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EXHIBIT 10.12(a)
INVESTOR'S RIGHTS AGREEMENT
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the ____ day of November,
2000 (the "Effective Date"), by and among Toxco, a ___________ corporation (the
"Company"), CombiMatrix Corporation, a Delaware corporation ("CombiMatrix") and
Acacia Research Corporation, a Delaware corporation ("Acacia"; together with
CombiMatrix, the "Investors" each of which is herein referred to as an
"Investor".)
RECITALS
WHEREAS, in order to induce the Company to approve the issuance of the
Common Stock and to induce the Investors to invest funds in the Company, the
Investors and the Company hereby agree that this Agreement shall govern the
rights of the Investors to cause the Company to register shares of Common Stock
issued or issuable to them and certain other matters as set forth herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Common Stock" means the Common Stock of the
Company, par value $0.001 per share.
(c) The term "Common Stock Equivalents" means and includes all
shares of Common Stock issued and outstanding at the
relevant time plus (i) all shares of Common Stock that may
be issued upon exercise of any options, warrants and other
rights of any kind that are then exercisable, and (ii) all
shares of Common Stock that may be issued upon conversion
or exchange of any convertible securities which are by
their terms then convertible into or exchangeable for
Common Stock, including without limitation, preferred
stock.
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(d) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under
the Act subsequently adopted by the SEC that permits
inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the
SEC.
(e) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee
thereof in accordance with Section 1.11 hereof.
(f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(g) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance
with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(h) "Qualified IPO" means the closing of a registered
underwritten public offering of shares of Common Stock of
the Company.
(i) The term "Registrable Securities" means (i) any Common
Stock or Common Stock Equivalents owned by Combimatrix and
Acacia and (ii) any Common Stock or Common Stock
Equivalents of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other
distribution with respect to, or in exchange for, or in
replacement of, the shares referenced in (i) above,
excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his
rights under this Section 1 are not assigned.
(j) The number of shares of "Registrable Securities"
outstanding shall be determined by the number of shares of
Common Stock outstanding that are, and the number of
shares of Common Stock issuable pursuant to then
exercisable or convertible Common Stock Equivalents that
are, Registrable Securities.
(k) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if the
Company shall receive at any time after the earlier of (i)
three (3) years after the date of this Agreement or (ii)
six (6) months after the effective date
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of the Qualified IPO, a written request from either or
both of CombiMatrix and Acacia (the "Initiating Holders")
that the Company file a registration statement under the
Act covering the registration of Registrable Securities
with an anticipated aggregate offering price of at least
$7,500,000, then the Company shall, within twenty (20)
days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of
this Section 1.2, use all reasonable efforts to effect, as
soon as practicable, the registration under the Act of all
Registrable Securities that the Holders request to be
registered in a written request received by the Company
within twenty (20) days of the mailing of the Company's
notice pursuant to this Section 1.2(a).
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a
part of their request made pursuant to this Section 1.2
and the Company shall include such information in the
written notice referred to in Section 1.2(a). In such
event the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such
Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters
selected for such underwriting by the Company (which
underwriter or underwriters shall be reasonably acceptable
to CombiMatrix and Acacia). Notwithstanding any other
provision of this Section 1.2, if the underwriter advises
the Company that marketing factors require a limitation of
the number of securities underwritten (including
Registrable Securities), then the Company shall so advise
all Holders of Registrable Securities that would otherwise
be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the
Initiating Holders); provided, however, that the number of
shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other
securities proposed to be included in such underwriting
are first excluded from the underwriting. To facilitate
the allocation of shares in accordance with these
promises, the Company may round the number of shares
allocated to any holder to the nearest 100 shares. Any
Registrable Securities
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excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 1.2:
(i) after the Company has effected three (3)
registrations pursuant to this Section 1.2, and
such registration has been declared or ordered
effective excluding any registration in which the
number of Registrable Securities sold by the
Initiating Holders is reduced pursuant to
Section1.2(b) to less than 60% of the number of
Registrable Securities originally requested by
initiating Holders to be registered in such
offering; or
(ii) during the period starting with the date sixty (60)
days prior to the Company's good faith estimate of
the date of the filing of, and ending on a date one
hundred eighty (180) days following the effective
date of, a Company-initiated registration subject
to Section 1.3, provided that the Company is
actively employing in good faith all reasonable
efforts to cause such registration statement to
become effective; or
(iii) if the Initiating Holders propose to dispose of
Registrable Securities that may be registered on
Form S-3 pursuant to Section 1.4 hereof; or
(iv) if the Company shall furnish to Holders requesting
a registration statement pursuant to this Section
1.2, a certificate signed by the Company's Chief
Executive Officer or Chairman of the Board stating
that in the good faith judgment of the Board of
Directors of the Company, it would be detrimental
to the Company and its stockholders for such
registration statement to be effected at such time,
in which event the Company shall have the right to
defer such filing for a period of not more than one
hundred twenty (120) days after receipt of the
request of the Initiating Holders, provided that
such right to delay a request shall be exercised by
the Company not more than once in any twelve
(12)-month period.
