<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______)*
Hyseq, Inc.
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(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
449163 30 2
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(CUSIP Number)
William B. Sawch, Esq.
The Perkin-Elmer Corporation
761 Main Avenue
Norwalk, CT 06859-0001
(203) 761-2900
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
August 13, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [_]
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities and Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
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CUSIP NO. 449163 30 2 Page 2 of 8 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Perkin - Elmer Corporation
06-0490270
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*--N/A
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
WC
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CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5 N/A
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
NY
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SOLE VOTING POWER
7
NUMBER OF 766,921 Shares
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
N/A
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 766,921 Shares
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
N/A
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
766,921 Shares
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
N/A [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.25%
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TYPE OF REPORTING PERSON*
14
CO
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<PAGE>
Item 1. Security and Issuer
The class of equity securities to which this Schedule 13D relates is the
Common Stock, par value $0.001, (the "Common Stock") of Hyseq, Inc., a Nevada
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 670 Almanor, Sunnyvale, California 94086.
Item 2. Identity and Background
This Schedule 13D is being filed by THE PERKIN - ELMER CORPORATION (herein,
also referred to as the "Reporting Person" or "Perkin - Elmer"), a New York
corporation. The address of the principal executive office of the Reporting
Person is 761 Main Avenue, Norwalk, CT 06859 - 0001.
Together with its consolidated subsidiaries, The Perkin - Elmer Corporation
develops, manufactures, and sells products in the analytical instruments and
life science markets.
The name, principal residence or business address, present principal
occupation and citizenship of each executive officer and director of the
Reporting Person are set forth on Schedule 1 hereto, which is incorporated
herein by reference.
During the past five years, neither the Reporting Person nor, to the
knowledge of the Reporting Person, any of its executive officers or directors
has been convicted in any criminal proceeding (excluding traffic violations or
similar misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
is or was subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Considerations
The amount of funds used to purchase the 766,921 shares of Common Stock
reported as beneficially owned herein was $10,000,000, all of which was provided
from Reporting Person's working capital.
Item 4. Purpose of Transaction
The shares of Common Stock purchased by Perkin-Elmer have been acquired for
investment purposes. Neither the Reporting Person nor, to the knowledge of the
Reporting Person, any of its executive officers or directors, has any present
plans or intentions which would result in or relate to any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Perkin-
Elmer may, in the future, make additional purchases of Common Stock either in
the open market or in private transactions depending on Perkin-Elmer's
evaluation of the Issuer's business, prospects and financial condition, market
for the Common Stock, other opportunities available to Perkin-Elmer, prospects
for Perkin-Elmer's own business, general
Page 3 of 8
<PAGE>
economic conditions, money and stock market conditions and other future
developments. However, Perkin-Elmer has no present intention to acquire any
additional shares of Common Stock. Depending on the same factors, Perkin-Elmer
may decide to sell all or part of its investment in the Common Stock, although
it has no present intention to do so.
Item 5. Interest in Securities of the Issuer:
(a) The Reporting Person beneficially owns 766,921 shares of Common Stock.
Based upon information contained in the most recently available filing by the
Issuer with the Securities and Exchange Commission, such shares constitute
approximately 6.25% of the outstanding shares of Common Stock.
(b) The Reporting Person has sole power to vote or to direct the vote, and
sole power to dispose or to direct the disposition, of the shares referenced in
Item 5(a).
(c) All transactions in the Common Stock by Perkin-Elmer that were
effected during the past 60 days are as follows: (i) on June 19, 1997, Perkin-
Elmer acquired 175,070 shares of Series B Convertible Preferred Stock (which
converted automatically into 396,825 shares of Common Stock upon completion of
the Issuer's Initial Public Offering on August 13, 1997, at a price equivalent
to $12.60 per share) pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement"); and (ii) on August 13, 1997, the Reporting Person purchased 370,096
shares in a private placement pursuant to the Stock Purchase Agreement at a
price of $13.51 per share. To the best knowledge of Perkin-Elmer, none of its
executive officers or directors has effected any transactions in the Common
Stock during the past 60 days.
