EXHIBIT 10.1
LEUCHEMIX, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (this "AGREEMENT") is
made as of the 1st day of October, 2004, by and between Leuchemix, Inc., a
California corporation (the "COMPANY"), and Combimatrix Corporation, a Delaware
corporation (the "INVESTOR").
Whereas, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of the Company's Series A Preferred
Stock on the terms and conditions set forth in this Agreement;
Now, therefore, the parties hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
Subject to the terms and conditions of this Agreement, Investor agrees
to purchase and the Company agrees to sell to Investor at the Initial Closing
(as defined below) and each Subsequent Closing (as defined below) the number of
shares (the "INITIAL SHARES" and the "SUBSEQUENT SHARES," respectively, and
collectively, the "SHARES") of Series A Preferred Stock (the "SERIES A PREFERRED
STOCK"), set forth on SCHEDULE 1 hereto for a purchase price of US$1.2749 per
share. The Series A Preferred Stock shall contain the terms set forth in the
Amended and Restated Articles of Incorporation of the Company (the "AMENDED
ARTICLES"), being filed on or before the Initial Closing in the form attached
hereto as EXHIBIT A. Each Share will be convertible into one share of Common
Stock (the "COMMON STOCK") of the Company, as further set out in the Amended
Articles (subject to adjustment pursuant to the provisions of the Amended
Articles).
1.2 CLOSING DATES.
The purchase and sale of the Initial Shares (the "INITIAL CLOSING")
shall be held at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., Pacific Standard Time, on
October 1st, 2004, or at such other time and place as the Company and Investor
shall mutually agree, either orally or in writing. The purchases and sales of
the Subsequent Shares (the "SUBSEQUENT CLOSING") shall be held at the offices of
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, at 10:00 a.m., Pacific Standard Time, on a mutually agreeable date that
is within the first five business days of the applicable period indicated on
SCHEDULE 1 hereto, or at such other time and place as the Company and Investor
shall mutually agree, either orally or in writing. The Initial Closing and each
Subsequent Closing are referred to herein as a "Closing" and the date on which a
Closing occurs is referred to herein as a "CLOSING DATE."
Notwithstanding any provision herein or in any other Transaction
Document (defined below) to the contrary, from and after the Initial Closing the
obligation for Investor to participate in each Subsequent Closing as
contemplated by this Section 1.2 and SCHEDULE 1 hereto shall be absolute and
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unconditional. Without limiting the foregoing, the Company shall have no
obligation whatsoever to update its disclosure with respect to any sale of
securities to the Investor contemplated hereby inasmuch as (x) the Investor's
investment decision with respect to the purchase of all Shares is being made as
of the Initial Closing and (y) the delay represented by Subsequent Closings
reflects solely an accommodation by the Company with respect to the timing for
payment by the Investor for the Shares at issue.
1.3 NOTICE OF DEFAULT; OPPORTUNITY TO CURE.
If Investor fails to fund the purchase of Subsequent Shares at any
Subsequent Closing, the Company agrees to provide written notice of such failure
to Investor. Investor shall have ten (10) days following the receipt of such
notice to cure any such default.
1.4 DELIVERY.
At each Closing, the Company shall deliver to Investor a certificate
(in definitive form) registered in Investor's name, representing the Shares of
Series A Preferred Stock to be purchased by Investor from the Company at such
Closing against payment of the applicable purchase price as set forth on
SCHEDULE 1 hereto by wire transfer. If Investor does not have a representative
at a Closing, the Company shall deliver such certificate by overnight courier
service to the address as provided on the signature page herein.
1.4 NO OBLIGATION OF INVESTOR AFFILIATES.
Notwithstanding anything to the contrary that may be set forth in this
Agreement, the parties expressly acknowledge and agree that no affiliate of
Investor, including, without limitation, Investor's parent corporation, Acacia
Research Corporation, a Delaware corporation, and Investor's affiliate, Acacia
Media Technologies Corporation, a Delaware corporation, shall have or otherwise
incur any liability or obligation to the Company under this Agreement,
including, without limitation, as a result of any failure by Investor to deliver
the applicable purchase price with respect to any Closing.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a SCHEDULE OF EXCEPTIONS delivered by the
Company to Investor at the Initial Closing, the Company hereby represents and
warrants to Investor, as of the Initial Closing, as set forth below in this
Section 2:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION.
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of California, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as presently proposed to be
conducted, to execute and deliver this Agreement, that certain Investor Rights
Agreement dated as of even date herewith, by and between the Company, Investor,
and the holders of Common Stock named therein (the "FOUNDERS"), the form of
which is attached hereto as EXHIBIT B (the "INVESTOR RIGHTS AGREEMENT"), that
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certain Right of First Refusal and Co-Sale Agreement dated as of even date
herewith, by and among the Company, Investor and the Founders, the form of which
is attached hereto as EXHIBIT C (the "CO-SALE AGREEMENT"), that certain Voting
Agreement dated as of even date herewith, by and among the Company, Investor and
the Founders, the form of which is attached hereto as EXHIBIT D (the "VOTING
AGREEMENT"), and any other agreements to which the Company is a party the
execution and delivery of which is contemplated hereby (the "ANCILLARY
AGREEMENTS"), to issue and sell the Series A Preferred Stock and the Common
Stock issuable upon conversion thereof, and to carry out the provisions of this
Agreement, the Investor Rights Agreement, the Co-Sale Agreement, the Voting
Agreement, the Amended Articles and any Ancillary Agreement (collectively, the
"TRANSACTION DOCUMENTS"). The Company is duly qualified and is authorized to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business, properties, prospects, or financial condition.
2.2 AUTHORIZATION.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of the Transaction Documents, the performance of all obligations of the
Company hereunder and thereunder at the Initial Closing and each Subsequent
Closing and the authorization, issuance (or reservation for issuance), sale, and
delivery of the Series A Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion thereof has been taken or will be taken prior to
the Initial Closing, and the Transaction Documents, when executed and delivered,
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent that the
indemnification provisions contained in the Investor Rights Agreement may be
limited by applicable laws.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
The Series A Preferred Stock that is being purchased by Investor
hereunder, when issued, sold, and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investor Rights Agreement and under applicable state and federal securities
laws. The Common Stock issuable upon conversion of the Series A Preferred Stock
being purchased under this Agreement has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Amended
Articles, will be duly and validly issued, fully paid, and nonassessable and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Investor Rights Agreement and under applicable
state and federal securities laws.
2.4 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Series A Preferred Stock by the Company or the issuance of Common Stock upon
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conversion of the Series A Preferred Stock, except (i) the filing of the Amended
Articles with the Secretary of State of the State of California, and (ii) such
filings as have been made prior to the Initial Closing, (except any notices of
sale required to be filed with the Securities and Exchange Commission under
Regulation D of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or such post-closing filings as may be required under applicable state
securities laws, which will be timely filed within the applicable periods
therefor).
2.5 CAPITALIZATION AND VOTING RIGHTS.
The authorized capital of the Company consists, or will consist
immediately prior to the Initial Closing, of:
(a) PREFERRED STOCK. Ten Million (10,000,000) shares of Preferred
Stock, of which Three Million One Hundred Thirty-Seven Thousand Five Hundred
(3,137,500) shares have been designated Series A Preferred Stock, and up to all
of which will be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series A Preferred Stock are as stated in the Amended
Articles.
