Warrant to Purchase Stock [Series D Preferred] - Nanogen Inc. and Dominnion Fund II
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY OR (iii) RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED.
Shares Issuable Upon Exercise: 1,490
WARRANT TO PURCHASE
SHARES OF SERIES D PREFERRED STOCK
Expires September 11, 1999
THIS CERTIFIES THAT, for value received, Dominion Fund II, a
California limited partnership, is entitled to subscribe for and purchase 1,490
shares (as adjusted pursuant to provisions hereof, the "Shares") of the fully
paid and nonassessable Series D Preferred Stock, $.001 par value per share, of
Nanogen, Inc., a Delaware corporation (the "Company"), at a price per share of
$5.12 (such price and such other price as shall result, from time to time, from
adjustments specified herein is herein referred to as the "Warrant Price"),
subject to the provisions and upon the terms and conditions hereinafter set
forth. As used herein, the term "Preferred Stock" shall mean the Company's
presently authorized Series D Preferred Stock, and any stock into or for which
such Series D Preferred Stock may hereafter be converted or exchanged pursuant
to the Restated Certificate of Incorporation of the Company as from time to
time amended as provided by law and in such Certificate, and the term "Grant
Date" shall mean September 11, 1992, the date on which that certain warrant
(the "Nanotronics Warrant") to purchase shares of the Series A Preferred Stock,
no par value, of Nanotronics, Inc., a California corporation ("Nanotronics"),
was granted to Dominion Ventures, Inc. (as agent for Dominion Fund II, a
California limited partnership) ("Dominion Ventures"). The Nanotronics Warrant
was canceled in exchange for the issuance of this Warrant pursuant to the terms
of that certain Agreement and Plan of Merger, dated as of December 18, 1997, as
amended by an amendment thereto dated as of January 26, 1998, by and among the
Company, Nanotronics and Nanogen Merger Subsidiary, Inc., a California
corporation (which was merged with and into Nanotronics with Nanotronics
surviving as a wholly owned subsidiary of the Company).
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from and
after the Grant Date and prior to the earlier of the seventh annual anniversary
date of the Grant Date or the third annual anniversary of the consummation of
the Company's initial public offering of its Common Stock, the aggregate gross
proceeds from which exceed $10,000,000.
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2. Method of Exercise; Net Issue Exercise.
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election
of the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number
of Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Preferred Stock
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed
to have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of
the rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in
any event within thirty days of receipt of such notice and, unless this Warrant
has been fully exercised or expired, a new Warrant representing.the portion of
the Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
Holder a number shares of the Company's Preferred Stock computed using the
following formula:
X = Y(A-B)
------
X
Where X - The number of shares of Preferred Stock to be issued to
Holder.
Y - The number of shares of Preferred Stock purchasable under
this Warrant.
A - The fair market value of one share of the Company's
Preferred Stock.
B - Warrant price (as adjusted to the date of such
calculations).
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(b) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean the average of the closing bid and asked
prices of the Company's Preferred Stock quoted on the Nasdaq National Market or
the closing price quoted on any exchange on which the Preferred Stock is
listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the ten trading days prior to the date of determination
of fair market value. If the Preferred Stock is not traded on an exchange, the
fair market value shall be the price per share which the Company could obtain
from a willing buyer for shares sold by the Company from authorized but
unissued shares, as such price shall be determined by a qualified appraiser,
mutually agreed upon by the Company and the holder hereof.
3. Stock Fully Paid; Reservation of Shares. All Shares that may
be issued upon the exercise of the rights represented by this Warrant and
Common Stock issuable upon conversion of the Preferred Stock will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which the
rights represented by the Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of issuance upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
its Preferred Stock (and Common Stock issuable upon conversion thereof) to
provide for the exercise of the right represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is a continuing corporation and which does not result in any reclassification
or change of outstanding securities issuable upon exercise of this Warrant), or
in case of any sale of all or substantially all of the assets of the Company,
the Company, or such successor or purchasing corporation, as the case may be,
shall execute a new Warrant (in form and substance satisfactory to the holder
of this Warrant) providing that the holder of this Warrant shall have the right
to exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one
share of Preferred Stock. Such new Warrant shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Paragraph 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers and
transfers.
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<PAGE> 4
(b) Subdivisions or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide
or combine its Preferred Stock, the Warrant Price and the number of Shares
issuable upon exercise hereof shall be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Preferred Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of stockholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of
Preferred Stock outstanding immediately after such dividend or distribution and
the number of Shares subject to this Warrant shall be proportionately adjusted.