(d) No person other than the Reporting Person has the right to receive or
the power to direct the receipt of dividends from, or the proceeds of sale of,
the shares of Common Stock beneficially owned by the Reporting Person.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
On May 28, 1997, Perkin-Elmer and the Issuer executed the Stock Purchase
Agreement pursuant to which Perkin-Elmer agreed to purchase 175,070 shares of
Series B Convertible Preferred Stock (which converted automatically into 396,825
shares of Common Stock upon completion of the Issuer's Initial Public Offering)
on or before June 20, 1997 and additional shares having an aggregate value of
$5 million on the earlier to occur of the Issuer's initial public offering or
December 2, 1997. The Issuer completed its initial public offering on August
13, 1997, the date on which Perkin-Elmer purchased the additional 370,096 shares
of Common Stock in a private placement. In connection therewith, Perkin-Elmer
executed a lock-up agreement (the "Lock-Up Agreement") pursuant to which it
agreed, subject to certain exceptions, not to transfer or dispose of, and not to
enter into agreements transfering the economic risk of, Common Stock during the
180 day period after the date of the final prospectus (which was August 7, 1997)
for the initial public offering without the prior written consent of Lehman
Brothers Inc.
Page 4 of 8
<PAGE>
Item 7. Material to Be Filed as Exhibits
The shares purchased pursuant to the Stock Purchase Agreement, which is
included herein as Exhibit 1 and is incorporated herein by this reference, are
the subject of a Registration Rights Agreement pursuant to which Perkin-Elmer
may require that the Issuer register its securities on or before August 13,
2002. A copy of the Registration Rights Agreement is included herein as Exhibit
2 and is incorporated herein by this reference. A copy of the Lock-Up Agreement
is included herein as Exhibit 3 and is incorporated herein by this reference.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
THE PERKIN - ELMER CORPORATION
Dated: August 20, 1997 By: /s/ Peter Barrett
----------------------------------
Signature
Peter Barrett, Vice President
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Name/Title
Page 5 of 8
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SCHEDULE 1
----------
The following table sets forth the name, residence or business address,
present principal occupation or employment of each of the executive officers and
directors of Perkin-Elmer. Unless otherwise indicated, the address of each
person listed below is the business address of Perkin-Elmer, 761 Main Avenue,
Norwalk, Connecticut 06859-0001, and, unless otherwise indicated, each person
listed below is a citizen of the United States of America.
DIRECTORS
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Mr. Joseph F. Abely, Jr.
Retired Chairman and
Chief Executive Officer
Sea-Land Corporation
1210 Corbin Street
Elizabeth, NJ 07207
Mr. Richard H. Ayers
Retired Chairman and
Chief Executive Officer
The Stanley Works
114 Old Mill Road
Avon, CT 06001
Mr. Jean-Luc Belingard
Director General
F. Hoffmann-LaRoche Ltd.
Roche Diagnostics Systems
Postfach - Grenzacherstrasse 124
4002 Basel, Switzerland
Mr. Belingard is a French citizen
Dr. Robert H. Hayes
Professor
Harvard Business School
Morgan Hall T-35
Boston, MA 02163
Mr. Donald R. Melville
4 Paul Revere Road
Worcester, MA 01609
Page 6 of 8
<PAGE>
Mr. Burnell R. Roberts
Chairman
Sweetheart Holdings Inc.
2340 Kettering Tower
Dayton, OH 45423
Mr. Georges C. St. Laurent, Jr.
Former Chief Executive Officer
Western Bank
12655 S.W. Center Street, Suite 500
Beaverton, OR 97005
Dr. Carolyn W. Slayman
Deputy Dean for Academic and Scientific Affairs
Yale University School of Medicine
333 Cedar Street
New Haven, CT 06520-8000
Mr. Orin R. Smith
Chairman and Chief Executive Officer
Engelhard Corporation
101 Wood Avenue
Iselin, NJ 08830-0770
Mr. Richard F. Tucker
Retired Vice Chairman
Mobil Corporation
11 Over Rock Lane
Westport, CT 06880
Mr. Tony L. White
Chairman, President and
Chief Executive Officer
The Perkin-Elmer Corporation
EXECUTIVE OFFICERS
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Mr. Tony L. White
Chairman, President and
Chief Executive Officer
The Perkin-Elmer Corporation
Page 7 of 8
<PAGE>
Mr. Manuel A. Baez
Senior Vice President and
President, Analytical Instruments
The Perkin-Elmer Corporation
Dr. Peter Barrett
Vice President
The Perkin-Elmer Corporation
Mr. Ugo D. DeBlasi
Corporate Controller
The Perkin-Elmer Corporation
Dr. Michael W. Hunkapiller
Vice President
The Perkin-Elmer Corporation
Applied Biosystems Division
850 Lincoln Centre Drive
Foster City, CA 94404
Mr. Stephen O. Jaeger
Vice President,
Chief Financial Officer
and Treasurer
The Perkin-Elmer Corporation
Mr. Joseph E. Malandrakis
Vice President
The Perkin-Elmer Corporation
Mr. Michael J. McPartland
Vice President
The Perkin-Elmer Corporation
Dr. Mark C. Rogers
Senior Vice President,
Corporate Development and
Chief Technology Officer
The Perkin-Elmer Corporation
William B. Sawch, Esq.
