Investor Rights Agreement

ACLARA BIOSCIENCES, INC.


AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT


DECEMBER 30, 1999


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TABLE OF CONTENTS
Page
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1. CERTAIN COVENANTS OF THE COMPANY..................................... 2


(a) Financial Statements........................................... 2
(b) Operating Plan Other Reporting................................. 3
(c) Intellectual Property Rights................................... 3
(d) Payment of Taxes, Compliance with Laws, etc.................... 3
(e) Insurance...................................................... 3
(f) Maintenance of Properties...................................... 4
(g) Affiliated Transactions........................................ 4
(h) Inspection..................................................... 4
(i) Material Changes and Litigation................................ 4
(j) Confidentiality, Invention and Non-Competition
Agreements..................................................... 4
(k) Preemptive Rights.............................................. 4
(l) Employee Shares................................................ 6


2. REGISTRATION RIGHTS.................................................. 6


(a) Certain Definitions............................................ 6
(b) Sale or Transfer of Shares; Legend............................. 10
(c) Required Registrations......................................... 10
(d) Incidental Registration........................................ 12
(e) Registration Procedures........................................ 13
(f) Allocation of Expenses......................................... 17
(g) Indemnification................................................ 17
(h) Indemnification with Respect to Underwritten Offering.......... 19
(i) Information by Holder.......................................... 19
(j) Rule 144 Requirements.......................................... 19
(k) Selection of Underwriter....................................... 20
(1) Restrictions on Other Agreements............................... 20
(m) Lock-Up Agreement.............................................. 20
(n) Restrictions on Sale by the Company and Others................. 20
(o) Termination of Rights.......................................... 21


3. MISCELLANEOUS........................................................ 21


(a) Transfer of Rights............................................. 21
(b) Successors and Assigns......................................... 21
(c) Notices........................................................ 21


4. AMENDMENTS AND WAIVERS............................................... 22


5. COUNTERPARTS......................................................... 22


6. CAPTIONS............................................................. 23


7. SEVERABILITY......................................................... 23


8. GOVERNING LAW........................................................ 23


9. TERMINATION OF PRIOR AGREEMENT; WAIVER OF PREEMPTIVE RIGHTS.......... 23


10. BOARD ATTENDANCE BY J&J.............................................. 24


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AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT


This Amended and Restated Investor Rights Agreement (the "Agreement") is made as of December 30, 1999, by and among ACLARA BioSciences, Inc., a Delaware corporation (the "Company"), Phoenix Leasing Incorporated, a California corporation ("Phoenix"), Johnson & Johnson Development Corporation ("J&J"), The Perkin-Elmer Corporation ("Perkin-Elmer") and the Purchasers set forth on Schedule A attached hereto (the "Purchasers"). The Purchasers, Perkin-Elmer and J&J are hereinafter collectively referred to as the "Preferred Stockholders." Capitalized terms used and not defined herein shall have the meaning given in that Series H Redeemable Preferred Stock Purchase Agreement of even date herewith by and among the Company and certain of the Purchasers.


RECITALS


The Company and certain of the Purchasers have entered into a Series B Redeemable Preferred Stock Purchase Agreement dated May 9, 1995, pursuant to which such Purchasers acquired shares of the Company's Series B Redeemable Preferred Stock ("Series B Stock");


The Company and Phoenix have entered into a Master Equipment Lease dated November 15, 1995, pursuant to which the Company issued to Phoenix a warrant to purchase shares of the Company's Common Stock;


The Company and certain of the Purchasers (the "Series C Purchasers") have entered into a Series C Redeemable Preferred Stock Purchase Agreement dated as of November 15, 1996, pursuant to which such Purchasers will acquire shares of the Company's Series C Redeemable Preferred Stock ("Series C Stock");


The Company and Phoenix have entered into an additional equipment lease line, pursuant to which the Company has issued to Phoenix a warrant to purchase shares of the Company's Common Stock;