(b) COMMON STOCK. One Hundred Million (100,000,000) shares of common
stock ("COMMON STOCK"), of which Six Million Two Hundred Seventy-Five Thousand
(6,275,000) shares are issued and outstanding.
(c) The outstanding shares of Common Stock are owned by the
shareholders and in the numbers specified in SCHEDULE 2 hereto.
(d) The outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(e) Except for (i) the conversion privileges of the Series A Preferred
Stock to be issued under this Agreement, (ii) the Investor Rights Agreement, and
(iii) the Voting Agreement, there are no other outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or shareholder agreements or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. The Company is not a
party or subject to any agreement or understanding, and, to the Company's
knowledge, immediately prior to the Initial Closing, there is no agreement or
understanding between any persons that affects or relates to the voting or
giving of written consents with respect to any security or the voting by a
director of the Company.
2.6 SUBSIDIARIES.
The Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
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2.7 CONTRACTS AND OTHER COMMITMENTS.
There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound that may involve (i) obligations (contingent
or otherwise) of, or payments to the Company in excess of, $10,000, or (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company (other than the license of the Company's software and products
in the ordinary course of business), or (iii) provisions restricting or
affecting the development, manufacture or distribution of the Company's products
or service, or (iv) indemnification by the Company with respect to infringement
of proprietary rights.
2.8 RELATED-PARTY TRANSACTIONS.
No employee, officer, shareholder or director of the Company or member
of his or her immediate family is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any of
them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). To the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, shareholders, officers, or directors of
the Company and members of their immediate families may own stock in publicly
traded companies that may compete with the Company. To the Company's knowledge,
no officer, director, or shareholder or any member of their immediate families
is, directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of the Company).
2.9 REGISTRATION RIGHTS.
Except as provided in the Investor Rights Agreement, the Company is
presently not under any obligation and has not granted any rights to register
under the Securities Act any of its presently outstanding securities or any of
its securities that may subsequently be issued.
2.10 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 could 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 presently 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.
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2.11 COMPLIANCE WITH OTHER INSTRUMENTS.
The Company is not in violation or default in any material respect of
any provision of its Amended Articles or Bylaws or in any material respect of
any provision of any mortgage, indenture, agreement, instrument, or contract to
which it is a party or by which it is bound or, to its knowledge, of any federal
or state judgment, order, writ, decree, statute, rule, regulation or restriction
applicable to the Company. The execution, delivery, and performance by the
Company of the Transaction Documents, and the consummation of the transactions
contemplated thereby, will not result in any such violation or be in material
conflict with or constitute, with or without the passage of time or giving of
notice, either a material default under any such provision or an event that
results in the creation of any material lien, charge, or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 LITIGATION.
There is no action, suit, proceeding, or investigation pending or, to
the knowledge of the Company, currently threatened against the Company that
questions the validity of the Transaction Documents or the right of the Company
to enter into such agreements, or to consummate the transactions contemplated
thereby, or that might result, either individually or in the aggregate, in any
material adverse change in the assets, business, properties, prospects, or
financial condition of the Company, or in any material change in the current
equity ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or, to the knowledge of the
Company, currently threatened involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by the Company with potential backers of, or investors in, the
Company. The Company is not a party to or, to its knowledge, named in or subject
to any order, writ, injunction, judgment, or decree of any court, government
agency, or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company currently
intends to initiate.
2.13 DISCLOSURE.
The Company has made available to Investor all the information
reasonably available to it without undue expense that Investor has requested for
deciding whether to purchase the Series A Preferred Stock and all information
that the Company believes is reasonably necessary to enable Investor to make
such decision. To the Company's knowledge, neither this Agreement nor any other
agreements, written statements or certificates made or delivered in connection
herewith 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.
2.14 OFFERING.
Subject in part to the truth and accuracy of Investor's representations
set forth in this Agreement, the offer, sale and issuance of the Series A
Preferred Stock as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
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2.15 TITLE TO PROPERTY AND ASSETS; LEASES.
The Company owns its property and assets free and clear of all
mortgages, liens, loans and encumbrances, except such encumbrances and liens
that arise in the ordinary course of business and do not materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to its knowledge, holds a valid leasehold interest free of any liens,
claims, or encumbrances.
2.16 MATERIAL LIABILITIES.
The Company has no material liability or obligation, absolute or
contingent (individually or in the aggregate), except (i) obligations and
liabilities incurred after the date of incorporation in the ordinary course of
business that are not material, individually or in the aggregate, and (ii)
obligations under contracts made in the ordinary course of business that would
not be required to be reflected in financial statements prepared in accordance
with generally accepted accounting principles.
2.17 CHANGES.
To the Company's knowledge, since the date of incorporation, there has
not been any event or condition of any type that has materially and adversely
affected the business, properties, prospects, or financial condition of the
Company.
2.18 PATENTS AND TRADEMARKS.
To its knowledge, the Company owns or possesses sufficient legal rights
to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and processes necessary
for its business as now conducted without any conflict with, or infringement of
the rights of, others. The Schedule of Exceptions contains a complete list of
patents and pending patent applications of the Company.
Except for agreements with its own employees or consultants, in the
case of employees substantially in the form referenced in Section 2.21 below,
and standard end-user license agreements, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses, or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes of
any other person or entity. The Company has not received any written notice
alleging that the Company has violated or does violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights or processes of any other person or entity. The Company is
not aware that any of its employees is obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
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proposed to be conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated. The Company does
not believe it is or will be necessary to use any inventions of any of its
employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.19 MANUFACTURING AND MARKETING RIGHTS.
The Company has not granted rights to manufacture, produce, assemble,
license, market, or sell its products to any other person and is not bound by
any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products.
2.20 EMPLOYEES; EMPLOYEE COMPENSATION.
To its knowledge, the Company has complied in all material respects
with all applicable state and federal equal opportunity and other laws related
to employment. To the Company's knowledge, no employee of the Company is or will
be in violation of any judgment, decree, or order, or any term of any employment
contract, patent disclosure agreement, or other contract or agreement relating
to the relationship of any such employee with the Company, or any other party
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. The Company is not a party to or bound by
any currently effective employment contract, deferred compensation agreement,
bonus plan, incentive plan, profit sharing plan, retirement agreement, or other
employee compensation agreement. The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
2.21 CONFIDENTIAL INFORMATION AND INVENTIONS AGREEMENTS.
Each employee and officer of the Company has executed a Confidential
Information and Inventions Assignment Agreement substantially in the form or
forms, which have been made available to Investor.
2.22 TAX RETURNS, PAYMENTS, AND ELECTIONS.
The Company has not filed any tax returns and reports (federal, state
and local). The Company has paid all taxes and other assessments due, except
those contested by it in good faith. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended ("CODE"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 1362(a) or Section
341(f) of the Code, nor has it made any other elections pursuant to the Code
(other than elections that relate solely to methods of accounting, depreciation,
or amortization) that would have a material effect on the business, properties,
prospects, or financial condition of the Company. The Company has never had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. The Company has made adequate provisions on its books of
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account for all taxes, assessments, and governmental charges with respect to its
business, properties, and operations for such period. The Company has withheld
or collected from each payment made to each of its employees, the amount of all
taxes, including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.
