STANDBY EQUITY DISTRIBUTION AGREEMENT
Exhibit
10.1
STANDBY
EQUITY DISTRIBUTION AGREEMENT
THIS
AGREEMENT
dated as
of the 14th
day of
June 2006 (the “Agreement”)
between CORNELL
CAPITAL PARTNERS, LP,
a
Delaware limited partnership (the “Investor”),
and
ACACIA
RESEARCH CORPORATION,
a
Delaware corporation (the “Company”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, from time to time
as
provided herein, and the Investor shall purchase from the Company up to Fifty
Million Dollars ($50,000,000) of newly issued shares of the Company’s
Acacia Research - CombiMatrix common stock, par value $.001 per share (the
“Common
Stock”);
and
WHEREAS,
the
offer and sale of the shares of Common Stock issuable hereunder have been
registered by the Company in the Registration Statement on Form S-3 filed with
the U.S. Securities and Exchange Commission (the “SEC”),
which
has been declared effective by the SEC under the Securities Act of 1933 (the
“Securities
Act”).
NOW,
THEREFORE,
the
parties hereto agree as follows:
ARTICLE
I.
Certain
Definitions
Section
1.1. “Advance”
shall
mean the portion of the Commitment Amount requested by the Company in the
Advance Notice given to the Investor from time to time.
Section
1.2. “Advance
Date”
shall
mean the first (1st)
Trading
Day after expiration of the applicable Pricing Period for each
Advance.
Section
1.3. “Advance
Notice”
shall
mean a written notice in the form of Exhibit
A
attached
hereto to the Investor executed by an officer of the Company and setting forth
the Advance amount that the Company requests from the Investor in connection
with each Advance requested by the Company.
Section
1.4. “Advance
Notice Date”
shall
mean each date the Company delivers (in accordance with Section 2.2(b) of this
Agreement) to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement. No Advance Notice
Date shall be less than five (5) Trading Days after the prior Advance Notice
Date.
Section
1.5. “Base
Prospectus”
shall
mean the Company’s prospectus accompanying the Registration Statement.
Section
1.6. “Bid
Price”
shall
mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of
the
Common Stock on the Principal Market or if the Common Stock is not traded on
a
Principal Market, the highest reported bid price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc.
Section
1.7. “Closing”
shall
mean one of the closings of a purchase and sale of Common Stock pursuant to
Section 2.3.
Section
1.8. “CombiMatrix”
shall
mean CombiMatrix Corporation, a wholly owned subsidiary of the
Company.
Section
1.9. “Commitment
Amount”
shall
mean the aggregate amount of Fifty Million Dollars ($50,000,000) which the
Investor has agreed to provide to the Company in order to purchase the Shares
of
Common Stock pursuant to the terms and conditions of this Agreement,
provided
that,
the Company shall not effect any sale under this Agreement and the Investor
shall not have the right or the obligation to purchase Shares of Common Stock
under this Agreement to the extent that after giving effect to such purchase
and
sale the aggregate number of shares issued under this Agreement would exceed
13,368,674 shares of the Company’s capital stock regardless of class (which is
less than 20% of the 66,876,811 outstanding shares of the Company’s capital
stock regardless of class as of the date of this Agreement) unless or until
the
Company obtains any necessary shareholder approval or consent in accordance
with
Nasdaq rules prior to such issuance.
Section
1.10. “Commitment
Period”
shall
mean the period commencing on the earlier to occur of (i) the Effective Date,
or
(ii) such earlier date as the Company and the Investor may mutually agree in
writing, and expiring on the earliest to occur of (x) the date on which the
Investor shall have made payment of Advances pursuant to this Agreement in
the
aggregate amount of the Commitment Amount, (y) the date this Agreement is
terminated pursuant to Section 10.2 or (z) the date occurring twenty-four (24)
months after the Effective Date.
Section
1.11. “Common
Stock”
shall
mean shares of the Company’s Acacia Research - CombiMatrix common stock, par
value $.001 per share.
Section
1.12. “Damages”
shall
mean any loss, claim, damage, liability, reasonable costs and expenses
(including, without limitation, reasonable attorney’s fees and disbursements and
costs and expenses of expert witnesses and investigation).
Section
1.13. “Effective
Date”
shall
mean the date of execution of this Agreement.
Section
1.14. Intentionally
Omitted.
Section
1.15. “Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Section
1.16. “Material
Adverse Effect”
shall
mean any condition, circumstance, or situation that prohibits or otherwise
materially interferes with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material
respect.
Section
1.17. “Market
Price”
shall
mean the lowest daily VWAP of the Common Stock during the Pricing
Period.
Section
1.18. “Maximum
Advance Amount”
shall
be Five Million Dollars ($5,000,000) per Advance Notice, subject to the
limitations set forth in Section 1.8 of this Agreement.
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Section
1.19. “Minimum
Acceptable Price”
shall
mean the lowest price at which the Company is obligated to sell Shares during
the applicable Pricing Period set forth in the Advance Notice (not taking into
account any discount used to calculate the Purchase Price).
Section
1.20. “NASD”
shall
mean the National Association of Securities Dealers, Inc.
Section
1.21. “Person”
shall
mean an individual, a corporation, a partnership, an association, a trust or
other entity or organization, including a government or political subdivision
or
an agency or instrumentality thereof.
Section
1.22. “Pricing
Period”
shall
mean the five (5) consecutive Trading Days after the Advance Notice Date,
subject to any reduction pursuant to Section
2.2(c).
Section
1.23. “Prospectus”
shall
mean the Base Prospectus, as supplemented by any Prospectus Supplement.
Section
1.24. “Prospectus
Supplement”
shall
mean any prospectus supplement to the Base Prospectus filed with the SEC
pursuant to Rule 424(b) under the Securities Act, including, without limitation,
the Prospectus Supplement required pursuant to Section
6.7
hereof.
Section
1.25. “Principal
Market”
shall
mean the following markets or exchanges on which the Common Stock is listed
or
quoted for trading on the date in question: the Nasdaq National Market, the
Nasdaq Capital Market, the New York Stock Exchange, the American Stock Exchange,
or the OTC Bulletin Board, whichever is at the time the principal trading
exchange or market for the Common Stock.
Section
1.26. “Purchase
Price”
shall
be set at ninety seven and one half percent (97.5%) of the Market Price during
the applicable Pricing Period.
