-----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, CDqXNT/t5NBsAfWKaUoGTzuFHRyXWjrNPN9bjkH14Jbxn6nHEs4n7O4wt+MHJIG5 IsMfp9HI6yqPRiphKKIHcw== 0001036050-99-001960.txt : 19990928 0001036050-99-001960.hdr.sgml : 19990928 ACCESSION NUMBER: 0001036050-99-001960 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990923 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON LIFE SCIENCES INC /DE CENTRAL INDEX KEY: 0000094784 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 870277826 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-06533 FILM NUMBER: 99717351 BUSINESS ADDRESS: STREET 1: 137 NEWBURY STREET STREET 2: 8TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174250200 MAIL ADDRESS: STREET 1: 137 NEWBURY STREET STREET 2: 8TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: GREENWICH PHARMACEUTICALS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STRATEGIC MEDICAL RESEARCH CORP /DE DATE OF NAME CHANGE: 19790521 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) September 23, 1999 ---------------------- BOSTON LIFE SCIENCES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-6533 87-0277826 - -------------------------------- ------ ------------------------------------ (State or other jurisdiction of (Commission (I.R.S. Employer Identification No.) incorporation or organization) File No.) 137 Newbury Street 8/th/ Floor Boston, Massachusetts 02116 - ---------------------------------------- ------------ (Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (617) 425-0200 ---------------------- Item 5. Other Events. ------------- On September 22, 1999 Boston Life Sciences, Inc. entered into an agreement to sell $8 million in 8% convertible debentures due September 2003 and warrants to purchase a total of 1,680,000 shares of the Company's common stock to two institutional investment funds, both managed by the same institutional investment firm. The debentures will accrue interest at 8% per annum, payable semi-annually, and are convertible by the holders into common stock at a conversion price of $5.25 per share, subject to certain anti-dilution adjustments. The Company may elect to pay interest accrued on the debentures in shares of common stock, subject to certain limitations. The warrants were issued in two classes, the first, or "class A" warrants, are exercisable to purchase 960,000 shares of common stock at an exercise price of $5.75 per share. The second, or "class B" warrants, are exercisable to purchase 720,000 shares of common stock at an exercise price of $8.25 per share. The exercise price of both sets of warrants are also subject to anti-dilution adjustments. The Company will set aside $4 million of the proceeds of the placement for the redemption of the company's Series C preferred stock, to the extent that some of the Series C preferred stock remains unconverted in the months ahead. The timing of the use of funds for this purpose will depend upon market conditions. If all of the $4 million is not needed to redeem the Series C preferred stock, the Company will be free to use the money for general corporate purposes. The Company is obligated to file a registration statement covering resales of common stock issuable upon conversion of the debentures and exercise of the warrants within 30 days of closing. If an event of default occurs under the debentures, 120% of the outstanding principal amount and accrued interest on the debentures will become immediately due and payable by the Company. Alternatively, if the purchasers elect to convert into common stock of the company, and the Company fails to deliver such common stock to the purchasers within twelve trading days, or in the event that the Company's registration statement registering the shares into which the warrants and debentures are convertible lapses for more than 30 days, then the Company may be obligated to pay the purchasers the higher of (a) 120% of the outstanding principal amount and accrued interest on the debentures and (b) an amount equal to the market value of the number of shares of common stock into which the Debentures are convertible, subject to certain limitations. Events of default include any violation of the Company's obligations under the debenture, the securities purchase agreement between the purchasers and the Company or the registration rights agreement between the purchasers and the Company, failure of the Company to register the shares issuable on conversion of the warrants and debentures or to maintain the registration, any default of other debt in principal amount greater than $1,000,000, judgements against the Company for greater than $1,000,000, bankruptcy or insolvency, delisting from Nasdaq, a change of control where the debentures are not fully discharged, or failure to deliver shares of common stock to the Purchasers within twelve business days of any conversion. Additional penalties are payable to the purchasers if the Company fails to deliver shares to the purchasers on conversion and upon additional noncompliance events. Among the anti-dilution adjustments in the conversion price of the debentures and the exercise price of the warrants is an adjustment for stock issuances made at a price below the conversion price of the debentures or exercise price of the warrants, except in certain circumstances. In addition, there would be a reduction of the conversion price of the debentures and the exercise price of the warrants, subject to certain floors and other limitations, on each of the first and second anniversaries of the transaction if the market price of the Company's stock is less than the conversion or exercise price on such dates. At any time following the first anniversary of the transaction, the Company may redeem the debentures in whole or in part for cash at par, plus accrued and unpaid interest, subject to the purchasers' right to convert the debentures into common stock at the then conversion price. If the Company exercises this right, it will be obligated to issue additional class A warrants to the purchasers to purchase up to an additional 725,000 (if the full $8 million is redeemed, a pro-rata amount if less) shares of common stock. The Company will also have the right to require the purchasers to mandatorily convert some (at stock price thresholds ranging from $ 6.00 to $ 7.00) or all (at a stock price threshold in excess of $9.25) of the outstanding amount of the debentures into common stock if the market price of the common stock reaches certain price thresholds for a specified number of trading days. In addition, under the terms of the securities purchase agreement, the purchasers will have the right to buy up to 50% of certain new issuance of the Company's securities, not to exceed the lesser of (i) $8 million or (ii) the outstanding principal amount of the debentures plus accrued and unpaid interest. Copies of the material agreements related to the transaction as well as the press release announcing the transaction are filed as exhibits to this Form 8-K and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------ (c) Exhibits: -------- 10.1 Securities Purchase Agreement among the Company and the purchasers listed therein dated as of September 22, 1999. 10.2 Form of 8% Convertible Debenture dated as of September 22, 1999. 10.3 Form of Class A Warrant dated as of September 22, 1999. 10.4 Form of Class B Warrant dated as of September 22, 1999 10.5 Registration Rights Agreement among the Company and the purchasers dated as of September 22, 1999. 99.1 Press Release issued September 22, 1999 announcing the transaction. SIGNATURE 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. BOSTON LIFE SCIENCES INC. Date: September 23, 1999 By: /s/ Joseph Hernon ------------------- Name: Joseph Hernon Title: Chief Financial Officer and Secretary EXHIBIT INDEX The following designated exhibits are filed herewith: Exhibit - ------- 10.1 Securities Purchase Agreement among the Company and the purchasers listed therein dated as of September 22, 1999. 10.2 Form of 8% Convertible Debenture dated as of September 22, 1999. 10.3 Form of Class A Warrant dated as of September 22, 1999. 10.4 Form of Class B Warrant dated as of September 22, 1999. 10.5 Registration Rights Agreement among the Company and the purchasers dated as of September 22, 1999. 99.1 Press Release issued September 22, 1999 announcing the transaction. EX-10.1 2 SECURITIES PURCHASE AGREEMENT EXHIBIT 10.1 ================================================================================ SECURITIES PURCHASE AGREEMENT Among BOSTON LIFE SCIENCES, INC., BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. and BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. Dated as of September 22, 1999 ================================================================================ SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of --------- September 22, 1999, among Boston Life Sciences, Inc., a Delaware corporation (the "Company"), Brown Simpson Strategic Growth Fund, Ltd. and Brown Simpson ------- Strategic Growth Fund, L.P. (each referred to herein as a "Purchaser" and, --------- collectively, the "Purchasers.") ---------- WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D as promulgated by the United States Securities and Exchange Commission (the "Commission") under Section 4(2) of the ---------- Securities Act of 1933, as amended (the "Securities Act"); -------------- 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 $8,000,000 principal amount of 8% Convertible Debentures due September 22, 2003 (the "Debentures"), in the form of Exhibit A annexed hereto, and the Class A and - ----------- --------- Class B warrants (collectively, the "Warrants"), in the forms of Exhibit B and -------- --------- Exhibit C annexed hereto, respectively, to purchase the Company's common stock, - --------- par value $0.01 per share (the "Common Stock"); and ------------ WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form of Exhibit D attached hereto (the --------- "Registration Rights Agreement") pursuant to which the Company has agreed to - ------------------------------ provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW THEREFORE, in consideration of the promises and mutual covenants and agreements hereinafter, the Company and the Purchasers hereby agree as follows: ARTICLE I. PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS 1.1 Purchase and Sale. Subject to the terms and conditions set forth ----------------- herein, the Company shall issue and sell to each Purchaser, and each Purchaser, severally and not jointly, shall purchase from the Company on the Closing Date (as defined below), the principal amount of Debentures as set forth for such Purchaser on Schedule I. ---------- 1.2 Closings. -------- a. The Closing. The closing of the purchase and sale of the Debentures ----------- and the issuance of the Warrants (the "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 "Closing ------- Date"). At the Closing: - ---- (i) Each Purchaser shall deliver, as directed by 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 or accounts designated in writing by the Company; (ii) The Company shall deliver to each Purchaser a Debenture, 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 Warrants, in the forms of Exhibit B and Exhibit C hereto, representing the right to acquire the --------- --------- number of shares of Common Stock 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 4.1 hereof. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1 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 (which for ------------ purposes of this Agreement means any entity in which the Company, directly or indirectly, owns the majority of such entity's capital stock or holds an equivalent equity or similar interest) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), 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 as a foreign corporation 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 in Section 2.1(b)) or any of the transactions contemplated hereby or thereby or (y) have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its Subsidiaries, taken as a whole or (z) adversely affect the Company's ability to perform its obligations under any Transaction Document (any of (x), (y) or (z), being a "Material Adverse Effect"). The Company has furnished to each of the Purchasers - ------------------------ true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of -------------- Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the "Bylaws"), and the true, complete and accurate copies of documents evidencing ------ all classes of securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto. 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 Debenture, the Warrants and the Registration Rights Agreement (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 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, the authorized capital stock -------------- of the Company is as set forth in Schedule 2.1(c). All of such outstanding --------------- shares of capital stock have been, or upon issuance will be, validly authorized and issued, fully paid and nonassessable and were issued in accordance with the registration or qualification provisions of the Securities Act, or pursuant to valid exemptions therefrom. Except as disclosed in Schedule 2.1(c), (i) no --------------- shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances granted by the Company, 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 Transaction Document, (ii) there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, or giving any Person (as defined below) any right to subscribe for or acquire, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iii) there are no outstanding debt securities of the Company or any of its Subsidiaries, (iv) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (v) there are no securities or instruments containing anti- dilution or similar provisions that will be triggered by the sale of the Debentures or issuance of the Warrants or upon the conversion of the Debentures or upon the exercise of the Warrants, (vi) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement and (vii) except as specifically disclosed in the SEC Documents (as defined in Section 2.1(k) hereof), no Person (as defined below) or group of related Persons (a) 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 or (b) to the best knowledge of the Company, beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) 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. The shares of ---------------------------------------------- Common Stock issuable upon conversion of the Debentures (the "Debenture Shares") and exercise of the Warrants (the "Warrant Shares") (collectively, the "Underlying Shares") are and will at all times hereafter continue to be duly - ------------------ authorized and reserved for issuance and 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, "Liens") and will not be subject to any preemptive or similar ----- rights. Subject to the accuracy and completeness of each of the Purchasers' representations and warranties in Section 2.2, the issuance by the Company of the Debentures, the Warrants and the Underlying Shares is exempt from registration under the Securities Act. e. No Conflicts. The execution, delivery and performance of this ------------ Agreement and each of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including the issuance of the Underlying Shares) do not and will not (i) conflict with or violate any provision of the Certificate of Incorporation, Bylaws or other organizational 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 breach or a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument (evidencing a Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected which, individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect, 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 and the rules and regulations of the principal market or exchange on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries, or by which any material property or asset of the Company or any Subsidiary is bound or affected which, individually or in the aggregate, would be reasonably expected 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, regulatory or self regulatory agency, 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 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 or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, to the Company's knowledge, or any of their respective properties or assets 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) could reasonably be expected to, 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 other credit agreement or instrument to which it is a party or by which it or any of its properties or assets is bound, (ii) is in default under or in violation of any other agreement to which it is a party or by which its properties or assets are bound, the default or violation of which, individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect, (iii) is in violation of any order of any court, arbitrator or governmental body applicable to it, (iv) is in violation of any statute, rule or regulation of any governmental authority to which it is subject, which, individually or in the aggregate, would be reasonably expected to have a Material Adverse Effect, (v) is in default under or in violation of its Certificate of Incorporation, Bylaws or other organizational documents, respectively, or (vi) is in default under or in violation of any of the listing requirements of Nasdaq as in effect on the date hereof and is not aware of any facts which would reasonably lead to delisting or suspension of the Common Stock by Nasdaq in the foreseeable future. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, rule or regulation of any governmental entity, except where such violations have not resulted or would not reasonably result, individually or in the aggregate, in a Material Adverse Effect. i. Disclosure; Absence of Certain Changes. None of this Agreement, the -------------------------------------- Schedules to this Agreement, the Transaction Documents or the SEC Documents or the documents set forth on Schedule 2.1(i) contain 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 in --------------- SEC Documents filed on EDGAR at least five business days prior to the date hereof, since December 31, 1998, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, liabilities or results of operations of the Company or the Subsidiaries or, insofar as can reasonably be foreseen, the future operating or financial condition of the Company and 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. j. Private Offering; Solicitation. The Company and all Persons acting ------------------------------ on its behalf have not (i) made, directly or indirectly, 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 Debenture Shares, the Warrant Shares or the Underlying Shares under the Securities Act, (ii) distributed any offering materials in connection with the offering and sale of the Debentures or the Warrants, other than the SEC Documents, the Schedules to this Agreement, any amendments and any supplements thereto, or (iii) solicited any offer to buy or sell the Debentures or the Warrants by means of any form of general solicitation or advertising. The offer, sale and issuance of the Debentures, the Warrants, the Debenture Shares and the Warrant Shares to the Purchasers will not be integrated with any other offer, sale and issuance of the Company's securities (past, current, or future) under the Securities Act or any regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. Subject to the accuracy and completeness of the representations and warranties of the respective Purchasers contained in Section 2.2 hereof, the offer, sale and issuance by the Company to the Purchasers of the Debentures, the Warrants and the Underlying Shares is exempt from the registration requirements of the Securities Act. k. SEC Documents; Financial Statements; Nonpublic Information. The ---------------------------------------------------------- Common Stock of the Company is registered pursuant to Section 12(g) of the Exchange Act. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof, (the foregoing materials and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being collectively referred to herein as the "SEC Documents"), on a timely basis or has received a valid extension of such ------------- time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. To the best of the Company's knowledge, as of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States 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 or, in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the 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, immaterial 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. 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, other than as set forth in Schedule 2.1(m). 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 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 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 is and will be in compliance with all such maintenance requirements. p. Intellectual Property Rights. To the Company's knowledge, and ---------------------------- except for sponsored research and license agreements between the Company and Harvard Medical School and its affiliated institutions, the Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trademark applications, trade names and service marks, whether or not registered, and all patents, patent applications, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and intellectual property rights (collectively, "Intellectual Property Rights") which are ---------------------------- necessary for use in connection with their respective businesses as now conducted and as described in the SEC Documents. To the Company's knowledge, neither the Company nor any of its Subsidiaries has infringed or is infringing on any of the Intellectual Property Rights of any Person and, except as set forth on Schedule 2.1(p), there is no claim, action or proceeding which has been --------------- made or brought or alleged against, or to the Company's knowledge, is being made, brought or threatened against, the Company or its Subsidiaries regarding the infringement of any of the Intellectual Property Rights, and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing, except where any of the foregoing would not be reasonably likely to have a Material Adverse Effect. 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), since January 1, 1999 no --------------- executive officer (as defined in Rule 501(f) under the Securities Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. 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 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 each of its 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, free and clear of any conflicts, and without any defaults or violations thereunder, except where the failure to possess such permits, or the existence of any conflict, default or violation would not, individually or in the aggregate, be reasonably expected to 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. 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. v. Tax Status; Firpta. Except as set forth on Schedule 2.1(v), the ------------------ --------------- Company and each of the Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith (which are set forth on Schedule 2.1(v) hereof), and has set aside on it books provisions reasonably - --------------- adequate in all material respects 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. w. Transactions With Affiliates. Except as set forth on Schedule ---------------------------- -------- 2.1(c) or Schedule 2.1(w), 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 other than transactions that would not require disclosure under Section 404 of Regulation S-K of the Securities Act and the Exchange Act. x. Application to Takeover Protection. The Company and its Board of ---------------------------------- Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or the laws of the state of incorporation which is or could become applicable to the Purchasers or the Transaction Documents in connection with the issuance of the Underlying Shares. The issuance of the Underlying Shares will not trigger any poison pill provisions of any of the Company's stockholders' rights or similar agreements. y. Environmental Laws. Except as set forth on Schedule 2.1(y), 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. z. Foreign Corrupt Practices. Neither the Company, nor any of its ------------------------- Subsidiaries, nor to the best of the Company's knowledge, 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. 2.2 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 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 and not with a present view to or for distributing or reselling the Debentures, the Warrants, the Debenture Shares or the Warrant Shares or any part thereof or interest therein in violation of the Securities Act; provided, however, that by making the representations herein, -------- ------- such Purchaser does not agree to hold any of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares for any minimum or other specific term and reserves the right, subject to the provisions of Section 5.5, to dispose of the Debentures at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. c. Purchaser Status. At the time such Purchaser was offered the ---------------- Debentures and the Warrants, and at the Closing Date, (i) it was and will be an "accredited investor" as defined in Rule 501 under the Securities Act and (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. Such Purchaser understands and acknowledges that (i) -------- the Debentures and the Warrants are being offered and sold to such Purchaser without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act or Regulation D promulgated thereunder and (ii) the availability of such exemption depends in part on, and the Company will rely upon the accuracy and truthfulness of, the representations set forth in this Section 2.2 and such Purchaser hereby consents to such reliance. e. Information. Such 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 such Purchaser or its advisors. Such Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company. 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 or representations and warranties of the Company contained in any other transaction document. Such Purchaser understands that its investment in the Debentures and Warrants involves a significant degree of risk. f. Governmental Review. Such 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. Such Purchaser is a resident of the jurisdiction set --------- forth immediately below such Purchaser's name on Schedule II 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. ARTICLE III. OTHER AGREEMENTS 3.1 Transfer Restrictions. --------------------- a. If any Purchaser should decide to dispose of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares held by it, such Purchaser understands and agrees that it may do so only pursuant to the provisions of Section 5.5, if applicable, and pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, such as Rule 144 promulgated under the Securities Act ("Rule 144"). In connection with any permitted 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 Securities Act. 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 Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Transaction Documents. 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 "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. IN ADDITION, THE DEBENTURES AND WARRANTS REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF SEPTEMBER 22, 1999 AMONG THE COMPANY AND THE PURCHASERS PARTY THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE COMPANY. The Underlying Shares shall not contain the legend set forth above (or any other legend) if (i) the sale of Underlying Shares is pursuant to an effective Registration Statement (as defined in the Registration Rights Agreement) under the Securities Act, or if (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 Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company agrees that it will provide each Purchaser, upon request, with a certificate or certificates representing Underlying Shares, free from such legend at such time as such legend is no longer required hereunder. 3.2 Stop Transfer Instruction. The Company may not make any notation on ------------------------- its records or give instructions to any transfer agent of the Company which enlarge the restrictions on transfer set forth in Section 3.1. 3.3 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 Section 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, will promptly, but in no event later than five (5) Business Days, notify the Purchasers of such filings 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, subject to the provisions of Section 5.5, the Debentures, the Warrants, the Debenture Shares, or the Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act. 3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement, ------------- the Company shall (i) qualify the Debenture Shares and the Warrant Shares under the securities or "blue sky" laws of such jurisdictions as the Purchasers may request (or to obtain an exemption from such qualification), and (ii) shall continue such qualification at all times through the resale of all Debenture Shares or Warrant Shares, but in any event not past the third anniversary of the Closing Date. 3.5 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 Securities 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 Securities Act of the sale of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to any Purchaser. 