Document:

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                                                                    EXHIBIT 4.08

                                PANOPTICON, INC.

                                 1999 STOCK PLAN

        1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.

        2. Definitions. As used herein, the following definitions shall apply:

                (a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.

                (b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.

                (c) "Board" means the Board of Directors of the Company.

                (d) "Code" means the Internal Revenue Code of 1986, as amended.

                (e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.

                (f) "Common Stock" means the Common Stock of the Company.

                (g) "Company" means Panopticon, Inc., a California corporation.

                (h) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.

                (i) "Director" means a member of the Board of Directors of the
Company.

                (j) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive

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Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.

                (k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                (l) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

                        (i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

                        (ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or

                        (iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.

                (m) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

                (n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

                (o) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

                (p) "Option" means a stock option granted pursuant to the Plan.

                (q) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.

                (r) "Option Exchange Program" means a program whereby
outstanding Options are exchanged for Options with a lower exercise price.

                (s) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.

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                (t) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.

                (u) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

                (v) "Plan" means this 1999 Stock Plan.

                (w) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.

                (x) "Section 16(b) " means Section 16(b) of the Securities
Exchange Act of 1934, as amended.

                (y) "Service Provider" means an Employee, Director or
Consultant.

                (z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.

                (aa) "Stock Purchase Right" means a right to purchase Common
Stock pursuant to Section 11 below.

                (bb) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 1,000,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.

                If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.

        4. Administration of the Plan.

                (a) The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.

                (b) Powers of the Administrator. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion:

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                        (i) to determine the Fair Market Value;

                        (ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;

                        (iii) to determine the number of Shares to be covered by
each such award granted hereunder;

                        (iv) to approve forms of agreement for use under the
Plan;

                        (v) to determine the terms and conditions, of any Option
or Stock Purchase Right granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or Stock Purchase Right or
the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

                        (vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(f) instead of Common Stock;

                        (vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;

                        (viii) to initiate an Option Exchange Program;

                        (ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

                        (x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and

                        (xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.

                (c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.

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        5. Eligibility.

                (a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

                (b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

                (c) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
such relationship at any time, with or without cause.

        6. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.

        7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.

        8. Option Exercise Price and Consideration.

                (a) The per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

                        (i) In the case of an Incentive Stock Option

                                (A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.

                                (B) granted to any other Employee, the per Share
exercise price shall be no less than one hundred percent (100)% of the Fair
Market Value per Share on the date of grant.

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                        (ii) In the case of a Nonstatutory Stock Option

                                (A) granted to a Service Provider who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the exercise price shall be no less than one hundred ten (110%)
of the Fair Market Value per Share on the date of the grant.

                                (B) granted to any other Service Provider, the
per Share exercise price shall be no less than eighty five percent (85%) of the
Fair Market Value per Share on the date of grant.

                        (iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.

                (b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option shall be exercised, (5) consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

        9. Exercise of Option.

                (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement, but in no case at a rate of less than 20% per year over
five (5) years from the date the Option is granted. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.

                        An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company

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shall issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.

                        Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

                (b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

                (c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If such disability is not a "disability" as such
term is defined in Section 22(e)(3) of the Code, in the case of an Incentive
Stock Option such Incentive Stock Option shall automatically cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option on the day three months and one day following such
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

                (d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised

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within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

                (e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

        10. Non-Transferability of Options and Stock Purchase Rights. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

        11. Stock Purchase Rights.

                (a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The terms of the offer shall comply in
all respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.

                (b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but in no case at a rate of less than 20% per year
over five years from the date of purchase.

                (c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.

                (d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.

                                      -8-
<PAGE>   9

        12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.

                (a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.

                (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

                (c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase

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<PAGE>   10

Right immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option or
Stock Purchase Right, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

        13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.

        14. Amendment and Termination of the Plan.

                (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.

                (b) Shareholder Approval. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

                (c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

        15. Conditions Upon Issuance of Shares.

                (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

                (b) Investment Representations. As a condition to the exercise
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

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<PAGE>   11

        16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

        17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

        18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.

        19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.

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                                PANOPTICON, INC.

                                 1999 STOCK PLAN

                             STOCK OPTION AGREEMENT

        Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.      NOTICE OF STOCK OPTION GRANT

        ---------------------------------

        ---------------------------------

        The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

<TABLE>
<S>                                            <C>
        Grant Number
                                               ---------------------------------

        Date of Grant
                                               ---------------------------------

        Vesting Commencement Date
                                               ---------------------------------

        Exercise Price per Share               $
                                               ---------------------------------

        Total Number of Shares Granted
                                               ---------------------------------

        Total Exercise Price                   $
                                               ---------------------------------

        Type of Option:                        [X]  Incentive Stock Option

                                               [ ]  Nonstatutory Stock Option

        Term/Expiration Date:
                                               ---------------------------------
</TABLE>

Vesting Schedule:

        This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:

<PAGE>   13

        Termination Period:

        This Option shall be exercisable for three months after Optionee ceases
to be a Service Provider. Upon Optionee's death or disability, this Option may
be exercised three months after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.

II.     AGREEMENT

        1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

        If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").

        2. Exercise of Option.

                (a) Right to Exercise. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the applicable provisions of the Plan and this Option Agreement.

                (b) Method of Exercise. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.

        No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

        3. Optionee's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as

<PAGE>   14

Exhibit B, and shall read the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.

        4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

        5. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

                (a) cash or check;

                (b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or

                (c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

        6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.

        7. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

        8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.

        9. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND

<PAGE>   15

REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

                (a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.

                (b) Exercise of Nonstatutory Stock Option. There may be a
regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

                (c) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.

                (d) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

        10. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.

<PAGE>   16

        11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE's RIGHT OR THE COMPANY's RIGHT TO
TERMINATE OPTIONEE's RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

        Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

OPTIONEE:                                   PANOPTICON, INC.

---------------------------------           ---------------------------------
Signature                                   By

                                            Title
Residence Address

<PAGE>   17

                                    EXHIBIT A

                                 1999 STOCK PLAN

                                 EXERCISE NOTICE

Panopticon, Inc.
4600 El Camino Real
Suite 211
Los Altos, CA 94022

Attention: ___________________

        1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Panopticon, Inc. (the
"Company") under and pursuant to the 1999 Stock Plan (the "Plan") and the Stock
Option Agreement dated ________, 19__ (the "Option Agreement").

        2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.

        3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

        4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.

        5. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").

                (a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the

<PAGE>   18

Shares (the "Offered Price"), and the Holder shall offer the Shares at the
Offered Price to the Company or its assignee(s).

                (b) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.

                (c) Purchase Price. The purchase price ("Purchase Price") for
the Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.

                (d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

                (e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

                (f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.

                (g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

<PAGE>   19

        6. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

        7. Restrictive Legends and Stop-Transfer Orders.

                (a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:

                THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
                THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
                SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
                AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
                COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
                OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
                COMPLIANCE THEREWITH.

                THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
                HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
                EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
                THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
                OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
                FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

                (b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

                (c) Refusal to Transfer. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.

        8. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this

<PAGE>   20

Agreement shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.

        9. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

        10. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.

        11. Entire Agreement. The Plan and Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.

Submitted by:                               Accepted by:

OPTIONEE:                                   PANOPTICON, INC.

---------------------------------           ---------------------------------
Signature                                   By
                                            Its

Address:                                    Address:

                                            ------------------------------------
                                            Date Received

<PAGE>   21

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE:

COMPANY:              PANOPTICON, INC.

SECURITY:             COMMON STOCK

AMOUNT:

DATE:

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

                (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

                (b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.

                (c) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701

<PAGE>   22

at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, (3) the amount of Securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
and (4) the timely filing of a Form 144, if applicable.