Vice President, General Counsel
and Secretary
The Perkin-Elmer Corporation
Page 8 of 8
<PAGE>
EXHIBIT 1
HYSEQ, INC.
STOCK PURCHASE AGREEMENT
FOR
SERIES B CONVERTIBLE PREFERRED STOCK
MAY 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. SALE AND PURCHASE OF STOCK........................................................................... 1
--------------------------
1.1.Sale 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
2.3.No Conflict with Law or Documents................................................................... 3
2.4.Capital 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
2.10.Financial Statements............................................................................... 5
2.11.Tax 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
2.20.Insurance.......................................................................................... 7
2.21.Labor Agreements and Actions....................................................................... 8
2.22.Loans and Advances................................................................................. 8
2.23.Employees.......................................................................................... 8
2.24.Environmental Protection........................................................................... 8
3. PURCHASERS' REPRESENTATIONS AND WARRANTIES........................................................... 9
3.1.Authority........................................................................................... 9
3.2.Place 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
4.5.No Proceeding or Litigation......................................................................... 11
4.6.Board Approval...................................................................................... 11
</TABLE>
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<TABLE>
<S> <C>
4.7.Additional Agreements............................................................................... 11
5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.................................................... 12
5.1.Representations and Warranties...................................................................... 12
5.2.Performance......................................................................................... 12
5.3.No Proceeding or Litigation......................................................................... 12
6. COVENANTS OF THE COMPANY............................................................................. 12
6.1.Use of Proceeds..................................................................................... 12
6.2.Properties, Business, Insurance..................................................................... 12
6.3.Financial 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
6.8.Trust 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
</TABLE>
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<PAGE>
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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<PAGE>
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
Perkin-Elmer 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
---------------------------------------------------------
(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.
--------
(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.
<PAGE>
(c) Each Closing shall take place at the offices of Sachnoff & Weaver,
Ltd., 30 South Wacker Drive, Suite 2900, Chicago, Illinois 60606. 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
----------------------------------------------------
Company. The Company is a corporation duly organized, validly existing and in
- -------
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
-------------
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.
2
<PAGE>
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
-------------
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
----------------------------
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
3
<PAGE>
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
-----------------------------------------------------
and By-Laws. The copy of the Company's Articles, attached hereto as Exhibit A,
- -----------
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
------------
"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
--------------------
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.
--------------------
(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
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(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
-----------
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
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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
------------------------------------------
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,
-------
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
----------
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
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SECTION 2.19. Changes. From March 31, 1997, until the date hereof,
-------
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
---------
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
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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
------------------------
its business, and, to the knowledge of the Company, the real property that the
Company leases at 670 Almanor Avenue, Sunnyvale, California 94086 (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
<PAGE>
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
<PAGE>
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 Sachnoff & Weaver, 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
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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
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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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 1933 Act. 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 1933
Act) 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
<PAGE>
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
-------------
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
<PAGE>
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 670 Almanor Avenue, Sunnyvale, California 94086 to the
attention of Lewis S. Gruber, President and Chief Executive Officer, with a copy
to Sachnoff & Weaver, Ltd., 30 South Wacker Drive, Suite 2900, Chicago, Illinois
60606 to the attention of Misty S. Gruber.
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
---------
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
----------------------------------
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
------------
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
<PAGE>
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/ PETER BARRETT By /s/ LEWIS S. GRUBER
- ------------------------------------- -------------------------------------
Name: Peter Barrett Name: Lewis S. Gruber
Title: Title: President and Chief Executive
Address: Officer
Address: 670 Almanor Avenue
Sunnyvale, California 94086
THE WEST COAST PURCHASER ATTEST:
- ------------------------
By: /s/ LEWIS T. WILLIAMS By: /s/ JAMES N. FLETCHER
- ------------------------------------- ------------------------------------
Name: Lewis T. Williams, M.D., Ph.D. James N. Fletcher, Secretary
Title: Senior Vice President
Address: 4560 Horton Street
Emeryville, CA 94608
21
<PAGE>
Schedule 1.1(b)
---------------
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.
<PAGE>
Schedule 1.2
------------
Closings
--------
East Coast Purchaser
- --------------------
First Closing. The First Closing shall take place on such date as is
-------------
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,
--------------
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
-------------
determined by mutual agreement of the parties; provided, however, that such date
-------- -------
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.
<PAGE>
Exhibit: 2
REGISTRATION RIGHTS AGREEMENT
HYSEQ, INC.
This Registration Rights Agreement (the "Agreement") is made and entered
into as of the 19th day of June, 1997, by and between Hyseq, Inc., a Nevada
corporation (the "Company"), and The Perkin-Elmer Corporation (the "Holder").
W I T N E S S E T H:
WHEREAS, the Holder has agreed to purchase shares of shares of the
Company's Series B Preferred Stock, par value $.001 per share (the "Preferred
Stock" or "Shares"), pursuant to the Stock Purchase Agreement dated as of May
28, 1997 (the "Purchase Agreement"); and
WHEREAS, as additional consideration for the purchase of the Shares by each
Holder, the Company desires to grant to each such Holder registration rights
with respect to the Shares;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
-----------
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"1933 Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (i) the common stock issuable
or issued upon conversion of the Preferred Stock (the "Common Stock") and (ii)
any common stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Preferred Stock or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such person's
registration rights are not assigned; provided, however, that as to any
particular securities that are included in Registrable Securities, such
securities shall cease to be Registrable Securities when (i) such shares shall
have been sold to the public pursuant to a registered public offering or (ii)
such securities shall have been sold pursuant to Rule 144 (or any successor
provision) under the 1933 Act.
(c) The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are exercisable or convertible into, Registrable
Securities; and
(d) The term "Holder" includes any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Paragraph 12 hereof.
2. Required Registration. At any time after the date which is six (6)
---------------------
months after the closing of an initial public offering of the Company's common
stock, the Holders of a majority of the total number of Registrable Securities
then outstanding may request (a "Demand") that the Company prepare and file a
registration statement under the 1933 Act covering any or all of the Registrable
Securities. In the event that the Company receives a Demand under this Paragraph
2, the Company shall, within five (5) business days of the receipt of the
Demand, give written notice of such request to all Holders of Registrable
Securities and shall file a registration statement not more than the later of
(i) thirty (30) business days after receipt of a Demand or (ii) ten (10)
business days after requisite financial statements are available for inclusion
in the registration statement, and use its best efforts to effect as soon as
practicable thereafter, the registration under the 1933 Act in accordance with
Paragraph 4 hereof of all Registrable Securities which the Holders request be
registered within twenty (20) business days after the mailing of such notice by
the Company in accordance with subparagraph 16(c). The Company shall be
obligated to register Registrable Securities pursuant to this Paragraph 2 on one
occasion only, provided, however, that such obligation shall be deemed satisfied
-----------------
only when a registration statement covering all Registrable Securities specified
in such Demand, as well as by any Holders joining in such Demand, shall have
become effective for the sale of such Registrable Securities in accordance with
the method of disposition specified by the requesting Holders, and, if such
method of disposition is a firm commitment underwritten public offering, all
such shares have been sold pursuant thereto.
Notwithstanding anything to the contrary contained herein, the Company may
not, on its own behalf or on behalf of any other stockholder(s), file a
registration statement under the 1933 Act for a public offering of its common
stock within 90 days after the effective date of a registration statement filed
under this Paragraph 2.