3.6 Listing and Reservation of Debenture Shares and Warrant Shares. -------------------------------------------------------------- a. The Company shall (i) not later than ten (10) business days after the 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 1.2 times the maximum number of Underlying Shares then issuable, assuming that the payment of all future dividends on such shares then outstanding were made in shares of Common Stock, (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, (iii) maintain, so long as any other shares of Common Stock shall be so listed, such listing of all such Underlying Shares and not take any action which results in the delisting or suspension of such Underlying Shares and (iv) provide to the Purchasers evidence of such listing. b. The Company at all times shall reserve a sufficient number of shares of its authorized but unissued Common Stock to provide for 1.2 times the full conversion of the outstanding Debentures (including the payment of all dividends thereon) and exercise of the outstanding 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 Closing. If at any time the number of shares of Common Stock authorized and reserved for issuance is insufficient to cover 120% of the number of Debenture Shares and Warrant Shares issued and issuable upon conversion of the Debentures and exercise of the Warrants (based on the Conversion Price (as defined in the Debenture) of the Debentures in effect from time to time and the Exercise Price (as defined in the Warrants) of the Warrants in effect from time to time) without regard to any limitation on conversions or exercises, the Company will promptly take all corporate action necessary to authorize and reserve 120% of such shares pursuant to Section 3(b) of the Registration Statement, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company's obligations under this Section 3.6(b), in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of shares. In addition, upon the occurrence of a Reset Event (as defined in the Debenture) pursuant to Section 4.2(b) of the Debenture or Section 3(b) of the Warrant, the Company shall be required to file, within fifteen (15) business days of such Reset Event, a registration statement covering the product of 1.2 and the number Underlying Shares, less the number of Underlying Shares for which a registration statement is then effective. The Company shall use its best efforts to cause such 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 that date the 100th day following the Filing Date; provided, however, that the Effectiveness Date shall -------- ------- be extended to up to the 130th day following the Filing Date if the Initial Registration Statement is not declared effective by the Commission prior to the 130th day following the Filing Date due to delays which are solely attributable to the Commission, so long as the Company responds to any comments received from the Commission in a commercially reasonable manner and as promptly as practicable, but in no event later than ten (10) Business Days.. All calculations of the above amount shall be made without regard to any limitation on conversions of Securities or exercises of Warrants. 3.7 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 Transaction Documents, as well as any events or occurrences arising after the date hereof and prior to the Closing Date, which would reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained herein to be incorrect or breached as of the 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 Transaction Documents unless the Purchasers consummate the Closing after receiving such disclosure. 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 Transaction Documents 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. 3.8 Form D. The Company agrees to file a Form D with respect to the ------ Debenture and Warrants as required by Rule 506 under Regulation D and to provide a copy thereof to each Purchaser promptly after such filing. 3.9 Future Financings. ----------------- a. As long as any Debentures are outstanding, except for (i) issuance of the Underlying Shares; (ii) shares of Common Stock deemed to have been issued by the Company in connection with any plan 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; (iii) 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; (iv) the securities to be issued in the transactions set forth on such Schedule 2.1(c); (v) shares issued in a transaction registered under the Securities Act; 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 shares of Common Stock or other securities convertible into or exchangeable or exercisable for Common Stock (the "New Security") at (a) ------------ an effective price per share which is less or may be less (including, without limitation, any security which is convertible into or exchangeable or exercisable for Common Stock at a price which may change with the market price of the Common Stock) than the Conversion Price (as defined in the Debenture) of the Debentures as of the date thereof or (b) an effective price per share greater than the Conversion Price but less than the Average Price (as defined in the Debenture) on the date of such issuance or sale (either of (a) or (b) a "Future Financing"), the Company shall provide to the Purchasers by 5:00 p.m. - ---------------- (New York time) on or before the third (3/rd/) Trading Day (as defined below) after the decision to issue the New Security 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 (based on the principal amount of the Debentures held by such Purchaser relative to the aggregate principal amount of Debentures outstanding) to purchase, on the same terms as the Future Financing, an amount of New Securities for an aggregate purchase price which shall not exceed the sum of fifty percent (50%) of the amount of proceeds that will be raised in such Future Financing, not to exceed the lesser of (i) $8,000,000 or (ii) the outstanding principal amount of, and interest owing on, such Purchaser's Debenture. 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 (5/th/)Trading Day after such Purchaser has received the Future Financing Notice. In the event the terms and conditions of a proposed Future Financing are amended in any respect after delivery of the Future Financing Notice but prior to the closing of the proposed Future Financing to which such Future Financing Notice relates, the Company shall deliver a new notice to each Purchaser describing the amended terms and conditions of the proposed Future Financing and each Purchaser thereafter shall have an option during the five (5) Trading Days period following delivery of such new notice to purchase its pro rata share (based on the Purchaser's percentage of the principal amount of the outstanding Debentures such Purchaser owns) of the New Securities being offered on the same terms as contemplated by such proposed Future Financing, as amended. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Financing. At the closing for such Future Financing, the transactions contemplated by this Section 3.9 shall close, subject to the completion of mutually satisfactory documentation, and the Company shall tender to each Purchaser certificates representing the New Securities that it agreed to purchase and the Purchasers shall make payment for the entire purchase price in 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 Debenture as payment of the purchase price for the shares of Common Stock that it desires to purchase pursuant to this Section 3.8. "Trading Day" shall mean a day on which the Nasdaq (or in the event the ----------- Common Stock is not traded on Nasdaq, such other securities market on which the Common Stock is listed) is open for trading. b. If the Company shall enter into a transaction to issue any New Securities prior to March 22, 2000 (a "Subsequent Transaction"), each Purchaser ---------------------- shall have the right to have such Purchaser's Transaction Documents amended to reflect the terms of such Subsequent Transaction and the Company shall, if requested, issue new Debentures and Warrants to such Purchaser reflecting the terms of the Subsequent Transaction. 3.10 Use of Proceeds. The Company agrees to set aside and keep on hand --------------- $4,000,000 of the proceeds from the sale of the Debentures to be applied to the redemption of or concession of, all of the Company's Class C floating preferred stock until such time as the guaranteed return obligation thereunder becomes cancelled and/or non-operative. The Purchasers agree that if and to the extent that the amount required to guarantee such redemption of or concession of all of the Company's Class C floating preferred stock falls below $4,000,000, the Company may use the balance of such amount for general corporate purposes. 3.11 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 (other than any action, proceeding or investigation brought by the Company against any Purchaser), 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, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Transaction Documents, 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, the Company will reimburse such Purchaser for its reasonable legal and other actual out-of-pocket expenses (including the reasonable 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. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of its obligations hereunder which is permissible under applicable law. 3.12 Transfer Agent Instructions. At the Closing the Company shall issue --------------------------- irrevocable instructions to its transfer agent (and shall issue to any subsequent transfer agent as required), to issue certificates, registered in the name of each such Purchaser or its respective nominee(s), for the Debenture Shares and/or the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company in a form acceptable to such Purchasers (the "Irrevocable Transfer Agent Instructions"). So long as required pursuant to --------------------------------------- Section 3.1(b), 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 3.12, and stop transfer instructions to give effect to Section 3.1 hereof (in the case of the Debenture Shares and the Warrant Shares, prior to registration of the Debenture Shares under the Securities 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 Transaction Documents. If a Purchaser provides the Company with an opinion of counsel, the form and substance of which opinion shall be customary for opinions of counsel in comparable transactions, to the effect that a public sale, assignment or transfer of the Debentures, the Debenture Shares, the Warrants and the Warrant Shares may be made without registration under the Securities Act or the Purchaser provides the Company with reasonable assurances that the 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 3.12 will be inadequate and agrees, in the event of a beach or threatened breach by the Company of the provisions of this Section 3.12, 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. 3.13 Press Release; Filing of Form 8-K. Subject to the provisions of --------------------------------- Section 6.10 hereof, prior to the opening of Nasdaq on September 23, 1999, the Company shall file a press release in form and substance reasonably acceptable to the Purchasers. On or before the 10/th/ business day following the 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. 3.14 Trading Restrictions. Each Purchaser agrees that it shall not, -------------------- directly or indirectly through one or more intermediaries, engage in any short sales of the Company's Common Stock, unless within seven (7) Trading Days after the initiation of such short sale the Purchaser shall have delivered to the Company a Notice of Conversion, in accordance with Section 4.2 of the Debenture, pursuant to which the Purchaser shall convert such principal amount of Debentures held by such Purchaser into the number of shares of Common Stock as shall be sufficient to cover, and shall use such shares to so cover in full, the shares required to be delivered by such Purchaser in satisfaction of and in connection with such short sale. The parties agree that the provisions of this Section 3.14 shall be specifically enforceable. 3.15 Best Efforts. Each of the parties hereto shall use its best efforts ------------ to satisfy each of the conditions to be satisfied by it as provided in Article IV of this Agreement. 3.16 Subsequent Registrations. Other than Underlying Shares and other ------------------------ Registrable Securities (as defined in the Registration Rights Agreement) to be registered in accordance with the Registration Rights Agreement, the Company shall not, for a period of not less than 90 Trading Days after the date that the Registration Statement (as defined in the Registration Rights Agreement) is declared effective by the Commission, without the prior written consent of two- thirds of the Purchasers, (i) issue or sell any of its or any of its Affiliates' equity or equity-equivalent securities unless such issuance or sale is equal to or greater than $10.00 per share of Common Stock on the date such issuance or sale or (ii) (a) register for resale any securities of the Company or (b) have a registration statement declared effective covering an issuance by the Company of any of its securities, unless the purchasers of such securities agree to not to offer or sell such securities for a period of 120 following the date the Registration Statement is declared effective by the Commission. Any days that any Purchaser is unable to sell Underlying Shares under an Registration Statement shall be added to such 90 Trading Day and 120 Trading Day period for the purposes of (i) and (ii), respectively, above. 3.17 Material Information. The Company covenants that any information -------------------- provided by the Company to the Purchasers, their agents or their counsel which could be deemed to constitute material non-public information will cease to be material non-public information (either through disclosure by the Company or otherwise) by December 21, 1999. ARTICLE IV. CONDITIONS 4.1 Closing Conditions. ------------------ a. Conditions Precedent to the Obligation of the Company to Sell. The ------------------------------------------------------------- obligation of the Company to sell the Debentures and the Warrants hereunder is subject to the satisfaction or waiver (with prior written notice to each Purchaser) by the Company, at or before the 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 (except for representations and warranties that speak as of a specific date) and as of the 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 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. b. Conditions Precedent to the Obligation of the Purchasers to ----------------------------------------------------------- Purchase. The obligation of each Purchaser hereunder to acquire and pay for the Debentures and Warrants is subject to the satisfaction or waiver (with prior written notice to the Company and each other Purchaser) by such Purchaser, at or before the 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 Closing Date as though made at that time (except for representations and warranties that speak as of a specific date); (ii) Performance by the Company. The Company shall have -------------------------- performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing; (iii) No Injunction. No 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; (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 (except for any suspension of trading of limited duration solely to permit dissemination of material information regarding the Company); (v) Listing of Common Stock. The Common Stock shall be listed ----------------------- for trading on Nasdaq; (vi) Required Approvals. All Required Approvals shall have been ------------------ obtained and copies thereof delivered to such Purchaser; (vii) Shares of Common Stock. The Company shall have duly ---------------------- reserved the number of Underlying Shares required by this Agreement and the Transaction Documents to be reserved for issuance upon conversion of the Debentures and the exercise of the Warrants; (viii) Change of Control. No Change of Control shall have occurred ----------------- between August 15, 1999 and the Closing Date. "Change of Control" means the ----------------- occurrence of any of (i) an acquisition after the date hereof by any Person or "group" (as described in Section 13(d)(3) of the Exchange Act) of in excess of 51% 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 a majority of those individuals who are members of the Board of Directors on the date hereof, or their duly elected successors who are directors immediately prior to such transaction, in one or a series of related transactions, (iii) the merger of the Company with or into another entity, unless following such transaction, the Holders of the Company's securities continue to hold at least 50% of the securities of the resulting company following such transaction, (iv) the consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, (v) the removal of David Hillson as CEO of the Company or (vi) 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), (iii), (iv) or (v). (ix) Resolutions. The Board of Directors of the Company shall ----------- have adopted resolutions consistent with Section 2.1(b) and in a form reasonably acceptable to each Purchaser (the "Resolutions"); ----------- c. Documents and Certificates. At the Closing, the Company shall have -------------------------- delivered to the Purchasers the following in form and substance reasonably satisfactory to the Purchasers: (i) Opinion. An opinion of the Company's legal counsel in the ------- form attached hereto as Exhibit E dated as of the Closing Date; --------- (ii) Debenture. Debentures representing the principal amount of --------- 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) Warrant. Warrants representing the 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) Registration Rights. The Company shall have executed and ------------------- delivered the Registration Rights Agreement; (v) Officer's Certificate. An Officer's Certificate dated the --------------------- Closing Date and signed by an executive officer of the Company confirming the accuracy of the Company's representations, warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.1 as of the Closing Date; (vi) Secretary's Certificate. A Secretary's Certificate dated the ----------------------- Closing Date and signed by the Secretary or Assistant Secretary of the Company certifying (A) that attached thereto is a true and complete copy of the Certificate of Incorporation of the Company, as in effect on the Closing Date, (B) that attached thereto is a true and complete copy of the by-laws of the Company, as in effect on the Closing Date and (C) that attached thereto is a true and complete copy of the Resolutions duly adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and of the Transaction Documents, and that such Resolutions have not been modified, rescinded or revoked; (vii) Certificates of Incorporation. The Company shall have ----------------------------- delivered to each of the Purchasers a copy of a certificate evidencing the incorporation and good standing of the Company and each Subsidiary whose individual operations are material to the consolidated operations, earnings, assets or financial condition of the Company, in such corporation's state of incorporation issued by the Secretary of State of such state of incorporation as of a date within ten days of the Closing Date. The Company shall have delivered to each of the Purchasers a copy of its Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten days of the Closing Date; (viii) Lockup Letters. The officers and directors of the Company -------------- shall have delivered to the Purchasers a letter in the form of Exhibit E hereto --------- pursuant to which they agree not to offer or sell, for a purchase price of less than $8.00 per share, shares of Common Stock such officer or director beneficially owns during any time period when any Purchaser is unable to freely offer for sale or to sell any Underlying shares pursuant to an effective registration statement. ARTICLE V. MISCELLANEOUS 5.1 Entire Agreement. This Agreement, together with the Exhibits and ---------------- Schedules hereto and the Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. 5.2 Notices. Any notices, consents, waivers or other communications ------- required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party (if received by 7:00 p.m. EST where such notice is received) or the first business day following such delivery (if received after 7:00 p.m. EST where such notice is received); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: Boston Life Sciences, Inc. 137 Newbury Street 8th Floor Boston, MA 02116 Facsimile: (617) 425-0996 Attention: Joseph Hernon With a copy to: Ropes & Gray One International Place Boston, MA 02110 Facsimile: (617) 951-7050 Attention: Steven A. Wilcox If to the Transfer Agent: If to Brown Simpson Strategic Growth Fund, Ltd. to: 152 West 57/th/ Street, 40/th/ Floor New York, New York 10029 Telephone: (212) 247-8200 Facsimile: (212) 247-1329 Attention: Paul Gustus If to Brown Simpson Strategic Growth Fund, L.P. to: 152 West 57/th/ Street, 40/th/ Floor New York, New York 10029 Telephone: (212) 247-8200 Facsimile: (212) 247-1329 Attention: Paul Gustus With a copy, in the case of Notice to Brown Simpson Strategic Growth Fund, Ltd., Brown Simpson Strategic Growth Fund, L.P. to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue New York, New York 10022 Telephone: (212) 872-1000 Facsimile: (212) 872-1002 Attention: James Kaye Each party shall provide written notice to the other party of any change in address or facsimile number in accordance with the provisions hereof. 5.3 Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, by both the Company and the Purchasers holding at least sixty percent (60%) of the then outstanding principal balance of Debentures (the "Majority Holders"). 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. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Debentures purchased under this Agreement at the time outstanding (including securities into which such Debentures have been converted), each future holder of all such Debentures and securities and the Company. Upon effectuation of each such amendment or waiver, the Company shall promptly give written notice thereof to the record holders of the Debentures and Underlying Shares (if applicable) who have not previously consented thereto in writing. 5.4 Headings. 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. 5.5 Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Majority Holders. No Purchaser shall assign, transfer, sell or otherwise dispose of this Agreement or the Debentures or any rights or obligations hereunder or thereunder without the prior written consent of the Company, except that a Purchaser may assign some or all of its rights hereunder or thereunder (i) to an "affiliate" of such Purchaser (as such term is defined in the 1934 Act (subject to such affiliate demonstrating to the reasonable satisfaction of the Company its satisfaction of the representations and warranties of the Purchaser set forth in Section 2.2 hereof)) or (ii) to any other Purchaser, without the consent of the Company; provided that each permitted assignee agrees to be bound by and to comply with the provisions of this Agreement. 5.6 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 5.7 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 5.8 Survival. The representations and warranties of the Company and the -------- Purchasers contained in Sections 2.1 and 2.2 and the agreements and covenants set forth in Section 3 shall survive the Closing and any conversion of the Debentures or exercise of the Warrants regardless of any investigation made by or on behalf of the such Purchaser or by or on behalf of the Company, except that, in the case of representations and warranties such survival shall be limited to the period of six (6) years following the Closing Date on which they were made or deemed to have been made. This section shall have no effect on the survival of the indemnification provisions of the Registration Rights Agreement. 5.9 Counterparts. This Agreement may be executed in two or more ------------ counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 5.10 Publicity. The Company and the Purchasers 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 will not publicly or otherwise disclose the names of the Purchasers without each such Purchaser's prior written consent. The Purchasers and their affiliated companies shall, without further cost, have the right to use in its advertising, marketing or other similar materials, the Company's logo and trademarks and all or parts of the Company's press releases that focus on the Transaction forming the subject matter of this Agreement or which make reference to the Transaction. The Purchasers understand that this grant by the Company only waives objections that the Company might have to the use of such materials by the Purchasers and in no way constitutes a representation by the Company that references in such materials to the activities of third-parties have been cleared or constitute a fair use. 5.11 Severability. In case any one or more of the provisions of this ------------ Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 5.12 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 agree to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 5.13 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. 5.14 Payment Set Aside. To the extent that the Company makes a payment or ----------------- payments to the Purchasers hereunder or pursuant to the Transaction Documents 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 applicable bankruptcy or fraudulent conveyance laws, then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 5.15 Further Assurances. Each party shall do and perform, or cause to be ------------------ done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 5.16 Fees and Expenses. Except as set forth in the Registration Rights ----------------- 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; provided, however, that the Company shall pay the -------- ------- Purchasers an aggregate fee of $20,000 at the Closing. 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. 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. BOSTON LIFE SCIENCES, INC. By:______________________________ Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: Brown Simpson Asset Management, LLC By: ____________________________________ Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: Brown Simpson Capital,LLC its general partner By:___________________________ Name: Title: Schedule I
Principal Amount Number of Shares of Number of Shares of Name of Purchaser of Debentures Class A Warrants Class B Warrants - ----------------- ------------- ---------------- ---------------- Brown Simpson Strategic $6,400,000 776,000 576,000 Growth Fund, Ltd. Brown Simpson Strategic $1,600,000 194,000 144,000 Growth Fund, L.P.