2.23 ENVIRONMENTAL AND SAFETY LAWS.
To its knowledge, the Company is not in violation of any applicable
statute, law, or regulation relating to the environment or occupational health
and safety, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.
2.24 SECTION 83(B) ELECTIONS.
To the Company's knowledge, all individuals who have purchased shares
of the Company's Common Stock under agreements that provide for the vesting of
such shares have filed timely elections under Section 83(b) of the Internal
Revenue Code and any analogous provisions of applicable state tax laws.
2.25 MINUTE BOOKS.
The copy of the minute book of the Company made available to Investor
contains minutes of all meetings of directors and shareholders and all actions
by written consent without a meeting by the directors and shareholders since the
date of incorporation and accurately reflects all actions by the directors (and
any committee of directors) and shareholders with respect to all transactions
referred to in such minutes in all material respects.
2.26 CERTAIN ACTIONS.
The Company has not: (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to its common stock; (ii) incurred
any indebtedness for money borrowed or incurred any other liabilities or entered
into any contracts with obligations individually in excess of $10,000 or in
excess of $50,000 in the aggregate; (iii) made any loans or advances to any
person, other than advances for travel expenses in the ordinary course of
business; (iv) sold, exchanged or otherwise disposed of any materials assets or
rights other than the sale of inventory on the ordinary course of business; or
(v) entered into any material transactions with any if its officers, directors
or employees or any entity controlled by any of such individuals, or made any
loans or guarantees for the benefit of its officers, directors or employees, or
any members of their immediate families, other than travel advances and other
advances made in the ordinary course of business.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
Investor hereby represents and warrants to the Company that:
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3.1 AUTHORIZATION.
All corporate action on the part of Investor, its officers, directors
and stockholders necessary for the authorization, execution and delivery of the
Transaction Documents and the performance of all obligations of Investor
thereunder at the Initial Closing and each Subsequent Closing has been taken or
will be taken prior to the Initial Closing, and each Transaction Document, when
executed and delivered, will constitute valid and legally binding obligations of
Investor, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent that the indemnification provisions contained in the Investor Rights
Agreement may be limited by applicable laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.
This Agreement is made with Investor in reliance upon Investor's
representation to the Company, which by Investor's execution of this Agreement
Investor hereby confirms, that the Series A Preferred Stock to be purchased by
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "SECURITIES") will be acquired for investment for Investor'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 Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
3.3 RECEIPT OF INFORMATION.
Investor believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Series A Preferred
Stock. Investor 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 Series A Preferred Stock and the business,
properties, prospects, and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to Investor or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of Investor to rely
thereon.
3.4 INVESTMENT EXPERIENCE.
Investor represents that it is experienced in evaluating and investing
in private placement transactions of securities of companies in a similar stage
of development and acknowledges that Investor is able to fend for itself, can
bear the economic risk of Investor's investment, and has such knowledge and
experience in financial and business matters that Investor is capable of
evaluating the merits and risks of the investment in the Series A Preferred
Stock. Investor has not been organized for the purpose of acquiring the Series A
Preferred Stock.
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3.5 ACCREDITED INVESTOR.
Investor is an "accredited investor" within the meaning of Securities
and Exchange Commission ("SEC") Rule 501 of Regulation D, as presently in
effect.
3.6 RESTRICTED SECURITIES.
Investor understands that the Series A Preferred Stock (and any Common
Stock issued on conversion thereof) may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Stock (or the Common Stock issued on conversion thereof) or an
available exemption from registration under the Securities Act, the Series A
Preferred Stock (and any Common Stock issued on conversion thereof) must be held
indefinitely. In particular, Investor is aware that the Series A Preferred Stock
(and any Common Stock issued upon conversion thereof) may not be sold pursuant
to Rule 144 promulgated under the Securities Act unless all of the conditions of
that Rule are met. Among the conditions for use of Rule 144 may be the
availability of current information to the public about the Company. Such
information is not now available and the Company has no present plans to make
such information available.
3.7 LEGENDS.
To the extent applicable, each certificate or other document evidencing
any of the Series A Preferred Stock or any Common Stock issued upon conversion
thereof shall be endorsed with the legends substantially in the Form set forth
below:
(a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
3.8 FURTHER LIMITATIONS ON DISPOSITION.
Without in any way limiting the representations set forth above,
Investor further agrees not to make any disposition of all or any portion of the
Shares unless and until the transferee has agreed in writing for the benefit of
the Company to be bound by this Section 3 and the Investor Rights Agreement and
the Voting Agreement provided and to the extent this Section and such agreements
are then applicable, and:
11
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Securities Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
3.9 OBLIGATION TO FUND.
Investor acknowledges and agrees that the purchase of the Initial
Shares at the Initial Closing shall obligate Investor, absolutely and
unconditionally, to purchase all of the Subsequent Shares at each Subsequent
Closing as set forth on SCHEDULE 1 hereto.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT INITIAL CLOSING.
The obligations of Investor under paragraph 1.1 of this Agreement at
the Initial Closing are subject to the fulfillment on or before the Initial
Closing of each of the following conditions, unless otherwise waived in writing
(it being understood and agreed that, from and after the Initial Closing, the
Investor's obligations at each Subsequent Closing shall be absolute and
unconditional):
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in Section
2 shall be true on and as of the Initial Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Initial Closing.
4.2 PERFORMANCE.
The Company shall have performed and complied with all agreements,
obligations, and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Initial Closing.
4.3 COMPLIANCE CERTIFICATE.
The President of the Company shall deliver to Investor at the Initial
Closing a certificate certifying that the conditions specified in paragraphs
4.1, 4.2, 4.4, and 4.7 have been fulfilled.
4.4 QUALIFICATIONS.
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Series A
Preferred Stock pursuant to this Agreement shall be duly obtained and effective
as of the Initial Closing.
12
4.5 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated at the Initial Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to Investor, which shall have
received all such counterpart original and certified or other copies of such
documents as it may reasonably request.
4.6 OPINION OF COMPANY COUNSEL.
Investor shall have received from Pillsbury Winthrop LLP, counsel for
the company, an opinion, dated as of the Initial Closing, in the form attached
hereto as EXHIBIT E.
4.7 TRANSACTION AGREEMENTS.
The Company shall have entered into the Investor Rights Agreement, the
Co-Sale Agreement, and the Voting Agreement.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS.
The obligations of the Company to Investor under this Agreement are
subject to the fulfillment on or before each Closing of each of the following
conditions, unless otherwise waived in writing:
5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Investor contained in Section 3
shall be true on and as of such Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
5.2 QUALIFICATIONS.
All authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Shares pursuant
to this Agreement shall be duly obtained and effective as of such Closing.
5.3 TRANSACTION AGREEMENTS.
The Investor shall have entered into the Investor Rights Agreement, the
Co-Sale Agreement, and the Voting Agreement.
5.4 PAYMENT OF PURCHASE PRICE.
The Investor shall have delivered the applicable purchase price as set
forth on SCHEDULE 1 hereto.
13
6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT.
This Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
6.2 SURVIVAL OF WARRANTIES.
The warranties, representations and covenants of the Company and
Investor contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Initial Closing.
6.3 SUCCESSORS AND ASSIGNS.
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
shares of Series A Preferred Stock sold hereunder or any Common Stock issued
upon conversion thereof). 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.
