EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
Agreement No. __________ Dated as of October 27, 1999
between
MMC/GATX PARTNERSHIP NO. 1
as Lender
and
DIGIRAD CORPORATION
a Delaware corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as Borrower
CREDIT AMOUNT: $3,000,000
Repayment Period: 36 months
Treasury Note Maturity: 36 months
Loan Margin: 750 basis points
Commitment Termination Dates: November 1, 1999 (First Loan)
June 30, 2000 (Second Loan)
The defined terms and information set forth on this cover page are a
part of the LOAN AND SECURITY AGREEMENT, dated as of the date first written
above (this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
ARTICLE I
INTERPRETATION
1.01 CERTAIN DEFINITIONS. Unless otherwise indicated in this
Agreement or any other Operative Document, the following terms, when used in
this Agreement or any other Operative Document, shall have the following
respective meanings:
"APPLICABLE PREMIUM" shall mean an amount equal to: (i) 4% of the
amount being prepaid or accelerated more than twelve (12) months after, but on
or before twenty-four (24) months after the first Payment Date, or (ii) 3% of
the amount being prepaid or accelerated more than twenty-four (24) months after
the first Payment Date; PROVIDED THAT if an Event of Default occurs within
twelve (12) months of the first Payment Date (other than an Event of Default
specified in Section 9.01 h, i, j, k or l), the Applicable Premium shall be 4%
of the amount being prepaid or accelerated.
"BORROWER'S HOME STATE" shall mean California, the state in which
Borrower's principal place of business is located.
"BROKER" shall mean Priority Capital.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
public holiday under the laws of California or Borrower's Home State or other
day on which banking institutions are authorized or obligated to close in
California or Borrower's Home State.
"CLAIM" has the meaning given to that term in SECTION 10.03.
"COLLATERAL" has the meaning given to that term in SECTION 5.01.
"COMMITMENT FEE" has the meaning given to that term in SECTION 2.04.
"COMMITMENT TERMINATION DATES" shall mean (a) with respect to the First
Loan, November 1, 1999, and (b) with respect to the Second Loan, June 30, 2000,
which are the dates specified on the cover page of this Agreement.
"CREDIT AMOUNT" shall mean the maximum aggregate amount of the Loans
under this Agreement (if the conditions specified in Schedule 3 are satisfied),
which amount is set forth following such term on the cover page of this
Agreement.
"DEFAULT" shall mean any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.
"DEFAULT RATE" shall mean the per annum rate of interest equal to the
higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
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"DISCLOSURE SCHEDULE" has the meaning set forth in the definition of
the term "Permitted Liens."
"ENVIRONMENTAL LAW" shall mean the Resource Conservation and Recovery
Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree (in each case having the force of law)
regulating or imposing liability or standards of conduct concerning any
Hazardous Material, as now or at any time hereafter in effect.
"EQUIPMENT" has the meaning given to that term in SECTION 5.01.
"EQUIPMENT COLLATERAL" has the meaning given to that term in SECTION
5.01.
"EQUIPMENT LIST" has the meaning given to that term in SECTION 5.04.
"EQUIPMENT LOANS" has the meaning given to that term in SECTION 2.02.
"EQUITY SECURITIES" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"EVENT OF DEFAULT" has the meaning given to that term in SECTION 9.01.
"FUNDING DATE" shall mean a date on which a Loan is made to or on
account of Borrower under this Agreement; provided that the Funding Date for the
Second Loan shall be on or after March 31, 2000.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied.
"HAZARDOUS MATERIAL" means any hazardous, dangerous or toxic
constituent material, pollutant, waste or other substance, whether solid, liquid
or gaseous, which is regulated by any federal, state or local governmental
authority.
"INDEBTEDNESS" shall mean, with respect to Borrower or any Subsidiary,
the aggregate amount of, without duplication, (a) all obligations of such Person
for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (excluding
trade payables aged less than 180 days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person;
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term "INDEBTEDNESS" shall include all Indebtedness of Borrower and the
Subsidiaries.
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"INTELLECTUAL PROPERTY" shall mean all of Borrower's right, title and
interest in and to patents, patent rights (and applications and registrations
therefor), trademarks and service marks (and applications and registrations
therefor), inventions, copyrights, mask works (and applications and
registrations therefor), trade names, trade styles, software and computer
programs, trade secrets, methods, processes, know how, drawings, specifications,
descriptions, and all memoranda, notes, and records with respect to any research
and development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.
"INVESTMENT" shall mean the purchase or acquisition of any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person, or the extension of any advance, loan, extension of
credit or capital contribution to, or any other investment in, any Person.
"LIEN" shall mean any pledge, bailment, lease, mortgage, hypothecation,
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"LOAN" means a loan advanced by Lender to Borrower under this
Agreement.
"LOAN MARGIN" shall mean the number of basis points set forth following
such term on the cover page of this Agreement.
"LOAN RATE" shall mean, with respect to each Loan, the per annum rate
of interest (based on a year of twelve 30-day months) equal to the sum of (a)
the U.S. Treasury note rate of a term equal to the Treasury Note Maturity as
quoted in THE WALL STREET JOURNAL on the date the Note with respect to each Loan
is prepared, plus (b) the Loan Margin.
"NOTE" shall mean one of the secured promissory notes of Borrower
substantially in the form of EXHIBIT A.
"OBLIGATIONS" has the meaning given to that term in SECTION 5.01.
