EXHIBIT 1
HYSEQ, INC.
STOCK PURCHASE AGREEMENT
FOR
SERIES B CONVERTIBLE PREFERRED STOCK
MAY 28, 1997
TABLE OF CONTENTS
1. SALE AND PURCHASE OF STOCK........................................................................... 1
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▇.▇.▇▇▇▇ and Purchase of Series B Convertible Preferred Stock........................................... 1
1.2.Closings............................................................................................ 1
2. THE COMPANY'S REPRESENTATIONS AND WARRANTIES......................................................... 2
2.1.Organization, Good Standing and Qualification of the Company........................................ 2
2.2.Authorization....................................................................................... 2
▇.▇.▇▇ Conflict with Law or Documents................................................................... 3
▇.▇.▇▇▇▇▇▇▇ Stock....................................................................................... 3
2.5.Shares and Conversion Shares........................................................................ 4
2.6.Consents and Approvals.............................................................................. 4
2.7.Articles of Incorporation, Certificate of Designation and By-Laws................................... 4
2.8.Subsidiaries........................................................................................ 4
2.9.Compliance with Laws................................................................................ 4
▇.▇▇.▇▇▇▇▇▇▇▇▇ Statements............................................................................... 5
▇.▇▇.▇▇▇ Matters........................................................................................ 5
2.12.Agreements Affecting the Company's Capital Stock................................................... 5
2.13.Patents, Trademarks, Proprietary Rights............................................................ 5
2.14.Contracts and Agreements........................................................................... 6
2.15.Litigation, etc.................................................................................... 6
2.16.Title to Properties and Assets; Liens, etc......................................................... 6
2.17.Permits............................................................................................ 6
2.18.Disclosure......................................................................................... 7
2.19.Changes............................................................................................ 7
▇.▇▇.▇▇▇▇▇▇▇▇▇.......................................................................................... 7
2.21.Labor Agreements and Actions....................................................................... 8
▇.▇▇.▇▇▇▇▇ and Advances................................................................................. 8
2.23.Employees.......................................................................................... 8
2.24.Environmental Protection........................................................................... 8
3. PURCHASERS' REPRESENTATIONS AND WARRANTIES........................................................... 9
3.1.Authority........................................................................................... 9
▇.▇.▇▇▇▇▇ of Business................................................................................... 9
3.3.Purchase Without a View to Distribution............................................................. 9
3.4.Restrictions on Transfer............................................................................ 9
3.5.Additional Representations of the Purchaser......................................................... 10
4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS...................................................... 10
4.1.Proceedings and Certain Documents................................................................... 10
4.2.Representations and Warranties...................................................................... 11
4.3.Performance......................................................................................... 11
4.4.Opinion of Counsel to the Company................................................................... 11
▇.▇.▇▇ Proceeding or Litigation......................................................................... 11
4.6.Board Approval...................................................................................... 11
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4.7.Additional Agreements............................................................................... 11
5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.................................................... 12
5.1.Representations and Warranties...................................................................... 12
5.2.Performance......................................................................................... 12
▇.▇.▇▇ Proceeding or Litigation......................................................................... 12
6. COVENANTS OF THE COMPANY............................................................................. 12
6.1.Use of Proceeds..................................................................................... 12
6.2.Properties, Business, Insurance..................................................................... 12
▇.▇.▇▇▇▇▇▇▇▇▇ Statements................................................................................ 13
6.4.Restrictive Agreements Prohibited................................................................... 13
6.5.Compliance with Laws................................................................................ 13
6.6.Keeping of Records and Books of Account............................................................. 13
6.7.Reserve for Conversion Shares....................................................................... 14
▇.▇.▇▇▇▇▇ Shares........................................................................................ 14
7. COVENANTS OF THE PURCHASER........................................................................... 14
7.1.Limitations on Purchase of Additional Securities.................................................... 14
8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF PREFERRED
STOCK AND CONVERSION SHARES............................................................................. 17
8.1.Compliance with 1933 Act............................................................................ 17
8.2.Restrictive Legend.................................................................................. 17
8.3.Restrictions on Transferability..................................................................... 17
8.4.Procedures on Sale of Stock to Third Parties by the Purchaser....................................... 18
8.5.Termination of Restrictions on Transferability...................................................... 19
8.6.Required Registration............................................................................... 20
9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS............................................... 20
9.1.Survival............................................................................................ 20
10. MISCELLANEOUS....................................................................................... 20
10.1.Owner of Shares.................................................................................... 20
10.2.Successors......................................................................................... 20
10.3.Finder's Fees...................................................................................... 20
10.4.Governing Law...................................................................................... 20
10.5.Notice............................................................................................. 21
10.6.Entire Agreement................................................................................... 21
10.7.Headings........................................................................................... 21
10.8.Amendment.......................................................................................... 21
10.9.Payment of Expenses................................................................................ 21
10.10.Waiver of Covenants and Agreements................................................................ 21
10.11.Counterparts...................................................................................... 21
10.12.Severability...................................................................................... 21
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EXHIBITS
"A" - Articles of Incorporation
"B" - Certificate of Designation
"C" - By-Laws
"D-1" - Audited Financial Statements - December 31, 1994, 1995 and 1996
"D-2" - Unaudited Financial Statements - March 31, 1997
"E" - Opinion of Counsel to the Company
"G" - Registration Rights Agreement
SCHEDULES
1.1(b) - Shares to be Purchased
1.2 - Closings
2.4 - Certain Options, Warrants and Other Rights
2.12 - Agreements Affecting Company's Capital Stock
2.13 - Patents
2.15 - Litigation
2.18 - Information Statement
2.22 - Loans and Advances
8.4 - List of Prohibited Transferees
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STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
this 28th day of May, 1997, by and between HYSEQ, INC. (the "Company"), and The
▇▇▇▇▇▇-▇▇▇▇▇ Corporation (the "East Coast Purchaser") and Chiron Corporation
(the "West Coast Purchaser"). The East Coast Purchaser and the West Coast
Purchaser are sometimes severally referred to herein as the "Purchaser" and
collectively as the "Purchasers."
SECTION 1. SALE AND PURCHASE OF STOCK.
SECTION 1.1. Sale and Purchase of Series B Convertible Preferred Stock
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(a) By the First Closing Date (as defined in Section 1.2), the
Company, by all requisite corporate action, shall have authorized the issuance
and sale of the maximum number shares of its Series B Convertible Preferred
Stock, par value $.001 per share (the "Preferred Stock"), and Common Stock,
$.001 par value ("Common Stock"), contemplated to be sold pursuant to Section
1.2 hereof. The Preferred Stock shall have the rights, preferences and
privileges set forth in the Amended and Restated Articles of Incorporation as
amended (the "Articles"), and that certain Certificate of Designations,
Preferences and Rights of Series B Preferred Stock (the "Certificate of
Designation" and together with the Articles, the "Authorizing Documents")
authorized by the Company's Board of Directors in accordance with the Articles
and as set forth elsewhere herewith. The Preferred Stock is convertible into
Common Stock on the terms set forth in the Certificate of Designation and the
terms of this Agreement. The shares of Common Stock issuable and issued upon
conversion of the Preferred Stock sold hereunder are referred to herein as
"Conversion Shares."