(d) No Impairment. The Company will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization,
recapitalization, 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 Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Paragraph 4 and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the holder of this Warrant against impairment.
(e) Notices of Record Date. In the event of any taking by
the Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining stockholders
who are entitled to vote in connection with any proposed merger or
consolidation of the Company with or into any other corporation, or any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail to the holder of the Warrant, at least twenty
(20) days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
5. Notice of Adjustments. Whenever the Warrant Price shall be
adjusted pursuant to the provisions hereof, the Company shall within thirty
(30) days of such adjustment deliver a certificate signed by its chief
financial officer to the registered holder(s) hereof setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant
Price after giving effect to such adjustment.
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<PAGE> 5
6. Fractional Shares. No fractional shares of Preferred Stock
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or
Shares of Preferred Stock.
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to
be issued upon exercise hereof and the Common Stock to be issued upon
conversion of such Preferred Stock are being acquired for investment and that
such holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Preferred Stock to be issued upon exercise hereof (or Common Stock
issued upon conversion of the Preferred Stock) except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended (the
"Act"). This Warrant and all shares of Preferred Stock issued upon exercise of
this Warrant (unless registered under the Act) shall be stamped or imprinted
with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY' THAT SUCH REGISTRATION IS NOT
REQUIRED OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
sale or other disposition of this Warrant or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant (or Common Stock issued upon
conversion of such Preferred Stock) prior to registration of such shares, the
holders hereof and each subsequent holder of the Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the
Act as then in effect or any federal or state law then in effect) of this
Warrant or such shares of Preferred Stock or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Preferred Stock or Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act. Each certificate representing this Warrant or
the shares of Preferred Stock or Common Stock thus transferred (except a
transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to insure compliance with the Act,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to insure compliance with the Act.
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<PAGE> 6
Nothing herein shall restrict the transfer of this Warrant or any portion
hereof by the initial holder hereof to any partnership affiliated with the
initial holder, or to any partner of any such partnership provided such
transfer may be made in compliance with applicable federal and state securities
laws. The Company may issue stop transfer instructions to its transfer agent
in connection with the foregoing restrictions.
8. Rights as Stockholders: Information.
8.1 Stockholder Rights. No holder of the Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription
rights or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
8.2 Financial Statements and Information. The Company shall deliver
to the registered holder hereof (i) as soon as is practicable but in any event
within 90 days after the end of the fiscal year of the Company, a consolidated
balance sheet of the Company as of the end of such year and a consolidated
statement of income, retained earnings and cash flows for such year, which
year-end financial reports shall be in reasonable detail and certified by
independent public accountants of nationally recognized standing selected by
the Company, and (ii) within 45 days after the end of each fiscal quarter other
than the last fiscal quarter, unaudited consolidated statements of income,
retained earnings and cash flows for such quarter and a consolidated balance
sheet as of the end of such quarter. In addition, the Company shall deliver to
the registered holder hereof any other information or data provided to the
stockholders of the Company in their capacity as stockholders. The holder
hereof shall receive and maintain the information furnished pursuant to this
Section 8.2 in confidence. The Company recognizes that the holder intends to
report such information to its affiliates and agrees to such reporting, with
the understanding that the holder hereof shall use reasonable care and judgment
in conveying such information to its affiliates. This right to receive
information is only assignable to affiliates of the original holder of this
Warrant.
The covenants set forth in this Section 8.2 shall terminate
and be of no further force or effect when the Company first becomes subject to
the periodic reporting requirements of Sections 12 (f) or 15 (d) of the
Securities Exchange Act of 1934, as amended.
9. Registration Rights. The Company hereby covenants and agrees
that the holder hereof (or any registered transferee thereof pursuant to
Section 7 hereof), shall be entitled to participate in the registration rights
with respect to the Preferred Stock or Common Stock issuable upon conversion
thereof purchasable by the holder hereof pursuant to the Warrant, in the same
manner and to the same extent as a "Holder" pursuant to the Company's Amended
and Restated Investors' Rights Agreement, dated as of May 5, 1997, as amended
by Amendment No.
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<PAGE> 7
1 thereto, dated as of August 1, 1997, a true and correct copy of which is
attached hereto as Exhibit B (the "Registration Rights"). The holder hereof
shall be deemed a "Holder" and the shares of Preferred Stock issuable upon
exercise of this Warrant and Common Stock upon conversion thereof shall be
deemed "Registrable Securities" as those terms are defined in the Registration
Rights. Anything to the contrary notwithstanding, the holder of this Warrant
may transfer the Registration Rights to any affiliate of the holder hereof.
