Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
as of April 1, 2011, by and among CombiMatrix Corporation, a Delaware
corporation (the “Company”), and each purchaser identified on the signature
pages hereto (each, including its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

 

RECITALS

 

A.            The Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.

 

B.            Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to issue and sell, upon the terms and conditions stated in
this Agreement, Units (as defined below), consisting of (i) that number of
shares of the common stock, par value $0.001 per share (the “Common Stock”), of
the Company (the aggregate amount of which for all Purchasers together shall be
collectively referred to herein as the “Shares”) and (ii) warrants, in
substantially the form attached hereto as Exhibit A (the “Warrants”), to acquire
up to that number of additional shares of Common Stock equal to 42.5% of the
number of Shares purchased by such Purchaser (rounded down to the nearest whole
share) (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants collectively are referred to herein as the “Warrant
Shares”) as may be purchased by the Purchaser for the Purchaser’s Subscription
Amount (as defined below) at the Unit Purchase Price (as defined below) per
Unit.

 

C.            The Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.

 

D.            Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investors Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
“Investors Rights Agreement”), pursuant to which, among other things, the
Company will agree to provide certain registration rights with respect to the
Shares and the Warrant Shares under the Securities Act and the rules and
regulations promulgated thereunder.

 

E.             Contemporaneously with the execution and delivery of this
Agreement, the Company and HLM Venture Partners III, L.P. (“HLM”) are executing
and delivering an HLM Rights Agreement, substantially in the form attached
hereto as Exhibit C (the “HLM Rights Agreement”), pursuant to which, among other
things, the Company will agree to provide certain rights to HLM.

 

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AGREEMENT

 

In consideration of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company and each of the Purchasers agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1          Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:

 

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or, to the Company’s Knowledge, threatened in writing against the Company or any
of its respective properties or, to the Company’s Knowledge, pending or
threatened in writing against any officer, director or employee of the Company
acting in his or her capacity as an officer, director or employee before or by
any federal, state, county, local or foreign court, arbitrator, governmental or
administrative agency, regulatory authority, stock market, stock exchange or
trading facility.

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Agreement” shall have the meaning ascribed to such term in the Preamble.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Buy-In” has the meaning set forth in Section 4.1(f).

 

“Buy-In Price” has the meaning set forth in Section 4.1(f).

 

“California Courts” means the state and federal courts sitting in the City of
San Francisco, California.

 

“Common Stock Purchase Price” means the Closing Bid Price of a share of Common
Stock on the date hereof;

 

“Closing” means the closing of the purchase by the Purchasers and sale by the
Company of Shares and Warrants to such Purchasers pursuant to this Agreement on
the Closing Date as provided in Section 2.1(a) hereof.

 

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“Closing Bid Price” means, for any security as of any date, the consolidated
closing bid price for such security on the Principal Trading Market, as reported
by Bloomberg, or, if the Principal Trading Market begins to operate on an
extended hours basis and does not designate the closing bid price then the last
bid price of such security prior to 4:00 p.m., New York City Time, as reported
by Bloomberg, or, if the Principal Trading Market is not the principal
securities exchange or trading market for such security, the last closing price
of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg.  All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

 

“Closing Date” means the fourth (4th) Trading Day after the date on which this
Agreement has been executed and delivered by all parties hereto, unless on such
date the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 (other than
those to be satisfied at the Closing, but subject to satisfaction of such
conditions at Closing) shall not have been satisfied or waived, in which case
the Closing Date shall be on the second (2nd) Trading Day after the date on
which the last to be satisfied or waived of the conditions set forth in
Sections 2.1, 2.2, 5.1 and 5.2 (other than those to be satisfied at the Closing,
but subject to such satisfaction at Closing) shall have been satisfied or
waived.

 

“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified or changed.

 

“Company Counsel” means Dorsey & Whitney LLP.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

“Company’s Knowledge” — information shall be deemed to be known to the
“Company’s Knowledge” if that information is actually known or reasonably should
have been known by any officer of the Company, in each case after reasonable
inquiry by such officers of the Company having responsibility for the matter or
matters that are the subject of the information.

 

“Control” (including the terms “controlling”, “controlled” by or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

 

“Environmental Laws” has the meaning set forth in Section 3.1(l).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

 

“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.

 

“HLM” has the meaning set forth in the Recitals.

 

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“Intellectual Property” has the meaning set forth in Section 3.1(r).

 

“Investors Rights Agreement” has the meaning set forth in the Recitals.

 

“Irrevocable Transfer Agent Instructions” has the meaning set forth in
Section 4.1(d).

 

“Lien” means any lien, charge, claim, encumbrance, security interest, right of
first refusal, preemptive right or other restrictions of any kind (other than
restrictions pursuant to securities laws).

 

“Material Adverse Effect” means a material adverse effect on the results of
operations, assets, liabilities, business or financial condition of the Company
and its Subsidiaries taken as a whole, except that any of the following, either
alone or in combination, shall not be deemed a Material Adverse Effect:  
(i) effects caused by changes or circumstances affecting general market
conditions in the U.S. economy or which are generally applicable to the industry
in which the Company operates to the extent that such effect does not affect the
Company disproportionally compared to comparable companies in the industry of
the Company, or (ii) effects resulting from or relating to the announcement or
disclosure of the sale of the Securities or other transactions contemplated by
this Agreement.

 

“Material Contract” means any contract of the Company that has been filed or was
required to have been filed as an exhibit to the SEC Reports pursuant to
Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.

 

“Material Permits” has the meaning set forth in Section 3.1(p).

 

“Outside Date” means April 30, 2011.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the date of this
Agreement and the Closing Date, shall be the Nasdaq Capital Market.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or, to the Company’s Knowledge, threatened in
writing.

 

“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Investors Rights Agreement and covering the resale by the
Purchasers of the Registrable Securities (as defined in the Investors Rights
Agreement).

 

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“Required Approvals” has the meaning set forth in Section 3.1(e).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“SEC Reports” has the meaning set forth in Section 3.1(h).

 

“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

 

“Short Sales” include, without limitation, (i) all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and (ii) sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers.

 

“Subscription Amount” has the meaning set forth in Section 2.1(a).

 

“Subsidiary” means, with respect to any Person at any date, any corporation,
limited or general partnership, limited liability company, trust, estate,
association, joint venture or other business entity (i) the accounts of which
would be consolidated with those of such Person in such Person’s consolidated
financial statements if such financial statements were prepared in accordance
with GAAP or (ii) of which more than 50% of (A) the outstanding capital stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body is held by such
Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company is held by such Person or (C) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such Person, and “ Subsidiaries “ mean, collectively, each
Subsidiary with respect to any Person.

 

“Trading Affiliate” has the meaning set forth in Section 3.2(h).

 

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported in the “pink sheets”
by Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices);  provided , that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

 

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“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the
Nasdaq Capital Market or the OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.

 

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Disclosure Schedule delivered with this Agreement, the
Warrants, the Investors Rights Agreement, the HLM Rights Agreement, the
Irrevocable Transfer Agent Instructions,  and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means BNY Mellon Shareowner Services, or any successor transfer
agent for the Company.

 

“Unit” means one share of Common Stock and a Warrant to purchase 0.425 of a
share of Common Stock, which Unit shall be immediately separable.

 

“Unit Purchase Price” means the sum of: (a) the Common Stock Purchase Price; and
(b) the Warrant Purchase Price.

 

“Warrant Purchase Price” means $0.053125 (equivalent to $0.125 for each Warrant
to purchase one Warrant Share).

 

“Warrants” has the meaning set forth in the Recitals to this Agreement.

 

ARTICLE 2

 

PURCHASE AND SALE

 

2.1          Closing.

 

(a)           Amount. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units equal to the quotient resulting from dividing (i) the
aggregate purchase price for such Purchaser, as indicated below such Purchaser’s
name on the signature page of this Agreement (the “Subscription Amount”) by
(ii) the Unit Purchase Price, rounded down to the nearest whole Unit. The
Warrants shall have an exercise price equal to the Common Stock Purchase Price
per Warrant Share.

 

(b)           Closing. The Closing of the purchase and sale of the Shares and
Warrants shall take place at the offices of Cooley LLP, 3175 Hanover Street,
Palo Alto, California on the Closing Date or at such other locations or remotely
by facsimile transmission or other electronic means as the parties may mutually
agree.

 

(c)           Form of Payment. On the Closing Date, (i) each Purchaser shall
wire its Subscription Amount, in United States dollars and in immediately
available funds, in the amount set forth as the “Aggregate Purchase Price
(Subscription Amount)” indicated below such Purchaser’s name on the applicable
signature page hereto by wire transfer to the Company’s account, as set forth in
instructions previously provided to the Purchasers, (ii) the Company shall
irrevocably instruct the Transfer Agent to deliver to each Purchaser one or more
stock certificates, free and clear of all restrictive and other legends except
as expressly provided in Section 4.1(b) hereof, evidencing the number of Shares
such Purchaser is purchasing pursuant to Section 2(a), within two (2) Business
Days after the Closing and (iii) the Company shall issue to each Purchaser a
Warrant, free and clear of all restrictive and other legends except as expressly
provided in Section 4.1(b) hereof, pursuant to which such Purchaser shall have
the right to acquire such number of Warrant Shares pursuant to Section 2(a), in
the case of clauses (ii) and (iii), duly executed on behalf of the Company and
registered in the name of such Purchaser.