1.3 Company Registration.
(a) Notice of Registration. If (but without any obligation to
do so) the Company proposes to register (including for
this purpose a
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registration effected by the Company for stockholders
other than the Holders) any of its stock or other
securities under the Act in connection with the public
offering of such securities (other than a registration
relating solely to the sale of securities to participants
in a Company stock or other employee benefit plan, a
registration relating to a corporate reorganization or
other transaction under Rule 145 of the Act, a
registration on any form that does not include
substantially the same information as would be required to
be included in a registration statement covering the sale
of the Registrable Securities, or a registration in which
the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also
being registered), the Company shall, at such time,
promptly give each Holder written notice of such
registration. Upon the written request of each Holder
given within twenty (20) days after mailing of such notice
by the Company in accordance with Section 3.5, the Company
shall, subject to the provisions of Section 1.3(c), use
all reasonable efforts to cause to be registered under the
Act all of the Registrable Securities that each such
Holder has requested to be registered.
(b) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration
initiated by it under this Section 1.3 prior to the
effectiveness of such registration whether or not any
Holder has elected to include securities in such
registration. The expenses of such withdrawn registration
shall be borne by the Company in accordance with Section
1.7 hereof.
(c) Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's
capital stock, the Company shall not be required under
this Section 1.3 to include any of the Holders' securities
in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled
to select the underwriters) and enter into an underwriting
agreement in customary form with an underwriter or
underwriters selected by the Company, and then only in
such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering
by the Company. If the total amount of securities,
including Registrable Securities, requested by
stockholders to be included in such offering exceeds the
amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is
compatible with the success of the offering, then the
Company shall be required to include in the offering only
that number of such securities, including Registrable
Securities, that the underwriters determine in
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their sole discretion will not jeopardize the success of
the offering (the securities so included to be first on
behalf of the Company and then to be apportioned pro rata
among the selling stockholders (including the Holders)
according to the total amount of securities proposed to be
included therein by each selling stockholder or in such
other proportions as shall mutually be agreed to by such
selling stockholders), and if advised by the underwriters,
the selling Holders may be excluded entirely if no other
stockholder's securities are included. To facilitate the
allocation of shares in accordance with these promises,
the Company may round the number of shares allocated to
any stockholder to the nearest 100 shares. For purposes of
the preceding parenthetical concerning apportionment, for
any selling stockholder that is a Holder of Registrable
Securities and that is a partnership or corporation, the
partners, retired partners and stockholders of such
Holder, or the estates and family members of any such
partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to
be a single "selling Holder," and any pro rata reduction
with respect to such "selling Holder" shall be based upon
the aggregate amount of Registrable Securities owned by
all such related entities and individuals.
1.4 Form S-3 Registration. In case the Company shall receive from the
Holders of at least ten percent (10%) of the Registrable
Securities a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company shall:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other
Holders; and
(b) use all reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications
and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such
portion of such Holders' Registrable Securities as are
specified in such request, together with all or such
portion of the Registrable Securities of any other Holders
joining in such request as are specified in a written
request given within fifteen (15) days after receipt of
such written notice from the Company, provided, however,
that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to
this section 1.4:
(i) if Form S-3 is not available for such offering by
the Holders;
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(ii) if the Holders, together with the holders of any
other securities of the Company entitled to
inclusion in such registration, propose to sell
Registrable Securities and such other securities
(if any) at an aggregate price to the public (net
of any underwriters' discounts or commissions) of
less than $7,500,000;
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer
or Chairman of the Board of the Company stating
that in the good faith judgment of the Board of
Directors of the Company, it would be detrimental
to the Company and its stockholders for such Form
S-3 Registration to be effected at such time, in
which event the Company shall have the right to
defer the filing of the Form S-3 registration
statement for a period of not more than one hundred
twenty (120) days after receipt of the request of
the Holder or Holders under this Section 1.4;
provided, however, that the Company shall not
utilize this right more than twice in any twelve
month period;
(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already
effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to
execute a general consent to service of process in
effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities
and other securities so requested to be registered as soon
as practicable after receipt of the request or requests of
the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as requests for
registration effected pursuant to Sections 1.2.
