FORM OF NANOSPHERE, INC. NOTE AND WARRANT PURCHASE AGREEMENT DATED JUNE 8, 2004 AND JULY 8, 2004
Exhibit
10.26
FORM
OF
NANOSPHERE, INC.
DATED
JUNE 8, 2004 AND JULY 8, 2004
THIS NOTE AND WARRANT PURCHASE AGREEMENT (“Agreement”) is made as of , 2004 by and
between Nanosphere, Inc., a Delaware corporation (the “Company”), and Xxxxx Investment Fund,
L.L.C., a Delaware limited liability company (the “Lender”).
WHEREAS, the Lender intends to (i) loan to the Company and
(ii) extend the Maturity Date of that certain convertible promissory note made by the Company to
the Lender dated February 10, 2004 in the principal amount of Four Million Dollars [(the “Prior
Note”) from May 31, 2004 to July 9, 2004 (the
“Prior Note Extension”)] (together, the “Total
Consideration”) [and dated June 8, 2004 in the
principal amount of One Million Dollars (the “Prior Notes”)
to August 13, 2004 (the “Prior Note Extensions”)
(together, the “Total Consideration”)];
WHEREAS, the parties intend for the Company to issue in return for the Total Consideration (i)
a promissory note convertible into shares of the Company’s Series C Preferred Stock, $0.01 par
value per share (“Series C Preferred”), or such other securities to be issued and sold in the first
sale of preferred stock or other shares of capital stock of the Company after the date hereof (the
“Next Equity Securities”) which results in gross proceeds to the Company of at least Six Million
Dollars ($6,000,000), excluding the conversion of indebtedness and exercise of warrants and cash
investments by existing Company investors (unless otherwise consented to, or directed, in writing
by the Majority Holders, as defined in the Note) (the “Next Equity Financing”), (ii) a warrant to purchase shares of either the Company’s Series C Preferred or
Next Equity Securities (the “New Warrant”), and (iii) in consideration of the Prior Note Extension,
a warrant to purchase shares of either the Company’s Series
C Preferred or Next Equity Securities (the “Extension Warrant”);
WHEREAS, the parties hereto wish to provide for the sale and issuance of such note and
warrants in return for the Total Consideration paid to the Company;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
| 1. | Amount and Terms of the Note; Terms of Warrants. |
| 1.1 | Promissory Note and Warrants. |
(a) Issuance. In return for the Total Consideration paid by the Lender, the Company
shall sell and issue to such Lender (i) a convertible promissory note in the form attached hereto
as Exhibit A (the “Note”), and (ii) the New Warrant and the Extension Warrant, each being a
warrant to purchase shares of either Series C Preferred or Next Equity Securities (collectively,
the “Warrant Shares”) in the forms attached hereto as Exhibits B-1 and B-2,
respectively (together, the “Warrants”).
(b) Promissory Note. The Note shall have an initial principal balance equal to and shall be dated as of the date the Total Consideration is paid
to the Company. After consideration of all relevant factors, the Company
and the Lender agree that the consideration for the Note is deemed to equal all but $20.00 of the
cash portion of the Total Consideration.
(c) Warrants. The Warrants shall be exercisable, at the sole option of the Lender, as
follows:
(i) The New Warrant shall be exercisable for either
shares
of Series C Preferred at an exercise price of Sixty
Cents ($0.60) per share or, after the closing of the Next Equity Financing, that number of
shares of Next Equity Securities equal to the quotient obtained by dividing (i)
by (ii) the price per security at which such Next Equity
Securities are sold in such Next Equity Financing.
(ii) The Extension Warrant shall be exercisable for either
shares of Series C Preferred at an exercise
price of Sixty Cents ($0.60) per share or, after the closing of the Next Equity Financing,
that number of shares of Next Equity Securities equal to the quotient obtained by dividing
(i) by (ii) the
price per security at which such
Next Equity Securities are sold in such Next Equity Financing.
After consideration of all relevant factors, the Company and the Lender agree that the cash
consideration for each of the Warrants is deemed to equal $10.00.
1.2 Closing.
The closing (the “Closing”) of the purchase of the Note and Warrants
in return for the Total Consideration shall take place at the offices of Xxxx, Xxxxxx & Xxxxxxxxx
llp, Xxx Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, at 10:00 a.m., on , 2004, or at such other time and place as the Company and the Lender agree upon orally or in
writing. At the Closing, the Lender shall deliver the Total Consideration to the Company by check
or wire transfer and the Company shall deliver to the Lender the Note and Warrants executed by the
Company in return for the respective Total Consideration paid to the Company.
2. Representations and Warranties of the Company.
In connection with the
transactions provided for herein, the Company hereby represents and warrants to the Lender that:
2.1 Organization,
Good Standing, and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Authorization.
All corporate action on the part of the Company, its officers,
directors, and stockholders necessary for the authorization, execution, and delivery of this
Agreement, the performance of all obligations of the Company hereunder, and the
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authorization, issuance (or reservation for issuance), and delivery of the Note, the Warrants and,
subject to Section 4.11 hereof, the Series C Preferred Warrant Shares has been taken or will be
taken prior to the Closing. This Agreement, the Note and the Warrants constitute the Company’s
valid and legally binding obligations, enforceable in accordance with their terms.
2.3 Valid Issuance of Series C Preferred, Next Equity Securities and Warrant
Shares. The shares of the Series C Preferred, Next Equity Securities and the Warrant Shares,
when issued, sold, and delivered in accordance with the terms of the Note and Warrants for the
consideration expressed therein, shall be duly and validly issued, fully paid, and nonassessable
and, based in part upon the representations of the Lender in this Agreement, will be issued in
compliance with all applicable federal and state securities laws.
3. Representations and Warranties of the Lender. In connection with the
transactions provided for herein, the Lender hereby represents and warrants to the Company that:
3.1 Authorization. This Agreement constitutes the Lender’s valid and legally binding
obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. The Lender acknowledges that this Agreement is
made with the Lender in reliance upon the Lender’s representation to the Company that the Note, the
Warrants, the Warrant Shares, the Series C Preferred and the Next Equity Securities issuable upon
conversion of the Note or exercise of the Warrants (collectively, the “Securities”) will be
acquired for investment for the Lender’s own account, not as a nominee or agent, and, except as
contemplated by Section 4.1 hereof, not with a view to the resale or distribution of any part
thereof, and that, except as contemplated by Section 4.1 hereof, the Lender has no present
intention of selling, granting any participation, or otherwise distributing the same. By executing
this Agreement, the Lender further represents that, except as contemplated by Section 4.1 hereof,
it does not have any contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participations to such person or to any third person, with respect to the
Securities. The Lender represents that it has full power and authority to enter into this
Agreement.
3.3 Disclosure of Information. The Lender acknowledges that it has received all the
information it considers necessary or appropriate for deciding whether to acquire the Note and
Warrants. The Lender further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of the Note and
Warrants.
3.4 Investment Experience. The Lender is an investor in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear the economic risk
of its investment, and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in the Securities. The Lender also
represents it has not been organized solely for the purpose of acquiring the Securities.
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3.5 Accredited Investor. The Lender is an “accredited investor” within the meaning of
Rule 501 of Regulation D of the Securities Act of 1933, as amended (the “Act”).
3.6 Restricted Securities. The Lender understands that the Securities are
characterized as “restricted securities” under the federal securities laws in as much as they are
being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
Act only in certain limited circumstances.
3.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Lender further agrees not to make any disposition of all or
any portion of the Securities unless:
(a) There is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration statement; or
(b) (i) if the Lender shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company, the Lender shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition
will not require registration of such shares under the Act. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 under the Act except in
extraordinary circumstances.
3.8 Legends. It is understood that the Securities may bear the following
legend:
“These securities have not been registered under the Securities Act of 1933. They may not be
sold, offered for sale, pledged, hypothecated, or otherwise transferred except pursuant to an
effective registration statement under the Securities Act of 1933 or an opinion of counsel
reasonably satisfactory to the Company that registration is not required under such Act or unless
sold pursuant to Rule 144 under such Act.”