Section
1.27. “Registration
Statement”
shall
mean the Company’s shelf-registration statement on Form S-3, SEC File Number
333-133529, filed by the Company with the SEC under the Securities Act for
the
registration of the Common Stock, as such Registration Statement may be amended
and supplemented from time to time.
Section
1.28. “SEC”
shall
mean the United States Securities and Exchange Commission.
Section
1.29. “Securities
Act”
shall
have the meaning set forth in the recitals of this Agreement.
Section
1.30. “SEC
Documents”
shall
mean Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and Proxy Statements of the Company as supplemented to
the
date hereof, filed by the Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may
be,
until such time as the Company no longer has an obligation to maintain the
effectiveness of the Registration Statement.
Section
1.31. “Shares”
shall
mean the shares of Common Stock to be issued hereunder pursuant
to Advances.
3
Section
1.32. “Subsidiary”
or “Subsidiaries” shall
mean a subsidiary or subsidiaries of CombiMatrix.
Section
1.33.“Trading
Day”
shall
mean any day during which the New York Stock Exchange shall be open for
business.
Section
1.34. “VWAP”
shall
mean the volume weighted average price of the Common Stock as quoted by
Bloomberg, LP.
ARTICLE
II.
Advances
Section
2.1. Advances.
Subject
to the terms and conditions of this Agreement (including, without limitation,
the provisions of Article VII hereof), the Company, at its sole and exclusive
option, may issue and sell to the Investor, and the Investor shall purchase
from
the Company, shares of Common Stock by the delivery, in the Company’s sole
discretion, of one or more Advance Notices to the Investor. The number of shares
of Common Stock that the Investor shall purchase pursuant to each Advance Notice
shall be determined by dividing the amount of the Advance by the Purchase Price.
No fractional shares shall be issued. Fractional shares shall be rounded to
the
next higher whole number of shares. The Advance Notice shall specify the Advance
amount requested and establish the Minimum Acceptable Price for such Advance
Notice.
Section
2.2. Mechanics.
(a) Advance
Notice.
At any
time during the Commitment Period, the Company may require the Investor to
purchase shares of Common Stock by delivering an Advance Notice to the Investor,
subject to the conditions set forth in Article VII; provided, however, the
amount of each Advance as designated by the Company in the applicable Advance
Notice shall not be more than the Maximum Advance Amount and the aggregate
amount of the Advances actually paid by Investor to the Company pursuant to
this
Agreement shall not exceed the Commitment Amount. The Company acknowledges
that
the Investor may sell shares of the Common Stock corresponding with a particular
Advance Notice after the Advance Notice is received by the Investor. There
shall
be a minimum of five (5) Trading Days between each Advance Notice
Date.
(b) Date
of Delivery of Advance Notice.
An
Advance Notice shall be deemed delivered on (i) the Trading Day it is received
by facsimile or otherwise by the Investor if such notice is received prior
to
5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it
is
received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading
Day
or at any time on a day which is not a Trading Day. No Advance Notice may be
deemed delivered on a day that is not a Trading Day.
(c) Below
Minimum Acceptable Price. If
the
VWAP for the Common Stock on any Trading Day in a Pricing Period is lower than
the Minimum Acceptable Price, then for each such Trading Day, the total amount
of the Advance requested by the Company corresponding to such Pricing Period
shall be automatically reduced by Twenty Percent (20%) and each such Trading
Day
shall be excluded from the Pricing Period for purposes of determining the Market
Price. The number of shares of Common Stock to be delivered to the Investor
at
the Closing (in accordance with Section 2.3 of this Agreement) shall correspond
with the Advance Notice amount as reduced pursuant to this Section 2.2, except
that the Company shall be obligated to sell, and the Investor shall be obligated
to purchase that number of Shares of Common Stock corresponding to such Advance
Notice that have been sold by the Investor during the applicable Pricing Period
in an amount not to exceed the number of shares specified in the Advance Notice
during the applicable Pricing Period and such shares shall be priced at the
greater
of the
Purchase Price or applicable Minimum Acceptable Price.
4
Section
2.3. Closings.
On each
Advance Date the Company shall deliver the Shares purchased by the Investor
to
the Investor (free of restrictive legend) against simultaneous payment therefor
to the Company’s designated account by wire transfer of immediately available
funds provided that if the Shares are received by Investor later than 1:00
p.m.
(New York time) payment shall be made with next day funds. In addition, on
or
prior to the Advance Date, each of the Company and the Investor shall deliver
to
the other all documents, instruments and writings required to be delivered
by
either of them pursuant to this Agreement in order to implement and effect
the
transactions contemplated herein. To the extent the Company has not paid the
fees, expenses, and disbursements of the Investor in accordance with Section
12.4, the amount of such fees, expenses, and disbursements may be deducted
by
the Investor (and shall be paid to the relevant party) directly out of the
proceeds of the Advance with no reduction in the amount of shares of the Common
Stock to be delivered on such Advance Date.
Section
2.4. Hardship.
In the
event the Investor sells shares of the Common Stock after receipt of an Advance
Notice and the Company fails to perform its obligations as mandated in Section
2.3, and specifically the Company fails to deliver to the Investor on the
Advance Date the shares of Common Stock corresponding to the applicable Advance
pursuant to Section 2.3(i), the Company acknowledges that the Investor may
suffer financial hardship and therefore shall be liable for any and all losses,
commissions, fees, or financial hardship caused to the Investor.
Section
2.5. Current
Report.
Within
four (4) business days after the Effective Date (and prior to the Company
delivering an Advance Notice to the Investor hereunder), the Company shall
file
with the SEC a report on Form 8-K relating to the transactions contemplated
by,
and describing the material terms and conditions of, this Agreement, and to
the
extent not included in a Prospectus Supplement, disclosing all information
relating to the transactions contemplated hereby required to be disclosed in
the
Registration Statement and Base Prospectus, including, without limitation,
information required to be disclosed in the section captioned “Plan of
Distribution” and “Risk Factors” in the Base Prospectus (the “Current
Report”).
Prior
to filing the Current Report with the SEC, the Company shall provide the
Investor a reasonable opportunity to comment on a draft of such Current Report
and shall give due consideration to such comments.
ARTICLE
III.