6.4 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of the
State of California as applied to agreements among California residents entered
into and to be performed entirely within California.
6.5 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
instrument.
6.6 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.
6.7 NOTICES.
Any notice required or permitted to be given to a party pursuant to the
provisions of this Agreement will be in writing and will be effective and deemed
given to such party under this Agreement on the earliest of the following:
(a) the date of personal delivery;
14
(b) one (1) business day after transmission by facsimile or telecopier,
addressed to the other party at its facsimile number or telecopier address
specified herein (or hereafter noticed to the parties hereto), with confirmation
of transmission;
(c) one (1) business day after deposit with a return receipt express
courier for United States deliveries, or three (3) business days after such
deposit for deliveries outside of the United States; or
(d) three (3) business days after deposit in the United States mail by
registered or certified mail (return receipt requested) for United States
deliveries.
All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to the party to be
notified at the address set forth below such party's signature on this
Agreement, or at such other address as such other party may designate by ten
(10) days advance written notice to the other parties hereto. All notices for
delivery outside the United States will be sent by facsimile or by express
courier. Any notice given hereunder to more than one person will be deemed to
have been given, for purposes of counting time periods hereunder, on the date
effectively given to the last party required to be given such notice. Notices to
the Company will be marked "Attention: President."
6.8 FINDER'S FEES.
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with this transaction. Investor 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 cost and
expenses of defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless Investor 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.
6.9 ATTORNEYS' FEES.
If any action at law or in equity is necessary to enforce or interpret
the terms of any of the Transaction Documents or the Amended Articles, the
prevailing party shall be entitled to reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which such party may be
entitled.
6.10 AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investor. 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 have been converted), each future holder
of all such securities, and the Company.
15
6.11 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 was so excluded and shall be enforceable in accordance with its terms.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LEUCHEMIX, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Title: PRESIDENT
----------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
COMBIMATRIX CORPORATION
/S/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇, CEO
CombiMatrix Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
17
SCHEDULE 1
------------------------- -------------------- -----------------------
Date Amount Shares
------------------------- -------------------- -----------------------
------------------------- -------------------- -----------------------
Q4-2004 (Initial
Closing) $250,000.24 196,094
------------------------- -------------------- -----------------------
Q1-2005 $250,000.24 196,094
------------------------- -------------------- -----------------------
------------------------- -------------------- -----------------------
Q2-2005 $350,000.85 274,532
------------------------- -------------------- -----------------------
Q3-2005 $500,000.48 392,188
------------------------- -------------------- -----------------------
Q4-2005 $500,000.48 392,188
------------------------- -------------------- -----------------------
Q1-2006 $650,000.12 509,844
------------------------- -------------------- -----------------------
------------------------- -------------------- -----------------------
Q2-2006 $750,000.72 588,282
------------------------- -------------------- -----------------------
Q3-2006 $749,995.62 588,278
------------------------- -------------------- -----------------------
------------------------- -------------------- -----------------------
Total $3,999,998.75 3,137,500
------------------------- -------------------- -----------------------
18
SCHEDULE 2
COMMON STOCK OWNERS
NAME SHARES OF COMMON STOCK
---- ----------------------
▇▇▇▇ ▇▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇ 1,000,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 25,000
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000
▇▇▇▇ ▇▇▇▇ 25,000
▇▇▇▇▇ ▇▇▇▇▇▇ 1,000,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 2,000,000
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1,000,000
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,000,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000
TOTAL: 6,275,000
19
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
LEUCHEMIX, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ certifies that:
1. He is the President and Secretary of Leuchemix, Inc., a California
corporation (the "CORPORATION").
2. The date of filing of the original Articles of Incorporation of this
Corporation with the Secretary of State of California was September 12, 2003.
3. The Articles of Incorporation of the Corporation are amended and
restated to read as follows:
ARTICLE I.
The name of the Corporation is Leuchemix, Inc.
ARTICLE II.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III.
A. The Corporation is authorized to issue two classes of stock
designated "PREFERRED STOCK" and "COMMON STOCK," respectively. The number of
shares of Preferred Stock authorized to be issued is TEN MILLION (10,000,000)
and the number of shares of Common Stock authorized to be issued is ONE HUNDRED
MILLION (100,000,000).
B. THREE MILLION ONE HUNDRED THIRTY-SEVEN THOUSAND FIVE HUNDRED
(3,137,500) shares of Preferred Stock are designated "SERIES A PREFERRED STOCK."
The remaining shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Corporation (the "BOARD") is
expressly authorized to provide for the issue of all or any wholly unissued
shares of the Preferred Stock in one or more series, and to fix the designation
and number of shares and to determine or alter for each such series such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other rights and such qualifications,
limitations or restrictions thereof as shall be stated and expressed in the
resolution or resolutions adopted by the Board providing for the issue of such
shares and as may be permitted by the General Corporation Law of California. The
Board is also expressly authorized to increase or decrease (but not below the
number of shares of such series then outstanding) the number of shares of any
series (subject to the provisions of Section 5(d) of Article III.C. below, if
applicable) subsequent to the issue of shares of that series.
A-1
If the number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status of authorized but unissued
shares of Preferred Stock
C. Subject to the powers, preferences, rights, restrictions,
limitations and other matters relating to one or more additional series of
Preferred Stock as may be designated from time to time, the powers, preferences,
rights, restrictions, limitations and other matters relating to Series A
Preferred Stock are as follows (NOTE: Section references within this ARTICLE
III.C. are to other Sections within this ARTICLE III.C. unless otherwise
expressly provided):
1. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary (in any event, a "LIQUIDATION"),
the holders of Series A Preferred Stock shall be entitled to receive by reason
of their ownership thereof, prior and in preference to any distribution of any
of the assets of the Corporation to the holders of Common Stock, an amount per
outstanding share of Series A Preferred Stock equal to the sum of (i) $1.2749
(such amount being hereinafter referred to as the "ORIGINAL SERIES A PURCHASE
PRICE"), as adjusted for any stock dividends, combinations, splits or similar
events affecting or with respect to the Series A Preferred Stock after the
Original Issue Date (as defined in SECTION 3(F)(I)(2) below), and (ii) an amount
equal to the sum of all declared but unpaid dividends on each such share (the
sum of clauses (i) and (ii) being hereinafter referred to as the "SERIES A
LIQUIDATION PREFERENCE"). If, upon the occurrence of a Liquidation, the assets
and funds thus distributed among the holders of Series A Preferred Stock shall
be insufficient to permit the payment to such holders of the full Series A
Liquidation Preference, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably, on a per share
basis, among the holders of Series A Preferred Stock.
(b) Upon completion of the distribution in full of the Series A
Liquidation Preference as contemplated by SECTION 1(a) above, the remaining
assets of the Corporation available for distribution to shareholders, if any,
shall be distributed ratably among the holders of Common Stock in proportion to
the number of shares of Common Stock held by each such holder.
(c) For purposes of this SECTION 1, any acquisition of the Corporation
by means of a merger or other form of corporate reorganization in which the
shareholders of the Corporation do not own, following such transaction, a
majority of the outstanding shares of the surviving or acquiring corporation
(measured on an as-converted to common stock basis), or a sale of all or
substantially all of the assets of the Corporation (any such acquisition or sale
being hereinafter referred to as an "ACQUISITION"), shall be treated as a
Liquidation. Upon the closing of any Acquisition, the holders of Series A
Preferred Stock and Common Stock shall be entitled to receive the amounts of
cash, securities or other property as specified in SECTIONS 1(a) and 1(b) above,
respectively.