Schedule II Name of Purchaser Address - ----------------- ------- Brown Simpson Strategic Growth Fund, Ltd. 152 West 57/th/ Street, 40/th/ Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Residence: Grand Cayman, Cayman Islands Brown Simpson Strategic Growth Fund, L.P. 152 West 57/th/ Street, 40/th/ Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Residence: New York, New York Exhibit A [Form of Convertible Debenture] Exhibit B [Form of Class A Warrant] Exhibit C [Form of Class B Warrant] Exhibit D [Registration Rights Agreement] Exhibit E [Company's Legal Opinion] EX-10.2 3 FORM OF 8% CONVERTIBLE DEBENTURE EXHIBIT 10.2 8% CONVERTIBLE DEBENTURES NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND APPLICABLE STATE LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 22, 1999, BY AND BETWEEN THE COMPANY AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. No. __ $ ________________ BOSTON LIFE SCIENCES, INC. 8% CONVERTIBLE DEBENTURES DUE SEPTEMBER 22, 2003 Boston Life Sciences, Inc., a Delaware corporation (the "Company"), ------- for value received hereby promises to pay to [Insert Holder] or its registered assigns ("Holder") the principal sum of ____________Dollars at the Company's ------ office or agency for said purpose in New York, New York on September 22, 2003 in such coin or currency (or, as provided herein, at the Holder's option in Common Stock) 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 Debenture is one of a duly authorized issue of 8% Convertible Debentures, due September 22, 2003 of the Company (the "Debenture") referred to --------- in the Securities Purchase Agreement (the "Purchase Agreement"), dated as of ------------------ September 22, 1999, by and among the Company and the Purchasers listed on Schedule I thereto. The Debentures are subject to the terms and conditions of the Purchase Agreement. The Company agrees to issue from time to time replacement Debentures in the form hereof to facilitate any transfers and assignments as are made consistent with the terms hereof and the Purchase Agreement. In addition, after delivery of an indemnity in form and substance reasonably satisfactory to the Company, the Company also agrees to issue replacement Debentures for securities which have been lost, stolen, mutilated or destroyed as set forth below. The Company 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 Debentures and particulars of the respective Debentures held by them and of all transfers of such Debentures. References to the "Holder" or ------ "Holders" shall mean the Person listed in the Register as the payee of any ------- Debenture unless the payee shall have presented such Debenture to the Company 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; provided, however, that the Company shall have no obligation to register any - -------- ------- purported transfer of this Debenture unless such transfer is made in accordance with the terms and conditions hereof and of the Purchase Agreement. The ownership of the Debentures shall be proven by the Register, absent manifest error. For the purpose of paying interest and principal on the Debentures, the Company shall be entitled to rely on the names and addresses in the Register and, not withstanding anything to the contrary contained in this Debenture, absent manifest error no Event of Default shall occur under Section 3.1(a) if payment is made in accordance with the name, address and other particulars contained in the Register. No provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of and interest on this Debenture at the place, times, rate, and in the currency, herein prescribed. The principal of this Debenture shall bear interest at the rate of 8% per annum (the "Interest Rate"), which interest shall accrue daily from the most ------------- recent Interest Payment Date on which interest has been paid on this Debenture and shall be payable semi-annually on July 1 and January 1 of each year (an "Interest Payment Date"), commencing on January 1, 2000, to the Holder hereof --------------------- until the principal amount is paid or made available for payment. The interest so payable on any Interest Payment Date will be paid in cash or an equivalent value of the Company's Common Stock calculated based upon the Average Price (as defined herein) as of such Interest Payment Date, at the Company's option, subject to certain conditions contained herein, to the Holder of this Debenture at the close of business on the Record Date for the interest payable on such Interest Payment Date. The "Record Date" for any interest payment is the close of business on ----------- December 15 or June 15, as the case may be, whether or not a Business Day, immediately preceding the Interest Payment Date on which such interest is payable. Any amounts that have become due and payable hereunder and remain unpaid by the Company after expiration of any applicable grace period for such payment provided herein shall accrue interest thereafter until payment in full of such amount at the rate of twenty percent (20%) (the "Default Rate") per ------------ annum and shall be payable upon demand by the Holder. Interest, whether at the Interest Rate or the Default Rate, 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 begins to accrue, in the case of the Interest Rate, or becomes due and payable, in the case of the Default Rate. Each of the Interest Rate and the Default Rate shall be effective both before and after any judgment may be rendered in a court of competent jurisdiction, provided, however, that if either the Interest Rate or Default -------- ------- Rate is deemed to be in excess of the amount permitted to be charged by the Company under applicable laws, the Holder shall be entitled to collect an Interest Rate or Default Rate, as the case may be, 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 Debenture and shall be so applied. The principal of, and interest on, this Debenture are payable in coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts, at the last address of the Holder last appearing on the Register (in the case of interest, as of the Record Date), except that interest due on the principal amount (but not interest overdue for more than five (5) Business Days), may, at the Company's option be paid in shares of Common Stock calculated based upon the Average Price (as defined herein) as of the applicable Interest Payment Date. Except with respect to interest overdue for more than five days, it shall be assumed that the Company shall elect to make all payments of interest in Common Stock unless the Company shall have given written notice to each Holder not less than five (5) Business Days prior to the applicable Interest Payment Date of its intention to pay such interest in cash. Notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of interest due on the principal amount if: (i) the 2 number of shares of Common Stock at the time authorized, unissued and unreserved for all other purposes is insufficient to pay interest hereunder in shares of Common Stock or there is an insufficient number of authorized shares of Common Stock reserved (pursuant to Section 3.6(b) of the Purchase Agreement) for issue for full conversion of all of the Debentures issued pursuant to the Purchase Agreement; (ii) such shares are not either registered for resale pursuant to the Registration Statement by the Effective Date (as such terms are defined in the Registration Rights Agreement (as defined herein)) or freely transferable without volume restrictions pursuant to Rule 144(k) promulgated under the Act, as determined by counsel to the Company pursuant to a written opinion letter addressed and in form and substance acceptable to the Holder and the transfer agent for such shares, subject to the receipt by the Company and such counsel of a representation from such Holder that it is not an affiliate of the Company for purposes of Rule 144 promulgated under the Act; (iii) such shares are not listed or quoted on the Nasdaq (as defined herein) or a Subsequent Market (as defined herein); (iv) the issuance of such shares would result in the recipient thereof owning more than 9.99% of the issued and outstanding shares of Common Stock; or (v) an Event of Default has occurred and is continuing or an event that, with the passage of time or giving of notice or both would constitute an Event of Default, has occurred and is continuing. The number of issued and outstanding shares of Common Stock directly held by the Holder shall not limit the Company's right to pay interest in the form of Common Stock. In the event that the Company is prohibited from paying interest in Common Stock pursuant to this paragraph, such interest shall be paid in cash without regard to whether the Company provided notice of its intention to pay such interest in cash. 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 Debenture 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 (as defined herein). Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Purchase Agreement. The terms defined in this Section 1.1 include the plural as well as the singular. "Acceleration Notice" has 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. "Appraiser" shall mean a nationally recognized or major regional --------- investment banking firm or firm of independent certified public accountants of recognized standing. "Authorization Date" has the meaning set forth in Section 4.8. ------------------ "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 Value during the ten (10) Trading Days immediately preceding such date, divided by (z) eight (8). "Board of Directors" means either the Board of Directors of the ------------------ Company or any committee of such Board duly authorized to act hereunder. 3 "Business Day" means any day except a Saturday, Sunday or other day on ------------ which commercial banks in the City of New York are authorized or required 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 any of (i) an acquisition ----------------- after the date hereof by Person or "group" (as described in Section 13(d)(3) of the Exchange Act) of in excess of 51% 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 a majority of those individuals who are members of the Board of Directors on the date hereof, or their duly elected successors who are directors immediately prior to such transaction, in one or a series of related transactions, (iii) the merger of the Company with or into another entity, unless following such transaction, the Holders of the Company's securities continue to hold at least 51% of the securities of the resulting company following such transaction, (iv) the consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, or (v) 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), (iii) or (iv). "Closing Date" has the meaning set forth in the Purchase Agreement. ------------ "Common Stock" means the common stock, par value $.01 per share, of ------------ the Company. "Converted Debentures" has the meaning set forth in Section 3.1. -------------------- "Convertible Securities" has the meaning set forth in Section ---------------------- 4.5(g)(i)(A). "Conversion Date" has the meaning set forth in Section 4.4(a). --------------- "Conversion Default" has the meaning set forth in Section 4.8. ------------------ "Conversion Default Date" has the meaning set forth in Section 4.8. ----------------------- "Conversion Default Payments" has the meaning set forth in Section --------------------------- 4.8. "Conversion Price" has 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, (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. 4 "Debenture" or "Debentures" has the meaning set forth in the second --------- ---------- paragraph hereof. "Default Rate" has the meaning set forth in the seventh paragraph ------------ hereof. "Determination Date" has the meaning set forth in Section 4.9. ------------------ "Excluded Securities" means (i) the Debentures, the Warrants and the ------------------- Underlying Shares, (ii) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are issued or deemed to have been issued from time to time in connection with a Stock Option Plan, (iii) shares of Common Stock of the Company issuable upon the exercise of any options, warrants or other securities convertible or exercisable therefor outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, (iv) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are 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, (v) warrants for up to 200,000 shares of Common Stock per year, not exceeding 600,000 shares in the aggregate, provided that the conversion price of any such warrants is above the Per Share Market Value on the date the warrant is issued, (and the Common Stock issued upon exercise thereof) issued after the date hereof by the Company for purposes other than raising capital, (vi) either Common Stock or preferred stock convertible into Common Stock, provided that such stock shall be issued at a price per share of not less -------- than $4.50 in return for proceeds not to exceed the greater of (1) $2,000,000 or (2) the amount expended by the Company in the redemption of the Company's Series C floating preferred stock; provided, further however, that (a) such stock shall -------- not be issued prior to December 1, 1999 and resales of such Common Stock (or Common Stock issuable upon conversion of such preferred stock) shall not be registered under the Securities Act prior to April 1, 2000, (b) the purchasers of such Common Stock shall be prohibited from executing short sales of Common Stock under substantially the same terms and conditions as the Purchasers are hereunder, and (c) Brown Simpson shall have a right of first offer with respect to such sale of stock at a price that is not less than the price at which such stock is eventually sold; and provided further that if preferred stock is -------- issued, the conversion terms of such preferred stock shall be no more favorable to investors than the conversion terms in the Debenture and (vii) warrants described on Schedule 2.1(m) to the Securities Purchase Agreement. "Event of Default" has the meaning set forth in Section 3.1. ---------------- "Excess Amount" has the meaning set forth in Section 4.8. ------------- "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. "Excess Principal" has the meaning set forth in Section 4.9 ---------------- "GAAP" or "generally accepted accounting principles" means, at the ---- ---------------------------------------- Closing Date, United States generally accepted accounting principles, consistently applied, as 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 may be approved by a significant segment of the accounting profession of the United States, that are applicable to the circumstances as of the date of determination; provided, however, that, except as otherwise specifically provided, all calculations made for purposes of determining compliance with the terms of the provisions of this Agreement shall utilize GAAP in effect at the time of preparation of, and in accordance with the GAAP used to prepare, the historical financial statements of the Company on the Closing Date. 5 "Holder" or other similar terms means the registered holder of any ------ Debenture. "Interest Payment Date" has the meaning set forth in the fifth --------------------- paragraph hereof. "Interest Rate" has the meaning set forth in the fifth paragraph ------------- hereof. "Issuable Maximum" has the meaning set forth in Section 4.9. ---------------- "Company" has the meaning set forth in the first paragraph hereof. ------- "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 Debenture, the Company 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. "Majority Holders" means the Holders of at least sixty percent (60%) ---------------- of the then outstanding principal amount of the Debentures. "Mandatory Conversion" has the meaning set forth in Section 6.1(a). -------------------- "Mandatory Conversion Date" has the meaning set forth in Section 6.2. ------------------------- "Mandatory Conversion Event" has the meaning set forth in Section -------------------------- 6.1(a). "Mandatory Conversion Notice" has the meaning set forth in Section --------------------------- 6.1(b). "Mandatory Conversion Notice Date" has the meaning set forth in -------------------------------- Section 6.2. "Mandatory Prepayment Amount" for any Debenture means the sum of (x) --------------------------- 120% of the principal amount of the Debenture to be prepaid and (y) all amounts, costs, interest, due in respect of such principal amount. "Maturity Date" means the date on which the principal of a Debenture ------------- becomes due and payable as herein provided, whether on the Stated Maturity Date or pursuant to acceleration upon an Event of Default. "Nasdaq" means the Nasdaq SmallCap Market. ------ "Non-Conversion Prepayment Amount" for any Debenture means the greater -------------------------------- of (i) the Mandatory Prepayment Amount and (ii) at the option of the Holder, either (I) the principal amount of the Debenture to be repaid, plus all accrued and unpaid interest thereon, divided by the Conversion Price on the date the Mandatory Prepayment Amount became due and payable, multiplied by the Per Share Market Value on the date the Mandatory Prepayment Amount became due and payable or (II) the principal amount of the Debenture 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 aggregate amount payable to the Holder upon acceleration is paid in full, multiplied by the Per Share Market Value on the Trading Day immediately prior to the date the aggregate amount payable to the Holder upon acceleration is paid in full. "Notice of Company Redemption" has the meaning set forth in Section ---------------------------- 5.2 hereof. 6 "Notice of Conversion" has the meaning set forth in Section 4.2 -------------------- hereof. "Options" has the meaning set forth in Section 4.5(g)(i)(A). ------- "Original Issue Date" of any Debenture (or portion thereof) means the ------------------- earlier of (i) the date of such Debenture and (ii) the date of any Debenture (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 (as reported by Bloomberg Information Services, Inc., or any successor reporting service) on Nasdaq or, if the Common Stock is not then quoted on Nasdaq, 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 Majority Holders; provided, however, that the Company, after receipt of the determination -------- ------- by such Appraiser, shall have the right to select in good faith 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 Debenture, and includes, without limitation, all classes and series of preferred or preference stock. "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 Agreement" means that certain Securities Purchase Agreement ------------------ dated as of September 22, 1999, by and among the Company and the Purchasers. "Purchase Price" means, with respect to any security, the purchase -------------- price paid to the Company upon issuance of such security. "Purchasers" has the meaning ascribed thereto in the Purchase ---------- Agreement. "Record Date" has the meaning set forth in the sixth paragraph hereof. ----------- "Redemption Date" has the meaning set forth in Section 5.2 hereof. --------------- "Redemption Notice Date" has the meaning set forth in Section 5.2 ---------------------- hereof. 7 "Redemption Price" has the meaning set forth in Section 5.1 hereof. ---------------- "Register" has the meaning set forth in the third paragraph hereof. -------- "Registration Rights Agreement" means that Registration Rights ----------------------------- Agreement dated as of September 22, 1999, by and among the Company and the Purchasers. "Reserved Amount" has the meaning set forth in Section 4.8. --------------- "Reset Option" has the meaning set forth in Section 4.2(b). ------------ "Reset Event" has the meaning set forth in Section 4.2(b). ----------- "Responsible Officer" means David Hillson or Joseph Hernon. ------------------- "Shareholder Approval" has the meaning set forth in Section 4.9. -------------------- "Stated Maturity Date" means September 22, 2003. -------------------- "Stock Option Plan" means 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, consultant or other Person with a business relationship with the Company. "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. "Subsequent Market" means the New York Stock Exchange, American Stock ----------------- Exchange or Nasdaq National Market. "Threshold Price" has the meaning set forth in Section 4.5(g)(i). --------------- "Trading Day" means (a) a day on which the Common Stock is traded on ----------- Nasdaq or, if the Common Stock is not then designated on Nasdaq, 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. "Underlying Shares" has the meaning set forth in the Purchase ----------------- Agreement. "Valuation Event" has the meaning set forth in Section --------------- 4.5(g)(i)(D)(I). "Void Redemption Notice" has the meaning set forth in Section 5.3 ---------------------- hereof. "Warrants" has the meaning set forth in the Purchase Agreement. -------- 8 ARTICLE II PAYMENT; THE SECURITIES 2.1 Payment of Principal and Interest. The Company covenants and --------------------------------- agrees that it will duly and punctually pay or cause to be paid the principal of and interest on each of the Debentures at the place or places, at the respective times and in the manner provided in the Debentures. 2.2 Mutilated, Defaced, Destroyed, Lost and Stolen Debentures. In --------------------------------------------------------- case any Debenture shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Company shall execute and deliver a new Debenture, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Debenture. In every case the applicant for a substitute Debenture shall furnish to the Company such security or indemnity as it may reasonably require to indemnify and defend and to save it harmless and, in every case of destruction, loss or theft evidence to the Company's satisfaction of the apparent destruction, loss or theft of such Debenture and of the ownership thereof. Upon the issuance of any substitute Debenture, the Company 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 Debenture 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 Company may, instead of issuing a substitute Debenture, 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 Debenture), if the applicant for such payment shall furnish to the Company such security or indemnity as it may reasonably 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 Company evidence to the Company's reasonable satisfaction of the apparent destruction, loss or theft of such Debenture and of the ownership thereof. Every substitute Debenture issued pursuant to the provisions of this Section by virtue of the fact that any Debenture is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the apparently destroyed, lost or stolen Debenture 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 Debenture equally and proportionately with any and all other Debentures duly authenticated and delivered hereunder. All Debentures 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 Debentures 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 Debentures; Destruction Thereof. All Debentures ----------------------------------------------- surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Company for cancellation, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Debenture. The Company shall destroy canceled Debentures held by it and deliver a certificate of destruction to the Holder, unless otherwise required. If the Company shall acquire any of the Debentures, such acquisition alone shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the Company so elects. 9 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: a. default in the payment of all or any part of (i) interest on any of the Debentures, which default shall not have been cured within five (5) Business Days following the applicable Interest Payment Date, (ii) the principal of any of the Debentures as and when the same shall become due and payable either at maturity or otherwise; or b. except as set forth in Section 3.1(i) and 3.1(k), failure on the part of the Company to duly observe or perform any of the covenants or agreements on the part of the Company contained in this Debenture, the Purchase Agreement, the Registration Rights Agreement or the Warrants, for a period of ten (10) Business Days after the earlier of (x) the date on which any Responsible Officer shall have obtained actual knowledge of such failure or (y) the date on which written notice thereof has been given to the Company by the Majority Holders; or c. any representation or warranty made by the Company in the Purchase Agreement shall prove to have been incorrect in any material respect when made. d. there shall have occurred with respect to any issue or issues of Debt (other than the Debentures) of the Company 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 twenty (20) Business Days of such acceleration; or e. one or more judgments or orders for the payment of money shall be rendered against the Company or any Subsidiary of the Company in excess of $1,000,000 in the aggregate (treating any deductibles, self insurance or retention as not so covered), which judgments or orders are not discharged and remain outstanding for a period of thirty (30) consecutive days following entry of the judgment or order which causes the aggregate amount described above to exceed $1,000,000 in which period a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not have been in effect; or f. a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company 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 Company or any of its Subsidiaries or for any substantial part of the property of the Company or any of its Subsidiaries or ordering the winding up or liquidation of the affairs of the Company or any of its Subsidiaries, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or 10 g. the Company 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 Company or any of its Subsidiaries or for any substantial part of the property of the Company or any of its Subsidiaries, or the Company or any of its Subsidiaries shall make any general assignment for the benefit of creditors; 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 five (5) Business Days; or i. a Registration Statement (as defined in the Purchase Agreement) covering the Underlying Shares (x) shall not have been declared effective by the Securities and Exchange Commission on or prior to the 30th day after the Effectiveness Date (as defined in the Registration Rights Agreement) or, (y) after its initial effectiveness, such Registration Statement lapses in effect or sales of all of the Registrable Securities (as defined in the Registration Rights Agreement) otherwise cannot be made thereunder (whether by reason of the Company's failure to amend or supplement the prospectus included therein in accordance with the Registration Rights Agreement or otherwise) for more than thirty (30) consecutive days or sixty (60) days in any twelve (12) month period, except for any Black-out Periods pursuant to Section 3(r) of the Registration Rights Agreement or as otherwise provided in the Registration Rights Agreement; or j. a Change of Control shall occur and the obligations of the Company under this Debenture shall not have been (i) fully discharged or accounted for or (ii) fully assumed by the controlling entity; provided, however -------- ------- that (i) such controlling entity shall be a public corporation whose common stock is listed for trading on the Nasdaq or a Subsequent Market and (ii) the market valuation of such controlling entity shall be in excess of $300 million; or k. the Company shall fail to issue shares of Common Stock within twelve (12) Trading Days after the Holder delivers a Notice of Conversion pursuant to Section 4.2 hereof, other than under the circumstances described in Section 4.9 hereof, in which case Section 4.9 shall be the sole and exclusive remedy of Holder; then, in each and every such case (other than an Event of Default specified in Section 3.1(f) or 3.1(g) hereof), unless the principal shall have already become due and payable, by notice in writing to the Company signed by the Majority Holders (the "Acceleration Notice"), the Majority Holders may declare the entire ------------------- principal amount of the Debentures and any interest accrued thereon (and, in lieu thereof, the aggregate amounts described below) 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(f) or 3.1(g) occurs, the principal of and any accrued interest on this Debenture (and, in lieu thereof, the aggregate amounts described below) shall become and be immediately due and payable without any declaration or other act on the part of the Holder. In the event that the Company shall not have promptly, but in any event within five (5) Business Days upon receipt of an Acceleration Notice, paid the Holder the amount specified below, the Conversion Price shall automatically be reduced to equal the average Per Share Market Value of the Common Stock during the preceding thirty (30) consecutive Trading Days immediately preceding the date of computation, provided, that such Per Share Market Value is lower -------- than the Conversion Price. The aggregate amount payable to a Holder upon acceleration relating to an Event of Default described in Section 3.1 (a), (f), (g) and (i)(x) shall be equal to the sum of: (i) the Mandatory 11 Prepayment Amount plus (ii) the Holder's reasonable costs of collection, plus (iii) if applicable and at the option of the Holder, the Mandatory Prepayment Amount for the principal amount of the Debentures that would then be held by such Holder had the principal amount of Debentures converted within thirty (30) days prior to such Event of Default into Underlying Shares that are then held by the Holder not been so converted (the "Converted Debentures"); provided, that -------------------- -------- the Holder shall not be entitled to a Mandatory Prepayment Amount with respect to Converted Debentures if each of the following have occurred: (i) prior to the occurrence of the 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 and (ii) a Registration Statement with respect to such Underlying Shares had been continuously effective, and (iii) the Common Stock has been quoted on Nasdaq or any Subsequent Market for such thirty (30) day period; and provided, further, that in the event the Holder elects to receive -------- ------- all or any portion of the Mandatory Prepayment Amount with respect to Converted Debentures, the Holder shall not be entitled to such amount unless it returns the Underlying Shares relating thereto to the Company as provided below. The aggregate principal amount payable upon acceleration relating to an Event of Default described in Section 3.1(b), (c), (d), (e), (h) and (j) shall be equal to the sum of: (i) the Mandatory Prepayment Amount plus (ii) the Holder's reasonable costs of collection, plus (iii) at the option of the Holder, the Mandatory Prepayment Amount for the Converted Debentures that would then be held by such Holder had the principal amount of Debentures converted into Underlying Shares within three (3) Trading Days prior to such Event of Default 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 (3) Trading Days and provided, further, that in the -------- ------- event the Holder elects to receive all or any portion of the Mandatory Prepayment Amount with respect to the Converted Debentures, the Holder shall not be entitled to such amount unless it returns the Underlying Shares relating thereto to the Company as provided below. The aggregate principal amount payable upon acceleration relating to an Event of Default described in Section 3.1(i)(y) or Section 3.1(k) shall be equal to: at the option of the Holder the sum of: (i) (a) the Mandatory Prepayment Amount or (b) the Non-Conversion Prepayment Amount plus, (ii) the Holder's reasonable costs of collection, plus (iii) at the option of the Holder, the Mandatory Prepayment Amount or the Non-Conversion Prepayment Amount, as the case may, be for the Converted Debentures that would then be held by such Holder had the principal amount of Debentures converted into Underlying Shares within (x) three (3) Trading Days prior to such Event of Default then held by the Holder not been so converted with respect to an Event of Default pursuant to Section 3.1(k), or (y) thirty (30) Trading Days prior to such Event of Default then held by the Holder not been so converted with respect to an Event of Default pursuant to Section 3.1(i)(y); provided, that the Holder shall not be -------- entitled to the Mandatory Prepayment Amount or the Non-Conversion Prepayment Amount, or as the case may be 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 (3) Trading Days or thirty (30) Trading Days, as applicable; and provided, -------- further, that in the event the Holder elects to receive all or any portion of - ------- the Mandatory Prepayment Amount or the Non-Conversion Prepayment Amount, as the case may be with respect to the Converted Debentures, the Holder shall not be entitled to such amount unless it returns the Underlying Shares relating thereto to the Company as provided below. For purposes of this Section 3.1, the principal amount of this Debenture shall be treated as outstanding until such date as the Holder shall have been issued Underlying Shares upon a conversion (or attempted conversion) thereof. Interest shall accrue on the amounts payable hereunder (other than the Non-Conversion Prepayment Amount) from the day after such amount is due through the date of payment 12 in full thereof at the Default Rate, accruing daily from the date of acceleration until such amounts, plus any such interest thereon, is paid in full. Within five (5) Business Days of receipt by the Holder of payments of amounts due to the Holder under this Section 3.1, (i) the Holder shall return the Debentures to the Company and (ii) in the event the amounts paid relate to the Converted Debentures, the Holder shall return the Underlying Shares into which such Converted Debentures were converted. In the event of acceleration relating to the occurrence of an Event of Default, the Holder need not provide and the Company 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. 