4. Miscellaneous.
4.1 Subsequent Offering. The parties agree that, subsequent to the Closing, the
Company shall offer the right to participate in a financing on substantially the same terms as
those contained herein with an aggregate additional amount up to as may be appropriate
or necessary for the Company to comply with any contractual preemptive rights binding the Company
(the “Subsequent Offering”). The parties agree that, prior to the closing of the Subsequent
Offering, this Agreement, the Note (provided that the dollar amount thereof will not be reduced),
the Warrants and all other documents contemplated hereby shall be amended pursuant to modifications
drafted by counsel to the Lender (subject to the Company’s approval) to account for and accommodate
any other lenders participating in the Subsequent Offering and to provide that the lender(s) of a
majority of the total consideration paid in the offering
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contemplated hereby and the Subsequent Offering shall control all elections hereunder and
thereunder (including, without limitation, the conversion, declaration of default or extension of
maturity dates of the promissory notes and the exercise of the warrants, but excluding individual
holder’s rights to elect into which class of the Company’s preferred stock a note or warrant will
be converted or exercised and excluding the respective rights of holders in respect of the
underlying preferred stock, once outstanding, which shall be governed by the Company’s Amended and
Restated Certificate of Incorporation, as amended, and such contractual obligations undertaken by
such holders, if any). The parties agree that the closing of the Subsequent Offering will take
place no later than , 2004. If such offering does not close by such date, this Agreement,
the Note, the Warrants and any other documents contemplated hereby shall continue in effect and no
subsequent modifications shall be made thereto.
4.2 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. 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.
4.3 Governing Law. This Agreement shall be governed by and construed under the laws of
the State of Delaware as applied to agreements among Delaware residents, made and to be performed
entirely within the State of Delaware.
4.4 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.
4.5 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.
4.6 Notices. All notices and other communications required or permitted hereunder
shall be in writing and may be delivered in person, by telecopy with written confirmation,
overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed as follows:
If to the Company:
Nanosphere, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn.: President
Fax: (000) 000-0000
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn.: President
Fax: (000) 000-0000
With a copy to:
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Xxxxxx Xxxxxx LLP
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
If to the Lender:
Xxxxx Investment Fund, L.L.C.
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx Xxxxx
Fax: (000) 000-0000
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx Xxxxx
Fax: (000) 000-0000
With a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx llp
0 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxx Xxxxxxxxx
Fax: (000) 000-0000
0 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxx Xxxxxxxxx
Fax: (000) 000-0000
Each such notice or other communication shall for all purposes under this Agreement be treated
as effective or having been given when delivered if delivered personally or, if sent by mail, at
the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid, or, if sent by telecopier with written confirmation, at the earlier of (a) twenty-four
(24) hours after confirmation of transmission by the sending telecopier machine or (b) delivery of
written confirmation.
4.7 Finder’s Fee. Each party represents that it neither is nor will be obligated for
any finder’s fee or commission in connection with this transaction. The Lender agrees to indemnify
and to hold harmless the Company from any liability for any commission or compensation in the
nature of a finder’s fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Lender or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold harmless the Lender from
any liability for any commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability) for which the Company or any of
its officers, employees, or representatives is responsible.
4.8 Transaction Expenses. The Company shall pay, and shall hold the Lender harmless
against liability for the payment of, the reasonable fees and expenses (including legal fees and
expenses) incurred by or on behalf of the Lender in connection with (a) the negotiation and
execution of this Agreement and the other documents contemplated hereby and
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the consummation of the transactions contemplated hereby, (b) any amendments or waivers in respect
of this Agreement or such other documents, and (c) the successful enforcement of the rights granted
under this Agreement or the other documents contemplated hereby.
4.9 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.
4.10 U.S. Dollars. All references in this Agreement to “dollars,”, “U.S.$” and
“$” are to United States dollars.
4.11 Reservation of Shares. The Company shall have sufficient shares of the
appropriate class and series of its capital stock reserved at or prior to the time that the Lender
exercises the Warrants or converts the Note.
4.12 Entire Agreement; Amendments and Waivers. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. 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), with the written consent of the Company and
the Lender. Any waiver or amendment effected in accordance with this Section shall be binding upon
each holder of any securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder of all such
securities and the Company.
4.13 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.
4.14 Understanding Among Potential Lenders. The determination of any lender to
participate in the Subsequent Offering shall be made by such lender independent of any other
lender, including the Lender, and independent of any statements or opinions as to the advisability
of such participation or as to the properties, business, prospects or conditions (financial or
otherwise) of the Company which may have been made or given by any other lender or by any agent or
employee of any other lender. In addition, in such Subsequent Offering, it shall be acknowledged by
each of the other lender that neither the Lender nor its affiliates or counsel has acted as an
agent of or counsel to any other lender in connection with its participation in the Subsequent
Offering and that neither the Lender nor its affiliates or counsel shall be acting as an agent of
or counsel to such lender in connection with monitoring its participation therein.
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IN WITNESS WHERE, the parties have executed this Agreement as of the date first above written.
| THE COMPANY: NANOSPHERE, INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Xxxxxxx X. Xxxxx | ||||
| Chief Financial Officer | ||||
| THE LENDER: XXXXX INVESTMENT FUND, L.L.C. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | ||||
| Title: | ||||
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Exhibit A
Form of Convertible Promissory Note
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY, EXCEPT IN
CONNECTION WITH SALES IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE ACT, REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
NANOSPHERE, INC.
CONVERTIBLE PROMISSORY NOTE
CONVERTIBLE PROMISSORY NOTE
| Chicago, Illinois | ||||
| , 2004 | ||||
FOR VALUE RECEIVED, NANOSPHERE, INC., a Delaware corporation (the “Company”) hereby
absolutely and unconditionally promises to pay to the order of Xxxxx Investment Fund, L.L.C. or
its assigns (the “Lender,” which term shall include the holder, from time to time, of this Note),
the principal amount of
in legal tender of the United States, together with interest (computed on the basis of a 360-day
year of twelve 30-day months for actual days elapsed) on such principal amount outstanding from
time to time at the rate of seven and one-half percent (7.5%) per annum. After the earlier of the
Maturity Date (hereinafter defined) or the occurrence of an Event of Default (hereinafter
defined), the total unpaid indebtedness hereunder shall bear interest at a rate equal to ten
percent (10%) per annum. This Note is being delivered by the Company pursuant to the terms of
Section 1.1 of that certain Note and Warrant Purchase Agreement, dated as of
, 2004, between
the Company and the Lender (the “Purchase Agreement”). Pursuant to the terms of the Purchase
Agreement, together with this Note the Company shall deliver to the Lender a warrant to purchase a
certain number of shares of either Series C Preferred or Next Equity Securities, as such terms are
defined in the Purchase Agreement, for a total consideration of
. After consideration of all factors, by Lender’s acceptance of this Note
and the Company’s acceptance of the loan evidenced hereby, the Company and Lender agree that the
consideration for the Note is deemed to equal all but $20.00 of such total cash consideration.
1. Repayments and Prepayments.
(a) Subject to Section 3(a) or 5(a) hereof, all principal, accrued interest and all other
amounts owing under this Note shall be due and payable on , 2004 (the “Maturity Date”).
(b) The Company may not prepay this Note at any time, either in whole or in part without the
prior consent of the holders of outstanding convertible notes issued by the Company pursuant to
the terms of Sections 1.1 and 4.1 of the Purchase Agreement (the “Bridge Notes”), representing a
majority of the aggregate unpaid principal amounts under the Bridge Notes (the “Majority
Holders”), which consent may be granted or withheld at the sole discretion of the Majority
Holders.
(c) All payments received under this Note shall be applied first to costs, expenses and other
amounts (other than principal and interest), then to accrued interest on the date of payment and
then to the outstanding principal balance of this Note.
(d) All payments of principal and interest shall be made to the holder of this Note not later
than 1:00 p.m. (Chicago time) on the date and at the place of payment designated by the holder
hereof as aforesaid, and any payment received on such date but after such hour shall be deemed to
have been paid to and received by the holder hereof on the next succeeding business day. If the
date on which any payment is required to be made pursuant to this Note is not a business day, then
such payment shall be due and payable on the next succeeding date which is not a Saturday, Sunday
or legal holiday, and such extension of time shall be included in computing interest. All payments
hereunder shall be made without set-off, counterclaim or reduction of any kind or nature
whatsoever.
