Exhibit 10.4

 

 

CDX, INC.

 

INVESTORS’ RIGHTS AGREEMENT

 

March [___], 2014

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page       Section 1 Definitions 1       1.1 Certain Definitions 1      
Section 2 Registration Rights 3       2.1 Requested Registration 3 2.2 Company
Registration 5 2.3 Registration on Form S-3 6 2.4 Expenses of Registration 7 2.5
Registration Procedures 7 2.6 Indemnification 8 2.7 Information by Holder 10 2.8
Restrictions on Transfer 10 2.9 Rule 144 Reporting 11 2.10 Market Stand-Off
Agreement 12 2.11 Delay of Registration 12 2.12 Transfer or Assignment of
Registration Rights 12 2.13 Limitations on Subsequent Registration Rights 13
2.14 Termination of Registration Rights 13       Section 3 Information Covenants
13       3.1 Basic Financial Information and Inspection Rights 13 3.2
Confidentiality 13 3.3 “Bad Actor” Notice 14 3.4 Termination of Covenants 14    
  Section 4 Right of First Refusal 14       4.1 Right of First Refusal to
Significant Holders 14       Section 5 Miscellaneous 16       5.1 Amendment 16
5.2 Notices 16 5.3 Governing Law 17 5.4 Successors and Assigns 17 5.5 Entire
Agreement 17 5.6 Delays or Omissions 17 5.7 Severability 18 5.8 Titles and
Subtitles 18 5.9 Counterparts 18 5.10 Telecopy Execution and Delivery 18 5.11
Jurisdiction; Venue 18 5.12 Further Assurances 18 5.13 Termination Upon Change
of Control 18 5.14 Conflict 18

 

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TABLE OF CONTENTS (continued)

 

5.15 Attorneys’ Fees 19 5.16 Aggregation of Stock 19 5.17 Jury Trial 19

 

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CDX, INC.

INVESTORS’ RIGHTS AGREEMENT

 

This Investors’ Rights Agreement (this “Agreement”) is dated as of March [__],
2014, and is between CDx, Inc., a Delaware corporation (the “Company”), and the
persons and entities listed on Exhibit A (each, an “Investor” and collectively,
the “Investors”).

 

Recitals

 

The Investors are parties to certain Series A Preferred Stock Subscription
Agreements, between the Company and each Investor (the “Subscription
Agreements”), and it is a condition to the closing of the sale of the Series A
Preferred Stock to the Investors listed on such Schedule of Investors that the
Investors and the Company execute and deliver this Agreement.

 

The parties therefore agree as follows:

 

Section 1

Definitions

 

1.1          Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:

 

(a)          “Bad Actor Disqualification” means any “bad actor” disqualification
described in Rule 506(d)(1)(i) through (viii) under the Securities Act.

 

(b)          “Commission” shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

 

(c)          “Common Stock” means the Common Stock of the Company.

 

(d)          “Conversion Stock” shall mean shares of Common Stock issued upon
conversion of the Series A Preferred Stock.

 

(e)          “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

 

(f)          “Holder” shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been duly and validly transferred in accordance
with Section 2.12 of this Agreement.

 

(g)          “Indemnified Party” shall have the meaning set forth in
Section 2.6(c).

 

(h)          “Indemnifying Party” shall have the meaning set forth in
Section 2.6(c).

 

(i)          “Initial Closing” shall mean the date of the initial sale of shares
of the Company’s Series A Preferred Stock pursuant to the Subscription
Agreements.

 

 

 

 

(j)          “Initial Public Offering” shall mean the closing of the Company’s
first firm commitment underwritten public offering of the Company’s Common Stock
registered under the Securities Act.

 

(k)          “Initiating Holders” shall mean any Holder or Holders who in the
aggregate hold not less than 50% of the outstanding Registrable Securities.

 

(l)          “New Securities” shall have the meaning set forth in
Section 4.1(a).

 

(m)          “Other Selling Stockholders” shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include their
Other Shares in certain registrations hereunder.

 

(n)          “Other Shares” shall mean shares of Common Stock, other than
Registrable Securities (as defined below), (including shares of Common Stock
issuable upon conversion of shares of any currently unissued series of Preferred
Stock of the Company) with respect to which registration rights have been
granted.

 

(o)           “Registrable Securities” shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and (ii) any Common
Stock issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the shares referenced in (i) above; provided, however,
that Registrable Securities shall not include any shares of Common Stock
described in clause (i) or (ii) above which have previously been registered or
which have been sold to the public either pursuant to a registration statement
or Rule 144, or which have been sold in a private transaction in which the
transferor’s rights under this Agreement are not validly assigned in accordance
with this Agreement.

 

(p)          The terms “register,” “registered” and “registration” shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

 

(q)          “Registration Expenses” shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses, fees
and disbursements of counsel for the Holders and the compensation of regular
employees of the Company, which shall be paid in any event by the Company.

 

(r)          “Restricted Securities” shall mean any Registrable Securities
required to bear the first legend set forth in Section 2.8(b).

 

(s)          “Rule 144” shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

 

(t)          “Rule 145” shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission

 

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(u)          “Securities Act” shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

 

(v)         “Selling Expenses” shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder.