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 Debentures 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 Holders to Exchange Debentures. Subject to and upon --------------------------------------- compliance with the provisions of this Section, this Debenture is exchangeable for an equal principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same; provided, -------- however, that no exchanges shall be made for Debentures in denominations of less - ------- than $400,000. No service charge will be made for such registration of transfer or exchange. 4.2 Right of Holders to Convert Debentures into Common Stock; Reset --------------------------------------------------------------- of Conversion Price. - ------------------- a. Subject to and upon compliance with the provisions of this Section, all or any portion of the principal amount of this Debenture (and any accrued but unpaid interest thereon), at any time from the date hereof to the close of business on the Maturity Date, may be converted into duly authorized, validly issued, fully-paid and nonassesable shares of Common Stock at $5.25 per share (the "Conversion Price"), or, in the event that any adjustment in the ---------------- Conversion Price or the securities or other property issuable upon conversion has taken place pursuant to Article IV hereof, then at the applicable Conversion Price and into such securities or other property as so adjusted, upon surrender of the Debenture or Debentures, the principal amount of which is so to be converted, to the Company at any time during usual business hours at the Company's offices, accompanied by a written notice of election to convert as provided in the form attached hereto as Exhibit A. In order for such written --------- notice to be 13 effective (a "Notice of Conversion"), such notice must (i) state that the Holder -------------------- irrevocably elects to make such conversion, (ii) specify the principal amount of the Debenture to be converted, and (iii) include the name or names (with address and social security number or other taxpayer identification number, as applicable) in which the certificates of Common Stock are to be issued (and, if different than the Holder, accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Company). b. At the option of the Majority Holders (the "Reset Option"), the ------------ Conversion Price shall be reduced to the average of the Per Share Market Value for the seven (7) Trading Days immediately following the occurrence of any of the following events (each, a "Reset Event"): ----------- (i) The Company issues shares of its Common Stock or options, warrants or other securities convertible or exchangeable therefor (other than Excluded Securities), at a price per share of Common Stock below the Conversion Price then in effect; or (ii) If all or any portion of the principal amount of this Debenture is outstanding on the first anniversary of the Closing Date; provided, however, that in such event the Conversion Price then in effect -------- ------- shall not be reduced to an amount below $3.00; or (iii) If all or any portion of the principal amount of this Debenture is outstanding on the second anniversary of the Closing Date; provided, however, that in such event the Conversion Price then in effect -------- ------- shall not be reduced to an amount below $1.50. In the case of a Reset Event under (i) above, (a) the Company shall notify the Majority Holders in writing within five (5) Business Days of the date of such event (the "Company Reset Notice") in accordance with Section 4.5(e) and -------------------- (b) the Reset Option will be deemed to be exercised, and the Conversion Price shall be automatically reduced as of the date of such Reset Event unless, within five (5) Business Days after the receipt by the Holder of the Company Reset Notice, the Majority Holders provide the Company with written notification of their decision not to exercise the Reset Option. In the case of a Reset Event under (ii) or (iii) above, the Conversion Price shall be automatically reduced upon the occurrence of such Reset Event. 4.3 Adjustment for Dividends; Interest; Conversion of Multiple ---------------------------------------------------------- Debentures. No payment or adjustment will be made for dividends on any Common - ---------- Stock except as provided herein. On conversion of all or any portion of this Debenture, any accrued and unpaid interest attributable to the portion of the principal amount of this Debenture being so converted shall not be canceled, extinguished or forfeited, but rather shall be paid in full to the Holder thereof by the payment of an amount of shares of Common Stock valued at the Average Price equal thereto. If the Holder converts other Debentures at the same time as converting all or any portion of this Debenture, the number of shares of Common Stock issuable upon the conversion shall be based on the total principal amount of the Debentures being converted. 4.4 Issuance of Shares Upon Conversion. ---------------------------------- a. No later than three (3) Trading Days after delivery of a Notice of Conversion and the surrender of this Debenture for conversion, the Company shall deliver or cause to be delivered to, or upon the written order of, the Holder of this Debenture a certificate or certificates representing the number of duly authorized, validly issued, fully-paid and nonassesable shares of Common Stock, into which this Debenture (together with any other Debentures of such Holder being converted) may be converted in accordance with the provisions of this Article IV. Such conversion shall be deemed to have been made at the time and on the date the Notice of Conversion is delivered to the Company (the 14 "Conversion Date") and the rights of the Holder of such Debenture or Debentures --------------- as a Holder (subject to the Company's satisfaction of its obligations hereunder with respect to such conversion) shall cease at such time with respect to the Converted Debentures; the Person or Persons entitled to receive the shares of Common Stock upon conversion of such Debenture or Debentures 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 Debenture which is converted in part only, upon such conversion the Company shall execute and deliver to the holder thereof, as requested by such holder, a new Debenture or securities of authorized denominations in aggregate principal amount equal to the unconverted portion of such Debenture. b. [reserved] c. In lieu of delivering physical certificates representing the Underlying Shares, provided the Company's transfer agent is participating in the Depositary Trust Company Fast Automated Debentures Transfer ("FAST") program, ---- upon consent of the Holder and in compliance with the provisions of Sections 4.1, 4.2 and 4.4, the Company may, at its option, cause its transfer agent to electronically transmit the shares of Common Stock issuable upon conversion of the Debenture to the Holder by crediting the account of the Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time period for delivery described in subparagraph (a) above shall apply to the electronic transmittals described herein. d. In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4.4(a), including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid interest hereunder, by the third (3rd) Trading Day after the Conversion Date, and if after such third (3rd) Trading Day and before delivery of such certificate or certificates the Holder purchases (in an open market, arms' length transaction) Common Stock to deliver in satisfaction of a sale by such Holder of such Underlying Shares which the Holder was entitled to receive upon such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder (in addition ------ to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including reasonable brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue for which such Buy-In was made, multiplied by (2) the Per Share Market Value on the Conversion Date and (B) at the option of the Holder, either return the Debenture for which such conversion was not honored or deliver to such Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its conversion and delivery obligations under Section 4.4(a). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the Per Share Market Value of the Common Stock on such date totaled $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In within five (5) Business Days of the date such Buy-In occurred and provide a broker confirmation evidencing Holder's total purchase price (including, any brokerage commissions) for the shares of Common Stock so purchased. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties hereto agree that in the event that (other than under the circumstances referred to in Section 4.9 hereof) the Company fails to deliver the shares of Common Stock required to be issued by the Company upon the conversion of such Debenture or Debentures pursuant to this Section 4.4 within the three (3) Trading Day period referred to above, the Company shall, upon demand of the Holder, pay to the Holder cash in an amount equal to the product of (w) the number of 15 shares of Common Stock for which timely delivery was not made, (x) the Per Share Market Value of such shares on the Conversion Date, (y) the number of days after such three (3) Trading Day period that such shares were not delivered to the Holder, and (z) 0.005. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties hereto agree that in the event that (other than under the circumstances referred to in Section 4.9 hereof) the Company fails to deliver the shares of Common Stock required to be issued by the Company upon the conversion of such Debenture or Debentures pursuant to this Section 4.4 by the fifth (5/th/) Trading Day after the Conversion Date, the Company shall, at the time of actual delivery of such shares of Common Stock to the Holder, also deliver to the Holder cash in an amount equal to any positive difference between (i) the product (x) the number of shares of Common Stock being delivered and (y) the Per Share Market Value on the Trading Day immediately preceding such delivery, and (ii) the product of (x) the number of shares of Common Stock being delivered and (y) the greater of the Conversion Price or the Per Share Market Value on the Conversion Date. 4.5 Adjustment of Conversion Price. In addition to any adjustment to ------------------------------ the Conversion Price as the result of a Reset Event, the Conversion Price in effect at any time shall be subject to adjustment from time to time 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 Debenture 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 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; Options; Warrants or Other Securities. If the Company, --------------------------------------------- at any time while this Debenture is outstanding, shall issue rights, options, warrants or other securities to all of the holders of Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Threshold 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, options, warrants or other securities 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, options, warrants or other securities 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, options, warrants or other securities 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 rights, warrants, options or other securities, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 4.5(b), if any such rights, warrants, options or other securities 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 4.5(g) after the 16 issuance of such rights, warrants, options or other securities) had the adjustment of the Conversion Price made upon the issuance of such rights, warrants, options or other securities been made on the basis of the issuance of only that number of shares of Common Stock (if any) actually purchased upon the exercise of such rights, warrants, options or other securities actually exercised. c. Subscription Rights. If the Company, at any time while this ------------------- Debenture is outstanding, shall distribute to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other securities entitling them to subscribe for, purchase, convert to, exchange for or to otherwise acquire any security (excluding those referred to in Sections 4.5(a) and (b) above), then in each such case the Conversion Price at which the Debenture shall thereafter be exercisable shall be determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction, the denominator of which shall be the Per Share Market Value of Common Stock determined as of the date mentioned above, and the numerator of which shall be such Per Share Market Value of the Common Stock on such date less the then fair market value at such 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 an Appraiser selected in good faith by the Holder; 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 thereafter. d. Rounding. All calculations under this Section 4.5 shall be made -------- to the nearest cent or the nearest l/l00th of a share, as the case may be. e. Notice of Adjustment. Whenever the Conversion Price is adjusted -------------------- pursuant to paragraphs 4.2(b) or 4.5(a), (b) or (c), the Company shall promptly deliver to the Holder 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. In the event of any reclassification of --------------------- the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to convert the principal amount of (and any accrued by unpaid interest on) this Debenture into the securities, cash or property receivable upon or deemed to be held by holders of Common Stock following such reclassification or compulsory share exchange, and the Holder shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of Common Stock into which the principal amount (and any accrued but unpaid interest thereon) of this Debenture could have been converted immediately prior to such event would have received. g. Adjustment to Conversion Price. If the Company, at any time ------------------------------ while this Debenture is outstanding, takes any of the actions described in this Section 4.5(g), then, in order to prevent dilution of the rights granted under this Debenture, at any time prior to the Maturity Date, the Conversion Price will be subject to adjustment from time to time as provided in this Section 4.5(g); provided, however, that no adjustment to the Conversion Price shall be -------- ------- made pursuant to this Section 4.5(g) in respect of any action by the Company with respect to which the Conversion Price is adjusted pursuant to Section 4.2(b) above. (i) Adjustment of Conversion Price upon Issuance of Common ------------------------------------------------------ Stock. If at any time while this Debenture is outstanding the Company ----- issues or sells, or is deemed to have 17 issued or sold, any shares of Common Stock (other than any Excluded Securities), for a consideration per share less than the lower of (x) the -------- Per Share Market Price on the Trading Day immediately prior to the date of issuance and (y) the Conversion Price then in effect (such lesser price, the "Threshold Price"), the Conversion Price then in effect shall be --------------- reduced to an amount equal to the consideration per share of Common Stock in such issuance. For the purpose 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 while this ------------------- Debenture is outstanding the Company in any manner grants, issues or sells any rights, options, warrants, options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than any Excluded Securities) (such rights, warrants 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 Convertible Securities is less than the Threshold Price, then the Conversion Price then in effect shall be reduced 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 upon conversion or exchange of such Options. (B) Issuance of Convertible Securities. If at any time ---------------------------------- while this Debenture is outstanding the Company 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 any Excluded Securities) is less than Threshold Price, then the Conversion Price then in effect shall be reduced to an amount equal to the price per share for which the Common Stock is issuable 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 upon 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 immediately after such change in option price or rate of conversion, 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) Effect on Conversion 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 18 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 in respect of such securities will be based on the Average Price of such securities on the Trading Day immediately preceding the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Majority Holders. 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 in good faith by the Company and agreed upon by the Majority Holders. 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 $.01 per share. (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. (E) Certain Events. If any event that would adversely -------------- affect the rights of the Holder occurs but is 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 Conversion Price so as to protect the rights of the Holder, or assigns, of this Debenture; provided, however, that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 4.5(g). 19 (F) Notices. The Company shall give the Holder written ------- notice of the occurrence of any of the events specified in this Section 4.5(g) as soon as practicable, but in no event later than three (3) Business Days, after such event and shall publicly disclose such event prior to or concurrently with the giving of such notice. Such notice shall contain at least a description of the event and the adjusted Conversion Price with a reference to the applicable paragraph in Section 4.5(g) hereof. 4.6 Restriction on Conversion by Either the Holder or the Company. ------------------------------------------------------------- Notwithstanding anything herein to the contrary, in no event shall any Holder or the Company have the right or be required to convert any or all of the aggregate principal amount and interest accrued thereon of this Debenture if as a result of such conversion the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock following such conversion. For purposes of this Section 4.6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this Section 4.6 may be waived by a Holder as to itself (and solely as to itself) upon not less than 65 days prior written notice to the Company, and the provisions of this Section 4.6 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). The provisions of this Section 4.6 may be waived by the Company in the event of a properly issued Mandatory Conversion Notice, as it relates to the securities referenced in such notice. 4.7 Officer's Certificate. Whenever the number of shares purchasable --------------------- upon conversion shall be adjusted as required by the provisions of Sections 4.2(b) or 4.5, the Company 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 Conversion Price 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 Company and by the secretary or any assistant secretary of the Company. Each such officer's certificate shall be made available at all reasonable times for inspection by any Holder of the Debentures and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the each of the Holders. 4.8 Reservation of Shares. The Company 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 Debentures as herein provided, such number of shares of the Common Stock as shall then be issuable upon the conversion of all outstanding Debentures into Common Stock in accordance with Section 3.6(b) of the Purchase Agreement (the "Reserved Amount"). The Company covenants that all shares of the Common Stock --------------- issued upon conversion of the Debenture which shall be so issuable shall, when issued, be duly and validly issued and fully paid and non-assessable. If, at any time at which the then applicable Conversion Price is less than the Per Share Market Value, a Holder of this Debenture submits a Notice of Conversion and the Company does not have sufficient authorized but unissued shares of Common Stock available to effect such conversion in accordance with the provisions of this Article IV (a "Conversion Default"), subject to Section ------------------ 4.13, the Company shall issue to the Holder all of the shares of Common Stock which are then available to effect such conversion. The portion of this Debenture which the Holder included in its Conversion Notice and which exceeds the amount which is then convertible into available shares of Common Stock (the "Excess Amount") shall, notwithstanding anything to the contrary contained ------------- herein, not be convertible into Common Stock in accordance with the terms hereof until the date additional shares of Common Stock are authorized by the Company to permit such conversion, at which time, if the Holder elects to proceed with such conversion by written notice to the Company within twenty (20) Business Days after the 20 Authorization Notice Date (as defined below), the Conversion Price in respect thereof shall be the lesser of (i) the Conversion Price on the Conversion Default Date (as defined below) and (ii) the lowest Per Share Market Value on any date after the Conversion Default Date and prior to that date which is five (5) Business Days after the Company provides the Holder with written notice that additional shares of Common Stock have been authorized by the Company to permit such conversion in respect thereof (the "Authorization Notice Date"). In ------------------------- addition, the Company shall pay to the Holder payments ("Conversion Default ------------------ Payments") for a Conversion Default in the amount of (x) the Excess Amount, - -------- multiplied by (y) .24, multiplied by (z) (N/365), where N equals the number of days from the day the holder submits a Notice of Conversion giving rise to a Conversion Default (the "Conversion Default Date") to the date (the ----------------------- "Authorization Date") that the Company authorizes a sufficient number of shares ------------------ of Common Stock to effect conversion of the Excess Amount. The Company shall use its best efforts to authorize a sufficient number of shares of Common Stock as soon as practicable following the earlier of (i) such time that the Holder notifies the Company or that the Company otherwise becomes aware that there are or likely will be insufficient authorized and unissued shares to allow full conversion thereof and (ii) a Conversion Default. The Company shall send notice to the Holder of the authorization of additional shares of Common Stock, the Authorization Date and the amount of Holder's accrued Conversion Default Payments. The accrued Conversion Default Payments for each calendar month shall be paid in cash to the Holder by the fifth (5th) Business Day of the month following the month in which it has accrued. Nothing herein shall limit the Holder's right to pursue actual damages (to the extent in excess of the Conversion Default Payments) for the Company's failure to maintain a sufficient number of authorized shares of Common Stock, and each Holder shall have the right to pursue all remedies available at law or in equity (including decree of specific performance and/or injunctive relief). 4.9 Compliance With Governmental Requirements; NASDAQ Limitation. The ------------------------------------------------------------ Company covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Debentures 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 Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. If on any date (the "Determination Date") (a) the Common Stock is listed for trading on Nasdaq or the Nasdaq National 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 Debentures and exercise in full of the Warrants as if all such Debentures were converted and such Warrants were exercised on such Determination Date (without regard to any limitations on conversions) and as payment of interest thereon, and (y) the aggregate number of shares of Common Stock issued to the Purchasers upon any prior conversion of the Debentures or exercise of the Warrants, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the date hereof (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 principal amount of the Debentures 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 such Holder's pro rata allocation (as described below) of the Issuable Maximum (the "Excess Principal"), the Company may elect to prepay cash to the ---------------- Holders in an amount equal to the Non-Conversion Prepayment Amount with respect to such Excess Principal. Any such election by the Company must be made in writing to the Holders within five (5) Trading Days after 21 the Determination Date and the payment of such Non-Conversion Prepayment Amount must be made in full to the Holders within ten (10) Business Days after the date such notice is delivered. If the Company 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 Majority Holders 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 either: (i) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request unless the Company has previously used its best efforts to, but has failed to, obtain such approval (provided, that if the Company shall fail to obtain the Shareholder Approval during such 60-day period, the Holder may demand the cash payment set forth in Section 4.9(ii) herein) or (ii) pay cash to such Holder, within five (5) Business Days of such Holder's notice, in an amount equal to the Non-Conversion Prepayment Amount for such Holder's portion of the Excess Principal. The payment of the Non-Conversion Prepayment Amount to each Holder pursuant to this Section shall be determined on a pro rata basis upon the principal amount of the Debentures held by such Holder on the Determination Date which is in excess of the pro rata allocation of the Issuable Maximum. If the Company fails to pay the Non-Conversion Prepayment Amount in full pursuant to this Section within five (5) Business Days after the date payable, the Company will pay interest thereon at a rate of 20% 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. Until the Company has received the Shareholder Approval no Holder of the Debentures shall be issued, upon conversion of Debentures, shares of Common Stock in an amount greater than such Holder's allocated portion of the Issuable Maximum pursuant to Section 4.13. Notwithstanding anything to the contrary in this Debenture, in no event shall the Company be required to issue shares of Common Stock upon conversion of the Debentures if such issuance would violate the rules of Nasdaq or the Nasdaq National Market. 4.10 Fractional Shares. Upon a conversion hereunder, the Company ----------------- 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 Company 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. 4.11 Payment of Tax Upon Issue or Transfer. The issuance of ------------------------------------- certificates for shares of the Common Stock on conversion of the Debentures 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 Company 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 Debentures so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 4.12 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 4:00 p.m. EST where such notice is to be received), or the first Business Day following such delivery (if received after 4:00 p.m. EST where such notice is to be received) or (b) on the second Business Day following the 22 date of mailing by overnight 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 Boston Life Sciences, Inc., 137 Newbury Street, 8th Floor, Boston, MA, 02166, Attn: Joseph Hernon, Chief Financial Officer, fax no. (617) 425-0996 with copies to Ropes & Gray, One International Place, Boston, MA 02110-2624, Attn: Steven A. Wilcox, Esq., fax no. (617) 951-7050, 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. 4.13 Allocation of Reserved Amount and Issuable Maximum. The Reserved -------------------------------------------------- Amount and Issuable Maximum shall be allocated pro rata among the Purchasers based on the principal amount of Debentures issued to each Purchaser pursuant to the Purchase Agreement. Each increase to the Reserved Amount and Issuable Maximum shall be allocated pro rata among the Purchasers based on the principal amount of Debentures held by each Purchaser at the time of the increase in the Reserved Amount and Issuable Maximum. In the event a Purchaser shall sell or otherwise transfer any of such Purchaser's Debentures, each transferee shall be allocated a pro rata portion of such transferor's Reserved Amount and Issuable Maximum. Any portion of the Reserved Amount and Issuable Maximum which remains allocated to any person or entity which does not hold any Debentures shall be allocated to the remaining Purchasers, pro rata, based on the principal amount of such Debentures then held by such Purchasers. ARTICLE V OPTIONAL REDEMPTION 5.1 Optional Redemption. The Debenture will not be redeemable at the ------------------- option of the Company prior to the first anniversary of the Closing Date. So long as (i) no Event of Default (or any event that with the passage of time or giving of notice or both would constitute an Event of Default) shall have occurred and be continuing and no Determination Date shall have occurred with respect to which any amounts due to the Holder pursuant to Section 4.9 above shall not have been paid in full, (ii) any Registration Statement required to be filed and be effective pursuant to 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) days prior to the Redemption Notice Date (as defined below) and (iii) the Company has a sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion of the Debentures, the principal amount of the Debenture will be redeemable at the option of the Company, in whole at any time or in part from time to time after the first anniversary of the Closing Date, at a price equal to the then outstanding principal amount of the Debenture or the portion thereof then being redeemed (a "Redemption Price") (expressed in percentages of the principal ---------------- amount thereof) in each case together with all accrued and unpaid interest and other amounts due in respect thereof to the Redemption Date (as defined below) (subject to the right of the Holder on the Record Date to receive interest due on the Interest Payment Date if sooner than the Redemption Date). 