(d) Any securities to be delivered to the holders of Series A Preferred
Stock and Common Stock pursuant to SECTION 1(c) above shall be valued as
follows:
A-2
(i) For securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty (30) day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid and asked
prices over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof as determined in good
faith by the Board; and
(ii) The value of securities subject to investment letter or
other restrictions on free marketability shall be appropriately discounted as
determined in good faith by the Board.
(e) The provisions of this SECTION 1 are in addition to the protective
provisions of SECTION 5 below.
(f) Without limiting the provisions of SECTION 5 below, Sections 502
and 503 of the California Corporations Code shall not apply to any redemption,
repurchase or other acquisition for value by the Corporation of any shares of
Preferred Stock or Common Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of the Series A Preferred Stock shall be entitled to
receive dividends at the rate of $0.0765 per share (as adjusted for any stock
dividends, combinations, splits or similar events affecting or with respect to
such shares after the Original Issue Date) per annum, payable out of funds
legally available therefor; PROVIDED, HOWEVER, that (i) any such dividend shall
be payable only when, as and if declared by the Board and (ii) any rights of the
holders of Series A Preferred Stock to any such dividend shall be noncumulative.
(b) No dividend or other distribution (other than any dividend or
distribution payable solely in shares of Common Stock or any right to acquire
shares of Common Stock) shall be paid or declared on the Common Stock during any
12-month period, and the Corporation shall not repurchase, redeem or otherwise
acquire for value any shares of Common Stock, unless and until, during that
12-month period, a dividend as set forth in SECTION 2(a) above on the Series A
Preferred Stock shall have been paid or declared and set apart, except the
Corporation may do the following (collectively, "EXEMPT COMMON STOCK
TRANSACTIONS"):
(i) repurchase shares of Common Stock from any former
employee, director or consultant pursuant to agreements which permit the
Corporation to repurchase such shares upon the termination of such employee's,
director's or consultant's service to the Corporation; and
A-3
(ii) acquire shares of Common Stock in exercise of the
Corporation's right of first refusal pursuant to any contractual arrangements to
which such shares are subject.
(c) In addition to the provisions of Section 2(b) above, no dividend or
distribution (other than any dividend or distribution payable solely in shares
of Common Stock or any right to acquire shares of Common Stock) shall be paid or
declared on any shares of Common Stock unless an equivalent dividend or
distribution (measured on an as-if-converted to Common Stock basis) shall have
been paid or declared and set apart on the Series A Preferred Stock.
(d) In the event of a conversion of any of the shares of Series A
Preferred Stock pursuant to Section 3 below, any declared and unpaid dividends
on such shares shall be paid in cash upon such conversion.
3. CONVERSION. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) CONVERSION PRICES. As used herein, the "SERIES A CONVERSION PRICE"
initially shall be the Original Series A Purchase Price, but shall be subject to
adjustment as set forth in Sections 3(f), 3(g) and 3(h) below.
(b) DIVIDENDS. Upon any conversion of any shares of Series A Preferred
Stock as provided in this Section 3, any declared and unpaid dividends with
respect to such shares shall be paid to the holder thereof as provided in
Section 2(d) above.
(c) RIGHT TO CONVERT. Subject to the provisions of Section 3(e)(i)
below, each share of Series A Preferred Stock shall be convertible, at the
option of the holder thereof at any time after the date of issuance of such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Original Series A Purchase Price by the Series
A Conversion Price then in effect.
(d) AUTOMATIC CONVERSION OF SERIES A. Each share of Series A Preferred
Stock shall automatically be converted into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Purchase Price by the Series A Conversion Price then in effect upon the
earlier of the following:
(i) the date specified by the vote, written consent or
agreement of the holders of at least a majority of the shares of Series A
Preferred Stock then outstanding; or
(ii) the closing of a sale of Common Stock in a firm
commitment, underwritten public offering registered under the Securities Act of
1933, as amended (the "SECURITIES ACT"), other than a registration relating
solely to a transaction under Rule 145 of the Securities Act or to an employee
benefit plan of the Corporation, at a public offering price per share (before
underwriters' discounts and expenses) of at least $5.10 (as adjusted for any
stock dividends, combinations, splits or similar events affecting or with
respect to the Common Stock after the Original Issue Date) with aggregate
proceeds to the Corporation and any selling shareholders (before underwriters'
discounts and expenses) of at least $10,000,000.00 (a "QUALIFIED INITIAL PUBLIC
OFFERING").
A-4
(e) MECHANICS OF CONVERSION.
(i) Before any holder of shares of Series A Preferred Stock
shall be entitled to convert such shares pursuant to the provisions of Section
3(c) above and receive a certificate or certificates evidencing the shares of
Common Stock into which such holder's shares of Series A Preferred Stock are
convertible, such holder shall give written notice of the same to the
Corporation at its principal executive offices and shall surrender the
certificate or certificates evidencing such shares, duly endorsed, at such
offices of the Corporation. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such offices to such holder (A) a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled and (B) payment for any declared but unpaid dividends on the
shares of Series A Preferred Stock converted (as provided in Section 2(d)
above). Any such conversion shall be deemed to have been made immediately prior
to the close of business on the date of the holder's surrender of the
certificate or certificates evidencing such holder's shares of Series A
Preferred Stock to be converted, and such holder shall be treated for all
purposes as the holder of the shares of Common Stock issuable upon such
conversion as of such date.
(ii) Upon the occurrence of any of the events specified in
Section 3(d) above, the outstanding shares of Series A Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; provided, however, that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless the certificates evidencing such
shares of Series A Preferred Stock are either delivered to the Corporation or
its transfer agent as provided below, or the holder notifies the Corporation or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Upon the occurrence of such automatic conversion of the Series A Preferred
Stock, the holders of Series A Preferred Stock shall surrender the certificates
representing such shares at the office of the Corporation or any transfer agent
for the Series A Preferred Stock. Thereupon, there shall be issued and delivered
to each such holder promptly at such office and in his, her or its name as shown
on such surrendered certificate or certificates, a certificate or certificates
for the number of shares of Common Stock into which the shares of Series A
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred, and any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 2(d) above. If an automatic conversion
is effected by reason of a Qualified Initial Public Offering, such conversion
may, at the option of any holder tendering Series A Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A Preferred Stock shall
not be deemed to have converted such Series A Preferred Stock until immediately
prior to the closing of such sale of securities.
(f) ADJUSTMENTS TO SERIES A CONVERSION PRICE.
(i) SPECIAL DEFINITIONS. For purposes of this Section 3(f),
the following definitions apply:
A-5
(1) "OPTIONS" mean rights, options or warrants to subscribe
for, purchase or otherwise acquire any shares of Common Stock or any
Convertible Securities (as hereinafter defined).
(2) "ORIGINAL ISSUE DATE" means the date on which the first
share of Series A Preferred Stock is issued by the Corporation.
(3) "CONVERTIBLE SECURITIES" mean any evidences of
indebtedness, shares (other than shares of Series A Preferred Stock) or
other securities convertible into or exchangeable for Common Stock.
