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EXHIBIT 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT.
September 30, 1999 $12,500,000
GERON CORPORATION
SERIES C TWO PERCENT (2%) CONVERTIBLE DEBENTURES
Geron Corporation, a Delaware corporation (the "Issuer"), for value
received hereby promises to pay to RGC International Investors, LDC or its
registered assigns the principal sum of Twelve Million Five Hundred Thousand
Dollars ($12,500,000), together with all accrued but unpaid interest thereon, on
September 30, 2002 in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts at the last address of the Holder (as defined herein) last
appearing on the Register (as defined herein).
This Security is one of a duly authorized issue of Series C two percent
(2%) convertible debentures of the Issuer (the "Security") referred to in the
Securities Purchase Agreement (the "Purchase Agreement") dated as of September
30, 1999 by and between the Issuer and the Purchaser (as defined in the Purchase
Agreement). The Securities are subject to the terms and conditions of the
Purchase Agreement, a copy of which is on file at and may be obtained from the
Issuer at its principal office at the address set forth in Section 4.5 hereof.
The Issuer agrees to issue from time to time replacement Securities in the form
hereof to facilitate any transfers and assignments. In addition, after delivery
of an indemnity in form and substance satisfactory to the Issuer, the Issuer
also agrees to issue replacement Securities for securities which have been lost,
stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Securities and particulars of the respective Securities held by
them and of all transfers of such Securities. References to the "Holder" or
"Holders" shall mean the Person listed in the Register as the payee of any
Security unless the payee shall have presented such Security to the Issuer for
transfer and the transferee shall have been entered in the Register as a
subsequent holder, in which case the term shall mean such subsequent holder. The
ownership of the Securities shall be proven by the Register. For the purpose of
paying
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interest and principal on the Securities, the Issuer shall been titled to rely
on the names and addresses in the Register and notwithstanding anything to the
contrary contained in this Security, no Event of Default shall occur under
Section 3.1 if payment of principal is made in accordance with the names and
addresses and particulars contained in the Register.
No provision of this Security shall alter or impair the obligations of
the Issuer, which are absolute and unconditional, to pay the principal of and
accrued interest on this Security at the place, times, rate, and in the
currency, herein prescribed.
The principal of this Security shall bear interest at the rate (the
"Interest Rate") of two percent (2%) per annum, except in the case of an Event
of Default (as defined in Article III hereof), in which case the Interest Rate
of this Security shall thereafter be seven percent (7%) per annum (to the extent
that the payment of such interest shall be legally enforceable), which shall
accrue from the date of such Event of Default to the date such default has been
cured or waived and overdue principal, if any, has been paid or duly provided
for. Such interest will be computed on the basis of a 365-day year (or 366 days
in the case of a leap year). Interest on any overdue principal shall be payable
on demand. Payment of the principal of and any such interest on this Security
will be at the offices of the Holder of this Security.
Interest will be computed on the basis of a fraction, the denominator of
which is 365 (or 366 for any leap year)and the numerator of which is the actual
number of days elapsed from the date such interest becomes due and payable.
The applicable Interest Rate shall be effective both before and after
any judgment may be rendered in a court of competent jurisdiction, provided,
however, that if the applicable Interest Rate is deemed to be in excess of the
amount permitted to be charged by the Issuer under applicable laws, the Holder
shall be entitled to collect an Interest Rate only at the highest rate permitted
by law, and any interest collected by the Holder in excess of such lawful amount
shall be deemed a payment in reduction of the Principal Amount then outstanding
under this Security and shall be so applied.
The payment obligations evidenced by this Security shall rank senior to
all other Debt of the Issuer in existence as of the date of issuance of this
Security except that it shall rank junior to the Series A Zero-Coupon
Convertible Debentures issued December 10, 1998 and the Series B Zero-Coupon
Convertible Debentures issued June 17, 1999. The Issuer shall not hereafter and
while this Security is outstanding issue directly or indirectly any Debt for
Money Borrowed which is senior to the indebtedness evidenced by this Security.
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ARTICLE I
DEFINITIONS
1.1 CERTAIN TERMS DEFINED. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Security shall have the respective meanings specified below.
All accounting terms used herein and not expressly defined shall have the
meanings given to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" shall mean
such accounting principles which are generally accepted as of the date hereof.
The terms defined in this Section 1.1 include the plural as well as the
singular.
"Acceleration Notice" shall have the meaning set forth in Section 3.1.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition,"control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling"and "controlled" have meanings correlative to the
foregoing.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Values during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight.
"Board of Directors" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act hereunder.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the original
Issue Date, including, without limitation, all Common Stock and all Preferred
stock.
"Change of Control" means the occurrence of one or more of the following
events: the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Buyers or any of their
Affiliates, of in excess of 50% of the voting securities of the Issuer, (ii) a
replacement of more than one-half of the members of the Issuer's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
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transactions, (iii) the merger of the Issuer with or into another entity,
consolidation or sale of all or substantially all of the assets of the Issuer in
one or a series of related transactions or (iv) the execution by the Issuer of
an agreement to which the Issuer is a party or by which it is bound, providing
for any of the events set forth in (i), (ii) or (iii).
"Common Stock" means the common stock, par value $.001 per share, of the
Issuer.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Conversion Price" shall have the meaning set forth in Section 4.2.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee undercapitalized leases, (vi) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"Debt for Money Borrowed" of any Person means at any date, without
duplication, Debt of the type referred to in clauses (i) and (ii) of the
definition of "Debt" set forth herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" or "generally accepted accounting principles" means generally
accepted accounting principles in the United States, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession.
"Holder", "Holder of Securities", "Securityholder" or other similar
terms means the registered holder of any Security.
"Incurrence" means the incurrence, creation, assumption or in any other
manner becoming liable with respect to, or the extension of the maturity of or
becoming responsible for the payment of, any Debt. "Incur" shall have a
comparable meaning.