        In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

                (d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

                                            Signature of Optionee:

                                            ------------------------------------

                                            Date:                     , 19
                                                 ---------------------     -----

                                      -2-<PAGE>   1
                                                                    EXHIBIT 10.1

                         COMMON STOCK PURCHASE AGREEMENT

                          DATED AS OF SEPTEMBER 6, 2000

                                 BY AND BETWEEN

                                GERON CORPORATION

                                       AND

               ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                         <C>
ARTICLE I Definitions........................................................................1
        Section 1.1  Definitions.............................................................1

ARTICLE II Purchase and Sale of Common Stock.................................................4
        Section 2.1  Purchase and Sale of Stock..............................................4
        Section 2.2  The Shares..............................................................4
        Section 2.3  Registration Statement and Prospectus...................................4
        Section 2.4  Purchase Price and Closing..............................................4

ARTICLE III Representations and Warranties...................................................5
        Section 3.1  Representations and Warranties of the Company...........................5
        Section 3.2  Representations and Warranties of the Purchaser........................11

ARTICLE IV Covenants........................................................................12
        Section 4.1  Securities Compliance..................................................12
        Section 4.2  Registration and Listing...............................................13
        Section 4.3  Registration Statement.................................................13
        Section 4.4  Compliance with Laws...................................................13
        Section 4.5  Keeping of Records and Books of Account................................13
        Section 4.6  Other Agreements and Other Financings..................................13
        Section 4.7  Non-public Information.................................................14
        Section 4.8  Stop Orders............................................................14
        Section 4.9  Amendments to the Registration Statement...............................14
        Section 4.10 Prospectus Delivery....................................................15
        Section 4.11 Selling Restrictions; Volume Limitations...............................15
        Section 4.12 Notice.................................................................15

ARTICLE V Conditions to Closing, Draw Downs and Call Options................................15
        Section 5.1  Conditions Precedent to the Obligation of the Company to Close and to
                     Issue a Draw Down Notice or Grant a Call Option and Sell
                     the Shares.............................................................15
        Section 5.2  Conditions Precedent to the Obligation of the Purchaser to Close.......17
        Section 5.3  Conditions Precedent to the Obligation of the Purchaser to Accept
                     a Draw Down or Call Option Grant and Purchase the Shares...............17

ARTICLE VI Draw Down Terms; Call Option.....................................................19
        Section 6.1  Draw Down Terms........................................................19
        Section 6.2  Purchaser's Call Option................................................21

ARTICLE VII Termination.....................................................................22
        Section 7.1  Term; Termination by Mutual Consent....................................22
        Section 7.2  Company Termination....................................................22
        Section 7.3  Other Termination......................................................22
        Section 7.4  Effect of Termination..................................................23

ARTICLE VIII Indemnification................................................................23
        Section 8.1  General Indemnity......................................................23
        Section 8.2  Indemnification Procedures.............................................24

ARTICLE IX Miscellaneous....................................................................25
        Section 9.1  Fees and Expenses......................................................25
        Section 9.2  Specific Enforcement, Consent to Jurisdiction..........................25
        Section 9.3  Entire Agreement; Amendment............................................25
</TABLE>

                                       31
<PAGE>   3

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                         <C>
        Section 9.4  Notices................................................................26
        Section 9.5  Waivers................................................................26
        Section 9.6  Headings...............................................................27
        Section 9.7  Successors and Assigns.................................................27
        Section 9.8  Governing Law..........................................................27
        Section 9.9  Survival...............................................................27
        Section 9.10 Counterparts...........................................................27
        Section 9.11 Publicity..............................................................27
        Section 9.12 Severability...........................................................27
        Section 9.13 Further Assurances.....................................................28
</TABLE>

<PAGE>   4

                         COMMON STOCK PURCHASE AGREEMENT

        This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
September 6, 2000 by and between Geron Corporation, a Delaware corporation (the
"Company") and Acqua Wellington North American Equities Fund, Ltd., a limited
liability company organized under the laws of the Commonwealth of The Bahamas
(the "Purchaser").

        NOW, THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

                                   ARTICLE I
                                   DEFINITIONS

        Section 1.1 Definitions.

               (a) "Acceptable Financing" shall have the meaning assigned to
such term in Section 4.6(b) hereof.

               (b) "Articles" shall have the meaning assigned to such term in
Section 3.1(c) hereof.

               (c) "Bylaws" shall have the meaning assigned to such term in
Section 3.1(c) hereof.

               (d) "Call Option" means the transactions contemplated under
Section 6.2 of this Agreement.

               (e) "Call Option Amount" shall mean the actual amount of proceeds
received by the Company by a Call Option under this Agreement.

               (f) "Call Option Amount Requested" shall mean the amount of a
Call Option requested by the Company as provided in Section 6.2 hereof.

               (g) "Call Option Notice" shall mean a notice sent by the
Purchaser to the Company on the Trading Day the Purchaser elects to exercise a
Call Option, as provided in Section 6.2(e) hereof, and substantially in the form
attached hereto as Exhibit E.

               (h) "Call Option Threshold Price" shall have the meaning assigned
to such term in Section 6.1(j) hereof.

               (i) "Closing" shall have the meaning assigned to such term in
Section 2.4 hereof.

               (j) "Commission" shall mean the Securities and Exchange
Commission or any successor entity.

               (k) "Commission Documents" shall mean all reports, schedules,
forms, statements and other documents, including any amendments thereto or
restatements thereof, filed by the

1
<PAGE>   5

Company with the Commission pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act, which have been previously filed by the Company and which shall be
filed by the Company in the future during the Investment Period, including,
without limitation the Form 10-K/A filed by the Company for the year ended
December 31, 1999 (the "1999 Form 10-K/A"), and shall include all information
contained in such filings and all filings incorporated by reference therein.

               (l) "Commission Filings" means the Registration Statement on Form
S-3 No. 333-32256, and all other filings made by the Company with the Commission
prior to or after the Effective Date pursuant to the Exchange Act.

               (m) "Common Stock" means the Company's common stock, $.001 par
value per share.

               (n) "Draw Down" means the transactions contemplated under Section
6.1 of this Agreement.

               (o) "Draw Down Amount" means the actual amount of proceeds
received by the Company by a Draw Down under this Agreement.

               (p) "Draw Down Amount Requested" shall mean the amount of a Draw
Down requested by the Company in its Draw Down Notice as provided in Section
6.1(j) hereof.

               (q) "Draw Down Discount Percentage" shall mean ninety-five
percent (95%) or such other discount percentage as mutually agreed upon in
writing by the Company and the Purchaser.

               (r) "Draw Down Exercise Date" shall have the meaning assigned to
such term in Section 6.1(a) hereof.

               (s) "Draw Down Notice" shall mean a notice sent by the Company to
exercise a Draw Down as provided in Section 6.1(j) hereof.

               (t) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive Trading Days starting with the first Trading Day specified in a Draw
Down Notice, or such other period mutually agreed upon by the Purchaser and the
Company.

               (u) "Effective Date" shall mean September 6, 2000.

               (v) "Environmental Laws" shall have the meaning assigned to such
term in Section 3.1(r) hereof.

               (w) "Event Period" shall have the meaning assigned to such term
in Section 7.3 hereof.

               (x) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.

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<PAGE>   6

               (y) "GAAP" shall mean generally accepted accounting principles in
the United States of America as applied by the Company.

               (z) "Indebtedness" shall have the meaning assigned to such term
in Section 3.1(k) hereof.

               (aa) "Investment Period" shall have the meaning assigned to such
term in Section 7.1 hereof.

               (bb) "Material Adverse Effect" shall mean any effect on the
business, operations or financial condition of the Company that is material and
adverse to the Company and its subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material respect; provided,
however, that continued losses from operations shall not be deemed to be a
Material Adverse Effect.

               (cc) "Material Agreements" shall have the meaning assigned to
such term in Section 3.1(s) hereof.

               (dd) "Nasdaq" means the NASDAQ National Market or any successor
thereto.

               (ee) "Other Financing" shall have the meaning assigned to such
term in Section 4.6(b) hereof.

               (ff) "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, or, if the prospectus
included in the Registration Statement omits information in reliance on Rule
430A under the Securities Act, and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act, the
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectus filed with the Commission
pursuant to Rule 424(b).

               (gg) "Registration Statement" shall mean the registration
statement on Form S-3, Commission File Number 333- 32256 under the Securities
Act, filed with the Securities and Exchange Commission for the registration of
the Shares, as such Registration Statement may be amended from time to time.

               (hh) "Section 6.1(m) Notice" shall have the meaning assigned to
such term in Section 6.1(m) hereof.

               (ii) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.

               (jj) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(d) hereof.

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<PAGE>   7

               (kk) "Shares" shall mean, collectively, the shares of Common
Stock of the Company issuable to the Purchaser upon exercise of any Draw Down
and those shares of Common Stock issuable to the Purchaser upon exercise of any
Call Option.