Representations
and Warranties of Investor
Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:
5
Section
3.1. Organization
and Authorization.
The
Investor is duly incorporated or organized and validly existing in the
jurisdiction of its incorporation or organization and has all requisite power
and authority to purchase and hold the securities issuable hereunder. The
decision to invest and the execution and delivery of this Agreement by such
Investor, the performance by such Investor of its obligations hereunder and
the
consummation by such Investor of the transactions contemplated hereby have
been
duly authorized and requires no other proceedings on the part of the Investor.
The undersigned has the right, power and authority to execute and deliver this
Agreement and all other instruments, on behalf of the Investor. This Agreement
has been duly executed and delivered by the Investor and, assuming the execution
and delivery hereof and acceptance thereof by the Company, will constitute
the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.
Section
3.2. Evaluation
of Risks.
The
Investor has such knowledge and experience in financial, tax and business
matters as to be capable of evaluating the merits and risks of, and bearing
the
economic risks entailed by, an investment in the Company and of protecting
its
interests in connection with this transaction. It recognizes that its investment
in the Company involves a high degree of risk.
Section
3.3. No
Legal Advice From the Company.
The
Investor acknowledges that it had the opportunity to review this Agreement
and
the transactions contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. The Investor is relying solely on
such
counsel and advisors and not on any statements or representations of the Company
or any of its representatives or agents for legal, tax or investment advice
with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
Section
3.4. Not
an
Affiliate.
The
Investor is not an officer, director or a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with the Company or any “Affiliate”
of
the
Company (as that term is defined in Rule 405 of the Securities Act).
Section
3.5. Trading
Activities.
The
Investor’s trading activities with respect to the Common Stock shall be in
compliance with all applicable federal and state securities laws, rules and
regulations and the rules and regulations of the Principal Market on which
the
Common Stock is listed or traded. Neither
the Investor nor its affiliates has an open short position in the Common Stock
of the Company, the Investor agrees that it shall not, and that it will cause
its affiliates not to, engage in any short sales of or hedging transactions
with
respect to the Common Stock, provided
that the
Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor pursuant
to the Advance Notice
during
the applicable Pricing Period.
Section
3.6. Proposed
Split-Off.
Investor represents and warrants that it has reviewed the Company’s current
report on Form 8-K filed with the SEC on January 9, 2006, and the press release
included therewith as Exhibit 99.1, wherein the Company disclosed that its
Board
of Directors has approved the split-off of CombiMatrix Corporation by redeeming
all of the issued and outstanding shares of CombiMatrix Stock for all of the
outstanding shares of common stock of CombiMatrix Corporation. Investor
acknowledges that the Securities to be purchased by Investor may be exchanged
for shares of common stock of CombiMatrix Corporation upon terms and conditions
contained in the Company’s Articles of Incorporation, as amended from time to
time, in the Company’s sole and absolute discretion.
6
ARTICLE
IV.
Representations
and Warranties of the Company
Except
as
stated below, on the disclosure schedules attached hereto or in the SEC
Documents (as defined herein), the Company hereby represents and warrants to,
and covenants with, the Investor that the following are true and correct as
of
the date hereof:
Section
4.1. Organization
and Qualification.
The
Company is duly incorporated or organized and validly existing in the
jurisdiction of its incorporation or organization and has all requisite
corporate power to own its properties and to carry on its business as now being
conducted. Each of the Company, CombiMatrix and its Subsidiaries, is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on
the
Company and its subsidiaries taken as a whole.
Section
4.2. Authorization,
Enforcement, Compliance with Other Instruments.
(i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, and any related agreements, in accordance with the
terms
hereof and thereof, (ii) the execution and delivery of this Agreement, and
any
related agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement,
and any related agreements have been duly executed and delivered by the Company,
(iv) this Agreement, and assuming the execution and delivery thereof and
acceptance by the Investor and any related agreements constitute the valid
and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the
enforcement of creditors’ rights and remedies.
Section
4.3. Capitalization.
The
authorized capital stock of the Company and the shares thereof issued and
outstanding as of the Effective Date are as set forth in the 2005 Form 10k
or on
Schedule 4.3 attached hereto. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents or on Schedule 4.3 attached hereto, no shares of Common Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in the
SEC Documents, as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
Common Stock or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which CombiMatrix or any of its Subsidiaries
is or may become bound to issue additional shares of Common Stock or any of
its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of Common Stock or any of its Subsidiaries, (ii)
there are no outstanding debt securities (iii) there
are no outstanding registration statements other than on Form S-8 and the
Registration Statement and (iv) there are no agreements or arrangements under
which CombiMatrix or any of its Subsidiaries is obligated to register the sale
of any of their securities under the Securities Act. There are no securities
or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of
the
transactions described herein or therein. The Company has furnished to the
Investor true and correct copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate
of Incorporation”),
and
the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
and
the terms of all securities convertible into or exercisable for Common Stock
and
the material rights of the holders thereof in respect thereto.
7
Section
4.4. No
Conflict.
The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not
(i)
result in a violation of the Certificate of Incorporation, any certificate
of
designations of any outstanding series of preferred stock of the Company or
By-laws or (ii) conflict with or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market on which
the
Common Stock is quoted) applicable to the Company or any of its subsidiaries
or
by which any material property or asset of the Company or any of its
subsidiaries is bound or affected and which would cause a Material Adverse
Effect. Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles
of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted in violation of any material
law, ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under or contemplated by this Agreement in accordance with
the terms hereof or thereof. All consents, authorizations, orders, filings
and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which
might
give rise to any of the foregoing.
Section
4.5. SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Exchange Act since January
1,
2004. The Company has delivered to the Investor or its representatives, or
made
available through the SEC’s website at xxxx://xxx.xxx.xxx, true and complete
copies of the SEC Documents. As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the “Financial
Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is
not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
8
Section
4.6. 10b-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were made,
not misleading.
Section
4.7. No
Default.
Except
as disclosed in the SEC Documents, the Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of
the
exhibits or attachments hereto will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under its Certificate of Incorporation, By-Laws,
any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or
by
which it is bound, or any statute, or any decree, judgment, order, rules or
regulation of any court or governmental agency or body having jurisdiction
over
the Company or its properties, in each case which default, lien or charge is
likely to cause a Material Adverse Effect on the Company’s business or financial
condition.
