Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 LB I Group Inc. c/o Lehman Brothers, Inc. 3 World Financial Center New York, New York 10285 Attn: Kevin Jenirs Fax: (212) 526-2198 RGC International Investors, LDC c/o Rose Glen Capital Management, L.P. 3 Bala Plaza East, Suite 200 251 Saint Asaphs Road Bala Cynwyd, PA 19004 Attn: Wayne D. Bloch Fax: (620) 617-0570
31 EX-10.41 5 REGISTRATION RIGHTS AGREEMENT DATED 12/10/1998 1 EXHIBIT 10.41 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of December 10, 1998, among Geron Corporation, a Delaware corporation (the "Company"), and the parties who have executed this Agreement and whose names appear on Schedule I hereto (each party listed on Schedule I hereto is sometimes individually referred to herein as a "Purchaser" and all such parties are sometimes collectively referred to herein as the "Purchasers." This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof among the Company and the Purchasers (the "Purchase Agreement"). The Company and the Purchasers hereby agree as follows: 1. Definitions Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" has meaning set forth in Section 3(o) hereof. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," controlling" and "controlled" have meanings correlative to the foregoing. "Allowable Grace Period" has the meaning set forth in Section 3(p) hereof. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government actions to close. "Closing Date" shall mean the Tranche A Closing Date as defined in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. 32 2 "Common Stock" means the Company's Common Stock, par value $.001 per share. "Debentures" means collectively, the Company's Series A Zero Coupon Convertible Debentures and Series B Zero Coupon Convertible Debentures issuable pursuant to the Purchase Agreement. "Effectiveness Date" means the earlier of (i) the 90th day following the Closing Date, or (ii) the fifth day after the Company has received notice (written or oral) from the Commission that the Commission Staff will not be reviewing the Registration Statement. "Effectiveness Period" has the meaning set forth in Section 2(a) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Event" has the meaning set forth in Section 2(d) hereof. "Filing Date" means as soon as practicable but in no event later than the 30th day following the Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" has the meaning set forth in Section 5(c) hereof. "Indemnifying Party" has the meaning set forth in Section 5(c) hereof. "Losses" has the meaning set forth in Section 5(a) hereof. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. 33 3 "Purchase Price" has the meaning set forth in Section 2(d) hereof. "Registrable Securities" means the shares of Common Stock issuable upon (i) conversion of the Debentures, (ii) payment of interest in respect of the Debentures, (iii) exercise of the Warrants, and (iv) any shares of the Company's capital stock issued with respect to (i), (ii) and (iii) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise. "Registration Delay Payment" has the meaning set forth in Section 2(d) hereof. "Registration Statement" means the registration statement and any additional registration statements contemplated by Section 2(a), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement. "Rose Glen Agreements" means that certain Registration Rights Agreement entered into by the Company and the Initial Investors (as defined therein) in connection with the issuance of Series A Convertible Preferred Stock by the Company on March 27, 1998 and any successor or additional registration rights agreements entered into by the Company and any of the Initial Investors. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 416" means Rule 416 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Special Counsel" means one special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. "Warrants" means the warrants issuable pursuant to the Purchase Agreement. 34 4 2. Shelf Registration (a) The Company shall use its best efforts to prepare and file with the Commission, on or prior to the Filing Date, the Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to a "Shelf" registration statement under Rule 415. The Registration Statement shall be on Form S-3 or any successor form (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the reasonable consent of the original Holders of the Registrable Securities). The Registration Statement shall state, to the extent permitted by Rule 416, that it also covers such indeterminate number of shares of Common Stock as may be required to effect conversion of the Debentures (and payment of interest thereon) or exercise of the Warrants, in each case to prevent dilution resulting from stock splits, stock dividends or similar events, or by reason of changes in the Conversion Price in accordance with the terms of the Debentures or by reason of changes in the Exercise Price (as defined in the Warrants) in accordance with the terms of the Warrants. The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement and (ii) use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event on or prior to the Effectiveness Date, and to keep such Registration Statement continuously effective under the Securities Act until the date which is three years after the date that such Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144 as determined by counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent to such effect (the "Effectiveness Period"). (b) [Intentionally Omitted]. (c) [Intentionally Omitted]. (d) If (i) the Registration Statement covering all the applicable Registrable Securities and required to be filed by the Company pursuant to this Agreement is not (A) filed with the Commission on or before the Filing Date or (B) declared effective by the Commission on or before the applicable Effectiveness Date or (ii) on any day after the Registration Statement has been declared effective by the Commission, other than days during an Allowable Grace Period, (A) sales of all the Registrable Securities required to be included on a Registration