1.5 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all
reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of
a majority of the Registrable Securities
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registered thereunder, keep such registration statement
effective for a period of up to one hundred twenty (120)
days or, if earlier, until the distribution contemplated
in the Registration Statement has been completed;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of
all securities covered by such registration statement;
(c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned
by them;
(d) use all reasonable efforts to register and qualify the
securities covered by such registration statement under
such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required
in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter of such offering;
(f) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act
or the happening of any event as a result of which the
prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then
existing;
(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on
which similar securities issued by the Company are then
listed;
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP
number for all such
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Registrable Securities, in each case not later than the
effective date of such registration;
(i) furnish, if required by the underwriters or pursuant to an
underwriting agreement, on the date that such Registrable
Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1,
if such securities are being sold through underwriters,
(i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such
registration, in form and substance as is customarily
given to underwriters in an underwritten public offering,
addressed to the underwriters and (ii) a letter dated such
date, from the independent certified public accountants of
the Company, in form and substance as is customarily given
by independent certified public accountants to
underwriters in an underwritten public offering, addressed
to the underwriters; and
(j) if required by the underwriters or pursuant to an
underwriting agreement, the Company shall make itself
available for road shows and due diligence in such a
manner as is customarily given to underwriters in an
underwritten public offering.
1.6 Information From Holder. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. All expenses (other than any selling
Holder's pro rata share of underwriting discounts, commissions,
out-of-pocket expenses of selling Holder or Holders and fees and
costs of counsel for the selling Holder or Holders) incurred in
connection with registrations, filings or qualifications pursuant
to Sections 1.2, 1.3 and 1,4, including (without limitation) all
registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the
Company shall be borne by the Company. Notwithstanding the
foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating
Holders shall bear such expenses pro rata based upon the number
of Registrable Securities that were to be requested in the
withdrawn registration), unless, in the case of a registration
requested under Section 1.2, the Holders of a majority of the
Registrable Securities agree to forfeit
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their right to one demand registration pursuant to Section 1.2,
provided, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known
to the Holders at the time of their request and have withdrawn
the request with reasonable promptness following disclosure by
the Company of such material adverse change, then the Holders
shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.2.
1.8 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Section 1.
1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners or officers,
directors and stockholders of each Holder, legal counsel
and accountants for each Holder, any underwriter (as
defined in the Act) for such Holder and each person, if
any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or any
state securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following
statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such
registration statement, including any preliminary
prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation
promulgated under the Act, the 1934 Act or any state
securities laws; and the Company will reimburse each such
Holder, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection l.9(a)
shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor
shall the
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Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information
furnished expressly for use in connection with such
registration by any such Holder, underwriter or
controlling person; provided further, however, that the
foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of
any Holder or underwriter, or any person controlling such
Holder or underwriter, from whom the person asserting any
such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as
then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Holder or
underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of
the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage
or liability.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the
registration statement, each person, if any, who controls
the Company within the meaning of the Act, legal counsel
and accountants for the Company, any underwriter, any
other Holder selling securities in such registration
statement and any controlling person of any such
underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act,
the 1934 Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such
Holder expressly for use in connection with such
registration; and each such Holder will reimburse any
person intended to be indemnified pursuant to this
subsection l.9(b), for any legal or other expenses
reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this subsection l.9(b) shall not
apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is
effected without the consent of the Holder (which consent
shall not be unreasonably withheld), provided that in no
event shall any indemnity under this subsection
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l.9(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be
represented without conflict by one counsel) shall have
the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between
such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the
indemnified party under this Section 1.9, but the omission
so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section
1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any
loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability,
claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the
omission to
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state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained
in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering
of Registrable Securities in a registration statement
under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times
after ninety (90) days after the effective date of the
Qualified IPO;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the
1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with
the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the
first registration statement filed by the Company), the
Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold
pursuant to Form S-3 (at any time after it so qualifies),
(ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as
may be reasonably requested in availing any Holder of any
rule or regulation of the SEC that permits the selling of
any such securities without registration or pursuant to
such form.
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1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this
Section 1 may be assigned (but only with all related obligations)
by a Holder to a transferee or assignee of such securities,
provided: (a) the transferee acquires 100% of the Registrable
Securities owned or held by the transferring Holder on the day of
transfer; (b) the Transferee is not eligible to sell the shares
pursuant to any provisions of Rule 144(k) of the Act; (c) the
Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which
such registration rights are being assigned; (d) such transferee
or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without
limitation the provisions of Section 1.13 below; and (e) such
assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
1.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
during the period of duration specified by the Company and an
underwriter of common stock or other securities of the Company,
following the effective date of a registration statement of the
Company filed under the Act in connection with an underwritten
offering, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such
period except Common Stock included in such registration;
provided, however, that:
(a) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements; and
(b) such market stand-off time period shall not exceed 180
days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this Section
1.12 shall not apply to a registration relating solely to employee benefit plans
on Form S-l or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating
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solely to a Commission Rule 145 transaction on Form S-14 or Form S-15 or similar
forms which may be promulgated in the future.