Section
4.8. Absence
of Events of Default.
Except
for matters described in the SEC Documents and/or this Agreement, no Event
of
Default, as defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (as so defined), has occurred and is
continuing, which would have a Material Adverse Effect on the Company’s
business, properties, prospects, financial condition or results of
operations.
Section
4.9. Intellectual
Property Rights.
CombiMatrix and
its
Subsidiaries own, possess, license or have other rights to use all foreign
and
domestic patents, patent applications, trade and service marks, trade and
service xxxx registrations, trade names, copyrights, licenses, inventions,
trade
secrets, technology, Internet domain names, know-how and other intellectual
property, necessary for the conduct of CombiMatrix Group's (as defined in the
Prospectus) businesses as now conducted or as proposed in the Prospectus to
be
conducted (collectively, the "INTELLECTUAL PROPERTY"). Except as set forth
in
the Prospectus, (a) the Company or CombiMatrix have not received written notice,
and has no knowledge of, any rights of third parties to any such Intellectual
Property; (b) to the Company's or CombiMatrix’s knowledge, there is no
infringement by third parties of any such Intellectual Property; (c) there
is no
pending or, to the Company's or CombiMatrix’s knowledge, threatened action,
suit, proceeding or claim by others challenging the Company's and its
Subsidiaries' rights in or to any such Intellectual Property; (d) there is
no
pending or, to the Company's or CombiMatrix’s knowledge, threatened action,
suit, proceeding or claim by others challenging the validity or scope of any
such Intellectual Property; (e) there is no pending or, to the Company's or
CombiMatrix’s knowledge, threatened action, suit, proceeding or claim by others
that the Company and its Subsidiaries infringe or otherwise violate any patent,
trademark, copyright, trade secret or other proprietary rights of others; (f)
to
the Company's or CombiMatrix’s knowledge, there is no third-party U.S. patent or
published U.S. patent application which contains claims for which an
Interference Proceeding (as defined in 35 U.S.C. ss. 135) has been commenced
against any patent or patent application which constitutes the Intellectual
Property described in the Prospectus; and (g) the Company, CombiMatrix and
its
Subsidiaries have taken all steps necessary to perfect its ownership of the
Intellectual Property, in each of clauses (a)-(g) except for such infringement,
conflict or action which would not, singularly or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
9
Section
4.10. Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute nor,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union and the Company and its subsidiaries believe that their relations with
their employees are good.
Section
4.11. Environmental
Laws.
To the
best of its knowledge, the Company and its subsidiaries are (i) in compliance
with any and all applicable material foreign, federal, state and local laws
and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
Section
4.12. Title.
Except
as set forth in the SEC Documents, the Company has good and marketable title
to
its properties and material assets owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Company. Any real property
and
facilities held under lease by the Company and its subsidiaries are held by
them
under valid, subsisting and enforceable leases with such exceptions as are
not
material and do not interfere with the use made and proposed to be made of
such
property and buildings by the Company and its subsidiaries.
Section
4.13. Insurance.
The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
10
Section
4.14. Regulatory
Permits.
To the
best of its knowledge, the Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
Section
4.15. Internal
Accounting Controls.
The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
Section
4.16. No
Material Adverse Breaches, etc.
Except
as set forth in the SEC Documents, neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction,
or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect on the business, properties, operations, financial condition, results
of
operations or prospects of the Company or its subsidiaries. Except as set forth
in the SEC Documents, neither the Company nor any of its subsidiaries is in
breach of any contract or agreement which breach, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations
or
prospects of the Company or its subsidiaries.
Section
4.17. Absence
of Litigation.
Except
as set forth in the SEC Documents or in Schedule 4.17 attached hereto, there
is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting CombiMatrix, the Common Stock or any Subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a Material Adverse
Effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of CombiMatrix to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of CombiMatrix and
its
Subsidiaries taken as a whole.
Section
4.18. Subsidiaries.
Except
as disclosed in the SEC Documents, the Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity.
11
Section
4.19. Tax
Status.
Except
as disclosed in the SEC Documents, the Company and each of its subsidiaries
has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) has paid all taxes and other governmental assessments
and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment
of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of
the
Company know of no basis for any such claim.
Section
4.20. Certain
Transactions.
Except
as set forth in the SEC Documents none of the officers, directors, or employees
of the Company is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
Section
4.21. Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
Section
4.22. Use
of
Proceeds.
The
proceeds from the sale of the Shares shall be used by the Company as set forth
in the Base Prospectus and any Prospectus Supplements filed pursuant to the
requirements of this Agreement.
Section
4.23. Further
Representation and Warranties of the Company.
For so
long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that
it
will maintain the listing of its Common Stock on the Principal
Market.
Section
4.24. Opinion
of Counsel.
Investor shall receive an opinion letter from counsel to the Company on the
date
hereof.
Section
4.25. Dilution.
The
Company is aware and acknowledges that issuance of shares of the Common Stock
could cause dilution to existing shareholders and could significantly increase
the outstanding number of shares of Common Stock.
Section
4.26. Securities
Act.
The
Company has complied with all applicable federal and state securities laws
in
connection with the offer, issuance and sale of the Shares hereunder.
(a) The
Company has prepared and filed with the SEC in accordance with the provisions
of
the Securities Act the Registration Statement, including the Base Prospectus,
relating to the Shares. The Registration Statement was declared effective by
order of the SEC on May 26, 2006. As of the date hereof, no stop order
suspending the effectiveness of the Registration Statement has been issued
by
the SEC or is continuing in effect under the Securities Act and no proceedings
therefor are pending before or, to the Company’s knowledge, threatened by the
SEC. No order preventing or suspending the use of the Prospectus has been issued
by the SEC.
12
(b) The
Company meets the requirements for the use of Form S-3 under the Securities
Act.
The Registration Statement in the form in which it became effective and the
Base
Prospectus complied in all material respects with the provisions of the
Securities Act and did not at any such time contain an untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein (in the case of the Prospectus, in
the
light of the circumstances under which they were made) not misleading; provided
that this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Base Prospectus made in
reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly
for use therein.
(c) In
accordance with Rule 2710(b)(7)(C)(i) of the Conduct Rules of the National
Association of Securities Dealers, Inc., the Shares have been registered with
the SEC on Form S-3 under the Securities Act and are being offered pursuant
to
Rule 415 promulgated under the Securities Act.