 

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2.2          Closing Deliveries. (a) On or prior to the Closing with respect to
the Purchasers, the Company shall issue, deliver or cause to be delivered to
such Purchaser the following (the “Company Deliverables”):

 

(i)            this Agreement, duly executed by the Company;

 

(ii)           a Warrant, executed by the Company and registered in the name of
such Purchaser as set forth on the Stock Certificate Questionnaire included as
Exhibit E-2 hereto, pursuant to which such Purchaser shall have the right to
acquire such number of Warrant Shares equal to 42.5% of the number of Units
issuable to such Purchaser pursuant to Section 2.1(a), rounded down to the
nearest whole share, on the terms set forth therein;

 

(iii)         a legal opinion of Company Counsel, dated as of the Closing Date
and in the form previously agreed to between HLM and the Company, executed by
such counsel and addressed to the Purchasers;

 

(iv)          the Investors Rights Agreement, duly executed by the Company;

 

(v)            duly executed Irrevocable Transfer Agent Instructions;

 

(vi)          a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors of the Company or a duly authorized committee
thereof approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, (b) certifying the
current versions of the certificate of incorporation, as amended, and by-laws of
the Company and (c) certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf of the
Company, in the form attached hereto as Exhibit F;

 

(vii)         the Compliance Certificate referred to in Section 5.1(g);

 

(viii)        a certificate evidencing the formation and good standing of the
Company issued by the Secretary of State of the State of Delaware, as of a date
within five (5) days of the Closing Date;

 

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(ix)          a certificate evidencing the Company’s qualification as a foreign
corporation and good standing issued by the Secretary of State of the State of
California, as of a date within five (5) days of the Closing Date; and

 

(x)           a certified copy of the Certificate of Incorporation, as certified
by the Secretary of State of the State of the State of Delaware, as of a date
within ten (10) days of the Closing Date.

 

In addition, on or prior to the Closing with respect to HLM the Company shall
deliver to HLM the HLM Rights Agreement, duly executed by the Company (such
document shall also be referred to herein as a Company Deliverable).

 

(b)           On or prior to the Closing each Purchaser shall deliver or cause
to be delivered to the Company the following (the “Purchaser Deliverables”):

 

(i)            this Agreement, duly executed by such Purchaser;

 

(ii)           its Subscription Amount, in United States dollars and in
immediately available funds, in the amount set forth as the “Aggregate Purchase
Price (Subscription Amount)” indicated below such Purchaser’s name on the
applicable signature page hereto by wire transfer to the Company’s account as
previously provided to the Purchasers;

 

(iii)          the Investors Rights Agreement, duly executed by such Purchaser;
and

 

(iv)          a fully completed and duly executed Accredited Investor
Questionnaire and Stock Certificate Questionnaire in the forms attached hereto
as Exhibits E-1 and E-2, respectively.

 

(c)           On or prior to the Closing HLM shall deliver or cause to be
delivered to the Company the HLM Rights Agreement, duly executed by HLM (such
document shall also be referred to herein as a Purchaser Deliverable).

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

3.1          Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers as of the date hereof and the Closing
Date (except for the representations and warranties that speak as of a specific
date, which shall be made as of such date), to each of the Purchasers that,
except as set forth in the Disclosure Schedule delivered separately herewith
(which Disclosure Schedule shall qualify any representation or warranty
otherwise made herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules):

 

(a)           Subsidiaries. Other than the Company’s Subsidiaries, the Company
does not own any equity or debt securities in any Person. The Company owns all
the capital stock of each of its Subsidiaries.

 

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(b)           Organization and Qualification. Each of the Company and each of
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, with the
requisite corporate power and authority to own or lease and use its properties
and assets and to carry on its business as currently conducted. Each of the
Company and each of its Subsidiaries is not in violation of any of the
provisions of its certificate of incorporation or bylaws. Each of the Company
and each of its Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have a Material Adverse Effect.

 

(c)           Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery by the Company of each of the Transaction Documents to
which it is a party and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Shares and the Warrants and the reservation for issuance and the subsequent
issuance of the Warrant Shares upon exercise of the Warrants) have been duly
authorized by all necessary corporate action on the part of the Company, and no
further corporate action is required by the Company, its Board of Directors or
its stockholders in connection therewith other than in connection with the
Required Approvals. Each of the Transaction Documents to which it is a party has
been (or upon delivery will have been) duly executed by the Company and is, or
when delivered in accordance with the terms hereof, will constitute the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application. 
Except as set forth on Schedule 3.1(c) to the Disclosure Schedule and except as
contemplated by the Investors Rights Agreement and HLM Rights Agreement, there
are no shareholder agreements, voting agreements, or other similar arrangements
with respect to the Company’s capital stock to which the Company is a party or,
to the Company’s Knowledge, between or among any of the Company’s stockholders.

 

(d)           No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares and Warrants and the reservation
for issuance and subsequent issuance of the Warrant Shares upon exercise of the
Warrants) do not and will not (i) conflict with or violate any provisions of the
Company’s certificate of incorporation or bylaws, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any Material Contract or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including federal and state securities laws and regulations, assuming
the correctness of the representations and warranties made by the Purchasers
herein, and the rules and regulations of any self regulatory organization to
which the Company or its securities are subject , including all applicable
Trading Markets), or by which any property or asset of the Company is bound or
affected.

 

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(e)            Filings, Consents and Approvals. Neither the Company nor any of
its Subsidiaries is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents (including the issuance of the Securities), other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Investors Rights Agreement, (ii) filings
required by applicable state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filing of any requisite notices and/or
application(s) to the Principal Trading Market for the issuance and sale of the
Common Stock and the Warrants, (v) the filings required in accordance with
Section 4.10 of this Agreement and (vi) those that have been made or obtained
prior to the date of this Agreement (collectively, the “Required Approvals”).

 

(f)            Issuance of the Securities. The Shares have been duly authorized
and, when issued and paid for in accordance with the terms of the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable and
free and clear of all Liens, other than restrictions on transfer provided for in
the Transaction Documents or imposed by applicable securities laws, and shall
not be subject to preemptive or similar rights of shareholders. The Warrants
have been duly authorized and, when issued and paid for in accordance with the
terms of the Transaction Documents, will be duly and validly issued, free and
clear of all Liens, other than restrictions on transfer provided for in the
Transaction Documents or imposed by applicable securities laws, and shall not be
subject to preemptive or similar rights of shareholders. The Warrant Shares
issuable upon exercise of the Warrants have been duly authorized and, when
issued and paid for in accordance with the terms of the Transaction Documents
and the Warrants will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens, other than restrictions on transfer provided for in
the Transaction Documents or imposed by applicable securities laws, and shall
not be subject to preemptive or similar rights of shareholders. Assuming the
accuracy at all relevant times of the representations and warranties of the
Purchasers in this Agreement, the Shares and the Warrant Shares will be issued
in compliance with all applicable federal and state securities laws. As of the
Closing Date, the Company shall have reserved from its duly authorized capital
stock not less than the maximum number of shares of Common Stock issuable upon
exercise of the Warrants (without taking into account any limitations on the
exercise of the Warrants set forth in the Warrants). The Company shall, so long
as any of the Warrants are outstanding, take all action necessary to reserve and
keep available out of its authorized and unissued capital stock, solely for the
purpose of effecting the exercise of the Warrants, the number of shares of
Common Stock issuable upon exercise of the Warrants (without taking into account
any limitations on the exercise of the Warrants set forth in the Warrants).

 

(g)           Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) has been set forth in
the SEC Reports and has changed since the date set forth in such SEC Reports
only to reflect stock option exercises and grants that have not, individually or
in the aggregate, had a material affect on the issued and outstanding capital
stock, options and other securities.

 

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All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable, have been issued in
compliance in all material respects with all applicable federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase any capital
stock of the Company.  Except as set forth in Schedule 3.1(g) and the SEC
Reports: (i) No shares of the Company’s capital stock are subject to preemptive
rights or any other similar rights or any Liens suffered or permitted by the
Company; (ii) 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, or exercisable or exchangeable for, any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing indebtedness of the
Company or by which the Company is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the Securities Act (except the Investors
Rights Agreement); (vi) there are no outstanding securities or instruments of
the Company which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; (vii) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities; (viii) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; and (ix) the Company has no liabilities or
obligations required to be disclosed in the SEC Reports but not so disclosed in
the SEC Reports.