Statement cannot be made pursuant to the respective Registration Statement (including, without limitation, because of a failure to keep the Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to the Registration Statement, or to register sufficient shares of Common Stock) or (B) the Common Stock is not listed or included for quotation on the National Market System of the Nasdaq Stock Market ("Nasdaq"), the New York Stock Exchange ("NYSE") or the American Stock Exchange (the "AMEX") after being so listed or included for quotation, (each such event specified in (i) and (ii) above, an "Event"), then, as partial relief for the damages to any Holder by reason of any such delay in or reduction 35 5 of its ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each Holder an amount in cash (a "Registration Delay Payment") equal to the then outstanding principal amount of the Debentures (and, in the case of Holders, the principal amount of Debentures from which such Registrable Securities were converted) (the "Aggregate Price") multiplied by two hundredths (.020) times the sum of: (i) the number of months (prorated for partial months) after the end of the Effectiveness Date and prior to the date the Registration Statement is declared effective by the Commission, provided, however, that there shall be excluded from such period any delays which are solely attributable to changes required by the Purchasers in the Registration Statement with respect to information relating to the Purchasers, or to the failure of the Purchasers to conduct their review of the Registration Statement pursuant to Section 3(a); (ii) the number of months (prorated for partial months) that sales cannot be made pursuant to the Registration Statement after the Registration Statement has been declared effective (including, without limitation, when sales cannot be made by reason of the Company's failure to properly supplement or amend the Prospectus in accordance with the terms of this Agreement, or otherwise, but excluding when such sales cannot be made solely by reason of any act or omission solely attributable to the Purchasers and excluding any days during an Allowable Grace Period; and (iii) the number of months (prorated for partial months) that the Common Stock is not listed or included for quotation on the Nasdaq, NYSE or AMEX or that trading thereon is halted after the Registration Statement has been declared effective. (e) The Company represents and warrants that it meets the registrant eligibility and transaction requirements for the use of Form S-3 (for primary and secondary offerings) for the registration of the sale of Registrable Securities by the Purchasers and any other Holders and the Company shall file all reports required to be filed by the Company with the Commission in a timely manner so as to maintain such eligibility for the use of Form S-3. 3. Registration Procedures In connection with the Company's registration obligations hereunder, the Company shall: (a) Use its best efforts to prepare and file with the Commission on or prior to the Filing Date a Registration Statement on Form S-3 or its successor form (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance herewith or in accordance with the method or methods of distribution thereof as specified by the Holders (except if otherwise directed by the Holders), and cause the Registration Statement to become effective and remain effective as provided herein. (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be 36 6 amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold and their Special Counsel as promptly as possible (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) [Intentionally Omitted]. (f) Furnish to each Holder, their Special Counsel and any managing underwriters, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent 37 7 requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Promptly deliver to each Holder, their Special Counsel, and any underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any underwriters in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders, and their Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (i) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such managing underwriters or Holders may request at least two (2) Business Days prior to any sale of Registrable Securities. (j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on Nasdaq and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement. 38 8 (l) [Intentionally Omitted]. (m) Make available for inspection by the selling Holders, any representative of such Holders, any underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by such selling Holders or underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Holder, representative, underwriter, attorney or accountant in connection with the Registration Statement; provided, however, that if any information is determined in good faith by the Company in writing to be of a confidential nature at the time of delivery of such information, then prior to delivery of such information, the Company and the Holders shall enter into a confidentiality agreement reasonably acceptable to the Company and the Holders providing that such information shall be kept confidential, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities (provided, however, that the Company shall be given notice of any such pending disclosure so that the Company may seek a protective order); (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law; (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person; or (iv) such information becomes available to such Person from a source other than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. (n) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts Underwritten Offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. (o) The Company may require each selling Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. 