(d) Each
Prospectus Supplement required to be filed pursuant this Agreement, when filed
with the SEC under Rule 424(b) under the Securities Act, shall comply in all
material respects with the provisions of the Securities Act and shall not at
such time contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from any Prospectus Supplement made in reliance
upon
and in conformity with information relating to the Investor furnished to the
Company in writing by or on behalf of the Investor expressly for use
therein.
(e) The
Company has not distributed and, prior to the completion of the distribution
of
the Common Stock, shall not distribute any offering material in connection
with
the offering and sale of the Common Stock other than the Registration Statement,
the Base Prospectus as supplemented by any Prospectus Supplement or such other
materials, if any, permitted by the Securities Act.
ARTICLE
V.
Indemnification
The
Investor and the Company represent to the other the following with respect
to
itself:
Section
5.1. Indemnification.
13
(a) In
consideration of the Investor’s execution and delivery of this Agreement, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, each
affiliate, employee, representative and advisor of and to each person, if any,
who controls the Investor within the meaning of Section 15 of the Securities
Act
or Section 20(a) of the Exchange Act (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Investor
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Investor Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Investor Indemnitees or any of them as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any representation
or warranty made by the Company in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement
or
any other certificate, instrument or document contemplated hereby or thereby,
or
(c) any violation of law (including United States federal securities laws)
in
connection with the transactions contemplated by this Agreement by the Company
or any of its subsidiaries, affiliates, officers, directors or employees, (d)
any untrue statement or alleged untrue statement of a material fact contained,
or incorporated by reference, in the Registration Statement or any amendment
thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (e) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus or any omission or alleged omission
to state therein, or in any document incorporated by reference therein, a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. To the extent that the foregoing undertaking by the Company may
be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Investor’s other obligations under this Agreement, the
Investor shall defend, protect, indemnify and hold harmless the Company each
affiliate, employee, representative and advisor of and to each person, if any,
who controls the Company within the meaning of Section 15 of the Securities
Act
or Section 20(a) of the Exchange Act (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement, or any instrument or document contemplated hereby
or
thereby executed by the Investor, (b) any breach of any covenant, agreement
or
obligation of the Investor(s) contained in this Agreement, or any other
certificate, instrument or document contemplated hereby or thereby executed
by
the Investor, or (c) any violation of law (including United States federal
securities laws) in connection with the transactions contemplated by this
Agreement by the Investor or any of its affiliates, officers, directors or
employees, or (d) any untrue statement or alleged untrue statement of a material
fact contained in the Current Report or any Prospectus Supplement or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case, to
the
extent, but only to the extent, the untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon, and in conformity with,
written information furnished by the Investor to the Company expressly for
inclusion in the Current Report or such Prospectus Supplement.. To the extent
that the foregoing undertaking by the Investor may be unenforceable for any
reason, the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
14
(c) The
obligations of the parties to indemnify or make contribution under this Section
5.1 shall survive termination.
Section
5.2. Indemnification
Procedures.
Promptly
after a person receives notice of a claim or the commencement of an action
for
which the person intends to seek indemnification under Section
5.1,
the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding; provided,
however,
that
failure to notify the indemnifying party will not relieve the indemnifying
party
from liability under Section
5.1,
except
to the extent it has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it. After
an
indemnifying party notifies an indemnified party that the indemnifying party
wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,
action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a
condition to receiving indemnification as provided in Section
5.1,
will
cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying
party will be liable for any settlement of any action effected without its
prior
written consent. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested (by written notice) an indemnifying
party
to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated hereby effected without its written consent if: (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
written notice of the terms of such settlement at least 30 days prior to such
settlement being entered into, (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to
the
date of such settlement, (iv) such settlement includes an unconditional release
of the indemnifying party from all further liability for losses arising out
of
such action or claim, (v) such settlement does not include an injunction that
will materially adversely affect any indemnifying party, and (vi) such
settlement does not admit liability or fault on the part of any indemnifying
party. No indemnifying party will, without the prior written consent of the
indemnified party, effect any settlement of a pending or threatened action
with
respect to which an indemnified party is, or is informed that it may be, made
a
party and for which it would be entitled to indemnification, unless the
settlement includes an unconditional release of the indemnified party from
all
liability and claims which are the subject matter of the pending or threatened
action.
15
If
for
any reason the indemnification provided for in this Agreement is not available
to, or is not sufficient to hold harmless, an indemnified party in respect
of
any loss or liability referred to in Section
5.1
as to
which such indemnified party is entitled to indemnification thereunder, each
indemnifying party shall, in lieu of indemnifying the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result
of
such loss or liability, (i) in the proportion which is appropriate to reflect
the relative benefits received by the indemnifying party, on the one hand,
and
by the indemnified party, on the other hand, from the sale of Shares which
is
the subject of the claim, action, suit or proceeding which resulted in the
loss
or liability or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only
the
relative benefits referred to in clause (i) above, but also the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, with respect to the statements or omissions which are the subject
of
the claim, action, suit or proceeding that resulted in the loss or liability,
as
well as any other relevant equitable considerations.
The
remedies provided for in Section
5.1
and this
Section
5.2 are
not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity.
ARTICLE
VI.
Covenants
The
Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Commitment Period:
Section
6.1. Effective
Registration Statement.
During
the Commitment Period, the Company shall use its best efforts to maintain the
continuous effectiveness of the Registration Statement under the Securities
Act.
Section
6.2. Listing
of Common Stock.
The
Company shall maintain the Common Stock’s authorization for quotation on a
Principal Market and shall comply with the Company’s reporting, filing and other
obligations under the bylaws, listed securities maintenance standards and other
rules of such Principal Market.
Section
6.3. Exchange
Act Registration.
The
Company will cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act, will file in a timely manner all reports
and
other documents required of it as a reporting company under the Exchange Act
and
will not take any action or file any document (whether or not permitted by
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said
Exchange Act.
16
Section
6.4. Transfer
Agent Instructions.
The
Company shall deliver instructions to its transfer agent to issue shares of
Common Stock to the Investor free of restrictive legends on or before each
Advance Date as set forth in Section 2.3.
Section
6.5. Corporate
Existence.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company.