 

(h)           SEC Reports. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it prior to the date
hereof under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for twelve (12) months preceding the date hereof (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”
and together with this Agreement and the Schedules to this Agreement (if any),
the “Disclosure Materials”), on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of the date hereof, the Company is not
aware of any event occurring on or prior to the date hereof (other than the
transactions contemplated by the Transaction Documents) that requires the filing
of a Form 8-K after the Closing. As of their respective filing dates, or to the
extent corrected by a subsequent amendment, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

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The Company is not aware of any event that requires the filing of a Current
Report on Form 8-K that has not been filed.

 

(i)            Financial Statements. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
Subsidiaries taken as a whole as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments. Each of the
Material Contracts to which the Company is a party or to which the property or
assets of the Company is subject has been filed as an exhibit to the SEC
Reports.

 

(j)            Tax Matters. Each of the Company and its Subsidiaries (i) has
prepared and filed when due all foreign, federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) 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,
with respect to which adequate reserves have been set aside on the books of the
Company and its Subsidiaries and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply, except, in the
case of clauses (i) and (ii) above, where the failure to so pay or file any such
tax, assessment, charge or return would not have a Material Adverse Effect. The
Company believes as of the date hereof (but without having performed any
specific analysis) that it does not have any net operating losses or other tax
attributes currently subject to limitations under Sections 382, 383, or 384 of
the Code (or any corresponding provisions of state, local or foreign tax law)
and neither the execution and delivery of this Agreement and the Transaction
Documents nor the consummation of the transactions contemplated by this
Agreement and the Transaction Documents will create or impose any such
limitations.

 

(k)           Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as disclosed in the SEC
Reports, (i) there have been no events, occurrences or developments that have
had or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, (ii) neither the Company nor any of its
Subsidiaries has incurred any material liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or to be disclosed in filings made with the
Commission, (iii) the Company has not materially altered its method of
accounting or the manner in which it keeps its accounting books and records,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (other than in
connection with repurchases of unvested stock issued to employees of the
Company), (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except stock options and Common Stock issued in the
ordinary course pursuant to existing Company stock option or stock purchase
plans or executive and director corporate arrangements disclosed in the SEC
Reports and (vi) there has not been any material change or amendment to, or any
waiver of any material right under, any Material Contract under which the
Company, any of its Subsidiaries or any of its assets is bound or subject.

 

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Except for the issuance of the Securities contemplated by this Agreement and the
transactions contemplated by the Transaction Documents, no event, liability or
development has occurred or exists with respect to the Company, its Subsidiaries
or its business, properties, operations or financial condition that would be
required to be disclosed by the Company under applicable securities laws at the
time this representation is made that has not been publicly disclosed at least
one Trading Day prior to the date that this representation is made.

 

(l)            Environmental Matters. Each of the Company and its Subsidiaries
(i) is not in violation of any statute, rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) does not own or
operate any real property contaminated with any substance that is in violation
of any Environmental Laws, (iii) is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or (iv) is not subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or would have, individually or in the aggregate, a
Material Adverse Effect; and there is no pending or, to the Company’s Knowledge,
investigation threatened in writing that might lead to such a claim.

 

(m)         Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities, (ii) except as disclosed in the SEC Reports,
involves a claim of violation of or liability under any federal, state, local or
foreign laws governing the operations of the Company or its Subsidiaries,
including without limiting the generality of the foregoing, laws regulating the
protection of human health, including without limiting the generality of the
foregoing, laws relating to the manufacture, processing, packaging, labeling,
marketing, distribution, use, inspection, treatment, storage, disposal,
transport or handling of the products of the Company and its Subsidiaries, and
regulated or hazardous substances, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder, all as may be in effect from time to time
and all successors, replacements and expansions thereof, (iii) involves injury
to or death of any person arising from or relating to any of the product of the
Company or its Subsidiaries, or (iv) except as disclosed in the SEC Reports,
could, if there were an unfavorable decision, individually or in the aggregate,
have a Material Adverse Effect. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company under the Exchange Act or the Securities Act.

 

(n)           Employment Matters. No material labor dispute exists or, to the
Company’s Knowledge, is threatened with respect to any of the employees of the
Company or its Subsidiaries which would have a Material Adverse Effect. None of
the employees of the Company and its Subsidiaries is a member of a union that
relates to such employee’s relationship with the Company or its Subsidiaries,
and neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company believes that its relationship with its
employees is good.

 

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(o)           Compliance. Each of the Company and its Subsidiaries (i) is not in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any of its Subsidiaries), nor has the Company or any of its
Subsidiaries received written notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any other
Material Contract, (ii) is not in material violation of any order of any court,
arbitrator or governmental body having jurisdiction over the Company, its
Subsidiaries or their respective properties or assets, (iii) is and at all time
has been in material compliance with, and not in material default under or in
material violation of, all rules and regulations under Medicare and Medicaid
(and all federal and state agencies and programs administering Medicare and
Medicaid), including without limitation as to all billing, collections and
reimbursement activities of the Company and its Subsidiaries; or (iv) is not or
has not been in material violation of, or in receipt of notice that it is in
material violation of, any statute, rule or regulation of any governmental
authority to the Company’s Knowledge applicable to the Company or any of its
Subsidiaries, including without limitation, all applicable rules and regulations
of each of: (1) Clinical Laboratory Improvement Amendments (CLIA); (2) the
Health Insurance Portability and Accountability Act of 1996 (HIPAA); (3) state
licensure requirements including without limitation the California Department of
Health Services; (4) Food and Drug Administration (the “FDA”), and all
applicable laws, statutes, ordinances, rules or regulations (including, without
limitation, the Federal Food, Drug and Cosmetic Act of 1938, as amended and
similar foreign laws and regulations) enforced by the FDA or equivalent foreign
authorities, CLIA, FDA, HIPPA.

 

(p)           Regulatory Permits. Each of the Company and its Subsidiaries
possesses all material certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct its business as described in the SEC Reports, including without
limitation the FDA ( “Material Permits”), and (i) neither the Company nor any of
its Subsidiaries has received any notice of Proceedings relating to the
revocation or modification of any such Material Permits and (ii) to the
Company’s Knowledge, no facts or circumstances exist that the Company would
reasonably expect to give rise to the revocation or modification of any Material
Permits.

 

(q)           Title to Assets. Each of the Company and its Subsidiaries has good
and marketable title in fee simple to all real property owned by it as set forth
in the SEC Reports. Each of the Company and its Subsidiaries has good and
marketable title to all tangible personal property owned by it which is material
to the business of the Company and its Subsidiaries, in each case free and clear
of all Liens except such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities held under
lease by the Company or any of its Subsidiaries are held by the Company or its
Subsidiary (as applicable) 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.

 

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(r)           Patents and Trademarks. The Company 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 mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology and other proprietary rights and processes (collectively, the
“Intellectual Property”) necessary for the conduct of their businesses as now
conducted. Except as set forth on Schedule 3.1(r) to the Disclosure Schedule:
(a) except for Intellectual Property that is licensed, there are no rights of
third parties to any such Intellectual Property; (b) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property;
(c) there is no Proceeding by others challenging the Company’s rights in or to
any such Intellectual Property; (d) there is no Proceeding by others challenging
the validity or scope of any such Intellectual Property; and (e) there is no
Proceeding by others that the Company infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of
others.

 

(s)           Insurance. Each of the Company and its Subsidiaries is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent in the businesses and
locations in which the Company and its Subsidiaries are engaged. Neither the
Company nor any of its Subsidiaries has received any notice of cancellation of
any such insurance. Neither the Company nor any of its Subsidiaries has any
Knowledge that it will be unable to renew its existing insurance coverage for
the Company and its Subsidiaries as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a material increase in cost.

 

(t)            Transactions With Affiliates and Employees. None of the officers
or directors of the Company and its Subsidiaries and, to the Company’s
Knowledge, none of the employees of the Company and its Subsidiaries, is
presently a party to any transaction with the Company or any of its Subsidiaries
or to a presently contemplated transaction (other than for services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act,
except as contemplated by the Transaction Documents or set forth in the SEC
Reports.

 

(u)           Internal Accounting Controls. Each of the Company and its
Subsidiaries maintains 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 GAAP and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any differences.

 

(v)            Sarbanes-Oxley; Disclosure Controls. The Company is in compliance
in all material respects with all of the provisions of the Sarbanes-Oxley Act of
2002 which are applicable to it. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act).

 

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(w)           Certain Fees. No person or entity will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or a Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company. The Company shall indemnify, pay, and hold
each Purchaser harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any such right, interest or claim.

 

(x)           Private Placement. Assuming the accuracy at all relevant times of
the Purchasers’ representations and warranties set forth in Section 3.2 of this
Agreement and the accuracy of the information disclosed in the Accredited
Investor Questionnaires, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Purchasers under
the Transaction Documents.