10. Additional Rights.
10.1 Second Sales. The Company agrees to assist the holder of this
Warrant in obtaining liquidity if opportunities to make secondary sales of the
Company's securities become available. To this end, the Company will promptly
provide the holder of this Warrant with notice of any offer to acquire from the
Company's security holders (other than offers by the Company) more than twenty
percent (20%) of the total voting power of the Company and will cooperate with
the holder in arranging the sale of this Warrant to the person or persons
making such offer. Notwithstanding the foregoing, nothing herein shall be
construed to grant to the holder a right of co-sale in any such event.
10.2 Mergers. Unless the Company provides the holder of this Warrant
with at least 30 days' notice of the proposed transaction, the Company will not
(i) sell, lease, exchange, convey or otherwise dispose of all or substantially
all of its property or business, or (ii) merge into or consolidate with any
other corporation (other than a wholly-owned subsidiary of the Company), or
effect any transaction (including a merger or other reorganization) or series
of related transactions, in which more than 50% of the voting power of the
Company is disposed of. The Company will cooperate with the holder in
arranging the sale of this Warrant in connection with any such transaction.
11. Representations and Warranties. This Warrant is issued and
delivered on the basis of the follows:
(a) This Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the shares of Preferred Stock and the holders are as set forth
in the Company's Restated Certificate of Incorporation, as amended, a true and
complete copy of which has been delivered to the original holder of this
Warrant;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved and, when issued in accordance with the
terms of the Company's
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<PAGE> 8
Restated Certificate of Incorporation, as amended, will be validly issued,
fully paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Restated Certificate
of Incorporation, as amended, or Bylaws, do not and will not contravene any
law, governmental rule or regulation, judgment or order applicable to the
Company, and do not and will not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration with or the taking of
any action in respect of or by, any Federal, state or local government
authority or agency or other person.
12. Amendment of Conversion Rights. During the term of this
Warrant, the Company agrees that it shall not amend its Restated Certificate of
Incorporation, as amended, without the prior written consent of the holder or
holders entitled to purchase a majority of the Shares upon exercise of this
Warrant if as a result of such amendment any of the conversion rights,
including without limitation the conversion price or anti-dilution protection
privileges, of the Preferred Stock would be affected.
13. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is sought.
14. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, sent by telecopy or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefore on the
signature page of this Warrant.
15. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Preferred Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof. The Company
will, at the time of the exercise of this Warrant, in whole or in part, upon
request of the holder hereof but at the Company's expense, acknowledge in
writing its continuing obligation to the holder hereof in respect of any rights
(including, without limitation, any right to registration of the shares of
Registrable Securities) to which the holder hereof shall continue to be
entitled after such exercise in accordance with this Warrant; provided, that
the failure of the holder hereof to make any such request shall not affect the
continuing obligation of the Company to the holder hereof in respect of such
rights.
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16. Lost Warrants or Stock Certificates. The Company covenants to
the holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver at the holders expense, if any,
a new Warrant or stock certificate, or like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
17. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
18. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
LAWS OF THE STATE OF CALIFORNIA.
NANOGEN, INC.
By: /s/ Howard Birndorf
------------------------------------
Name: Howard Birndorf
Title:
10398 Pacific Center Court
San Diego, California 92121
Date: January 29, 1998
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<PAGE> 10
EXHIBIT A
Notice of Exercise
To: Nanogen, Inc.
1. The undersigned hereby elects to purchase __________ shares of
Series D Preferred Stock of Nanogen, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
______________________________
(Name)
______________________________
______________________________
______________________________
(Address)
______________________________
(Telephone)
3. The undersigned represents that the aforesaid shares being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
________________________________________
(Signature)
Typed Name:_____________________________
Address:________________________________
________________________________
________________________________
________________________________
_________________________________
(Date)
A-1
<PAGE> 11
EXHIBIT A-1
Notice of Exercise
To: Nanogen, Inc.
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement of Form S-________, filed ____________________, 19___,
the undersigned hereby elects to purchase _________ shares of Series D
Preferred Stock of the Company (or such lesser number of shares as may be sold
on behalf of the undersigned at the Closing) pursuant to the terms of the
attached Warrant.
2. Please deliver to the custodian for the selling stockholders a
stock certificate representing such ____________ shares.
3. The undersigned has instructed the custodian for the selling
stockholders to deliver to the Company $_______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior
to the Closing.
________________________________________
(Signature)
Typed Name:_____________________________
Address:________________________________
________________________________
________________________________
________________________________
________________________________
(Date)
A-1-1