"OPERATIVE DOCUMENTS" shall mean this Agreement, the Notes and the
Warrants and all other documents, instruments and agreements executed and
delivered in connection herewith or therewith or in respect of the closing of
the transactions contemplated hereby or thereby.
"PAYMENT DATE" has the meaning given to that term in the applicable
Note.
"PERMITTED INDEBTEDNESS" shall mean and include:
(a) Indebtedness of Borrower to Lender;
(b) Indebtedness of Borrower secured by Liens permitted
under clause (e) of the definition of Permitted
Liens;
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(c) Indebtedness arising from the endorsement of
instruments in the ordinary course of business;
(d) Indebtedness existing on the date hereof and set
forth on the Disclosure Schedule;
(e) Indebtedness consisting of a revolving credit
facility in an aggregate principal amount not
exceeding the lesser of: (1) $2,500,000, or (2) a
borrowing base calculated as a percentage (not
exceeding 100%) of qualified accounts receivable plus
eligible inventory; and
(f) Subordinated Indebtedness.
"PERMITTED INVESTMENTS" shall mean and include:
(a) Deposits with commercial banks organized under the
laws of the United States or a state thereof to the
extent such deposits are fully insured by the Federal
Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more
than one (1) year from the date of issuance; and
(c) Investments in open market commercial paper rated at
least "Al" or "P1" or higher by a national credit
rating agency and maturing not more than one (1) year
from the creation thereof.
(d) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into
in the ordinary course of business;
(e) Investments consisting of deposit accounts of
Borrower in which Lender has a perfected security
interest; and
(f) Other Investments aggregating not in excess of Two
Hundred Fifty Thousand Dollars ($250,000) at any
time.
"PERMITTED LIENS" shall mean (a) the Lien created by this Agreement,
(b) Liens for fees, taxes, levies, imposts, duties or other governmental charges
of any kind which are not yet delinquent or which are being contested in good
faith by appropriate proceedings which suspend the collection thereof (PROVIDED,
HOWEVER, that such proceedings do not involve any substantial danger of the
sale, forfeiture or loss of any item of equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as SCHEDULE 2 ("DISCLOSURE SCHEDULE"), (d) Liens to
secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary
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course of business of Borrower, (e) Liens upon any equipment or other personal
property acquired by Borrower more than eighteen (18) months after the date
hereof to secure (i) the purchase price of such equipment or other personal
property or (ii) lease obligations or indebtedness incurred solely for the
purpose of financing the acquisition of such equipment or other personal
property; PROVIDED that (A) such Liens are confined solely to the equipment or
other personal property so acquired and the amount secured does not exceed the
acquisition price thereof, and (B) no such Lien shall be created, incurred,
assumed or suffered to exist in favor of Borrower's officers, directors or
shareholders holding five percent (5%) or more of Borrower's Equity Securities,
(f) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings; and (g) non-exclusive
licenses of Intellectual Property entered into in the ordinary course of
business and non-exclusive licenses or similar arrangements entered into in
connection with joint ventures and corporate collaborations; and (h) Liens
securing Indebtedness permitted under clause (e) of the definition of Permitted
Indebtedness.
"PERSON" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"PRIME RATE" shall mean the interest rate per annum specified in the
"Money Rates" column of THE WALL STREET JOURNAL, but such rate shall in no event
be more than the highest interest rate permitted by applicable law.
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness subordinated to the
Obligations on terms and conditions acceptable to Lender in its sole discretion.
"SUBSIDIARY" shall mean any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"TERM" shall mean the period from and after the date hereof until the
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.
"THIRD PARTY EQUIPMENT" has the meaning given that term in SECTION
5.05.
"TREASURY NOTE MATURITY" shall mean the period of months set forth
following such term on the cover page of this Agreement.
"WARRANTS" shall mean separate warrants to be issued at the direction
of Lender to purchase securities of Borrower substantially in the form of
EXHIBIT B.
1.02. HEADINGS. Headings in this Agreement and each of the other
Operative Documents are for convenience of reference only and are not part of
the substance hereof or thereof.
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1.03. PLURAL TERMS. All terms defined in this Agreement or any other
Operative Document in the singular form shall have comparable meanings when used
in the plural form and VICE VERSA.
1.04. CONSTRUCTION. This Agreement is the result of negotiations
among, and has been reviewed by, Borrower and Lender and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower or Lender.
1.05. ENTIRE AGREEMENT. This Agreement, together with the terms set
forth in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters. Borrower acknowledges that it is not relying on any representation or
agreement made by Lender or any employee, agent or attorney of Lender, other
than the specific agreements set forth in this Agreement and the Operative
Documents.
1.06. OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to articles,
sections, exhibits, schedules and annexes herein and hereto unless otherwise
indicated. References in this Agreement and each of the other Operative
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreements issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Operative Document shall refer
to this Agreement or such other Operative Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this Agreement or any other Operative Document, all accounting
terms used in this Agreement or any other Operative Document shall be construed,
and all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with GAAP.
ARTICLE II
THE CREDIT
2.01. Credit Facility.
(a) THE CREDIT AMOUNT. Subject to the terms and
conditions of this Agreement and relying upon the representations and warranties
herein set forth as and when made or deemed to be made, Lender agrees to lend to
Borrower a maximum of two Loans (respectively, the "First Loan" and the "Second
Loan") in an aggregate amount not to exceed the
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Credit Amount. The First Loan shall be in the amount of Two Million Dollars
($2,000,000) and the Second Loan shall be in the amount of One Million Dollars
($1,000,000). The Loans may be prepaid only as set forth in SECTION 2.01(d).