5.2 Mechanics of Redemption. The Company shall exercise its right ----------------------- to redeem by delivering written notice by facsimile and overnight courier ("Notice of Company Redemption") to each Holder (the first full Business Day ---------------------------- following such notice being referred to herein as the "Redemption Notice Date"). ---------------------- Such Notice of Company Redemption shall indicate (A) the maximum, if any, aggregate dollar amount of Redemption Price which the Company will pay for such Redemption, (B) each Holder's pro rata allocation of such maximum amount, (C) the Redemption Price, and (D) confirm the date 23 ("Redemption Date") the Company shall effect the Redemption, which date shall be --------------- not less than ten (10) Business Days and not more than sixty (60) calendar days after the Redemption Notice Date. If the Company elects not to redeem all the Debentures outstanding, the Company shall allocate for redemption from each Holder an amount of the Redemption Price equal to such Holder's pro rata amount (based on the principal amount of the Debenture held by such Holder on the date of the Notice of Company Redemption relative to the total principal of the Debentures outstanding on such date). Notwithstanding anything in this Section 5, the Company (i) shall convert any portion of this Debenture not subject to such Notice of Company Redemption if a Conversion Notice for such portion of this Debenture is delivered to the Company in accordance with Section 4, and (ii) shall convert all or any portion of this Debenture subject to such Notice of Company Redemption if a Conversion Notice for such portion of this Debenture is delivered in accordance with Section 4 at least two (2) Business Days before the Redemption Date; provided, however that in the case of (ii), if a Reset Event specified in Section 4.2(b)(ii) or Section 4.2(b)(iii) shall have occurred within the ten (10) Business Days immediately preceding or following the Redemption Notice Date, the applicable Conversion Price in respect of such conversion shall be treated as not having been adjusted as the result of such Reset Event. 5.3 Payment of Redemption Price. The Company shall pay the --------------------------- applicable Redemption Price to the Holder of the Debentures being redeemed in cash on the Redemption Date. If the Company shall fail to pay the applicable Redemption Price to such Holder on the Redemption Date, in addition to any remedy such Holder may have under this Debenture and the Purchase Agreement, such unpaid amount shall bear interest at the Default Rate until paid in full. Until the Company pays such unpaid applicable Redemption Price in full to each Holder, each Holder of Debentures submitted for redemption pursuant to this Section 5 and for which the applicable Redemption Price has not been paid, shall have the option, in lieu of redemption exercised by sending written notice thereof to the Company (the "Void Redemption Notice"), (A) to require the ---------------------- Company to promptly return to such Holder all of the Debentures that were submitted for redemption by such Holder under this Section 5 and for which the applicable Redemption Price has not been paid or (B) to convert those Debentures for which the applicable Redemption Price has not been paid at a Conversion Price equal to the lesser of (I) the Conversion Price applicable to such conversion on the Redemption Date and (II) the lowest Per Share Market Value from the Redemption Date to the date the Holder gives a Void Redemption Notice. Upon the Company's receipt of such Void Redemption Notice(s), (i) the redemption shall be null and void with respect to those Debentures submitted for redemption by such Holders and for which the applicable Redemption Price has not been paid, (ii) as provided by such Void Redemption Notice, the Company shall immediately either (a) return any Debentures submitted to the Company by such Holders for redemption under this Section 5 and for which the applicable Redemption Price has not been paid or (b) convert such Debentures into Common Stock at a Conversion Price equal to the lesser of (I) the Conversion Price applicable to such conversion on the date on which such Debentures were originally presented for redemption and (II) the lowest Per Share Market Value from the Redemption Date to the date the Holder gives a Void Redemption Notice. If the Company fails to timely effect a redemption in accordance with this Section 5, the Company shall not be allowed to submit another Notice of Company Redemption within the thirty (30) days following the date such Holders gave a Void Redemption Notice, without the prior written consent of the Majority Holders. If the Company chooses to redeem all or any portion of the Debentures pursuant to this Section 5, the Company shall issue such number of the Company's Class A Warrants equal to the product of (i) the product (a) 725,000 and (b) the quotient of (1) the principal amount of this Debenture over (2) 8,000,000, and (ii) the quotient of (a) the principal amount of this Debenture for which the Company is submitting a Notice of Company Redemption over (b) the original principal amount of this Debenture. 24 ARTICLE VI MANDATORY CONVERSION 6.1 Mandatory Conversion. a. Mandatory Conversion Events. This Debenture is convertible at --------------------------- the option of the Company from time to time, to the extent and subject to the conditions set forth in this Article VI (the "Mandatory Conversion") as follows: -------------------- (i) The entire outstanding principal amount of this Debenture plus interest accrued is convertible in whole or in part if the Per Share Market Price of the Common Stock exceeds $9.25 for any twelve (12) consecutive Trading Days (the "Mandatory Total Conversion Event") (ii) in addition, $1,000,000 of the -------------------------------- principal amount of the Debentures is convertible if the Per Share Market Price of the Common Stock equals or exceeds $6.00 for any four (4) consecutive Trading Days; (iii) in addition, an additional $1,000,000 of the principal amount of the Debentures outstanding is convertible if the Per Share Market Price of the Common Stock equals or exceeds $6.50 for any three (3) consecutive trading Days; and (iv) in addition, an additional $1,000,000 of the principal amount of the Debentures outstanding is convertible if the Per Share Market Price of the Common Stock equals or exceeds $7.00 for any three (3) consecutive Trading Days (each of clauses (ii), (iii) and (iv), a "Mandatory Partial Conversion Event" ---------------------------------- and together with the Mandatory Total Conversion Event, the "Mandatory --------- Conversion Events". - ----------------- b. Mandatory Conversion Notice. Subject to the conditions set forth --------------------------- in Section 6.1(a), so long as (i) no Event of Default (or any event that with the passage of time or giving of notice or both would constitute an Event of Default) shall have occurred and be continuing, (ii) any Registration Statement required to be filed and be effective pursuant to 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) days prior to the Mandatory Conversion Notice Date (as defined below) and (iii) the Company has a sufficient number of authorized shares of Common Stock reserved for issuance upon full conversion of the Debentures, upon ten (10) Business Days' prior written notice to the Holder (a "Mandatory Conversion Notice"), the --------------------------- portion of the principal amount of the Debentures indicated in the applicable clause of 6.1(a) may be converted by the Company, in whole or in part, into shares of Common Stock at the Conversion Price in effect on the date of such notice. 6.2 Mechanics of Mandatory Conversion. The Company shall exercise --------------------------------- its right to cause a Mandatory Conversion hereunder by delivering its Mandatory Conversion Notice by facsimile and overnight courier to each Holder (such date that the Mandatory Conversion Notice is given on, the "Mandatory Conversion -------------------- Notice Date"), no later than twenty (20) Business Days after the occurrence of a - ----------- Mandatory Conversion Event. Such Mandatory Conversion Notice shall indicate (a) the Conversion Price, (b) the number of shares of Common Stock that each Holder shall receive as a result of the Mandatory Conversion and (c) a confirmation of the date that the Company shall effect the Mandatory Conversion and issue shares of Common Stock to the Holders (the "Mandatory Conversion Date"), which shall be ------------------------- no sooner than five (5) Business Days or later than ten (10) Business Days after the receipt of the Mandatory Conversion Notice by the Holder. The Company shall issue the Common Stock on the Mandatory Conversion Date. The Mandatory Conversion shall be subject to the provisions set forth in Section 4.4, mutatis mutandis. 25 ARTICLE VII MISCELLANEOUS 7.1 Modification of Debentures. This Debenture may be modified -------------------------- without prior notice to any Holder upon the written consent of the Company and the Majority Holders. The Majority Holders may waive compliance by the Company with any provision of this Debenture 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 Debentures whose Holders must consent to an amendment, supplement or waiver, (2) reduce the principal amount of or extend the fixed maturity of any Debenture or (3) make any Debenture payable in money or property other than as stated in the Debentures. 7.2 Miscellaneous. This Debenture 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. 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 Debenture, 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 Debenture by acceptance of this Debenture agrees to be bound by the provisions of this Debenture which are expressly binding on such Holder. 7.3 Rank. Except as expressly provided herein, no provision of this ---- Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Debenture at the time, place, and rate, and in the coin or currency (or, as provided herein, in Common Stock), herein prescribed. This Debenture is a direct obligation of the Company. Except as otherwise provided herein, the Company may not voluntarily prepay the outstanding principal amount of the Debenture. 7.4 Debentures Owned by Company Deemed Not Outstanding. In -------------------------------------------------- determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Debenture, Debentures which are owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that any Debentures owned by the Purchasers shall be deemed outstanding for purposes of making such a determination. Debentures so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Company the pledgee's right so to act with respect to such Debentures and that the pledgee is not the Company or an Affiliate of the Company. 7.5 Notice to Holders Prior to Taking Certain Types of Action. In --------------------------------------------------------- case: a. the Company shall authorize the issuance, at any time from and after the Original Issue Date, to all holders of any class or series of its Capital Stock, of rights or warrants to subscribe for or purchase shares of its Capital Stock or of any other right; 26 b. the Company shall authorize, at any time from and after the Original Issue Date, the distribution to all holders of any class or series of its Capital Stock, of evidences of its indebtedness or assets; c. the Company shall declare a dividend (or other distribution) on its Common Stock or the Company shall declare a special nonrecurring dividend on or a redemption of its Common Stock; d. of any subdivision, combination or reclassification of any class or series of Capital Stock of the Company at any time from and after the Original Issue Date or of any consolidation or merger to which the Company is a party and for which approval by the shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or e. of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be mailed to the Holders of this Debenture, at their last addresses as they shall appear upon the registration books of the Company, at least 10 days prior to the applicable record date hereinafter specified, a notice stating (i) the date as of which the holders of record of such class or series of Capital Stock are to be entitled to receive any such rights, warrants or distribution are to be determined, or (ii) the date on which any such subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action is expected to become effective, and the date as of which it is expected that holders of record of such class or series of Capital Stock record shall be entitled to exchange their stock for securities or other property, if any, deliverable upon such subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action. The failure to give the notice required by this Section 7.5 or any defect therein shall not affect the legality or validity of any distribution, right, warrant, subdivision, combination, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or other action, or the vote upon any of the foregoing. 7.6 Effect of Headings. The Section headings herein are for ------------------ convenience only and shall not affect the construction hereof. 7.7 No Rights as Stockholder. This Debenture shall not entitle the ------------------------ Holder to any rights as a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof. 7.8 Failure or Indulgence Not Waiver. No failure or delay on the -------------------------------- part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 27 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed as of this 22nd day of September, 1999. BOSTON LIFE SCIENCES, INC. By _________________________________ Name: Title: 28 EXHIBIT A BOSTON LIFE SCIENCES, INC. CONVERSION NOTICE Reference is made to the Debenture issued by Boston Life Sciences, Inc. (the "Debenture"). In accordance with and pursuant to the Debenture, the undersigned --------- hereby irrevocably elects to convert the principal amount of the Debenture, indicated below into shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Company, by tendering the Debenture specified below as ------------ of the date specified below. Date of Conversion:___________________________________________________________ Aggregate Principal Amount to be converted:___________________________________ Debenture no(s). of Debenture to be converted:________________________________ Please confirm the following information: Conversion Price:_____________________________________________________________ Number of shares of Common Stock to be issued:________________________________ Please issue the Common Stock into which the Debenture is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to:_____________________________________________________________________ Facsimile Number:_____________________________________________________________ Authorization: By:______________________________ Title: Dated:_______________________________ Account Number (if electronic book entry transfer):___________________________ Transaction Code Number (if electronic book entry transfer):__________________ 29 EX-10.3 4 FORM OF CLASS A WARRANT EXHIBIT 10.3 FORM OF CLASS A WARRANT NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND APPLICABLE STATE LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, THE WARRANTS REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF SEPTEMBER 22, 1999 AMONG THE COMPANY AND THE PURCHASERS PARTY THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE COMPANY. September 22, 1999 ________shares Warrant No. __ BOSTON LIFE SCIENCES, INC. STOCK PURCHASE WARRANT Registered Owner: [Insert Registered Owner] This certifies that, for value received, Boston Life Sciences, Inc., 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, within three (3) Business Days of the date thereof, shall issue to the Registered Owner, or assigns, up to the number of shares specified in Section 2 hereof of fully paid and nonassessable shares of 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 (the "Warrant Shares") is _____ shares, subject to -------------- adjustment from time to time as to the number and kind of securities for which this Warrant is exercisable, all as set forth in Section 6 hereof. The Company shall at all times reserve and hold available out of its authorized and unissued shares of Common Stock or other securities, as the case may be, 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 or other securities, as the case may be, that may be issued upon the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and nonassessable, free from all taxes, liens and charges with respect to the purchase and the issuance of the shares, and shall not have any legend or restrictions on resale, except as required by Section 3.2(b) of the Purchase Agreement. 3. Exercise Price. a. The initial per share exercise price of this Warrant, representing the price per share at which the shares of stock issuable upon exercise of this Warrant may be purchased, is $5.75, subject to adjustment from time to time pursuant to the provisions of Section 6 hereof (the "Exercise Price"). -------------- b. At the option of the Registered Owner, the Exercise Price will be reduced to an amount which is equal to the sum of (x) the product of (i) 4.5% and (ii) the average of the Per Share Market Value for the seven (7) Trading Days immediately following the occurrence of either of the following events (each, a "Reset Event") and (y) the average of the Per ----------- Share Market Value for the seven (7) Trading Days immediately following the occurrence of such Reset Event: (i) The Company issues shares of its Common Stock or options, warrants or other securities convertible or exchangeable therefor (other than Excluded Securities), at a price per share of Common Stock below the Exercise Price then in effect; or (ii) If all or any portion of the principal amount of the Debenture (as defined in the Purchase Agreement is outstanding on the first anniversary of the Closing Date. (iii) If all or any portion of the principal amount of the Debenture (as defined in the Purchase Agreement) is outstanding on the second anniversary of the Closing Date. In the case of a Reset Event under (i) above, (a) the Company shall notify the Majority Holders in writing within five (5) Business Days of the date of such event (the "Company Reset Notice") in accordance with Section 6(e), and (b) the -------------------- Reset Option will be deemed to be exercised, and the Exercise Price shall be automatically reduced as of the date of such Reset Event unless, within five (5) Business Days after the receipt by the Holder of the Company Reset Notice, the Registered Holder provides the Company with written notification of its decision not to exercise the Reset Option. In the case of a Reset Event under (ii) or (iii) above, the Conversion Price shall be automatically reduced upon the occurrence of such Reset Event. Notwithstanding the foregoing, in the case of a Reset Event under (ii) above, the Exercise Price shall not be reduced below $3.14, and in the case of a Reset Event under (iii) above, the Exercise Price shall not be reduced below $1.57. 4. Exercise Period. This Warrant may be exercised from the Closing Date (as defined in the Purchase Agreement) up to and including September 22, 2004 (5 years less 1 day) (the "Exercise Period"). If not exercised during this period, --------------- this Warrant and all rights granted under this Warrant shall expire and lapse. 5. Tender; Issuance of Certificates. a. Subject to Section 16 hereof, this Warrant may be exercised, in whole or in part, by (i) actual delivery of (a) the Exercise Price in cash, (b) a duly executed Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit A, properly executed by the Registered Owner, or --------- assigns, of this Warrant, and (c) by surrender of this Warrant, or (ii) if the resale of the Warrant Shares by the Registered Owner is not then registered pursuant to an effective registration statement under the Securities Act, delivery to the Company of a written notice of an election to effect a "Cashless Exercise" in accordance with Section 5(b), below, for the Warrant Shares specified in the Warrant Exercise Form. The Warrant Shares so purchased shall be deemed to be issued to the Registered Owner as of the close of business on the date on which this Warrant shall have been surrendered, the completed Warrant Exercise Form shall have been delivered and payment shall have been made for such shares as set forth above. The payment and Warrant Exercise Form must be delivered to the registered office of the Company either in person or as set for in Section 13 hereof. b. Commencing one hundred (100) days from the Filing Date (as defined in the Registration Rights Agreement), if, and only if, at the time of exercise of this Warrant, the Warrant Shares are not saleable pursuant to an effective registration statement, other than as allowed in Section 3(r) of the Registration Rights Agreement, then in addition to the exercise of all or a part of this Warrant by payment of the Exercise Price in cash as provided above, and in lieu of such payment, the Registered Owner shall have the right to effect a cashless exercise (a 2 "Cashless Exercise"). In the event of a Cashless Exercise the Registered ----------------- Owner may exercise this Warrant in whole or in part by surrendering this Warrant in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares as to which this Warrant is being exercised multiplied by (y) a fraction, the numerator of which is the Per Share Market Value of the Common Stock less the Exercise Price then in effect and the denominator of which is the Per Share Market Value (in each case adjusted for fractional shares as herein provided). c. In lieu of physical delivery of the Warrant Shares, provided the Company's transfer agent is participating in the Depositary Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon consent --- ---- of the Registered Owner and in compliance with the provisions hereof, the Company may, at its option, use its best efforts to cause its transfer agent to electronically transmit the Warrant Shares to the Registered Owner by crediting the account of the Registered Owner's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time period for delivery described herein shall apply to the electronic transmittals described in subparagraph (d) below. d. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Warrant Exercise Form, and any cash payments due under Section 15 hereof shall be delivered to the Registered Owner within a reasonable time, not exceeding three (3) Business Days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Registered Owner and shall be registered in the name of the Registered Owner or such other name as shall be designated by such Registered Owner. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Registered Owner a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. 6. Adjustment of Exercise Price. a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock ----------------------------------------------------------------- Splits. If the Company, at any time while this Warrant is outstanding, (a) ------ shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, then 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 or Other Securities. If the Company, at --------------------------------------------- any time while this Warrant is outstanding, shall issue rights, options, warrants or other securities to all of the holders of Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Threshold 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, options, warrants or other securities plus the number of additional shares of Common Stock offered for subscription, purchase, conversion, exchange or acquisition and the numerator of which shall be the number of shares of Common 3 Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights, options, warrants or other securities 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, options, warrants or other securities are issued, and shall become effective immediately after the issue date of such rights, options, warrants or other securities. However, upon the expiration of any rights, warrants, options or other securities, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this Section 6(b), if any such rights, warrants, options or other securities 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(h) after the issuance of such rights, warrants, options or other securities) had the adjustment of the Exercise Price made upon the issuance of such rights, warrants, options or other securities been made on the basis of the issuance of only that number of shares of Common Stock (if any) actually purchased upon the exercise of such rights, warrants, options or other securities actually exercised. c. Subscription Rights. If the Company, at any time while this ------------------- Warrant is outstanding, shall distribute to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other security entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire 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 date of 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 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 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 in good faith an additional Appraiser meeting the same qualifications 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 thereafter. d. Rounding. All calculations under this Section 6 shall be made to -------- the nearest cent or the nearest l/l00th of a share, as the case may be. e. Notice of Adjustment. Whenever the Exercise Price is adjusted -------------------- pursuant to paragraphs 3(b) or 6(a), (b), (c) or (h), the Company shall promptly deliver to the Registered Owner a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. f. Reclassification, Etc. In the event of any reclassification of --------------------- the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Registered Owner shall have the right thereafter to convert the shares of Common Stock underlying this Warrant into the securities, cash or property receivable upon or deemed to be held by holders of Common Stock following such reclassification or compulsory share exchange, and the Registered Owner shall be entitled upon such event to receive such amount of securities, cash or property received by a holder of Common Stock in an amount equal to the difference of (i) the amount such holder would have received had he held the 4 number of shares of Common Stock for which this Warrant could have been exercised immediately prior to such reclassification or compulsory share exchange minus (ii) the Exercise Price in effect immediately prior to such date, multiplied by the number of shares of Common Stock for which this Warrant could have been exercised immediately prior to such reclassification or compulsory share exchange. g. Notice of Certain Events. If: ------------------------ (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to 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 (iv) 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, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be delivered to the Registered Owner, at least 10 Business 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, at any time while ---------------------------- this Warrant is outstanding, 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 no -------- ------- adjustment to the Conversion Price shall be made pursuant to this Section 6(h) in respect of any action by the Company with respect to which the Conversion Price is adjusted pursuant to Section 3(b) above. (i) Adjustment of Exercise Price upon Issuance of Common Stock. ---------------------------------------------------------- If at any time while this Warrant is outstanding the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than any Excluded Securities) for a consideration per share less than the lower of the Per Share Market Value on the Trading Day immediately prior to the date of issuance or sale and (y) the Exercise Price (such lesser price, the "Threshold Price"), the Exercise Price --------------- then in effect shall be reduced to 5 an amount equal to the consideration per share of Common Stock of such issuance or sale. For the purpose 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 while this Warrant is ------------------- outstanding the Company in any manner grants, issues or sells any rights, options, warrants, options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than any Excluded Securities) (such rights, option or warrants 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 Convertible Securities is less than the Threshold Price, then the Exercise 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 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 while ---------------------------------- this Warrant is outstanding the Company 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 any Excluded Securities) is less than the Threshold Price, then the Exercise 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 issuance, 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) 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 in respect of such securities will be based on the Average Price of such securities on the Trading Day immediately preceding the date of receipt thereof. 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 6 deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the registered owners of at least 60% of the Underlying Shares and 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 in good faith by the Company and agreed upon in good faith by the holders of at least 60% of the Underlying Shares and the Warrants then outstanding. 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 $ .01. (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 that would adversely -------------- affect the rights of the Registered Owner of this Warrant occurs but is not expressly provided for by Section 6 hereof (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 of this Warrant; provided, however, that no such adjustment will increase the Exercise Price as otherwise determined pursuant to this Section 6(h). Notwithstanding the foregoing, 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. i. Adjustment of Number of Shares. Upon each adjustment of the ------------------------------ Exercise Price as a result of the calculations made in this Section 6, the number of Warrant Shares 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 after such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. 