(b) Subject to the terms and conditions herein set forth, the Company
agrees to sell, issue and deliver to each Purchaser and each Purchaser agrees to
buy from the Company the number of shares set forth under such Purchaser's name
on Schedule 1.1(b) hereto.
SECTION 1.2. Closings.
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(a) The purchase and sale of the First Closing Shares with respect to
each Purchaser shall be at a closing (respectively, the "First Closing") set
forth below such Purchaser's name on Schedule 1.2 attached hereto. As used
herein, the term "First Closing Date" shall mean, with respect to each
Purchaser, the date on which the First Closing for such Purchaser takes place.
(b) The purchase and sale of the Second Closing Shares with respect to
each Purchaser shall be at a closing (respectively, the "Second Closing" and,
collectively with the First Closing, the "Closings") set forth below such
Purchaser's name on Schedule 1.2 attached hereto. As used herein, the term
"Second Closing Date" shall mean, with respect to each Purchaser, the date on
which the Second Closing for such Purchaser takes place.
(c) Each Closing shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Ltd., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. At each
Closing, the Company shall deliver to the Purchaser a certificate representing
the number of Shares such Purchaser is purchasing, and the parties will promptly
exchange such other originally executed documents contemplated by this
Agreement. The consideration payable for the foregoing shares shall be paid by
certified or bank cashier's check or wire transfer in New York Clearing House
(next day) funds to the order of the Company's account at the Union Bank in San
Francisco, California. With respect to each Purchaser, the shares of Preferred
Stock to be sold at the First Closing are referred to herein as the "First
Closing Shares" and the shares of Preferred Stock or Common Stock to be sold at
the Second Closing are referred to herein as the "Second Closing Shares" and,
together with the First Closing Shares, as the "Shares."
SECTION 2. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers as follows:
SECTION 2.1. Organization, Good Standing and Qualification of the
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Company. The Company is a corporation duly organized, validly existing and in
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good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own and lease its properties and assets and to
conduct its business as now conducted. The Company is qualified to do business
as a foreign corporation and is in good standing in such states where the
conduct of its business or its ownership or leasing of property requires such
qualification and where the failure to so qualify would have a material adverse
effect on the Company's financial condition.
SECTION 2.2. Authorization. The Company has all requisite corporate
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power and authority to execute and deliver this Agreement, the Registration
Rights Agreement between the Company and each Purchaser (respectively for each
Purchaser, the "Registration Rights Agreement") and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Registration Rights Agreements by the
Company have been duly authorized by all requisite corporate action, and this
Agreement and the Registration Rights Agreements have been duly executed and
delivered by the Company and constitute its valid and binding obligations,
enforceable against the Company in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization
and other similar laws relating to or affecting the enforcement of debtors'
obligations or creditors' rights generally, and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any such proceeding may be brought.
The Company shall obtain any authorization, consent or approval or other action
by, or make any filing with any court or administrative body that may be
required under the applicable federal or state securities laws in connection
with the offer, issuance, sale or delivery of the Shares or Conversion Shares.
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SECTION 2.3. No Conflict with Law or Documents. The execution,
---------------------------------
delivery and performance of this Agreement by the Company will not violate any
provision of law, any rule or regulation of any governmental authority, or any
judgment, decree or order of any court binding on the Company, and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties,
assets or outstanding capital stock of the Company under its Articles, the
Certificate of Designation or By-Laws, or any indenture, mortgage, lease,
agreement or other instrument to which the Company is a party or by which it or
any of its properties is bound.
SECTION 2.4. Capital Stock. The authorized capital stock of the
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Company consists of (i) 3,000,000 shares of Series A Preferred Stock, par value
$.001 per share, of which 2,170,460 shares have been duly and validly issued and
are currently outstanding, fully paid and nonassessable; (ii) 5,000,000
additional shares of preferred stock, par value $.001 per share, including, upon
filing of the Certificate of Designation, 525,210 shares of Series B Preferred
Stock, none of which are currently outstanding; and (iii) 20,000,000 shares of
Common Stock, par value $.001 per share, of which 2,329,540 shares have been
duly and validly issued and are currently outstanding, fully paid and
nonassessable. At the First Closing, the Company shall have reserved 4,514,642
shares of its Common Stock, including 988,600 shares of its Common Stock which
have been reserved for issuance under existing stock option plans and agreements
("Options") of which Options to purchase 727,264 shares are issued and
outstanding; 526,042 shares of its Common Stock which have been reserved upon
exercise of certain outstanding warrants ("Warrants"); and 3,000,000 shares
reserved for issuance upon conversion of the authorized shares of Series A
Preferred Stock, including 2,170,460 shares which have been reserved for
issuance upon conversion of the outstanding Series A Preferred Stock (but
excluding shares which shall have been reserved for issuance upon conversion of
the outstanding Series B Preferred Stock). At each Closing, the Company shall
have reserved for issuance such shares of Common Stock as is then necessary for
issuance upon conversion of all outstanding Series B Preferred Stock. Except as
set forth on Schedule 2.4, there are (i) no preemptive or similar rights to
purchase or otherwise acquire from the Company shares of capital stock of the
Company pursuant to any provision of law, the Articles or By-Laws of the
Company, by agreement or otherwise and (ii) except for the 2,170,460 shares of
Series A Preferred Stock outstanding, no outstanding subscriptions, warrants,
options or other rights or commitments of any character to subscribe for or
purchase from the Company, or obligating the Company to issue, any shares of
capital stock of the Company or any securities convertible into or exchangeable
for such shares. The Company intends to amend its Articles to increase the
number of its authorized shares of Common stock to 50,000,000.
SECTION 2.5. Shares and Conversion Shares. The Shares, when issued
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and delivered against payment therefor in accordance with this Agreement, will
be duly and validly issued, fully paid and nonassessable and will have the
rights, preferences and privileges specified in the Articles. The requisite
number of shares of duly authorized and unissued Conversion Shares will have
been duly authorized and reserved for issuance upon the conversion or exercise
of the Preferred Stock, and no further corporate action will be required for the
valid issuance of
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shares of Common Stock constituting the Conversion Shares. The Conversion Shares
will, at the time of Closing and thereafter, not be subject to preemptive or
similar rights of any person, and when issued upon conversion of the Preferred
Stock in accordance with this Agreement and the Articles will be duly and
validly issued, fully paid and nonassessable.