 

(y)           Registration Rights. Other than each of the Purchasers, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company other than those securities
which are currently registered on an effective registration statement on file
with the Commission.

 

(z)            No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its or its behalf has conducted any “general
solicitation” or “general advertising” (as those terms are used in Regulation D)
in connection with the offer or sale of any of the Securities.

 

(aa)          No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company nor
any Person acting on its behalf has, directly or indirectly, at any time within
the past six months, made any offers or sales of any Company security or
solicited any offers to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by
the Company of the Securities as contemplated hereby or (ii) cause the offering
of the Securities pursuant to the Transaction Documents to be integrated with
prior offerings by the Company for purposes of any applicable law, regulation or
shareholder approval provisions, including, without limitation, under the
rules and regulations of any Trading Market on which any of the securities of
the Company are listed or designated.

 

(bb)         Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to terminate the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration. Except as set forth
in the SEC Reports, the Company has not, in the 12 months preceding the date
hereof, received written notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
Except as set forth in the SEC Reports, the Company is in compliance in all
material respects with the listing and maintenance requirements for continued
trading of the Common Stock on the Principal Trading Market.

 

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(cc)         Investment Company. The Company is not required to be registered
as, and is not an Affiliate of, and immediately following the Closing will not
be required to register as, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

(dd)         Application of Takeover Protections; Rights Agreements. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of the
State of Delaware that is or could reasonably be expected to become applicable
to any of the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.

 

(ee)         Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its SEC Reports and is not so disclosed or that otherwise would have a
Material Adverse Effect.

 

(ff)          Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the Securities.

 

(gg)        No Additional Agreements. The Company does not have any agreement or
understanding with any Purchaser with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.

 

(hh)         Shell Company.  The Company is not, nor has it ever been, a “shell
company” (as such term is defined in Rule 12b-2 promulgated under the Exchange
Act).

 

(ii)           Complete Disclosure.  The Company has provided each Purchaser
with all information requested by such Purchaser in connection with their
decision to purchase the Shares and Warrant Shares.  To the Company’s knowledge,
none of the Transaction Documents contains any untrue statement of a material
fact nor to the Company’s knowledge omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.

 

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3.2          Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

 

(a)           Organization; Authority. If such Purchaser is an entity, it is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser. Each of the Transaction
Documents to which such Purchaser is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

 

(b)           No Conflicts. The execution, delivery and performance by such
Purchaser of the Transaction Documents to which such Purchaser is a party and
the consummation by such Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
such Purchaser, or (ii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws)
applicable to such Purchaser.

 

(c)           Investment Intent. Such Purchaser understands that the Securities
are “restricted securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities and,
upon exercise of the Warrants, will acquire the Warrant Shares issuable upon
exercise thereof as principal for its own account and not with a view to, or for
distributing or reselling such Securities or any part thereof in violation of
the Securities Act or any applicable state securities laws, provided, however ,
that by making the representations herein, such Purchaser does not agree to hold
any of the Securities for any minimum period of time and reserves the right,
subject to the provisions of this Agreement and the Investors Rights Agreement,
at all times to sell or otherwise dispose of all or any part of such Securities
or Warrant Shares pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. Such Purchaser
does not presently have any agreement, plan or understanding, directly or
indirectly, with any Person to distribute or effect any distribution of any of
the Securities (or any securities which are derivatives thereof) to or through
any person or entity; such Purchaser is not a member of FINRA, an Affiliate of a
FINRA member, or a registered broker-dealer under Section 15 of the Exchange Act
or an entity engaged in a business that would require it to be so registered as
a broker-dealer.

 

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(d)           Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof and the Closing Date it is, and on
each date on which it exercises the Warrants it will be, an “accredited
investor” as defined in Rule 501(a) under the Securities Act.

 

(e)           General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general advertisement.

 

(f)            Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.

 

(g)           Access to Information. Such Purchaser acknowledges that it has had
the opportunity to review the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and its respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company’s representations and warranties contained
in the Transaction Documents. Such Purchaser has sought such accounting, legal
and tax advice as it has considered necessary to make an informed decision with
respect to its acquisition of the Securities.

 

(h)           Certain Trading Activities. Other than with respect to the
transactions contemplated herein, since the time that such Purchaser was first
contacted by the Company or any other Person regarding the transactions
contemplated hereby, neither the Purchaser nor, to the knowledge of such
Purchaser, any Affiliate of such Purchaser which (x) had knowledge of the
transactions contemplated hereby, (y) has or shares discretion relating to such
Purchaser’s investments or trading or information concerning such Purchaser’s
investments, including in respect of the Securities, and (z) is subject to such
Purchaser’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser
or Trading Affiliate, effected or agreed to effect any transactions in the
securities of the Company (including, without limitation, any Short Sales
involving the Company’s securities). Notwithstanding the foregoing, in the case
of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s or Trading Affiliate’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s or Trading
Affiliate’s assets, the representation set forth above shall apply only with
respect to the portion of assets managed by the portfolio manager that have
knowledge about the financing transaction contemplated by this Agreement.

 

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Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). The
Purchaser covenants that neither it nor any Person acting at the direction of
such Purchaser will engage in any transactions in the securities of the Company
(including Short Sales) after the date hereof and prior to the date that the
transactions contemplated by this Agreement are publicly disclosed.

 

(i)            Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.  Such Purchaser shall indemnify, pay, and
hold the Company harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any such right, interest or claim.

 

(j)            Independent Investment Decision. Such Purchaser has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision. Such Purchaser understands that nothing in this Agreement or any other
materials presented by or on behalf of the Company to the Purchaser in
connection with the purchase of the Securities constitutes legal, tax or
investment advice. Such Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.

 

(k)           Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.

 

(l)            No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

(m)         Regulation M. Such Purchaser is aware that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Common Stock
and other activities with respect to the Common Stock by the Purchasers.

 

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(n)           Residency. Such Purchaser’s principal executive offices (or
primary residence if such Purchaser is a natural person) are in the jurisdiction
set forth immediately below Purchaser’s name on the applicable signature
page attached hereto.

 

(o)           Holdings. As of the date hereof, such Purchaser and its Affiliates
do not beneficially own a number of shares of the Company’s Common Stock such
that the purchase of the Shares would result in such Purchaser and its
Affiliates beneficially owning more than 19.99% of the Company’s outstanding
Common Stock.

 

ARTICLE 4

 

OTHER AGREEMENTS OF THE PARTIES

 

4.1          Transfer Restrictions.

 

(a)           Compliance with Laws. Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the Securities may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state and federal
securities laws. In connection with any transfer of the Securities other than
(i) pursuant to an effective registration statement, (ii) to the Company,
(iii) to an Affiliate of a Purchaser, (iv) pursuant to Rule 144 or Rule 144A,
(v) pursuant to Rule 144 without restriction following the applicable holding
period or (v) in connection with a bona fide pledge, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall provide
the Company with a representation letter containing substantially the same
representations and warranties set forth in Section 3.2 hereof, the Company
shall satisfy itself, acting reasonably, that the number of transferees is
sufficiently limited and, in the case of transferees that are partners or
limited liability company members, the transfer is for no consideration.

 

(b)           Legends. Certificates evidencing the Securities shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form until such time as they are not required
under Section 4.1(c) (and a stock transfer order may be placed against transfer
of the certificates for the Securities):

 

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED] [OR] [THESE SECURITIES HAVE NOT BEEN
REGISTERED] UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS PROVIDED BY SECTION 4 OF THAT CERTAIN
SECURITIES PURCHASE AGREEMENT, DATED AS OF APRIL 1, 2011, BY AND AMONG
COMBIMATRIX CORPORATION AND EACH PURCHASER IDENTIFIED ON THE SIGNATURE PAGES
THERETO.

 

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(c)           Removal of Legends. The legend set forth in Section 4.1(b) above
shall be removed and the Company shall issue or cause to be issued a certificate
without such legend or any other legend affixed pursuant to this Agreement to
the holder of the applicable Shares or Warrant Shares upon which it is stamped
or issue or cause to be issued to such holder by electronic delivery at the
applicable balance account at DTC, if (i) such Securities are sold pursuant to
an effective Registration Statement and the Purchaser has delivered a signed and
completed Purchaser’s Certificate of Subsequent Sale in substantially the form
of Exhibit G attached hereto (the “Certificate of Sale”) with respect to such
Securities, (ii) such Securities are sold or transferred pursuant to Rule 144
and the Purchaser delivers a signed customary seller representation letter,
broker representation letter and a copy of a filed Form 144 (if applicable), or
(iii) such Securities are eligible for sale under Rule 144 without restriction
and the Purchaser delivers a signed customary non-affiliate represenation
letter. Any fees (with respect to the Transfer Agent, Company Counsel or
otherwise) associated with the removal of such legend shall be borne by the
Company. Following such time as a legend is no longer required for certain
Securities, the Company will no later than five (5) Trading Days following the
delivery by a Purchaser to the Transfer Agent (with notice to the Company) of a
legended certificate representing such Shares or Warrant Shares (endorsed or
with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer) and delivery to the Company
of the aforementioned documents, deliver or cause to be delivered to the
transferee of such Purchaser or such Purchaser, as applicable, a certificate
representing such Securities that is free from all restrictive and other legends
that were affixed pursuant to this Agreement. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section 4.1. Certificates for
Shares or Warrant Shares subject to legend removal hereunder may be transmitted
by the Transfer Agent to the Purchasers, as applicable, by crediting the account
of the transferee’s Purchaser’s prime broker with DTC.