(b) INTEREST RATES. Borrower shall pay interest on the
unpaid principal amount of each Loan from the date of such Loan until such Loan
is paid in full, at a per annum rate of interest equal to the Loan Rate for such
Loan determined in accordance with the definition of Loan Rate. The Loan Rate
applicable to a Loan shall not be subject to change in the absence of manifest
error. All computations of interest on a Loan shall be based on a year of twelve
30-day months. If Borrower pays interest on a Loan which is determined to be in
excess of the then legal maximum rate, then that portion of each interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of such Loan.
(c) PAYMENTS OF PRINCIPAL AND INTEREST. If a Funding Date
is not the first day of the month, Borrower shall make an interest only payment
on the first Payment Date specified in Lender's Note and thirty-six (36) equal
monthly payments of principal plus accrued interest on the outstanding principal
amount of such Loan commencing on the first Payment Date as set forth in
Lender's Note.
(d) OPTIONAL PREPAYMENT WITH PREMIUM. Borrower may not
prepay any Loan within twelve (12) months of its first Payment Date; thereafter,
upon ten (10) Business Days' prior written notice to Lender, Borrower may, at
its option, at any time, prepay all, and not less than all, of a Loan in full at
a prepayment price equal to the principal amount of the Loan, plus interest
accrued on the Loan through and including the date of such prepayment, plus a
premium on the Loan equal to the Applicable Premium. If an Event of Default
occurs and is continuing (other than an Event of Default specified in Section
9.01 h, i, j, k or 1, in which case no Applicable Premium is due and payable),
and Lender exercises its right under Section 9.02 to accelerate the Loans or the
Loans are automatically accelerated, Borrower expressly agrees that the amount
then due and payable shall include the Applicable Premium as of the date of such
acceleration.
2.02. USE OF PROCEEDS; THE LOAN AND THE NOTES; DISBURSEMENT.
(a) USE OF PROCEEDS. The proceeds of the Loans shall be
used solely for: (1) working capital, or (2) general corporate purposes of
Borrower, or (3) purchase of, or reimbursement to Borrower of the acquisition
costs of Equipment ("EQUIPMENT LOANS"), or (4) any combination of the foregoing.
(b) THE LOANS AND THE NOTES. The obligation of Borrower
to repay the unpaid principal amount of and interest on each Loan shall be
evidenced by a Note issued to Lender and Lender is authorized to endorse on a
grid annexed to its Note appropriate notations regarding payments made on the
Note; PROVIDED, HOWEVER, that the failure to make, or an error in making, any
such notation shall not limit or otherwise affect the obligations of Borrower
hereunder or thereunder.
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(c) DISBURSEMENT. Lender shall disburse its Loans by wire
transfer to Borrower unless otherwise directed in writing by Borrower.
(d) TERMINATION OF COMMITMENT TO LEND. Notwithstanding
anything to the contrary in the Operative Documents, Lender's obligations to
advance the Loans hereunder shall terminate on the earliest of (i) the
occurrence of any Event of Default hereunder and (ii) the respective Commitment
Termination Dates.
2.03. OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Borrower shall make all payments
due to Lender in lawful money of the United States, in immediately available
funds, at the address for payments and in the manner specified in SECTION
10.05(B).
(b) DATE. Whenever any payment due hereunder shall fall
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
(c) DEFAULT RATE. If either (i) any amounts required to
be paid by Borrower under this Agreement or the other Operative Documents
(including principal or interest payable on the Loan, any fees or other amounts)
remain unpaid after such amounts are due, or (ii) an Event of Default has
occurred and is continuing, Borrower shall pay interest on the outstanding
principal balance hereunder from the date due or from the date of the Event of
Default, as applicable, until such past due amounts are paid in full or until
all Events of Defaults are cured, as applicable, at a per annum rate equal to
the Default Rate, such rate to change from time to time as the Prime Rate shall
change. All computations of such interest at the Default Rate shall be based on
a year of 360 days and twelve 30-day months.
(d) FACILITY FEE; COMMITMENT FEE. Upon the execution and
delivery of this Agreement, Borrower agrees to pay to Lender a facility fee
("FACILITY FEE") of $25,000 as follows: (i) Borrower has paid a commitment fee
in the aggregate amount of $20,000 (the "COMMITMENT FEE"); Twenty Thousand
Dollars ($20,000) of the Commitment Fee shall be applied towards the Facility
Fee, and (ii) Borrower shall pay to Lender Five Thousand Dollars ($5,000)
concurrently with Borrower's execution and delivery of this Agreement. Borrower
agrees to pay to Lender within thirty (30) days of invoice Lender's expenses in
connection with due diligence or the negotiation, documentation (including
without limitation, filing fees related thereto) and funding of the Loans, up to
a maximum of Five Thousand Dollars ($5,000); provided that if the First Loan is
funded after invoice but before payment, Lender may deduct the invoiced amount
from the First Loan proceeds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. REPRESENTATIONS AND WARRANTIES. Except as set forth in the
Disclosure Schedule, Borrower makes the following representations and warranties
to Lender as of the date hereof and again on the Funding Date:
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(a) ORGANIZATION AND QUALIFICATION. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and is duly qualified to do business in Borrower's
Home State. Borrower has no Subsidiaries.
(b) AUTHORITY. Borrower has all necessary corporate
power, authority and legal right and has obtained all approvals and consents and
has given all notices necessary to execute and deliver this Agreement and the
other Operative Documents and to perform the terms hereof and thereof. Borrower
has all requisite corporate power and authority to own and operate its
properties and to carry on its businesses as now conducted.
(c) CONFLICT WITH OTHER INSTRUMENTS ETC. Neither the
execution and delivery of any Operative Document to which Borrower is a panty
nor the consummation of the transactions therein contemplated nor compliance
with the terms, conditions and provisions thereof will conflict with or result
in a breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) PROPERTIES. Borrower has good and marketable title to
the Collateral, free and clear of all Liens, other than Permitted Liens.
Borrower has good title and ownership of, or is licensed under, all of Borrower
5 current Intellectual Property, with no known infringement of the rights of
others. Borrower has not received any communications alleging that Borrower has
violated, or by conducting its business as proposed, would violate any
proprietary rights of any other Person. Borrower has no knowledge of any
infringement or violation by it of the intellectual property rights of any third
party and has no knowledge of any violation or infringement by a third party of
any of its Intellectual Property. The Collateral and the Intellectual Property
constitute substantially all of the assets and property of Borrower.
(e) AUTHORIZATION, GOVERNMENTAL APPROVALS, ETC. The
execution and delivery by Borrower of each Operative Document, the granting of
the security interest in the Collateral, the issuance of the Warrants, the
issuance of the securities into which the Warrants are exercisable, the issuance
of any securities into which the securities issuable upon exercise of the
Warrants are convertible, and the performance of the obligations herein and
therein contemplated have each been duly authorized by all necessary action on
the part of Borrower. No authorization, consent, approval, license or exemption
of, and no registration, qualification, designation, declaration or filing with,
or notice to, any Person is, was or will be necessary to (i) the valid execution
and delivery of any Operative Document to which Borrower is a party, (ii) the
performance of Borrower's obligations under any Operative Document, or (iii) the
granting of the security interest in the Collateral, except for filings in
connection with the perfection of the security interest in any of the Collateral
or the issuance of the Warrants. The Operative Documents have been or will be
duly executed and delivered and constitute or will constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency
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or other similar laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of equity.
(f) LITIGATION. There are no actions, suits, proceedings
or investigations pending or, to the knowledge of Borrower, threatened against
or affecting Borrower, or the business or any property or asset owned by it,
before any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(g) SECURITY INTEREST. Assuming the proper filing of one
or more financing statement(s) identifying the Collateral with the proper state
and/or local authorities, the security interests in the Collateral granted to
Lender pursuant to this Agreement (i) constitute and will continue to constitute
first priority security interests (except to the extent any other Permitted Lien
may create any priority to Lender's Lien under this Agreement) and (ii) are and
will continue to be superior and prior to the rights in the Collateral of all
other creditors of Borrower (except to the extent of such Permitted Liens).
Except as set forth in the Disclosure Schedule, Borrower does not own any right,
title or interest in or to any real property (other than leasehold interests),
motor vehicles, promissory notes or other property (excluding Intellectual
Property) with respect to which a security interest must be perfected by a
method other than the filing of a UCC-1 financing statement.
(h) EXECUTIVE OFFICES. The principal place of business
and chief executive office of Borrower, and the office where Borrower will keep
all records and files regarding the Collateral, is set forth on the cover page
of this Agreement.
(i) SOLVENCY, ETC. Borrower is Solvent (as defined below)
and, after the execution and delivery of the Operative Documents and the
consummation of the transactions contemplated thereby, Borrower will be Solvent.
"SOLVENT" shall mean, with respect to any Person on any date, that on such date
(a) the fair value of the property of such Person is greater than the fair value
of the liabilities (including, without limitation, contingent liabilities) of
such Person, (b) the present fair saleable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature and (d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
(j) CATASTROPHIC EVENTS; LABOR DISPUTES. None of Borrower
or its properties is or has been affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or other casualty that could reasonably be expected to have
a material adverse effect on the financial condition, business or operations of
Borrower. There are no disputes presently subject to grievance procedure,
arbitration or litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which Borrower is
a party, and there are no strikes, lockouts, work stoppages or slowdowns, or, to
the acknowledge of Borrower, jurisdictional disputes or organizing activity
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occurring or threatened which could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower.
(k) NO MATERIAL ADVERSE EFFECT. No event has occurred and
no condition exists which could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower
since December 31, 1998, the date of Borrower's last audited financial
statements.
(1) ACCURACY OF INFORMATION FURNISHED. None of the
Operative Documents and none of the other certificates, statements or
information furnished to Lender by or on behalf of Borrower in connection with
the Operative Documents or the transactions contemplated thereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Lender recognizes that
all financial projections furnished to Lender by or on behalf of Borrower in
connection with the Operative Documents or the transactions contemplated thereby
are not to be viewed as facts and that actual results during the period or
periods covered by such projections may differ from the projected or forecasted
results.
(m) CERTAIN AGREEMENTS OF OFFICERS, EMPLOYEES AND
CONSULTANTS.
(i) To the knowledge of Borrower, no officer,
employee or consultant of Borrower is, or is now expected to be, in violation of
any term of any employment contract, proprietary information agreement,
nondisclosure agreement, noncompetition agreement, or any other material
contract or agreement or any restrictive covenant relating to the right of any
such officer, employee or consultant to be employed by Borrower because of the
nature of the business conducted or to be conducted by Borrower or relating to
the use of trade secrets or proprietary information of others, and to Borrower's
knowledge, the continued employment of Borrower's officers, employees and
consultants does not subject Borrower to any material liability for any claim or
claims arising out of or in connection with any such contract, agreement, or
covenant.
(ii) To the knowledge of Borrower, no officers of
Borrower, and no employee or consultant of Borrower whose termination, either
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the financial condition, business or operations of
Borrower, has any present intention of terminating his or her employment or
consulting relationship with Borrower.
ARTICLE IV
REPORTING REQUIREMENTS
4.01. FURNISHING REPORTS. Borrower shall furnish to Lender:
(a) FINANCIAL STATEMENTS. So long as Borrower is not
subject to the reporting requirements of Section 12 or Section 15 of the
Securities and Exchange Act of 1934, as amended, promptly as they are available,
unaudited monthly and audited annual financial
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statements of Borrower and such other financial information as Lender may
reasonably request from time to time. From and after such time as Borrower
becomes a publicly reporting company, promptly as they are available and in any
event: (i) at the time of filing of Borrower's Form 10-K with the Securities and
Exchange Commission after the end of each fiscal year of Borrower, the financial
statements of Borrower filed with such Form 10-K; and (ii) at the time of filing
of Borrower's Form 10-Q with the Securities and Exchange Commission after the
end of each of the first three fiscal quarters of Borrower, the financial
statements of Borrower filed with such Form 10-Q.
(b) NOTICE OF DEFAULTS. As soon as possible, and in any
event within five (5) Business Days after the discovery of a Default or Event of
Default provide Lender with an officer's certificate of Borrower setting forth
the facts relating to or giving rise to such Default or Event of Default and the
action which Borrower proposes to take with respect thereto.
(c) MISCELLANEOUS. Such other information as Lender may
reasonably request from time to time.
ARTICLE V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
5.01. GRANT OF SECURITY INTEREST. Borrower, in order to secure the
payment of the principal and interest with respect to the Loans made pursuant to
this Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"OBLIGATIONS"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"COLLATERAL"): All right, title, interest, claims and demands of Borrower in and
to:
(a) All goods and equipment now owned or hereafter
acquired, including, without limitation, all laboratory equipment, computer
equipment, office equipment, machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products including
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
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(c) All contract rights and general intangibles (except
to the extent included within the definition of Intellectual Property), now
owned or hereafter acquired, including, without limitation, goodwill, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
disks, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts,
contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower (subject, in each case, to
the contractual rights of third parties to require funds received by Borrower to
be expended in a particular manner), whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, letters of
credit, certificates of deposit, instruments, chattel paper and investment
property, including, without limitation, all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Borrowers
books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of
the above and all substitutions for, additions and accessions to and proceeds
thereof, including, without limitation, insurance, condemnation, requisition or
similar payments and proceeds of the sale or licensing of Intellectual Property
to the extent such proceeds no longer constitute Intellectual Property; but
(g) EXCLUDING, all Intellectual Property; and
(h) Any and all of the following equipment collateral
(collectively, "EQUIPMENT COLLATERAL"):
All right, title, interest, claims and demands of
Borrower in and to each and every item of equipment, fixtures
or personal property, whether now owned or hereafter acquired,
together with all substitutions, renewals or replacements of
and additions, improvements, accessions, replacement parts and
accumulations to any and all of such equipment, fixtures or
personal property (collectively, the "EQUIPMENT"), together
with all proceeds thereof, including, without limitation,
insurance, condemnation, requisition or similar payments, and
all proceeds from sales, renewals, releases or other
dispositions thereof, which is financed with or is designated
as collateral for the Obligations on and after the date of
this Agreement by designating such equipment, fixtures and
personal property on a UCC financing statement listing
Borrower as "debtor" and Lender as "secured party."
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5.02. DURATION OF SECURITY INTEREST. Lender's security interest in
the Collateral shall continue until the payment in full and the satisfaction of
all Obligations, whereupon such security interest shall terminate. Lender, upon
payment in full and the satisfaction of the Obligations, shall execute such
further documents and take such further actions as may be necessary to effect
the release and/or termination contemplated by this SECTION 5.02, including duly
executing and delivering termination statements for filing in all relevant
jurisdictions.
5.03. POSSESSION AND LOCATION OF COLLATERAL. The Collateral is and
shall remain in the possession of Borrower at Borrower's address stated on the
cover page of this Agreement. So long as no Event of Default has occurred and is
continuing, Borrower shall remain in full possession, enjoyment and control of
the Collateral (except only as may be otherwise required by Lender for
perfection of its security interest therein) and to manage, operate and use the
same and each part thereof with the rights and franchises appertaining thereto;
PROVIDED, HOWEVER, that the possession, enjoyment, control and use of the
Collateral shall at all times be subject to the observance and performance of
the terms of this Agreement.
5.04. EQUIPMENT COLLATERAL. On or prior to its execution and
delivery of this Agreement, Borrower shall provide Lender with a listing, in
detail to Lender's satisfaction, of all of Borrower's equipment, fixtures and
personal property (collectively, an "Equipment List"), which, at Lender's
option, shall be attached as an exhibit to a UCC financing statement filed by
Lender naming Borrower as "debtor" and Lender as "secured party." Within thirty
days after the end of every quarter after the date hereof, Borrower shall
provide Lender with an Equipment List of equipment, fixtures and personal
property acquired by Borrower during such quarter (which may exclude Third Party
Equipment), and such Equipment List shall, at Lender's option, be attached as an
exhibit to a UCC financing statement filed by Lender naming Borrower as "debtor"
and Lender as "secured party." Borrower agrees to execute and deliver to Lender
any and all such financing statements to Lender.
5.05. LIEN SUBORDINATION. Lender agrees that the Liens granted to it
hereunder (except for Liens in Equipment Collateral) shall be subordinate to the
Liens granted in connection with Indebtedness permitted by clause (e) of the
definition of Permitted Indebtedness. Lender agrees to enter into a
subordination agreement with the lender of the Indebtedness permitted by clause
(e) of the definition of Permitted Indebtedness substantially in the form of
EXHIBIT D and to negotiate in good faith any changes thereto as long as they are
acceptable to Lender. Lender agrees that the Liens granted to it hereunder in
Third Party Equipment shall be subordinate to the Liens of future lenders
providing equipment financing and equipment lessors for equipment and other
personal property acquired by Borrower more than eighteen (18) months after the
date hereof ("THIRD PARTY EQUIPMENT"); PROVIDED, that, in the case of equipment
financings and leasing such Liens are confined solely to the equipment so
financed and the proceeds thereof. Notwithstanding the foregoing, the
Obligations hereunder shall not be subordinate in right of payment to any
obligations to other lenders, equipment lenders or equipment lessors and
Lender's rights and remedies hereunder shall not in any way be subordinate to
the rights and remedies of any such lender or equipment lessors. Lender agrees
to execute and deliver such agreements and documents as may be reasonably
requested by Borrower from time to time which set forth the lien subordination
described in this SECTION 5.05 and are reasonably acceptable to Lender. Lender
shall have no obligation to execute any agreement or document
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which would impose obligations, restrictions or lien priority on Lender which
are less favorable to Lender than those described in this SECTION 5.05.
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01. AFFIRMATIVE COVENANTS.
(a) PAYMENT OF TAXES ETC. Borrower shall pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it, prior
to the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien upon any of its properties; PROVIDED that there
shall be no requirement to pay any such tax, assessment, charge, levy or claim
(i) which is being contested in good faith and by appropriate proceedings or
which presents no risk of seizure, forfeiture, levy or other event which could
jeopardize any Collateral or (ii) for which payment in full is bonded or
reserved in Borrower's financial statements.
(b) INSPECTION RIGHTS. Borrower shall, at any reasonable
time and from time to time, permit Lender or any of its agents or
representatives to inspect the Collateral, to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
Borrower and to discuss the affairs, finances and accounts of Borrower with any
of its officers or directors relating in each case to Lender's capacity as
lender and secured party hereunder and with respect to the Collateral.
(c) MAINTENANCE OF EQUIPMENT AND SIMILAR ASSETS. Borrower
shall keep and maintain all items of equipment and other similar types of
personal property that form any significant portion or portions of the
Collateral in good operating condition and repair and shall make all necessary
replacements thereof and renewals thereto so that the value and operating
efficiency thereof shall at all times be maintained and preserved. Borrower
shall not permit any such material item of Collateral to become a fixture to
real estate or an accession to other personal property, without the prior
written consent of Lender. Borrower shall not permit any such material item of
Collateral to be operated or maintained in violation of any applicable law,
statute, rule or regulation. With respect to items of leased equipment (to the
extent Lender has any security interest in any residual Borrower's interest in
such equipment under the lease), Borrower shall keep, maintain, repair, replace
and operate such leased equipment in accordance with the terms of the applicable
lease.
(d) INSURANCE. Borrower shall, obtain and maintain, at
its own expense, insurance of a type and with such limits as are carried by
similarly situated companies, including at a minimum:
(i) "All risk" insurance against loss or damage
to the Collateral. The coverage limit shall be determined to Lender's reasonable
satisfaction. The deductible shall not exceed $25,000. The policy shall name
Lender as loss payee with respect to the Equipment, shall not be invalidated by
any action of or breach of warranty by Borrower of any provision thereof and
waive subrogation against Lender.
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(ii) Commercial general liability insurance
(including contractual liability, products liability and completed operations
coverages) reasonably satisfactory to Lender. The limit of liability shall be at
least $5,000,000 per occurrence. The policy shall be without deductible, except
for products liability coverage which may have a deductible up to $25,000. The
policy(ies) shall name Lender as an additional insured in the full amount of
Borrower's liability coverage limits (or the coverage limits of any successor to
Borrower or such successor's parent which is providing coverage), be primary and
without contribution as respects any insurance carried by Lender, and contain
cross liability and severability of interest clauses.
(iii) Such other insurance against risks of loss
and with terms as shall be reasonably required by Lender.
All policies of insurance shall be placed with financially sound,
commercial insurers reasonably satisfactory to Lender. All policies of insurance
shall provide that Lender shall be given 30 days notice of cancellation of
coverage. This notice provision shall be without qualification. On or prior to
the first Funding Date and prior to each policy renewal, Borrower shall furnish
to Lender certificates of insurance or other evidence satisfactory to Lender
that insurance complying with all of the above requirements is in effect.
ARTICLE VII
NEGATIVE COVENANTS
7.01. NEGATIVE COVENANTS. So long as the Obligations remain
outstanding, Borrower shall not:
(a) NAME; LOCATION OF CHIEF EXECUTIVE OFFICE AND
COLLATERAL. Without thirty (30) days prior written notice to Lender, change its
chief executive office or principal place of business or remove or cause to be
removed from the location set forth on the cover page hereof or move any
Collateral to a location other than that set forth on the cover page hereof.
(b) LIENS ON COLLATERAL. Create, incur, assume or suffer
to exist any Lien of any kind upon any Collateral, whether now owned or
hereafter acquired, except Permitted Liens.
(c) NEGATIVE PLEDGE REGARDING INTELLECTUAL PROPERTY.
Create, incur, assume or suffer to exist any Lien of any kind upon any
Intellectual Property, whether now owned or hereafter acquired, except Permitted
Liens.
(d) DISPOSITIONS OF COLLATERAL OR INTELLECTUAL PROPERTY.
Convey, sell, offer to sell, lease, transfer, exchange or otherwise dispose of
(collectively, a "Transfer") all or any part of the Collateral or Intellectual
Property to any Person, other than: (i) Transfers of inventory in the ordinary
course of business; (ii) Transfers which would constitute Permitted Liens under
clause (g) of the definition of Permitted Liens; or (iii) Transfers of worn-out
or obsolete equipment.
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(e) DISTRIBUTIONS. (i) Pay any dividends or make any
distributions on its Equity Securities; (ii) purchase, redeem, retire, defease
or otherwise acquire for value any of its Equity Securities (other than
repurchases by cancellation of indebtedness pursuant to the terms of employee
stock purchase plans, employee restricted stock agreements or similar
arrangements in an aggregate amount not to exceed $100,000); (iii) return any
capital to any holder of its Equity Securities as such; (iv) make any
distribution of assets, Equity Securities, obligations or securities to any
holder of its Equity Securities as such; or (v) set apart any sum for any such
purpose; provided, however, that Borrower may pay dividends payable solely in
common stock.
(f) MERGERS OR ACQUISITIONS. Merge or consolidate with or
into any other Person or acquire all or substantially all of the capital stock
or assets of another Person; provided that in the event Borrower requests
Lender's consent to such a transaction and Lender does not consent (Lender's
decision whether to consent is at Lender's sole discretion), Borrower may prepay
the Obligations without any Applicable Premium; provided further, if Lender does
consent, the provisions of Section 2.01(d) apply.
(g) TRANSACTIONS WITH AFFILIATES. Enter into any
contractual obligation with any affiliate or engage in any other transaction
with any affiliate except upon terms at least as favorable to Borrower as an
arms-length transaction with unaffiliated Persons.
(h) MAINTENANCE OF ACCOUNTS. Maintain any deposit
accounts or accounts holding securities owned by Borrower except (i) accounts
located at Silicon Valley Bank, Bank of America and State Street Bank & Trust
(▇▇▇▇▇▇▇ ▇▇▇▇▇ Premier Institutional Fund), and (ii) other accounts with respect
to which Lender takes such action as it deems necessary to obtain a perfected
security interest in such account.
(i) INDEBTEDNESS PAYMENTS. (i) Prepay, redeem, purchase,
defease or otherwise satisfy in any manner prior to the scheduled repayment
thereof any Indebtedness for borrowed money (other than amounts due or permitted
to be prepaid under this Loan Agreement or the Notes or under any revolving
credit agreement constituting Permitted Indebtedness under clause (e) of the
definition of Permitted Indebtedness) or lease obligations, (ii) amend, modify
or otherwise change the terms of any Indebtedness for borrowed money or lease
obligations so as to accelerate the scheduled repayment thereof or (iii) repay
any notes to officers, directors or shareholders. Borrower shall provide a
subordination agreement, in the form provided by Lender, between Lender and the
following shareholders: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust, ▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, duly executed by such shareholders within forty-five (45) days after
the date of this Agreement.
(j) INDEBTEDNESS. Create, incur, assume or permit to
exist any Indebtedness except Permitted Indebtedness.
(k) INVESTMENTS. Make any Investment except for Permitted
Investments.
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ARTICLE VIII
CONDITIONS PRECEDENT
8.01. CLOSING. At the time of execution and delivery of this
Agreement, Borrower shall have duly executed and/or delivered to Lender the
items set forth in PART I OF SCHEDULE 3.
8.02. OTHER CONDITIONS. The obligation of the Lender to make the
Loans shall be subject to the execution and/or delivery to such Lender of each
of the items set forth in PART I OF SCHEDULE 3 and the satisfaction by Borrower
of each condition set forth in PART II OF SCHEDULE 3.
8.03. COVENANT TO DELIVER. Borrower agrees (not as a condition but
as a covenant) to deliver to Lender each item required to be delivered to Lender
as a condition to a Loan, if the Loan is advanced. Borrower expressly agrees
that the extension of any Loan prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver such
item.