SECTION 2.6. Consents and Approvals. Except for filings under Federal
----------------------
and applicable state securities laws, if any, no permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority or other person, not made or obtained, is required in
connection with the execution or delivery of this Agreement by the Company, the
offer, issuance, sale or delivery of the Shares or Conversion Shares, or the
carrying out by the Company of the other transactions contemplated hereby.
SECTION 2.7. Articles of Incorporation, Certificate of Designation
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and By-Laws. The copy of the Company's Articles, attached hereto as Exhibit A,
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is a complete, true and correct copy of such document and is in full force and
effect. The copy of the Certificate of Designation attached hereto as Exhibit B,
is a complete, true and correct copy of such document as it will be in full
force and effect at Closing. The copy of the Company's By-Laws, as amended to
date, attached hereto as Exhibit C, is a complete, true and correct copy of such
document and is in full force and effect.
SECTION 2.8. Subsidiaries. Except for Hyseq Diagnostics, Inc. (the
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"Subsidiary"), the Company has no subsidiaries and does not own any equity
interest, directly or indirectly, in any other corporation, partnership, joint
venture or other enterprise or entity. The Company owns all of the outstanding
capital stock of the Subsidiary.
SECTION 2.9. Compliance with Laws. The Company is in compliance with
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all laws, ordinances, rules and regulations of governmental authorities
applicable to or affecting it, its properties or its business except where
noncompliance would not have a material adverse effect on the Company, and the
Company has not received notice of any claimed default with respect to such
laws, ordinances, rules and regulations.
SECTION 2.10. Financial Statements.
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(a) The audited financial statements of the Company as of and for the
year ending December 31, 1994, 1995 and 1996 and the unaudited financial
statements of the Company as of and for the three months ending March 31, 1997
are set forth in Exhibits D-1 and D-2 (the "Financial Statements"). Each of
such Financial Statements is accurate and complete in all material respects, is
consistent with the books and records of the Company and has been prepared in
accordance with generally accepted accounting principles, consistently applied,
provided that the unaudited quarterly Financial Statements do not contain
footnote disclosure and are subject to the normal year end adjustments.
4
(b) The balance sheets included in the Financial Statements reflect
all liabilities and obligations of the Company, whether absolute, accrued,
contingent or otherwise as of the dates thereof, that are of a nature required
to be set forth as a liability on a balance sheet.
SECTION 2.11. Tax Matters. The Company and the Subsidiary have filed
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all Federal, state and other tax returns which are required to be filed (other
than those whose failure to be filed would not have a material adverse effect on
the Company) and have paid all taxes reflected thereon which have become due and
payable and which are not being contested in good faith by appropriate
proceedings. None of such returns nor the Subsidiary has audited for any period,
and neither the Company nor the Subsidiary has received notice that any such
returns will be audited for any period. No deficiency assessment with respect to
or proposed adjustment of the Company's or the Subsidiary's Federal, state,
county or local taxes is pending or, to the best of the Company's knowledge,
threatened. There is no tax lien, whether imposed by any federal, state, county
or local taxing authority, outstanding against the assets, properties or
business of the Company or the Subsidiary.
SECTION 2.12. Agreements Affecting the Company's Capital Stock.
------------------------------------------------
Except for this Agreement and as set forth on Schedule 2.12, there are no
agreements, written or oral, between the Company and any record owner of its
capital stock, or, to the knowledge of the Company among any record owners of
its capital stock, relating to the acquisition, disposition, repurchase,
registration under the federal securities laws, or voting of the capital stock
of the Company.
SECTION 2.13. Patents, Trademarks, Proprietary Rights. Set forth on
---------------------------------------
Schedule 2.13 is a list of patents issued or assigned to the Company. The
Company owns, or has the right to use, and has the right to bring actions for
the infringement of, all patents, trademarks, service marks, trade names,
inventions, technology, know-how, formulae, trade secrets, confidential and
proprietary information, computer software programs, and other intellectual
property necessary for the operation of the Company's business as it is
currently conducted, and no such intellectual property is used pursuant to a
license from a third party or licensed to a third party. Except as permitted by
license, the Company's operation of its business does not, to its knowledge,
infringe on the patents, trademarks, service marks, trade names, copyrights,
trade secrets or other intellectual property of any other person, and no claim
has been made, notice given or dispute arisen concerning such infringement. U.S.
Patent No. 5,202,231 is in full force, has been assigned to the Company free and
clear of all liens, encumbrances and other claims, and is not subject to any
cancellation or reexamination proceeding or any other proceeding challenging its
extent or validity. No order, holding, decision or judgment has been rendered by
any governmental authority, and no agreement, consent or stipulation exists,
which would limit the Company's use of any intellectual property.
SECTION 2.14. Contracts and Agreements. The Company is not (x) to its
------------------------
knowledge in default under any lease, employment contract, loan agreement, or
other instrument, agreement, or contract to which it is a party or by which it
is bound, (y) in violation of its Articles or By-Laws, each as amended to the
date hereof, or (z) to its knowledge in default with
5
respect to any order, writ, injunction or decree of any court or governmental
agency binding on the Company, and no event has occurred which with notice or
lapse of time, or both, would create any default or violation described in
clauses (x) through (z). The Company has no knowledge of any material breach or
anticipated material breach by any other party to any agreements, instruments,
commitments, plans or arrangements to which it is a party or by which it is
bound.
SECTION 2.15. Litigation, etc. There are no actions, suits,
---------------
proceedings or investigations pending against the Company before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
overt threat thereof) that is or would be expected to have a material adverse
effect on the Company or its business or that question the validity of this
Agreement or the transactions contemplated hereby. Except as set forth on
Schedule 2.15 or described in the Information Statement, there are no actions,
suits, proceedings or investigations by the Company currently pending or which
the Company presently intends to initiate.
SECTION 2.17. Title to Properties and Assets; Liens, etc. The Company
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has an assignment of U.S. Patent No. 5,202,231 and has good and marketable title
to its properties and assets described in the Financial Statements and all
properties thereafter acquired. The Company holds such property (other than
intellectual property described in Section 2.13, which is held as described in
that section) free and clear of all mortgages, pledges, liens, leases,
encumbrances or charges, other than (i) the lien of current taxes not yet due
and payable, and (ii) possible minor liens and encumbrances that do not in any
case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and which have not arisen
otherwise than in the ordinary course of business.
SECTION 2.17. Permits. The Company has all franchises, permits,
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licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which would materially and adversely
affect the business, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
SECTION 2.18. Disclosure. The Company has fully provided Purchaser
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with all the information which Purchaser has requested for deciding whether to
purchase the Shares. Neither this Agreement, the Information Statement attached
as Schedule 2.18 nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading, except that the Information Statement (i) does not
contemplate this sale or any other sale of capital stock of the Company and (ii)
reflects the conversion of all of the Company's preferred stock and certain
other prospective transactions or events that may not have happened yet but
which are contemplated to happen in connection with an initial public offering.