(4) "RELATED PARTY" means any holder of more than five percent
(5%) of the Corporation's capital stock (including capital stock that
would be received upon the exercise of any Options) and (i) if such
holder is an individual, such holder's spouse, lineal descendents or
antecedents, siblings or the spouse of any of the foregoing, and (ii)
if such holder is an entity, then any person or entity that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with such holder.
(5) "ADDITIONAL SHARES OF COMMON STOCK" mean all shares of
Common Stock issued (or, pursuant to Section 3(f)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
a. Upon conversion of shares of Series A Preferred
Stock;
b. To employees, directors or consultants of the
Corporation who are not Related Parties under or pursuant to
stock option, stock bonus or stock purchase plans or
agreements or similar plans or agreements approved by a
majority of the Board so long as, for purposes of this clause
b (and without limiting the provisions of clause c below), the
number of shares of Common Stock so issuable or issued (and
not repurchased at cost or a lesser repurchase price by the
Corporation in connection with any termination of service)
does not exceed 1,882,500 shares;
c. To employees, directors or consultants of the
Corporation (including to any Related Party) under or pursuant
to stock option, stock bonus or stock purchase plans or
agreements or similar plans or agreements approved unanimously
by the Board after the Original Issue Date;
d. Pursuant to any bona fide joint venture,
partnership or collaboration or any research, product
development or marketing or intellectual property licensing
arrangement, or any arrangement similar to any of the
foregoing, if approved by the Board; provided, however, that
A-6
any such arrangement with a Related Party shall be approved
unanimously by the Board;
e. Pursuant to any leasing or credit arrangements if
approved by the Board; PROVIDED, HOWEVER, that any such
arrangement with a Related Party shall be approved unanimously
by the Board;
f. Pursuant to any merger, consolidation, acquisition
or similar business transaction if approved by the Board;
PROVIDED, HOWEVER, that any such transaction with a Related
Party shall be approved unanimously by the Board;
g. In connection with any underwritten public
offering of the Corporation's securities;
h. As a dividend or distribution on shares of Series
A Preferred Stock;
i. Upon any exercise or conversion of Options or
Convertible Securities (or Options exercisable for Convertible
Securities) which are outstanding as of the Original Issue
Date;
j. In any instance for which an appropriate
adjustment of the Series A Conversion Price is made pursuant
to the provisions of SECTION 3(g) below;
k. In a recapitalization or reorganization affecting
shares of Common Stock for which an appropriate adjustment of
the Series A Conversion Price is made, or pursuant to which
appropriate provisions are made for the holders of the
outstanding shares of Series A Preferred Stock, pursuant to
the provisions of SECTION 3(h) below; or
1. In any transaction or circumstance with respect to
which the holders of more than fifty percent (50%) of the then
outstanding shares of Series A Preferred Stock consent to such
shares of Common Stock being excluded from the definition of
"Additional Shares of Common Stock."
(ii) NO ADJUSTMENT OF SERIES A CONVERSION PRICE. Any provision
herein to the contrary notwithstanding, no adjustment in the Series A Conversion
Price shall be made in respect of the issuance (or, pursuant to SECTION
3(f)(iii) below, the deemed issuance) of Additional Shares of Common Stock
unless the consideration per share (determined pursuant to SECTION 3 (f)(v)
below) for an Additional Share of Common Stock issued (or, pursuant to SECTION 3
(f)(iii) below, deemed to be issued) by the Corporation is less than the Series
A Conversion Price in effect on the date of, and immediately prior to, such
issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In
the event the Corporation, at any time or from time to time after the Original
Issue Date, shall issue
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any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities
shall be deemed to be Additional Shares of Common Stock issued as of the time of
such issue or, in case such a record date shall have been fixed, as of the close
of business on such record date; PROVIDED, HOWEVER, that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) No further adjustments in the Series A Conversion
Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible
Securities;
(2) If such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase or decrease in the consideration payable to
the Corporation, or decrease or increase in the number of
shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof, the Series A Conversion Price computed
upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities; and PROVIDED, FURTHER, that no such adjustment of
the Series A Conversion Price shall affect shares of Common
Stock previously issued upon conversion of shares of Series A
Preferred Stock;
(3) Upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A
Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
a. In the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were the shares of Common
Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities, plus the additional consideration, if
any, actually received by the Corporation upon such
conversion or exchange; and
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b. In the case of Options for
Convertible Securities, the only Additional Shares of
Common Stock issued were the shares of Common Stock,
if any, actually issued upon the exercise of such
Options and the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, plus the additional consideration, if any,
actually received by the Corporation upon conversion
or exchange of such Convertible Securities;
(4) No readjustment pursuant to CLAUSES (2) or Q) above shall
have the effect of increasing the Series A Conversion Price to an
amount which exceeds the lower of the Series A Conversion Price on the
original adjustment date or the Series A Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date;
(5) In the case of any Options which expire by their terms not
more than sixty (60) days after the date of issue thereof, no
adjustment of the Series A Conversion Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment
shall be made in the same manner provided in CLAUSE 3 above; and
(6) If any record date shall have been fixed and Options or
Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Series A Conversion Price which
became effective on such record date shall be canceled as of the close
of business on such record date, and shall instead be made on the
actual date of issuance, if any.
(iv) ADJUSTMENT OF SERIES A CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event that this Corporation, at any
time after the Original Issue Date, shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to SECTION 3(f)(iii)) without consideration or for an amount of consideration
per share which is less than the Series A Conversion Price in effect on the date
of, and immediately prior to, such issue, then and in such event, the Series A
Conversion Price shall be reduced, concurrently with such issue, as of the
opening of business on the date of such issue, to a price determined by
multiplying such then applicable Series A Conversion Price in effect immediately
prior to such issuance or sale by a fraction:
(1) the numerator of which shall be (A) the number of shares
of Common Stock deemed outstanding (as provided below) immediately
prior to such issue or sale plus (B) the number of shares of Common
Stock which the aggregate consideration received (as determined in
SECTION 3(f)(v) below) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such then
applicable Series A Conversion Price, and
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(2) the denominator of which shall be the number of shares of
Common Stock deemed outstanding (as provided below) immediately prior
to such issue or sale plus the total number of Additional Shares of
Common Stock so issued.
For the purposes of the preceding sentence, the number of shares of Common Stock
deemed outstanding as of a given date shall be the sum of (A) the number of
shares of Common Stock outstanding, (B) the number of shares of Common Stock
into which the then outstanding shares of Series A Preferred Stock could be
converted if fully converted on the day immediately preceding the given date and
(C) the number of shares of Common Stock which could be obtained through the
exercise and conversion or exchange for Common Stock of all Options and
Convertible Securities outstanding on the date immediately preceding the given
date.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
SECTION 3(f), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
a. Insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation
(excluding amounts paid or payable for accrued interest or
accrued dividends);
b. Insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board; and
c. In the event Additional Shares of Common Stock are
issued together with other shares or securities or other
assets of the Corporation for consideration which covers both,
be the proportion of such consideration so received, computed
as provided in CLAUSES (1) and Q above, as determined in good
faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to the provisions of SECTION
3(f)(iii) above, relating to Options and Convertible Securities, shall
be determined by dividing:
a. The total amount, if any, received or receivable
by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution)
payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities,
or in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
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b. The maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against
dilution) issuable upon the exercise of such Options and
conversion or exchange of such Convertible Securities.