Section
6.6. Notice
of Certain Events Affecting Registration; Suspension of Right to Make an
Advance.
The
Company will immediately notify the Investor, and confirm in writing, upon
its
becoming aware of the occurrence of any of the following events: (i) receipt
of
any request for additional information by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement, the Prospectus, or for any additional information; (ii) the issuance
by the SEC or any other Federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Common Stock for sale in any jurisdiction
or
the initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, Prospectus,
or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain
any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or of the
necessity to amend the Registration Statement or supplement the Prospectus
to
comply with the Securities Act or any other law; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available
to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events. If at any time the SEC shall issue
any stop order suspending the effectiveness of the Registration Statement,
the
Company shall use commercially reasonable efforts to obtain the withdrawal
of
such order at the earliest possible time.
Section
6.7. Prospectus
Delivery.
The
Company shall file with the SEC a Prospectus Supplement prior to 8:00 p.m.
(New
York time) on the first Trading Day immediately following each Advance Date,
which shall include the identity of the Investor, the number of shares of Common
Stock issued pursuant to such Advance and the purchase price of the shares
of
Common Stock so issued. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such Prospectus Supplement (and shall
give due consideration to all such comments) and shall deliver or make available
to the Investor, without charge, an electronic copy of each form of Prospectus
Supplement, together with the Base Prospectus. The Company consents to the
use
of the Prospectus (and of any Prospectus Supplement thereto) in accordance
with
the provisions of the Securities Act and with the securities or “blue sky” laws
of the jurisdictions in which the Shares may be sold by the Investor, in
connection with the offering and sale of the Shares and for such period of
time
thereafter as the Prospectus is required by the Securities Act to be delivered
in connection with sales of the Shares. If during such period of time any event
shall occur that in the judgment of the Company and its counsel is required
to
be set forth in the Prospectus or should be set forth therein in order to make
the statements made therein, in the light of the circumstances under which
they
were made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with the Securities Act or any other applicable law or
regulation, the Company shall forthwith prepare and file with the SEC an
appropriate Prospectus Supplement to the Prospectus and shall expeditiously
furnish or make available to the Investor an electronic copy
thereof.
17
Section
6.8. Consolidation;
Merger.
The
Company shall not, at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially
all the assets of the Company to another entity (a “Consolidation
Event”)
unless
the resulting successor or acquiring entity (if not the Company) assumes by
written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to
this
Agreement.
Section
6.9. Issuance
of the Common Stock.
The sale
of the Common Stock shall be made in accordance with the provisions and
requirements of the Securities Act and any applicable state securities
law.
Section
6.10. Review
of Public Disclosures.
All SEC
filings (including, without limitation, all filings required under the Exchange
Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
public disclosures made by the Company, including, without limitation, all
investor relations materials, and scripts of analysts meetings and calls, shall
be reviewed and approved for release by the Company’s attorneys and, if
containing financial information, the Company’s independent certified public
accountants.
Section
6.11. Compliance
With Laws.
(i) The
Company will not, directly or indirectly, take any action designed to cause
or
result in, or that constitutes or might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the Company
or
which caused or resulted in, or which would in the future reasonably be expected
to cause or result in, stabilization or manipulation of the price of any
security of the Company.
(ii) The
Investor shall comply with all applicable provisions of the Securities Act
and
the Exchange Act, except for such non-compliance as would not, individually
or
in the aggregate, prohibit or otherwise interfere with the ability of the
Investor to enter into and perform its obligations under this Agreement in
any
material respect. Without limiting the generality of the foregoing, neither
the
Investor nor any of its officers, directors or affiliates has taken or will
take, directly or indirectly, any action designed or intended to stabilize
or
manipulate the price of any security of the Company, or which caused or resulted
in, or which might in the future reasonably be expected to cause or result
in
stabilization or manipulation of the price of any security of the
Company.
18
Section
6.12. Limitations
on Holdings and Issuances.
At no
time during the term of this Agreement shall the Investor directly or indirectly
own more than 9.9% of the then issued in outstanding shares of the Common Stock.
The Company shall not be obligated to issue and the Investor shall not be
obligated to purchase any shares of Common Stock which would result in the
issuance under this Agreement to the Investor at any time of Shares which,
when
aggregated with all other shares of Common Stock then owned beneficially by
the
Investor, would result in the beneficial ownership by the Investor of more
than
9.9% of the then issued in outstanding shares of Common Stock.
Section
6.13. Selling
Restrictions.
(i) The
Investor covenants that from and after the date hereof, through and including
the 90th
day
following the termination of this Agreement (the “Restricted Period”) neither
the Investor nor any of its affiliates (within the meaning of the Exchange
Act)
nor any entity managed by the Investor shall directly or indirectly, sell any
securities of the Company, except the Shares that it owns or has the right
to
purchase as provided in an Advance Notice. During the Restricted Period, neither
the Investor nor any of its affiliates nor any entity managed by the Investor
shall sell any shares of Common Stock of the Company it does not “own” or have
the unconditional right to receive, including shares in any account of the
Investor or any account directly or indirectly managed by the Investor of any
of
its affiliates or any entity managed by the Investor. Without limiting the
generality of the foregoing, prior to and during the Restricted Period, neither
the Investor nor any of its affiliates nor any entity managed by the Investor
or
any of its affiliates shall enter into a short position with respect to shares
of Common Stock of the Company, including in any account of the Investor or
in
any account directly or indirectly managed by the Investor or any of its
affiliates or any entity managed by the Investor, except that the Investor
may
sell Shares that it is obligated to purchase under a pending Advance Notice,
but
has not yet taken possession of so long as the Investor (or the broker-dealer
as
applicable) covers any such sales with the Shares purchased pursuant to such
Advance Notice; provided, however, that the Investor shall not be required
to
cover any such sales with the Shares purchased pursuant to such Advance Notice
if the Company fails to deliver such Shares to the Investor on the applicable
Closing Date upon the terms and subject to the provisions of this Agreement.
Prior to and during Restricted Period, the Investor shall not grant any option
to purchase or acquire any right to dispose or otherwise dispose for value
of
any Shares of Common Stock or any securities convertible into or excercisable
or
exchangeable for, or warrants to purchase, any shares of Common Stock, or enter
into any swap, hedge or other agreement that transfers, in whole or in part,
the
economic risk of ownership of the Common Stock, except for such sales expressly
permitted by this Section 6.13(i).