6
SECTION 2.19. Changes. From March 31, 1997, until the date hereof,
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there has not been, and from the date hereof until the First Closing, and except
as set forth herein, there will not be:
(a) any adverse change in the assets, liabilities, financial condition
or operating results of the Company, except for changes in the ordinary course
of business, including the expenditure of funds in connection with the Company's
operations, which have not been, individually or in the aggregate, materially
adverse;
(b) to the Company's knowledge, any other event or condition of any
character which can reasonably be expected to materially and adversely affect
the assets, properties, financial condition, operating results or business of
the Company (as such business is presently conducted);
(c) any change in the authorized capital of the Company;
(d) any material change in the manner of business or operations of
the Company; or
(e) any commitment (contingent or otherwise) to do any of the
foregoing.
SECTION 2.20. Insurance. The Company has insured, by reputable
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insurers, its assets that are of an insurable character against risks of
liability, casualty and fire in adequate amounts and consistent with prudent
industry practice. The Company has made, and will make, available to any
Purchaser, upon its request, a list of all insurance coverage carried by the
Company, the name of the carrier, the terms and amount of coverage.
SECTION 2.21. Labor Agreements and Actions. The Company is not bound
----------------------------
by or subject to (and none of its assets or properties is bound by or subject
to) any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company.
SECTION 2.22. Loans and Advances. Except as set forth in Schedule
------------------
2.22, the Company does not have any outstanding loans or advances to any person
and is not obligated to make any such loans or advances, except, in each case,
for advances to employees of the Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for the Company.
SECTION 2.23. Employees. No officer or key employee of the Company
---------
has advised the Company (orally or in writing) that he or she intends to
terminate employment with the Company. The Company, to the best of its
knowledge, has complied in all material respects
7
with all applicable laws relating to wages, hours, equal opportunity, collective
bargaining and the payment of Social Security and other taxes. The Company has
complied in all material respects with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
SECTION 2.24. Environmental Protection. The Company, the operation of
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its business, and, to the knowledge of the Company, the real property that the
Company leases at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Premises") are in compliance with all applicable Environmental Laws (as defined
below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws (as defined below), including,
without limitation, any Environmental Laws or orders or directives with respect
to any cleanup or remediation of any release or threat of release of Hazardous
Substances. The Company has not received any citation, directive, letter or
other communication, written or oral, or any notice of any proceeding, claim or
lawsuit, from any person arising out of the ownership or occupation of the
Premises, or the conduct of its operations, and the Company is not aware of any
basis therefor. The Company has obtained and maintains in full force and effect
all necessary permits, licenses and approvals required by all Environmental Laws
known by the Company to be applicable to the Premises and the business
operations of the Company conducted thereon. For the purposes of this Agreement,
the term "Environmental Laws" shall mean any Federal, state or local law or
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001, et
seq. and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et
seq. For purposes of this Agreement, the term "Hazardous Substances" shall
include oil and petroleum products, asbestos, polycholorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or toxic under any
Environmental Laws in such amounts as would constitute a violation of the
Environmental Laws.
SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser understands that, except as otherwise provided in
Schedule 1.1(b), neither the Shares nor the Conversion Shares will be registered
under the Securities Act of 1933, as amended (the "1933 Act"), on the grounds
that the sales provided for in this Agreement are exempt pursuant to Section
4(2) of the 1933 Act and/or Regulation D promulgated under the 1933 Act, and
that the reliance of the Company on such exemptions is predicated in part on the
Purchaser's representations, warranties, covenants and acknowledgments set forth
in this Section 3. Each purchaser, solely with respect to itself, makes the
following representations, warranties, covenants and acknowledgments to the
Company:
SECTION 3.1. Authority. The Purchaser has all requisite corporate
---------
power and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser has been duly authorized by all requisite
corporate action, and this Agreement has been duly executed and delivered by the
Purchaser and constitutes its valid and binding obligations, enforceable against
8
the Purchaser in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization and other similar
laws relating to or affecting the enforcement of debtors' obligations or
creditors' rights generally, and except that the availability of specific
performance, injunctive relief or other equitable remedies is subject to the
discretion of the court before which any such proceeding may be brought.
SECTION 3.2. Place of Business. The Purchaser represents and warrants
-----------------
to the Company that its principal business address is as set forth elsewhere
herein.
SECTION 3.3. Purchase Without a View to Distribution. The Purchaser
---------------------------------------
represents and warrants to the Company that the Shares to be purchased by such
Purchaser (and any Conversion Shares) are being acquired by the Purchaser for
its own account, not as a nominee or agent, and not with a view to resale or
distribution within the meaning of the 1933 Act, and the rules and regulations
thereunder, and the Purchaser will not distribute the Shares or Conversion
Shares, if any, in violation of the 1933 Act.
SECTION 3.4 Restrictions on Transfer. The Purchaser (i) acknowledges
------------------------
that the Shares and Conversion Shares, if any, are not registered under the 1933
Act and that the Shares and Conversion Shares, if any, to be acquired by it must
be held indefinitely by the Purchaser unless they are subsequently registered
under the 1933 Act or an exemption from registration is available, (ii) is aware
that any routine sales, under Rule 144 of the SEC promulgated under the 1933
Act, of the Shares and/or Conversion Shares, if any, may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (iii) is aware that Rule 144 is not
presently available for use by the Purchaser for resale of any such Shares and
Conversion Shares, and (iv) acknowledges that the Shares and Conversion Shares,
if any, are subject to the restrictions on transfer set forth in Section 8 of
this Agreement and that neither the Shares nor the Conversion Shares, if any,
may be transferred or disposed of by the Purchaser or other holder thereof
except in accordance with Section 8 hereof.
SECTION 3.5. Additional Representations of the Purchaser. The
-------------------------------------------
Purchaser represents that: (i) it is an "accredited investor" as such term is
defined in Rule 501 promulgated under the 1933 Act; (ii) its financial situation
is such that it can afford to bear the economic risk of holding the Shares and
Conversion Shares, if any, for an indefinite period of time and suffer complete
loss of its investment in the Shares and Conversion Shares; (iii) its knowledge
and experience in financial and business matters are such that it is capable of
evaluating the merits and risks of its purchase of the Shares and Conversion
Shares as contemplated by this Agreement; (iv) it understands that the Shares
and Conversion Shares are a speculative investment; (v) it understands and has
taken cognizance of all the risk factors related to the purchase of the Shares
and Conversion Shares, if any; (vi) it has obtained all documents and materials
and all other information it deems necessary or desirable to evaluate an
investment in the Shares; and (vii) it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
sale of the Shares.