2. Conversion. The outstanding principal and interest and all other amounts
owing on this Note shall be convertible into equity securities of the Company as follows:
(a) Qualified Financing. Subject to Section 2(b) below, from and after the closing of
the Company’s first equity financing after the date hereof with aggregate gross offering proceeds
of no less than Six Million Dollars ($6,000,000), excluding amounts received on conversion of any
promissory notes to the Company or exercise of any warrants and excluding cash investments by
existing Company investors (unless otherwise consented to, or directed, in writing by the Majority
Holders) (the “Next Qualified Financing”), the outstanding aggregate principal amount of this Note
plus all accrued but unpaid interest to such date and all other amounts owing hereunder may at the
Majority Holders’ option be converted into that number of shares of the type of equity securities
sold in the Next Qualified Financing (“Equity Securities”) equal to the quotient obtained by
dividing (i) such outstanding aggregate principal amount hereunder plus such accrued and unpaid
interest and all other amounts owing hereunder by (ii) the price per security at which such Equity
Securities are sold in such Next Qualified Financing.
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(b) Conversion Option. Notwithstanding anything to the contrary in Section 2(a) or
2(c) hereof, the Majority Holders shall have the option at any time to cause the conversion of this
Note plus accrued and unpaid interest and other amounts owing hereunder into that number of shares
of the Company’s Series C Preferred Stock, $0.01 par value per share (the “Series C Preferred
Stock”), equal to the quotient obtained by dividing (i) the outstanding aggregate principal amount
of this Note plus such accrued and unpaid interest and all other amounts owing hereunder by (ii)
Sixty Cents ($0.60) (as adjusted in the event of any stock split or the like), and such shares
shall be treated by the parties (including the granting of any registration rights) as though they
have been issued pursuant to the terms of that certain Series C Preferred Stock Purchase Agreement,
dated October 31, 2002, as amended, between the Company and the persons listed on the schedule of
purchasers attached thereto. The Company covenants that it shall use its best efforts to cause a
sufficient number of shares of Series C Preferred Stock (and Common Stock issuable upon conversion
thereof) to be authorized and reserved under the Company’s Amended and Restated Certificate of
Incorporation, as amended, prior to any such conversion of this Note. Notwithstanding the foregoing
or any other term hereof, within five (5) business days after the Lender’s receipt of written
notice from the Company that the closing of the Next Qualified Financing has occurred, the Lender
shall notify the Company in writing whether this Note shall thereafter be convertible solely into
Series C Preferred Stock or solely into Equity Securities (on the respective terms contained
herein). At its option, the Company may elect to restate this Note to account for such election by
the Lender, specifying the applicable price per security, subject to adjustment hereunder. The
Lender shall cooperate with any such restatement of this Note consistent with the terms hereof,
including without limitation, surrendering this Note for cancellation and restatement.
(c) Merger Transaction. Notwithstanding anything to the contrary in Section 2(a) or
2(b) hereof, if the Company shall consolidate with, merge with or sell or convey all or
substantially all of its assets to any other entity (a “Merger Transaction”) prior to the closing
of the Next Qualified Financing, then the Company shall give the Lender notice of such Merger
Transaction at least twenty (20) business days prior to the consummation of such transaction (the
“Closing Date”) and shall provide Lender with full access to such lawful information as may be
requested by Lender with respect to the Merger Transaction and the surviving corporation of such
transaction, and, at the Majority Holders’ option, either:
(i) this Note shall be converted, effective immediately prior to the consummation of such
transaction, into the number of whole shares of the Company’s Series C Preferred Stock equal to
the quotient obtained by dividing (x) the outstanding aggregate principal amount of this Note plus
all accrued but unpaid interest thereon as of the consummation date of such Merger Transaction and
all other amounts owing hereunder by (y) the price per share to be received by holders of the
Company’s Series C Preferred Stock (or, if such Series C Preferred Stock is to be converted into
the Company’s Common Stock upon or prior to such Merger Transaction, the price per share to be
received by holders of the Company’s Common Stock) pursuant to such Merger Transaction, or
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(ii) the Company shall repay the outstanding aggregate principal amount of this Note plus all
accrued but unpaid interest thereon and all other amounts owing hereunder immediately prior to or
concurrently with the closing of the Merger Transaction.
The Majority Holders shall give the Company and the Lender notice of their intent to proceed under
Section 2(b)(i) or 2(b)(ii) within two (2) business days prior to the Closing Date, and if no such
notice is given, the Majority Holders will be deemed to have elected to proceed under Section
2(b)(ii).
(d) Mechanics of Conversion. In connection with such conversion of this Note pursuant
to Section 2(a), 2(b) or 2(c)(i) above, the Lender shall surrender this Note, duly endorsed without
recourse, representation or warranty, at the principal office of the Company. At its expense, the
Company shall, as soon as practicable thereafter, issue and deliver to the Lender at such principal
office a certificate or certificates for the Equity Securities or Series C Preferred Stock, as
applicable (bearing such legends as may be required or advisable in the reasonable opinion of
counsel to the Company), together with a check payable to the Lender for any cash amounts payable
as described in Section 2(e) below.
(e) No Fractional Shares. No fractional shares shall be issued upon conversion of
this Note. In lieu of the Company issuing any fractional shares to the Lender upon the conversion
of this Note, the Company shall pay to the Lender an amount in cash equal to the product obtained
by multiplying the conversion price applied to effect such conversion by the fraction of a share
not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment
of the amounts specified in this Note, the Company shall be released from all its obligations and
liabilities under this Note.
(f) Purchase Agreement. As a condition of the issuance of this Note, the Lender and
the Company agree upon conversion hereof to enter into a purchase agreement and such other
necessary documents for the Equity Securities or Series C Preferred Stock, as applicable, with the
same terms and conditions as the purchase agreement executed by other investors in connection with
the Next Qualified Financing or Merger Transaction, as the case may be.
3. Events of Default.
(a) Upon the occurrence of any Event of Default (as defined below), and the written election
of the Majority Holders (except as provided below), the entire unpaid principal balance of this
Note and all of the unpaid interest accrued thereon and all other amounts owing hereunder shall be
immediately due and payable and the Lender shall have all legal and equitable rights of holders of
unsecured debt instruments, whether at law, in equity or under this Note (provided that such
principal, interest and other amounts shall become immediately due and payable if an Event of
Default listed in clause (ii) below shall occur). For purposes of this Note, the following events
shall each constitute an “Event of Default”: (i) failure to pay any amount owing by the Company
hereunder when due and payable, (ii) the initiation of any bankruptcy, insolvency, moratorium,
receivership or reorganization by or against the Company, or a general
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assignment of assets by the Company for the benefit of creditors, (iii) the material breach of any
representation or warranty of the Company contained in this Note or in the Purchase Agreement at
the time when such representation or warranty is made, (iv) the breach of any of the covenants set
forth in this Note or in the Purchase Agreement, or (v) any of the Company’s indebtedness for
borrowed money (or any guaranty by the Company thereof) is accelerated as a result of a default or
breach of or under any agreement for such borrowed money, including but not limited to loan,
credit or reimbursement agreements, or any default shall occur thereunder which entitles the
holder thereof to so accelerate such indebtedness, or material breach under any real property
lease agreement or capital equipment lease agreement by which the Company is bound or obligated.
(b) No remedy herein conferred upon the Lender is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and in addition to every other remedy
hereunder, now or hereafter existing at law or in equity or otherwise.
4. Notices.
(a) All notices, reports and other communications required or permitted hereunder shall be in
writing and may be delivered in person, by telecopy with written confirmation, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (i) if to the Lender, at the Lender’s address set forth in the Purchase
Agreement, and (ii) if to the Company at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
Attention: President (or such other address as the Company shall have furnished the Lender in
writing).
(b) Each such notice, report or other communication shall for all purposes under this Note be
treated as effective or having been given when delivered if delivered personally or, if sent by
mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in
a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid, or, if sent by telecopier with written confirmation, at the earlier of (i)
twenty-four (24) hours after confirmation of transmission by the sending telecopier machine or
(ii) delivery of written confirmation.
5. Miscellaneous.
(a) With the written consent of the Lender, the obligations of the Company and the rights of
the Lender under this Note may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or indefinitely). With the
prior written consent, or at the written direction, of the Majority Holders, the Company may amend
this Note or enter into a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Note, including any extension
of the Maturity Date. Neither this Note nor any provisions hereof may be changed, waived,
discharged or terminated orally, but only by a signed statement in writing executed by the Majority
Holders or the Lender, as applicable.