 

(d)           Irrevocable Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company represents and warrants that no instruction other
than the Irrevocable Transfer Agent Instructions or instructions consistent
therewith referred to in this Section 4.1(d) will be given by the Company to its
transfer agent in connection with this Agreement, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the other Transaction Documents and
applicable law. The Company acknowledges that a breach by it of its obligations
under this Section 4.1(d) will cause irreparable harm to a Purchaser.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 4.1(d) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 4.1(d), that a Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

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(e)           Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or
otherwise transfer the Warrants, Shares, the Warrant Shares or any interest
therein without complying with the requirements of the Securities Act. While the
Registration Statement, if any, remains effective, each Purchaser hereunder may
sell the Shares and Warrant Shares in accordance with the plan of distribution
contained in the Registration Statement and, if it does so, it will comply
therewith and with the related prospectus delivery requirements unless an
exemption therefrom is available. Each Purchaser, severally and not jointly with
the other Purchasers, agrees that if it is notified by the Company in writing at
any time that the Registration Statement registering the resale of the Shares or
the Warrant Shares is not effective or that the prospectus included in such
Registration Statement no longer complies with the requirements of Section 10 of
the Securities Act, the Purchaser will refrain from selling such Shares and
Warrant Shares until such time as the Purchaser is notified by the Company that
such Registration Statement is effective or such prospectus is compliant with
Section 10 of the Exchange Act, unless such Purchaser is able to, and does, sell
such Shares or Warrant Shares pursuant to an available exemption from the
registration requirements of Section 5 of the Securities Act.

 

(f)            Buy-In. If the Company shall fail for any reason or for no reason
to issue to a Purchaser unlegended certificates within seven (7) Business Days
after receipt of all documents necessary for the removal of the legend set forth
above, including, but not limited to the signed and completed Certificate of
Sale and customary representation letters reasonably acceptable to the Company 
(the “Deadline Date”), and such failure is caused by the Transfer Agent’s or the
Company’s failure to use commercially reasonable efforts to comply with
Section 4.1, then, in addition to all other remedies available to such
Purchaser, if on or after the Business Day immediately following such seven
(7) Business Day period, such Purchaser purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock that such Purchaser anticipated receiving from
the Company without any restrictive legend (a “Buy-In”), then the Company shall,
within seven (7) Business Days after such Purchaser’s request and in such
Purchaser’s sole discretion, either (i) pay cash to the Purchaser in an amount
equal to such Purchaser’s total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at
which point the Company’s obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate and such Shares shall be cancelled,
or (ii) promptly honor its obligation to deliver to such Purchaser a certificate
or certificates representing such shares of Common Stock and pay cash to the
Purchaser in an amount equal to the excess (if any) of the Buy-In Price over the
product of (a) such number of shares of Common Stock, times (b) the Closing Bid
Price on the Deadline Date.

 

4.2          Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Shares and the Warrant Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

 

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4.3          Reservation of Common Stock. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance from and after the Closing Date, no less than the maximum number of
shares of Common Stock issuable upon exercise of the Warrants issued at the
Closing.  On the Closing Date, the Company will notify the Transfer Agent of the
reservation of the Warrant Shares as required by this Section 4.3.

 

4.4          Furnishing of Information. In order to enable the Purchasers to
sell the Securities under Rule 144 of the Securities Act, for a period of one
year from the Closing Date, the Company shall use its commercially reasonable
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. During such one year period,
if the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Shares and Warrant Shares under Rule 144.

 

4.5          Form D and Blue Sky. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser who requests a copy in writing promptly after
such filing. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Purchasers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Purchasers who request in writing
such evidence. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the Closing Date.

 

4.6          No Integration. The Company shall not, and shall use its
commercially reasonable efforts to ensure that no Affiliate of the Company
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that
will be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to the Purchasers, or that will be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.

 

4.7          Securities Laws Disclosure; Publicity. On or before the fourth
Trading Day following the execution of this Agreement (or such earlier time as
required by law), the Company will file a Current Report on Form 8-K with the
Commission describing the terms of the Transaction Documents (and including as
exhibits to such Current Report on Form 8-K the material Transaction Documents
(including, without limitation, this Agreement, the form of Warrant and the
Investors Rights Agreement)). Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser or an Affiliate of any
Purchaser, or include the name of any Purchaser or an Affiliate of any Purchaser
in any press release or filing with the Commission (other than the Registration
Statement and other than as may be required in periodic and annual reports under
the Exchange Act), without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with (A) any
registration statement contemplated by the Investors Rights Agreement and
(B) the filing of final Transaction Documents (including signature
pages thereto) with the Commission or (ii) to the extent such disclosure is
required by law, request of the Staff of the Commission, Trading Market
regulations or request of the Trading Market Staff, in which case the Company
shall provide the Purchaser with prior written notice of such disclosure
permitted under this subclause (ii). From and after the issuance of the
Form 8-K, no Purchaser shall be in possession of any material, non-public
information received from the Company or any of its respective officers,
directors, employees or agents, that is not disclosed in the Form 8-K unless a
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information.

 

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Each Purchaser, severally and not jointly with the other Purchasers, covenants
that until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company as described in this Section 4.7, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction.

 

4.8          Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company shall not and shall cause each of its officers, directors, employees
and agents, not to, provide any Purchaser with any material, non-public
information regarding the Company from and after the filing of the Form 8-K
without the express written consent of such Purchaser, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information.

 

4.9          Indemnification.

 

(a)           Indemnification of Purchasers. In addition to the indemnity
provided in the Investors Rights Agreement and to other remedies available in
law or in equity to each Purchaser Party (as defined below), the Company will
indemnify, reimburse and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur, as a
result of or relating to third party claims against such Purchaser relating to
any material breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction
Documents, provided that such a claim for indemnification relating to any breach
of any of the representations or warranties made by the Company in this
Agreement is made within one year from the Closing. The Company will not be
liable to any Purchaser Party under this Agreement to the extent, but only to
the extent, that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.

 

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(b)           Indemnification of the Company. In addition to the indemnity
provided in the Investors Rights Agreement and to other remedies available in
law or in equity to each Company Party (as defined below), each Purchaser,
severally and not jointly, will indemnify, reimburse and hold the Company and
its directors, officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other title), each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Company Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Company Party may suffer or incur, as a
result of or relating to third party claims against the Company relating to any
material breach of any of the representations, warranties, covenants or
agreements made by such Purchaser in this Agreement or in the other Transaction
Documents, provided that such a claim for indemnification relating to any breach
of any of the representations or warranties made by such Purchaser in this
Agreement is made within one year from the Closing. Such Purchaser will not be
liable to any Company Party under this Agreement to the extent, but only to the
extent, that a loss, claim, damage or liability is attributable to any Company
Party’s breach of any of the representations, warranties, covenants or
agreements made by such Company Party in this Agreement or in the other
Transaction Documents.

 

(c)           Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any Proceeding in respect of which indemnity may be sought pursuant to
Section 4.9(a) or Section 4.9(b) (such Person from whom indemnification may be
sought, the “Indemnifying Person”), such Indemnified Person shall promptly
notify the Indemnifying Person in writing and the Indemnifying Person shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses;  provided, however, that the failure of any Indemnified
Person so to notify the Indemnifying Person shall not relieve the Indemnifying
Person of its obligations hereunder except to the extent that the Indemnifying
Person is actually and materially prejudiced by such failure to notify. In any
such Proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the reasonable
expense of such Indemnified Person unless:   (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
(ii) the Indemnifying Person shall have failed promptly to assume the defense of
such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Person in such Proceeding; or (iii) in the reasonable judgment of
counsel to such Indemnified Person, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of interests
between them. The Indemnifying Person shall not be liable for any settlement of
any Proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent
of the Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, the Indemnifying Person shall not effect any settlement
of any pending or threatened Proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such Proceeding.

 

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4.10        Listing of Securities. To the extent not previously filed, in the
time and manner required by the Principal Trading Market, the Company shall
prepare and file with such Trading Market an additional shares listing
notification covering all of the Shares and Warrant Shares

 

4.11        Use of Proceeds. The Company intends to use the net proceeds from
the sale of the Securities hereunder for working capital and general corporate
purposes.