(ii)
In
addition to the foregoing, in connection with the sale of the Company’s
securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.
Section
6.14. Broker-Dealer.
The
Investor shall use one or more brokers-dealers to effectuate all sales, if
any,
of the Shares that it may purchase from the Company pursuant to this Agreement
which (or whom) shall not be affiliated (as that term is defined in the Exchange
Act) with the Investor and not been currently engaged or used by the Company.
Investor will provide the Company with information regarding the identity of
any
broker-dealer used by Investor reasonably requested by the Company. The Investor
shall be solely responsible for all fees and commissions of the broker-dealer.
19
ARTICLE
VII.
Conditions
Precedent to the Right of the Company to Deliver an Advance
Notice
The
right
of the Company to deliver an Advance Notice is subject to the fulfillment by
the
Company, on such Advance Notice Date (a “Condition
Satisfaction Date”),
of
each of the following conditions:
7.1 Registration
of the Common Stock with the SEC; Filing of Reports with SEC.
The
Registration Statement is effective and the Company is not aware of any of
the
events set forth in Section
6.6
hereof.
The Current Report shall have been filed with the SEC, a Prospectus Supplement
shall have been filed with the SEC, as required pursuant to Section 6.7 in
connection with all prior Advances, and an electronic copy of such Prospectus
Supplement together with the Base Prospectus shall have been delivered or made
available to the Investor. The Company shall have filed with the SEC in a timely
manner all reports, notices and other documents required of a “reporting
company” under the Exchange Act and applicable SEC regulations.
7.2 Authority.
The
Company shall have obtained all permits and qualifications required by any
applicable state in accordance with the Agreement for the offer and sale of
the
shares of Common Stock, or shall have the availability of exemptions therefrom.
The sale and issuance of the shares of Common Stock shall be legally permitted
by all laws and regulations to which the Company is subject.
7.3 Fundamental
Changes.
There
shall not exist any fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post-effective
amendment to the Registration Statement pursuant to SEC rules and regulations.
7.4 Performance
by the Company.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
7.5 No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits or directly and adversely
affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of prohibiting
or
adversely affecting any of the transactions contemplated by this
Agreement.
7.6 No
Suspension of Trading in or Delisting of Common Stock.
The
trading of the Common Stock is not suspended by the SEC or a Principal Market
during any Trading Day. The Company shall not have received any notice
threatening the continued listing of the Common Stock on the Principal Market.
20
7.7 Maximum
Advance Amount.
The
amount of an Advance requested by the Company shall not exceed the Maximum
Advance Amount and shall not violate Sections
1.8 and
6.12
hereof.
7.8 No
Knowledge.
The
Company has no knowledge of any event which would be more likely than not to
have the effect of causing the Registration Statement to be suspended or
otherwise ineffective.
7.9 Executed
Advance Notice.
The
Investor shall have received the Advance Notice executed by an officer of the
Company and the representations contained in such Advance Notice shall be true
and correct as of each Condition Satisfaction Date.
7.10 Opinion
of Counsel.
Prior
to the first Advance, the Investor shall have received an opinion letter from
counsel to the Company in the form of Exhibit
B
hereto.
ARTICLE
VIII.
Due
Diligence Review; Non-Disclosure of Non-Public Information
Section
8.1. Non-Disclosure
of Non-Public Information.
(a) The
Company covenants and agrees that it shall refrain from disclosing, and shall
cause its officers, directors, employees and agents to refrain from disclosing,
any material non-public information to the Investor without also disseminating
such information to the public, unless prior to disclosure of such information
the Company identifies such information as being material non-public information
and provides the Investor with the opportunity to accept or refuse to accept
such material non-public information for review.
(b) Nothing
herein shall require the Company to disclose non-public information to the
Investor or its advisors or representatives, and the Company represents that
it
does not disseminate non-public information to any investors who purchase stock
in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of
any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically
or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of
the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
21
ARTICLE
IX.
Choice
of Law/Jurisdiction
Section
9.1. Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx County, New Jersey and the
United States District Court of New Jersey, sitting in Newark, New Jersey,
for
the adjudication of any civil action asserted pursuant to this
paragraph.
ARTICLE
X.
Assignment;
Termination
Section
10.1. Assignment.
Neither
this Agreement nor any rights of the Company hereunder may be assigned to any
other Person.
Section
10.2. Termination.
(a) The
obligations of the Investor to make Advances under Article II hereof shall
terminate twenty-four (24) months after the Effective Date.
(b) The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance
Date
that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for
an
aggregate of fifty (50) Trading Days, other than due to the acts of the
Investor, during the Commitment Period, or (ii) the Company shall at any time
fail materially to comply with the requirements of Article VI and such failure
is not cured within thirty (30) days after receipt of written notice from the
Investor, provided,
however,
that
this termination provision shall not apply to any period commencing upon the
filing of a post-effective amendment to such Registration Statement and ending
upon the date on which such post effective amendment is declared effective
by
the SEC.
(c) The
Company may terminate this Agreement effective upon three (3) days’ prior
written notice to the Investor; provided, however, that such termination shall
not occur during a Pricing Period or prior to a Closing Date.
Section
10.3. Effect
of Termination.
In the
event of Termination by the Company or the Investor, written notice thereof
shall be given to the other party as provided in Section 11.1 and the
transactions contemplated by this Agreement shall be terminated without further
action by either party. Nothing in this Section 10.3 shall be deemed to release
the Company or the Investor from any liability for any breach under this
Agreement, or to impair the rights of the Company and the Investor to compel
specific performance by the other party of its obligations under this Agreement.
The indemnification provisions contained in Sections 5.1 and 5.2 shall survive
termination hereunder.
22
ARTICLE
XI.