-5-
(b) No failure or delay by the Lender or the Majority Holders to exercise any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any
jurisdiction, such invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Note expresses the entire understanding of the parties with respect to the
transactions contemplated hereby. The Company and every endorser and guarantor of this Note,
regardless of the time, order or place of signing hereby, waives presentment, demand, protest,
diligence of collection and notice of every kind, and assents to any extension or postponement of
the time for payment or any other indulgence, to any substitution, exchange or release of
collateral, and to the addition or release of any other party or person primarily or secondarily
liable.
(c) If Lender retains an attorney for collection, restructuring or any “work-out” of this
Note, or if any suit or proceeding is brought for the recovery of all, or any part of, or for
protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and
expenses of the suit or proceeding, or any appeal thereof, incurred by the Lender, including
without limitation, reasonable attorneys’ fees.
(d) This Note shall for all purposes be governed by, and construed in accordance with the
laws of the State of Illinois (without reference to conflict of laws), and the Company consents to
the exclusive jurisdiction of the state and federal courts located in the State of Illinois, and
waives any argument that such forum is not convenient.
(e) This Note shall be binding upon the Company’s successors and assigns, and shall inure to
the benefit of the Lender’s successors and assigns. This Note may not be assigned by the Company.
(f) In no event shall the interest rate and other charges under this Note exceed the highest
rate permissible under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that a court determines that Lender has
received interest and other charges under this Note in excess of the highest permissible rate
applicable hereto, such excess shall be deemed received on account of, and shall automatically be
applied to reduce, the outstanding principal amount hereunder and the provisions hereof shall be
deemed amended to provide for the highest permissible rate. If there is no outstanding principal
amount under this Note, Lender shall refund such excess to the Company.
(g) Time is of the essence with respect to the performance of the obligations of the Company
under this Note.
(h) EACH OF THE COMPANY AND THE LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.
-6-
(i) The conversion or prepayment rights exercised by the Majority Holders shall also be
exercised on a pro rata basis by the holder hereof and all other holders of Bridge Notes
simultaneously or as near in time to each other as practicable. Upon such determination by the
Majority Holders, as evidenced by written notice to the Company and to the holder hereof and each
other holder of Bridge Notes, each such holder agrees to act in accordance with this provision to
effect such conversion.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
-7-
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly authorized
officer to take effect as of the date first hereinabove written.
| NANOSPHERE, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
-8-
Exhibit B-1
Form of New Warrant
THE TRANSFER OF THE WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT
TO THE CONDITIONS SPECIFIED HEREIN AND NO TRANSFER SHALL BE VALID OR
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS HAVE BEEN SATISFIED.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT, THE SHARES OF PREFERRED
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH PREFERRED STOCK HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”).
WARRANT
To Purchase Shares of Preferred Stock of
NANOSPHERE, INC.
(this “Warrant”)
To Purchase Shares of Preferred Stock of
NANOSPHERE, INC.
(this “Warrant”)
THIS WARRANT CERTIFIES that, as of , 2004 (the “Warrant Issue Date”), for value
received, Xxxxx Investment Fund, L.L.C. (the “Holder”), is entitled, upon the terms and subject to
the conditions hereinafter set forth (including without limitation Section 2.2 hereof), at any
time on or after the Warrant Issue Date and on or prior to , 2009 (the “Warrant Expiration
Date”) but not thereafter, to subscribe for and purchase, from Nanosphere, Inc., a Delaware
corporation (the “Company”), fully paid
and non-assessable shares of the Company’s Series C Preferred Stock, $0.01 par value per share
(“Series C Preferred”) at an exercise price (the “Series C Exercise Price”) of Sixty Cents ($0.60)
per share. As of the Warrant Issue Date, the aggregate price underlying this Warrant is
(the “Value”).
THE TERMS, CONDITIONS AND INSTRUCTIONS TO THIS WARRANT ARE AS FOLLOWS:
1. Title of Warrant. Prior to the expiration hereof and subject to compliance with
applicable laws and the provisions of Sections 8 and 9 hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the Company, referred
to in Section 2 hereof, by the Holder hereof in person or by duly authorized attorney, upon: (i)
surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed, (ii)
compliance with the restrictions on transfer in Section
8 hereof, and (iii) provision of written representations and warranties conforming to the
requirements set forth in Section 9 hereof, duly executed by each assignee named in such
assignment. Upon any such surrender of this Warrant and presentation of a duly executed assignment
hereof and the required written representations, the Company shall issue and deliver to each of
the assignees named in such assignment a new counterpart warrant (identical in form and substance
to this Warrant) as to which the right to purchase under this Warrant has been assigned to such
assignee and such assignee shall thereafter be deemed a “Holder” for all relevant purposes
pursuant hereto.
2. Exercise of Warrant.
2.1 General. The purchase rights represented by this Warrant are exercisable by the
registered holders of outstanding warrants issued by the Company pursuant to Sections 1.1 and 4.1
of that certain Note and Warrant Purchase Agreement, dated as of
, 2004, between the Company
and the Holder (the “Bridge Warrants”), representing a majority of the aggregate Value of the
Bridge Warrants (the “Majority Holders”), in whole or in part, at any time and from time to time
after the Warrant Issue Date and prior to 5:00 p.m. Delaware time on the Warrant Expiration Date
(the “Exercise Period”); provided, however, that in the event of (a) the closing of the issuance
and sale of shares of the Company’s Common Stock, $0.01 par value per share (the “Common Stock”),
in the Company’s first underwritten public offering pursuant to an effective registration statement
under the Securities Act (the “IPO”), (b) the closing of the Company’s sale or transfer of all or
substantially all of its assets, or (c) the closing of the acquisition of the Company by another
entity by means of merger, consolidation or other transaction or series of related transactions,
resulting in the exchange of the outstanding shares of the Company’s capital stock such that the
stockholders of the Company prior to such transaction own, directly or indirectly, less than 50% of
the voting power of the surviving entity, this Warrant shall, on the date of such event, no longer
be exercisable and become null and void. In the event of a proposed transaction of the kind
described above, the Company shall notify the Holder of the Warrant at least twenty (20) calendar
days prior to the consummation of such event or transact
2.2 Exercise. After the closing of the Company’s first equity financing after the
Warrant Issue Date with aggregate gross offering proceeds of no less than six million dollars
($6,000,000), excluding amounts received on conversion of any promissory notes of the Company or
exercise of any warrants and excluding cash investments by existing Company investors (unless
otherwise consented to, or directed, in writing by the Majority Holders) (the “Next Qualified
Financing”), and on or prior to the Warrant Expiration Date, the then outstanding Value of this
Warrant shall, at the Majority Holders’ option, be exercisable in whole or in part for that number
of shares of the type of equity securities sold in the Next Qualified Financing (the “Series D
Preferred” and, together with the Series C Preferred, the “Preferred Stock” or the “Warrant
Shares”) equal to the quotient obtained by dividing (i) the then outstanding Value by (ii) the
price per security at which such equity securities are sold in such Next Qualified Financing
(together with the Series C Exercise Price, as applicable, the “Exercise Price”). Notwithstanding
the foregoing or any other term hereof, within five (5) business days after the Holder’s receipt
of written notice from the Company that the closing of the Next Qualified Financing has occurred,
the
2
Holder shall notify the Company in writing whether this Warrant shall thereafter be exercisable
solely into Series C Preferred or solely into Series D Preferred (on the respective terms
contained herein). At its option, the Company may elect to restate this Warrant to account for
such election by the Holder, specifying the applicable number of Warrant Shares and Exercise
Price, subject to adjustment hereunder. The Holder shall cooperate with any such restatement of
this Warrant, including without limitation, surrendering this Warrant for cancellation and
restatement.
2.3 Manner of Exercise. The purchase rights represented by this Warrant are
exercisable by the surrender of this Warrant and the Notice of Exercise annexed hereto duly
executed at the offices of the Company, located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, Attn.: President (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder in accordance with Section 11.6 hereof) accompanied by
payment of the Exercise Price to the Company for the Warrant Shares thereby purchased by any of the
following means or combination thereof as determined by the Holder: (i) in cash; (ii) by check or
bank draft payable to the order of the Company; and/or (iii) by cancellation of any outstanding
indebtedness of the Company to the Holder. Notwithstanding the foregoing, this Warrant may also be
exercisable pursuant to Section 2.4 hereof. Upon receipt by the Company of the foregoing items, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased or
exercised. The Warrant Shares so purchased shall be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the date on which this Warrant shall
have been exercised as aforesaid. Certificates for Warrant Shares purchased or exercised hereunder
shall be delivered to the Holder within a reasonable time, but not later than ten (10) days after
the date on which this Warrant shall have been exercised as aforesaid. If this Warrant is exercised
with respect to less than all of the Warrant Shares, the Holder shall be entitled to receive a new
Warrant, in this form, covering the number of Warrant Shares with respect to which this Warrant
shall not have been exercised.