 

(w)          “Series A Preferred Stock” shall mean the shares of Series A
Preferred Stock issued pursuant to the Subscription Agreements.

 

(x)          “Shares” shall mean the Company’s Series A Preferred Stock.

 

(y)          “Significant Holders” shall have the meaning set forth in
Section 4.1.

 

(z)          “Subscription Agreements” shall have the meaning set forth in the
Recitals.

 

(aa)         “Withdrawn Registration” shall mean a forfeited demand registration
under Section 2.1 in accordance with the terms and conditions of Section 2.4.

 

Section 2

Registration Rights

 

2.1          Requested Registration. 

 

(a)          Request for Registration. Subject to the conditions set forth in
this Section 2.1, if the Company shall receive from Initiating Holders a written
request signed by such Initiating Holders that the Company effect any
registration with respect to all or a part of the Registrable Securities (such
request shall state the number of shares of Registrable Securities to be
disposed of by such Initiating Holders), the Company will:

 

(i)          promptly give written notice of the proposed registration to all
other Holders; and

 

(ii)         as soon as practicable, file and use its commercially reasonable
efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act) and to permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 20 days after such written notice from the Company is
mailed or delivered.

 

(b)          Limitations on Requested Registration. The Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 2.1:

 

(i)          Prior to the earlier of (A) the five year anniversary of the date
of this Agreement or (B) 180 days following the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public (or the subsequent date on which all
market stand-off agreements applicable to the offering have terminated);

 

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(ii)         If the Initiating Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration statement,
propose to sell Registrable Securities and such other securities (if any) the
aggregate proceeds of which (after deduction for underwriter’s discounts and
expenses related to the issuance) are less than $30,000,000;

 

(iii)        In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;

 

(iv)        After the Company has initiated two such registrations pursuant to
this Section 2.1 (counting for these purposes only (x) registrations which have
been declared or ordered effective and pursuant to which securities have been
sold, and (y) Withdrawn Registrations);

 

(v)         During the period starting with the date 60 days prior to the
Company’s good faith estimate of the date of filing of, and ending on a date 180
days after the effective date of, a Company-initiated registration (or ending on
the subsequent date on which all market stand-off agreements applicable to the
offering have terminated); provided that the Company is actively employing in
good faith commercially reasonable efforts to cause such registration statement
to become effective;

 

(vi)        If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be registered on Form S-3 pursuant to a request
made under Section 2.3;

 

(vii)       If the Initiating Holders do not request that such offering be
firmly underwritten by underwriters selected by the Initiating Holders (subject
to the consent of the Company); and

 

(viii)      If the Company and the Initiating Holders are unable to obtain the
commitment of the underwriter described in clause (b)(vii) above to firmly
underwrite the offer.

 

(c)          Deferral. If (i) in the good faith judgment of the board of
directors of the Company, the filing of a registration statement covering the
Registrable Securities would be detrimental to the Company and the board of
directors of the Company concludes, as a result, that it is in the best
interests of the Company to defer the filing of such registration statement at
such time, and (ii) the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the board of directors of the Company, it would be detrimental to the Company
for such registration statement to be filed in the near future and that it is,
therefore, in the best interests of the Company to defer the filing of such
registration statement, then (in addition to the limitations set forth in
Section 2.1(b)(v) above) the Company shall have the right to defer such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders, and, provided further, that the Company shall not defer its
obligation in this manner more than two times in any twelve-month period.

 

(d)          Other Shares. The registration statement filed pursuant to the
request of the Initiating Holders may, subject to the provisions of
Section 2.1(e), include Other Shares, and may include securities of the Company
being sold for the account of the Company.

 

(e)          Underwriting. The right of any Holder to include all or any portion
of its Registrable Securities in a registration pursuant to this Section 2.1
shall be conditioned upon such Holder’s participation in an underwriting and the
inclusion of such Holder’s Registrable Securities to the extent provided herein.
If the Company shall request inclusion in any registration pursuant to
Section 2.1 of securities being sold for its own account, or if other persons
shall request inclusion in any registration pursuant to Section 2.1, the
Initiating Holders shall, on behalf of all Holders, offer to include such
securities in the underwriting and such offer shall be conditioned upon the
participation of the Company or such other persons in such underwriting and the
inclusion of the Company’s and such person’s other securities of the Company and
their acceptance of the further applicable provisions of this Section 2
(including Section 2.10). The Company shall (together with all Holders and other
persons proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the
Company, which underwriters are reasonably acceptable to a majority-in-interest
of the Initiating Holders.

 

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Notwithstanding any other provision of this Section 2.1, if the underwriters
advise the Initiating Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the number of Registrable
Securities and Other Shares that may be so included shall be allocated as
follows: (i) first, among all Holders requesting to include Registrable
Securities in such registration statement based on the pro rata percentage of
Registrable Securities held by such Holders, assuming conversion; (ii) second,
to the Other Selling Stockholders (iii) third, to the Company, which the Company
may allocate, at its discretion, for its own account, or for the account of
other holders or employees of the Company.