1.13 Damages. The Company recognizes and agrees that the holder of
Registrable Securities will not have an adequate remedy if the
Company fails to comply with this Section 1 and that damages may
not be readily ascertainable, and the Company expressly agrees
that, in the event of such failure, it shall not oppose an
application by the holder of Registrable Securities or any other
person entitled to the benefits of this Section 1 requiring
specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach
of this Section 1.
1.14 Conflict. In the event of a conflict between the provisions of
this Section 1 and an underwriting agreement entered into by the
Company and the holder(s) of Registrable Securities included in a
registration pursuant to this Section 1, the provisions of such
underwriting agreement shall control.
1.15 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 1 after five
(5) years following the consummation of the Qualified IPO or, as
to any Holder, such earlier time at which all Registrable
Securities held by such Holder (and any affiliate of the Holder
with whom such Holder must aggregate its sales under Rule 144)
can be sold in any three (3)-month period without registration in
compliance with Rule 144 of the Act.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
CombiMatrix, Acacia, and each Investor owning shares constituting
at least 20% of the Registrable Securities:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the
Company, an income statement for such fiscal year, a
balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a
statement of cash flows for such year, such year-end
financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by
the Company;
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(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, an unaudited
income statement, statement of cash flows for such fiscal
quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(c) with respect to the financial statements called for in
subsections (a) and (b) of this Section 2.1, an instrument
executed by the Chief Financial Officer or President of
the Company certifying that such financials were prepared
in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of
footnotes that may be required by GAAP) and fairly present
the financial condition of the Company and its results of
operation for the period specified, subject to year-end
audit adjustment; and
(d) budgets of the Company prior to the commencement of a new
fiscal year.
2.2 Termination of Information Covenants. The covenants set forth in
Section 2.1 shall terminate as to Investors and be of no further
force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting
requirements of Sections 13 or 15(d) of the 1934 Act, whichever
event shall first occur.
2.3 Right of First Offer. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each
Investor a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined).
Subject to the exclusions identified in (i) and (ii) above, each time
the Company proposes to offer any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("Shares"), the
Company shall first make an offering of Shares to each Investor in accordance
with the following provisions:
(a) The Company shall mail a notice by certified mail (a "Sale
Notice") to the Investors stating (i) its bona fide
intention to offer such Shares, (ii) the number of such
Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
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(b) By written notification received by the Company within 15
calendar days of the mailing of the Sale Notice, the
Investor may elect to purchase or obtain, at the price and
on the terms specified in the Sale Notice, up to that
portion of such Shares which equals the proportion that
the number of shares of Common Stock issued and held, or
Common Stock Equivalents then held, by such Investor bears
to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities).
The Company shall promptly mail a written notice by
certified mail to each Investor which purchases all the
shares available to it ("Fully-Exercising Investor") of
any other Investor's failure to do likewise. During the
ten-day period commencing after such notice is mailed,
each Fully-Exercising Investor shall be entitled to obtain
that portion of the Shares for which Investors were
entitled to subscribe but which were not subscribed for by
the Investors which is equal to the proportion that the
number of shares of Common Stock issued and held, or
issuable upon conversion of Common Stock Equivalents then
held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock or Common Stock
Equivalents issued and held, by all Fully-Exercising
Investors who wish to purchase some of the unsubscribed
shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.3(b) are not elected to be
obtained as provided in subsection 2.3(b) hereof, the
Company may, during the 45 day period following the
expiration of the period provided in subsection 2.3(b)
hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than those
specified in the Sale Notice. If the Company does not
enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated
within 45 days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such
Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.
(d) The right of first offer in this Section 2.3 shall not be
applicable to Shares of Common Stock issued or issuable:
(i) upon conversion of any preferred stock of the
Company;
(ii) pursuant to the acquisition of another corporation
or other entity by the Company by merger, purchase
of substantially all of the assets, or other
reorganization approved by the Board of Directors;
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(iii) to employees, officers, directors, consultants, or
other persons performing services for the Company
pursuant to any stock offering, plan, or
arrangement approved by the Board of Directors;
(iv) to financial institutions or equipment lessors in
connection with the extension of credit to the
Company or in connection with the lease of
equipment approved by the Board of Directors but
not in the aggregate exceeding 5% of the Company's
fully diluted equity provided that in no event
issued for purposes of equity financing;
(v) to unaffiliated third parties in connection with
participation in strategic bona fide alliances or
other corporate partner transactions with the
Company approved by the Board of Directors; or
(vi) pursuant to the acquisition or licenses of
technology, software, or other intellectual
property rights approved by the Board of Directors.