(g) ADJUSTMENTS TO SERIES A CONVERSION PRICE FOR STOCK
DIVIDENDS AND FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event
that the Corporation, at any time or from time to time after the Original Issue
Date, shall declare or pay, without consideration, any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Series A
Conversion Price in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as appropriate.
(h) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If
the Common Stock issuable upon conversion of shares of Series A Preferred Stock
shall be changed into the same or a different number of shares of any other
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares provided for in
SECTION 3(g) above or an Acquisition provided for in SECTION 1(c) above), the
Series A Conversion Price then in effect (and the Conversion Rights, as
applicable) shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that Series A Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders of Series A Preferred Stock would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders of Series A Preferred Stock upon the conversion of Series A
Preferred Stock immediately before such change. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 3
with respect to the rights of the holders of the outstanding shares of Series A
Preferred Stock after the reorganization or reclassification to the end that the
provisions of this SECTION 3 (including the provisions regarding adjustment of
the Series A Conversion Price then in effect and the number of shares of Common
Stock issuable upon conversion of the outstanding shares of Series A Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(i) NO IMPAIRMENT. Except with the requisite vote of the
Corporation's shareholders (as set forth herein or required by applicable law),
the Corporation will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this SECTION 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights against impairment.
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(j) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Series A Conversion Price pursuant to the
provisions of this SECTION 3, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms of this
Section 3 and prepare and furnish to each holder of shares of Series A Preferred
Stock a certificate executed by the Corporation's President or Chief Financial
Officer setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of shares of Series A
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Series A Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such shares of Series A Preferred
Stock.
(k) ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series A Preferred Stock
pursuant hereto; PROVIDED, HOWEVER, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder
(whether in connection with any such conversion or otherwise).
(1) RESERVATION OF STOCK. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the outstanding
shares of Series A Preferred Stock, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose
(including engaging in best efforts to obtain the requisite shareholder approval
to effect any such action).
(m) FRACTIONAL SHARES. No fractional share shall be issued
upon the conversion of any share of Series A Preferred Stock. Rather, all shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Series A Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board).
4. VOTING RIGHTS; ELECTION OF DIRECTORS.
(a) VOTING RIGHTS. Except as otherwise expressly provided
herein (including in SECTION 5 below) or as required by law, (i) each holder of
shares of Series A Preferred Stock shall (A) be entitled to that number of votes
equal to the number of shares of Common Stock into which such shares of Series A
Preferred Stock could then be converted (pursuant to the provisions of SECTION
3(c) above) and (B) have voting rights and powers with respect thereto
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which are equal to the voting rights and powers of the holders of shares of
Common Stock, and (ii) holders of shares of Series A Preferred Stock shall vote
together with the holders of shares of Common Stock as a single class and shall
be entitled to notice of any shareholders' meeting in accordance with the Bylaws
of the Corporation; PROVIDED, HOWEVER, that fractional votes shall not be
permitted (and any fractional voting rights resulting from the above formula,
after aggregating all shares of Common Stock into which shares of Series A
Preferred Stock held by each holder could then be converted, shall be rounded to
the nearest whole number (with one-half being rounded upward)).
(b) ELECTION OF SERIES A DIRECTOR. For so long as the
outstanding number of shares of Series A Preferred Stock (assuming, for this
purpose, the exercise of all outstanding rights to acquire shares of Series A
Preferred Stock (except where any default by the holder of any such right has
not been cured within the applicable cure period)) represent at least FIVE
PERCENT (5%) of the total number of shares of Common Stock outstanding
(assuming, for this purpose, the conversion into Common Stock of all shares of
Series A Preferred Stock outstanding and the exercise and conversion or exchange
for Common Stock of all Options and Convertible Securities outstanding), the
holders of Series A Preferred Stock, voting as a separate class, shall be
entitled to (i) elect one (1) member of the Board (the "SERIES A DIRECTOR") at
each meeting or pursuant to each consent of the Corporation's shareholders for
the election of directors, (ii) remove from office such director and (iii) fill
any vacancy caused by the resignation, death or removal of such director.
5. SERIES A PROTECTIONS. For so long as at least FIFTY PERCENT (50%) of
the total number of shares of Series A Preferred Stock issued by the Corporation
remain outstanding, the Corporation shall not, without the vote, written consent
or agreement of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, voting or taking action as a class;
(a) Redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any shares of Series A Preferred
Stock or Common Stock; PROVIDED, HOWEVER, that the provisions of this SECTION
5(a) shall not apply to (i) any Exempt Common Stock Transactions or (ii) any
transactions approved unanimously by the Board;
(b) Pay or declare any dividend or distribution on any shares
of Common Stock; PROVIDED, HOWEVER, that the provisions of this SECTION 5(b)
shall not apply to (i) any dividend or distribution payable solely in shares of
Common Stock or any right to acquire shares of Common Stock or (ii) any dividend
or distribution approved unanimously by the Board;
(c) Amend, alter or waive the rights, preferences or
privileges of the shares of Series A Preferred Stock as set forth herein
including, but not limited to, reducing the amount payable to the holders of the
Series A Preferred Stock upon a Liquidation, reducing the dividend rate of the
Series A Preferred Stock provided for herein, making the Series A Preferred
Stock redeemable at the option of the Corporation, canceling or modifying the
conversion rights of the Series A Preferred Stock as provided for herein, or
adversely affecting the voting powers and rights of the Series A Preferred Stock
provided for herein;
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(d) Increase or decrease the total number of authorized shares
of Series A Preferred Stock;
(e) Modify any existing stock option, stock bonus or stock
purchase plans or agreements or similar plans or agreements in effect as of the
Original Issue Date, or adopt any new stock option, stock bonus or stock
purchase plans or agreements or similar plans or agreements following the
Original Issue Date, such that the total number of shares of Common Stock issued
or issuable pursuant thereto (and not repurchased at cost or a lesser repurchase
price by the Corporation in connection with any termination of service) exceeds
1,882,500 shares; PROVIDED, HOWEVER, that the provisions of this SECTION 5(e)
shall not apply to any stock option, stock bonus or stock purchase plans or
agreements or similar plans or agreements approved unanimously by the Board; or
(f) Enter into any material transaction including, without
limitation, any Acquisition, with a Related Party if such transaction has not
been unanimously approved by the Board.
6. STATUS OF CONVERTED STOCK. In the event that any shares of Series A
Preferred Stock shall be converted pursuant to the provisions of Section 3
above, the shares so converted shall thereupon be restored to the status of
authorized but unissued shares of Preferred Stock.
ARTICLE IV.
A. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. The Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) through Bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the Corporation and its shareholders.
C. Any repeal or modification of the provisions of this Article IV
shall only be prospective and shall not adversely affect any right or protection
of any director or agent of the Corporation existing or in effect at the time of
such repeal or modification.
* * *
4. The foregoing amendment and restatement of the Corporation's
Articles of Incorporation has been duly approved by the Corporation's Board of
Directors.