39 9 Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. (p) If (a) there is material non-public information regarding the Company which the Company's Board of Directors reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (b) there is a significant business opportunity (including but not limited to the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Company's Board of Directors determines not to be in the Company's best interest to disclose, then the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 20 consecutive days (an "Allowable Grace Period"), provided that the Company may not postpone or suspend its obligation under this Section 3(p) for more than 30 days in the aggregate during any 365-day period and there shall be an aggregate of not more than two (2) such suspensions during any 365-day period; provided, however, that no such postponement or suspension shall be permitted for consecutive 20 day periods, arising out of the same set of facts, circumstances or transactions. 4. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company, except as and to the extent specified in Section 4(b), shall be borne by the Company whether or not pursuant to an Underwritten Offering and whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with Nasdaq and each other securities exchange or market on which Registrable Securities are required hereunder to be listed and (B) in compliance with state securities or Blue Sky laws 40 10 (including, without limitation, fees and disbursements of counsel for the Holders in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the managing underwriters, if any, or the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and Special Counsel for the Holders, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. 5. Indemnification (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents (including any underwriters retained by such Holder in connection with the offer and sale of Registrable Securities), brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (in the case of any Prospectus or form of Prospectus or supplement thereto, in light of the circumstances under which they were made), except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (provided that 41 11 the Company amended any disclosure with respect to the method of distribution upon written notice from the Holders that such section of the Prospectus should be revised in any way). In addition, the Company shall not be liable for any Losses to any Holder with respect to any untrue or alleged untrue statement or omission or alleged omission if such statement or omission was made in a preliminary Prospectus that is corrected in a final Prospectus (or any amendment or supplement thereto) if the person asserting such Losses purchased Common Stock from a Holder in reliance upon such preliminary Prospectus (or a Prospectus which was subsequently amended or supplemented) or the Prospectus, as subsequently amended or supplemented, that was made available by the Company to such Holder at or prior to written confirmation of the sale of the Common Stock to such person in any case where such delivery of such Prospectus (as amended or supplemented) is required, unless such failure to deliver such final Prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 3(g) of this Agreement. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of prospectus. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, however, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which 42 12 determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 10 Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent 43 13 such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 6. Rule 144 As long as any Holder owns Registrable Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or l5(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings. As long as any Holder owns Registrable Securities, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions referred to in the Purchase Agreement. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7. Miscellaneous (a) Remedies. In the event of a breach by the Company or by a Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this 44 14 Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company shall use its best efforts to cause the Rose Glen Agreements to be consistent in all material respects with the rights granted to the Holders pursuant to this Agreement and to cause such Rose Glen Agreements to not conflict with any of the terms, provisions or rights granted hereunder. Other than the Rose Glen Agreements, neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in Schedule 2.1(r) of the Purchase Agreement, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth in Section 2 herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement. This Agreement, together with the Purchase Agreement, contain the entire understanding of the parities with respect tot he subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. (c) No Piggyback on Registrations. Except as disclosed on Schedule 7(c) of the Purchase Agreement, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statements and the Company shall not after the date hereof enter into any agreement providing such right to any of its securityholders, unless the right so granted is subject in all respects to the prior rights in full of the Holders set forth herein, and is not otherwise in conflict or inconsistent with the provisions of this Agreement. (d) Piggy-Back Registrations. If at any time when there is not an effective Registration Statement covering the Registrable Securities, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each Holder of Registrable Securities written notice of such determination and, if within fifteen (15) days after receipt of such notice, any such Holder shall so request in writing, (which request shall specify the Registrable Securities intended to be disposed of by the Purchasers), the Company will use reasonable efforts to effect 45 15 the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holder, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 7(d) for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) or underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the Underwriter's Representative should reasonably determine that the inclusion of such