2.4 Net Exercise. The Majority Holders may elect for the Holder to receive, without
the payment by the Holder of any additional consideration, Warrant Shares by surrender of this
Warrant at the principal office of the Company together with notice of such election, in which
event the Company shall issue to the holder hereof a number of shares of the applicable series of
Preferred Stock computed using the following formula:
| Y(A - B) | ||
X = |
A |
Where:
|
X = | The number of shares of the applicable series of Preferred Stock to be issued to the Holder pursuant to this net exercise; | ||
| Y = | The number of shares of the applicable series of Preferred Stock in respect of which the net issue election is made; | |||
| A = | The fair market value of one share of such series of Preferred Stock at the time the net issue election is made; |
3
| B = | The applicable Exercise Price (as adjusted to the date of the net issuance). |
For purposes of this Section 2.4, the fair market value of one share of either series of Preferred
Stock as of a particular date shall be mutually determined by the Majority Holders and the
Company’s board of directors. In the absence of such mutual agreement, the Majority Holders and
the Company shall mutually select a third party appraiser to determine such value and such parties
shall be bound by such determination. The fall costs of such appraisal shall be borne by the
Company.
2.5 No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction
of a share called for upon the exercise of this Warrant, an amount equal to such fraction
multiplied by the then current price at which each share of such series of Preferred Stock may be
purchased hereunder shall be paid in cash to the Holder.
2.6 Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued
in the name of the Holder or in such name or names as may be directed by the Holder; provided,
however, that in the event certificates for Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder, and provided further that upon any
transfer involved in the issuance or delivery of any certificates for Warrant Shares, the Company
may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
2.7 Transfer Restriction Legend. This Warrant and each certificate for Warrant Shares
issued upon exercise of this Warrant, unless at the time of exercise such Warrant Shares are
registered under the Securities Act, shall bear legends similar to the one set forth on the first
page of this Warrant.
2.8 Character of Warrant Shares. All Warrant Shares issuable upon the exercise of
this Warrant shall be duly authorized, validly issued, fully paid and nonassessable.
3. No Rights as Stockholders. This Warrant does not entitle the Holder to any voting
rights or other rights as a stockholder of the Company prior to the exercise hereof.
4. Adjustment of Exercise Price and Number of Shares Purchasable. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
4.1 Subdivisions, Combinations and Other Issuances. With
respect to any series of Preferred Stock issuable hereunder, if the Company shall at any time
prior to the expiration of this Warrant subdivide such Preferred Stock, by split-up or
4
otherwise, or combine such Preferred Stock, or issue additional shares of such Preferred Stock as
a dividend with respect to any shares of such Preferred Stock, the number of Warrant Shares
issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case
of a subdivision or stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Exercise Price payable per share, but the
aggregate purchase price payable for the total number of Warrant Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this Section 4.1 shall become
effective at the close of business on the date the subdivision or combination becomes effective,
or as of the record date of such dividend, or in the event that no record date is fixed, upon the
making of such dividend.
4.2 Reclassification, Reorganization and Consolidation. With
respect to any series of Preferred Stock issuable hereunder, in case of any reclassification,
capital reorganization, or change in such Preferred Stock (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 4.1 above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be delivered to the Holder,
so that the Holder shall have the right, subject to the termination provisions of Section 2.1
hereto and the election of the Majority Holders, to purchase, at a total price equal to that
remaining payable upon the full exercise of this Warrant, the kind and amount of shares of stock
and other securities and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of such Preferred Stock as were
purchasable by the Holder immediately prior to such reclassification, reorganization, or change. In
any such case, appropriate provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of
stock or other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate
purchase price shall remain the same.
4.3 Notice of Adjustment. When any adjustment is required to
be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Company shall promptly notify the Holder of such event and of the
number of shares of each series of Preferred Stock or other securities or property thereafter
purchasable upon exercise of this Warrant.
5. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the registered Holder at the above-mentioned office or agency of the Company, for a new
Warrant of like tenor and dated as of such exchange. The Company shall maintain at the
above-mentioned office or agency a registry showing the name and address of the registered Holder
of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance
with its terms, at such office or agency of the Company, and the Company shall be entitled to rely
in all respects, prior to written notice to the contrary, upon such registry.
6. Loss, Theft Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
5
mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of
this Warrant.
7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
8. Restriction on Transfer. The Holder of this Warrant, by acceptance hereof, agrees
that, absent an effective notification under Regulation A or registration statement, in either
case under the Securities Act, covering the disposition of this Warrant or the Warrant Shares,
such Holder will not sell or transfer any or all of such Warrant or the Warrant Shares, as the
case may be, without first: (i) providing the Company with an opinion of counsel (which may be
counsel for the Company) to the effect that such sale or transfer will be exempt from the
registration and prospectus delivery requirements of the Securities Act; (ii) consenting to the
Company making a notation on its records giving instructions to any transfer agent of the Warrant
or the Warrant Shares in order to implement such restriction on transferability; and (iii)
otherwise complying with the terms and conditions of the Company’s Amended and Restated
Certificate of Incorporation, as amended (the “Certificate”).
9. Investment Representations. This Warrant is being issued to the Holder in reliance
upon the representations and warranties made by the initial Holder to the Company, including,
without limitation, that the Holder is purchasing this Warrant and the Warrant Shares for its own
account, for investment and with no present intention of distributing or reselling any portion of
this Warrant or the Warrant Shares, but without prejudice to its right at all times to sell or
otherwise dispose of all or part of this Warrant or the Warrant Shares under either an effective
registration exemption available under the Securities Act, and either in compliance with the
registration or qualification requirement of any applicable state securities law or under an
exemption thereto available under such state law.
10. Notices of Record Date. In case:
i. the Company shall take a record of the holders of its
Preferred Stock or Common Stock for the purposes of entitling them to
receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares or stock of any class or any other
securities or property, or to receive any other right;
ii. of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation, or any
6
conveyance of all or substantially all of the assets of the Company to
another person or entity; or
iii. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice
specifying, as the case may be: (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of such dividend,
distribution or right; or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common Stock or Preferred
Stock shall be entitled to exchange their shares of Common Stock of Preferred Stock, as
applicable, for securities or other properly deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least thirty (30) days prior to the date therein specified.
11. Miscellaneous.
11.1 Issue Date; Binding Effect. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered by the Company on
the date hereof. This Warrant shall be binding upon any successors or assigns of the Company.
11.2 Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant shall have restrictions upon its resale imposed by state and federal
securities laws.
11.3 Authorized Shares. The Company covenants that during the period this Warrant is
outstanding, it will reserve from its authorized and unissued Preferred Stock and Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant and the Common Stock upon the conversion of such Warrant
Shares. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Preferred Stock upon the exercise of the
purchase rights under this Warrant. The Company covenants that all shares of Preferred Stock and
Common Stock which may be issued upon the exercise of rights represented by this Warrant or upon
the conversion of the Warrant Shares will, upon such exercise or conversion, be validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
11.4 No Impairment. The Company will not, by amendment of its Certificate or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in
7
the carrying out of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
11.5 Ownership of Warrant. The Company may deem and treat the registered Holder of
this Warrant as the true, lawful and absolute owner hereof for all purposes, and the Company shall
not be affected by any notice to the contrary.
11.6 Notices. All notices, reports and other communications required or permitted
hereunder shall be in writing and may be delivered in person, by telecopy with written
confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by
first-class, certified or registered, postage prepaid, addressed (i) if to the Holder, at the
Holder’s address set forth in the Purchase Agreement, and (ii) if to the Company at the address
set forth in Section 2.3 hereof (or such other address as the Company shall have furnished the
Holder in writing). Each such notice, report or other communication shall for all purposes under
this Warrant be treated as effective or having been given when delivered if delivered personally
or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has
been deposited in a regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid, or, if sent by telecopier with written confirmation, at the
earlier of (i) twenty-four (24) hours after confirmation of transmission by the sending telecopier
machine or (ii) delivery of written confirmation.