(e) The right of first offer set forth in this Section 2.3 may
not be assigned or transferred.
(f) The right of first offer set forth in this Section 2.3
shall terminate upon the completion of a Qualified IPO as
defined in Section 1.
2.4 Vesting of Employee Stock and Options. Unless the Board of
Directors of the Company determines otherwise, all Common Stock
and options to acquire Common Stock granted to employees of the
Company after the date of this Agreement shall have a vesting
schedule as follows: 12.5% shall vest at the end of the six month
period following full-time employment or the date of the grant,
which ever is later, and the remaining 87.5% shall vest at a rate
of 1/10th per quarter thereafter during the employee's full-time
employment.
3. Voting.
3.1 Board Composition. During the term of this Agreement and subject
to Section 3.6 hereof and the Company's Certificate of
Incorporation (the "Certificate of Incorporation") and the
relevant sections of the Company's Bylaws (if any), each Investor
agrees to vote all Common Stock Equivalents now or hereafter
directly or indirectly acquired (of record or beneficially) by
the Investors, in such manner as may be necessary to elect (and
maintain in office) as members of the Company's Board of
Directors, the following individuals:
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(a) three (3) directors designated by Acacia (each such
director, an "Acacia Designee"); and
(b) two (2) directors designated by CombiMatrix (each such
director, a "CombiMatrix Designee").
For purposes of this Agreement: (i) any individual who is designated for
election to the Company's Board of Directors pursuant to the foregoing
provisions of this Section 3.1 is hereinafter referred to as a "Board Designee";
and (ii) any individual, entity, or group of individuals and/or entities who has
the right to designate one or more Board Designees for election the Company's
Board of Directors pursuant to the foregoing provisions of this Section 3.1 is
hereinafter referred to as a "Designator" or as "Designators", as applicable.
3.2 Board Members. The initial Acacia Designees shall be
[______________], [_____________] and [_____________], the
initial CombiMatrix Designees shall be [______________] and
[______________].
3.3 Changes in Board Designees. From time to time during the term of
this Agreement, a Designator or Designators shall, in their sole
discretion, have the sole right to:
(a) elect to remove from the Company's Board of Directors any
incumbent Board Designee who occupies a Board seat for
which such Designator or Designators are entitled to
designate the Board Designee under Section 3.1; and/or
(b) designate a new Board Designee for election to a Board
seat for which such Designator or Designators are entitled
to designate the Board Designee under Section 3.1 (whether
to replace a prior Board Designee or to fill a vacancy in
such Board seat); provided, that, such removal and/or
designation of a Board Designee is approved in a writing
signed by Designator or Designators who are entitled to
designate such Board Designee under Section 3.1, in which
case such election to remove a Board Designee and/or elect
a new Board Designee will be binding on all such
Designators who are entitled to designate such Board
Designee.
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3.4 Further Assurances. The Company agrees not to vote any shares of
Company capital stock, or to take any other actions, that would
in any manner defeat, impair, be inconsistent with or adversely
affect the stated intentions of the parties under Section 3 of
this Agreement.
3.5 Term. The provisions of this Section 3 shall commence upon the
Effective Date and shall terminate upon the first to occur of the
following:
(a) Written agreement of the Investors; or
(b) Immediately prior to the closing of a Qualified IPO.
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of
the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 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 entered into and to be performed
entirely within Delaware.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
4.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery to the
party to be notified or upon delivery by confirmed facsimile
transmission, nationally recognized overnight courier service, or
upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and 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.
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4.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which
such party may be entitled.
4.7 Entire Agreement: Amendments and Waivers. This Agreement
(including schedules or exhibits hereto, if any) constitutes the
full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof and supercedes any
prior oral or written understanding. Any term of this Agreement
may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written
consent of the Company and the holders of at least seventy five
percent (75%) of the Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities each
future holder of all such Registrable Securities, and the
Company.
4.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
4.9 Aggregation of Stock. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any
rights under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOXCO., a _________ corporation
By:
------------------------------------
Name:
Title:
INVESTORS:
ACACIA RESEARCH CORPORATION, a Delaware
corporation
By:
------------------------------------
Name:
Title:
COMBIMATRIX CORPORATION, a Delaware
corporation
By:
------------------------------------
Name:
Title:
