NANOSPHERE, INC. NOTE PURCHASE AGREEMENT MARCH 15, 2006
THIS NOTE PURCHASE AGREEMENT (“Agreement”) is made as of March 15, 2006 by and between
Nanosphere, Inc., a Delaware corporation (the “Company”), and ▇▇▇▇▇ Investment Fund,
L.L.C., a Delaware limited liability company (the “Lender”).
WHEREAS, the Lender intends to loan One Million Two Hundred Fifty Thousand Dollars
($1,250,000) to the Company (the “Loan”);
WHEREAS, the parties intend for the Company to issue a promissory note in return for the Loan;
WHEREAS, the parties hereto wish to provide for the sale and issuance of such note in return
for the Loan;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Amount and Terms of the Note.
| 1.1 | Promissory Note. |
(a) Issuance. In return for the Loan, the Company shall sell and issue to the Lender
a promissory note in the form attached hereto as Exhibit A (the “Note”).
(b) Promissory Note. The Note shall have an initial principal balance equal to the
amount of the Loan and shall be dated as of the date the Loan is made to the Company.
1.2 Closing. The closing (the “Closing”) of the purchase of the Note in
return for the Loan shall take place at the offices of ▇▇▇▇, Gerber & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m., on March 16, 2006, or at such other
time and place as the Company and the Lender agree upon orally or in writing. At the Closing, the
Lender shall deliver the full amount of the Loan to the Company by check or wire transfer of
immediately available funds and the Company shall deliver to the Lender the Note executed by the
Company in return for the Loan made to the Company.
2. Representations and Warranties of the Company. In connection with the transactions
provided for herein, the Company hereby represents and warrants to the Lender that:
2.1 Organization, Good Standing, and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Authorization. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder, and the authorization,
issuance and delivery of the Note has been taken or will be taken prior to the Closing. This
Agreement and the Note constitute the Company’s valid and legally binding obligations, enforceable
in accordance with their terms.
3. Representations and Warranties of the Lender. In connection with the transactions
provided for herein, the Lender hereby represents and warrants to the Company that:
3.1 Authorization. This Agreement constitutes the Lender’s valid and legally binding
obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. The Lender acknowledges that this Agreement is
made with the Lender in reliance upon the Lender’s representation to the Company that the Note will
be acquired for investment for the Lender’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that the Lender has no present
intention of selling, granting any participation in, or otherwise distributing the same. By
executing this Agreement, the Lender further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell or transfer the Note. The Lender
represents that it has full power and authority to enter into this Agreement.
3.3 Disclosure of Information. The Lender acknowledges that it has received all the
information it considers necessary or appropriate for deciding whether to acquire the Note. The
Lender further represents that it has had an opportunity to ask questions and receive answers from
the Company regarding the terms and conditions of the offering of the Note.
3.4 Investment Experience. The Lender is an investor in securities of companies in
the development stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment, and has such knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of the investment in the Note. The Lender also
represents it has not been organized solely for the purpose of acquiring the Note.
3.5 Accredited Investor. The Lender is an “accredited investor” within the meaning of
Rule 501 of Regulation D of the Securities Act of 1933, as amended (the “Act”).
3.6 Restricted Securities. The Lender understands that the Note is characterized as a
“restricted security” under the federal securities laws inasmuch as it is being acquired from the
Company in a transaction not involving a public offering and that under such laws and applicable
regulations the Note may be resold without registration under the Act only in certain limited
circumstances.
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4. Miscellaneous.
4.1 [Reserved.]
4.2 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of, and be binding upon, the respective
successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
4.3 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Illinois as applied to agreements among Illinois residents, made and to be
performed entirely within the State of Illinois.
4.4 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Any signature delivered by a party by facsimile transmission shall be deemed to be an
original signature hereto.
4.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
4.6 Notices. All notices and other communications required or permitted hereunder
shall be in writing and may be delivered in person, by telecopy with written confirmation,
overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed as follows:
If to the Company:
Nanosphere, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Lender:
▇▇▇▇▇ Investment Fund, L.L.C.
Two ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Two ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Each such notice or other communication shall for all purposes under this Agreement be treated
as effective or having been given when delivered if delivered personally or, if sent by mail, at
the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid, or, if sent by telecopier with written confirmation, at the earlier of (a) twenty-four
(24) hours after confirmation of transmission by the sending telecopier machine or (b) delivery of
written confirmation.
4.7 Finder’s Fee. Each party represents that it neither is nor will be obligated for
any finder’s fee or commission in connection with this transaction. The Lender agrees to indemnify
and to hold harmless the Company from any liability for any commission or compensation in the
nature of a finder’s fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Lender or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold harmless the Lender from
any liability for any commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability) for which the Company or any of
its officers, employees, or representatives is responsible.
4.8 Transaction Expenses. The Company shall pay, and shall hold the Lender harmless
against liability for the payment of, the reasonable fees and expenses (including legal fees and
expenses) incurred by or on behalf of the Lender in connection with (a) the negotiation and
execution of this Agreement and the other documents contemplated hereby and the consummation of the
transactions contemplated hereby, (b) any amendments or waivers in respect of this Agreement or
such other documents, and (c) the successful enforcement of the rights granted under this Agreement
or the other documents contemplated hereby.
4.9 Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
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4.10 U.S. Dollars. All references in this Agreement to “dollars,”, “U.S.$” and “$”
are to United States dollars.
4.11 [Reserved.]
4.12 Entire Agreement; Amendments and Waivers. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of the Company and
the Lender. Any waiver or amendment effected in accordance with this Section shall be binding upon
each holder of any securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder of all such
securities and the Company.
4.13 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
4.14 [Reserved.]
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| THE COMPANY: | ||||||
| NANOSPHERE, INC. | ||||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||||
| Name: | ||||||
| Title: | President and Chief Executive Officer | |||||
| THE LENDER: | ||||||
| ▇▇▇▇▇ INVESTMENT FUND, L.L.C. | ||||||
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇ | |||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Note Purchase Agreement]
Exhibit
A
NANOSPHERE, INC.
UNSECURED PROMISSORY NOTE
UNSECURED PROMISSORY NOTE
| $1,250,000.00 | Chicago, Illinois March 16, 2006 |
FOR VALUE
RECEIVED, NANOSPHERE, INC., a Delaware corporation (the “Company”) hereby
absolutely and unconditionally promises to pay to the order of ▇▇▇▇▇ Investment Fund, L.L.C. or its
assigns (the “Lender,” which term shall include the holder, from time to time, of this
Note), the principal amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) in
legal tender of the United States, together with interest (computed on the basis of a 360-day year
of twelve 30-day months for actual days elapsed) on such principal amount outstanding from time to
time at the rate of four and fifty-eight one-hundredths percent (4.58%) per annum. After the
earlier of the Maturity Date (hereinafter defined) or the occurrence of an Event of Default
(hereinafter defined), the total unpaid indebtedness hereunder shall bear interest at a rate equal
to fourteen percent (14%) per annum.
1. Repayments and Prepayments.
(a) Subject to Section 2(a) or 4(a) hereof, all principal, accrued interest and all other
amounts owing under this Note shall be due and payable on the earlier of (a) the closing of the
Company’s first equity financing after the issuance of this Note which results in gross proceeds to
the Company of at least Twenty Five Million Dollars ($25,000,000) (excluding amounts received by
the Company on conversion of any promissory notes or exercise of any warrants and excluding cash
investments by existing Company investors) or (b) April 30, 2006 (the “Maturity Date”).
(b) All payments received under this Note shall be applied first to costs, expenses and other
amounts (other than principal and interest), then to accrued interest on the date of payment and
then to the outstanding principal balance of this Note.
(c) All payments of principal and interest shall be made to the holder of this Note not later
than 1:00 p.m. (Chicago time) on the date and at the place of payment designated by the holder
hereof as aforesaid, and any payment received on such date but after such hour shall be deemed to
have been paid to and received by the holder hereof on the next succeeding business day. If the
date on which any payment is required to be made pursuant to this Note is not a business day, then
such payment shall be due and payable on the next succeeding date which is not a Saturday, Sunday
or legal holiday, and such extension of time shall be included in computing interest. All payments
hereunder shall be made without set-off, counterclaim or reduction of any kind or nature
whatsoever.
2. Events of Default.
(a) Upon the occurrence of any Event of Default (as defined below), the entire unpaid
principal balance of this Note and all of the unpaid interest accrued thereon and all other
amounts owing hereunder shall be immediately due and payable and the Lender shall have all
legal and equitable rights of holders of unsecured debt instruments, whether at law, in equity or
under this Note. For purposes of this Note, the following events shall each constitute an
“Event
of Default”: (i) failure to pay any amount owing by the Company hereunder when due
and payable; (ii) the initiation of any bankruptcy, insolvency, moratorium, receivership or
reorganization by or against the Company, or a general assignment of assets by the Company for the
benefit of creditors; (iii) the material breach of any representation or warranty of the Company
contained in this Note or in that certain Note Purchase Agreement, dated as March 15, 2006, by and
between the Lender and the Company (the “Note Purchase Agreement”), at the time when such
representation or warranty is made; (iv) the breach of any of the covenants set forth in this Note
or the Note Purchase Agreement; or (v) any of the Company’s indebtedness for borrowed money (or any
guaranty by the Company thereof) is accelerated as a result of a default or breach of or under any
agreement for such borrowed money, including but not limited to loan, credit or reimbursement
agreements, or any default shall occur thereunder which entitles the holder thereof to so
accelerate such indebtedness, or material breach under any real property lease agreement or capital
equipment lease agreement by which the Company is bound or obligated.
(b) No remedy herein conferred upon the Lender is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and in addition to every other remedy hereunder, now
or hereafter existing at law or in equity or otherwise.
3. Notices.
(a) All notices, reports and other communications required or permitted hereunder shall be in
writing and may be delivered in person, by telecopy with written confirmation, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (i) if to the Lender, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, and (ii) if to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer (or such other address as the
Company shall have furnished the Lender in writing).
(b) Each such notice, report or other communication shall for all purposes under this Note be
treated as effective or having been given when delivered if delivered personally or, if sent by
mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in
a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid, or, if sent by telecopier with written confirmation, at the earlier of (i)
twenty-four (24) hours after confirmation of transmission by the sending telecopier machine or (ii)
delivery of written confirmation.
4. Miscellaneous.
(a) With the written consent of the Lender, the obligations of the Company and the rights of
the Lender under this Note may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely). Neither this Note nor any provisions hereof may be changed, waived, discharged
or terminated orally, but only by a signed statement in writing executed by the Lender.
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(b) No failure or delay by the Lender to exercise any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude
any other right, power or privilege. The provisions of this Note and the Note Purchase Agreement
are severable and if any one provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, such invalidity or unenforceability shall affect only such provision in
such jurisdiction. This Note expresses the entire understanding of the parties with respect to the
transactions contemplated hereby. The Company and every endorser and guarantor of this Note,
regardless of the time, order or place of signing hereby, waives presentment, demand, protest,
diligence of collection and notice of every kind, and assents to any extension or postponement of
the time for payment or any other indulgence, to any substitution, exchange or release of
collateral, and to the addition or release of any other party or person primarily or secondarily
liable.
(c) If Lender retains an attorney for collection, restructuring or any “work-out” of this
Note, or if any suit or proceeding is brought for the recovery of all, or any part of, or for
protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and
expenses of the suit or proceeding, or any appeal thereof, incurred by the Lender, including
without limitation, reasonable attorneys’ fees.
(d) This Note shall for all purposes be governed by, and construed in accordance with the laws
of the State of Illinois (without reference to conflict of laws), and the Company consents to the
exclusive jurisdiction of the state and federal courts located in the State of Illinois, and waives
any argument that such forum is not convenient.
(e) This Note shall be binding upon the Company’s successors and assigns, and shall inure to
the benefit of the Lender’s successors and assigns. This Note may not be assigned by the Company.
(f) In no event shall the interest rate and other charges under this Note exceed the highest
rate permissible under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that a court determines that Lender has
received interest and other charges under this Note in excess of the highest permissible rate
applicable hereto, such excess shall be deemed received on account of, and shall automatically be
applied to reduce, the outstanding principal amount hereunder and the provisions hereof shall be
deemed amended to provide for the highest permissible rate. If there is no outstanding principal
amount under this Note, Lender shall refund such excess to the Company.
(g) Time is of the essence with respect to the performance of the obligations of the Company
under this Note.
(h) EACH OF THE COMPANY AND THE LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.
[Signature page follows.]
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IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly authorized
officer to take effect as of the date first hereinabove written.
| NANOSPHERE, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | President and Chief Executive Officer | |||||
[Signature Page to Unsecured Promissory Note]