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"Issuer" shall have the meaning set forth in the first paragraph hereof.
"Issuer Conversion Notice" shall have the meaning set forth in Section
4.8.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Security, the Issuer shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Mandatory Prepayment Amount" for any Security means the greater of (i)
the sum of (x) 115% of the principal amount of the Security to be prepaid plus
all accrued and unpaid interest thereon and (y) all other amounts, costs,
interest, expenses and liquidated damages due in respect of such principal
amount and (ii) the sum of (x) at the option of the Holder, either (I) the
principal amount of the Security to be repaid, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on the date the Mandatory
Prepayment Amount is demanded or otherwise due, multiplied by the Average Price
on the date the Mandatory Prepayment Amount is demanded or otherwise due or (II)
the principal amount of the Security to be prepaid, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on the Trading Day immediately
prior to the date the Mandatory Prepayment Amount is paid in full, multiplied by
the Average Price on the Trading Day immediately prior to the date the Mandatory
Prepayment Amount is paid in full, and (y) all other amounts, costs, interest,
expenses and liquidated damages due in respect of such principal amount.
"Nasdaq" means the Nasdaq National Market.
"Original Issue Date" of any Security (or portion thereof) means the
earlier of (i) the date of such Security and (ii) the date of any Security (or
portion thereof) for which such security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Per Share Market Value" means (i) on any particular date the closing
bid price per share of the Common Stock on such date on Nasdaq or any Subsequent
Market on which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date or (ii) if the Common Stock is not listed
then on Nasdaq or any Subsequent Market, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good faith by
the holder of this Security; provided, however, that the Issuer, after receipt
of the determination by such appraiser, shall have the right to select an
additional appraiser, in
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which case, the fair market value shall be equal to the average of the
determinations by each such appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Security, and includes, without limitation, all classes and
series of preferred or preference stock.
"Principal", wherever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include "and premium, if
any."
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under generally accepted
accounting principles.
"Purchase Price" means, with respect to any Security, the purchase price
paid to the Issuer upon issuance of such Security.
"Purchaser" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Registration Rights Agreement" means that Registration Rights Agreement
dated as of September 30, 1999 by and between the Issuer and the Initial
Investor (as defined in the Registration Rights Agreement).
"Security" or "Securities" shall have the meaning set forth in the
second paragraph hereof.
"Stated Maturity Date" means September 30, 2002.
"Stock Plan" means any stock or compensation plan pursuant to which
Common Stock may be issued to any employee, officer, director or consultant of
the Issuer which is either (a) approved by the stockholders of the Issuer or (b)
approved by the compensation committee of the Issuer's Board of Directors for
legitimate compensation purposes which provides for the purchase of the Common
Stock at a purchase price of no less than 85% of the market price of the Common
Stock on the date of issuance of such option, warrant or security.
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"Subsidiary" means any corporation or other organization, whether
incorporated or unincorporated, in which the Issuer owns, directly or
indirectly, any equity or other ownership interest and which would be deemed to
be a "significant subsidiary" (as such term is defined in Rule 1-02(w) of
Regulation S-X promulgated under the Securities Act of 1933, as amended (the
"Securities Act")).
"Subsequent Market" means the New York Stock Exchange, American Stock
Exchange or Nasdaq SmallCap Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq or on such Subsequent Market on which the Common Stock is then listed or
quoted or (b) if the Common Stock is not listed on Nasdaq or a Subsequent
Market, a day on which the Common Stock is traded in the over-the-counter
Market, as reported by the OTC Bulletin Board, or (c) if the Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-countermarket as reported by the National Quotation Bureau Incorporated
(or any similar organization or agency succeeding its functions or reporting
prices) provided, however that in any event that the Common Stock is not listed
or quoted as set forth in (a), (b), or (c) hereof, then a Trading Day shall mean
any Business Day.
"Warrants" has the meaning set forth in the Purchase Agreement.
"Wholly-Owned Subsidiary" means with respect to any Person a Subsidiary
the voting stock of which is more than 90% owned by such Person.
ARTICLE II
PAYMENT; THE SECURITIES
2.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants and agrees
that it will duly and punctually pay or cause to be paid the principal and
interest (to the extent enforceable under applicable law), with respect to each
of the Securities at the place or places, at the respective times and in the
manner provided in the Securities.
2.2 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case
any temporary or definitive Security shall become mutilated, defaced or be
apparently destroyed, lost or stolen, the Issuer shall execute and deliver a new
Security, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security. In every case the applicant
for a substitute Security shall furnish to the Issuer such security or indemnity
as it may require to indemnify and defend and to save it harmless and, in every
case of destruction, loss or theft evidence to the Issuer's satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be
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imposed in relation thereto and any other expenses connected therewith. In case
any Security which has matured or is about to mature, or has been called for
redemption in full, or is being surrendered for conversion in full shall become
mutilated or defaced or be apparently destroyed, lost or stolen, the Issuer may,
instead of issuing a substitute Security, with the holder's consent, pay or
authorize the payment or conversion of the same (without surrender thereof
except in the case of a mutilated or defaced Security), if the applicant for
such payment shall furnish to the Issuer such security or indemnity as it may
require to save it harmless from all risks, however remote, and, in every case
of apparent destruction, loss or theft, the applicant shall also furnish to the
Issuer evidence to the Issuer's satisfaction of the apparent destruction, loss
or theft of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed, lost or
stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the apparently destroyed, lost or stolen Security shall be at any
time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Security
equally and proportionately with any and all other Securities duly authenticated
and delivered hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
defaced, or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.