Registrable Securities, would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer Registrable Securities then proposed to be sold by the Holders, then (x) the number of Registrable Securities of the Holders included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration); provided, however, that if securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). (e) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority of the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (f) Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated 46 16 below (if received by 8:00 p.m. EST where such notice is to be received), or the first business day following such delivery (if delivered on a business day after during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications are (i) if to the Company to Geron Corporation, 230 Constitution Drive, Menlo Park, California 94025 attn: David Greenwood, fax no. (650) 473-7701 and (ii) if to any Purchaser to the address set forth on the signature pages hereto with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other address as may be designated in writing hereafter, in the same manner, by such Person. (g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of a majority in interest of the Holders. Each Purchaser may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. (h) Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (j) Governing Law. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and the Purchasers as its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed in accordance with 47 17 the laws of the State of New York, without regard to principles of conflicts of law. Each party hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (n) [Intentionally Omitted] [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE TO FOLLOW] 48 18 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. GERON CORPORATION By: --------------------------------------- Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: Name: Mitchell Kaye --------------------------------------- Title: Principal Residence: Grand Cayman, Cayman Islands BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: --------------------------------------- Name: Mitchell Kaye Title: Principal Residence: New York, New York LB I GROUP INC. By: --------------------------------------- Name: Steven Berkenfeld Title: Senior Vice President Residence: New York, New York 49 19 RGC INTERNATIONAL INVESTORS, LDC By: Rose Glen Capital Management, L.P., Investment Manager BY: RGC GENERAL PARTNER CORP., AS GENERAL PARTNER By: ------------------------------- Name: Wayne D. Bloch Title: Managing Director Residence: Grand Cayman, Cayman Islands 50 20 SCHEDULE I Company - ------- GERON CORPORATION 230 Constitution Drive Menlo Park, CA 94025 Fax: (650) 473-7701 Purchasers: - ----------- BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Debentures Warrants BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. 152 West 57th Street, 40th Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Debentures Warrants LB I GROUP INC. c/o Lehman Brothers, Inc. 3 World Financial Center New York, New York 10285 Attn: Kevin Jenirs Fax: (212) 526-2198 Debentures Warrants RGC International Investors, LDC c/o Rose Glen Capital Management, L.P. 3 Bala Plaza East, Suite 200 251 Saint Asaphs Road Bala Cynwyd, PA 19004 Attn: Wayne D. Bloch Fax: (620) 617-0570 Debentures Warrants EX-99.1 6 PRESS RELEASE DATED DECEMBER 10, 1998. 1 EXHIBIT 99.1 GERON ANNOUNCES $15 MILLION IN FINANCING MENLO PARK, CA -- December 10, 1998 -- Geron Corporation (NASDAQ:GERN) announced today that it has entered into an agreement to sell $15 million in convertible zero coupon debentures to investment funds managed by three institutional investors. "This financing, together with cash on the balance sheet and committed funding from partners, brings our total cash available to $56 million, which will allow Geron to accelerate development programs relating to recent discoveries in embryonic stem cell technology as well as our telomerase programs," stated David L. Greenwood, Geron chief financial officer and vice-president of corporate development. The debentures were purchased by investment funds managed by Brown Simpson Asset Management, LLC and an investment fund managed by Rose Glen Capital Management, L.P. The debentures are convertible by the holders at a fixed conversion price of $10.00 per share. The debentures convert at the company's option when the common stock has traded at a certain premium to the fixed conversion price for five (5) consecutive trading days. For a period of eighteen (18) months, the investors hold a right to purchase up to $15,000,000 of additional Geron common stock at a premium to the fixed conversion price. Geron Corporation is a biopharmaceutical company focusing on discovering and developing therapeutic and diagnostic products based upon the company's understanding of human embryonic stem cells, and of telomere and telomerase in cells -- fundamental biological platforms underlying cancer and other age-related degenerative diseases. The company desires to take advantage of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Specifically, the company wishes to alert readers that the matters discussed in this press release may constitute forward-looking statements that are subject to certain risks and uncertainties. Actual results may differ materially from the results anticipated in these forward-looking statements. Additional information on potential factors that could affect the company's results is included in the company's quarterly report on Form 10-Q for the quarter ended September 30, 1998. Contact: Company Media Inquiries Investor Inquiries David Greenwood Carole Melis or Lisa Burns or Chief Financial Officer Mike Jackman John Nugent Geron Corporation CLM Communications Burns McClellan 650-473-7700 650-342-5686 212-213-0006
To receive an index and copies of recent press releases, call Geron's News on Demand toll-free fax service, 1-800-782-3279. Additional information about the company can be obtained at www.geron.com. -----END PRIVACY-ENHANCED MESSAGE-----