7 7. Restriction on Conversion by Either the Registered Owner or the Company. Notwithstanding anything herein to the contrary, in no event shall any Registered Owner or the Company have the right or be required to exercise this Warrant if as a result of such conversion the aggregate number of shares of Common Stock beneficially owned by such Registered Owner and its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock following such exercise. For purposes of this Section 7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this Section 7 may be waived by a Registered Owner as to itself (and solely as to itself) upon not less than 65 days prior written notice to the Company, and the provisions of this Section 7 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). 8. Officer's Certificate. Whenever the number of shares purchasable upon exercise shall be adjusted as required by the provisions of Section 3(b) or Section 6, the Company 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 Exercise Price, number of shares or other securities 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 Company and by the secretary or any assistant secretary of the Company. Each such officer's certificate shall be made available at all reasonable times for inspection by any Registered Owner of the Warrants and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the each of the Registered Owners. 9. 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 of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Appraiser" shall mean a nationally recognized or major regional --------- investment banking firm or firm of independent certified public accountants of recognized standing. "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 or other person with a business relationship with the Company. "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. "Change of Control" has the meaning set forth in Section 4.1 of the ----------------- Purchase Agreement. "Closing" has the meaning set forth in Section 1.2 of the Purchase ------- Agreement. "Common Stock" means the shares of the Company's Common Stock, par value ------------ $0.01 per share. "Company" means Boston Life Sciences, Inc., a Delaware corporation. ------- "Convertible Securities" has the meaning assigned to it in Section ---------------------- 6(h)(i)(A) hereof. 8 "Excluded Securities" means (i) the Debentures, the Warrants and the ------------------- Underlying Shares, (ii) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are issued or deemed to have been issued from time to time in connection with an Approved Stock Plan, (iii) shares of Common Stock of the Company issuable upon the exercise of any options, warrants or other securities convertible or exercisable therefor outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, (iv) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are 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, (v) warrants for up to 200,000 shares of Common Stock per year, not exceeding 600,000 shares in the aggregate, provided that the conversion price of any such warrants is above the Per Share Market Value on the date the warrant is issued, (and the Common Stock issued upon exercise thereof) issued after the date hereof by the Company for purposes other than raising capital, (vi) either Common Stock or preferred stock convertible into Common Stock, provided that such stock shall be issued at a -------- price per share of not less than $4.50 in return for proceeds not to exceed the greater of (1) $2,000,000 or (2) the amount expended by the Company in the redemption of the Company's Series C floating preferred stock; provided, further -------- however, that (a) such stock shall not be issued prior to December 1, 1999 and resales of such Common Stock (or Common Stock issuable upon conversion of such preferred stock) shall not be registered under the Securities Act prior to April 1, 2000, (b) the purchasers of such Common Stock shall be prohibited from executing short sales of Common Stock under substantially the same terms and conditions as the Purchasers are hereunder, and (c) Brown Simpson shall have a right of first offer with respect to such sale of stock at a price that is not less than the price at which such stock is eventually sold; and provided further -------- that if preferred stock is issued, the conversion terms of such preferred stock shall be no more favorable to investors than the conversion terms in the Debenture and (vii) warrants described on Schedule 2.1(m) to the Securities Purchase Agreement. "Exercise Period" has the meaning assigned to it the Section 4 hereof. --------------- "Exercise Price" has the meaning assigned to it in Section 3 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 the Nasdaq Smallcap Market or other 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 Nasdaq Smallcap 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 holders of at least 60% of the underlying shares issuable upon exercise of the warrants; provided, however, that the Company, after receipt of the -------- ------- determination by such Appraiser, shall have the right to select, in good faith, an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser; and provided, further -------- ------- that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Purchase Agreement" means that certain Securities Purchase Agreement, ------------------ dated September 22, 1999, among the Company and the Purchasers. "Purchaser" has the meaning set forth in the Purchase Agreement. --------- 9 "Registered Owner" means the person identified on the face of this Warrant ---------------- as the registered owner hereof or such other person as shown on the records of the Company as being the registered owner of this Warrant or their assigns. "Registration Rights Agreement" means that certain Registration Rights ----------------------------- Agreement, dated September 22, 1999, among the Company and the Purchasers. "Reset Event" has the meaning assigned to it in Section 3(b) hereof. ----------- "Threshold Price" has the meaning set forth in Section 6(h)(i) hereof. --------------- "Trading Day(s)" means any day on which the primary market on which shares -------------- of Common Stock are listed is open for trading. "Underlying Shares" has the meaning assigned to it in Section 2.1(d) of the ----------------- Purchase Agreement. "Warrant(s)" means the warrants issuable at the Closing. ---------- 10. NASDAQ Limitation. The Company covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Debentures 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 Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. If on any date (the "Determination Date") (a) the Common Stock is listed for trading on the Nasdaq Small Cap Market or the Nasdaq National Market, (b) the Exercise 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 Debentures and exercise in full of the Warrants as if all such Debentures were converted and such warrants were exercised on such Determination Date (without regard to any limitations on conversions) and as payment of interest thereon, and (y) the aggregate number of shares of Common Stock issued to the Purchasers upon any prior conversion of the Debentures or exercise of the Warrants, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the Closing Date (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 number of Warrant Shares the issuance of which would result in an issuance of shares of Common Stock in excess of the Warrant Holder's (a "Holder") pro rata allocation (as described below) of the Issuable Maximum (the "Excess Warrant Shares"), the Company may elect to prepay --------------------- cash to the Holders in an amount equal to the product of (A) the difference between the Per Share Market Value and the Exercise Price, multiplied by (B) the pro rata allocation of such Holder's Excess Warrant Shares (the "Non-Exercise Payment Amount"). Any such election by the Company must be made in writing to the Holders within five (5) Trading Days after the Determination Date and the payment of such Non-Exercise Prepayment Amount must be made in full to the Holders within ten (10) Business Days after the date such notice is delivered. If the Company 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 Non-Exercise Payment Amount hereunder within ten (10) Business Days thereafter, then the holders of at least 60% of the Underlying Shares exercisable upon exercise of the Warrants 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 either: (i) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request unless the Company has previously used its best efforts to, but has failed to, obtain such approval 10 (provided, that if the Company shall fail to obtain the Shareholder Approval during such 60-day period, the Holder may demand the cash payment set forth in Section 10(ii) herein) or (ii) pay cash to such Holder, within five (5) Business Days of such Holder's notice, in an amount equal to the Non-Exercise Prepayment Amount for such Holder's portion of the Excess Warrant Shares. The payment of the Non- Exercise Prepayment Amount to each Holder pursuant to this Section shall be determined on a pro rata basis upon the number of Underlying Shares issuable upon exercise of the Warrants held by such Holder on the Determination Date which is in excess of the pro rata allocation of the Issuable Maximum. If the Company fails to pay the Non-Exercise Prepayment Amount in full pursuant to this Section within five (5) Business Days after the date payable, the Company will pay interest thereon at a rate of 20% per annum to the converting Holder, accruing interest daily from the date of exercise until such amount, plus all such interest thereon, if any, is paid in full. Until the Company has received the Shareholder Approval no Holder of the Warrants shall be issued, upon exercise of Warrants, shares of Common Stock in an amount greater than such Holder's allocated portion of the Issuable Maximum pursuant to this Section 10. 11. Registration Rights. The Company will undertake the registration of the Common Stock into which such Warrants are exercisable at such times and upon such terms pursuant to the provisions of the Registration Rights Agreement. 12. Reservation of Underlying Shares; Listing. The Company 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 exercise of the Warrants as herein provided, such number of shares of the Common Stock as shall then be issuable upon the exercise of all outstanding Warrants into Common Stock. The Company covenants that all shares of the Common Stock issued upon exercise of the Warrant which shall be so issuable shall, when issued, be duly and validly issued and fully paid and non-assessable. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of the Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. 13. 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 5:00 p.m. eastern time where such notice is to be received), or the first Business Day following such delivery (if received after 5:00 p.m. eastern time 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 Boston Life Sciences, Inc., 137 Newbury Street, 8/th/ Floor, Boston, MA 02166, Attn: Joseph Hernon, Chief Financial Officer, fax no. (617) 425-0996 with copies to Steven A. Wilcox, Ropes & Gray, One International Place, Boston, MA 02110, fax: (617) 951-1050 and (ii) if to the Registered Owner to the address set forth on Schedule I 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. 14. Compliance With Governmental Requirements. The Company covenants that if any shares of Common Stock required to be reserved for purposes of exercise of Warrants hereunder require registration with or approval of any governmental authority under any Federal or state law, or any 11 national securities exchange, before such shares may be issued upon exercise, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. 15. Fractional Shares. Upon any exercise hereunder, the Company 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 Company elects not, or is unable, to make such a cash payment, the Registered Owner shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. 16. Payment of Tax Upon Issue of Transfer. The issuance of certificates for shares of the Common Stock upon exercise of the Warrants shall be made without charge to the Registered Owners 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 Company 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 exercise in a name other than that of the Registered Owner of such Warrant so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 17. Warrants Owned by Company Deemed Not Outstanding. In determining whether the holders of the outstanding Warrants have concurred in any direction, consent or waiver under this Warrant, warrants which are owned by the Company or any other obligor on the warrants or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the warrants shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that any Warrants owned by the Purchasers (as defined in the Purchase Agreement) shall be deemed outstanding for purposes of making such a determination. Warrants so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Company the pledgee's right so to act with respect to such warrants and that the pledgee is not the Company or any other obligor upon the securities or any Affiliate of the Company or any other obligor on the warrants. 18. Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. 19. No Rights as Stockholder. This Warrant shall not entitle the Registered Owner to any rights as a stockholder of the Company, 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 Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof. 20. Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. 12 21. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that the Company shall distribute "poison pill" rights pursuant to a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of ------ making any adjustment pursuant to Section 6 hereof, make proper provision so that each Registered Owner who exercises a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (i) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of ----------------- a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such exercise at the time of such exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such exercise occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares into which the Warrant to exercised was exercisable immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights, and in each case subject to the terms and conditions of the Rights. 22. Successors and Assigns. This Warrant shall be binding upon and inure to the benefit of the Registered Owners and its assigns, and shall be binding upon any entity succeeding to the Company by merger or acquisition of all or substantially all the assets of the Company. The Company may not assign this Warrant or any rights or obligations hereunder without the prior written consent of the holders of at least 60% of the Underlying Shares issuable upon exercise of the Warrants. The Registered Owner may not assign this Warrant without the prior written consent of the Company. 23. Governing Law. This Warrant 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 Warrant 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 13 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. BOSTON LIFE SCIENCES, INC. By:_______________________________ Name:_____________________________ Title:____________________________ EXHIBIT A Warrant Exercise Form --------------------- TO: BOSTON LIFE SCIENCES, INC. The undersigned hereby: (1) irrevocably subscribes for and offers to purchase _______ shares of Common Stock of Boston Life Sciences, Inc., pursuant to Warrant No. ___ heretofore issued to ___________________ on ____________, 199__; (2) encloses either (a) a cash payment of $__________ of (b) a Warrant representing _____ shares of Common Stock valued at the Per Share Market Price of $ _____ on ________, 199__, for these shares at a price of $____ 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: ________________________ ________________________ ________________________ Cashless Exercise (Y or N) _______ 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-10.4 5 FORM OF CLASS B WARRANT EXHIBIT 10.4 FORM OF CLASS B WARRANT NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND APPLICABLE STATE LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, THE WARRANTS REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF SEPTEMBER 22, 1999 AMONG THE COMPANY AND THE PURCHASERS PARTY THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE COMPANY. September 22, 1999 ________ shares Warrant No. __ BOSTON LIFE SCIENCES, INC. STOCK PURCHASE WARRANT Registered Owner: [Insert Registered Owner] This certifies that, for value received, Boston Life Sciences, Inc., 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, within three (3) Business Days of the date thereof, shall issue to the Registered Owner, or assigns, up to the number of shares specified in Section 2 hereof of fully paid and nonassessable shares of 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 (the "Warrant Shares") is _____ shares, subject to -------------- adjustment from time to time as to the number and kind of securities for which this Warrant is exercisable, all as set forth in Section 6 hereof. The Company shall at all times reserve and hold available out of its authorized and unissued shares of Common Stock or other securities, as the case may be, 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 or other securities, as the case may be, that may be issued upon the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and nonassessable, free from all taxes, liens and charges with respect to the purchase and the issuance of the shares, and shall not have any legend or restrictions on resale, except as required by Section 3.2(b) of the Purchase Agreement. 3. Exercise Price. a. The initial per share exercise price of this Warrant, representing the price per share at which the shares of stock issuable upon exercise of this Warrant may be purchased, is $8.25, subject to adjustment from time to time pursuant to the provisions of Section 6 hereof (the "Exercise Price"). -------------- b. At the option of the Registered Owner, the Exercise Price will be reduced to an amount which is equal to the sum of (x) the product of (i) 50% and (ii) the average of the Per Share Market Value for the seven (7) Trading Days immediately following the occurrence of either of the following events (each, a "Reset Event") and (y) the average of the Per ----------- Share Market Value for the seven (7) Trading Days immediately following the occurrence of such Reset Event: (i) The Company issues shares of its Common Stock or options, warrants or other securities convertible or exchangeable therefor (other than Excluded Securities), at a price per share of Common Stock below the Exercise Price then in effect; or (ii) If all or any portion of the principal amount of the Debenture (as defined in the Purchase Agreement is outstanding on the first anniversary of the Closing Date. (iii) If all or any portion of the principal amount of the Debenture (as defined in the Purchase Agreement) is outstanding on the second anniversary of the Closing Date. In the case of a Reset Event under (i) above, (a) the Company shall notify the Majority Holders in writing within five (5) Business Days of the date of such event (the "Company Reset Notice") in accordance with Section 6(e), and (b) the -------------------- Reset Option will be deemed to be exercised, and the Exercise Price shall be automatically reduced as of the date of such Reset Event unless, within five (5) Business Days after the receipt by the Holder of the Company Reset Notice, the Registered Holder provides the Company with written notification of its decision not to exercise the Reset Option. In the case of a Reset Event under (ii) or (iii) above, the Conversion Price shall be automatically reduced upon the occurrence of such Reset Event. Notwithstanding the foregoing, in the case of a Reset Event under (ii) above, the Exercise Price shall not be reduced below $4.57, and in the case of a Reset Event under (iii) above, the Exercise Price shall not be reduced below $2.28. 4. Exercise Period. This Warrant may be exercised from the Closing Date (as defined in the Purchase Agreement) up to and including September 22, 2004 (5 years less 1 day) (the "Exercise Period"). If not exercised during this period, --------------- this Warrant and all rights granted under this Warrant shall expire and lapse. 5. Tender; Issuance of Certificates. a. Subject to Section 16 hereof, this Warrant may be exercised, in whole or in part, by (i) actual delivery of (a) the Exercise Price in cash, (b) a duly executed Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit A, properly executed by the Registered Owner, or --------- assigns, of this Warrant, and (c) by surrender of this Warrant, or (ii) if the resale of the Warrant Shares by the Registered Owner is not then registered pursuant to an effective registration statement under the Securities Act, delivery to the Company of a written notice of an election to effect a "Cashless Exercise" in accordance with Section 5(b), below, for the Warrant Shares specified in the Warrant Exercise Form. The Warrant Shares so purchased shall be deemed to be issued to the Registered Owner as of the close of business on the date on which this Warrant shall have been surrendered, the completed Warrant Exercise Form shall have been delivered and payment shall have been made for such shares as set forth above. The payment and Warrant Exercise Form must be delivered to the registered office of the Company either in person or as set for in Section 13 hereof. b. Commencing one hundred (100) days from the Filing Date (as defined in the Registration Rights Agreement), if, and only if, at the time of exercise of this Warrant, the Warrant Shares are not saleable pursuant to an effective registration statement, other than as allowed in Section 3(r) of the Registration Rights Agreement, then in addition to the exercise of all or a part of this Warrant by payment of the Exercise Price in cash as provided above, and in lieu of such payment, the Registered Owner shall have the right to effect a cashless exercise (a 2 "Cashless Exercise"). In the event of a Cashless Exercise the Registered ---------------- Owner may exercise this Warrant in whole or in part by surrendering this Warrant in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares as to which this Warrant is being exercised multiplied by (y) a fraction, the numerator of which is the Per Share Market Value of the Common Stock less the Exercise Price then in effect and the denominator of which is the Per Share Market Value (in each case adjusted for fractional shares as herein provided). c. In lieu of physical delivery of the Warrant Shares, provided the Company's transfer agent is participating in the Depositary Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon consent --- ---- of the Registered Owner and in compliance with the provisions hereof, the Company may, at its option, use its best efforts to cause its transfer agent to electronically transmit the Warrant Shares to the Registered Owner by crediting the account of the Registered Owner's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time period for delivery described herein shall apply to the electronic transmittals described in subparagraph (d) below. d. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Warrant Exercise Form, and any cash payments due under Section 15 hereof shall be delivered to the Registered Owner within a reasonable time, not exceeding three (3) Business Days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Registered Owner and shall be registered in the name of the Registered Owner or such other name as shall be designated by such Registered Owner. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Registered Owner a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. 6. Adjustment of Exercise Price. a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock ----------------------------------------------------------------- Splits. If the Company, at any time while this Warrant is outstanding, (a) ------ shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, then 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 or Other Securities. If the Company, at --------------------------------------------- any time while this Warrant is outstanding, shall issue rights, options, warrants or other securities to all of the holders of Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Threshold 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, options, warrants or other securities plus the number of additional shares of Common Stock offered for subscription, purchase, conversion, exchange or acquisition and the numerator of which shall be the number of shares of Common 3 Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights, options, warrants or other securities 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, options, warrants or other securities are issued, and shall become effective immediately after the issue date of such rights, options, warrants or other securities. However, upon the expiration of any rights, warrants, options or other securities, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this Section 6(b), if any such rights, warrants, options or other securities 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(h) after the issuance of such rights, warrants, options or other securities) had the adjustment of the Exercise Price made upon the issuance of such rights, warrants, options or other securities been made on the basis of the issuance of only that number of shares of Common Stock (if any) actually purchased upon the exercise of such rights, warrants, options or other securities actually exercised. c. Subscription Rights. If the Company, at any time while this ------------------- Warrant is outstanding, shall distribute to all of the holders of Common Stock evidence of its indebtedness or assets or rights, options, warrants or other security entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire 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 date of 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 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 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 in good faith an additional Appraiser meeting the same qualifications 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 thereafter. d. Rounding. All calculations under this Section 6 shall be made to -------- the nearest cent or the nearest l/l00th of a share, as the case may be. e. Notice of Adjustment. Whenever the Exercise Price is adjusted -------------------- pursuant to paragraphs 3(b) or 6(a), (b), (c) or (h), the Company shall promptly deliver to the Registered Owner a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. f. Reclassification, Etc. In the event of any reclassification of --------------------- the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Registered Owner shall have the right thereafter to convert the shares of Common Stock underlying this Warrant into the securities, cash or property receivable upon or deemed to be held by holders of Common Stock following such reclassification or compulsory share exchange, and the Registered Owner shall be entitled upon such event to receive such amount of securities, cash or property received by a holder of Common Stock in an amount equal to the difference of (i) the amount such holder would have received had he held the 4 number of shares of Common Stock for which this Warrant could have been exercised immediately prior to such reclassification or compulsory share exchange minus (ii) the Exercise Price in effect immediately prior to such date, multiplied by the number of shares of Common Stock for which this Warrant could have been exercised immediately prior to such reclassification or compulsory share exchange. g. Notice of Certain Events. If: ------------------------ (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to 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 (iv) 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, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be delivered to the Registered Owner, at least 10 Business 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, at any time while ---------------------------- this Warrant is outstanding, 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 no -------- ------- adjustment to the Conversion Price shall be made pursuant to this Section 6(h) in respect of any action by the Company with respect to which the Conversion Price is adjusted pursuant to Section 3(b) above. (i) Adjustment of Exercise Price upon Issuance of Common Stock. ---------------------------------------------------------- If at any time while this Warrant is outstanding the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than any Excluded Securities) for a consideration per share less than the lower of the Per Share Market Value on the Trading Day immediately prior to the date of issuance or sale and (y) the Exercise Price (such lesser price, the "Threshold Price"), the Exercise Price --------------- then in effect shall be reduced to 5 an amount equal to the consideration per share of Common Stock of such issuance or sale. For the purpose 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 while this Warrant is ------------------- outstanding the Company in any manner grants, issues or sells any rights, options, warrants, options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than any Excluded Securities) (such rights, option or warrants 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 Convertible Securities is less than the Threshold Price, then the Exercise 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 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 while ---------------------------------- this Warrant is outstanding the Company 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 any Excluded Securities) is less than the Threshold Price, then the Exercise 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 issuance, 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) 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 in respect of such securities will be based on the Average Price of such securities on the Trading Day immediately preceding the date of receipt thereof. 