9
SECTION 4. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Each Purchaser's obligation to purchase and make payment for the
Shares to be purchased at the First Closing is subject, at its option, to the
satisfaction of each of the following conditions as of the First Closing Date,
and each Purchaser's obligation to purchase and make payment for the Shares to
be purchased at the Second Closing is subject, at its option, to the
satisfaction of each of the conditions set forth in Section 4.3, 4.4 and 4.5 as
of the Second Closing Date, it being understood that the conditions below are
several with respect to each Purchaser and that the failure or refusal of one
Purchaser to consummate a Closing or perform any other obligations hereunder
shall not affect the obligations of the other Purchaser hereunder:
SECTION 4.1. Proceedings and Certain Documents. All proceedings to be
---------------------------------
taken in connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the Purchaser.
SECTION 4.2. Representations and Warranties. On the First Closing
------------------------------
Date, the representations and warranties contained in Section 2 hereof shall be
true and correct in all material respects with the same effect as though made on
and as of the First Closing Date except (i) as to such representations and
warranties made as of an earlier, specific date then as of such date, and the
Company shall have so certified to the Purchaser in writing; (ii) as disclosed
in writing (the "Disclosure Notice") to the Purchaser at the First Closing with
specific reference to this Section 4.2, or (iii) that the number of issued and
outstanding shares of the Company's capital stock may be affected pursuant to
(A) issuance of Shares as contemplated herein or as described in any schedule
hereto, (B) shares of Common Stock issued upon the exercise of any or all
Options or Warrants, or (C) any conversions of issued and outstanding shares of
Series A Preferred Stock. If the Company delivers a Disclosure Notice to
Purchaser, Purchaser may elect either (i) to terminate this Agreement by written
notice delivered to the Company within 10 days of the Disclosure Notice and
neither party shall have any liability to the other or (ii) proceed with the
Closings and the Company shall have no liability to Purchaser with respect to
the items specified in the Disclosure Notice.
SECTION 4.3. Performance. All the covenants, agreements and
-----------
conditions contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date with respect to the Purchaser purchasing
Shares on such Closing Date shall have been performed or complied with in all
material respects, and the Company shall have so certified to the Purchaser in
writing.
SECTION 4.4. Opinion of Counsel to the Company. On the Closing Date,
---------------------------------
the Purchaser shall have received an opinion from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.,
counsel for the Company, dated the Closing Date, addressed to the Purchaser, in
form attached hereto as Exhibit E (except that on the Second Closing Dates, as
to matters set forth in numbered
10
paragraphs 5 and 6 of Exhibit E, counsel need only opine as to the status of
such matters as of the date of the Second Closing Date).
SECTION 4.5. No Proceeding or Litigation. No suit, action, or other
---------------------------
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of the transactions
contemplated in this Agreement shall have been instituted and be pending.
SECTION 4.6. Board Approval. Solely with respect to the obligations
--------------
of the East Coast Purchaser, the Board of Directors of the East Coast Purchaser
shall have approved the execution and delivery of this Agreement and the
Registration Rights Agreement.
SECTION 4.7. Additional Agreements. The Registration Rights Agreement
---------------------
and the Collaboration Agreement between the Company and the Purchaser
(respectively for each Purchaser, the "Collaboration Agreement") shall have been
executed and delivered by the Company to the applicable Purchaser.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Shares to be purchased by the
Purchaser at the First Closing is subject, at the Company's option, to the
satisfaction of each of the following conditions as of the First Closing Date,
and the Company's obligation to sell the Shares to be purchased by the Purchaser
at the Second Closing is subject, at the Company's option, to the satisfaction
of conditions set forth in Sections 5.2 and 5.3 (and Section 5.1 if the Second
Closing is for Preferred Stock) as of the Second Closing Date, it being
understood that the conditions below are several with respect to each Purchaser
and that the failure or refusal of the Company to consummate a Closing for one
Purchaser hereunder shall not be a condition to the obligations of the Company
with respect to the other Purchaser:
SECTION 5.1 Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties contained in Section 3 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date except as such representations and warranties relate to an
earlier, specific date then as of such date, and the Purchaser shall have so
certified to the Company in writing.
SECTION 5.2. Performance. All the covenants, agreements and
-----------
conditions contained in this Agreement to be performed or complied with by the
Purchaser on or prior to the Closing Date shall have been performed or complied
with in all material respects, and the Purchaser shall have so certified to the
Company in writing.
SECTION 5.3. No Proceeding or Litigation. No suit, action, or other
---------------------------
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of the transactions
contemplated in this Agreement shall have been instituted and be pending.
11
SECTION 6. COVENANTS OF THE COMPANY
SECTION 6.1. Use of Proceeds. The proceeds of the sale of the
---------------
Offering shall be used for general corporate purposes.
SECTION 6.2. Properties, Business, Insurance. The Company shall
-------------------------------
maintain and cause each of its subsidiaries, if any, to maintain as to their
respective properties and businesses, with financially sound and reputable
insurers, insurance against such casualties and contingencies and of such types
and in such amounts as is customary for companies similarly situated, which
insurance shall be deemed by the Company to be sufficient.
SECTION 6.3. Financial Statements.
--------------------
The Company shall furnish to the holders of the Preferred Stock, and
the Conversion Shares, if any, then outstanding (i) as soon as available but no
later than 120 days of the end of each fiscal year an audited consolidated
balance sheet, and related, audited consolidated statements of income and cash
flows and stockholders' equity of the Company and its subsidiaries, if any, and
as at the end of and for such fiscal year prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by the
opinion of an independent public accountant of recognized national standing
selected by the Board; and (ii) as soon as available but no later than 90 days
of the end of each fiscal quarter an unaudited consolidated balance sheet, and
related, unaudited consolidated statements of income and cash flows and
stockholders' equity of the Company and its subsidiaries, if any, and as at the
end of and for such fiscal quarter prepared in accordance with generally
accepted accounting principles, consistently applied, provided that such
quarterly financial statements need not contain footnotes and are subject to
normal year end adjustments.
All such financial statements, reports or other information (other
than publicly available information) provided to any Purchaser pursuant to this
Section 6.3 shall be deemed to be confidential information of the Company. The
Purchaser agrees to use reasonable efforts to prevent the disclosure of such
confidential information to any other person (excluding its officers, employees,
agents and counsel who have agreed to prevent such disclosure) except (i) as may
be necessary or desirable in connection with a request by a governmental agency,
regulatory or supervisory authority or court having or claiming jurisdiction
over such Purchaser, (ii) information obtained from a third party which is not
subject to the provisions of any confidentiality agreement in favor of the
Company, and (iii) in connection with the enforcement of such Purchaser's
rights hereunder or under the Articles and/or the Certificate of Designation.
Without limiting the generality of the foregoing, the Company may require any
person receiving any confidential information of the Company to enter into a
separate confidentiality and non-disclosure agreement, in form and substance
reasonably satisfactory to the Company and such person.
12
SECTION 6.4. Restrictive Agreements Prohibited. Neither the Company
---------------------------------
nor its subsidiaries, if any, shall become a party to any agreement which by its
terms restricts the Company's performance of this Agreement, the Articles, the
Certificate, the Registration Rights Agreement or the Collaboration Agreement.