 

ARTICLE 5

 

CONDITIONS PRECEDENT TO CLOSING

 

5.1          Conditions Precedent to the Obligations of the Purchasers to
Purchase Securities at the Closing. The obligation of each Purchaser to acquire
Securities at the Closing is subject to the fulfillment to such Purchaser’s
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by such Purchaser (as to itself only):

 

(a)           Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects (except for those representations and warranties which are qualified as
to materiality, in which case such representations and warranties shall be true
and correct in all respects) as of the date when made and as of the Closing
Date, as though made on and as of such date, except for such representations and
warranties that speak as of a specific date.

 

(b)           Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.

 

(c)           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 the consummation of any of the transactions contemplated by the
Transaction Documents.

 

(d)           Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities at the Closing
(including all Required Approvals if required prior to Closing), all of which
shall be and remain so long as necessary in full force and effect.

 

(e)           No Suspensions of Trading in Common Stock; Listing. The Common
Stock (i) shall be designated for quotation or listed on the Principal Trading
Market and (ii) shall not have been suspended, as of the Closing Date, by the
Commission or the Principal Trading Market from trading on the Principal Trading
Market.

 

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(f)            Company Deliverables. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a).

 

(g)           Compliance Certificate. The Company shall have delivered to each
Purchaser a certificate, dated as of the Closing Date and signed by its Chief
Executive Officer or its Chief Financial Officer, certifying to the fulfillment
of the conditions specified in Sections 5.1(a) and (b) in the form attached
hereto as Exhibit H.

 

(h)           Aggregate Offiering Size.  The aggregate Subscription Amount from
all Purchasers shall be no less than $6,000,000.

 

(i)            Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.

 

5.2          Conditions Precedent to the Obligations of the Company to sell
Securities at the Closing. The Company’s obligation to sell and issue the
Securities to each Purchaser at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:

 

(a)           Representations and Warranties. The representations and warranties
made by such Purchaser in Section 3.2 hereof shall be true and correct in all
material respects (except for those representations and warranties which are
qualified as to materiality, in which case such representations and warranties
shall be true and correct in all respects) as of the date when made, and as of
the Closing Date as though made on and as of such date, except for
representations and warranties that speak as of a specific date.

 

(b)           Performance. Such Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing Date.

 

(c)           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 the consummation of any of the transactions contemplated by the
Transaction Documents.

 

(d)           Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities at the Closing
(including all Required Approvals if required prior to Closing), all of which
shall be and remain so long as necessary in full force and effect.

 

(e)           Purchasers Deliverables. Such Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b).

 

(f)            Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 6.17 herein.

 

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ARTICLE 6

 

MISCELLANEOUS

 

6.1                               Fees and Expenses. Except as set forth in this
Section 6.1, the Company and the Purchasers shall each pay the fees and expenses
of their respective advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the sale and issuance of the Securities to the
Purchasers.  The Company shall pay the expenses of HLM incurred in connection
with the transactions contemplated by this Agreement, in an amount not to exceed
$75,000 against delivery of invoices therefor.

 

6.2                               Entire Agreement. The Transaction Documents,
together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules. At or after the
Closing, and without further consideration, the Company and the Purchasers will
execute and deliver to the other such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.

 

6.3                               Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of
successful transmission) at the facsimile number specified in this Section prior
to 5:00 p.m., New York City time, on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is not
a Trading Day or later than 5:00 p.m., New York City time, on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service with next day delivery specified, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:

 

If to the Company:

CombiMatrix Corporation

 

310 Goddard, Suite 150

 

Irvine, CA 92618

 

(949) 753-0624

 

Facsimile No.: (949) 753-1504

 

Attention:    Scott Burell

 

 

With a copy to:

Dorsey & Whitney LLP

 

38 Technology Drive, Suite 100

 

Irvine, California 92618-5310

 

Telephone No.:   (949) 932-3600

 

Facsimile No.:   (949) 271-5627

 

Attention:   Parker Schweich, Esq.

 

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If to a Purchaser:

To the address set forth under such Purchaser’s name on the signature
page hereof;

 

 

 

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

 

With a copy to:

Cooley LLP

 

Five Palo Alto Square

 

3000 El Camino Real

 

Palo Alto, California 94306-2155

 

Telephone No.:   (650) 843-5191

 

Facsimile No.:  (650) 849-7400

 

Attention:   Brett White

 

6.4                               Amendments; Waivers; No Additional
Consideration. No provision of this Agreement may be waived or amended except in
a written instrument signed, in the case of an amendment, by the Company and the
Purchasers holding or having the right to acquire a majority of the Shares and
the Warrant Shares on a fully-diluted basis at the time of such amendment or, in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Purchaser to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Purchasers who then hold
Securities.

 

6.5                               Construction. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party. This Agreement shall be construed as if drafted jointly by
the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or any of the Transaction Documents.

 

6.6                               Successors and Assigns. The provisions of this
Agreement shall inure to the benefit of and be binding upon the parties and
their successors and permitted assigns. This Agreement, or any rights or
obligations hereunder, may not be assigned by the Company without the prior
written consent of the Purchasers holding or having the right to acquire a
majority of the Shares and the Warrant Shares on a fully-diluted basis at the
time of such assignment. Any Purchaser may assign its rights hereunder in whole
or in part to any Person to whom such Purchaser assigns or transfers any
Securities in compliance with the Transaction Documents and applicable law,
provided such transferee shall agree in writing to be bound, with respect to the
transferred Securities, by the terms and conditions of this Agreement that apply
to the “Purchasers”.

 

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6.7                               No Third-Party Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

 

6.8                               Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of California, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective Affiliates, employees or agents) shall be commenced exclusively in
the California Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the California Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such California Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.9                               Survival. The representations and warranties
contained herein shall survive the Closing and the delivery of the Securities
for a period of one (1) year from the Closing Date. The agreements and covenants
contained herein shall survive for the applicable statute of limitations.

 

6.10                        Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.

 

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6.11                        Severability. If any provision of this Agreement is
held to be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Agreement.

 

6.12                        Replacement of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company and the Transfer Agent of such loss, theft or
destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company and the Transfer Agent for any losses in connection
therewith or, if required by the Transfer Agent, a bond in such form and amount
as is required by the Transfer Agent. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities. If a
replacement certificate or instrument evidencing any Securities is requested due
to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

 

6.13                        Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
each of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary damages may not
be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.

 

6.14                        Payment Set Aside. To the extent that the Company
makes a payment or payments to any Purchaser pursuant to any Transaction
Document or a Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

6.15                        Adjustments in Share Numbers and Prices. In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be deemed to be amended to appropriately
account for such event.

 

6.16                        Independent Nature of Purchasers’ Obligations and
Rights. The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under any Transaction Document.

 

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The decision of each Purchaser to purchase Securities pursuant to the
Transaction Documents has been made by such Purchaser independently of any other
Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser, and no Purchaser
and any of its agents or employees shall have any liability to any other
Purchaser (or any other Person) relating to or arising from any such
information, materials, statement or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose. The Company acknowledges that each of the
Purchasers has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser. The Company’s obligations to
each Purchaser under this Agreement are identical to its obligations to each
other Purchaser other than such differences resulting solely from the number of
Securities purchased by such Purchaser, but regardless of whether such
obligations are memorialized herein or in another agreement between the Company
and a Purchaser.

 

6.17                        Termination. This Agreement may be terminated and
the sale and purchase of the Shares and the Warrants abandoned at any time prior
to the Closing by either the Company or any Purchaser (with respect to itself
only), upon written notice to the other, if the Closing has not been consummated
on or prior to 5:00 p.m., California City time, on the Outside Date; provided,
however, that the right to terminate this Agreement under this Section 6.17
shall not be available to any Person whose failure to comply with its
obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such time.  Upon such termination,
any funds delivered to the Company by a Purchaser for the purchase of Units
hereby shall be immediately returned to such Purchaser.  Nothing in this
Section 6.17 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents. In the event of a termination pursuant to this
Section, the Company shall promptly notify all non-terminating Purchasers. Upon
a termination in accordance with this Section, the Company and the terminating
Purchaser(s) shall not have any further obligation or liability (including
arising from such termination) to the other, and no Purchaser will have any
liability to any other Purchaser under the Transaction Documents as a result
therefrom.