2.3 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All Securities
surrendered for payment, redemption, registration of transfer or exchange shall
be delivered to the Issuer for cancellation and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Security. If the Issuer shall acquire any of the Securities, such acquisition
alone shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF
DEFAULT. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
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(a) default in the payment of all or any part of the principal
of or interest on any of the Securities as and when the same shall become due
and payable either at maturity, upon any redemption, by declaration or
otherwise; or
(b) failure on the part of the Issuer duly to observe or perform
any other of the covenants or agreements on the part of the Issuer contained in
this Security or the Purchase Agreement or the Registration Rights Agreement for
a period of five (5) Business Days after the date on which any officer of the
Issuer shall have obtained actual knowledge of such failure or after written
notice thereof has been given to the Issuer by the holders of at least a
majority in aggregate principal amount of the Securities then outstanding; or
(c) there shall have occurred with respect to any issue or
issues of Debt of the Issuer and/or one or more Subsidiaries having an
outstanding principal amount of $1,000,000 or more in the aggregate for all such
issues of all such Persons, whether such Debt now exists or shall hereafter be
created, an event of default which has caused the holder thereof to declare such
debt to be due and payable prior to its stated maturity and such Debt has not
been discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration; or
(d) a judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Issuer or any Subsidiary of the
Issuer in excess of $500,000 in the aggregate for all such judgments or orders
against all such Persons (treating any deductibles, self insurance or retention
as not so covered) that shall not be discharged, and all such judgments and
orders remain outstanding and there shall be any period of 30 consecutive days
following entry of the judgment or order in excess of $500,000 or the judgment
or order which causes the aggregate amount described above to exceed $500,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Issuer or any of its subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Issuer
or any of its Subsidiaries or for any substantial part of the property of the
Issuer or any of its Subsidiaries or ordering the winding up or liquidation of
the affairs of the Issuer or any of its Subsidiaries, and such decree or order
shall remain unstayed and in effect for a period of 30 consecutive days; or
(f) the Issuer or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Issuer or any of its Subsidiaries or for any
substantial part of the property of the Issuer or any of its
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Subsidiaries, or the Issuer or any of its Subsidiaries shall make any general
assignment for the benefit of creditors; or
(g) any representation, warranty, certification or statement
made by the Issuer in the Purchase Agreement or in any certificate, financial
statement or other document delivered pursuant to the Purchase Agreement shall
prove to have been incorrect in any material respect when made; or
(h) the Common Stock shall be delisted from Nasdaq or shall be
suspended from trading on Nasdaq without resuming trading and/or being relisted
thereon or on a Subsequent Market or having such suspension lifted, as the case
may be, within three Business Days; or
(i) (X) a Registration Statement for the Registrable Securities
(as defined in the Registration Rights Agreement) shall not have been declared
effective by the Securities and Exchange Commission (the "SEC") on or prior to
the 180th day after the Closing Date (as defined in the Purchase Agreement), or
(Y) the Issuer fails to obtain the effectiveness of any additional Registration
Statement (required to be filed pursuant to Section 3(b) of the Registration
Rights Agreement) within ninety (90) days after the Registration Trigger Date
(as defined in the Registration Rights Agreement), or (Z) any such Registration
Statement, after its initial effectiveness and during the Registration Period
(as defined in the Registration Rights Agreement), lapses in effect or sales of
all of the Registrable Securities (as defined in the Registration Rights
Agreement, the "REGISTRABLE SECURITIES") otherwise cannot be made thereunder
(whether by reason of the Issuer's failure to amend or supplement the prospectus
included therein in accordance with the Registration Rights Agreement, the
Issuer's failure to file and obtain effectiveness with the SEC of an additional
Registration Statement required to be filed pursuant to Section 3(b) of the
Registration Rights Agreement or otherwise) for more than thirty (30)
consecutive days or more than sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective, excluding for purposes of
clause (Z) above only, days during the Allowed Delay period (as defined in the
Registration Rights Agreement) and excluding for purposes of clauses (X) and (Y)
above only, a delay caused by Purchaser's failure to comply with Sections 3(h)
and 4(a) of the Registration Rights Agreement; or
(j) a Change of Control shall occur; or
(k) the Issuer shall fail to obtain the Authorization Approval
contemplated by Section 3.17 of the Purchase Agreement prior to March 31, 2000.
then, in each and every such case (other than an Event of Default specified in
Section 3.1(e) or 3.1(f)hereof), unless the principal shall have already become
due and payable, by notice in writing to the Issuer (the "Acceleration Notice"),
a Holder may declare the entire principal amount of the Securities and any
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default specified in Section 3.1(e) or 3.1(f) occurs, the principal
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of and any accrued interest on the Securities shall become and be immediately
due and payable without any declaration or other act on the part of any Holder.
In the event that the Issuer shall not have promptly, but in any event within
five (5) Business Days of receipt of an Acceleration Notice, paid the Holder the
amount specified herein as due and payable in respect of such Event of Default,
the Conversion Price shall automatically be adjusted to equal the average Per
Share Market Value of the Common Stock during the preceding thirty (30)
consecutive Trading Days; provided, that the Per Share Market Value is lower
than the Conversion Price.
The aggregate amount payable upon an Event of Default described in
Section 3.1(a), (e), (f) and (i) shall be equal to the sum of (I) the Mandatory
Prepayment Amount plus (II) the Mandatory Prepayment Amount for the principal
amount of the Securities (the "Converted Debentures") that would then be held by
such Holder had the principal amount of Securities converted into Debenture
Shares (as defined in the Purchase Agreement) that are then held by the Holder
not been so converted; provided, that the Holder shall not be entitled to a
Mandatory Prepayment Amount with respect to Converted Debentures if both the
following have occurred: (i) prior to the occurrence of an Event of Default, the
Debenture Shares into which the Converted Debentures were converted had been
held by the Holder for more than thirty (30) days (which period shall be
extended at the time of occurrence of the Event of Default for the number of
Trading Days during such 30-day period that an Allowed Delay (as defined in the
Registration Rights Agreement) is in effect) and (ii) prior to the occurrence of
the Event of Default and after receipt by the Holder of the Debenture Shares
that are held by the holder at the time of the occurrence of the Event of
Default, the Registration Statement with respect to such Conversion Shares had
been continuously effective for thirty (30) Trading Days.