The Company and J&J have entered into a certain Stock Purchase Agreement dated as of April 17, 1997 (the "Series D Purchase Agreement"), pursuant to which J&J acquired shares of the Company's Series D Redeemable Preferred Stock ("Series D Stock");


The Company and certain of the Purchasers have entered into a Note and Warrant Purchase Agreement dated as of December 15, 1997, pursuant to which the Company has issued to such Purchasers warrants to purchase shares of Series D Stock (the "Series D Warrants");


The Company, J&J and Perkin-Elmer (the "Series E Purchasers") have entered into a certain Series E Redeemable Preferred Stock Purchase Agreement dated as of March 26, 1998


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(the "Series E Purchase Agreement"), pursuant to which J&J and Perkin-Elmer have purchased shares of the Company's Series E Redeemable Preferred Stock ("Series E Stock");


The Company and certain of the Purchasers (the "Series F Purchasers") have entered into a certain Series F Redeemable Preferred Stock Purchase Agreement dated as of January 12, 1999 (the "Series F Purchase Agreement"), pursuant to which such Purchasers have purchased shares of the Company's Series F Redeemable Preferred Stock ("Series F Stock");


The Company and Perkin-Elmer (the "Series G Purchasers") entered into a certain Series G Redeemable Preferred Stock Purchase Agreement dated as of April 29, 1999 pursuant to which Perkin-Elmer purchased shares of the Company's Series G Redeemable Preferred Stock ("Series G Stock");


The Company and certain of the Purchasers (the "Series H Purchasers") are entering into a certain Series H Redeemable Preferred Stock Purchase Agreement of even date herewith (the "Series H Purchase Agreement"), pursuant to which such Purchasers will purchase shares of the Company's Series H Redeemable Preferred Stock ("Series H Stock").


Each of the parties hereto desires to set forth in a single document certain covenants of the Company and certain of the pre-emptive rights, registration rights and other rights of the Preferred Stockholders;


NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:


1. Certain Covenants of the Company. The Company covenants and agrees that, until the earlier of (i) such time as all outstanding shares of Preferred Stock have been redeemed by the Company, or (ii) immediately prior to the closing of a public offering of the Common Stock of the Company which causes a mandatory conversion of the Preferred Stock pursuant to the Company's certificate of incorporation, it will perform and observe the following covenants and provisions:


(a) Financial Statements.


(i) The Company will maintain books of account in accordance with generally accepted accounting principles applied on a consistent basis, keep full and complete financial records and furnish to the Preferred Stockholders the following reports:


(A) within 90 days after the end of each fiscal year, a balance sheet of the Company as at the end of such year, together with statements of operations, shareholders' equity and cash flows of the Company for such year, audited and certified by public accountants of recognized national standing reasonably satisfactory to the Preferred Stockholders, prepared in accordance with generally accepted accounting principles and practices consistently applied;


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(B) at the request of a Preferred Stockholder and in no event more than 30 days after such request, an unaudited balance sheet of the Company as at the end of the month immediately preceding the month in which such request is made, together with statements of operations for such period, shareholder's equity and statements of changes of cash flows of the Company for such period and for the current fiscal year to the end of such period, and summaries of bookings and backlogs; provided, however, that no Preferred Stockholder may make such request more than 12 times in any 12-month period; and


(C) such other financial information as the Preferred Stockholders may reasonably request, including, without limitation, certificates of the principal financial officer of the Company concerning compliance with the covenants of the Company under this Section 1.


(b) Operating Plan / Other Reporting. The Company will also prepare and deliver to any holder of at least 250,000 shares (adjusted for stock splits, combinations, recapitalizations and the like) of Series B Stock, Series C Stock, Series D Stock, Series E Stock, Series F Stock, Series F-1 Preferred Stock, Series G Stock or Series H Stock (a "Qualifying Holder") (or to the director of the Company designated by such Qualifying Holder, if any):


(i) within 30 days after the start of each fiscal year, an annual Operating Plan prepared on a monthly basis, as well as any material adopted revisions to such Operating Plan, within a reasonable period of their adoption; and


(ii) management letters, communications with shareholders, press releases and registration statements.


(c) Intellectual Property Rights. The Company will keep in full force and effect its corporate existence and all patents and other Intellectual Property Rights useful in its business (except such rights as the Board of Directors, in its reasonable business judgment, has determined are not material to the Company's continuing operations).


(d) Payment of Taxes, Compliance with Laws, etc. The Company will pay and discharge all lawful taxes, assessments and governmental charges or levies imposed upon it or upon its income or property before the same shall become in default, as well as all lawful claims for labor, materials and supplies which, if not paid when due, might become a lien or charge upon its property or any part thereof; provided, however, that the Company shall not be required to pay and discharge any such tax, assessment, charge, levy, or claim so long as the validity thereof is being contested by the Company in good faith by appropriate proceedings and an adequate reserve therefor has been established on its books. The Company will use its best efforts to comply with all applicable laws and regulations in the conduct of its business including, without limitation, all Environmental Laws.


(e) Insurance. The Company will keep its insurable properties insured, upon reasonable business terms, by financially sound and reputable insurers against liability, and the


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(f) Maintenance of Properties. The Company will maintain all properties used or useful in the conduct of its business in good repair, working order and condition as is reasonably necessary to permit such business to be properly and advantageously conducted.


(g) Affiliated Transactions. All transactions by and between the Company and any officer, employee or stockholder of the Company or persons controlled by or affiliated with such officer, employee or stockholder, shall be conducted on an arms-length basis, shall be on terms and conditions no less favorable to the Company than could be obtained from unrelated persons and shall be approved by the Board of Directors after full disclosure of the terms thereof, for which purpose the interested party, if a Director, and any affiliate of the interested party who is a Director, shall not be entitled to vote.


(h) Inspection. The Company shall, upon reasonable prior notice, permit authorized representatives of any Qualifying Holder to visit and inspect any of the properties of the Company including its books of account (and to make copies thereof and take extracts therefrom), and to discuss the affairs, finances and accounts of the Company with its officers, administrative employees and independent accountants, all at the expense of such Qualifying Holder and at such reasonable times, during normal business hours and as often as may be reasonably requested.


(i) Material Changes and Litigation. The Company promptly (and, in any event, not later than the date of release of such information to the public generally) shall notify the Preferred Stockholders or their transferees of any material adverse change in the business, properties, assets, or condition (financial or otherwise) of the Company and of any litigation or governmental proceeding or investigation pending (or, to the best knowledge of the Company, threatened) against the Company or against any officer, director, key employee, or principal shareholder of the Company, that materially adversely affects (or if adversely determined, could materially adversely affect) its present or proposed business, properties, assets, or condition (financial or otherwise) taken as a whole.


(j) Confidentiality, Invention and Non-Competition Agreements. The Company shall require all employees and consultants of the Company to enter into the Company's standard form of confidentiality and invention agreement.


(k) Preemptive Rights.


(i) The Preferred Stockholders shall be entitled to a right of first refusal to purchase, on a pro rata basis, all or any part of New Securities (as defined below) which the Company may, from time to time, propose to sell and issue, subject to the terms and conditions set forth below. The pro rata share of each Preferred Stockholder shall equal a fraction, the numerator of which is the number of shares of Common Stock then held by such Preferred Stockholder or issuable upon exercise of any options, rights or warrants, and upon


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conversion or exercise of the Preferred Stock or any other convertible securities then held by such Preferred Stockholder and the denominator of which is the total number of shares of Common Stock then outstanding plus the number of shares of Common Stock issuable upon exercise of then outstanding options, rights or warrants or upon conversion or exercise of the Preferred Stock or any other then outstanding convertible securities.


(ii) "New Securities" shall mean any capital stock of the Company whether now authorized or not, and rights, options or warrants to purchase capital stock, and securities of any type whatsoever which are, or may become, convertible into capital stock; provided, however, that the term "New Securities" shall not include (1) the issuance of up to 850,000 shares of Series H Stock or shares of Common Stock issuable or issued upon conversion of the Series H Stock; (2) up to 3,342,669 shares of the Company's Common Stock or options therefor (and the shares of Common Stock issuable upon exercise of such options), net of repurchases, issuable pursuant to the Company's 1995 Stock Option Plan, the 1997 Stock Option Plan or another stock plan approved by the Board of Directors of the Company and the Series F Designee (as defined in the Company's Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on December 30, 1999 (the "Restated Certificate")), to the extent such Series F Designee has been appointed by the holders of Series F and Series F-1 Preferred Stock; (3) shares of Common Stock issued upon the exercise of any warrant or option or conversion of any convertible security outstanding prior to the date hereof, as disclosed in the Series H Purchase Agreement; (4) securities offered in a firm commitment underwritten public offering pursuant to an effective registration statement filed with the Securities and Exchange Commission covering the offer and sale of Common Stock for the account of the Company at a public offering price of at least $8.91 per share (with such amount to be appropriately adjusted for stock splits, stock dividends and the like) and having an aggregate offering price to the public resulting in gross proceeds to the Company of not less than $15,000,000; and (5) securities issued as a result of any stock split, stock dividend or reclassification of Common Stock, distributable on a pro rata basis to all holders of Common Stock.


(iii) In the event the Company intends to issue New Securities, it shall give each Preferred Stockholder written notice of such intention, describing the type of New Securities to be issued, the price thereof and the general terms upon which the Company proposes to effect such issuance. Each Preferred Stockholder shall have 30 days from the date of any such notice to agree to purchase all or part of its pro rata share of such New Securities for the price and upon the general terms and conditions specified in the Company's notice by giving written notice to the Company stating the quantity of New Securities to be so purchased. Each Preferred Stockholder shall have a right of overallotment such that if any Preferred Stockholder fails to exercise its right hereunder to purchase its total pro rata portion of New Securities, the other Preferred Stockholders may purchase such portion on a pro rata basis or on such other basis as such Preferred Stockholders electing their overallotment option may agree amongst themselves in writing, by giving written notice to the Company within 5 days from the date that the Company provides written notice to the other Preferred Stockholders of the amount of New Securities with respect to which such non-purchasing Preferred Stockholder has failed to exercise its right hereunder.


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(iv) In the event the Preferred Stockholders fail to exercise the foregoing right of first refusal with respect to any New Securities within such 30-day period (or the additional 5-day period provided for overallotments), the Company may within 120 days thereafter sell any or all of such New Securities not agreed to be purchased by the Preferred Stockholders at a price and upon general terms no more favorable to the purchasers thereof than specified in the notice given to each Preferred Stockholder pursuant to paragraph (c) above. In the event the Company has not sold such New Securities within such 120-day period, the Company shall not thereafter issue or sell any New Securities without first offering such New Securities to the Preferred Stockholders in the manner provided above.


(v) For purposes of this Section 1(k), "Preferred Stockholders" shall include each of the Preferred Stockholders, its general partners, officers or other affiliates and any person or entity to whom a Preferred Stockholder transfers Preferred Stock or Common Stock, each of which may apportion its pro rata share among itself and such general partners, officers and other affiliates in such proportions as it deems appropriate.


(l) Employee Shares. Stock issued or options granted by the Company to directors, officers or employees of the Company shall generally be subject to vesting over not less than four years (unless otherwise unanimously approved by the Board of Directors of the Company), and stock issued to such persons shall be subject to repurchase by the Company at the original purchase price per share upon such person's resignation or termination with or without cause, which repurchase rights shall lapse as to such stock ratably over four years (unless otherwise unanimously approved by the Board of Directors of the Company). Such stock or options shall be issued pursuant to the terms of a Restricted Stock Agreement or Stock Option Agreement, as appropriate, each as shall be approved by the directors elected by the holders of the Preferred Stock pursuant to the Restated Certificate. All such persons acquiring shares of capital stock of the Company shall be required to become parties to the Amended and Restated Stockholders' Agreement dated as of the date hereof by and among the Company and the stockholders named therein.


2. Registration Rights.


(a) Certain Definitions. As used in this Section 2 and elsewhere in this Agreement, the following terms shall have the following respective meanings:


"Commission" means the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act.


"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar United States statute, and the rules and regulations of the Commission issued under such act, as they each may, from time to time, be in effect.


"Registration Statement" means a registration statement filed by the Company with the Commission for a public offering and sale of securities of the Company (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for


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a limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation).


"Registration Expenses" means the expenses described in Section 2(f).


"Registrable Shares" means the Registrable B Shares, the Registrable C Shares, the Registrable D Shares, the Registrable E Shares, the Registrable F Shares, the Registrable G Shares, the Registrable H Shares and the Registrable Warrant Shares.


"Registrable B Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series B Stock, and (ii) any other shares of Common Stock of the Company issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, that any such shares registered and sold under the Securities Act or sold in reliance on Rule 144 under the Securities Act shall no longer be considered Registrable B Shares. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable B Shares, or to a number or percentage of Registrable B Shares held by a Series B Stockholder (as defined below), such reference shall include shares of Common Stock issuable upon conversion of the Series B Stock even though such conversion has not yet been effected.


"Registrable C Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series C Stock, and (ii) any other shares of Common Stock of the Company issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, that any such shares registered and sold under the Securities Act or sold in reliance on Rule 144 under the Securities Act shall no longer be considered Registrable C Shares. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable C Shares, or to a number or percentage of Registrable C Shares held by a Series C Stockholder (as defined below), such reference shall include shares of Common Stock issuable upon conversion of the Series C Stock even though such conversion has not yet been effected.


"Registrable D Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series D Stock (including the Series D Stock issued or issuable upon exercise of the Series D Warrants), and (ii) any other shares of Common Stock of the Company issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, that any such shares registered and sold under the Securities Act or sold in reliance on Rule 144 under the Securities Act shall no longer be considered Registrable D Shares. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable D Shares, or to a number or percentage of Registrable D Shares held by a Series D Stockholder (as defined below), such reference shall include shares of Common Stock issuable upon conversion of the Series D Stock even though such conversion has not yet been effected.


"Registrable E Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series E Stock, and (ii) any other shares of Common Stock of


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the Company issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, that any such shares registered and sold under the Securities Act or sold in reliance on Rule 144 under the Securities Act shall no longer be considered Registrable E Shares. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable E Shares, or to a number or percentage of Registrable E Shares held by a Series E Stockholder (as defined below), such reference shall include shares of Common Stock issuable upon conversion of the Series E Stock even though such conversion has not yet been effected.


"Registrable F Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series F Stock, (ii) the shares of Common Stock issued or issuable upon conversion of the shares, if any, of Series F-1 Preferred Stock issued or issuable upon conversion of the Series F Stock, and (iii) any other shares of Common Stock of the Company issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, that any such shares registered and sold under the Securities Act or sold in reliance on Rule 144 under the Securities Act shall no longer be considered Registrable F Shares. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable F Shares, or to a number or percentage of Registrable F Shares held by a Series F Stockholder (as defined below), such reference shall include shares of Common Stock issuable upon conversion of the Series F Stock and Series F-1 Preferred Stock even though such conversion has not yet been effected.


"Registrable G Shares" means (i) the shares of Common Stock issued or issuable upon conversion of the Series G Stock, and (ii) any other shares of Common Stock of the Company issued in respect of such shares (because of stock split ...