 

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6.18                        Rescission and Withdrawal Right.  Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option owed to such Purchaser by the Company under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then, prior to the performance
by the Company of the Company’s related obligation, such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

COMBIMATRIX CORPORATION

 

 

 

 

 

By:

/s/ R. Judd Jessup

 

Name:

R. Judd Jessup

 

Title:

CEO

 

 

 

 

 

Name of Purchaser:

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

Address:

 

 

 

 

 

Or

 

 

 

o  Check box if address has been provided separately (use this option for
greater confidentiality)

 

 

 

Aggregate Purchase Price (Subscription Amount):

 

 

 

 

 

 

 

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EXHIBITS:

 

A:

Form of Warrant

B:

Form of Investors Rights Agreement

C:

Form of HLM Rights Agreement

D:

Irrevocable Transfer Agent Instructions

E-1:

Accredited Investor Questionnaire

E-2:

Stock Certificate Questionnaire

F:

Form of Secretary’s Certificate

G:

Purchaser’s Certificate of Subsequent Sale

H:

Form of Officer’s Certificate

 

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EXHIBIT A

 

FORM OF WARRANT

 

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EXHIBIT B

 

FORM OF INVESTORS RIGHTS AGREEMENT

 

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EXHIBIT C

 

FORM OF HLM RIGHTS AGREEMENT

 

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EXHIBIT D

 

[Form of Irrevocable Transfer Agent Instructions]

 

As of [          ], 2011

 

[              ]

 

Attn:

 

Ladies and Gentlemen:

 

Reference is made to that certain Securities Purchase Agreement, dated as of
April 1, 2011 (the “Agreement”), by and among CombiMatrix Corporation, a
Delaware corporation (the “Company”), and the purchasers named on the signature
pages thereto (collectively, and including permitted transferees, the
“Holders”), pursuant to which the Company is issuing to the Holders shares (the
“Shares”) of Common Stock of the Company, par value $0.001 per share (the
“Common Stock”), and warrants (the “Warrants”), which are exercisable into
shares of Common Stock.

 

This letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time and the
conditions set forth in this letter are satisfied), subject to any stop transfer
instructions that we may issue to you from time to time, if any:

 

(i)                                    to issue certificates representing shares
of Common Stock upon transfer or resale of the Shares; and

 

(ii)                                to issue shares of Common Stock upon the
exercise of the Warrants (the “Warrant Shares”) to or upon the order of a Holder
from time to time upon delivery by the Company to you of a properly completed
and duly executed Exercise Notice from the Holder, in the form attached hereto
as Annex I.

 

You are instructed to, so long as you have received the certificate representing
shares of Common Stock, an instruction letter and: (a) written confirmation from
the Company’s legal counsel that a registration statement covering resales of
the Shares and the Warrant Shares has been declared effective by the Securities
and Exchange Commission (the “Commission”) under the Securities Act of 1933, as
amended (the “Securities Act”), a copy of such registration statement and a
completed and signed Purchaser’s Certificate of Subsequent Sale with respect to
a sale pursuant to such effective registration statement, (b) written
confirmation from the Company’s legal counsel that the Shares and the Warrant
Shares are eligible for sale in conformity with Rule 144 under the Securities
Act (“Rule 144”) and customary documentation from a Holder and its broker with
respect to a sale pursuant to Rule 144 or (c) written confirmation from the
Company’s legal counsel that the Shares and the Warrant Shares are eligible for
sale without restriction in conformity with Rule 144, or may be issued without
legend pursuant to Section 4.1(c) of the Agreement then, unless otherwise
required by law, within five (5) business days (assuming the transaction is in
good order) of your receipt of a notice of sale and documentation required
pursuant to clause (a) or (b) above, as applicable, or a request from a Holder
for the issuance of an unlegended certificate in the event that the Shares and
the Warrant Shares are eligible for sale without restriction in conformity with
Rule 144 under the Securities Act or pursuant to Section 4.1(c) of the
Agreement, you shall issue the certificates representing the Shares and/or the
Warrant Shares, as the case may be, registered in the names of the purchaser of
such Shares or Warrant Shares or the Holder, as the case may be, and such
certificates shall not bear any legend restricting transfer of the Shares or the
Warrant Shares thereby and should not be subject to any stop-transfer
restriction.

 

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In the event that you have not received the documentation required pursuant to
clause (a) or (b) of the immediately preceding paragraph or such Shares and
Warrant Shares are not eligible for sale without restriction in conformity with
Rule 144 under the Securities Act or eligible to be issued without legend
pursuant to Section 4.1(c) of the Agreement, then the certificates for such
Shares and/or Warrant Shares shall bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
PROVIDED BY SECTION 4 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF
APRIL 1, 2011, BY AND AMONG COMBIMATRIX CORPORATION AND EACH PURCHASER
IDENTIFIED ON THE SIGNATURE PAGES THERETO.

 

Please be advised that the Holders are relying upon this letter as an inducement
to enter into the Agreement and, accordingly, each Holder is a third party
beneficiary to these instructions.

 

 

Very truly yours,

 

 

 

CombiMatrix Corporation

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

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ANNEX I

 

FORM OF EXERCISE NOTICE

 

(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under the Warrants)

 

To:   CombiMatrix Corporation

 

(1)                                The undersigned holder hereby exercises the
right to purchase                       of the shares of Common Stock (the
“Warrant Shares”) of CombiMatrix Corporation, a Delaware corporation (the
“Company”), pursuant to the Warrant (the “Warrant”). Capitalized terms used
herein and not otherwise defined herein have the respective meanings set forth
in the Warrant.

 

(2)                                The Holder intends that payment of the
Exercise Price shall be made as (check one):

 

¨                                    “Cash Exercise” with respect
to                              Warrant Shares; and/or

 

¨                                    “Cashless Exercise” with respect
to                              Warrant Shares (if permitted pursuant to
Section 10 of the Warrant).

 

(3)                                If the Holder has elected a Cash Exercise,
the holder shall pay the sum of $           to the Company in accordance with
the terms of the Warrant.

 

(4)                                Pursuant to this Exercise Notice, the Company
shall deliver to the Holder            Warrant Shares in accordance with the
terms of the Warrant.

 

(5)                                By its delivery of this Exercise Notice, the
undersigned represents and warrants to the Company that in giving effect to the
exercise evidenced hereby, the Holder will not own in excess of the number of
shares of Common Stock permitted to be owned under Section 2.4 of this Warrant
to which this notice relates, and the undersigned hereby further makes the
representations and warranties set forth in Section 3.2 of the Purchase
Agreement.

 

Dated:

 

 

 

 

Name of Holder:

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

 

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ACKNOWLEDGEMENT

 

The Company hereby acknowledges this Exercise Notice and receipt of the
appropriate exercise price (other than in a “cashless exercise”) and hereby
directs [                    ] to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated
                        , 2011, from the Company and acknowledged and agreed to
by [                 ].

 

 

COMBIMATRIX CORPORATION

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

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EXHIBIT E-1

 

ACCREDITED INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

 

To:   CombiMatrix Corporation

 

This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.001 per share, certain warrants and shares of common
stock that may be issued upon exercise of such warrants (collectively, the
“Securities”), of CombiMatrix Corporation, a Delaware corporation (the
“Corporation”). The Securities are being offered and sold by the Corporation
without registration under the Securities Act of 1933, as amended (the “Act”),
and the securities laws of certain states, in reliance on the exemptions
contained in Section 4(2) of the Act and on Regulation D promulgated thereunder
and in reliance on similar exemptions under applicable state laws. The
Corporation must determine that a potential investor meets certain suitability
requirements before offering or selling Securities to such investor. The purpose
of this Questionnaire is to assure the Corporation that each investor will meet
the applicable suitability requirements. The information supplied by you will be
used in determining whether you meet such criteria, and reliance upon the
private offering exemptions from registration is based in part on the
information herein supplied.

 

This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security. Your answers will be kept strictly confidential.
However, by signing this Questionnaire, you will be authorizing the Corporation
to provide a completed copy of this Questionnaire to such parties as the
Corporation deems appropriate in order to ensure that the offer and sale of the
Securities will not result in a violation of the Act or the securities laws of
any state and that you otherwise satisfy the suitability standards applicable to
purchasers of the Securities. All potential investors must answer all applicable
questions and complete, date and sign this Questionnaire. Please print or type
your responses and attach additional sheets of paper if necessary to complete
your answers to any item.

 

PART A.                                               BACKGROUND INFORMATION

 

Name of Beneficial Owner of the Securities:

 

Business Address:

 

(Number and Street)

 

(City)

(State)

(Zip Code)

 

Telephone Number:

(      )

 

If a corporation, partnership, limited liability company, trust or other entity:

 

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Type of entity:

 

State of formation:

 

Approximate Date of formation:

 

Set forth in the space provided below the (i) state(s), if any, in the United
States in which you maintained your principal office during the past two years
and the dates during which you maintained your office in each state, and
(ii) state(s), if any, in which you pay income taxes:

 

 

 

Were you formed for the purpose of investing in the securities being offered?

 

Yes o

No o

 

If an individual:

 

Residence Address:

 

(Number and Street)

 

(City)

(State)

(Zip Code)

 

Telephone Number:   (      )

 

Age:

Citizenship:

Where registered to vote:

 

Set forth in the space provided below the state(s), if any, in the United States
in which you maintained your residence during the past two years and the dates
during which you resided in each state:

 

Are you a director or executive officer of the Corporation?

 

Yes o

No o

 

Social Security or Taxpayer Identification No.

 

PART B.   ACCREDITED INVESTOR QUESTIONNAIRE

 

In order for the Company to offer and sell the Securities in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please  initial each category  applicable to you
as a Purchaser of Securities of the Company.

