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EXHIBIT 10.18
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 5th day of May 1997, by
and between Nanogen, Inc., a California corporation (the "Company"), and the
investors listed on Schedule A hereto, each of which is herein referred to as an
"Investor."
RECITALS
WHEREAS, the Company and certain of the Investors are parties to (i) the
Series A Preferred Stock Purchase Agreement dated February 10, 1994, as amended
(the "Series A Agreement"), (ii) the Series B Preferred Stock and Warrant
Purchase Agreement, dated as of April 11, 1995, as amended ("Series B
Agreement") and (iii) the Series C Preferred Stock Purchase Agreement dated as
of December 19, 1996, as amended ("Series C Agreement");
WHEREAS, the Company previously entered into an Investors' Rights
Agreement dated December 19, 1996 (the "1996 Agreement"), with Dominion Ventures
and certain holders of the Series A, Series B and Series C Preferred Stock (the
"Prior Investors") pursuant to which the Company agreed to grant such
shareholders certain registration rights, information rights, rights of first
refusal and other rights;
WHEREAS, in order to induce Investor to purchase the Company's Series D
Preferred Stock pursuant to the Series D Preferred Stock Purchase Agreement
dated as of May 4, 1997 (the "Series D Agreement"), the Prior Investors holding
rights under the 1996 Agreement desire to amend and restate the 1996 Agreement
as set forth herein; and
WHEREAS, the holders of the Company's Series D Preferred Stock desire to
enter into this Agreement and to accept the rights created pursuant hereto.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Prior Investors who are parties to the 1996 Agreement hereby
agree that the 1996 Agreement shall be superseded and replaced in its entirety
by this Agreement, and the parties hereto further agree as follows:
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1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, (2)
the Common Stock issuable or issued upon exercise of the warrant issued to
Dominion Ventures, Inc. (which expires September 11, 1999), (3) the Common Stock
issuable or issued upon exercise of the warrants issued to purchasers of Series
B Preferred Stock pursuant to the Series B Agreement, and (4) any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any Investor who holds or has
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof; and
(e) The term "Initiating Holder" shall mean (i) prior to the
Company's initial public offering of securities, any Holder or Holders who in
the aggregate are Holders of more than 50% of the then outstanding Registrable
Securities and (ii) after the Company's initial public offering of securities,
any Holder or Holders who request to register Registrable Securities that would
have an aggregate price to the public of at least $7,500,000.
(f) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
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(g) The term "Act" means the Securities Act of 1933, as
amended.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
earlier of (i) January 1, 2000, or (ii) six (6) months after the effective date
of the first registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
an Initiating Holder that the Company file a registration statement under the
Act covering the registration of at least twenty percent (20%) of the
Registrable Securities then outstanding (or a lesser percent if the anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $7,500,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), effect as soon as practicable, and in
any event within 60 days of the receipt of such request, the registration under
the Act of all Registrable Securities which the Holders request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 1.2 and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by a majority in interest of
the Initiating Holders and shall be reasonably acceptable to the Company. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating
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Holders, in proportion (as nearly as practicable) to the amount of Registrable
Securities of the Company owned by each Holder; provided, however, that the
number of shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all other securities are first entirely excluded
from the underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at each
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days.
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(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Cause all such securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed.
(g) Provide a transfer agent and registrar for all such
securities not later than the effective date of such registration statement.
(h) With respect solely to an underwritten offering, make
available for inspection by any seller of securities, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement, subject to non-disclosure
obligations by the recipients of such information.
(i) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
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effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5 Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printing
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.
1.7 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing and
qualification fees, printing and accounting fees relating or apportionable
thereto, fees and disbursement of counsel for the Company, and the reasonable
fees and disbursements of one counsel for the selling Holders selected by them,
but excluding underwriting discounts and commissions relating to Registrable
Securities.
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1.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required, subject to the limitations set forth below, under
Section 1.3 to include any of the Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering unless such offering is the
initial public offering of the Company's securities in which case the selling
shareholders may be excluded entirely if the underwriters make the determination
described above and no other shareholder's securities are included or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 1.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder", and
any pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined in
this sentence.
1.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
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(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder, any officer, director, partner or agent thereof, and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other United States
federal or state securities law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act or other United States federal or state
securities law, or any rule or regulation promulgated under the Act, the 1934
Act or other United States federal or state securities law; and the Company will
pay to each such Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action as incurred;
provided, however, that the indemnity agreement contained in this subsection
1.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement, any officer, director,
partner or agent thereof and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other United States federal or state securities law insofar
as such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information
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furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection l.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.10(b) exceed the proceeds (net of underwriting discounts and commissions) from
the offering received by such Holder.