11.7 Construction. The validity and interpretation of the terms and provisions of
this Warrant shall be governed by the laws of the State of Delaware. The descriptive headings of
the several sections of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
11.8 Expiration. This Warrant shall be void and all rights represented hereby shall
cease unless exercised on or before the Expiration Date. All restrictions set forth herein on the
shares of capital stock issued upon exercise of any rights hereunder shall survive such exercise
and expiration of the rights granted hereunder.
11.9 Governing Law. This Warrant shall be governed by the laws of the State of
Delaware as applied to agreements among Delaware residents made and to be performed entirely
within the State of Delaware.
11.10 Waiver of Jury Trial. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT.
11.11 Registration Rights. The Company shall use its best efforts to cause all shares
of Common Stock issuable upon the conversion of Warrant Shares issued hereunder to be deemed to be
“Registrable Securities” under that certain Amended and Restated Registration Rights Agreement,
dated as of October 31, 2002, as amended, among the Company and the parties signatory thereto,
including the initial Holder.
8
11.12 Exercise by Majority Holders. The purchase rights exercised by the Majority
Holders shall also be exercised on a pro rata basis by all other holders of Bridge Warrants
simultaneously or as near in time to each other as practicable. Upon such determination by the
Majority Holders, as evidenced by written notice to the Company and to each other registered holder
of Bridge Warrants, each Holder of the applicable Bridge Warrant agrees to act in accordance with
this Warrant to effect such exercise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.
Dated:
| NANOSPHERE, INC., a Delaware corporation |
||||
| By: | ||||
| Xxxxxxx X. Xxxxx | ||||
| Chief Financial Officer | ||||
9
NOTICE OF EXERCISE
To: Nanosphere, Inc.
(1) The undersigned hereby elects to purchase shares of Stock of
Nanosphere, Inc. (the “Company”) pursuant to the terms of the attached warrant (the “Warrant”),
and tenders herewith payment of the purchase price in full, together with all applicable transfer
taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned or in such other name as is specified below:
| (Name) | ||||
| (Address) |
(3) The undersigned represents that the aforesaid shares are being acquired for the account
of the undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or
reselling such shares.
(4) The undersigned hereby represents and warrants to the Company that the undersigned:
| (i) | is an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”) and, if an entity, each individual, shareholder, limited partner or other member of the undersigned’s organization, as applicable, is an “accredited investor” within the meaning of such Rule 501; | ||
| (ii) | has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks thereof; | ||
| (iii) | has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management, and understands the nature of the Company’s business affairs; | ||
| (iv) | agrees and acknowledges that any projections, estimates or forecasts regarding the Company securities or the Company’s |
| business and financial affairs which the undersigned has received or reviewed do not represent, and shall not be deemed to be, a warranty or guarantee as to the actual future results of the Company or the likelihood or probability that such projections, estimates or forecasts will be met; |
| (v) | understands that: (a) the Company’s securities have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, (b) no public market now exists for any of the securities issued by the Company and that there is no assurance that a public market will ever exist for the Company’s securities; (c) the Company’s securities must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act and other applicable securities laws or is exempt from such registration; (d) the Company’s securities will bear a legend to such effect; and (e) the Company will make a notation on its transfer books to such effect; | ||
| (vi) | has no contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement; and | ||
| (vii) | understands that the Company’s securities are characterized as “restricted securities” under the applicable securities laws in as much as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations, the Company’s securities may be resold without registration under the Securities Act and other applicable securities law only in certain limited circumstances. The undersigned is aware that the provisions of Rule 144 (the “Rule”) promulgated under the Securities Act are presently not available to exempt the sale of the Company’s securities from the registration requirements of the Securities Act. Should the Rule subsequently become available, the undersigned is aware that any sale of the Company’s securities effected pursuant to the Rule may, depending upon the status of the undersigned as an “affiliate” or “non-affiliate” under the Rule, be made only in limited amounts in accordance with the provisions of the Rule, and that in no event may any Company securities be sold pursuant to the Rule until the undersigned has held the Company’s securities for the requisite holding period following payment of the purchase price. |
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| (Date) | (Signature) |
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required information. Do no use this
form to purchase shares.)
FOR
VALUE RECEIVED, the foregoing warrant (the “Warrant”) and all rights evidenced thereby are
hereby assigned to:
| (Please Print) | ||||
whose address is |
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| (Please Print) | ||||
| Dated: |
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Holder’s Signature: |
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Holder’s Address: |
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| (Please Print) | ||||
NOTE: The signature of Holder on this Assignment Form must correspond with the name as it appears
on the face of the Warrant, without alteration or enlargement or any change whatever, and must be
notarized by a notary public. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the Warrant.
STATE OF |
) | |||||||||
| ) | ss. | |||||||||
COUNTY OF
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) | |||||||||
I, the undersigned, a Notary Public in and for the County and State aforesaid, DO
HEREBY CERTIFY, that personally known to me to be the
, and personally known to me to be the same
person whose name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that the statements set forth in the foregoing Assignment Form are true
and correct, and that in such capacity, he/she signed and delivered the foregoing Assignment
Form, pursuant to authority given by the governing body of such entity, as his/her free and
voluntary act, and as the free and voluntary act of such entity, for the uses and purposes therein
set forth.
Subscribed and sworn to before me this day of .
[SEAL]
2
Exhibit B-2
Form of Extension Warrant
THE TRANSFER OF THE WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT
TO THE CONDITIONS SPECIFIED HEREIN AND NO TRANSFER SHALL BE VALID OR
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS HAVE BEEN SATISFIED.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT, THE SHARES OF PREFERRED
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH PREFERRED STOCK HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”).
WARRANT
To Purchase Shares of Preferred Stock of
NANOSPHERE, INC.
(this “Warrant”)
To Purchase Shares of Preferred Stock of
NANOSPHERE, INC.
(this “Warrant”)
THIS WARRANT CERTIFIES that, as of , 2004 (the “Warrant Issue Date”), for value
received, Xxxxx Investment Fund, L.L.C. (the “Holder”), is entitled, upon the terms and subject to
the conditions hereinafter set forth (including without limitation Section 2.2 hereof), at any time
on or after the Warrant Issue Date and on or prior to , 2009 (the “Warrant Expiration Date”)
but not thereafter, to subscribe for and purchase, from Nanosphere, Inc., a Delaware corporation
(the “Company”), fully paid
and non-assessable shares of the Company’s Series C Preferred Stock, $0.01 par value per share
(“Series C Preferred”) at an exercise price (the “Series C Exercise Price”) of Sixty Cents ($0.60)
per share. As of the Warrant Issue Date, the aggregate price underlying this Warrant is (the “Value”).
THE TERMS, CONDITIONS AND INSTRUCTIONS TO THIS WARRANT ARE AS FOLLOWS:
1. Title of Warrant. Prior to the expiration hereof and subject to compliance with
applicable laws and the provisions of Sections 8 and 9 hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the Company, referred
to in Section 2 hereof, by the Holder hereof in person or by duly authorized attorney, upon: (i)
surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed, (ii)
compliance with the restrictions on transfer in Section
8 hereof, and (iii) provision of written representations and warranties conforming to the
requirements set forth in Section 9 hereof, duly executed by each assignee named in such
assignment. Upon any such surrender of this Warrant and presentation of a duly executed assignment
hereof and the required written representations, the Company shall issue and deliver to each of
the assignees named in such assignment a new counterpart warrant (identical in form and substance
to this Warrant) as to which the right to purchase under this Warrant has been assigned to such
assignee and such assignee shall thereafter be deemed a “Holder” for all relevant purposes
pursuant hereto.