 

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o                                  (1)                                  A bank
as defined in Section 3(a)(2) of the Securities Act, or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity;

 

o                                  (2)                                  A broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934;

 

o                                  (3)                                  An
insurance company as defined in Section 2(13) of the Securities Act;

 

o                                  (4)                                  An
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act;

 

o                                  (5)                                  A Small
Business Investment Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of 1958;

 

o                                  (6)                                  A plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000;

 

o                                  (7)                                  An
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;

 

o                                  (8)                                  A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

 

o                                  (9)                                  An
organization described in Section 501(c)(3) of the Internal Revenue Code, a
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the Securities, with total assets in
excess of $5,000,000;

 

o                                (10)                                A trust,
with total assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the Securities, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial and business matters
that such person is capable of evaluating the merits and risks of investing in
the Company;

 

o                                  (11)                            A natural
person whose individual net worth, or joint net worth with that person’s spouse,
at the time of his purchase exceeds $1,000,000, excluding the value of the
primary residence of such natural person, calculated by subtracting from the
estimated fair market value of the property the amount of debt secured by the
property, up to the estimated fair market value of the property;

 

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o                                  (12)                            A natural
person who had an individual income in excess of $200,000 in each of the two
most recent years, or joint income with that person’s spouse in excess of
$300,000, in each of those years, and has a reasonable expectation of reaching
the same income level in the current year;

 

o                                  (13)                            An executive
officer or director of the Company;

 

o                                  (14)                            An entity in
which all of the equity owners qualify under any of the above subparagraphs. If
the undersigned belongs to this investor category only, list the equity owners
of the undersigned, and the investor category which each such equity owner
satisfies:

 

(Continue on a separate piece of paper, if necessary.)

 

A.

FOR EXECUTION BY AN INDIVIDUAL:

 

 

 

 

Date

 

 

By:

 

 

 

 

 

 

Print Name:

 

 

 

 

B.

FOR EXECUTION BY AN ENTITY:

 

 

 

 

 

Entity Name:

 

 

 

 

 

Date

 

 

By

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

Title:

 

 

 

 

C.

ADDITIONAL SIGNATURES (if required by partnership, corporation or trust
document):

 

 

 

 

 

Entity Name:

 

 

 

 

 

Date

 

 

By

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

Entity Name:

 

 

 

 

 

Date

 

 

By

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

Title:

 

 

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EXHIBIT E-2

 

STOCK CERTIFICATE QUESTIONNAIRE

 

Pursuant to Section 2.2(b) of the Agreement, please provide us with the
following information:

 

1.                                     The exact name that the Securities are to
be registered in (this is the name that will appear on the stock
certificate(s)).

 

 

2.                                     The mailing address, telephone and
telecopy number of the Registered Holder listed in response to Item 1 above:

 

 

 

 

3.                                     The Tax Identification Number (or, if an
individual, the Social Security Number) of the Registered Holder listed in
response to Item 1 above:

 

 

 

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EXHIBIT F

 

FORM OF SECRETARY’S CERTIFICATE

 

The undersigned hereby certifies that he is the duly elected, qualified and
acting Secretary of CombiMatrix Corporation, a Delaware corporation (the
“Company”), and that as such he is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of April 1, 2011, by and among the
Company and the investors party thereto (the  “Securities Purchase Agreement”),
and further certifies in his official capacity, in the name and on behalf of the
Company, the items set forth below. Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase
Agreement.

 

1.                                       Attached hereto as Exhibit A is a true,
correct and complete copy of the resolutions duly adopted by the Board of
Directors of the Company at a meeting of the Board of Directors held on        ,
2011 and by unanimous written consent on       , 2011.  Such resolutions have
not in any way been amended, modified, revoked or rescinded, have been in full
force and effect since their adoption to and including the date hereof and are
now in full force and effect.

 

2.                                       Attached hereto as Exhibit B is a true,
correct and complete copy of the Certificate of Incorporation of the Company,
together with any and all amendments thereto currently in effect, and no action
has been taken to further amend, modify or repeal such Certificate of
Incorporation, the same being in full force and effect in the attached form as
of the date hereof.

 

3.                                       Attached hereto as Exhibit C is a true,
correct and complete copy of the Bylaws of the Company and any and all
amendments thereto currently in effect, and no action has been taken to further
amend, modify or repeal such Bylaws, the same being in full force and effect in
the attached form as of the date hereof.

 

4.                                       Each person listed below has been duly
elected or appointed to the position(s) indicated opposite his name and is duly
authorized to sign the Securities Purchase Agreement and each of the Transaction
Documents on behalf of the Company, and the signature appearing opposite such
person’s name below is such person’s genuine signature.

 

Name

 

Position

 

Signature

 

 

 

 

 

R. Judd Jessup

 

Chief Executive Officer

 

 

 

 

 

 

 

Scott R. Burell

 

Chief Financial Officer

 

 

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this     
day of April, 2011.

 

 

 

 

Secretary

 

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I, R. Judd Jessup, Chief Executive Officer, hereby certify that Scott R. Burell
is the duly elected, qualified and acting Secretary of the Company and that the
signature set forth above is his true signature.

 

 

 

 

R. Judd Jessup

 

Chief Executive Officer

 

50

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EXHIBIT A

 

RESOLUTIONS

 

 

EXHIBIT B

 

CERTIFICATE OF INCORPORATION

 

 

EXHIBIT C

 

BYLAWS

 

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EXHIBIT G

 

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

 

To:                              [             ]

 

Attention:                                         [                 ]

 

The undersigned, the selling securityholder or an officer of, or other duly
authorized person, hereby certifies that                              represents
that it has sold                                shares of the Common Stock of
CombiMatrix Corporation and that such shares were sold on                 either
(i) in accordance with the registration statement on Form S-3 with file number
               , in which case the selling securityholder certifies that such
selling securityholder has delivered a current prospectus in connection with
such sale,  provided, however, that if Rule 172 under the Securities Act of
1933, as amended, is then in effect, such selling securityholder has confirmed
that a current prospectus is deemed to be delivered in connection with such
sale, or (ii) in accordance with Rule 144 under the Securities Act of 1933 (
“Rule 144”), in which case the selling securityholder certifies that it has
complied with the requirements of Rule 144. Print or type:

 

Name of individual representing selling

 

securityholder (if an institution):

 

 

 

Title of individual representing selling

 

securityholder (if an institution):

 

 

 

Signature by:

 

 

 

Selling securityholder or individual

 

representative :

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

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EXHIBIT H

 

FORM OF OFFICER’S CERTIFICATE

 

The undersigned Chief Executive Officer of CombiMatrix Corporation, a Delaware
corporation (the “Company”), pursuant to Section 5.1(g) of the Securities
Purchase Agreement, dated as of April 1, 2011, by and among the Company and the
Purchasers signatory thereto (the “Agreement”), hereby represents, warrants and
certifies, in his official capacity, in the name and on behalf of the Company,
to such investors as follows (capitalized terms used but not otherwise defined
herein shall have the meaning set forth in the Agreement):

 

1.                                       The representations and warranties of
the Company contained in the Agreement are true and correct in all material
respects (except for those representations and warranties which are qualified as
to materiality, in which case such representations and warranties are true and
correct in all respects) as of the date when made and as of the Closing Date, as
though made on and as of such date, except for such representations and
warranties that speak as of a specific date.

 

2.                                       The Company has performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing.

 

IN WITNESS WHEREOF, the undersigned has executed this certificate this [    ]
day of April, 2011.

 

 

 

 

R. Judd Jessup

 

Chief Executive Officer

 

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INSTRUCTION SHEET

 

(TO BE READ IN CONJUNCTION WITH THE ENTIRE SECURITIES PURCHASE AGREEMENT AND
INVESTORS RIGHTS AGREEMENT)

 

A.                                   Complete the following items in the
Securities Purchase Agreement and/or Investors Rights Agreement:

 

1.                                     Provide the information regarding the
Purchaser requested on the signature pages. The Securities Purchase Agreement
and the Investors Rights Agreement must be executed by an individual authorized
to bind the Purchaser.

 

2.                                       Exhibit E-1 — Accredited Investor
Questionnaire:

 

Provide the information requested by the Accredited Investor Questionnaire

 

3.                                       Exhibit E-2 Stock Certificate
Questionnaire:

 

Provide the information requested by the Stock Certificate Questionnaire

 

4.                                       Return the signed Securities Purchase
Agreement and Investors Rights Agreement, including Questionnaires, to:

 

Parker A. Schweich

Dorsey & Whitney LLP

38 Technology Dr., Suite 100

Irvine, CA  92618-5310

Telephone:  (949) 932-3671

Facsimile:  (949) 271-5627

Email:  schweich.parker@dorsey.com

 

B.                                     Instructions regarding the transfer of
funds for the purchase of Securities have been provided to the Purchasers.

 

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