(c) After receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section l.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
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considerations; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the proceeds (net of
underwriting discounts and commissions) received by such Holder from all
Registrable Securities offered and sold by such Holder pursuant to the
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the Violation relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies),
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(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
one or more Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, provided that the number of shares requested to be sold would have an
aggregate price to the public of at least $1,000,000, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
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(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with the
first two registrations requested pursuant to Section 1.12, including (without
limitation) all registration, filing and qualification fees, printing and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders, but excluding any underwriters' discounts or commissions associated
with Registrable Securities, shall be borne by the Company, and the expenses of
any subsequent registration shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Section 1.2.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 175,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership.
1.14 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration
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statement being declared effective prior to the earlier of either of the dates
set forth in subsection 1.2(a) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees
that, during the period specified by the Company's underwriter (such period not
to exceed 180 days following the effective date of the Company's registration
statement filed under the Act relating to its initial public offering), it shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any Registrable
Securities of the Company held by it at any time during such period except
common stock included in such registration, so long as all then-current officers
and directors of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after (a) five (5)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its securities to the general
public (the "IPO"), or (b) after the one-year anniversary of the effective date
of the IPO, as to any Holder (or permitted assignee) who can sell all
Registrable Securities held by such Holder under Rule 144(k) and owns less than
0.4% of the Company's outstanding Common Stock.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
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(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, schedule
as to the sources and application of funds for such fiscal quarter, an unaudited
balance sheet and a statement of shareholder's equity as of the end of such
fiscal quarter and a statement showing the number of shares of each class and
series of capital stock and securities convertible into or exercisable for
shares of capital stock outstanding at the end of the period, the number of
common shares issuable upon conversion or exercise of any outstanding securities
convertible or exercisable for common shares and the exchange ratio or exercise
price applicable thereto, all in sufficient detail as to permit the Investor to
calculate its percentage equity ownership in the Company;
(c) and to each Investor who holds at least 100,000 shares
of the Company's Preferred Stock, within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) and to each Investor who holds at least 100,000 shares
of the Company's Preferred Stock, within 30 days prior to the close of each
fiscal year, a comprehensive operating budget for the next fiscal year
forecasting the Company's revenues, expenses and cash position, prepared on a
monthly basis;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(f) or any other subsection of Section 2.1 to provide information which it deems
in good faith to be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Investor who holds
at least 100,000 shares of the Company's Preferred Stock, at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's finances and accounts with its
officers, all at such reasonable times as may be requested by
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the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
covenants set forth in subsections 2.1(c), (d), (e) and (f) and Section 2.2
shall terminate as to Investors and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean (i) any Investor signatory to this
Agreement who holds at least 10% of the original investment such Investor made
in the Company pursuant to the Series A Agreement, the Series B Agreement, the
Series C Agreement or Series D Agreement and who has not waived all rights of
first offer pursuant to Section 2.4 of the 1996 Agreement and (ii) any person
who acquires at least 10% of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock (or the Common Stock
issued upon conversion thereof) issued pursuant to the Series A Agreement,
Series B Agreement, Series C Agreement, or Series D Agreement and who has not
waived all rights of first offer pursuant to Section 2.5 of the 1996 Agreement.
For purposes of this Section 2.4, Investor includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
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16
(b) Within 20 calendar days after giving of the Notice, any
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issuable upon conversion of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock then held by such Major Investor bears to the total
number of shares of Common Stock issuable upon conversion of the Series A,
Series B, Series C and Series D Preferred Stock then held by all the Major
Investors. The Company shall promptly, in writing, inform each Major Investor
which purchases all the shares available to it ("Fully-Exercising Investor") of
any other Major Investor's failure to do likewise. During the ten-day period
commencing after such information is given, each Fully-Exercising Investor shall
be entitled to obtain that portion of the Shares not subscribed for by the Major
Investors which is equal to the proportion that the number of shares of Common
Stock issuable upon conversion of Series A, Series B, Series C and Series D
Preferred Stock then held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock issuable upon conversion of the Series A,
Series B, Series C and Series D Preferred Stock then held, by all
Fully-Exercising Investors who wish to purchase some of the unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not
be applicable (i) to the issuance or sale of Common Stock (or options therefor)
to employees, officers, directors or consultants for the primary purpose of
soliciting or retaining their service, (ii) to or after consummation of a bona
fide, firmly underwritten public offering of shares of common stock, registered
under the Act pursuant to a registration statement on Form S-1, at an offering
price of at least $7.50 per share (appropriately adjusted for any stock split,
dividend, combination or other recapitalization) and $7,500,000 in the
aggregate, (iii) the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or
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otherwise (v) the issuance of stock, warrants or other securities or rights in
connection with a strategic alliance, research and development partnership or
agreement, license agreement or other similar business relationship, or (vi) the
issuance of stock, warrants or other securities or rights to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes.