Notices
Section
11.1. Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S. certified
mail, return receipt requested; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) day after deposit
with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If
to the Company, to:
|
Acacia
Research Corporation
|
Attn:
Xxxx
X. Xxxx, Chairman & CEO
|
|
Xxxxxx
Xxxxxx, Esq.
|
|
000
Xxxxxxx Xxxxxx Xxxxx
0xx
Xxxxx
Xxxxxxx
Xxxxx, XX 00000
|
|
CombiMatrix
Corporation
|
|
Attn:
Xxxx
Xxxxx, President & CEO
|
|
Xxxxx
Xxxxxx, CFO
|
|
0000
Xxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
|
|
Xxxxxxxx,
XX 00000
|
|
With
a copy to:
|
Xxxxxxxxx
Xxxxxxx LLP
|
Attn: Xxxxxxx
X. Xxx
|
|
Xxxxx
Xxxxxxxx
|
|
000
Xxxx Xxxxxx Xxxxx, Xxxxx 0000
|
|
Xxxxx
Xxxx, XX 00000
|
|
If
to the Investor(s):
|
Cornell
Capital Partners, LP
|
000
Xxxxxx Xxxxxx -Xxxxx 0000
|
|
Xxxxxx
Xxxx, XX 00000
|
|
Attention: Xxxx
Xxxxxx
|
|
Portfolio
Manager
|
|
Telephone: (000)
000-0000
|
|
Facsimile: (000)
000-0000
|
23
With
a Copy to:
|
Xxxx
Xxxxx, Esq.
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
Xxxxxx
Xxxx, XX 00000
|
|
Telephone: (000)
000-0000
|
|
Facsimile: (000)
000-0000
|
|
Each
party shall provide five (5) days’ prior written notice to the other party of
any change in address or facsimile number.
ARTICLE
XII.
Miscellaneous
Section
12.1. Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof, though failure to deliver such copies
shall not affect the validity of this Agreement.
Section
12.2. Entire
Agreement; Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Investor, the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with
enforcement.
Section
12.3. Reporting
Entity for the Common Stock.
The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes
of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ
any
other reporting entity.
Section
12.4. Fees
and Expenses.
The
Company hereby agrees to pay the following fees:
(a) Structuring
Fees.
Each of
the parties shall pay its own fees and expenses (including the fees of any
attorneys, accountants, appraisers or others engaged by such party) in
connection with this Agreement and the transactions contemplated hereby, except
that (i) the Company shall pay the Investor or its designee a structuring fee
of
Fifteen Thousand Dollars ($15,000), of which $5,000 has been paid and the
remaining $10,000 shall be paid on the date hereof, and (ii) On each Advance
Date, the Company shall pay Yorkville Advisors, LLC a structuring fee of Five
Hundred Dollars ($500) directly out the gross proceeds of each
Advance.
24
(b) Due
Diligence Fee.
Company
has paid the Investor a non-refundable due diligence fee of Five Thousand
Dollars ($5,000) in connection with submission of the due diligence documents
requested by the Investor.
(c) Commitment
Fees.
(i) On
each
Advance Date the Company shall pay to the Investor, directly out of the gross
proceeds of each Advance, an amount equal to four percent (4%) of the amount
of
each Advance for the first $20,000,000 of the Commitment Amount advanced and
five percent (5%) of the amount of each Advance over $20,000,000 of the
Commitment Amount advanced. The Company hereby agrees that if such payment,
as
is described above, is not made by the Company on the Advance Date, such payment
shall be made as outlined and mandated by Section 2.3 of this Agreement.
(ii) Upon
the
execution of this Agreement the Company shall pay the Investor a cash fee of
$550,000.
Section
12.5. Brokerage.
Each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker who will demand payment of any fee
or
commission from the other party. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any person claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section
12.6. Confidentiality.
If for
any reason the transactions contemplated by this Agreement are not consummated,
each of the parties hereto shall keep confidential any information obtained
from
any other party (except information publicly available or in such party’s domain
prior to the date hereof, and except as required by court order, applicable
securities laws or taxing authorities) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information without retaining copies thereof, previously furnished by it as
a
result of this Agreement or in connection herein.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
25
IN
WITNESS WHEREOF,
the
parties hereto have caused this Standby Equity Distribution Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first
set
forth above.
COMPANY:
|
|
Acacia
Research Corporation
|
|
By: /s/
Xxxx X. Xxxx
|
|
Name: Xxxx
X. Xxxx
|
|
Title: Chairman
& Chief Executive Officer
|
|
INVESTOR:
|
|
Cornell
Capital Partners, LP
|
|
By: Yorkville
Advisors, LLC
|
|
Its: General
Partner
|
|
By: /s/
Xxxx Xxxxxx
|
|
Name: Xxxx
Xxxxxx
|
|
Title: Portfolio
Manager
|
26
EXHIBIT
A
ADVANCE
NOTICE - ACACIA RESEARCH CORPORATION
The
undersigned, _______________________ hereby certifies, with respect to the
sale
by ACACIA
RESEARCH CORPORATION (the
“Company”)
of the
Common Stock of Acacia Research - CombiMatrix issuable in connection with this
Advance Notice, delivered pursuant to the Standby Equity Distribution Agreement
(the “Agreement”),
as
follows:
1. The
undersigned is the duly elected ______________ of the Company.
2. There
are
no fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post effective amendment
to
the Registration Statement.
3.
The
Company has performed in all material respects all covenants and agreements
to
be performed by the Company and has complied in all material respects with
all
obligations and conditions contained in the Agreement on or prior to the Advance
Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date including, but not limited to, compliance with all securities
laws.
All conditions to the delivery of this Advance Notice are satisfied as of the
date hereof.
4. The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC
Filings”)
required to be made by it pursuant to applicable securities laws (including,
without limitation, all filings required under the Securities Exchange Act
of
1934, which include Forms 10-Q or 10-QSB, 00-X xx 00-XXX, 0-X, xxx.). All SEC
Filings and other public disclosures made by the Company, including, without
limitation, all press releases, analysts meetings and calls, etc. (collectively,
the “Public
Disclosures”),
have
been reviewed and approved for release by the Company’s attorneys and, if
containing financial information, the Company’s independent certified public
accountants. None of the Company’s Public Disclosures contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in the light of
the
circumstances under which they were made, not misleading.
5. The
Advance requested is _____________________.
6. The
Minimum Acceptable Price is ______________.
The
undersigned has executed this Certificate this ____ day of
_________________.
ACACIA
RESEARCH CORPORATION
By:____________________________
Name:
Title:
If
Returning This Advance Notice via Facsimile Please Send To: (000) 000-0000
and
(000) 000-0000
If
by
Mail, via Federal Express To: Cornell
Capital Partners, LP
000
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, XX 00000
EXHIBIT
B
FORM
OF LEGAL OPINION