SECTION 6.5. Compliance with Laws. The Company shall comply with all
--------------------
applicable laws, rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 6.6. Keeping of Records and Books of Account. The Company
---------------------------------------
shall keep, accurate records and books of account, in which entries will be made
in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company and such
subsidiaries, if any, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
SECTION 6.7. Reserve for Conversion Shares. The Company shall at all
-----------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred Stock
and otherwise complying with the terms of this Agreement, such number of its
duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Stock from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Stock or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable federal or state securities laws in connection with the issuance or
delivery of shares of Common Stock upon conversion of the Preferred Stock;
provided, however, that except as set forth in Section 8.6 nothing herein shall
be deemed to require the Company to register the Common Stock in any
jurisdiction. The Company will not, by amendment to its Articles or through any
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, issue or sale of securities or other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Preferred
Stock or the Conversion Shares, if any, and will at all times carry out all such
terms and take all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Preferred Stock.
SECTION 6.8. Trust Shares. The Company agrees to repurchase and
------------
cancel all shares of the Company's capital stock held in the Hyseq One Trust
prior to or concurrently with the Second Closing Date for the East Coast
Purchaser.
13
SECTION 7. COVENANTS OF THE PURCHASER.
SECTION 7.1. Limitations on Purchase of Additional Securities. Each
------------------------------------------------
Purchaser covenants and agrees with the Company as follows:
(a) Without the prior written consent of the Company, neither the
Purchaser nor any of its Affiliates will:
(i) acquire or offer, propose, or agree to acquire, directly
or indirectly, by purchase, tender or exchange offer or otherwise, beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of shares of Common
Stock or other securities of the Company entitled to vote generally in the
election of directors or securities convertible into or exercisable for shares
of Common Stock or such other securities (collectively, "Voting Securities"), or
rights or options to acquire such ownership, if such Voting Securities, together
with all other Voting Securities beneficially owned by the Purchaser and its
Affiliates would exceed 9.9% of the outstanding Voting Securities; provided,
however, that, the foregoing restriction shall not be deemed to be violated if
the percentage of outstanding Voting Securities beneficially owned by the
Purchaser and its Affiliates is increased as a result of a recapitalization of
the Company, a repurchase of securities by the Company or any other action taken
by the Company; or
(ii) make, or in any other way promote or participate in,
directly or indirectly, any "solicitation" of "proxies" from stockholders to
vote (as used in the proxy rules of the Securities and Exchange Commission) (i)
in a contest regarding the election of directors of the Company; or (ii) in a
contest or on a proposition regarding any business combination, restructuring,
liquidation, sale of assets, extraordinary dividend or other extraordinary
transaction involving the Company, provided that nothing herein shall limit the
Purchaser's right to vote its Voting Securities in accordance with what it deems
to be its best interests.
(b) If the percentage of the outstanding Voting Securities
beneficially owned by the Purchaser and its Affiliates exceeds 9.9% of the
outstanding Voting Securities (except as a result of a recapitalization of the
Company, a repurchase of Voting Securities by the Company, or any other action
taken by the Company or except with the prior written consent of the Company),
the Purchaser and its Affiliates shall take such action as may be required to
cause that number of such shares of Voting Securities in excess of 9.9% to be
counted for purposes of determining a quorum but to abstain on all matters
presented for vote.
(c) The covenants set forth in Sections 7.1(a) and 7.1(b) shall
terminate upon the first to occur of any of the following:
(i) it is publicly disclosed or the Purchaser otherwise
learns that another person or group has acquired or offered, proposed or agreed
to acquire, directly or indirectly, by purchase, tender or exchange offer or
otherwise, beneficial ownership of Voting Securities, or rights or options to
acquire such ownership, which Voting Securities, together with
14
all other Voting Securities beneficially owned by such person or group would
constitute a majority of the outstanding Voting Securities; or
(ii) subsequent to the second anniversary of the Company's
initial public offering, another person or group (other than management or the
Board of Directors of the Company) solicits proxies with the intention of
replacing a majority of the members of the Board of Directors of the Company; or
(iii) any amendment of the Articles or Bylaws of the Company
is effected without the consent of the Purchaser and such amendment adversely
affects the Purchaser in a manner different from the manner in which such
amendment affects holders of other shares of capital stock of the Company other
than those held by the Purchaser; or
(iv) the Company publicly discloses, or there is submitted to
the shareholders of the Company a proposal for, the merger, consolidation,
combination or other reorganization of the Company whereby holders of at least
80% of the outstanding Voting Securities immediately prior to such merger,
consolidation, combination or other reorganization will not hold at least 60% of
the outstanding Voting Securities of the surviving entity immediately after such
merger, consolidation, combination or other reorganization; or
(v) the Company publicly discloses, or there is submitted to
the shareholders of the Company a proposal for, the sale of all or substantially
all of the assets of the Company or any other similar transactions; or
(vi) a petition of bankruptcy or any petition for relief
under the provisions of the federal bankruptcy act or any other state or federal
law for the relief of debtors is filed by the Company or is filed by creditors
of the Company and remains undismissed for a period of 90 days after the filing
thereof or a receiver or trustee is appointed to take possession of the property
or assets of the Company or the Company executes an assignment of all or
substantially all of its assets, not in the ordinary course, for the benefit of
creditors; or
(vii) as to each Purchaser, there shall exist a material
breach of the Company of such Purchaser's Collaboration Agreement, which breach
shall remain unremedied beyond the applicable cure period set forth therein, or
the Company shall have terminated such Collaboration Agreement prior to the
expiration of its term or absent a breach by Purchaser; or
(viii) five years following the date of this Agreement; or
(ix) the Company sells capital stock to another person or
entity that is a party to a business collaboration or other similar agreement
with the Company (which expressly shall not include any agreement relating
solely to the raising of capital), which organization is not subject to a
restriction at least as restrictive as that set forth in this Section 7.1, in
which case Purchasers shall be bound by such less restrictive provisions.
15
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF
PREFERRED STOCK AND CONVERSION SHARES;
SECTION 8.1. Compliance with 1933 Act. The Preferred Stock, and the
------------------------
Conversion Shares, if any, shall not be transferable, except upon the conditions
specified in this Section 8, which conditions are intended to insure compliance
with the provisions of the 1933 Act, applicable state securities laws and
Section 1361(a) of the Internal Revenue Code of 1986 or any successor code or
law in respect of any such transfer.