               (ll) "Threshold Price" is the lowest price at which the Company
may set in the Draw Down Notice to sell Shares during each Draw Down Pricing
Period; provided, however, that at no time shall the Threshold Price be set
below sixteen dollars ($16.00) per share unless the Company and the Purchaser
mutually agree.

               (mm) "Trading Day" shall mean a trading day on the Nasdaq.

               (nn) "Trading Day Number" shall have the meaning assigned to such
term in Section 6.1(m) hereof

               (oo) "Truncated Draw Down Allocation Amount" shall mean the
portion of the Draw Down Amount Requested that is allocated to the purchase of
Shares in accordance with Section 6.1 hereof for each Trading Day in a reduced
Draw Down Pricing Period (as provided in Section 6.1(m) hereof).

               (pp) "VWAP" shall mean the daily volume weighted average price
(based on a Trading Day from 9:30 a.m. to 4:00 p.m. (New York time)) of the
Company on the Nasdaq as reported by Bloomberg Financial LP using the AQR
function.

                                   ARTICLE II
                        PURCHASE AND SALE OF COMMON STOCK

        Section 2.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company during the Investment Period
up to $50,000,000 of Common Stock based on up to twelve (12) Draw Downs during
the Investment Period as provided in Section 6.1 hereof. Subject to the terms
and conditions of this Agreement, the Company in its discretion may also grant
the Purchaser one (1) or more Call Options which may be exercised during any
Draw Down Pricing Period, as provided in Section 6.2 hereof. The aggregate
dollar amount of all Draw Down Amounts and Call Option Amounts pursuant to the
terms and conditions of this Agreement shall not exceed $50,000,000.

        Section 2.2. The Shares. The Company has or will have authorized and has
or will have reserved, and covenants to continue to so reserve once reserved,
subject to Section 4.4(b) hereof, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs and Call Options requested under this Agreement,
in any case prior to the issuance to the Purchaser of such Shares under this
Agreement.

        Section 2.3. Registration Statement and Prospectus. The Company has
prepared and filed with the Commission in accordance with the provisions of the
Securities Act, the Registration Statement, including a Prospectus subject to
completion relating to the Shares. The Registration Statement was declared
effective by the Commission on April 28, 2000.

        Section 2.4. Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to

4
<PAGE>   8

issue and sell to the Purchaser, and the Purchaser agrees to purchase, that
number of the Shares to be issued in connection with each Draw Down and exercise
of each Call Option in accordance with the terms and conditions of this
Agreement. The closing under this Agreement shall take place at the offices of
Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New
York 10174 (the "Closing") at 10:00 a.m. (New York time) on (i) September 6,
2000, or (ii) such other time and place or on such date as the Purchaser and the
Company may agree upon (the "Closing Date"). Each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

        Section 3.1. Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:

               (a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted and as described in the Commission Documents and the Commission
Filings. As of the Effective Date, the Company does not have any subsidiaries
(as defined in Section 3.1(g)) except as set forth in the Commission Documents,
the Commission Filings or on Schedule 3.1(a) attached hereto. The Company and
each such subsidiary is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary
except for any jurisdiction in which the failure to be so qualified will not
have a Material Adverse Effect.

               (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Sections 2.2 or 4.4(b), no further consent or authorization of the Company or
its Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Company. This Agreement constitutes, or shall
constitute when executed and delivered, a 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, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

               (c) Capitalization. The authorized capital stock of the Company
and the shares thereof issued and outstanding as of the Effective Date are set
forth in the Registration Statement or on Schedule 3.1(c) attached hereto. All
of the outstanding shares of Common Stock have been duly and validly authorized,
and are fully paid and nonassessable. Except as set forth in this Agreement or
as set forth in the Commission Documents, the Commission Filings or on Schedule
3.1(c) attached hereto, as of the Effective Date, no shares of Common Stock are

5
<PAGE>   9

entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement, the Commission Documents, the Commission
Filings or on Schedule 3.1(c) attached hereto, as of the Effective Date, there
are no contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of the capital stock
of the Company or options, securities or rights convertible into shares of
capital stock of the Company. Except as set forth in the Commission Documents,
the Commission Filings or on Schedule 3.1(c) attached hereto, as of the
Effective Date, the Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which, if determined
adversely against the Company, would have a Material Adverse Effect. The Company
has made available to the Purchaser true and correct copies of the Company's
Restated Certificate of Incorporation as amended and in effect on the Effective
Date (the "Articles"), and the Company's Amended and Restated Bylaws as in
effect on the Effective Date (the "Bylaws").

               (d) Issuance of Shares. The Shares to be issued under this
Agreement have been or will be (prior to issuance to the Purchaser hereunder)
duly authorized by all necessary corporate action and, when paid for or issued
in accordance with the terms hereof, the Shares shall be validly issued and
outstanding, fully paid and nonassessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock.

               (e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Articles
or Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a material lien, charge or encumbrance on any property of the
Company under any material agreement or commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries are bound or affected, except, in all cases
other than violations pursuant to clauses (i) and (iv) (to the extent of federal
securities law), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or issue and sell the Shares to the Purchaser
in accordance with the terms hereof (other than any filings which may be
required to be made by the Company with the Commission or Nasdaq subsequent to
the Closing and any Registration Statement which may be filed

6
<PAGE>   10

pursuant hereto); provided, however, that, for purpose of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the representations, warranties and agreements of the Purchaser herein.

               (f) Commission Documents, Financial Statements. The Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except
as disclosed in the Commission Documents, the Commission Filings or on Schedule
3.1(f) attached hereto, as of the Effective Date the Company has timely filed
all Commission Documents or obtained an appropriate extension pertaining
thereto. The Company has made available to the Purchaser true and complete
copies of the Commission Documents filed with the Commission since December 31,
1999 and prior to the Effective Date. The Company has not provided to the
Purchaser any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement. As of its date, the 1999 Form 10-K/A complied in all material
respects with the requirements of the Exchange Act and other federal, state and
local laws, rules and regulations applicable to it, and, as of its date, such
1999 Form 10-K/A did not contain any untrue statement of a material fact or omit
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. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and, fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject to appropriate amendments or restatements and, in the case of
unaudited statements, subject to normal year-end audit adjustments).

               (g) Subsidiaries. The Commission Documents, the Commission
Filings or Schedule 3.1(g) attached hereto set forth each subsidiary of the
Company as of the Effective Date, showing the jurisdiction of its incorporation
or organization and showing the percentage of the Company's ownership of the
outstanding stock or other interests of such subsidiary. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. Except as set
forth in the Commission Documents or the Commission Filings, none of such
subsidiaries is a "significant subsidiary" as defined in Regulation S-X.

               (h) No Material Adverse Effect. Since June 30, 2000, the Company
has not experienced or suffered any Material Adverse Effect.

               (i) No Undisclosed Liabilities. The Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the

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<PAGE>   11

Company or any subsidiary (including the notes thereto) in conformity with GAAP
not disclosed in the Commission Documents, other than those incurred in the
ordinary course of the Company's or its subsidiaries respective businesses since
June 30, 2000 and which, individually or in the aggregate, do not or would not
have a Material Adverse Effect.

               (j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect.

               (k) Indebtedness. The Commission Documents or Commission Filings
as of June 30, 2000 set forth all outstanding secured and unsecured Indebtedness
of the Company or any subsidiary, or for which the Company or any subsidiary has
commitments through such date. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $1,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $1,000,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.

               (l) Title to Assets. Each of the Company and its subsidiaries has
good and marketable title to all of their respective material real and personal
property reflected in the Commission Documents or the Commission Filings, free
of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission Documents, the
Commission Filings or on Schedule 3.1(l) attached hereto or those that do not or
would not have a Material Adverse Effect. All said real property leases of the
Company are valid and subsisting and in full force and effect in all material
respects.

               (m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents, the Commission Filings or on Schedule 3.1(m) attached hereto, there
is no action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company, any
subsidiary or any of their respective properties or assets and which, if
determined adversely to the Company or its subsidiary, would have a Material
Adverse Effect.

               (n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in all material respects
in accordance with all applicable federal, state and local governmental laws,
rules, regulations and ordinances, except as set forth in the Commission
Documents, the Commission Filings or on Schedule 3.1(n) attached hereto,

8
<PAGE>   12

and except as, individually or in the aggregate, do not or would not have a
Material Adverse Effect. The Company and each of its subsidiaries have all
government franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted by it, except where the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, do not or would
not have a Material Adverse Effect.