 

If a person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Initiating Holders. The securities so excluded shall also be withdrawn from
registration. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of shares to
be included in such registration was previously reduced as a result of marketing
factors pursuant to this Section 2.1(e), then the Company shall then offer to
all Holders who have retained rights to include securities in the registration
the right to include additional Registrable Securities in the registration in an
aggregate amount equal to the number of shares so withdrawn, with such shares to
be allocated among such Holders requesting additional inclusion, as set forth
above.

 

2.2          Company Registration.

 

(a)          Company Registration. If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders, other than a registration pursuant to Section 2.1 or 2.3, a
registration relating solely to employee benefit plans, a registration relating
to the offer and sale of debt securities, a registration relating to a corporate
reorganization or other Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, the Company will:

 

(i)          promptly give written notice of the proposed registration to all
Holders; and

 

(ii)         use its commercially reasonable efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 2.2(b) below, and in any
underwriting involved therein, all of such Registrable Securities as are
specified in a written request or requests made by any Holder or Holders
received by the Company within 10 days after such written notice from the
Company is mailed or delivered. Such written request may specify all or a part
of a Holder’s Registrable Securities.

 

(b)          Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to
Section 2.2(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 2.2 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company, the Other Selling Stockholders and other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.

 

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Notwithstanding any other provision of this Section 2.2, if the underwriters
advise the Company in writing that marketing factors require a limitation on the
number of shares to be underwritten, the underwriters may (subject to the
limitations set forth below) exclude all Registrable Securities from, or limit
the number of Registrable Securities to be included in, the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated, as follows:
(i) first, to the Company for securities being sold for its own account, and
(ii) second, to the Holders requesting to include Registrable Securities in such
registration statement based on the pro rata percentage of Registrable
Securities held by such Holders, assuming conversion

 

If a person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall also be
excluded therefrom by written notice from the Company or the underwriter. The
Registrable Securities or other securities so excluded shall also be withdrawn
from such registration. Any Registrable Securities or other securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.

 

(c)          Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.

 

2.3          Registration on Form S-3. 

 

(a)          Request for Form S-3 Registration. After its initial public
offering, the Company shall use its commercially reasonable efforts to qualify
for registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 2 and subject to the
conditions set forth in this Section 2.3, if the Company shall receive from a
Holder or Holders of Registrable Securities a written request that the Company
effect any registration on Form S-3 or any similar short form registration
statement with respect to all or part of the Registrable Securities (such
request shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders), the Company will take all such action with respect to such
Registrable Securities as required by Section 2.1(a)(i) and (ii).

 

(b)          Limitations on Form S-3 Registration. The Company shall not be
obligated to effect, or take any action to effect, any such registration
pursuant to this Section 2.3:

 

(i)          In the circumstances described in either Sections 2.1(b)(i),
2.1(b)(iii) or 2.1(b)(v);

 

(ii)         If the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) on Form S-3 at an
aggregate price to the public of less than $1,000,000; or

 

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(iii)        If, in a given twelve-month period, the Company has effected one
such registration in such period.

 

(c)          Deferral. The provisions of Section 2.1(c) shall apply to any
registration pursuant to this Section 2.3.

 

(d)          Underwriting. If the Holders of Registrable Securities requesting
registration under this Section 2.3 intend to distribute the Registrable
Securities covered by their request by means of an underwriting, the provisions
of Section 2.1(e) shall apply to such registration. Notwithstanding anything
contained herein to the contrary, registrations effected pursuant to this
Section 2.3 shall not be counted as requests for registration or registrations
effected pursuant to Section 2.1.

 

2.4          Expenses of Registration. All Registration Expenses incurred in
connection with registrations pursuant to Sections 2.1, 2.2 and 2.3 shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to
Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to be
registered or because a sufficient number of Holders shall have withdrawn so
that the minimum offering conditions set forth in Sections 2.1 and 2.3 are no
longer satisfied (in which case all participating Holders shall bear such
expenses pro rata among each other based on the number of Registrable Securities
requested to be so registered), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to a demand registration
pursuant to Section 2.1; provided, however, in the event that a withdrawal by
the Holders is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 2.1, such registration shall not be
treated as a counted registration for purposes of Section 2.1, even though the
Holders do not bear the Registration Expenses for such registration. All Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the holders of securities included in such registration pro rata among
each other on the basis of the number of Registrable Securities so registered.

 

2.5          Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 2, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its commercially reasonable
efforts to:

 

(a)          Keep such registration effective for a period ending on the earlier
of the date which is 60 days from the effective date of the registration
statement or such time as the Holder or Holders have completed the distribution
described in the registration statement relating thereto;

 

(b)          Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
subsection (a) above;

 

(c)          Furnish such number of prospectuses, including any preliminary
prospectuses, and other documents incident thereto, including any amendment of
or supplement to the prospectus, as a Holder from time to time may reasonably
request;

 

(d)          Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdiction as shall be reasonably requested by the
Holders; provided, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;

 

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(e)          Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in light of the circumstances
then existing, and following such notification promptly prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in light of the circumstances then existing;

 

(f)          Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;

 

(g)          Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed; and

 

(h)          In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1, enter into an underwriting
agreement in form reasonably necessary to effect the offer and sale of Common
Stock, provided such underwriting agreement contains reasonable and customary
provisions, and provided further, that each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.