SECTION 8.2. Restrictive Legend. Each certificate representing the
------------------
Preferred Stock and the Conversion Shares and any shares of Common Stock or
other securities issued in respect of such Preferred Stock or the Conversion
Shares upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 8.4 below) be stamped or otherwise imprinted with the
following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR
APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT
TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT TO SUCH SHARES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (2) THE COMPANY SHALL HAVE RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER, OR (3) THE COMPANY SHALL
HAVE RECEIVED A "NO ACTION" LETTER FROM THE SECURITIES EXCHANGE
COMMISSION COVERING SUCH TRANSFER AND AN OPINION AS REFERRED TO ABOVE
RELATING TO STATE LAW; TRANSFERABILITY IS FURTHER SUBJECT TO THE
PROVISIONS OF A PREFERRED STOCK PURCHASE AGREEMENT, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
SECTION 8.3. Restrictions on Transferability. The Company shall not
-------------------------------
be required to register the transfer of the Preferred Stock or any Conversion
Shares on the books of the Company unless: (i) such securities have been
registered under applicable federal and state securities laws or (ii) the
Company shall have been provided with an opinion of counsel (from counsel
reasonably acceptable to the Company) reasonably satisfactory to it prior to
such transfer to the effect that registration under the 1933 Act or any
applicable state securities law is not required in connection with the
transaction resulting in such transfer. Each certificate representing the
Preferred Stock and the Conversion Shares, if any, issued upon any transfer as
above provided shall bear the restrictive legend set forth in Section 8.2 above,
except that such restrictive legend shall not be required if the opinion of
counsel satisfactory to the Company
16
referred to above is to the further effect that such legend is not required in
order to establish compliance with the provisions of the 1933 Act and any
applicable state securities law. The cost of any opinion delivered under this
Section 8.3 shall be borne by the party requesting the transfer in question.
SECTION 8.4. Procedures on Sale of Stock to Third Parties by the
---------------------------------------------------
Purchaser. Except as otherwise expressly provided herein, the Purchaser hereby
---------
agrees that it shall not sell any Restricted Securities as defined under the
1933 Act or the rules and regulations promulgated thereunder, except in
accordance with the following procedures:
(a) The Purchaser shall first deliver to the Company a written notice
(the "Section 8.4 Offer Notice"), which Section 8.4 Offer Notice shall (i)
specifically identify the party or parties to whom or which the Purchaser
proposes to sell Restricted Securities (such party or parties hereinafter
referred to as the "Identified Parties"), pursuant to a bona fide written offer
from such Identified Parties ("Third Party Offer"), (ii) include a copy of the
Third Party Offer, and (iii) be irrevocable for the Offer Period, offering (the
"Section 8.4 Offer") to the Company all of the Company's securities proposed to
be sold by the Purchaser to such Identified Parties at the purchase price and on
the terms specified therein. The Company shall have the right and option, at
its sole discretion, for a period of 30 days after its receipt of the Section
8.4 Offer Notice (the "Offer Period"), to accept all, but not less than all, of
the Restricted Securities offered at the purchase price and upon the terms
stated in the Section 8.4 Offer Notice. Such acceptance will be made by
delivery of a written notice to the Purchaser within the Offer Period.
(b) Sales of Restricted Securities under the terms of Section 8.4(a)
above shall be made at the offices of the Company on a mutually satisfactory
business day within 30 days after the election by the Company to purchase such
Restricted Securities. Delivery of certificates or other instruments evidencing
such Restricted Securities duly endorsed for transfer, accompanied by investment
representations and other documents customary in transactions of this type,
shall be made on such date against payment of the purchase price therefor.
(c) If effective acceptance shall not be received pursuant to Section
8.4(a) above with respect to all Restricted Securities offered for sale pursuant
to the Section 8.4 Offer Notice or if the Company fails to complete the purchase
of the Restricted Securities within the thirty day period specified in Section
8.4(b), then, subject to subparagraph (d) below, the Purchaser may sell the
Identified Parties all or any part of the Restricted Securities so offered for
sale and not so accepted by the Company at a price not less than the price, and
on terms not more favorable to the purchaser thereof than the terms, stated in
the Section 8.4 Offer Notice at any time within 90 days after the expiration of
the Offer Period required by Section 8.4(a) above. In the event that the
Restricted Securities are not sold by the Purchaser during such 90-day period,
the right of the Purchaser to sell such stock shall expire and the obligations
of this Section 8.4 shall be reinstated; provided, however, that in the event
that the Purchaser determines, at any time during such 90-day period, that the
sale of all or any part of the remaining Restricted Securities on the terms set
forth in the Section 8.4 Offer Notice is impractical, the Purchaser can
17
terminate the offer and reinstate the procedure provided in this Section 8.4
without waiting for the expiration of such 90-day period.
(d) Before consummating a sale of Restricted Securities to the
Identified Parties, the Purchaser shall submit to the Company the written
opinion, addressed to the Company, of Purchaser's counsel as to whether, in the
opinion of such counsel, such proposed transfer involves a transaction requiring
registration of such Restricted Securities under the 1933 Act and applicable
state securities laws or an exemption thereunder is available. If in such
opinion of counsel (which opinion and counsel shall be reasonably acceptable to
the Company), the proposed transfer may be effected without registration under
the 1933 Act and any applicable state securities laws or "blue sky" laws, then
the Purchaser shall thereupon be entitled to effect such transfer in accordance
with the terms of subparagraph (c) above. Each certificate or other instrument
evidencing the securities issued upon such transfer (and each certificate or
other instrument evidencing any such securities not transferred) shall bear the
legend set forth in Section 8.2 hereof unless: (a) in such opinion of such
counsel (which opinion and counsel shall be reasonably acceptable to the
Company) the registration of future transfers is not required by the applicable
provisions of the 1933 Act and state securities laws, or (b) the Company shall
have waived the requirement of such legend; provided, however, that such legend
shall not be required on any certificate or other instrument evidencing the
securities issued upon such transfer in the event such transfer shall be made in
compliance with the requirements of Rule 144 (as amended from time to time or
any similar or successor rule) promulgated under the ▇▇▇▇ ▇▇▇. The Purchaser
shall not effect any transfer until such opinion of counsel has been given to
and accepted (which acceptance shall not be unreasonably delayed) by the Company
(unless waived by the Company) or until registration of the Restricted Shares
involved in the above-mentioned request has become effective under the 1933 Act.
(e) Anything contained herein to the contrary notwithstanding, the
provisions of this Section 8.4 shall not be applicable to a transfer pursuant to
Section 8.5 or 8.6 hereof, or a transfer to an Affiliate (as defined in the ▇▇▇▇
▇▇▇) of the Purchaser or to a person who is not a Competitor (as defined below)
if such Affiliate or person executes all documents necessary or desirable in the
reasonable judgment of the Company to become a party to, and be bound by, the
terms of this Agreement. As used herein, the term "Competitor" means any entity
listed on Schedule 8.4.
SECTION 8.5. Termination of Restrictions on Transferability. The
----------------------------------------------
conditions precedent imposed by this Section 8 upon the transferability of the
Preferred Stock and the Conversion Shares, if any, shall cease and terminate as
to any of the Preferred Stock or the Conversion Shares, when such securities
shall have been registered under the Securities Exchange Act of 1934.