3. Incidental Registration. If (but without any obligation to do so, and
-----------------------
other than pursuant to Paragraph 2) the Company, at any time, proposes to
register (including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock or other securities under
the 1933 Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities to
participants in an initial public offering, a Company stock plan or a
registration on Form S-4 or any other form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
each such time, give each Holder written notice of such registration in
accordance with subparagraph 16(c) hereof. Upon the written request of each
Holder given
1
<PAGE>
within twenty (20) business days after mailing of such notice by the Company,
the Company shall use its best efforts, subject to the provisions of Paragraph
8, to cause to be registered under the Securities Act all of the Registrable
Securities that each Holder has requested to be registered; provided that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Paragraph 3 without obligation to any Holder.
4. Obligations of the Company. Whenever required under this Agreement to
--------------------------
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible (unless otherwise specified in this
Agreement):
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective until this agreement is terminated pursuant to
Paragraph 15 hereof.
(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
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders covered by such registration statement such
numbers of copies of the registration statement (including each preliminary
prospectus) and the prospectus contained therein in conformity with the
requirements of the 1933 Act, and such other documents all as they may
reasonably request in order to facilitate the disposition of such Registrable
Securities.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders thereof, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered under the 1933
Act of 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. Upon such notification, such Holders shall
immediately cease making offers of Registered Securities. The Company shall
promptly provide such Holders with revised prospectuses and, following receipt
of the revised prospectuses, such Holders shall be free to resume making offers
of the Registered Securities.
(g) If the offering is underwritten and at the request of any Holder of
Registrable Securities, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion, dated such date, of counsel representing the
Company for the purposes of such registration, addressed to the underwriters and
to such Holder, stating that such registration statement has become effective
under the 1933 Act and that (A) to the best knowledge of such counsel, no stop
order suspending the effectiveness thereof has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
1933 Act, (B) the registration statement, the related prospectus and each
amendment or supplement thereof comply as to form in all material respects with
the requirements of the 1933 Act (except that such counsel need not express any
opinion as to financial statements contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters or by
such Holder or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such Holder, stating that they are independent public
accountants within the meaning of the 1933 Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or
2
<PAGE>
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request.
(h) Use its best efforts to list the Registrable Securities covered by such
registration statement with any securities exchange or interdealer quotation
system on which the Common Stock is then listed or included for quotation.
5. Provision of Information. It shall be a condition precedent to the
------------------------
obligations of the Company to take any action pursuant to this Agreement that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be reasonably required to effect the
registration of the Registrable Securities.
6. Expenses of Required Registration. With respect to the demand
---------------------------------
registration right under Paragraph 2, expenses, other than underwriting
discounts and commissions and any nonaccountable expense allowance (attributable
to the Holders of Registrable Securities on a pro rata basis with securities to
be registered by the Company and any other selling stockholders) of any
underwriters, incurred in connection with registration and fees and expenses of
counsel to the selling Holders, if any, 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;
provided that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Paragraph 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); provided, however, that if, at the time of
such withdrawal, such Holders have learned of a material adverse change in the
condition, business or prospects of the Company taken as a whole from that known
to such Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Paragraph 2.
7. Expenses of Incidental Registration. The Company shall bear and pay
-----------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Paragraph 2 for the Holder, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the Holder selected by it, but excluding underwriting discounts
and commissions and any nonaccountable expense allowance (attributable to the
Holders of Registrable Securities on a pro rata basis with securities to be
registered by the Company and any other selling stockholders) of underwriters
relating to Registrable Securities.
8. Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares being issued by the Company, the Company shall not be
required under Paragraph 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 and then only in such quantity as will
not, in the opinion of the underwriters, 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
reasonably believe compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not jeopardize the success of the offering (the securities so included to
be apportioned such that all Registrable Securities held by the Holders shall be
included in such registration, and if this is not possible, then pro rata among
the Holders of Registrable Securities and the holders of any class or series of
securities with liquidation rights pari passu with Registrable Securities but
in any case subsequent to the holders of Series A Preferred Stock to the extent
required under their respective registration rights agreements and prior to the
holders of any other class of securities other than Registrable Securities or
any class or series of securities with liquidation rights pari passu with
Registrable Securities). For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder that is a Holder of Registrable
Securties 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 stockholder," and
any pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
9. Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
10. Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder of such Registrable Securities, the officers and directors
of each such Holder, any underwriter (as defined in the 1933 Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the Securities and Exchange Act of 1934, as
amended ("the 1934 Act"), against any losses, claims, damages or liabilities
joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
3
<PAGE>
upon any of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of 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 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law; and the Company will reimburse each Holder, officer or director,
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 subparagraph 10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder.