2.5 Pay to Play.
(a) In the event a Major Investor does not purchase ("a
Failure to Purchase") its Pro Rata Amount of a Future Issuance (as defined
below) subsequent to the initial sale of Series D Preferred Stock, such Major
Investor (and any transferee of all or any part of such Major Investor's shares
of Series A, Series B, Series C and Series D Preferred Stock) shall
automatically waive any and all rights of first offer pursuant to Section 2.4
with respect to any and all Future Issuances of Shares of the Company's capital
stock subsequent to such Failure to Purchase.
(b) "Future Issuance" means an issuance of Shares which is
designated and allocated by resolution at a duly held meeting of the Board of
Directors of the Company for issuance to the holders of Series A, Series B,
Series C and Series D Preferred Stock less any of such stock issuable to one or
more new investors approved by the Board.
(c) "Pro Rata Amount" means the number of shares of Series
A, Series B, Series C and Series D Preferred Stock which such Investor holds on
the date of this Agreement divided by the number of shares of Series A, Series
B, Series C and Series D Preferred Stock held on the date of this Agreement by
all Investors.
2.6 Termination of Certain Covenants. The covenants set forth in
this Section 2 shall terminate and be of no further force or effect upon the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the firm commitment
underwritten offering of its securities to the general public.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified (or upon
the date of attempted delivery where delivery is refused) or, if sent by
telecopier, telex, telegram, or other facsimile means, upon receipt of
appropriate confirmation of receipt, or upon deposit with the United States
Postal Service, by registered or certified mail, or next day air courier, with
postage and fees prepaid and addressed to the party entitled to such notice at
the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by 10 days' advance written notice to
the other parties to this Agreement.
3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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3.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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3.10 Entire Agreement. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NANOGEN, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxx, Chief
Executive Officer
Address: 00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
ENTERPRISE PARTNERS II, L.P.
By: Enterprise Management Partners II,
L.P.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
--------------------------------
General Partner
Series A: 909,091 shares
Series B: 545,455 shares
Series C: 125,832 shares
ENTERPRISE PARTNERS II ASSOCIATES, L.P.
By: Enterprise Management Partners II,
L.P.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
--------------------------------
General Partner
Series A: 90,909 shares
Series B: 54,545 shares
Series C: 12,583 shares
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XXXXXXX XXXXXXX XXXXXXXX & XXXXX VI
By: /s/ X. Xxxxx
-------------------------------------
General Partner
Series A: 867,000 shares
Series B: 520,200 shares
Series C: 138,416 shares
KPCB VI FOUNDERS FUND, L.P.
By: /s/ X. Xxxxx
-------------------------------------
General Partner
Series A: 133,000 shares
Series B: 79,800 shares
INTERWEST PARTNERS V, L.P.
By: Interwest Management Partners V,
L.P.,
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
--------------------------------
General Partner
Series B: 993,750 shares
Series C: 85,976 shares
INTERWEST INVESTORS V
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
General Partner
Series B: 6,250 shares
Series C: 540 shares
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SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Its Managing General Partner
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx,
Attorney-in-Fact
Series B: 1,100,407 shares
Series C: 95,142 shares
DLJ CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx,
Attorney-in-Fact
Series B: 91,593 shares
Series C: 7,919 shares
/s/ Xxxxxx Xxxxxxxx
------------------------------------------
Xxxxxx Xxxxxxxx
Series A: 200,000 shares
Series B: 240,000 shares
Series C: 38,064 shares
------------------------------------------
Xx. Xxxxxxxxx D. Cross
Series C: 689 shares
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.
By:_______________________________________
Series C: 750,000 shares
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XXXX XXXXXXXXXXXXX SERVICES LIMITED
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Series C: 1,250,000 shares
INTEGRAL CAPITAL PARTNERS III, L.P.
By:_______________________________________
Series C: 368,250 shares
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL III, L.P.
By:_______________________________________
Series C: 131,750 shares
THE GLOBAL HEALTH SCIENCES FUND
By:_______________________________________
Series C: 625,000 shares
------------------------------------------
Xxxxxx X. Xxxx
Series C: 100,000 shares
------------------------------------------
Xxxxxx X. Xxxx
Series C: 100,000 shares
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THE HEALTH CARE AND BIOTECHNOLOGY
VENTURE FUND
By:_______________________________________
Series C: 281,250 shares
MDS HEALTH VENTURES INC.
By:_______________________________________
Series C: 93,750 shares
------------------------------------------
Xxxxx X. and Xxxxxxx X. Xxxxxx
Series C: 25,000 shares
TECHNO VII A LIMITED PARTNERSHIP
By:_______________________________________
Series C: 44,872 shares
TECHNO VII B LIMITED PARTNERSHIP
By:_______________________________________
Series C: 205,128 shares
VULCAN VENTURES INC.
By:_______________________________________
Series C: 500,000 shares
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ORACLE PARTNERS
By:_______________________________________
Series C: 1,250,000 shares
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