SECTION 8.6. Required Registration. The Purchaser shall be entitled
---------------------
to request that the Company effect the registration under the 1933 Act of
Restricted Shares under the terms and conditions of that certain registration
rights agreement attached hereto as Exhibit G.
18
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
SECTION 9.1. Survival. All covenants, agreements, representations and
--------
warranties made herein and in the certificates delivered pursuant hereto shall
survive the execution and delivery of this Agreement and the issuance and sale
of the Shares hereunder; provided, however, representations and warranties made
herein or therein shall only be deemed to have been made as of the date hereof
and as of the Closing Date (except as specifically provided in Sections 4.2 and
5).
SECTION 10. MISCELLANEOUS
SECTION 10.1. Owner of Shares. The Company may deem and treat the
---------------
person in whose name the Shares or the Conversion Shares, if any, are registered
as the absolute owner thereof for all purposes whatsoever, and the Company shall
not be affected by any notice to the contrary.
SECTION 10.2. Successors. This Agreement shall be binding upon and
----------
except as provided herein, shall inure to the benefit of the respective
successors, executors, personal representatives, heirs and assigns of each of
the parties hereto.
SECTION 10.3. Finder's Fees. Each party to this Agreement represents
-------------
and warrants that, to the best of its knowledge, no broker or finder has acted
for such party in connection with this Agreement or the transactions
contemplated by this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, arrangements or understandings made by such party. The Company
shall indemnify the Purchaser against, and hold it harmless from, any liability,
cost, or expense (including reasonable attorneys' fees and expenses) resulting
from any such agreement, arrangement, or understanding made by the Company, and
the Purchaser shall indemnify the Company against, and hold the Company harmless
from, any liability, cost, or expense (including reasonable attorneys fees and
expenses) resulting from any such agreement, arrangement, or understanding made
by the Purchaser, with any third party, for brokerage or finders fees or other
commissions in connection with this Agreement.
SECTION 10.4. Governing Law. This Agreement shall be governed by and
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construed under the laws of the State of California applicable to contracts made
and to be performed in such jurisdiction, without regard to choice of law
principles.
SECTION 10.5. Notice. Unless otherwise provided, any notice or other
------
communications required or permitted hereunder shall be given in writing and
shall be deemed effectively given when delivered personally, or upon receipt by
the party entitled to receive the
19
notice when sent by registered or certified mail, postage prepaid, addressed to
the party to be notified at the address indicated for such party on the
signature page hereof or at such other address as such party may designate by
ten (10) days advance written notice to the other parties. All notices shall be
given to the Company at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to the
attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief Executive Officer, with a copy
to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ to the attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
SECTION 10.6. Entire Agreement. This Agreement together with the
----------------
Exhibits and Schedules attached hereto or delivered herewith sets forth the
entire understanding of the parties with respect to the transactions
contemplated hereby.
SECTION 10.7. Headings. The headings of the sections of this
--------
Agreement are inserted for convenience of reference only and shall not be
considered a part hereof.
SECTION 10.8. Amendment. This Agreement may not be modified, amended
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or changed without the written consent of each Purchaser.
SECTION 10.9. Payment of Expenses. The Company shall pay the costs
-------------------
and expenses incurred by it in connection with the issuance and sale of the
Shares, and the execution, delivery and performance of this Agreement. Each
Purchaser shall pay the costs and expenses incurred by it in connection with the
purchase of its Shares and the execution, delivery and performance of this
Agreement.
SECTION 10.10. Waiver of Covenants and Agreements. Notwithstanding
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any other provision contained herein, any covenant, agreement or provisions on
the part of the Company to be performed herein may be waived by written
agreement of the Purchaser waiving compliance.
SECTION 10.11. Counterparts. This Agreement may be executed and
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delivered in two or more counterparts, each of which shall be an original
document and all of which together shall constitute a single binding agreement.
SECTION 10.12. 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.
20
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement as of the date first set forth above.
THE EAST COAST PURCHASER HYSEQ, INC.
------------------------ -----------
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------- -------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Title: President and Chief Executive
Address: Officer
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
THE WEST COAST PURCHASER ATTEST:
------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------- ------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D., Ph.D. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary
Title: Senior Vice President
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
21
Schedule 1.1(b)
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Shares to Be Purchased
----------------------
The East Coast Purchaser
------------------------
Subject to the terms and conditions herein set forth, the Company agrees to
sell, issue and deliver to the East Coast Purchaser and the East Coast Purchaser
agrees to buy (i) at the First Closing, 175,070 shares of the Preferred Stock
for a price equal to $28.56 per share and an aggregate purchase price of
$5,000,000 and (ii) at the Second Closing, either (A) such number of shares of
Preferred Stock having an aggregate value of $5,000,000 based on the lesser of
(x) $28.56 per share and (y) the Conversion Price of the Preferred Stock then in
effect or (B) in the event the Company consummates an initial public offering of
its Common Stock on or prior to December 2, 1997, such number of shares of
Common Stock having an aggregate value of $5,000,000 (valued at a price per
share equal to the price to public in such public offering less one-half of the
underwriting discounts and commissions applicable to the shares sold to the
public which are not applicable to the shares of Common Stock sold to
Purchaser), which shares of Common Stock shall be registered pursuant to the
1933 Act.
The West Coast Purchaser
------------------------
Subject to the terms and conditions herein set forth, the Company agrees to
sell, issue and deliver to the West Coast Purchaser and the West Coast Purchaser
agrees to buy, (i) at the First Closing, 175,070 shares of the Preferred Stock
for a price equal to $28.56 per share and an aggregate purchase price of
$5,000,000 and (ii) at the Second Closing, in the event the Company consummates
an initial public offering of its Common Stock on or prior to December 2, 1997,
such number of shares of Common Stock having an aggregate value of $2,500,000
(valued at a price per share equal to the price to public in such public
offering less one-half of the underwriting discounts and commissions applicable
to the shares sold to the public which are not applicable to the shares of
Common Stock sold to Purchaser), which shares of Common Stock shall be
registered pursuant to the 1933 Act.
Schedule 1.2
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Closings
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East Coast Purchaser
--------------------
First Closing. The First Closing shall take place on such date as is
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determined by mutual agreement of the parties; provided, however, that such date
shall be no later June 20, 1997.
Second Closing. The Second Closing shall take place on December 2, 1997 or,
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if the Company sells Common Stock as set forth on Schedule 1.1(b), on the date
of the closing of the initial public offering, or at such other date as is
determined by mutual agreement of the parties.
West Coast Purchaser
--------------------
First Closing. The First Closing shall be held on such date as is
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determined by mutual agreement of the parties; provided, however, that such date
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shall be no later June 2, 1997.
Second Closing. The Second Closing shall be held, if at all, on the date of
--------------
the closing of the Company's initial public offering occurring on or before
December 2, 1997 or such later date as is determined by mutual agreement of the
parties. If the Company does not consummate a public offering on or prior to
December 2, 1997, there will be no Second Closing.