2. Exercise of Warrant.
2.1 General. The purchase rights represented by this Warrant are exercisable by the
registered holders of outstanding warrants issued by the Company pursuant to Sections 1.1 and 4.1
of that certain Note and Warrant Purchase Agreement, dated as of , 2004, between the Company
and the Holder (the “Bridge Warrants”), representing a majority of the aggregate Value of the
Bridge Warrants (the “Majority Holders”), in whole or in part, at any time and from time to time
after the Warrant Issue Date and prior to 5:00 p.m. Delaware time on the Warrant Expiration Date
(the “Exercise Period”); provided, however, that in the event of (a) the closing of the issuance
and sale of shares of the Company’s Common Stock, $0.01 par value per share (the “Common Stock”),
in the Company’s first underwritten public offering pursuant to an effective registration statement
under the Securities Act (the “IPO”), (b) the closing of the Company’s sale or transfer of all or
substantially all of its assets, or (c) the closing of the acquisition of the Company by another
entity by means of merger, consolidation or other transaction or series of related transactions,
resulting in the exchange of the outstanding shares of the Company’s capital stock such that the
stockholders of the Company prior to such transaction own, directly or indirectly, less than 50% of
the voting power of the surviving entity, this Warrant shall, on the date of such event, no longer
be exercisable and become null and void. In the event of a proposed transaction of the kind
described above, the Company shall notify the Holder of the Warrant at least twenty (20) calendar
days prior to the consummation of such event or transact
2.2 Exercise. After the closing of the Company’s first equity financing after the
Warrant Issue Date with aggregate gross offering proceeds of no less than six million dollars
($6,000,000), excluding amounts received on conversion of any promissory notes of the Company or
exercise of any warrants and excluding cash investments by existing Company investors (unless
otherwise consented to, or directed, in writing by the Majority Holders) (the “Next Qualified
Financing”), and on or prior to the Warrant Expiration Date, the then outstanding Value of this
Warrant shall, at the Majority Holders’ option, be exercisable in whole or in part for that number
of shares of the type of equity securities sold in the Next Qualified Financing (the “Series D
Preferred” and, together with the Series C Preferred, the “Preferred Stock” or the “Warrant
Shares”) equal to the quotient obtained by dividing (i) the then outstanding Value by (ii) the
price per security at which such equity securities are sold in such Next Qualified Financing
(together with the Series C Exercise Price, as applicable, the “Exercise Price”). Notwithstanding
the foregoing or any other term hereof within five (5) business days after the Holder’s receipt
of written notice from the Company that the closing of the Next Qualified Financing has occurred,
the
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Holder shall notify the Company in writing whether this Warrant shall thereafter be exercisable
solely into Series C Preferred or solely into Series D Preferred (on the respective terms contained
herein). At its option, the Company may elect to restate this Warrant to account for such election
by the Holder, specifying the applicable number of Warrant Shares and Exercise Price, subject to
adjustment hereunder. The Holder shall cooperate with any such restatement of this Warrant,
including without limitation, surrendering this Warrant for cancellation and restatement.
2.3 Manner of Exercise. The purchase rights represented by this Warrant are
exercisable by the surrender of this Warrant and the Notice of Exercise annexed hereto duly
executed at the offices of the Company, located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, Attn.: President (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder in accordance with Section 11.6 hereof) accompanied by
payment of the Exercise Price to the Company for the Warrant Shares thereby purchased by any of the
following means or combination thereof as determined by the Holder: (i) in cash; (ii) by check or
bank draft payable to the order of the Company; and/or (iii) by cancellation of any outstanding
indebtedness of the Company to the Holder. Notwithstanding the foregoing, this Warrant may also be
exercisable pursuant to Section 2.4 hereof. Upon receipt by the Company of the foregoing items, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased or
exercised. The Warrant Shares so purchased shall be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the date on which this Warrant shall
have been exercised as aforesaid. Certificates for Warrant Shares purchased or exercised hereunder
shall be delivered to the Holder within a reasonable time, but not later than ten (10) days after
the date on which this Warrant shall have been exercised as aforesaid. If this Warrant is exercised
with respect to less than all of the Warrant Shares, the Holder shall be entitled to receive a new
Warrant, in this form, covering the number of Warrant Shares with respect to which this Warrant
shall not have been exercised.
2.4 Net Exercise. The Majority Holders may elect for the Holder to receive, without
the payment by the Holder of any additional consideration, Warrant Shares by surrender of this
Warrant at the principal office of the Company together with notice of such election, in which
event the Company shall issue to the holder hereof a number of shares of the applicable series of
Preferred Stock computed using the following formula:
| Y(A - B) | ||||||
| X = | A |
Where:
|
X = | The number of shares of the applicable series of Preferred Stock to be issued to the Holder pursuant to this net exercise; | ||
| Y = | The number of shares of the applicable series of Preferred Stock in respect of which the net issue election is made; | |||
| A = | The fair market value of one share of such series of Preferred Stock at the time the net issue election is made; |
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| B = | The applicable Exercise Price (as adjusted to the date of the net issuance). |
For purposes of this Section 2.4, the fair market value of one share of either series of Preferred
Stock as of a particular date shall be mutually determined by the Majority Holders and the
Company’s board of directors. In the absence of such mutual agreement, the Majority Holders and the
Company shall mutually select a third party appraiser to determine such value and such parties
shall be bound by such determination. The full costs of such appraisal shall be borne by the
Company.
2.5 No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction
of a share called for upon the exercise of this Warrant, an amount equal to such fraction
multiplied by the then current price at which each share of such series of Preferred Stock may be
purchased hereunder shall be paid in cash to the Holder.
2.6 Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder, and provided further that upon any transfer involved in the
issuance or delivery of any certificates for Warrant Shares, the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
2.7 Transfer Restriction Legend. This Warrant and each certificate for Warrant Shares
issued upon exercise of this Warrant, unless at the time of exercise such Warrant Shares are
registered under the Securities Act, shall bear legends similar to the one set forth on the first
page of this Warrant.
2.8 Character of Warrant Shares. All Warrant Shares issuable upon the exercise of
this Warrant shall be duly authorized, validly issued, fully paid and nonassessable.
3. No Rights as Stockholders. This Warrant does not entitle the Holder to any voting
rights or other rights as a stockholder of the Company prior to the exercise hereof.
4. Adjustment of Exercise Price and Number of Shares Purchasable.
The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
4.1 Subdivisions, Combinations and Other Issuances. With respect to any series of
Preferred Stock issuable hereunder, if the Company shall at any time prior to the expiration of
this Warrant subdivide such Preferred Stock, by split-up or
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otherwise, or combine such Preferred Stock, or issue additional shares of such Preferred Stock as
a dividend with respect to any shares of such Preferred Stock, the number of Warrant Shares
issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case
of a subdivision or stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Exercise Price payable per share, but the
aggregate purchase price payable for the total number of Warrant Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this Section 4.1 shall become
effective at the close of business on the date the subdivision or combination becomes effective,
or as of the record date of such dividend, or in the event that no record date is fixed, upon the
making of such dividend.
4.2 Reclassification, Reorganization and Consolidation. With
respect to any series of Preferred Stock issuable hereunder, in case of any reclassification,
capital reorganization, or change in such Preferred Stock (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 4.1 above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be delivered to the Holder,
so that the Holder shall have the right, subject to the termination provisions of Section 2.1
hereto and the election of the Majority Holders, to purchase, at a total price equal to that
remaining payable upon the full exercise of this Warrant, the kind and amount of shares of stock
and other securities and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of such Preferred Stock as were
purchasable by the Holder immediately prior to such reclassification, reorganization, or change. In
any such case, appropriate provisions shall be made with respect to the rights and interest of the
Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of
stock or other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate
purchase price shall remain the same,
4.3 Notice of Adjustment. When any adjustment is required to
be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Company shall promptly notify the Holder of such event and of the
number of shares of each series of Preferred Stock or other securities or property thereafter
purchasable upon exercise of this Warrant.
5. Exchange and Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the registered Holder at the above-mentioned office or agency of the Company, for a new
Warrant of like tenor and dated as of such exchange. The Company shall maintain at the
above-mentioned office or agency a registry showing the name and address of the registered Holder
of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance
with its terms, at such office or agency of the Company, and the Company shall be entitled to rely
in all respects, prior to written notice to the contrary, upon such registry.
6. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
5
mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of
this Warrant.
7. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
8. Restriction on Transfer. The Holder of this Warrant, by acceptance hereof, agrees
that, absent an effective notification under Regulation A or registration statement, in either
case under the Securities Act, covering the disposition of this Warrant or the Warrant Shares,
such Holder will not sell or transfer any or all of such Warrant or the Warrant Shares, as the
case may be, without first: (i) providing the Company with an opinion of counsel (which may be
counsel for the Company) to the effect that such sale or transfer will be exempt from the
registration and prospectus delivery requirements of the Securities Act; (ii) consenting to the
Company making a notation on its records giving instructions to any transfer agent of the Warrant
or the Warrant Shares in order to implement such restriction on transferability; and (iii)
otherwise complying with the terms and conditions of the Company’s Amended and Restated
Certificate of Incorporation, as amended (the “Certificate”).