 

2.6          Indemnification. 

 

(a)          To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, each of its officers, directors and partners, legal
counsel and accountants and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 2, and
each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all expenses, claims,
losses, damages and liabilities (or actions, proceedings or settlements in
respect thereof) arising out of or based on: (i) any untrue statement (or
alleged untrue statement) of a material fact contained or incorporated by
reference in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
(or alleged violation) by the Company of the Securities Act, any state
securities laws or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any offering covered by such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers, directors,
partners, legal counsel and accountants and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action; provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability, or action arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder, any of such Holder’s officers,
directors, partners, legal counsel or accountants, any person controlling such
Holder, such underwriter or any person who controls any such underwriter, and
stated to be specifically for use therein; and provided, further that, the
indemnity agreement contained in this Section 2.6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).

 

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(b)          To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, officers, partners, legal counsel
and accountants and each underwriter, if any, of the Company’s securities
covered by such a registration statement, each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, each
other such Holder, and each of their officers, directors and partners, and each
person controlling each other such Holder, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on:
(i) any untrue statement (or alleged untrue statement) of a material fact
contained or incorporated by reference in any prospectus, offering circular or
other document (including any related registration statement, notification, or
the like) incident to any such registration, qualification or compliance, or
(ii) any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, directors,
officers, partners, legal counsel and accountants, persons, underwriters, or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of such Holder hereunder shall
not apply to amounts paid in settlement of any such claims, losses, damages or
liabilities (or actions in respect thereof) if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld); and provided that in no event shall any indemnity under this
Section 2.6 exceed the gross proceeds from the offering received by such Holder,
except in the case of fraud or willful misconduct by such Holder.

 

(c)          Each party entitled to indemnification under this Section 2.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party’s expense; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.6, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.

 

-9-

 

 

(d)          If the indemnification provided for in this Section 2.6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. No person or
entity will be required under this Section 2.6(d) to contribute any amount in
excess of the gross proceeds from the offering received by such person or
entity, except in the case of fraud or willful misconduct by such person or
entity. No person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.

 

(e)          Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.

 

2.7          Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 2.

 

2.8          Restrictions on Transfer.

 

(a)          The holder of each certificate representing Registrable Securities
by acceptance thereof agrees to comply in all respects with the provisions of
this Section 2.8. Each Holder agrees not to make any sale, assignment, transfer,
pledge or other disposition of all or any portion of the Restricted Securities,
or any beneficial interest therein, unless and until the transferee thereof has
agreed in writing for the benefit of the Company to take and hold such
Restricted Securities subject to, and to be bound by, the terms and conditions
set forth in this Agreement, including, without limitation, this Section 2.8 and
Section 2.10, and:

 

(i)          There is then in effect a registration statement under the
Securities Act covering such proposed disposition and the disposition is made in
accordance with the registration statement; or

 

(ii)         The Holder shall have given prior written notice to the Company of
the Holder’s intention to make such disposition and shall have furnished the
Company with a detailed description of the manner and circumstances of the
proposed disposition, and the Holder shall have furnished the Company, at the
Holder’s expense, with (i) an opinion of counsel, reasonably satisfactory to the
Company, to the effect that such disposition will not require registration of
such Restricted Securities under the Securities Act or (ii) a “no action” letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company.

 

(b)          Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws):

 

-10-

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE
COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO (1) RESTRICTIONS ON
TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC
OFFERING, AS SET FORTH IN AN INVESTORS’ RIGHTS AGREEMENT, AND (2) VOTING
RESTRICTIONS AS SET FORTH IN A VOTING AGREEMENT AMONG THE COMPANY AND THE
ORIGINAL HOLDERS OF THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE COMPANY.

 

The Holders consent to the Company making a notation on its records and giving
instructions to any transfer agent of the Restricted Securities in order to
implement the restrictions on transfer established in this Section 2.8.

 

(c)          The first legend referring to federal and state securities laws
identified in Section 2.8(b) stamped on a certificate evidencing the Restricted
Securities and the stock transfer instructions and record notations with respect
to the Restricted Securities shall be removed and the Company shall issue a
certificate without such legend to the holder of Restricted Securities if
(i) those securities are registered under the Securities Act, or (ii) the holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company to the effect that a sale or transfer of those securities may be made
without registration or qualification.

 

(d)          Each Investor agrees not to make any sale, assignment, transfer,
pledge or other disposition of any securities of the Company, or any beneficial
interest therein, to any person other than the Company unless and until the
proposed transferee confirms to the reasonable satisfaction of the Company that
neither the proposed transferee nor any of its directors, executive officers,
other officers that may serve as a director or officer of any company in which
it invests, general partners or managing members nor any person that would be
deemed a beneficial owner of those securities (in accordance with Rule 506(d) of
the Securities Act) is subject to any Bad Actor Disqualification, except as set
forth in Rule 506(d)(2) or (d)(3) under the Securities Act and disclosed,
reasonably in advance of the transfer, in writing in reasonable detail to the
Company.

 

2.9          Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its commercially reasonable efforts to:

 

(a)          Make and keep adequate current public information with respect to
the Company available in accordance with Rule 144 under the Securities Act, at
all times from and after ninety (90) days following the effective date of the
first registration under the Securities Act filed by the Company for an offering
of its securities to the general public;

 

-11-

 

 

(b)          File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements; and

 

(c)          So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after 90 days following the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.

 

2.10        Market Stand-Off Agreement. Each Holder shall not sell or otherwise
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
of any Common Stock (or other securities) of the Company held by such Holder
(other than those included in the registration) during the period from the
filing of the registration statement for the Company’s Initial Public Offering
filed under the Securities Act that includes securities to be sold on behalf of
the Company to the public in an underwritten public offering under the
Securities Act through the end of the 180-day period following the effective
date of the registration statement (or such other period as may be requested by
the Company or an underwriter to accommodate regulatory restrictions on (i) the
publication or other distribution of research reports and (ii) analyst
recommendations and opinions, including, but not limited to, the restrictions
contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor
provisions or amendments thereto). The obligations described in this
Section 2.10 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions and may stamp each such certificate with the second
legend set forth in Section 2.8(b) with respect to the shares of Common Stock
(or other securities) subject to the foregoing restriction until the end of such
180-day (or other) period. Each Holder agrees to execute a market standoff
agreement with said underwriters in customary form consistent with the
provisions of this Section 2.10.

 

2.11        Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.

 

2.12        Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 2 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 500,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like); provided that (i) such transfer
or assignment of Registrable Securities is effected in accordance with the terms
of Section 2.8, the Right of First Refusal and Co-Sale Agreement, and applicable
securities laws, (ii) the Company is given written notice prior to said transfer
or assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
intended to be transferred or assigned and (iii) the transferee or assignee of
such rights assumes in writing the obligations of such Holder under this
Agreement, including without limitation the obligations set forth in
Section 2.10.

 

-12-

 

 

2.13        Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of Holders holding a majority of the Registrable Securities (excluding any of
such shares held by any Holders whose rights to request registration or
inclusion in any registration pursuant to this Section 2 have terminated in
accordance with Section 2.14), enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are senior to the
registration rights granted to the Holders hereunder.

 

2.14        Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to Sections 2.1,
2.2 or 2.3 shall terminate on the earlier of (i) such date, on or after the
closing of the Company’s first registered public offering of Common Stock, on
which all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 during any
90-day period and (ii) three years after the closing of the Company’s Initial
Public Offering.

 

Section 3

Information Covenants

 

3.1          Basic Financial Information and Inspection Rights.

 

(a)          Basic Financial Information. The Company will furnish the following
reports to each Holder who owns at least 500,000 Shares and/or Conversion Stock
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits, and the like):

 

(i)          As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company and its subsidiaries,
if any, as at the end of such fiscal year, and consolidated statements of income
and cash flows of the Company and its subsidiaries, if any, for such year,
prepared in accordance with U.S. generally accepted accounting principles
consistently applied, certified by the Chief Financial Officer of the Company;
and

 

(ii)         As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within 45 days after the end of the first, second, and third quarterly
accounting periods in each fiscal year of the Company, an unaudited consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such quarterly period, and unaudited consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such period, prepared in
accordance with U.S. generally accepted accounting principles consistently
applied, subject to changes resulting from normal year-end audit adjustments.

 

3.2          Confidentiality. Anything in this Agreement to the contrary
notwithstanding, no Holder by reason of this Agreement shall have access to any
trade secrets or classified information of the Company. The Company shall not be
required to comply with any information rights of Section 3 in respect of any
Holder whom the Company reasonably determines to be a competitor or an officer,
employee, director or holder of more than ten percent (10%) of a competitor.
Each Holder acknowledges that the information received by them pursuant to this
Agreement may be confidential and for its use only, and it will not use such
confidential information in violation of the Exchange Act or reproduce, disclose
or disseminate such information to any other person (other than its employees or
agents having a need to know the contents of such information, and its
attorneys), except in connection with the exercise of rights under this
Agreement, unless the Company has made such information available to the public
generally.

 

-13-

 

 

3.3          “Bad Actor” Notice. Each party to this Agreement will promptly
notify each other party to this Agreement in writing if it or, to its knowledge,
any person specified in Rule 506(d)(1) under the Securities Act becomes subject
to any Bad Actor Disqualification.

 

3.4          Termination of Covenants. The covenants set forth in this Section 3
shall terminate and be of no further force and effect after the closing of the
Company’s Initial Public Offering.

 

Section 4

Right of First Refusal

 

4.1          Right of First Refusal to Significant Holders. The Company hereby
grants to each Holder who owns at least 500,000 Shares or Conversion Stock (as
presently constituted and subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits and the like) (the “Significant Holders”),
the right of first refusal to purchase its pro rata share of New Securities (as
defined in this Section 4.1(a)) which the Company may, from time to time,
propose to sell and issue after the date of this Agreement. A Significant
Holder’s pro rata share, for purposes of this right of first refusal, is equal
to the ratio of (a) the number of shares of Common Stock owned by such
Significant Holder immediately prior to the issuance of New Securities (assuming
full conversion of the Shares and full conversion or exercise of all outstanding
convertible securities, rights, options and warrants held by such Significant
Holder) to (b) the total number of shares of Common Stock outstanding
immediately prior to the issuance of New Securities (assuming full conversion of
the Shares and full conversion or exercise of all outstanding convertible
securities, rights, options and warrants). Each Significant Holder shall have a
right of over-allotment such that if any Significant Holder fails to exercise
its right hereunder to purchase its pro rata share of New Securities, the other
Significant Holders may purchase the non-purchasing Significant Holder’s portion
on a pro rata basis. This right of first refusal shall be subject to the
following provisions:

 

(a)          “New Securities” shall mean any capital stock (including Common
Stock and/or Preferred Stock) of the Company whether now authorized or not, and
rights, convertible securities, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
exercisable or convertible into capital stock; provided that the term “New
Securities” does not include:

 

(i)          the Shares and the Conversion Stock;

 

(ii)         securities issued or issuable to officers, employees, directors,
consultants, placement agents, and other service providers of the Company (or
any subsidiary) pursuant to stock grants, option plans, purchase plans,
agreements or other employee stock incentive programs or arrangements approved
by the board of directors of the Company;

 

(iii)        securities issued pursuant to the conversion or exercise of any
outstanding convertible or exercisable securities as of this date of this
Agreement;

 

(iv)        securities issued or issuable as a dividend or distribution on
Preferred Stock of the Company or pursuant to any event for which adjustment is
made pursuant to paragraph 4(e), 4(f) or 4(g) of the certificate of
incorporation of the Company;

 

(v)         securities offered pursuant to a bona fide, firmly underwritten
public offering pursuant to a registration statement filed under the Securities
Act;

 

-14-

 

 

(vi)        securities issued or issuable pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets or other reorganization or to a joint venture agreement, provided, that
such issuances are approved by the board of directors of the Company;

 

(vii)       securities issued or issuable to banks, equipment lessors, real
property lessors, financial institutions or other persons engaged in the
business of making loans pursuant to a debt financing, commercial leasing or
real property leasing transaction approved by the board of directors of the
Company;

 

(viii)      securities issued or issuable in connection with sponsored research,
collaboration, technology license, development, OEM, marketing or other similar
agreements or strategic partnerships approved by the board of directors of the
Company;

 

(ix)         securities issued to suppliers or third party service providers in
connection with the provision of goods or services pursuant to transactions
approved by the board of directors of the Company;

 

(x)          securities of the Company which are otherwise excluded by the
affirmative unanimous vote of the board of directors of the Company; and

 

(xi)         any right, option or warrant to acquire any security convertible
into the securities excluded from the definition of New Securities pursuant to
subsections (i) through (x) above.

 

(b)          In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each
Significant Holder shall have 10 days after any such notice is mailed or
delivered to agree to purchase such Holder’s pro rata share of such New
Securities and to indicate whether such Holder desires to exercise its
over-allotment option for the price and upon the terms specified in the notice
by giving written notice to the Company, in substantially the form attached as
Schedule 1, and stating therein the quantity of New Securities to be purchased.

 

(c)          In the event the Holders fail to exercise fully the right of first
refusal and over-allotment rights, if any, within said 10-day period (the
“Election Period”), the Company shall have 90 days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within 90 days from the date of said agreement) to
sell that portion of the New Securities with respect to which the Significant
Holders’ right of first refusal option set forth in this Section 4.1 was not
exercised, at a price and upon terms no more favorable to the purchasers thereof
than specified in the Company’s notice to Significant Holders delivered pursuant
to Section 4.1(b). In the event the Company has not sold within such 90-day
period following the Election Period, or such 90-day period following the date
of said agreement, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Significant
Holders in the manner provided in this Section 4.1.

 

(d)          The right of first refusal granted under this Agreement shall
expire upon, and shall not be applicable to, the Company’s Initial Public
Offering.

 

(e)          A Holder will not have a right of first refusal to purchase a pro
rata share of New Securities in accordance with this Section 4 and will not be a
Significant Holder for purposes of the right of first refusal granted under this
Section 4 if, and for so long as, the Holder, any of its directors, executive
officers, other officers that may serve as a director or officer of any company
in which it invests, general partners or managing members or any person that
would be deemed a beneficial owner of the securities of the Company held by the
Holder (in accordance with Rule 506(d) of the Securities Act) is subject to any
Bad Actor Disqualification, except as set forth in Rule 506(d)(2) or (d)(3)
under the Securities Act.

 

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Section 5

Miscellaneous

 

5.1          Amendment. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument referencing this Agreement and signed by the
Company and the Holders holding a majority of the Registrable Securities
(excluding any of such shares that have been sold to the public or pursuant to
Rule 144, and excluding, with respect to Section 2 (other than Sections 2.8, 2.9
and 2.10), any of such shares held by any Holders whose rights to request
registration or inclusion in any registration pursuant to Section 2 have
terminated in accordance with Section 2.14); provided, however, that Holders
purchasing shares of Series A Preferred Stock in a Closing after the date hereof
may become parties to this Agreement, by executing a counterpart of this
Agreement without any amendment of this Agreement pursuant to this paragraph or
any consent or approval of any other Holder; and provided, further, that if any
amendment, waiver, discharge or termination operates in a manner that treats any
Holder different from other Holders, the consent of such Holder shall also be
required for such amendment, waiver, discharge or termination. Any such
amendment, waiver, discharge or termination effected in accordance with this
paragraph shall be binding upon each Holder and each future holder of all such
securities of Holder. Each Holder acknowledges that by the operation of this
paragraph, the holders of a majority of the Registrable Securities (excluding
any of such shares that have been sold to the public or pursuant to Rule 144,
and excluding, with respect to Section 2 (other than Sections 2.8, 2.9 and
2.10), any of such shares held by any Holders whose rights to request
registration or inclusion in any registration pursuant to Section 2 have
terminated in accordance with Section 2.14) will have the right and power to
diminish or eliminate all rights of such Holder under this Agreement.

 

5.2          Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, sent by facsimile or electronic mail (if to an Investor
or Holder) or otherwise delivered by hand, messenger or courier service
addressed:

 

(a)          if to an Investor, to the Investor’s address, facsimile number or
electronic mail address as shown in the Company’s records, as may be updated in
accordance with the provisions hereof;

 

(b)          if to any Holder, to such address, facsimile number or electronic
mail address as shown in the Company’s records, or, until any such Holder so
furnishes an address, facsimile number or electronic mail address to the
Company, then to the address, facsimile number or electronic mail address of the
last holder of such shares for which the Company has contact information in its
records; or

 

(c)          if to the Company, to the attention of the Chief Executive Officer
or Chief Financial Officer of the Company at 4225 Executive Square Suite 600, La
Jolla, CA 92037, or at such other current address as the Company shall have
furnished to the Investors or Holders, with a copy (which shall not constitute
notice) to Elton Satusky, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, CA 94304.

 

-16-

 

 

Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given (i) if delivered by hand, messenger
or courier service, when delivered (or if sent via a nationally-recognized
overnight courier service, freight prepaid, specifying next-business-day
delivery, one business day after deposit with the courier), or (ii) if sent via
mail, at the earlier of its receipt or five days after the same has been
deposited in a regularly-maintained receptacle for the deposit of the United
States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile,
upon confirmation of facsimile transfer or, if sent via electronic mail, upon
confirmation of delivery when directed to the relevant electronic mail address,
if sent during normal business hours of the recipient, or if not sent during
normal business hours of the recipient, then on the recipient’s next business
day. In the event of any conflict between the Company’s books and records and
this Agreement or any notice delivered hereunder, the Company’s books and
records will control absent fraud or error.

 

Subject to the limitations set forth in Delaware General Corporation Law
§232(e), each Investor and Holder consents to the delivery of any notice to
stockholders given by the Company under the Delaware General Corporation Law or
the Company’s certificate of incorporation or bylaws by (i) facsimile
telecommunication to the facsimile number set forth on Exhibit A (or to any
other facsimile number for the Investor or Holder in the Company’s records),
(ii) electronic mail to the electronic mail address set forth on Exhibit A (or
to any other electronic mail address for the Investor or Holder in the Company’s
records), (iii) posting on an electronic network together with separate notice
to the Investor or Holder of such specific posting or (iv) any other form of
electronic transmission (as defined in the Delaware General Corporation Law)
directed to the Investor or Holder. This consent may be revoked by an Investor
or Holder by written notice to the Company and may be deemed revoked in the
circumstances specified in Delaware General Corporation Law §232.

 

5.3          Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of California as applied to agreements entered
into among California residents to be performed entirely within California,
without regard to principles of conflicts of law.

 

5.4          Successors and Assigns. This Agreement, and any and all rights,
duties and obligations hereunder, shall not be assigned, transferred, delegated
or sublicensed by any Investor without the prior written consent of the Company.
Any attempt by an Investor without such permission to assign, transfer, delegate
or sublicense any rights, duties or obligations that arise under this Agreement
shall be void. Subject to the foregoing and except as otherwise provided herein,
the provisions of this Agreement shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

 

5.5          Entire Agreement. This Agreement and the exhibits hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof. No party hereto shall be liable or bound to any other
party in any manner with regard to the subjects hereof or thereof by any
warranties, representations or covenants except as specifically set forth
herein.

 

5.6          Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement
shall impair any such right, power or remedy of such non-defaulting party, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.

 

-17-

 

 

5.7           Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the
extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
same economic, business and other purposes of the illegal, void or unenforceable
provision. The balance of this Agreement shall be enforceable in accordance with
its terms.

 

5.8           Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits attached hereto.

 

5.9           Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties that
execute such counterparts, and all of which together shall constitute one
instrument.

 

5.10         Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto and
delivered by such party by facsimile or any similar electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen. Such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all parties
hereto agree to execute and deliver an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

 

5.11         Jurisdiction; Venue. With respect to any disputes arising out of or
related to this Agreement, the parties consent to the exclusive jurisdiction of,
and venue in, the state courts in Santa Clara County in the State of California
(or in the event of exclusive federal jurisdiction, the courts of the Northern
District of California).

 

5.12         Further Assurances. Each party hereto agrees to execute and
deliver, by the proper exercise of its corporate, limited liability company,
partnership or other powers, all such other and additional instruments and
documents and do all such other acts and things as may be necessary to more
fully effectuate this Agreement.

 

5.13         Termination Upon Change of Control. Notwithstanding anything to the
contrary herein, this Agreement (excluding any then-existing obligations) shall
terminate upon (a) the acquisition of the Company by another entity by means of
any transaction or series of related transactions to which the Company is party
(including, without limitation, any stock acquisition, reorganization, merger or
consolidation but excluding any sale of stock for capital raising purposes)
other than a transaction or series of transactions in which the holders of the
voting securities of the Company outstanding immediately prior to such
transaction continue to retain (either by such voting securities remaining
outstanding or by such voting securities being converted into voting securities
of the surviving entity), as a result of shares in the Company held by such
holders prior to such transaction, at least fifty percent (50%) of the total
voting power represented by the voting securities of the Corporation or such
surviving entity outstanding immediately after such transaction or series of
transactions; or (b) a sale, lease or other conveyance of all substantially all
of the assets of the Company.

 

5.14         Conflict. In the event of any conflict between the terms of this
Agreement and the Company’s certificate of incorporation or its bylaws, the
terms of the Company’s certificate of incorporation or its bylaws, as the case
may be, will control.

 

-18-

 

 

5.15         Attorneys’ Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

 

5.16         Aggregation of Stock. All securities held or acquired by affiliated
entities (including affiliated venture capital funds) or persons shall be
aggregated together for purposes of determining the availability of any rights
under this Agreement.

 

5.17         Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING (WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATED TO THIS AGREEMENT. If the waiver of jury trial set forth in
this section is not enforceable, then any claim or cause of action arising out
of or relating to this Agreement shall be settled by judicial reference pursuant
to California Code of Civil Procedure Section 638 et seq. before a referee
sitting without a jury, such referee to be mutually acceptable to the parties
or, if no agreement is reached, by a referee appointed by the Presiding Judge of
the California Superior Court for Santa Clara County. This paragraph shall not
restrict a party from exercising remedies under the Uniform Commercial Code or
from exercising pre-judgment remedies under applicable law.

 

(signature page follows)

 

-19-

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated
in the introductory clause.

 

  CDX, INC.   a Delaware corporation         By:  

 

  Name:  

 

  Title:  

 

(Signature page to the Investors’ Rights Agreement)

 

 

 

 

The parties are signing this Investors’ Rights Agreement as of the date stated
in the introductory clause.

 

  INVESTOR           (Print investor name)           (Signature)          
(Print name of signatory, if signing for an entity)           (Print title of
signatory, if signing for an entity)

 

(Signature page to the Investors’ Rights Agreement)

 

 

 

 

EXHIBIT A

 

INVESTORS

 

[Yazbeck Consulting & Investments Group]

[insert address]

[insert fax]

[insert email]

 

 

 

 

SCHEDULE 1

 

NOTICE AND WAIVER/ELECTION OF

RIGHT OF FIRST REFUSAL

 

I do hereby waive or exercise, as indicated below, my rights of first refusal
under the [Amended and Restated] Investors’ Rights Agreement dated as of
[_____________] (the “Agreement”):

 

1.     Waiver of [10] days’ notice period in which to exercise right of first
refusal: (please check only one)

 

¨WAIVE in full, on behalf of all Holders, the [___]-day notice period provided
to exercise my right of first refusal granted under the Agreement.

 

¨DO NOT WAIVE the notice period described above.

 

2.     Issuance and Sale of New Securities: (please check only one)

 

¨WAIVE in full the right of first refusal granted under the Agreement with
respect to the issuance of the New Securities.

 

¨ELECT TO PARTICIPATE in $__________ (please provide amount) in New Securities
proposed to be issued by CDx, Inc., a Delaware corporation, representing LESS
than my pro rata portion of the aggregate of $[_______] in New Securities being
offered in the financing.

 

¨ELECT TO PARTICIPATE in $__________ in New Securities proposed to be issued by
CDx, Inc., a Delaware corporation, representing my FULL pro rata portion of the
aggregate of $[_______] in New Securities being offered in the financing.

 

¨ELECT TO PARTICIPATE in my full pro rata portion of the aggregate of $[_______]
in New Securities being made available in the financing AND, to the extent
available, the greater of (x) an additional $__________ (please provide amount)
or (y) my pro rata portion of any remaining investment amount available in the
event other Significant Holders do not exercise their full rights of first
refusal with respect to the $[_______] in New Securities being offered in the
financing.

 

Date: ________________

      (Print investor name)           (Signature)           (Print name of
signatory, if signing for an entity)           (Print title of signatory, if
signing for an entity)

 

This is neither a commitment to purchase nor a commitment to issue the New
Securities described above. Such issuance can only be made by way of definitive
documentation related to such issuance. CDx, Inc. will supply you with such
definitive documentation upon request or if you indicate that you would like to
exercise your first offer rights in whole or in part.