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 6 deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the registered owners of at least 60% of the Underlying Shares and 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 in good faith by the Company and agreed upon in good faith by the holders of at least 60% of the Underlying Shares and the Warrants then outstanding. 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 $ .01. (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 that would adversely -------------- affect the rights of the Registered Owner of this Warrant occurs but is not expressly provided for by Section 6 hereof (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 of this Warrant; provided, however, that no such adjustment will increase the Exercise Price as otherwise determined pursuant to this Section 6(h). Notwithstanding the foregoing, 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. i. Adjustment of Number of Shares. Upon each adjustment of the ------------------------------ Exercise Price as a result of the calculations made in this Section 6, the number of Warrant Shares 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 after such event and the denominator of which shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event. 7 7. Restriction on Conversion by Either the Registered Owner or the Company. Notwithstanding anything herein to the contrary, in no event shall any Registered Owner or the Company have the right or be required to exercise this Warrant if as a result of such conversion the aggregate number of shares of Common Stock beneficially owned by such Registered Owner and its Affiliates would exceed 9.99% of the outstanding shares of the Common Stock following such exercise. For purposes of this Section 7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this Section 7 may be waived by a Registered Owner as to itself (and solely as to itself) upon not less than 65 days prior written notice to the Company, and the provisions of this Section 7 shall continue to apply until such 65th day (or later, if stated in the notice of waiver). 8. Officer's Certificate. Whenever the number of shares purchasable upon exercise shall be adjusted as required by the provisions of Section 3(b) or Section 6, the Company 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 Exercise Price, number of shares or other securities 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 Company and by the secretary or any assistant secretary of the Company. Each such officer's certificate shall be made available at all reasonable times for inspection by any Registered Owner of the Warrants and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the each of the Registered Owners. 9. 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 of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Appraiser" shall mean a nationally recognized or major regional --------- investment banking firm or firm of independent certified public accountants of recognized standing. "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 or other person with a business relationship with the Company. "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. "Change of Control" has the meaning set forth in Section 4.1 of the ----------------- Purchase Agreement. "Closing" has the meaning set forth in Section 1.2 of the Purchase ------- Agreement. "Common Stock" means the shares of the Company's Common Stock, par value ------------ $0.01 per share. "Company" means Boston Life Sciences, Inc., a Delaware corporation. ------- "Convertible Securities" has the meaning assigned to it in Section ---------------------- 6(h)(i)(A) hereof. 8 "Excluded Securities" means (i) the Debentures, the Warrants and the ------------------- Underlying Shares, (ii) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are issued or deemed to have been issued from time to time in connection with an Approved Stock Plan, (iii) shares of Common Stock of the Company issuable upon the exercise of any options, warrants or other securities convertible or exercisable therefor outstanding on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement, (iv) shares of Common Stock of the Company, or any options, warrants or other securities convertible or exchangeable therefor, that are 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, (v) warrants for up to 200,000 shares of Common Stock per year, not exceeding 600,000 shares in the aggregate, provided that the conversion price of any such warrants is above the Per Share Market Value on the date the warrant is issued, (and the Common Stock issued upon exercise thereof) issued after the date hereof by the Company for purposes other than raising capital, (vi) either Common Stock or preferred stock convertible into Common Stock, provided that such stock shall be issued at a -------- price per share of not less than $4.50 in return for proceeds not to exceed the greater of (1) $2,000,000 or (2) the amount expended by the Company in the redemption of the Company's Series C floating preferred stock; provided, further -------- however, that (a) such stock shall not be issued prior to December 1, 1999 and resales of such Common Stock (or Common Stock issuable upon conversion of such preferred stock) shall not be registered under the Securities Act prior to April 1, 2000, (b) the purchasers of such Common Stock shall be prohibited from executing short sales of Common Stock under substantially the same terms and conditions as the Purchasers are hereunder, and (c) Brown Simpson shall have a right of first offer with respect to such sale of stock at a price that is not less than the price at which such stock is eventually sold; and provided further -------- that if preferred stock is issued, the conversion terms of such preferred stock shall be no more favorable to investors than the conversion terms in the Debenture and (vii) warrants described on Schedule 2.1(m) to the Securities Purchase Agreement. "Exercise Period" has the meaning assigned to it the Section 4 hereof. --------------- "Exercise Price" has the meaning assigned to it in Section 3 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 the Nasdaq Smallcap Market or other 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 Nasdaq Smallcap 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 holders of at least 60% of the underlying shares issuable upon exercise of the warrants; provided, however, that the Company, after receipt of the -------- ------- determination by such Appraiser, shall have the right to select, in good faith, an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser; and provided, further -------- ------- that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. "Purchase Agreement" means that certain Securities Purchase Agreement, ------------------ dated September 22, 1999, among the Company and the Purchasers. "Purchaser" has the meaning set forth in the Purchase Agreement. --------- 9 "Registered Owner" means the person identified on the face of this Warrant ---------------- as the registered owner hereof or such other person as shown on the records of the Company as being the registered owner of this Warrant or their assigns. "Registration Rights Agreement" means that certain Registration Rights ----------------------------- Agreement, dated September 22, 1999, among the Company and the Purchasers. "Reset Event" has the meaning assigned to it in Section 3(b) hereof. ----------- "Threshold Price" has the meaning set forth in Section 6(h)(i) hereof. --------------- "Trading Day(s)" means any day on which the primary market on which shares -------------- of Common Stock are listed is open for trading. "Underlying Shares" has the meaning assigned to it in Section 2.1(d) of the ----------------- Purchase Agreement. "Warrant(s)" means the warrants issuable at the Closing. ---------- 10. NASDAQ Limitation. The Company covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Debentures 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 Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. If on any date (the "Determination Date") (a) the Common Stock is listed for trading on the Nasdaq Small Cap Market or the Nasdaq National Market, (b) the Exercise 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 Debentures and exercise in full of the Warrants as if all such Debentures were converted and such warrants were exercised on such Determination Date (without regard to any limitations on conversions) and as payment of interest thereon, and (y) the aggregate number of shares of Common Stock issued to the Purchasers upon any prior conversion of the Debentures or exercise of the Warrants, would equal or exceed 20% of the number of shares of the Common Stock outstanding on the Closing Date (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 number of Warrant Shares the issuance of which would result in an issuance of shares of Common Stock in excess of the Warrant Holder's (a "Holder") pro rata allocation (as described below) of the Issuable Maximum (the "Excess Warrant Shares"), the Company may elect to prepay --------------------- cash to the Holders in an amount equal to the product of (A) the difference between the Per Share Market Value and the Exercise Price, multiplied by (B) the pro rata allocation of such Holder's Excess Warrant Shares (the "Non-Exercise Payment Amount"). Any such election by the Company must be made in writing to the Holders within five (5) Trading Days after the Determination Date and the payment of such Non-Exercise Prepayment Amount must be made in full to the Holders within ten (10) Business Days after the date such notice is delivered. If the Company 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 Non-Exercise Payment Amount hereunder within ten (10) Business Days thereafter, then the holders of at least 60% of the Underlying Shares exercisable upon exercise of the Warrants 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 either: (i) use its best efforts to obtain the Shareholder Approval applicable to such issuance as soon as is possible, but in any event not later than the 60th day after such request unless the Company has previously used its best efforts to, but has failed to, obtain such approval 10 (provided, that if the Company shall fail to obtain the Shareholder Approval during such 60-day period, the Holder may demand the cash payment set forth in Section 10(ii) herein) or (ii) pay cash to such Holder, within five (5) Business Days of such Holder's notice, in an amount equal to the Non-Exercise Prepayment Amount for such Holder's portion of the Excess Warrant Shares. The payment of the Non- Exercise Prepayment Amount to each Holder pursuant to this Section shall be determined on a pro rata basis upon the number of Underlying Shares issuable upon exercise of the Warrants held by such Holder on the Determination Date which is in excess of the pro rata allocation of the Issuable Maximum. If the Company fails to pay the Non-Exercise Prepayment Amount in full pursuant to this Section within five (5) Business Days after the date payable, the Company will pay interest thereon at a rate of 20% per annum to the converting Holder, accruing interest daily from the date of exercise until such amount, plus all such interest thereon, if any, is paid in full. Until the Company has received the Shareholder Approval no Holder of the Warrants shall be issued, upon exercise of Warrants, shares of Common Stock in an amount greater than such Holder's allocated portion of the Issuable Maximum pursuant to this Section 10. 11. Registration Rights. The Company will undertake the registration of the Common Stock into which such Warrants are exercisable at such times and upon such terms pursuant to the provisions of the Registration Rights Agreement. 12. Reservation of Underlying Shares; Listing. The Company 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 exercise of the Warrants as herein provided, such number of shares of the Common Stock as shall then be issuable upon the exercise of all outstanding Warrants into Common Stock. The Company covenants that all shares of the Common Stock issued upon exercise of the Warrant which shall be so issuable shall, when issued, be duly and validly issued and fully paid and non-assessable. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of the Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. 13. 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 5:00 p.m. eastern time where such notice is to be received), or the first Business Day following such delivery (if received after 5:00 p.m. eastern time 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 Boston Life Sciences, Inc., 137 Newbury Street, 8/th/ Floor, Boston, MA 02166, Attn: Joseph Hernon, Chief Financial Officer, fax no. (617) 425-0996 with copies to Steven A. Wilcox, Ropes & Gray, One International Place, Boston, MA 02110, fax: (617) 951-1050 and (ii) if to the Registered Owner to the address set forth on Schedule I 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. 14. Compliance With Governmental Requirements. The Company covenants that if any shares of Common Stock required to be reserved for purposes of exercise of Warrants hereunder require registration with or approval of any governmental authority under any Federal or state law, or any 11 national securities exchange, before such shares may be issued upon exercise, the Company will use its best efforts to cause such shares to be duly registered or approved, as the case may be. 15. Fractional Shares. Upon any exercise hereunder, the Company 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 Company elects not, or is unable, to make such a cash payment, the Registered Owner shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. 16. Payment of Tax Upon Issue of Transfer. The issuance of certificates for shares of the Common Stock upon exercise of the Warrants shall be made without charge to the Registered Owners 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 Company 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 exercise in a name other than that of the Registered Owner of such Warrant so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 17. Warrants Owned by Company Deemed Not Outstanding. In determining whether the holders of the outstanding Warrants have concurred in any direction, consent or waiver under this Warrant, warrants which are owned by the Company or any other obligor on the warrants or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the warrants shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that any Warrants owned by the Purchasers (as defined in the Purchase Agreement) shall be deemed outstanding for purposes of making such a determination. Warrants so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Company the pledgee's right so to act with respect to such warrants and that the pledgee is not the Company or any other obligor upon the securities or any Affiliate of the Company or any other obligor on the warrants. 18. Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. 19. No Rights as Stockholder. This Warrant shall not entitle the Registered Owner to any rights as a stockholder of the Company, 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 Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof. 20. Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. 12 21. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that the Company shall distribute "poison pill" rights pursuant to a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of ------ making any adjustment pursuant to Section 6 hereof, make proper provision so that each Registered Owner who exercises a Warrant after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (i) if such exercise occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of ----------------- a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon such exercise at the time of such exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such exercise occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares into which the Warrant to exercised was exercisable immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights, and in each case subject to the terms and conditions of the Rights. 22. Successors and Assigns. This Warrant shall be binding upon and inure to the benefit of the Registered Owners and its assigns, and shall be binding upon any entity succeeding to the Company by merger or acquisition of all or substantially all the assets of the Company. The Company may not assign this Warrant or any rights or obligations hereunder without the prior written consent of the holders of at least 60% of the Underlying Shares issuable upon exercise of the Warrants. The Registered Owner may not assign this Warrant without the prior written consent of the Company. 23. Governing Law. This Warrant 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 Warrant 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 13 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. BOSTON LIFE SCIENCES, INC. By:________________________ Name:______________________ Title:_____________________ EXHIBIT A Warrant Exercise Form --------------------- TO: BOSTON LIFE SCIENCES, INC. The undersigned hereby: (1) irrevocably subscribes for and offers to purchase _______ shares of Common Stock of Boston Life Sciences, Inc., pursuant to Warrant No. ___ heretofore issued to ___________________ on ____________, 199__; (2) encloses either (a) a cash payment of $__________ of (b) a Warrant representing _____ shares of Common Stock valued at the Per Share Market Price of $ _____ on ________, 199__, for these shares at a price of $____ 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: _____________________ _____________________ _____________________ Cashless Exercise (Y or N) ______ 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-10.5 6 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.5 REGISTRATION RIGHTS AGREEMENT ----------------------------- This Registration Rights Agreement (this "Agreement") is made and --------- entered into as of September 22, 1999 among Boston Life Sciences, Inc., 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. "AMEX" has the meaning set forth in Section 2(d) 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 Closing Date as defined in the Purchase ------------ Agreement. "Commission" means the Securities and Exchange Commission. ---------- "Common Stock" means the Company's Common Stock, par value $.01 per ------------ share. "Effectiveness Date" means the earlier of (i) the fifth Business Day ------------------ after the Company has received notice (written or oral) from the Commission that the Commission Staff will not be reviewing the Registration Statement or has no further comments on the Registration Statement or (ii) the 100th day following the Filing Date; provided, however, that the Effectiveness Date shall be -------- ------- extended to up to the 130th day following the Filing Date if the Initial Registration Statement is not declared effective by the Commission prior to the 130th day following the Filing Date due to delays which are solely attributable to the Commission, so long as the Company responds to any comments received from the Commission in a commercially reasonable manner and as promptly as practicable, but in no event later than ten (10) Business Days. "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. ------------------ "Initial Registration Statement" has the meaning set forth in Section ------------------------------ 2(a) hereof. "Losses" has the meaning set forth in Section 5(a) hereof. ------ "Majority Holders" means the Holders of at least sixty (60%) percent ---------------- of the Registrable Securities. "Nasdaq" has the meaning set forth in Section 2(d). ------ "NYSE" has the meaning set forth in Section 2(d). ---- "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. "Registrable Securities" means the shares of Common Stock issued or ---------------------- issuable upon (i) conversion of or with respect to the Securities, (ii) payment of interest or any other payments in respect of the Securities, (iii) exercise of the Warrants, and (iv) any shares of the Company's capital stock issued with respect to (i), (ii) or (iii) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise. Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been publicly distributed pursuant to Rule 144, or (iii) all such securities held by any Holder may immediately be sold by the Holder thereof under the Securities Act without restriction as to volume or otherwise. For purposes of this Agreement, the number of shares of Registrable Securities outstanding at any time shall be determined by adding (i) the number of shares of 2 Common Stock outstanding which are Registrable Securities and (ii) the maximum number of shares of Common Stock issuable pursuant to then convertible securities which upon issuance would be Registrable Securities. "Registration Delay Payment" has the meaning set forth in Section 2(d) -------------------------- hereof. "Registration Statement" means the Initial Registration Statement and ---------------------- any additional registration statements contemplated by Sections 2(a), 2(b) and 7(d), 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. "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. "Securities" means the Company's 8% convertible debentures issuable ---------- pursuant to the Purchase Agreement. "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. "Trading Day" means a day on which the Nasdaq (or in the event the ----------- Common Stock is not traded on Nasdaq, such other securities market on which the Common Stock is listed) is open for trading. "Underlying Shares" means the shares of Common Stock issuable upon ----------------- conversion of the Securities and exercise of the Warrants. "Underwritten Registration or Underwritten Offering" means a -------------------------------------------------- registration in connection with which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective registration statement, whether on a firm commitment or best efforts basis. "Warrants" means the warrants issuable pursuant to the Purchase -------- Agreement. 2. Registration Requirements ------------------------- (a) Filing and Effectiveness Obligations. On or prior to the Filing ------------------------------------ Date, the Company shall prepare and file with the Commission a Registration Statement (the "Initial Registration Statement") which shall cover all ------------------------------ Registrable Securities for an offering to be made on a continuous basis pursuant to a "Shelf" registration statement under Rule 415. The Initial Registration Statement shall be 3 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 Majority Holders). The Company shall (i) not permit any securities other than the Registrable Securities and securities set forth in Schedule 2.1(r) of the Purchase Agreement to be included in the Initial Registration Statement and (ii) use its best efforts to cause the Initial 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 Initial Registration Statement continuously effective, subject to Section 3(r) and except that 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) shall not be deemed to be a violation of this obligation, under the Securities Act until the date which is five (5) years after the date that such Initial Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Initial 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 Holders and the Company's transfer agent to such effect (the "Effectiveness Period"). 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 Securities (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 Securities or by reason of changes in the Exercise Price (as defined in the Warrants) in accordance with the terms of the Warrants. If the Commission does not permit the Company to register such an indeterminate number of shares of Common Stock, or if the Company chooses not to register an indeterminate number of shares of Common Stock, the number of shares of Common Stock initially included in the Initial Registration Statement shall be no less than 1.2 times the sum of the number of Securities and Warrants that are then issuable upon conversion of the Securities (based on the Conversion Price (as defined in the Securities) as would then be in effect at such time) and the exercise of the Warrants, without regard to any limitation on the Investor's ability to convert the Securities or exercise the Warrants. In addition, upon the occurrence of a Reset Event (as defined in the Securities) pursuant to Section 4.2(b) of the Securities or Section 3(b) of the Warrant, the Company shall be required to file, within ten (10) business days of such Reset Event, a registration statement covering the product of 1.2 and the number Underlying Shares, less the number of Underlying Shares for which a registration statement is then effective. The Company shall use its best efforts to cause such 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 that date which is thirty (30) days after the filing date thereof. All calculations of the above amount shall be made without regard to any limitation on conversions of Securities or exercises of Warrants. (b) Underwritten Offering. In addition to the Initial Registration --------------------- Statement, at any time when there is not an effective Registration Statement covering the Registrable Securities, if the Holders of a majority of the Registrable Securities covered by a Registration Statement so elect on or after March 22, 2000 an offering of Registrable Securities pursuant to such Registration Statement may be effected on no more than one (1) occasion in the form of an Underwritten Offering. In such event, and if the managing underwriters advise the Company and such Holders in writing that in their opinion the amount of Registrable Securities proposed to be sold in such Underwritten Offering exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering, there shall be included in such Underwritten Offering the amount of such Registrable Securities which in the opinion of such managing underwriters can be sold, and such amount shall be allocated pro rata --- ---- among the Holders proposing to sell Registrable Securities in such Underwritten Offering. 4 (c) Underwriter. If any of the Registrable Securities are to be sold ----------- in an Underwritten Offering, the investment banker in interest that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering. No Holder may participate in any Underwritten Offering hereunder unless such Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such arrangements. (d) Penalties. If (i) the Initial 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, (ii) on any day after the Registration Statement has been declared effective by the Commission (A) sales of all the Registrable Securities required to be included on a Registration Statement cannot be made pursuant to the 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 but excluding any periods during which the Registrable Securities cannot be sold due to any update or amendment of the Registration Statement pursuant to Section 3(b) hereof , provided that each such period shall not exceed twenty (20) Business Days, or in the event of a black-out period declared by the Company pursuant to Section 3(r) hereof) or (B) the Common Stock is not listed or included for quotation on the National Market System of the Nasdaq Stock Market or the Nasdaq Smallcap Market ("Nasdaq"), the New York Stock Exchange ("NYSE") ------ ---- or the American Stock Exchange (the "AMEX") after being so listed or included ---- for quotation or (iii) the Company shall otherwise fail to file a Registration Statement required by Section 2(a) hereof, (each such event specified in (i), (ii) and (iii) above, an "Event"), then, as partial relief for the damages to ----- any Holder by reason of any such delay in or reduction 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 Securities (and, in the case of Holders, the principal amount of Securities from which such Registrable Securities were converted) 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 periods during which the Registrable Securities cannot be sold due to any update or amendment of the Registration Statement pursuant to Section 3(b) hereof, provided that each such period shall not exceed twenty (20) Business Days, or in the event of a black-out period declared by the Company pursuant to Section 3(r) hereof); or (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. The Company shall pay any Required Registration Delay Payments to each Holder in cash on the last Business Day of each month during which an Event has occurred and is continuing. In the event the Company fails to make a Registration Delay Payment in a timely manner, such Registration Delay Payment shall bear interest at the rate of 2.0% per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, if a Purchaser elects to 5 exercise the penalty set forth in this Section 2(d), such Purchaser shall not be entitled to declare an Event of Default pursuant to Section 3.1(i) of the Securities. (e) Form S-3 Eligibility. 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) Preparation of Registration Statement. 