(b) To the extent permitted by law, each selling Holder, severally and not
jointly will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, each person, if
any, who controls the Company within the meaning of the 1933 Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities joint or several) to
which the Company or any such director, officer or controlling person may become
subject, under the 1933 Act, the 1934 Act or other federal or state law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or controlling person, other Holder,
officer, director, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subparagraph 10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no event
shall any indemnity under this subparagraph 10(b) exceed the gross proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Paragraph 10
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Paragraph 10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that any indemnified party shall have the right to retain its
own 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
actions, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Paragraph 10, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Paragraph 10.
(d) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to subparagraph 10(a) or 10(b)
but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the 1933 Act, the
1934 Act, or otherwise, then the Company (including for this purpose any
contribution made by or
4
<PAGE>
on behalf of any officer, director, employee, agent or counsel of the Company,
or any controlling person of the Company), on the one hand, and the Holders
(including for this purpose any contribution by or on behalf of an indemnified
party), on the other hand, shall contribute to the losses, liabilities, claims,
damages, and expenses to which any of them may be subject, in such proportions
as are appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Holders, on the other hand; provided, however, that if
applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Holders in
connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative benefits received by
the Company, on the one hand, and the Holders, on the other hand, shall be
deemed to be in the same proportion as the total proceeds from the offering
received by each of the Company on the one hand and the Holders, on the other
hand.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by the Holders, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and Holders agree that it would be unjust and inequitable
if the respective obligations of the Company and the Holders for contribution
were determined by pro rata or per capital allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method of allocation
that does not reflect the equitable considerations referred to in this
subparagraph 10(d). No person guilty of a fraudulent misrepresentation (within
the meaning of subparagraph 11(f) of the 1933 Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this subparagraph 10(d), each person, if any,
who controls a Holder within the meaning of Section 15 of the 1933 Act or
Section 20(a) of the 1934 Act and each officer, director, stockholder, employee,
agent and counsel of the Holders shall have the same rights of contribution as
the Holder, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act and each officer,
director, employee, agent and counsel of the Company, shall have the same rights
to contribution as the Company, subject in each case to the provisions of this
subparagraph 10(d). Anything in this subparagraph 10(d) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
subparagraph 10(d) is intended to supersede any right to contribution under the
1933 Act, the 1934 Act, or otherwise.
(e) The obligations of the Company and Holders under this Paragraph 10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
11. Efforts Under the 1934 Act. With a view to making available to the
--------------------------
Holders the benefits of Rule 144 under the 1933 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, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 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 Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company), the 1933 Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration.
5
<PAGE>
12. Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities pursuant to this Agreement may be assigned by
a Holder to a transferee or assignee of such securities; provided, in each case,
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and, such transferee or assignee shall, as a condition to such transfer, deliver
to the Company a written instrument by which such transferee or assignee agrees
to be bound by the obligations imposed on Holders of Registrable Securities
pursuant to this Agreement and provided, further, that such assignment shall be
effective only if immediately following such transfer, the disposition of such
securities by the transferee or assignee: (i) is restricted under the 1933 Act;
or (ii) is exempt from registration under the 1933 Act.
13. Market Stand-Off Agreement. Each Holder owning more than 2% of the
--------------------------
outstanding stock of the Company hereby agrees that it shall not, to the extent
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, sell or otherwise transfer or dispose (other than to
donees who agree to be similarly bound) of any Registrable Securities during a
reasonable and customary period of time, as agreed to by the Company and the
underwriters, not to exceed 180 days, following the effective date of a
registration statement of the Company filed under the 1933 Act; provided,
however, that:
(a) such agreement shall be applicable only to a registration statement of
the Company which covers shares (or securities) to be sold to the public by an
underwriter on its behalf in an initial public offering; and
(b) 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.
In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
thereof until the end of such reasonable and customary period.