               (o) Certain Fees. No brokers, finders or financial advisory fees
or commissions will be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.

               (p) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.

               (q) Operation of Business. The Company or one or more of its
subsidiaries owns, controls or has the right to use all patents, trademarks,
service marks, trade names, copyrights, licenses and authorizations as set forth
in the Commission Documents, the Commission Filings or on Schedule 3.1(q)
attached hereto which are necessary for the conduct of its business as now
conducted and as described in the Commission Documents and Commission Filings.
The Company has not received any notice of conflict with the rights of others,
except to the extent set forth in the Commission Documents or the Commission
Filings or Schedule 3.1(q) attached hereto and except to the extent that any
such conflict would not have a Material Adverse Effect.

               (r) Environmental Compliance. The Company and each of its
subsidiaries (i) is in compliance with any and all applicable foreign, federal,
state and local laws and regulations regulating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and (iii) is 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.

               (s) Material Agreements. Except as set forth in the Commission
Documents, the Commission Filings or on Schedule 3.1(s) attached hereto, neither
the Company nor any subsidiary of the Company is a party to any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement, a
copy of which would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-3 or applicable form (collectively, "Material
Agreements") if the Company or any subsidiary were registering securities under
the Securities Act. The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the Material Agreements, have received no notice of default by the Company
thereunder or have timely cured any default as to which notice has been
received, and, to the best of the Company's

9
<PAGE>   13

knowledge, are not in default under any Material Agreement now in effect, the
result of which would have a Material Adverse Effect.

               (t) Transactions with Affiliates. Except as set forth in the
Commission Documents, the Commission Filings or on Schedule 3.1(t) attached
hereto, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions exceeding
$1,000,000 between (a) the Company or any subsidiary, on the one hand, and (b)
on the other hand, any officer, employee or director of the Company, or any of
its subsidiaries, or any person who would be covered by Item 404(a) of
Regulation S-K or any corporation or other entity controlled by such officer,
employee, director or person.

               (u) Securities Act. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.

                    (i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.

                    (ii) The Company meets the requirements for the use of Form
S-3 under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be amended or supplemented from
time to time, and the Prospectus and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Securities Act, complied
or will comply, as the case may be, in all material respects with the provisions
of the Securities Act and did not at any such times 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 the light of the
circumstances under which they made, not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Purchaser furnished to the Company
in writing by or on behalf of the Purchaser expressly for use therein.

                    (iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, the Prospectus or other materials, if any, permitted by
the Securities Act.

               (v) Employees. As of the Effective Date, neither the Company nor
any subsidiary of the Company has any collective bargaining agreements with any
of its employees, except as set forth in the Commission Documents, the
Commission Filings or on Schedule 3.1(v) attached hereto. As of the Effective
Date, except as disclosed in the Registration Statement, the Commission
Documents, the Commission Filings or Schedule 3.1(v), no officer, consultant or
key employee of the Company or any subsidiary whose termination, either
individually or in the aggregate, would have a Material Adverse Effect, has
terminated or, to the knowledge of the

10
<PAGE>   14

Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.

               (w) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries as set forth in the
Registration Statement.

               (x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

               (y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended. As used in this Section
3.1(y), the term "Plan" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any
subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.

               (z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.

        Section 3.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:

               (a) Organization and Standing of the Purchaser. The Purchaser is
a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of The Bahamas.

               (b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and

11
<PAGE>   15

delivered by the Purchaser. This Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

               (c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Purchaser is a party, (iii) create or impose or lien, charge or
encumbrance on any property of the Purchaser under any agreement or any
commitment to which the Purchaser is party or by which the Purchaser is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Purchaser or its properties,
except for such conflicts, defaults and violations as would not, individually or
in the aggregate, prohibit or otherwise interfere with the ability of the
Purchaser to enter into and perform its obligations under this Agreement in any
material respect. The Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Shares in accordance with
the terms hereof; provided, however, that for purposes of the representation
made in this sentence, the Purchaser is assuming and relying upon the accuracy
of the representations, warranties and agreements of the Company herein.

               (d) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Shares. The Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.

                                   ARTICLE IV
                                    COVENANTS

        The Company covenants with the Purchaser, and the Purchaser covenants
with the Company, as follows, which covenants of one party are for the benefit
of the other party, during the Investment Period.

        Section 4.1. Securities Compliance. The Company shall notify the
Commission and Nasdaq, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this

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<PAGE>   16

Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Shares to the Purchaser.

        Section 4.2. Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock and the listing of the Shares purchased
by Purchaser hereunder on Nasdaq or any relevant market or system, if
applicable, and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Nasdaq or any relevant
market or system.

        Section 4.3. Registration Statement. Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with this Agreement.

        Section 4.4. Compliance with Laws.

               (a) The Company shall comply, and cause each subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which would have a Material Adverse Effect.

               (b) In addition to the limitations set forth in Section 4.6
hereof, the Company will not be obligated to issue and the Purchaser will not be
obligated to purchase any shares of the Company's Common Stock which would
result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company's Common Stock.

        Section 4.5. Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all material financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

        Section 4.6. Other Agreements and Other Financings.

               (a) The Company shall not enter into any agreement in which the
terms of such agreement would restrict or impair the right to perform of the
Company or any subsidiary under this Agreement or the Articles.

               (b) The Company shall notify the Purchaser if the Company enters
into any definitive financing agreement with a third party, the principal
purpose of which is to secure equity financing for the Company (an "Other
Financing") during the Investment Period, except that (i) stock options granted
under the Company's stock option plans or stockholder rights plan, (ii) shares
of Common Stock issued under the Company's employee stock purchase plans, (iii)
shares of Common Stock and/or warrants to purchase shares of Common Stock issued
for

13
<PAGE>   17

the purposes of licensing agreements and/or collaborative agreements with third
parties, (iv) shares of Common Stock or warrants to purchase shares of Common
Stock issued to third parties in connection with the formation or maintenance of
strategic partnerships, alliances or joint ventures or for the acquisition of
products, licenses, businesses (including divisions thereof) or other assets,
(v) shares of Common Stock or other securities sold by the Company in a firm
commitment underwritten public offering, (vi) the issuance of securities by any
subsidiary of the Company, (vii) issuances of securities which are set forth on
Schedule 4.6(b) attached hereto, (viii) warrants to purchase shares of Common
Stock issued in connection with equipment financings or leasing arrangements and
(ix) shares issued upon conversion of outstanding warrants (each, an "Acceptable
Financing") shall not be Other Financings. If the Company enters into an Other
Financing during a Draw Down Pricing Period, the Purchaser shall have the
options set forth in Section 6.1(l) hereof.

        Section 4.7. Non-public Information. Neither the Company nor any of its
officers or agents shall knowingly disclose any material non-public information
about the Company to the Purchaser and neither the Purchaser nor any of its
affiliates, officers or agents will solicit any material non-public information
from the Company. If Purchaser knowingly receives any material non-public
information about the Company from any third party, Purchaser will promptly
inform Company.

        Section 4.8. Stop Orders. The Company will advise the Purchaser promptly
and, if requested by the Purchaser, will confirm such advice in writing: (i) of
the Company's receipt of notice of any request by the Commission for amendment
of or a supplement to the Registration Statement, any Prospectus or for
additional information; (ii) of the Company's receipt of notice of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) of the Company becoming aware of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement or the Prospectus (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Securities Act to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Securities Act or any other law. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company will make commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible time.

        Section 4.9. Amendments to the Registration Statement. The Company will
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus which relates to the Purchaser or this Agreement
of which the Purchaser shall not previously have been advised or to which the
Purchaser shall reasonably object after being so advised within forty-eight (48)
hours of receipt of such amendment or supplement to the Prospectus or (ii) so
long as, in the reasonable opinion of counsel for the Purchaser, a Prospectus is
required to be delivered in connection with any purchase of Shares by the
Purchaser, file any Prospectus or Prospectus supplement pursuant to the Exchange
Act without delivering a copy of such Prospectus or Prospectus supplement to the
Purchaser, promptly following such filing.

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<PAGE>   18

        Section 4.10. Prospectus Delivery. The Company shall file a Prospectus
supplement to the Registration Statement one Trading Day prior to each
Settlement Date and will deliver a Prospectus and Prospectus supplement to the
Purchaser on each Settlement Date. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares may be sold by the Purchaser, in connection
with the offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Securities Act to be delivered in
connection with sales of the Shares. If during such period of time any event
shall occur that in the judgment of the Company and its counsel or in the
opinion of counsel for the Purchaser is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Securities Act or any other applicable
law or regulation, the Company will forthwith prepare and, subject to Section
4.8 above, file with the Commission an appropriate supplement or amendment to
such Prospectus, and will expeditiously furnish or make available to the
Purchaser a reasonable number of copies thereof.

        Section 4.11. Selling Restrictions; Volume Limitations. The Purchaser
covenants that during the Investment Period and for a period of three (3) months
after any termination of this Agreement in accordance with Article VII hereof,
neither the Purchaser, nor any of its affiliates, nor any entity managed by the
Purchaser, will sell any shares of Common Stock of the Company (including,
without limitation, any grant of any option to purchase or acquire any right to
dispose or otherwise dispose for value, any shares of Common Stock or any
securities convertible into, or exchangeable for, or warrants to purchase, any
shares of Common Stock or any swap, short-sale, hedge or other agreement that
transfers, in whole or in part, the economic risk of ownership of the Common
Stock) or be in a short position with respect to shares of Common Stock of the
Company in any account directly or indirectly managed by the Purchaser, or any
affiliates of the Purchaser, or any entity managed by the Purchaser, except that
during the Investment Period the Purchaser shall have the right to sell those
Shares that the Purchaser has purchased or has accumulated for purchase during
each Trading Day of a Draw Down Pricing Period pursuant to the terms and
conditions described in this Agreement or any other similar agreement between
the Company and the Purchaser. In addition, on a daily Trading Day basis, the
Purchaser agrees to restrict the volume of sales of Shares to no more than
thirty percent (30%) of the total trading volume of the Common Stock, as
reported on Bloomberg Financial LP using HP function, for such Trading Day.

        Section 4.12. Notice. the Company shall immediately notify the Purchaser
that (i) a Material Adverse Effect has occurred or (ii) the Company has entered
into an Other Financing.

                                   ARTICLE V
               CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS

        Section 5.1. Conditions Precedent to the Obligation of the Company to
Close and to Issue a Draw Down Notice or Grant a Call Option and Sell the
Shares. The obligation hereunder of the Company to enter into this Agreement
and, in its sole discretion, to issue a Draw Down Notice or grant a Call Option
and to issue and sell the Shares to the Purchaser is subject to the satisfaction
or waiver, at or

15
<PAGE>   19

before the Closing and, with respect to each Draw Down, at or before each Draw
Down Exercise Date and each Settlement Date of each of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.

               (a) Accuracy of the Purchaser's Representations and Warranties.
Except for representations and warranties that are expressly made as of a
particular date, the representations and warranties of the Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of each Draw Down Exercise Date and each Settlement Date as though
made at that time.

               (b) Registration Statement. The Company shall have a dollar
amount of Shares registered under the Registration Statement which are in an
amount equal to or in excess of the dollar amount worth of Shares issuable
pursuant to such Draw Down Notice or Call Option. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to the Closing Date or each Settlement Date, as applicable.

               (c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing.

               (d) No Injunction. No statute, 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.

               (e) No Suspension, Etc. Trading in the Common Stock shall not
have been suspended by the Commission or the Nasdaq (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to each Draw Down Exercise Date and applicable Settlement
Date), and, at any time prior to the Closing and each Draw Down Exercise Date,
none of the events described in clauses (i), (ii) and (iii) of Section 4.8
hereof shall have occurred, trading in securities generally as reported on
Nasdaq shall not have been suspended or limited, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Company, makes it impracticable or
inadvisable to issue the Shares.

               (f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

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<PAGE>   20

        Section 5.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.

               (a) Accuracy of the Company's Representations and Warranties.
Except for representations and warranties that are expressly made as of a
particular date, the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Closing as though made at that time.

               (b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the Commission.

               (c) 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.

               (d) 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.

               (e) No Suspension, Etc. Trading in the Common Stock shall not
have been suspended by the Commission or the Nasdaq (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to Closing), and, at any time prior to the Closing, trading
in securities generally as reported on Nasdaq shall not have been suspended or
limited, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in any financial market which, in each case, in the reasonable judgment
of the Purchaser, makes it impracticable or inadvisable to purchase the Shares.

               (f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

               (g) Opinion of Counsel and Closing Certificate. At the Closing,
the Purchaser shall have received (i) an opinion of counsel to the Company,
dated the date of Closing, in the form of Exhibit A hereto, and (ii) a closing
certificate from the Company, dated the date of Closing, in the form of Exhibit
B hereto.

        Section 5.3. Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation
hereunder of the Purchaser to

17
<PAGE>   21

accept a Draw Down and to acquire and pay for the Shares is subject to the
satisfaction or waiver, at or before each Draw Down Exercise Date and each
Settlement Date, of each of the conditions set forth below. The conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any time
in its sole discretion.

               (a) Accuracy of the Company's Representations and Warranties.
Except for representations and warranties that are expressly made as of a
particular date, each of the representations and warranties of the Company shall
be true and correct in all material respects as of the date when made and as of
each Draw Down Exercise Date and each Settlement Date as though made at that
time.

               (b) Registration Statement. The Company shall have a dollar
amount of Shares registered under the Registration Statement which are in an
amount equal to or in excess of the dollar amount worth of Shares issuable
pursuant to such Draw Down Notice or Call Option. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall have been amended or supplemented, as required, to disclose the sale of
the Shares prior to each Settlement Date, as applicable.

               (c) No Suspension. Trading in the Common Stock shall not have
been suspended by the Commission or the Nasdaq (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to each Draw Down Exercise Date and each Settlement Date), and,
at any time prior to such Draw Down Exercise Date or such Settlement Date,
trading in securities generally as reported on Nasdaq shall not have been
suspended or limited, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares. The Common Stock shall not have been delisted from Nasdaq
or any successor market on which it trades.

               (d) 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 each Draw Down Exercise Date and each
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit C.

               (e) 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.

               (f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

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<PAGE>   22

               (g) No Material Adverse Effect. No Material Adverse Effect shall
have occurred.

                                   ARTICLE VI
                          DRAW DOWN TERMS; CALL OPTION

        Section 6.1. Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:

               (a) The Company may, in its sole discretion, issue a Draw Down
Notice (as defined in Section 6.1(j) hereof) for a specified Draw Down Amount
Requested of up to $8,000,000 or such other amount mutually agreed upon by the
Purchaser and the Company, which Draw Down the Purchaser will be obligated to
accept. The date the Company issues any Draw Down Notice in accordance with this
Section 6.1 shall be a "Draw Down Exercise Date" for purposes of this Agreement.

               (b) Subject to Section 6.1(i) below, the number of Shares to be
issued by the Company to the Purchaser in connection with each Draw Down shall
be equal to the sum of the quotients (for each Trading Day of the Draw Down
Pricing Period for which the VWAP equals or exceeds the Threshold Price) of (x)
1/20th (or such other fraction based on the length of the Draw Down Pricing
Period) of the Draw Down Amount divided by (y) the Draw Down Discount Percentage
(or such other percentage mutually agreed upon by the Purchaser and the Company)
multiplied by the VWAP of the Common Stock for such Trading Day.

               (c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive Trading Days (each, a "Settlement Period"); provided, however,
that the Company may request in its Draw Down Notice that the Draw Down Pricing
Period consist of only one twenty (20) consecutive Trading Day Settlement
Period, which request the Purchaser shall in good faith consider.

               (d) Each Draw Down shall be settled on the second Trading Day
after the end of each Settlement Period (the "Settlement Date").

               (e) There shall be a minimum of five (5) Trading Days between the
end of a Draw Down Pricing Period and the commencement of the next Draw Down
Pricing Period, unless otherwise mutually agreed upon between the Purchaser and
the Company.

               (f) There shall be a maximum of twelve (12) Draw Downs during the
Investment Period.

               (g) At the end of each Draw Down Pricing Period, the Purchaser's
total Draw Down commitment under this Agreement (which equals $50,000,000 as of
the Effective Date) shall be reduced by the total amount of the Draw Down Amount
and the Call Option Amount, if any, for such Draw Down Pricing Period.

               (h) Each Draw Down will automatically expire on the last Trading
Day of each Draw Down Pricing Period.

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<PAGE>   23

               (i) If the VWAP on a given Trading Day in a Draw Down Pricing
Period is less than the Threshold Price, then the total amount of the Draw Down
Amount Requested for such Draw Down Pricing Period will be reduced by 1/20th (or
such other fraction based on the length of the Draw Down Pricing Period) and no
Shares will be purchased or sold with respect to such Trading Day, except as
provided below. At no time shall the Threshold Price be set below sixteen
dollars ($16.00) unless agreed upon by the Company and the Purchaser. If trading
in the Common Stock is suspended for any reason for more than three (3) hours in
any Trading Day, the price of the Common Stock may, at the Purchaser's option,
be deemed to be below the Threshold Price for that Trading Day. For each Trading
Day during a Draw Down Pricing Period that the VWAP is below the Threshold Price
or is deemed to be below the Threshold Price pursuant to the immediately
preceding sentence, the Purchaser may, at its option, purchase the Common Stock
at the Threshold Price multiplied by the Draw Down Discount Percentage. The
Purchaser will inform the Company via facsimile transmission no later than 8:00
p.m. (New York time) on the last Trading Day of such Draw Down Pricing Period as
to the number of Shares, if any, the Purchaser chooses to purchase under such
circumstances.

               (j) As a condition to exercise of any Draw Down, the Company must
provide a notice to the Purchaser of the Company's exercise of any Draw Down via
facsimile transmission before commencement of trading on the first Trading Day
of the Draw Down Pricing Period covered by such notice (the "Draw Down Notice"),
substantially in the form attached hereto as Exhibit D. The Draw Down Notice
shall specify the Draw Down Amount Requested, set the Threshold Price for such
Draw Down and designate the first Trading Day of the Draw Down Pricing Period
and specify the Call Option(s), if any, that the Company wishes to grant to the
Purchaser during the Draw Down Pricing Period and the applicable Threshold Price
for such Call Option (the "Call Option Threshold Price"). Unless the Company and
the Purchaser mutually agree otherwise, at no time shall the Purchaser be
required to purchase more than $8,000,000 of the Common Stock for a given Draw
Down Pricing Period (excluding the Common Stock purchased pursuant to a Call
Option).

               (k) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or its designees via the Deposit
Withdrawal Agent Commission system ("DWAC"), against payment therefor to the
Company's designated account by wire transfer of immediately available funds,
provided that the Shares are received by the Purchaser no later than 1:00 p.m.
(New York time), or of next day available funds if the Shares are received
thereafter. In certain circumstances and as set forth in Section 9.1(b), a
failure by the Company to deliver such Shares may result in the payment of
liquidated damages by the Company to the Purchaser.

               (l) If during any Draw Down Pricing Period the Company shall
enter into an Other Financing (other than shares of Common Stock issued under
this Agreement or in connection with an Acceptable Financing), the Purchaser may
in its sole discretion (i) purchase the Draw Down Amount Requested of shares of
Common Stock and/or Call Option Amount Requested during such Draw Down Pricing
Period on the terms at which the Company issued shares of Common Stock in the
Other Financing during such Draw Down Pricing Period, (ii) purchase the Draw
Down Amount Requested of shares of Common Stock and/or Call Option Amount
Requested during such Draw Down Pricing Period at the applicable Draw Down
Discount Percentage times the VWAP for such Draw Down Pricing Period, or (iii)
elect not to

20
<PAGE>   24

purchase any Shares during such Draw Down Pricing Period. The Purchaser shall
notify the Company of its election on the business day preceding the Settlement
Date.

               (m) If during any Draw Down Pricing Period the Company elects to
reduce the number of Trading Days in such Draw Down Pricing Period, the Company
will notify the Purchaser before commencement of trading on any Trading Day (a
"Section 6.1(m) Notice") and the last Trading Day of such Draw Down Pricing
Period shall be the Trading Day preceding the receipt of the Section 6.1(m)
Notice; provided, however, that if the Company delivers the Section 6.1(m)
Notice during trading hours on a Trading Day, then the last Trading Day of such
Draw Down Pricing Period shall be the Trading Day on which the Section 6.1(m)
Notice was received by the Purchaser.

        The Purchaser will purchase the Truncated Draw Down Allocation Amount
for each of the Trading Days prior to receipt of the Section 6.1(m) Notice, for
an aggregate purchase price determined in accordance with clauses (b) and (i) of
this Section 6.1.

        In addition, the Purchaser may, at its option, elect to purchase Shares
in an additional dollar amount equal to the product of the Draw Down Amount
Requested, first multiplied by (x) a fraction, the numerator of which equals one
(1) and the denominator of which equals twenty (20) or such other number of
Trading Days in such Draw Down Pricing Period as the parties may have mutually
agreed upon with respect to such Draw Down Pricing Period (twenty (20) or such
other mutually agreed upon number being referred to herein as the "Trading Day
Number"), and next multiplied by (y) that number that is equal to the Trading
Day Number minus the number of Trading Days in the reduced Draw Down Pricing
Period. The price per share for such additional dollar amount shall equal (i)
the aggregate total of Truncated Draw Down Allocation Amounts during the reduced
Draw Down Pricing Period divided by (ii) the number of Shares to be purchased
during such reduced Draw Down Pricing Period.

        Upon receipt of the Section 6.1(m) Notice, the Purchaser may (x) elect
to purchase the Common Stock at the Threshold Price for any Trading Day that the
VWAP was below the Threshold Price during the reduced Draw Down Pricing Period
in accordance with Section 6.1(i) hereof, (y) elect to purchase the Common Stock
in the additional amount as set forth in the preceding paragraph of this Section
6.1(m), and (z) elect to exercise any unexercised Call Options (for a Call
Option Amount not in excess of $1,000,000) by issuing a Call Option Notice to
the Company, in each such case, no later than 10:00 a.m. (New York time) on the
first Trading Day after the end of the reduced Draw Down Pricing Period. The
exercise price of the Call Option shall be based on the VWAP on the last Trading
Day of the reduced Draw Down Pricing Period (in lieu of the VWAP as specified in
clause (A) of Section 6.2(b) hereof) and otherwise determined in accordance with
Section 6.2(b) hereof.

        The Settlement Date for the Truncated Draw Down Amount exercised during
a effected Draw Down Pricing Period shall be the second Trading Day after
receipt of the Section 6.1(m) Notice.

        Section 6.2. Purchaser's Call Option.

               (a) The Company may, in its sole discretion, grant to the
Purchaser the right to exercise one (1) or more Call Options during each Draw
Down Pricing Period for a specified Call Option Amount Requested. The Call
Option Amount Requested shall not exceed

21
<PAGE>   25

$50,000,000 minus the sum of all Draw Down Amounts and Call Option Amounts and
the Draw Down Amount Requested in the Draw Down Notice. The Call Option Amount
Requested and the Call Option Threshold Price shall be set forth in the Draw
Down Notice.

               (b) The number of shares of Common Stock to be issued in
connection with each Call Option shall equal the (i) the Call Option Amount
divided by (ii) the product of the Draw Down Discount Percentage (or such other
percentage mutually agreed upon by the Purchaser and the Company) and the
greater of (A) the VWAP for the Common Stock on the day the Purchaser issues its
Call Option Notice or (B) the Call Option Threshold Price.

               (c) Each Call Option exercised shall be settled on the next
Settlement Date.

               (d) The Call Option Threshold Price designated by the Company in
its Draw Down Notice shall apply to each Call Option.

               (e) For each Call Option that the Purchaser exercises pursuant to
this Section 6.2, as a condition to such exercise the Purchaser must issue a
Call Option Notice (as defined in Section 1.1(g) hereof) to the Company no later
than 8:00 p.m. (New York time) on the day such Call Option is exercised. If the
Purchaser does not exercise a Call Option by 8:00 p.m. (New York time) on the
last day of the applicable Draw Down Pricing Period, the Purchaser's Call
Options with respect to that Draw Down Pricing Period shall automatically
terminate.

                                  ARTICLE VII
                                   TERMINATION

        Section 7.1. Term; Termination by Mutual Consent. The term of this
Agreement shall expire on the earlier of (i) twenty-four (24) consecutive months
from the Effective Date (the "Investment Period"), (ii) the date that all of the
shares registered under the Registration Statement have been issued and sold and
(iii) the date that the Purchaser has purchased in the aggregate $50,000,000
pursuant to all Draw Downs and Call Options. This Agreement may be terminated at
any time by mutual written consent of the parties.

        Section 7.2. Company Termination. The Company may terminate this
Agreement effective upon thirty (30) days' written notice; provided, however,
that such termination does not occur during a Draw Down Pricing Period or prior
to a Settlement Date.

        Section 7.3. Other Termination. The Company shall inform the Purchaser,
and the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if during the Investment
Period (x) the Company, without the Purchaser's prior written consent, enters
into an Other Financing which provides for (i) the issuance of Common Stock or
securities convertible, exercisable or exchangeable into Common Stock at a
conversion price or exercise price discounted in excess of twenty-five (25%) of
the market price of the Common Stock on the Closing Date of such Other Financing
or (ii) a mechanism for the reset of the purchase price of the Common Stock or
for the reset of the conversion price or exercise price of any securities which
may be converted, exercised or exchanged into Common Stock to below the market
price of the Common Stock on the Closing Date of such Other Financing, (y) a
non-curable event resulting in a Material Adverse Effect has occurred or (z) an
event resulting in a Material Adverse Effect has occurred and such event has not
been cured within

22
<PAGE>   26

sixty (60) days of its occurrence. In such event, the Purchaser may terminate
this Agreement upon one (1) business day's prior written notice during the Event
Period.

        Section 7.4. Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1, 7.2 or 7.3 herein, this Agreement shall
become void and of no further force and effect, except as provided in Section
9.9 hereof. Nothing in this Section 7.4 shall be deemed to release the Company
or the Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.

                                  ARTICLE VIII
                                 INDEMNIFICATION

        Section 8.1 General Indemnity.

               (a) Indemnification by the Company. The Company will indemnify
and hold harmless the Purchaser, each of its directors, fund managers and
officers, and each person, if any, who controls the Purchaser within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from
and against any losses, claims, damages, liabilities and expenses (including
reasonable costs of defense and investigation and all attorneys' fees) to which
the Purchaser, each of its directors, fund managers and officers, and each such
controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained, or incorporated by
reference, in the Registration Statement relating to Common Stock being sold to
the Purchaser (including any Prospectus or Prospectus supplement which are a
part of it), or any amendment or supplement to it, or (ii) the omission or
alleged omission to state in that Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

        The Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or such controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company will not be liable to the extent any loss,
claim, damage, liability or expense arises out of, or is based upon, an untrue
statement, alleged untrue statement, omission or alleged omission, included in
any Prospectus or Prospectus supplement or any amendment or supplement to the
Prospectus or Prospectus supplement in reliance upon, and in conformity with,
written information furnished by the Purchaser to the Company for inclusion in
the Prospectus or Prospectus supplement.

               (b) Indemnification by the Purchaser. The Purchaser will
indemnify and hold harmless the Company, each of its directors and officers, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company, each of its directors and officers, and
each controlling person, if any, may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof)

23
<PAGE>   27

arise out of or are based upon (i) any untrue statement or alleged untrue
statement included in any Prospectus or Prospectus supplement or any amendment
or supplement to the Prospectus or Prospectus supplement, or (ii) the omission
or alleged omission to state in any Prospectus or Prospectus supplement or any
amendment or supplement to it 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, the untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon, and in conformity with, written
information furnished by the Purchaser to the Company for inclusion in the
Prospectus or Prospectus supplement or an amendment or supplement to it. The
Purchaser will reimburse the Company and each such director, officer or
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Company or the other person in investigating,
defending against, or preparing to defend against any such claim, suit, action
or proceeding.

        Section 8.2. Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it. After an
indemnifying party notifies an indemnified party that the indemnifying party
wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,
action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in all
reasonable respects with the indemnifying party in the defense of any action or
claim as to which indemnification is sought. No indemnifying party will be
liable for any settlement of any action effected without its prior written
consent. No indemnifying party will, without the prior written consent of the
indemnified party, effect any settlement of a pending or threatened action with
respect to which an indemnified party is, or is informed that it may be, made a
party and for which it would be entitled to indemnification, unless the
settlement includes an unconditional release of the indemnified party from all
liability and claims which are the subject matter of the pending or threatened
action.

        If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which it is
entitled to indemnification thereunder, each indemnifying party will, in lieu of
indemnifying the indemnified party, contribute to the amount paid or payable by
the indemnified party as a result of such loss or liability, (i) in the
proportion which is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and by the indemnified party on the other
from the sale of Shares which is the subject of the claim, action, suit or
proceeding which resulted in the loss or liability or (ii) if that allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits of the sale of such Shares, but also the relative
fault of the indemnifying party and the indemnified party with respect to the
statements or omissions which are the subject of the claim, action, suit or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.

24
<PAGE>   28

                                   ARTICLE IX
                                  MISCELLANEOUS

        Section 9.1. Fees and Expenses.

               (a) Each party shall bear its own fees and expenses related to
the transactions contemplated by this Agreement; provided, however, that the
Company shall pay, at the Closing, all reasonable attorneys' fees and expenses
incurred by the Purchaser up to $30,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement and any amendments,
modifications or waivers of this Agreement. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.

               (b) If the Company issues a Draw Down Notice and fails to deliver
the Shares on the applicable Settlement Date, and such failure continues for ten
(10) Trading Days, the Company shall pay the Purchaser, in cash or restricted
shares of Common Stock, at the option of the Purchaser, as liquidated damages
for such failure and not as a penalty an amount equal to two percent (2%) of the
payment required to be paid by the Purchaser on such Settlement Date (i.e., the
sum of the Draw Down Amount and the Call Option Amount)for the initial thirty
(30) days following such Settlement Date and an additional two percent (2%) for
each additional thirty (30) day period thereafter until the Shares have been
delivered, which amount shall be prorated for such periods less than thirty (30)
days.

        Section 9.2. Specific Enforcement, Consent to Jurisdiction.

               (a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that either party shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement by the other party and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
party may be entitled by law or equity.

               (b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement, and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of
the Company and the Purchaser consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section shall affect or limit any right to serve process in any other
manner permitted by law.

        Section 9.3. Entire Agreement; Amendment. This Agreement represents the
entire agreement of the parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by either
party relative to subject matter hereof not expressly set forth

25
<PAGE>   29

herein. No provision of this Agreement may be amended other than by a written
instrument signed by both parties hereto.

        Section 9.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile (with telecopy or facsimile machine
confirmation of delivery received) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The address for
such communications shall be:

If to the Company:    Geron Corporation
                      230 Constitution Drive
                      Menlo Park, CA  94025
                      Telephone Number:  (650) 473-7700
                      Fax:  (650) 473-7701
                      Attention:  David L. Greenwood

With copies to:       Latham & Watkins
                      135 Commonwealth Drive
                      Menlo Park, CA  94025
                      Telephone Number:  (650) 463-4693
                      Fax:  (650) 463-2600
                      Attention:  Alan C. Mendelson, Esq.

If to the Purchaser:  Acqua Wellington North American Equities Fund, Ltd.
                      c/o Fortis Fund Services (Bahamas) Ltd.
                      Montage Sterling Centre
                      East Bay Street, P.O. Box 55-6238
                      Nassau, Bahamas
                      Telephone Number:  (242) 394-2700
                      Fax:  (242) 394-9667
                      Attention:  Anthony L.M. Inder Rieden

With copies to:       Parker Chapin LLP
                      The Chrysler Building
                      405 Lexington Avenue
                      New York, NY  10174
                      Telephone Number:  (212) 704-6000
                      Fax:  (212) 704-6157
                      Attention:  Christopher S. Auguste, Esq.

        Either party hereto may from time to time change its address for notices
by giving at least ten (10) days advance written notice of such changed address
to the other party hereto.

        Section 9.5. Waivers. No waiver by either party 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

26
<PAGE>   30

waiver of any other provisions, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. No provision of
this Agreement may be waived other than in a written instrument signed by the
party against whom enforcement of such waiver is sought.

        Section 9.6. Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

        Section 9.7. Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, in the
Company's sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. After Closing, the
assignment by a party to this Agreement of any rights hereunder shall not affect
the obligations of such party under this Agreement.

        Section 9.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.

        Section 9.9. Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, except with respect to the Selling
Restriction set forth in Section 4.6 hereof which shall survive until three
months after the termination of this Agreement, and the agreements and covenants
set forth in Article VIII of this Agreement shall survive the execution and
delivery hereof and the Closing hereunder.

        Section 9.10. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.

        Section 9.11. Publicity. Prior to the Closing, neither the Company nor
the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement without the prior written
consent of the other party to such disclosure, except that if the Company is
required by law, based upon an opinion of the Company's counsel, to issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement prior to the Closing, the Company may do so and shall consult
with the Purchaser in advance on the form and substance of such press release.
After the Closing, the Company may issue a press release or otherwise make a
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided,
however, that prior to issuing any such press release, making any such public
statement or announcement, the Company shall consult with the Purchaser on the
form and substance of such press release or other disclosure. If no comment is
provided by Purchaser promptly (and in any event within forty-eight (48) hours
after such consultation), such press release, public statement or announcement
shall be deemed acceptable to Purchaser.

        Section 9.12. Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other

27
<PAGE>   31

provision or part of a provision of this Agreement, and this Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that such
provisions would be valid, legal and enforceable to the maximum extent possible.

         Section 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

28
<PAGE>   32

        IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be duly executed by their respective authorized officer as
of the date first above written.

                                     GERON CORPORATION

                                     By: /s/ DAVID L. GREENWOOD
                                         ----------------------------------
                                           Name:  David L. Greenwood
                                           Title: Senior Vice President and
                                                  Chief Financial Officer

                                     ACQUA WELLINGTON NORTH AMERICAN
                                     EQUITIES FUND, LTD.

                                     By: /s/ ANTHONY L.M. INDER RIEDEN
                                         --------------------------------------
                                           Name:  Anthony L.M. Inder Rieden
                                           Title: Director

<PAGE>   33

                                EXHIBIT B TO THE
                         COMMON STOCK PURCHASE AGREEMENT
                       CLOSING CERTIFICATE OF THE COMPANY

                               CLOSING CERTIFICATE

                                September 6, 2000

        The undersigned, __________________, ________________ of Geron
Corporation, a Delaware corporation (the "Company"), delivers this certificate
in connection with the Common Stock Purchase Agreement, dated as of September 6,
2000 (the "Purchase Agreement"), by and among the Company and Acqua Wellington
North American Equities Fund, Ltd. (the "Purchaser"), and hereby certifies on
the date hereof, that (capitalized terms used herein without definition have the
meanings assigned to them in the Purchase Agreement):

        1. Attached hereto as EXHIBIT A is a true, complete and correct copy of
the Restated Certificate of Incorporation, as amended, of the Company as filed
with the Secretary of State of the State of Delaware. The Restated Certificate
of Incorporation, as amended, of the Company has not been further amended or
restated, and no document with respect to any amendment to the Restated
Certificate of Incorporation, as amended, of the Company has been filed in the
office of the Secretary of State of the State of Delaware since the date shown
on the face of the state certification relating to the Company's Restated
Certificate of Incorporation, as amended, which is in full force and effect on
the date hereof, and no action has been taken by the Company in contemplation of
any such amendment or the dissolution, merger or consolidation of the Company.

        2. Attached hereto as EXHIBIT B is a true and complete copy of the
Amended and Restated By-laws of the Company, as amended and restated through,
and as in full force and effect on, the date hereof, and no proposal for any
amendment, repeal or other modification to the Amended and Restated By-laws of
the Company has taken or is currently pending before the Board of Directors or
stockholders of the Company.

        3. The Board of Directors of the Company has approved the transactions
contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.

        4. Each person who, as an officer of the Company, or as attorney-in-fact
of an officer of the Company, signed (i) the Agreement, (ii) the Registration
Statement and (iii) any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Agreement, was
duly elected, qualified and acting as such officer or duly appointed and acting
as such attorney-in-fact, and the signature of each such person appearing on any
such document is his genuine signature.

        5. Latham & Watkins is entitled to rely on this certificate in
connection with the opinions that such firm is rendering pursuant to Sections
5.2(g) of the Purchase Agreement.

        6. The actions, resolutions and other records of the Company relating to
all of the proceedings of the Stockholders of the Company, the Board of
Directors of the Company and any committees thereof made available to the
Purchasers and their counsel are the true, correct and complete copies thereof,
with respect to all proceedings of said Stockholders, Board of Directors and
committees thereof. Such records and other documents of the Company made
available to the Purchasers and their

<PAGE>   34

counsel were true and complete in all respects. There have been no material
changes, additions or alterations in said records and other documents that have
not been disclosed to the Purchasers.

        IN WITNESS WHEREOF, I have signed my name as of the date first above
written.

                                        ________________________________________
                                        By:

        I, __________________, Chief Executive Officer of Geron Corporation, do
hereby certify that ______________________ is the duly elected, qualified and
acting Secretary of the above mentioned company, and that the signature set
forth above is her true and genuine signature.

        IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.

                                        By: ____________________________________
                                            Name:
                                            Title:  Chief Executive Officer

<PAGE>   35

                                    EXHIBIT C
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                             COMPLIANCE CERTIFICATE

               In connection with the issuance of shares of common stock of
Geron Corporation, a Delaware corporation (the "Company") pursuant to the Draw
Down Notice, dated ___________ delivered by the Company to Acqua Wellington
North American Equities Fund, Ltd. (the "Purchaser") pursuant to Article VI of
the Common Stock Purchase Agreement dated September 6, 2000, by and between the
Company and Acqua Wellington North American Equities Fund, Ltd. (the
"Agreement"), the undersigned hereby certifies as follows:

        1. The undersigned is the duly elected Chief Financial Officer of the
Company.

        2. Except as set forth in the attached Schedule, the representations and
warranties of the Company set forth in Section 3.1 of the Agreement are true and
correct in all material respects as of the date when made and as of the date
hereof, except for representations and warranties that speak as of a particular
date.

        3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.

               Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Agreement.

               The undersigned has executed this Certificate this _____ day of
_________, 2000.

                                        By:_____________________________________

                                        Name:___________________________________

                                        Title:__________________________________

<PAGE>   36

                                    EXHIBIT D
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                            FORM OF DRAW DOWN NOTICE

        Reference is made to the Common Stock Purchase Agreement dated as of
September 6, 2000, (the "Purchase Agreement") between Geron Corporation, a
Delaware corporation (the "Company"), and Acqua Wellington North American
Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.

        In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.

        Draw Down Amount:
                         ----------------------------------------------

        Draw Down Pricing Period start date:
                                            ---------------------------

        Draw Down Pricing Period end date:
                                          -----------------------------

        Settlement Date:
                        -----------------------------------------------

        Draw Down Threshold Price:
                                  -------------------------------------

        Minimum Threshold Price:    $16.00
                                ---------------------------------------

        Call Option Amount:
                           --------------------------------------------

        Call Option Threshold Price:
                                    -----------------------------------

        Dollar Amount and/or Number of Shares
        of Common Stock Currently Unissued
        under the Registration Statement:
                                         ------------------------------

Dated:
      ---------------

                                            ------------------------------------
                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                            Address:
                                            Facsimile No.:
                                            Wire Instructions:
                                                              ------------------
                                            Contact Name:
                                                         ----------------
Receipt Acknowledged:

Acqua Wellington North American Equities Fund, Ltd.

By:
   -----------------------
   Name:
   Title:

<PAGE>   37

                                    EXHIBIT E
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                           FORM OF CALL OPTION NOTICE

To: ______________
Fax #:

        Reference is made to the Common Stock Purchase Agreement dated as of
________, 2000 (the "Purchase Agreement") between Geron Corporation, a Delaware
corporation (the "Company"), and Acqua Wellington North American Equities Fund,
Ltd. Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.

        In accordance with and pursuant to Section 6.2 of the Purchase
Agreement, the Purchaser hereby issues this Call Option Notice to exercise a
Call Option for the Call Option Amount indicated below.

        Call Option Amount Exercised:______________________

        Number of Shares to be purchased:__________________

        VWAP on the date hereof:___________________________

        Draw Down Discount Percentage:_____________________

        Settlement Date:___________________________________

        Call Option Threshold Price:_______________________

        Minimum Threshold Price:___________________________

Dated:_______________

                             Acqua Wellington North American Equities Fund, Ltd.

                             By: _______________________________________________
                                 Name:
                                 Title:

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