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 (which shall include a Plan of Distribution substantially in the form of Exhibit A annexed hereto, unless in --------- connection with an Underwritten Offering) or in connection with an Underwritten Offering hereunder, such other form agreed to by the Company and by a majority- in-interest of Holders of Registrable Securities to be covered by such Registration Statement) (except if otherwise directed by the Majority Holders), and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than three (3) Business Days -------- ------- prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall, if reasonably practicable (i) furnish to the Holders, their Special Counsel and any managing underwriters, copies of all such documents proposed to be filed (including documents incorporated by reference), which documents will be subject to the review of such Holders, their Special Counsel and such managing underwriters, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to such Holders and such underwriters, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Majority Holders, their Special Counsel or any managing underwriters shall reasonably object, and will not request acceleration of such Registration Statement without prior notice to such counsel. The sections of such Registration Statement covering information with respect to the Holders, the Holder's beneficial ownership of securities of the Company or the Holders intended method of disposition of Registrable Securities shall conform to the information provided to the Company by each of the Holders. (b) Amendments. (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 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 as promptly as possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; 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 6 Registration Statement as so amended or in such Prospectus as so supplemented. In the event the number of shares available under a Registration Statement filed pursuant to this Agreement is insufficient to cover 120% of the Registrable Securities issued or issuable upon conversion of the Securities and exercise of the Warrants, the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefore, if applicable), or both, so as to cover 120% of the Registrable Securities, in each case, as soon as practicable, but in any event within twenty (20) Business Days after the necessity therefor arises (based on the Conversion Price of the Securities and other relevant factors on which the Company reasonably elects to rely). The Company shall use its best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. The provisions of Section 2(d) above shall be applicable with respect to such obligation, with the ninety (90) days running from the day after the date on which the Company reasonably first determines (or reasonably should have determined) the need therefor. (c) Notifications. Notify the Holders of Registrable Securities to ------------- be sold, their Special Counsel and any managing underwriters as promptly as possible (and, in the case of (i)(C) below, not later than the first Business Day after effectiveness) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (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; (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; and (vii) the beginning and end of a black-out period pursuant to Section 3(r). (d) Suspensions. 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) Supplements and Post-Effective Amendments. If requested by any ----------------------------------------- managing underwriter or the Holders of a majority in interest of the Registrable Securities to be sold in connection with an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the -------- ------- 7 Company shall not be required to take any action pursuant to this Section 3(e) that would, in the opinion of counsel for the Company, violate applicable law. (f) Copies of Registration Statement. 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 requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Copies of Prospectus. 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) Blue Sky. Prior to any public offering of Registrable --------- Securities, use its best efforts to register or qualify or cooperate with the selling Holders, any underwriters 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 or underwriter 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) Certificates. Cooperate with the Holders and any managing ------------ underwriters 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 and the Purchase Agreement, 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 three (3) Business Days prior to any sale of Registrable Securities. (j) Supplements and Amendments. 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) Listing. 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, subject to compliance with Rule 4460(i)(10(D) of the Nasdaq National Market. 8 (l) Underwriting Agreement. Enter into such agreements (including an ---------------------- underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other actions in connection therewith (including those reasonably requested by any managing underwriters and the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and whether or not an underwriting agreement is entered into, (i) make such representations and warranties to such Holders and such underwriters as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when requested; (ii) in the case of an Underwritten Offering obtain and deliver copies thereof to the managing underwriters, if any, or in the case of non-Underwritten Offerings, if reasonably requested by the selling Holders (and at the expense of such selling Holders), obtain and deliver copies thereof to such selling Holders, of opinions of counsel to the Company and updates thereof addressed to each such underwriter, in form, scope and substance reasonably satisfactory to any such managing underwriters and Special Counsel to the selling Holders covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by such Special Counsel and underwriters; (iii) immediately prior to the effectiveness of the Registration Statement, and, in the case of an Underwritten Offering, at the time of delivery of any Registrable Securities sold pursuant thereto, and, in the case of non-Underwritten Offerings, at such time as the selling Holders may reasonably request (and at the expense of such selling Holders), obtain and deliver copies to the Holders and the managing underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if required, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each of the underwriters, if any, in form and substance as are customary in connection with Underwritten Offerings; (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders and the underwriters, if any, than those set forth in Section 5 (or such other provisions and procedures acceptable to the managing underwriters, if any, and holders of a majority of Registrable Securities participating in such Underwritten Offering; and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold, their Special Counsel and any managing underwriters to evidence the continued validity of the representations and warranties made pursuant to clause 3(1)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. (m) Due Diligence. 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 9 than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. (n) Earnings Statement. Comply in all material respects with all ------------------ applicable rules and regulations of the Commission and make generally available to its securityholders 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 3-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) Information. 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, and such shall not form the basis for penalties pursuant to Section 2(d) hereof. The Company shall hold in confidence and not make any disclosure of information concerning a Holder provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning a Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Holder prior to making such disclosure, and allow the Holder, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 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. 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), 3(c)(vi) or 3(c)(vii), 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 10 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. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of a Holder in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which a Holder has entered into a contract for sale prior to the Holder's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(c)(vii) and for which the Holder has not yet settled. (p) Responses to the Commission. The Company agrees to respond fully --------------------------- and completely to any and all comments on a Registration Statement received from the Commission staff as promptly as possible but, for non-Underwritten Offerings, in no event later than ten (10) Business Days of the receipt of such comments, regardless of whether such comments are in oral or written form. (q) Confirmation of Effectiveness. Within two (2) Business Days ----------------------------- after a Registration Statement which covers applicable Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Holders whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the Commission in the form attached hereto as Exhibit B. --------- (r) Black-out Periods. Subject to the last sentence of this Section ----------------- 3(r), notwithstanding anything to the contrary in this Agreement, the Company may delay the filing or effectiveness of the Registration Statement, other than the Initial Registration Statement, or by written notice require that the Holders immediately cease sales of Registrable Securities (for a period not to exceed thirty (30) consecutive days in any one instance and for a period not to exceed sixty (60) calendar days in any twelve-month period) pursuant to a Registration Statement at any time that (i) the Company becomes engaged in a business activity or negotiation which is not disclosed in a Registration Statement (or the prospectus included therein) which the Company reasonably believes must be disclosed therein under applicable law and which the Company desires to keep confidential for business purposes, (ii) the Company determines that a particular disclosure so determined to be required to be disclosed therein would be premature or would adversely affect the Company or its business or prospects or (iii) the Registration Statement can no longer be used under the existing rules and regulations promulgated under the Securities Act (each of (i), (ii) or (iii), a "Material Condition"). The Company shall not be required ------------------ to disclose to the Holders which of the reasons specified in (i), (ii) or (iii) above is the basis for requiring a suspension of sales due to the occurrence of a Material Condition. The Company will use its commercially reasonable best efforts to ensure that the use of the Registration Statement (and the prospectus included therein) may be resumed as soon as it is practicable. The Company may not suspend sales of Registrable Securities under a Registration Statement pursuant to this Section 3(r) more than two times during any twelve-month period. 4. Registration Expenses --------------------- All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, other than with regard 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, reasonable 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 11 hereunder to be listed and (B) in compliance with state securities or Blue Sky laws (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) reasonable fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement; provided, however, that any expenses -------- ------- attributable to amendments to the Registration Statement necessitated by transfers of Registrable Securities by the Holders, as well as any underwriting discounts, commissions and transfer taxes relating to the Registrable Securities included in the offering by the Holders, fees and disbursements for accountants for the Holders, and any other expenses incurred by the Holders not expressly included above shall be borne by the Holders and not by the Company. 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. Notwithstanding anything contained in this Section 4 to the contrary, the Holders shall be responsible for all fees and expenses relating to an Underwritten Offering. 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), 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 joint or several losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, together with actions, proceedings or inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, "Losses"), as incurred, arising out of or relating to (i) 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 and in conformity with 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 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) or (ii) any violation or alleged violation by the Company of the Securities Act, the 12 Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of Registrable Securities. The Company shall not, however, be liable for any Losses to any Holder with respect to any untrue or alleged untrue statement of material fact or omission or alleged omission of material fact if such statement or omission was made in a preliminary Prospectus and the applicable purchaser did not receive a copy of the final Prospectus (or any amendment or supplement thereto) at or prior to the confirmation of the sale of the Registrable Securities in any case where such delivery is required by the Securities Act and the untrue or alleged untrue statement of material fact or omission or alleged omission of material fact contained in such preliminary Prospectus was corrected in the final Prospectus (or any amendment or supplement thereto), unless the 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 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 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 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; provided, however, that the indemnity agreement contained in this Section 5(b) - -------- ------- shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the prior written consent of such Holder. 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 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 13 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 reasonable 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 ten (10) Business Days of written notice thereof to the Indemnifying Party, which notice shall be delivered no more frequently than on a monthly basis (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 court of competent jurisdiction 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 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. In no event shall any selling Holder be required to contribute an amount under this Section 5(d) in excess of the net proceeds received by such Holder upon sale of the Registrable Securities pursuant to the Registration Statement giving rise to such contribution obligation. 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 -------- 14 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 l5(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 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. 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 set forth herein or 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 subordinated in all respects to the 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 parties with respect to the 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 ----------------------------- -------- 2.1(c) or Schedule 2.1(r) of the Purchase Agreement, neither the Company nor - ------ --------------- any of its securityholders (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 subordinated in all 15 respects to the 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. Except as provided herein 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 ten (10) 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 Holders), the Company will use reasonable efforts to effect 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) or (y) none of the Registrable Securities of the Holders shall be included in such registration statement if the Company, after consultation with the underwriter(s), recommends the inclusion of none of such Registrable Securities; 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). Notwithstanding the foregoing, the Company shall not file any registration statement under the Securities Act (other than on Form S-4 or Form S-8) relating to the offer and sale of any equity securities of the Company, or offer or sell any equity securities of the Company in a transaction exempt from registration pursuant to Regulation S under the Securities Act, until such time as the Initial Registration Statement has been effective for a period of sixty (60) Trading Days, which period shall be tolled if the effectiveness of the Initial Registration Statement is suspended for any reason whatsoever. (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 16 the Company and the Majority Holders; provided, however, that for the purposes -------- ------- of this sentence, Registrable Securities that are owned, directly or indirectly, by the Company, or an Affiliate of the Company are not deemed outstanding. 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 the Majority Holders; 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. Any amendment or waiver effected in accordance with this Section shall be binding upon each Holder, each future Holder, and the Company. Upon effectiveness of each such amendment or waiver, the Company shall promptly give written notice thereof to the Holders who have not previously consented thereto in writing. (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 below (if received by 5:00 p.m. eastern time where such notice is to be received), or the first Business Day following such delivery (if received after 5:00 p.m. eastern time 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 Boston Life Sciences, Inc., 137 Newbury Street, 8/th/ Floor, Boston, MA 02166, attn. Joseph Hernon, Chief financial Officer, fax no. (617) 425-0996, with copies to Ropes & Gray, One International Place, Boston, MA 02110, fax no. 617-951-7050, attn. Steven A. Wilcox and (ii) if to any Purchaser to the address set forth on Schedule I hereto with copies to those specified on the signature pages hereto and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye, Esq., 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 the Majority Holders. No Holder shall assign, transfer, sell or otherwise dispose of this Agreement or any of the rights or obligations hereunder without the prior written consent of the Company, except that a Holder may assign some or all of its rights hereunder (i) to an "affiliate" of such Holder (as such term is defined in the Securities Exchange Act of 1934) or (ii) to any other Holder, without the consent of the Company; provided that each permitted -------- assignee agrees to be bound by and to comply with the provisions of this Agreement. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (h) 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. (i) 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 the laws of the State of New York, without regard to principles of conflicts of law. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of 17 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. (j) Cumulative Remedies. The remedies provided herein are cumulative ------------------- and not exclusive of any remedies provided by law. (k) 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. (l) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (m) Shares Held by The Company and its Affiliates. Whenever the --------------------------------------------- consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (n) Revision of SEC Position on Warrants. In the event the rules and ------------------------------------ regulations of the Commission or the policies of the staff of the Commission are modified and as a result thereof the Company and the Company's counsel determines in good faith that it may be practicable and in the interests of the Company and the Holders to register the exercise of the Warrants so that the Warrant Shares may be freely resold without maintaining an effective registration statement under the Securities Act for resales, the Company and the Holders agree to cooperate in good faith to effect such amendments to this Agreement as may be appropriate to provide that the Company may fulfill its obligations hereunder with respect to the Warrants and the Warrant Shares by maintaining an effective registration statement under the Securities Act covering the exercise of the Warrants rather than the resale of the Warrant Shares. 18 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. BOSTON LIFE SCIENCES, INC. By:________________________________________ Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. By: Brown Simpson Asset Management, LLC By:________________________________________ Name: Title: BROWN SIMPSON STRATEGIC GROWTH FUND, L.P. By: Brown Simpson Capital, LLC its general partner By:________________________________________ Name: Title: SCHEDULE I ---------- Company - ------- Boston Life Sciences, Inc. 137 Newbury Street, 8/th/ Floor Boston, MA 02166 Attn: Joseph Hernon, CFO Fax: 617-425-0996 Purchasers: - ---------- Brown Simpson Strategic Growth Fund, L.P. 152 West 57/th/ Street, 40/th/ Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 Brown Simpson Strategic Growth Fund, Ltd. 152 West 57/th/ Street, 40/th/ Floor New York, New York 10019 Attn: Paul Gustus Fax: (212) 247-1329 EXHIBIT A PLAN OF DISTRIBUTION Our company is registering the shares of common stock on behalf of the selling stockholders. All costs, expenses and fees in connection with the registration of the shares offered by this prospectus will be borne by the Company, other than brokerage commissions and similar selling expenses, if any, attributable to the sale of shares which will be borne by the selling stockholders. Sales of shares may be effected by selling stockholders from time to time in one or more types of transactions (which may include block transactions) on the Nasdaq National Market, in the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling stockholders have advised our company that they have not entered into any agreements, understandings or arrangements with any underwriters or broker- dealers regarding the sale of their securities, nor is there an underwriter or coordinated broker acting in connection with the proposed sale of shares by the selling stockholders. The selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the shares or of securities convertible into or exchangeable for the shares in the course of hedging positions they assume with selling stockholders. The selling stockholders may also enter into options or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealers or other financial institutions of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as amended or supplemented to reflect such transaction). The selling stockholders may make these transactions by selling shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker- dealer might be in excess of customary commissions). The selling stockholders and any broker-dealers that act in connection with the sale of shares are "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers or any profit on the resale of the shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. Because selling stockholders are "underwriters" within the meaning of Section 2(11) of the Securities Act, the selling stockholders will be subject to the prospectus delivery requirements of the Securities Act. Our company has informed the selling stockholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market. Selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of Rule 144. Upon our company being notified by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing: . the name of each such selling stockholder and of the participating broker-dealer(s); . the number of shares involved; . the initial price at which such shares were sold; . the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable; . that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and . other facts material to the transactions. In addition, upon our company being notified by a selling stockholder that a donee or pledgee intends to sell more than 500 shares, a supplement to this prospectus will be filed. EXHIBIT B FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [TRANSFER AGENT] Attn.: Re: Boston Life Sciences, Inc. Ladies and Gentlemen: We are counsel to Boston Life Sciences, Inc., a ____ corporation (the "Company"), and have represented the Company in connection with that certain Securities Purchase Agreement (the "Purchase Agreement") entered into by and among the Company and the buyers named therein (collectively, the "Holders") pursuant to which the Company issued to the Holders its 8% convertible debentures (the "Securities") convertible into shares of the Company's common stock, par value $____ per share (the "Common Stock"), and Warrants (the "the Warrants") to acquire shares of Common Stock. Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Securities and exercise of the Warrants, under the Securities Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on _______________, 1999, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names each of the Holders as a selling stockholder thereunder. In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement. Very truly yours, [ISSUER'S COUNSEL] cc: [LIST NAMES OF HOLDERS] EX-99.1 7 PRESS RELEASE ISSUED SEPTEMBER 22, 1999 Exhibit 99.1 FOR IMMEDIATE RELEASE BOSTON LIFE SCIENCES RAISES $8 MILLION TO FUND CLINICAL PROGRAMS IN ANTI- ANGIOGENESIS AND ATTENTION DEFICIT HYPERACTIVITY DISORDER September 22, 1999, Boston, MA--Boston Life Sciences, Inc. (NASDAQ: BLSI) announced today that a placement of $8 million in convertible debentures has been completed by H.C. Wainwright & Co., the Company's financial advisor, in a transaction with a single institutional investor. The Company's CEO and President, David Hillson commented, "Our goal of rapid clinical development of Altropane for the additional indication of Attention Deficit Hyperactivity Disorder (ADHD), the advancement of our anti-angiogenesis agent into human trials in early 2000, plus our intention to expand the program of cytokine regulation under Professor Laurie Glimcher, have made it desirable to further strengthen our financial resources." "Given the positive results obtained in our Physician's Sponsored ADHD trial recently completed, and the multi-faceted potential of Prof. Glimcher's work in cytokine, T-cell regulation as evidenced by our new collaborative relationship with Pfizer, we want to enhance the advancement of these programs and thus our potential ability to conclude joint ventures with larger partners who can bear the considerable cost of late stage clinical trials." "In the case of Troponin, we believe that it is especially important to obtain results in humans as quickly as possible. While our burn rate has remained at roughly $7 million annually over the last several years (including 1999), we now expect to see a moderate increase for 2000 given the progression of our technology. This placement will give us about $18 million in cash with which to start the new millenium." "A portion of the proceeds of the placement is to be set aside for the redemption of the Company's Series C Preferred Stock (to the extent that some of this issue remains unconverted over the months ahead). The timing of the use of funds for this purpose will depend upon market conditions," added Mr. Hillson. Terms of Convertible Debentures The debentures, due on September 20, 2003, are convertible into common stock at a conversion price of $5.25 and will accrue interest at 8% per annum payable in shares of common stock. A total of 1,680,000 warrants were also issued in two classes, the first ("class A") are exercisable to purchase 960,000 shares of common stock at $5.75; the second ("class B") are exercisable to purchase 720,000 shares of common stock at $8.25. The Company is obligated to file a registration statement covering resales of common stock issuable upon conversion of the debentures and exercise of the warrants within 30 days of closing. At any time following the first anniversary of the transaction, the Company may redeem the debentures in whole or in part for cash at the par value and the issuance of additional warrants, subject to the purchasers' right to convert into common stock at the then conversion price. For complete details of the financing described above, investors should read the current report on Form 8-K to be filed with the Securities and Exchange Commission. About Boston Life Sciences, Inc. BLSI is developing novel treatments for cancer, autoimmune disease, and central nervous system disorders. Products awaiting FDA review, in clinical trials or in preclinical development by BLSI include Therafectin(R) for the treatment of Rheumatoid Arthritis; Troponin I, an anti-angiogenic factor for the treatment of solid tumor metastases; Altropane, a radioimaging agent for the diagnosis of Parkinson's Disease and Attention Deficit Hyperactivity Disorder (ADHD); AF-1 for the potential treatment of stroke and spinal cord injury; fusion toxins for the treatment of adenocarcinomas, allergies, and multiple sclerosis and transcription factors that may control the expression of molecules associated with autoimmune disease and allergies. This release contains forward-looking statements which, as such, involve risks and uncertainties by which actual results may vary materially from these expectations. Readers are referred to the documents filed by Boston Life Sciences, Inc., specifically the Company's annual report on Form 10-K/A for the year ended December 31, 1998, and recent quarterly and periodic reports which identify important risk factors that could cause actual results to differ from those contained in any forward-looking statements. Statements made in this press release regarding the expected timing and results of clinical trials, the potential expansion of any existing programs, discussions with potential partners and projections regarding financial expenditures are forward-looking statements. Meaningful factors that may affect these statements include: the results of scientific data from clinical trials and delays in the regulatory or development processes; the outcome of any discussions with potential partners and the required level of financial expenditures. The Company undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For further information Media Contact Analyst Contact Boston Life Sciences, Inc. Jim Weinrebe Neil Berkman David Hillson Lauren Arnold Neil Berkman Associates President & Chief Executive Officer Schwartz Communications 310.277.5162 617.425.0200 781.684.0770 www.bostonlifesciences.com
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