14. Amendment of Registration Rights. Any provision of this Agreement may
--------------------------------
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding; provided, however, that any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
15. Termination of Registration Rights. The Company's obligations
----------------------------------
pursuant to this Agreement (other than pursuant to Paragraphs 3 and 10) shall
terminate as to any Holder of Registrable Securities on the earlier of (i) when
the Holder can remove the restrictive legend on such Holder's shares pursuant to
Rule 144(k) under the 1933 Act (or any such successor rule) or (ii) on the fifth
anniversary of the closing of the initial registered public offering of Common
Stock of the Company. The Company's obligations pursuant to Paragraph 3 hereof
shall terminate as to any Holder of Registrable Securities on the fifth
anniversary of the closing of the initial registered public offering of Common
Stock of the Company.
16. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company of its obligations
--------
under this Agreement, each Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.
(b) Agreements and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
unless such amendment, modification or supplement is in writing and signed by
the Company and the Holders of at least two thirds of the outstanding
Registrable Securities.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, or telecopies, initially to the address set forth below, and
thereafter at such other address, notice of which is given in accordance with
the provisions of this subparagraph 16(c):
6
<PAGE>
(i) if to the Company:
Lewis S. Gruber, President and CEO
Hyseq, Inc.
Almanor Avenue
Sunnyvale, California 94086
copy to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
Attention: Misty S. Gruber, Esq.
(ii) if to the Holders:
At the address set forth in the Company's Stock Register.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
(d) Successors and Assigns. Subject to Paragraph 12, this Agreement shall
----------------------
inure to the benefit of and be binding upon the successors and assigns of each
of the parties, including without limitation and without the need for an express
assignment, subsequent holders of the Registrable Shares subject to the terms
hereof.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
--------
references only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California without reference to its
conflicts of law provisions.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application hereof in any circumstance is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any such
provisions contained herein shall not be affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of this agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are not restrictions, promises
warranties or undertakings, other than those set forth or referred to herein,
concerning the registration rights granted by the Company pursuant to this
Agreement.
(j) Subsequent Registration Rights. The Company shall not grant to any
------------------------------
third party any registration rights more favorable than, or inconsistent with,
any of those contained herein so long as any of the registration rights under
this Agreement remains in effect.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
HYSEQ, INC.
By: /s/ Lewis S. Gruber
------------------------------------
Lewis S. Gruber, President and CEO
HOLDER:
THE PERKIN-ELMER CORPORATION
By: /s/ Peter Barrett
-----------------------------
Name: Peter Barrett
---------------------------
Title: Vice President
----------------------
8
<PAGE>
HYSEQ, INC.
LOCK-UP AGREEMENT
June 11, 1997
Lehman Brothers, Inc.
Morgan Stanley & Co. Incorporated
Fahnestock & Co. Inc.
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Amy E. Rees
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), propose to
enter into an Underwriting Agreement with Hyseq, Inc. (the "Company") providing
for the public offering (the "Public Offering") by the several Underwriters,
including yourselves, of common stock of the Company (the "Common Stock").
In consideration of the Underwriters' agreement to purchase and make the
Public Offering of the Company's Common Stock, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees, during the period ending one hundred eighty (180) days after the date of
the final Prospectus for the Public Offering (the "Lock-up Period"), not to (1)
offer, pledge, sell, contract to sell, engage in any short sale, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or (2) enter into any swap
or similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, otherwise than (i) as a bona fide gift or
gifts, (ii) by will or intestacy to the undersigned's immediate family or to a
trust the beneficiaries of which are exclusively the undersigned and/or a member
or members of his or her immediate family, (iii) as a distribution to limited
partners or shareholders of the undersigned, (iv) as a purchase of shares by the
undersigned on the open market or the sale of such shares, or (v) with the prior
written consent of Lehman Brothers, Inc. In addition, the undersigned agrees
that, without the prior written consent of Lehman Brothers, Inc. on behalf of
the Underwriters, it will not, during the Lock-up Period, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
The undersigned confirms that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's legal representatives,
successors and assigns. The undersigned agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of securities of the Company held by the undersigned except in
compliance with the terms and conditions of this Agreement.
This Agreement shall terminate and be of no further effect if the
Registration Statement for the Public Offering is not declared effective by the
Securities and Exchange Commission by October 31, 1997.
Very truly yours,
/s/ Peter Barrett
-------------------------------
(Signature)
Peter Barrett
-------------------------------
(Print Name if an Entity)
Vice President
-------------------------------
(Print Title if an Entity)