The aggregate principal amount payable on each Event of Default other
than as described in Section 3.1(a), (e),(f) and (i) shall be equal to the sum
of (I) the Mandatory Prepayment Amount plus (II) the Mandatory Prepayment Amount
for the Converted Debentures that would then be held by such Holder had the
principal amount of Securities converted into Debenture Shares that are then
held by the Holder not been so converted; provided, that the holder shall not be
entitled to a Mandatory Prepayment Amount with respect to Converted Debentures
if prior to the occurrence of an Event of Default, the Debenture Shares into
which the Converted Debentures were converted had been held by the Holder for
more than three Trading Days (which period shall be extended at the time of
occurrence of the Event of Default for the number of Trading Days during such
3-day period that an Allowed Delay is in effect).
For purposes of this Section 3.1, principal amount of the Securities are
outstanding until such date as the holder shall have received Debenture Shares
upon a conversion (or attempted conversion) thereof. Interest shall accrue on
the prepayment amount hereunder from the day after such amount is due (being the
date of an Event of Default) through the date of payment in full thereof at the
rate of seven percent (7%) per annum, accruing daily from the date of conversion
until such amount, plus any interest thereon, if any, is paid in full. Payment
of the Mandatory Prepayment Amount pursuant to this Section 3.1 shall be in
addition to any other amounts that may be due to the Holder
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pursuant to this Security. Within five (5) Business Days of receipt by the
Holder of payments of amounts due to the Holder, (i) the Holder shall return the
Securities to the Issuer and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Issuer
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any demand for payment may be rescinded
and annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Upon delivery of any Acceleration Notice to the Issuer, the
Issuer shall provide a copy of such notice to the other Holders, if any. Failure
to deliver such notice shall not affect the validity of the notice delivered by
the Holders in accordance with the provisions referred to above.
3.2 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF
DEFAULT. No right or remedy herein conferred upon or reserved to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Securities or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1 RIGHT OF SECURITYHOLDERS TO EXCHANGE SECURITIES. Subject to and upon
compliance with the provisions of this Section, this Security is exchangeable
for an equal principal amount of debentures of different authorized
denominations, as requested by the holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
4.2 RIGHT OF SECURITYHOLDERS TO CONVERT SECURITIES INTO COMMON STOCK.
Subject to and upon compliance with the provisions of this Section, the
principal amount of this Security, or any portion thereof, together with accrued
but unpaid interest thereon,
13
may, at any time and at or before the close of business on September 30, 2002,
be converted into duly authorized, validly issued, fully-paid and non-assessable
shares of Common Stock at $10.25 per share (the "Conversion Price"), or, in case
an adjustment in the Conversion Price and the securities or other property
issuable upon conversion has taken place pursuant to Article III or IV hereof,
then at the applicable Conversion Price, as adjusted, and in such securities or
other property as so adjusted, upon surrender to the Issuer at any time prior to
8:00 p.m., New York City time, on any Business Day at the Issuer's offices, of a
written notice of election to convert as provided in the form attached hereto as
Exhibit A (a "Conversion Notice"); provided, however, until the earlier of the
Authorization Date and March 31, 2000, the Holder of the Security shall not,
without the prior written consent of the Company, convert the Security into a
number of shares of Common Stock in excess of the number of shares of Common
Stock the Company has reserved for issuance pursuant to the terms of the
Security (but in no event shall such number of shares reserved be less than
1,189,009).
4.3 SURRENDER OF SECURITY UPON CONVERSION. Notwithstanding anything to
the contrary set forth herein, upon conversion of this Security in accordance
with the terms thereof, the Holder of this Security shall not be required to
physically surrender the Security to the Issuer unless the entire unpaid
principal amount of the Security is so converted. The Holder and the Issuer
shall maintain records showing the principal amount so converted and the dates
of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Issuer, so as not to require physical surrender of the
Security upon each such conversion. In the event of any dispute or discrepancy,
such records of the Issuer shall be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if any portion of the Security
is converted as aforesaid, the Holder may not transfer the Security unless the
Holder first physically surrenders the Security to the Issuer, whereupon the
Issuer will forthwith issue and deliver upon the order of the Holder a new
Security of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of the Security. The Holder and any assignee,
by acceptance of the Security, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of a Security,
the unpaid and unconverted principal amount of such Security represented by such
Security may be less than the amount stated on the face thereof.
4.4 ADJUSTMENT FOR DIVIDENDS. No payment or adjustment will be made for
dividends on any Common Stock except as provided herein. On conversion of a
Security, that portion of interest accrued and unpaid interest attributable to
the period from the Original Issuance Date to the Conversion Date with respect
to the converted Security shall not be canceled, extinguished or forfeited, but
rather shall be deemed to be paid in full to the Holder thereof through delivery
of the Common Stock, in exchange for the Security being converted pursuant to
the provisions hereof. If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of the Securities converted.
4.5 ISSUANCE OF SHARES UPON CONVERSION.
14
(a) As promptly as practicable after the delivery of a
Conversion Notice, as herein provided, but in any event within three Trading
Days of the date of such Conversion Notice (so long as the Conversion Notice was
sent and confirmed via facsimile to the Issuer prior to 8:00 p.m., New York City
time, on the date specified therein as the conversion date), the Issuer shall
deliver or cause to be delivered at its said office or agency to or upon the
written order of the holder of the Security or Securities so converted a
certificate or certificates representing the number of duly authorized, validly
issued, fully-paid and non-assessable shares of Common Stock, into which such
Security or Securities may be converted in accordance with the provisions of
this Article IV. The Conversion Notice shall state that the holder irrevocably
elects to convert such Security or Securities, or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. Such notice shall also state the name or names (with address and
social security or other taxpayer identification number) in which said
certificate or certificates are to be issued. Such conversion shall be deemed to
have been made on the date specified in the Conversion Notice as the date of
conversion, the rights of the holder of such Security or Securities as a Holder
shall cease at such time, the person or persons entitled to receive the shares
of Common Stock upon conversion of such Security or Securities shall be treated
for all purposes as having become the record holder or holders of such shares of
Common Stock at such time and such conversion shall be at the Conversion Price
in effect at such time. In the case of any Security which is converted in part
only, upon such conversion, the Issuer shall execute and deliver to the holder
thereof, as requested by such holder, a new Security or securities of authorized
denominations in aggregate principal amount equal to the unconverted portion of
such Security.
(b) In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion of this Security, provided the Issuer's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the Holder and
its compliance with the provisions contained in this Section 4.5, the Issuer
shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting
the account of ▇▇▇▇▇▇'s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system (to the extent not inconsistent with any
provisions of the Purchase Agreement).
4.6 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at
any time shall be subject to adjustment from time to time upon the occurrence of
an Event of Default as set forth in Article III and upon the happening of
certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Issuer, at any time while this Security is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Issuer, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common
15
Stock (excluding treasury shares, if any) outstanding before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this paragraph 4.6(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Rights; Warrants. If the Issuer, during the period
commencing on the Closing Date through and including the date which is 15 months
from the Closing Date, shall issue rights or warrants to all of the holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than $10.00, the Conversion Price shall be multiplied
by a fraction, the denominator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at $10.00 per share. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this paragraph (b), if any such right or warrant
shall expire and all or any portion thereof shall not have been exercised, the
Conversion Price shall immediately upon such expiration be re-computed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of section (g) after the issuance of such rights
or warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for subscription
or purchase only that number of shares of Common Stock (if any) actually
purchased upon the exercise of such rights or warrants actually exercised;
provided, however, that if (X) (1) the Registration Statement (as defined in the
Registration Rights Agreement) is then in effect and has been in effect and
sales of all of the Registrable Securities can be made thereunder for at least
twenty (20) Trading Days prior to a Trigger Date (as defined below); (2) the
Issuer has, at all times prior to the Trigger Date, a sufficient number of
authorized shares of Common Stock reserved for issuance upon full conversion of
all of the Securities issued pursuant to the Purchase Agreement; and (3) no
Event of Default shall have occurred and be continuing; and (Y) the Per Share
Market Value is greater than 150% of the Conversion Price in effect on the
Closing Date for any five (5) consecutive Trading Days prior to the 180th day
following the Closing Date (the last day of such five (5) consecutive Trading
Day period being referred to herein as the "Trigger Date"), then this provision
shall expire automatically on the 180th day following the Closing Date.
(c) Subscription Rights. If the Issuer, during the period
commencing on the Closing Date through and including the date which is 15 months
from the Closing
16
Date, shall distribute to all of the holders of Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in paragraphs 6(a) and (b) above), then in
each such case the Conversion Price at which this Security shall thereafter be
exercisable shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction the denominator of which
shall be the Per Share Market Value of Common Stock determined as of the record
date mentioned above, and the numerator of which shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Issuer, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (an "Appraiser") selected in good faith by
the Holder of the Security; and provided, further, that the Issuer, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser meeting the same qualifications, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above; provided, however, that if (X) (1) the Registration
Statement (as defined in the Registration Rights Agreement) is then in effect
and has been in effect and sales of all of the Registrable Securities can be
made thereunder for at least twenty (20) Trading Days prior to a Trigger Date;
(2) the Issuer has, at all times prior to the Trigger Date, a sufficient number
of authorized shares of Common Stock reserved for issuance upon full conversion
of all of the Securities issued pursuant to the Purchase Agreement; and (3) no
Event of Default shall have occurred and be continuing; and (Y) the Per Share
Market Value is greater than 150% of the Conversion Price in effect on the
Closing Date for any five (5) consecutive Trading Days prior to the 180th day
following the Closing Date, then this provision shall expire automatically on
the 180th day following the Closing Date.
(d) Rounding. All calculations under this section 4.6 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case maybe.
(e) Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to paragraphs 4.6(a), (b), (c) or (g), the Issuer shall
promptly mail to the holder of this Security, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(f) Reclassification, Etc. If:
A. the Issuer shall declare a dividend (or any other
distribution) on its Common Stock; or
17
B. the Issuer shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
C. the Issuer shall authorize the granting to all the holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
D. the approval of any shareholders of the Issuer shall be
required in connection with any reclassification of the
Common Stock of the Issuer, any consolidation or merger to
which the Issuer is a party, any sale or transfer of all or
substantially all of the assets of the Issuer, of any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
E. the Issuer shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Issuer;
then the Issuer shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Security, and shall cause to be mailed to the
holder of this Security, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
(g) Adjustment to Conversion Price. In order to prevent dilution
of the rights granted under this Security, during the period commencing on the
Closing Date through and including the date which is 15 months from the Closing
Date, the Conversion Price will be subject to adjustment from time to time as
provided in this Section 4.6(g); provided, however, that if (X) (1) the
Registration Statement (as defined in the Registration Rights Agreement) is then
in effect and has been in effect and sales of all of the Registrable Securities
can be made thereunder for at least twenty (20) Trading Days prior to a Trigger
Date; (2) the Issuer has, at all times prior to the Trigger Date, a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of all of the Securities issued pursuant to the Purchase Agreement;
and (3) no Event of Default shall have occurred and be continuing; and (Y) the
Per Share Market Value is greater than 150% of the Conversion Price in effect on
the Closing Date for any
18
five (5) consecutive Trading Days prior to the 180th day following the Closing
Date, then this provision shall expire automatically on the 180th day following
the Closing Date:
(i) Adjustment of Conversion Price upon Issuance of
Common Stock. If, during the period commencing on the Closing Date through and
including the date which is 15 months from the Closing Date, the Issuer issues
or sells, or is deemed to have issued or sold, any shares of Common Stock (other
than the Debenture Shares and the Warrant Shares (each as defined in the
Purchase Agreement) or shares of Common Stock deemed to have been issued by the
Issuer in connection with a Stock Plan, shares of Common Stock issuable upon the
exercise of any options or warrants outstanding on the date hereof or upon
conversion of convertible securities outstanding on the date hereof, in each
case as listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued in a Strategic Venture (as defined
below), or shares of Common Stock issued or deemed to have been issued as
consideration for an acquisition by the Issuer of a division, assets or business
(or stock constituting any portion thereof) from another person) for a
consideration per share less than $10.00, then immediately after such issue or
sale, the Conversion Price then in effect shall be reduced to an amount equal to
the consideration per share of Common Stock in such issuance or sale. A
"Strategic Venture" shall mean a venture between the Issuer and a pharmaceutical
or biotechnology company or an Affiliate thereof, the primary purpose of which
is not to raise capital in the form of equity (including without limitation
through the issuance of warrants, convertible securities, phantom stock rights,
stock appreciation rights or other rights with equity features) and pursuant to
which the Issuer contributes to or issues securities of the Issuer valued at
less than 50% of the entire contribution of the Issuer. If the Holder and the
Issuer cannot agree on the value of the components of such contribution, the
last two sentences of subsection (E)(I) entitled "Calculation of Consideration"
shall apply.
For purposes of determining the adjusted Conversion Price under this
Section 4.6(g), the following shall be applicable:
(A) Issuance of Options. If, during the period commencing on the
Closing Date through and including the date which is 15 months from the
Closing Date, the Issuer in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (other than
the Debenture Shares or Warrant Shares or shares of Common Stock deemed
to have been issued by the Issuer in connection with a Stock Plan,
shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person or shares of
Common Stock issued or deemed to have been issued in a Strategic
Venture) (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
19
"Convertible Securities") and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than $10.00, then the
Conversion Price shall be adjusted to equal the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities. No adjustment
of the Conversion Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion
or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If, during the period
commencing on the Closing Date through and including the date which is
15 months from the Closing Date, the Issuer in any manner issues or
sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange (other than
the Debenture Shares or Warrant Shares or shares of Common Stock deemed
to have been issued by the Issuer in connection with a Stock Plan,
shares of Common Stock issuable upon the exercise of any options or
warrants outstanding on the date hereof or upon conversion of
convertible securities outstanding on the date hereof, in each case as
listed in Schedule 2.1(c) of the Purchase Agreement, shares of Common
Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another person or shares of
Common Stock issued or deemed to have been issued in a Strategic
Venture) is less than $10.00, then the Conversion Price shall be
adjusted to equal the price per share for which Common Stock is issuable
upon the conversion or exchange of such Convertible Securities.
(C) Change in Option Price or Rate of Conversion. If there is a
change during the period commencing on the Closing Date through and
including the date which is 15 months from the Closing Date in (i) the
purchase price provided for in any Options, (ii) the additional
consideration, if any, payable upon the issue, conversion or exchange of
any Convertible Securities or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock, then
the Conversion Price in effect at the time of such change shall be
readjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially
granted, issued or sold; provided that no adjustment shall be made if
such adjustment would result in an increase of the Conversion Price then
in effect.
(D) Certain Definitions. For purposes of determining the
adjusted Conversion Price under this Section 4.6(g)(i), "Common Stock
Deemed Outstanding" means, at any given time, the number of shares of
Common Stock issued and outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections
4.6(g)(i)(A) and 4.6(g)(i)(B) hereof
20
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock
issuable upon conversion of the Securities or exercise of the Warrants.
(E) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Conversion Price under this Section 4.6(g)(i),
the following shall be applicable:
(I) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor
will be deemed to be the net amount received by the Issuer therefor. In
case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Issuer will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Issuer will be the arithmetic average of the Per Share Market Values of
such security for the five (5) consecutive Trading Days immediately
preceding the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Issuer is the
surviving entity, the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly
by the Issuer and the holders of a majority of the Underlying Shares of
the Securities then outstanding. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an Appraiser selected
by the Issuer. The determination of such Appraiser shall be binding upon
all parties absent manifest error.
(II) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Issuer, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(III) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or
held by or for the account of the Issuer, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
(IV) Record Date. If the Issuer takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or
21
(2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Certain events. If any event occurs of the type
contemplated by the provisions of Section 4.6(g)(i) (subject to the exceptions
stated therein) but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features other than pursuant to a Stock
Plan), then the Issuer's Board of Directors will make an appropriate adjustment
in the Conversion Price so as to protect the rights of the Holder, or assigns,
of this Security; provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 4.6(g).
In no event shall any provision in this Section 4.6 cause the Conversion
Price to be greater than the Conversion Price on the date of issuance of this
Security.
4.7 NASDAQ LIMITATION. If on any date (the "Determination Date") (a) the
Common Stock is listed for trading on Nasdaq or the Nasdaq Small Cap Market, (b)
the Conversion Price then in effect is such that the sum of (x) the aggregate
number of shares of Common Stock that would then be issuable upon conversion in
full of the then outstanding principal amount of the Securities and as payment
of interest thereon, plus (y) the aggregate number of shares of Common Stock
that have previously been issued upon conversion of the Securities, plus (z) any
shares of Common Stock issued or issuable upon conversion of any other
securities of the Issuer (excluding the warrants issued by the Issuer pursuant
to that certain Securities Purchase Agreement, dated as of December 10, 1998,
and the warrants issued pursuant to the Purchase Agreement) which would be
aggregated with the Common Stock issuable upon conversion of the Securities as
required by the applicable rules and regulations of Nasdaq (or any successor
entity), would equal or exceed 20% of the number of shares of the Common Stock
outstanding immediately prior to the Closing Date (as defined in the Purchase
Agreement) (such number of shares as would not equal or exceed such 20% limit,
the "Issuable Maximum"), and (c) the Issuer shall not have previously obtained
the vote of the stockholders of the Issuer (the "Stockholder Approval"), if any,
as may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common Stock are
deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
aggregate principal amount of the Securities then held by the Holders for which
a conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of the Issuable Maximum (the "Excess
Principal") the Issuer may elect to prepay cash to the holders in an amount
equal to the Mandatory Prepayment Amount. Any such election by the Issuer must
be made in writing to the Holders within two Trading Days after the
Determination Date and the payment of such Mandatory Prepayment Amount
applicable to such prepayment must be
22
made in full to the Holders with ten (10) Business Days after the date such
notice is delivered. If the Issuer does not deliver timely a notice of its
election to prepay under this Section or shall, if it shall have delivered such
a notice, fail to pay the prepayment amount hereunder within ten (10) Business
Days thereafter, then the Holders of a majority of the aggregate principal
amount of the Securities then outstanding shall have the option by written
notice to the Issuer, to declare any such notice given by the Issuer, if given,
to be null and void and require the Issuer to pay cash to each Holder in an
amount equal to the Mandatory Prepayment Amount for such Holder's portion of the
Excess Principal. The payment of the Mandatory Prepayment Amount to each Holder
pursuant to this Section shall be determined on a pro rata basis upon the
principal amount of the Securities held by such Holder on the determination
Date. If the Issuer fails to pay the Mandatory Prepayment Amount in full
pursuant to this Section within five Business Days after the date payable, the
Issuer will pay interest thereon at a rate of seven percent (7%) per annum to
the converting Holder, accruing interest daily from the date of conversion until
such amount, plus all such interest thereon, if any, is paid in full.
In no event shall the Issuer be required to issue shares of
Common Stock upon conversion of the Securities if such issuance would violate
the rules of the Nasdaq Stock Market.
4.8 CONVERSION AT THE OPTION OF THE ISSUER. Subject to the provisions of
this paragraph, this Security shall, upon ten (10) days' prior written notice to
the Holders, be convertible into shares of Common Stock at the option of the
Issuer, in whole or in part, which option may be exercised at any time during
the five business days following the date on which the Per Share Market Value of
the Common Stock equals or exceeds an amount equal to 175% of the Conversion
Price as of the Original Issuance Date of this Security for a period of ten (10)
consecutive Trading Days. Any conversion of this Security pursuant to this
Section 4.8 shall be made on a pro rata basis with the conversion of the
Securities held by other Persons. The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by dividing the outstanding
principal amount of this Security to be converted, plus all accrued but unpaid
interest thereon (to the extent such interest is not being paid in cash), by the
Conversion Price on the Issuer Conversion Date (as defined herein).
Notwithstanding the foregoing, the Issuer shall not be permitted to deliver
requests for the conversion of a Holder's Securities if (a) both (1) a
Registration Statement for the Registrable Securities is not then effective and
has not been effective for a period of at least ninety (90) consecutive Trading
Days prior to such date and (2) such Holder is not permitted to resell
Registrable Securities pursuant to Rule 144(k) under the Act, without volume
restrictions, as evidenced by an opinion letter of counsel to the Issuer and
reasonably acceptable to the Holder and transfer agent for the Common Stock; (b)
there are not sufficient shares of Common Stock authorized and reserved for
issuance upon such conversion; or (c) the Issuer shall have defaulted on its
material covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement, which default has not been cured in full to the
reasonable satisfaction of the Holder. The Issuer shall exercise its right to
require conversion by delivering to the Holder a form of conversion notice
attached hereto as Exhibit B (the "Issuer Conversion Notice"). Each issuer
Conversion Notice shall specify the principal
23
amount of Securities to be converted and the date on which such conversion is to
be effected, which date may not be prior to the tenth day after the date such
Issuer Conversion Notice is deemed to have been delivered hereunder (the "Issuer
Conversion Date"), as well as the other information set forth on Exhibit B.
Subject to the provisions hereof, each Issuer Conversion Notice, once given,
shall be irrevocable. If the Issuer is requiring conversion of less than all of
the principal amount represented by the Securities tendered by the Holder in
response to an Issuer Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Issuer shall honor such conversion to the
extent permissible hereunder and pro rata with all other Holders of the
Securities and shall promptly deliver to such Holder a new Security for such
principal amount as has not yet been converted.
4.9 RESTRICTION ON CONVERSION BY THE HOLDER. Notwithstanding anything in
this Security to the contrary, in no event shall the Holder of this Security be
entitled to convert an amount of Securities in excess of that amount of
Securities upon conversion of which the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unexercised Securities and the unexercised or unconverted
portion of any other securities of the Issuer (including the Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise of
the Securities (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 9.9% of the outstanding shares of Common
Stock following such conversion. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13D-G thereunder, except as otherwise
provided in clause (i) hereof.
4.10 OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 4.6,
the Issuer shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Issuer and by the secretary or any assistant secretary of the Issuer. Each such
officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first class mail, of such certificate to
the each of the Holders.
4.11 RESERVATION OF SHARES. The Issuer covenants that it will (i) from
the Closing Date to the Authorization Date (as defined in the Purchase
Agreement) reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of this Security and the exercise of the Warrants, a minimum of
1,189,009 shares of the Common Stock and (ii) at all times after the
Authorization Date, reserve and keep available out of its authorized shares of
24
Common Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of the Securities as herein provided, such number of shares of the
Common Stock as shall be equal to 125% of the shares then issuable upon the
conversion of all the Securities into Common Stock. The Issuer covenants that
all shares of the Common Stock issued upon conversion of the Security which
shall be so issuable shall, when issued, be duly and validly issued and fully
paid and non-assessable.