5. The foregoing amendment and restatement of the Corporation's
Articles of Incorporation has been duly approved by the required vote of
shareholders in accordance with Sections 902 and 903 of the California
Corporations Code. The total number of outstanding shares of the Corporation is
6,275,000 shares of Common Stock and no shares of Preferred Stock. The number of
shares voting in favor of the amendment and restatement equaled or
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exceeded the vote required. The percentage vote required was more than 50% of
the outstanding shares of Common Stock.
I further declare raider penalty of perjury under the laws of the State
of California that the matters set forth herein are true and correct of my own
knowledge.
Executed in Woodside, California, on September 24, 2004.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President and Secretary
[OFFICE OF THE SECRETARY OF STATE SEAL]
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EXHIBIT B
INVESTOR RIGHTS AGREEMENT
[SEE EXHIBIT 10.4 TO THIS FORM 10-Q]
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EXHIBIT C
CO-SALE AGREEMENT
[SEE EXHIBIT 10.2 TO THIS FORM 10-Q]
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EXHIBIT D
VOTING AGREEMENT
[SEE EXHIBIT 10.3 TO THIS FORM 10-Q]
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EXHIBIT E
LEGAL OPINION
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PILLSBURY WINTHROP LLP
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▇▇▇-▇▇▇-▇▇▇▇ F: ▇▇▇-▇▇▇-▇▇▇▇
October 1, 2004
Combimatrix Corporation
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Re: Leuchemix Inc. - Sale of Series A Preferred Stock
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Leuchemix, Inc., a California corporation
("LEUCHEMIX"), with respect to the negotiation and execution of that certain
Series A Preferred Stock Purchase Agreement entered into as of October 1, 2004
(the "PURCHASE AGREEMENT"), between you and Leuchemix. Unless otherwise defined
herein, terms with initial letters capitalized shall have their respective
meanings as set forth in the Purchase Agreement. This opinion is rendered
pursuant to Section 4.6 of the Purchase Agreement.
We have examined executed originals, counterparts or copies of each of the
following:
(a) the Purchase Agreement;
(b) the Investor Rights Agreement;
(c) the Co-Sale Agreement; and
(d) the Voting Agreement (referred to herein with the Purchase
Agreement, the Investor Rights Agreement and the Co-Sale
Agreement, collectively, as the "TRANSACTION DOCUMENTS").
We have also examined such corporate records of Leuchemix and such other
documents and certificates of public officials and representatives of Leuchemix
as we have deemed necessary as a basis for the opinions expressed herein.
We have assumed, without any independent investigation or verification of any
kind: (i) the genuineness of all signatures; (ii) the authenticity and
completeness of all documents submitted to us as originals; (iii) the conformity
to the originals of all documents submitted to us as copies; (iv) that there are
no agreements or understandings among any of the parties to the Transaction
Documents, written or oral, or usage of trade or course of prior dealing among
such parties, that would, in any case, define, supplement or qualify
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Combimatrix Corporation
October 1, 2004
Page 2
any of the terms of the Transaction Documents; (v) the legal capacity of all
natural persons; and (vi) as to documents executed by parties other than
Leuchemix, that each such party had the power to enter into and perform its
obligations thereunder, and that such documents have been duly and validly
authorized, executed and delivered by, and are binding upon and enforceable
against, such entities.
We express no opinion as to the laws of any jurisdiction other than California
and the United States, nor as to the effect on the transactions contemplated by
the Transaction Documents of any antitrust or tax laws or regulations or, except
as expressly set forth in paragraph 6 below, any securities laws or regulations.
Based on the foregoing and subject to the qualifications set forth below, it is
our opinion that:
1. Leuchemix has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California and has
all requisite corporate power and corporate authority to own and operate its
properties and to carry on its business as presently conducted.
2. Leuchemix's authorized capitalization is as set forth in the Amended
Articles. To our knowledge, Six Million Two Hundred Seventy-Five Thousand
(6,275,000) shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The shares of the Company's Series A
Preferred Stock to be sold to the Investor (the "SHARES"), when issued and paid
for pursuant to the terms of the Purchase Agreement, will be duly authorized,
validly issued, fully paid and nonassessable. The Common Stock issuable upon
conversion of the Shares has been reserved for issuance and, when and if issued
upon such conversion in accordance with the Amended Articles, will be duly
authorized, validly issued, fully paid and nonassessable. The issuance of the
Shares and the Common Stock issuable upon conversion of the Shares is, to our
knowledge, not subject to any preemptive rights or rights of first refusal or
other similar rights created by Leuchemix. Other than as set forth in the
Transaction Documents, the Amended Articles or the Schedule of Exceptions
referenced in the Purchase Agreement, there are, to our knowledge, no options,
warrants, conversion privileges or other rights outstanding to purchase or
otherwise obtain from Leuchemix any securities of Leuchemix.
3. Leuchemix has all requisite corporate power and corporate authority
to issue the Shares, and all corporate action required to be taken for the due
and proper authorization and valid issuance of the Shares has been taken.
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Combimatrix Corporation
October 1, 2004
Page 3
4. Leuchemix has all requisite corporate power and corporate authority
to execute and deliver the Transaction Documents and to perform its obligations
thereunder. All corporate action required to be taken for the due and proper
authorization, execution and delivery of the Transaction Documents by Leuchemix
and the performance by Leuchemix of the covenants of Leuchemix set forth in the
Transaction Documents has been taken, and the Transaction Documents have been
executed and delivered by Leuchemix.
5. Each of the Transaction Documents constitutes a valid and legally
binding agreement of Leuchemix, enforceable against Leuchemix in accordance with
its respective terms.
6. Subject to the accuracy of your representations in Section 3 of the
Purchase Agreement, the offer, sale and issuance of the Shares to you in
conformity with the terms of the Purchase Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended, and the qualification requirements of Section 25110 of the
California Corporate Securities Law of 1968, as amended.
Our opinion set forth above in paragraph 5 above is subject to and limited by
the following:
(i) the effect of bankruptcy, insolvency, fraudulent
conveyance, reorganization, receivership, conservatorship, arrangement,
moratorium and other laws affecting or relating to the rights of
creditors generally;
(ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding
in equity or at law;
(iii) the effect of applicable court decisions, invoking
statutes or principles of equity, which have held that certain
covenants and provisions of agreements are unenforceable where the
breach of such covenants or provisions imposes restrictions or burdens
upon a party, and it cannot be demonstrated that the enforcement of
such restrictions or burdens is necessary for the protection of the
other party, or which have held that the other party's enforcement of
such covenants or provisions under the circumstances would violate such
other party's covenants of good faith and fair dealing implied under
California law; and
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Combimatrix Corporation
October 1, 2004
Page 4
(iv) the enforceability of provisions regarding indemnity or
contribution (to the extent contrary to public policy), non-waiver of
remedies by a failure or delay of exercise, severability, parol
evidence, voting arrangements or rights, attorneys' fees, choice of
venue, consent to jurisdiction and choice of law.
The opinions set forth herein are as of the date of this letter and we do not
render any opinion as to the effect of any matter which may occur or be
effective subsequent to the date hereof. This opinion is rendered solely for
your information in connection with the transactions contemplated by the
Purchase Agreement to which Leuchemix is a party and may not be relied upon by
any other person or for any other purpose without our prior express written
consent.
Very truly yours,
/s/ Pillsbury Winthrop LLP
--------------------------
Pillsbury Winthrop, LLP
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