9. Investment Representations. This Warrant is being issued to the Holder in reliance
upon the representations and warranties made by the initial Holder to the Company, including,
without limitation, that the Holder is purchasing this Warrant and the Warrant Shares for its own
account, for investment and with no present intention of distributing or reselling any portion of
this Warrant or the Warrant Shares, but without prejudice to its right at all times to sell or
otherwise dispose of all or part of this Warrant or the Warrant Shares under either an effective
registration exemption available under the Securities Act, and either in compliance with the
registration or qualification requirement of any applicable state securities law or under an
exemption thereto available under such state law.
10. Notices of Record Date. In case:
i. the Company shall take a record of the holders of its
Preferred Stock or Common Stock for the purposes of entitling them to
receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares or stock of any class or any other
securities or property, or to receive any other right;
ii. of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation, or any
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conveyance of all or substantially all of the assets of the Company to
another person or entity; or
iii. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice
specifying, as the case may be: (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of such dividend,
distribution or right; or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common Stock or Preferred
Stock shall be entitled to exchange their shares of Common Stock of Preferred Stock, as
applicable, for securities or other properly deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least thirty (30) days prior to the date therein specified.
11. Miscellaneous.
11.1 Issue Date; Binding Effect. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered by the Company on
the date hereof. This Warrant shall be binding upon any successors or assigns of the Company.
11.2 Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant shall have restrictions upon its resale imposed by state and federal
securities laws.
11.3 Authorized Shares. The Company covenants that during the period this Warrant is
outstanding, it will reserve from its authorized and unissued Preferred Stock and Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant and the Common Stock upon the conversion of such Warrant
Shares. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Preferred Stock upon the exercise of the
purchase rights under this Warrant. The Company covenants that all shares of Preferred Stock and
Common Stock which may be issued upon the exercise of rights represented by this Warrant or upon
the conversion of the Warrant Shares will, upon such exercise or conversion, be validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
11.4 No Impairment. The Company will not, by amendment of its Certificate or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in
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the carrying out of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
11.5 Ownership of Warrant. The Company may deem and treat the registered Holder of
this Warrant as the true, lawful and absolute owner hereof for all purposes, and the Company shall
not be affected by any notice to the contrary.
11.6 Notices. All notices, reports and other communications required or permitted
hereunder shall be in writing and may be delivered in person, by telecopy with written
confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by
first-class, certified or registered, postage prepaid, addressed (i) if to the Holder, at the
Holder’s address set forth in the Purchase Agreement, and (ii) if to the Company at the address
set forth in Section 2.3 hereof (or such other address as the Company shall have furnished the
Holder in writing). Each such notice, report or other communication shall for all purposes under
this Warrant be treated as effective or having been given when delivered if delivered personally
or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has
been deposited in a regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid, or, if sent by telecopier with written confirmation, at the
earlier of (i) twenty-four (24) hours after confirmation of transmission by the sending telecopier
machine or (ii) delivery of written confirmation.
11.7 Construction. The validity and interpretation of the terms and provisions of
this Warrant shall be governed by the laws of the State of Delaware. The descriptive headings of
the several sections of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
11.8 Expiration. This Warrant shall be void and all rights represented hereby shall
cease unless exercised on or before the Expiration Date. All restrictions set forth herein on the
shares of capital stock issued upon exercise of any rights hereunder shall survive such exercise
and expiration of the rights granted hereunder.
11.9 Governing Law. This Warrant shall be governed by the laws of the State of
Delaware as applied to agreements among Delaware residents made and to be performed entirely
within the State of Delaware.
11.10 Waiver of Jury Trial. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT.
11.11 Registration Rights. The Company shall use its best efforts to cause all shares
of Common Stock issuable upon the conversion of Warrant Shares issued hereunder to be deemed to be
“Registrable Securities” under that certain Amended and Restated Registration Rights Agreement,
dated as of October 31, 2002, as amended, among the Company and the parties signatory thereto,
including the initial Holder.
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11.12 Exercise by Majority Holders. The purchase rights exercised by the Majority
Holders shall also be exercised on a pro rata basis by all other holders of Bridge Warrants
simultaneously or as near in time to each other as practicable. Upon such determination by the
Majority Holders, as evidenced by written notice to the Company and to each other registered holder
of Bridge Warrants, each Holder of the applicable Bridge Warrant agrees to act in accordance with
this Warrant to effect such exercise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.
Dated:
| NANOSPHERE, INC., a Delaware corporation |
||||
| By: | ||||
| Xxxxxxx X. Xxxxx | ||||
| Chief Financial Officer | ||||
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NOTICE OF EXERCISE
To: Nanosphere, Inc.
(1) The undersigned hereby elects to purchase shares of Stock of
Nanosphere, Inc. (the “Company”) pursuant to the terms of the attached warrant (the “Warrant”),
and tenders herewith payment of the purchase price in full, together with all applicable transfer
taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned or in such other name as is specified below:
| (Name) | ||||
| (Address) | ||||
(3) The undersigned represents that the aforesaid shares are being acquired for the account
of the undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or
reselling such shares.
(4) The undersigned hereby represents and warrants to the Company that the undersigned:
| (i) | is an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”) and, if an entity, each individual, shareholder, limited partner or other member of the undersigned’s organization, as applicable, is an “accredited investor” within the meaning of such Rule 501; | ||
| (ii) | has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks thereof; | ||
| (iii) | has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management, and understands the nature of the Company’s business affairs; | ||
| (iv) | agrees and acknowledges that any projections, estimates or forecasts regarding the Company securities or the Company’s |
| business and financial affairs which the undersigned has received or reviewed do not represent, and shall not be deemed to be, a warranty or guarantee as to the actual future results of the Company or the likelihood or probability that such projections, estimates or forecasts will be met; | |||
| (v) | understands that: (a) the Company’s securities have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, (b) no public market now exists for any of the securities issued by the Company and that there is no assurance that a public market will ever exist for the Company’s securities; (c) the Company’s securities must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act and other applicable securities laws or is exempt from such registration; (d) the Company’s securities will bear a legend to such effect; and (e) the Company will make a notation on its transfer books to such effect; | ||
| (vi) | has no contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement; and | ||
| (vii) | understands that the Company’s securities are characterized as “restricted securities” under the applicable securities laws in as much as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations, the Company’s securities may be resold without registration under the Securities Act and other applicable securities law only in certain limited circumstances. The undersigned is aware that the provisions of Rule 144 (the “Rule”) promulgated under the Securities Act are presently not available to exempt the sale of the Company’s securities from the registration requirements of the Securities Act. Should the Rule subsequently become available, the undersigned is aware that any sale of the Company’s securities effected pursuant to the Rule may, depending upon the status of the undersigned as an “affiliate” or “non-affiliate” under the Rule, be made only in limited amounts in accordance with the provisions of the Rule, and that in no event may any Company securities be sold pursuant to the Rule until the undersigned has held the Company’s securities for the requisite holding period following payment of the purchase price. |
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| (Date) | (Signature) |
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required information. Do no use this
form to purchase shares.)
FOR VALUE RECEIVED, the foregoing warrant (the “Warrant”) and all rights evidenced thereby are
hereby assigned to:
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whose address is |
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| Dated: |
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Holder’s Signature: |
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Holder’s Address: |
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NOTE: The signature of Holder on this Assignment Form must correspond with the name as it appears
on the face of the Warrant, without alteration or enlargement or any change whatever, and must be
notarized by a notary public. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the Warrant.
STATE OF
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COUNTY OF
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I, the undersigned, a Notary Public in and for the County and State aforesaid, DO
HEREBY CERTIFY, that personally known to me to be the
, and personally known to me to be the same
person whose name is subscribed to the foregoing instrument, appeared before me this day in
person and acknowledged that the statements set forth in the foregoing Assignment Form are true
and correct, and that in such capacity, he/she signed and delivered the foregoing Assignment
Form, pursuant to authority given by the governing body of such entity, as his/her free and
voluntary act, and as the free and voluntary act of such entity, for the uses and purposes therein
set forth.
Subscribed and sworn to before me this day of .
[SEAL]
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