4.12 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Issuer covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Securities hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Issuer will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
4.13 FRACTIONAL SHARES. Upon a conversion hereunder, the Issuer shall
not be required to issue stock certificates representing fractions of shares of
the Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market value at such
time. If the Issuer elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
4.14 PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of certificates
for shares of the Common Stock on conversion of the Securities shall be made
without charge to the Holders thereof for any documentary stamp or similar taxes
that maybe payable in respect of the issue or delivery of such certificate,
provided that the Issuer shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the holder of such
Securities so converted and the Issuer shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
4.15 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 8:00 p.m. EST
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Issuer to Geron
Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ attn: ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇ with copies to ▇▇▇▇▇▇ Godward LLP, ▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.,
fax no. (▇▇▇) ▇▇▇-▇▇▇▇ and (ii) if to any Holder to the address set forth
immediately below
25
such ▇▇▇▇▇▇'s name on the signature pages to the Purchase Agreement or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
ARTICLE V
MISCELLANEOUS
5.1 MODIFICATION OF SECURITIES. The Securities may be modified without
prior notice to any Holder upon the written consent of the Holders of a majority
in principal amount of the Securities then outstanding. The Holders of a
majority in principal amount of the Securities then outstanding may waive
compliance by the Issuer with any provision of the Securities without prior
notice to any Holder. However, without the consent of each Holder affected, an
amendment, supplement or waiver may not (1) reduce the amount of Securities
whose Holders must consent to an amendment, supplement or waiver, (2) reduce the
principal amount of or extend the fixed maturity of any Security or (3) make any
Security payable in money or property other than as stated in the Securities.
5.2 MISCELLANEOUS. This Security shall be deemed to be a contract under
the laws of the State of Delaware, and for all purposes shall be construed in
accordance with the laws of said State, except as may otherwise be required by
mandatory provisions of law. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Security, except as specifically provided herein, and assent
to extensions of the time of payment, or forbearance or other indulgence without
notice. The Holder of this Security by acceptance of this Security agrees to be
bound by the provisions of this Security which are expressly binding on such
Holder.
5.3 SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In determining
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any direction, consent or waiver under this Security,
Securities which are owned by the Issuer or any other obligor on the Securities
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided that any Securities owned by any Purchaser shall be
deemed outstanding for purposes of making such a determination. Securities so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Issuer the pledgers right so
to act with respect to such Securities and that the pledgee is not the Issuer or
any other obligor upon the securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer or any other obligor on the Securities.
5.4 EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
5.5 NO RIGHTS AS STOCKHOLDER. This Security shall not entitle the Holder
to any rights as a stockholder of the Issuer, including without limitation, the
right to vote, to
26
receive dividends and other distributions, or to receive notice of, or to
attend, meetings of stockholders or any other proceedings of the Issuer, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
5.6 REMEDIES. The Issuer acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, or assigns, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Issuer acknowledges that the remedy at law for breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened breach by the Issuer of any of the provisions hereunder, that the
Holder, or assigns, shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure
breaches of the provisions of this Security and to enforce specifically the
terms and provisions hereof, without the necessity of showing economic loss and
without any bond or other security being required.
5.7 ALLOCATION OF RESERVED SHARES. Prior to the Authorization Date, the
holder of this Security shall not transfer this Security, or any portion
thereof, without obtaining a prior written agreement with such transferee as to
the allocation of shares of Common Stock reserved for issuance upon conversion
of this Security and upon exercise of the Warrants and providing notice to the
Issuer thereof.
27
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
GERON CORPORATION
[Seal]
By
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Dated:
Attest:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
28
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Two Percent (2%) Convertible Debentures)
Pursuant to the terms of the Series C Two Percent (2%) Convertible
Debenture (the "Security"), the undersigned hereby irrevocably elects to convert
$ __________ principal amount of the Security into shares of Common Stock of
Geron Corporation, a Delaware corporation (the "ISSUER"). Capitalized terms used
herein and not otherwise defined herein have the respective meanings provided in
the Security. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any. A
copy of the Security is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned hereby irrevocably elects to convert $___________ in
accrued but unpaid interest on the Security and/or $___________ in payments
pursuant to Section 2(c) of the Registration Rights Agreement at the Conversion
Price, as adjusted, set forth below.
[ ] The undersigned hereby requests that the Issuer electronically transmit the
Common Stock issuable pursuant to this Notice of Conversion to the account of
the undersigned or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DWAC Transfer").
Name of DTC Prime Broker: _________________________________
Account Number: ___________________________________________
[ ] In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Issuer issue a certificate or certificates for the
number of shares of Common Stock set forth above (which numbers are
based on the Holder's calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto:
Name: _____________________________________________________
Address: __________________________________________________
__________________________________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Security shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
Date of Conversion: _______________________________________
Applicable Conversion Price: ______________________________
29
Number of Shares of Common Stock to be Issued pursuant to:
(i) Conversion of principal amount of the Security:
___________________________________________________________
(ii) Conversion of accrued but unpaid interest on the
Security and/or payments pursuant to Section 2(c) of the
Registration Rights Agreement:
Signature: ________________________________________________
Name: _____________________________________________________
Address: __________________________________________________
*If the entire unpaid principal amount of the Security is to be converted, the
Issuer is not required to issue shares of Common Stock until the original
Security (or evidence of loss, theft or destruction thereof) to be converted is
received by the Issuer or its Transfer Agent. The Issuer shall issue and deliver
shares of Common Stock to an overnight courier not later than three (3) Trading
Days following receipt of the original Security to be converted, and interest
shall accrue at the applicable Interest Rate pursuant to the Security for the
number of Trading Days such issuance and delivery is late.