ARTICLE IX
DEFAULT AND REMEDIES
9.01. EVENTS OF DEFAULT. An "Event of Default" shall mean the
occurrence of one or more of the following described events:
(a) Borrower shall (i) default in the payment of
principal of or interest on any Loan when the same is due, or (ii) default in
the payment of any expense or other amount payable hereunder or thereunder for
five (5) days after receipt of written notice from a Lender that the same is
due; or
(b) Borrower shall breach any provision of SECTION
6.01(d) or SECTION 7.01; or
(c) Borrower shall default in the performance of any
covenant, agreement or obligation (other than a covenant, agreement or
obligation referred to in, SECTION 9.01 (a) or SECTION 9.01 (b)) contained in
any Operative Document (other than the Warrants) and Borrower shall fail to cure
within thirty (30) days after receipt of written notice from Lender any default
in the performance of any such covenant, agreement or obligation contained
therein; or
(d) Borrower shall have breached the terms of any of the
Warrants; or
(e) Any representation or warranty made herein or on the
Funding Date by Borrower in any Operative Document, or any certificate or
financial statement furnished pursuant to the provisions of any Operative
Document, shall prove to have been false or misleading in any material respect
as of the time made or furnished; or
(f) Any Operative Document shall in any material respect
cease to be, or Borrower shall assert that any Operative Document is not, a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms; or
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(g) Defaults shall exist under any agreements of Borrower
which consist of the failure to pay any Indebtedness at maturity or which result
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of Indebtedness of Borrower in an aggregate amount in
excess of One Hundred Thousand Dollars ($100,000) or a material default shall
exist under any financing agreement with Lender or any of Lender's affiliates or
Lender shall have received a "Blockage Notice" under a subordination agreement
with the lender of the Indebtedness permitted under clause (e) of the definition
of Permitted Indebtedness; or
(h) A proceeding shall have been instituted in a court of
competent jurisdiction seeking a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee (or similar official) of
Borrower or for any substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of thirty (30) consecutive days or such
court shall enter a decree or order granting the relief sought in such
proceeding; or
(i) Borrower shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian (or other similar
official) of Borrower or for any substantial part of its property, or shall make
a general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action in
furtherance of any of the foregoing; or
(j) A final judgment or order for the payment of money in
excess of One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered
by insurance issued by an insurer not an affiliate of Borrower) shall be
rendered against Borrower and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy; or
(k) If there occurs a material adverse change in
Borrower's business, or if there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Lender or a material
impairment of the value or priority of Lender's security interests in the
Collateral; or
(1) If any material portion of Borrower's assets is
attached, seized, subjected to writ or distress warrant, or is levied upon, or
comes into possession of any trustee, receiver or Person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
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record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contesting by Borrower.
9.02. CONSEQUENCES OF EVENT OF DEFAULT.
(a) If an Event of Default specified under any of CLAUSES
(a) THROUGH (g) OR (j) THROUGH (l) OF SECTION 9.01 shall occur and be
continuing, Lender may (i) declare all of the Loans, together with interest
thereon, plus the Applicable Premium and all other liabilities of Borrower
hereunder and under the other Operative Documents to be immediately due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived, and (ii) terminate any commitment to make
the Loans and terminate any commitment to advance money or extend credit to or
for the benefit of Borrower pursuant to any other agreement or commitment
extended by a Lender to Borrower.
(b) If an Event of Default specified under CLAUSE (h) OR
(i) OF SECTION 9.01 shall occur, then immediately and without notice (i) the
Loans, together with interest thereon, plus the Applicable Premium and all other
liabilities of Borrower hereunder and under the other Operative Documents shall
automatically become due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and (ii) Lender's
commitments hereunder to make the Loans and any other commitment of Lender to
Borrower to advance money or extend credit pursuant to any other agreement or
commitment shall be terminated.
(c) Borrower expressly agrees that the amount due and
payable upon any such acceleration or prepayment of the Loans contrary to the
terms hereof shall include a Applicable Premium as of the date of such
acceleration or prepayment (except for an Event of Default specified in Section
9.01 h, i, j, k or l).
9.03. RIGHTS REGARDING COLLATERAL. Borrower agrees that when any
Event of Default has occurred and is continuing, Lender shall have the rights,
options, duties and remedies of a secured party as permitted by law and, in
addition to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth, including the
following:
(a) Lender, personally or by agents or attorneys, shall
have the right (subject to compliance with any applicable mandatory legal
requirements) to require Borrower to assemble the Collateral and make it
available to Lender at a place to be designated by Lender or to take immediate
possession of the Collateral, or any portion thereof, and for that purpose may
pursue the same wherever it may be found, and may enter any of premises of
Borrower, with or without notice, demand, process of law or legal procedure, to
the extent permitted by applicable law, and search for, take possession of,
remove, keep and store the same, or use and operate or lease the same until
sold. In furtherance of Lender's rights hereunder, Borrower hereby grants to
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Lender an irrevocable, non-exclusive license (exercisable without royalty or
other payment by Lender) to use, license or sublicense any patent, trademark,
trade name, copyright or other Intellectual Property in which Borrower now or
hereafter has any right, title or interest together with the right of access to
all media in which any of the foregoing may be recorded or stored; provided,
however, that such license shall only be exercisable in connection with the
disposition of Collateral upon Lender's exercise of its remedies hereunder.
(b) Lender may, if at the time such action may be lawful
and always subject to compliance with any mandatory legal requirements, either
with or without taking possession and either before or after taking possession,
without instituting any legal proceedings whatsoever, having first given notice
of such sale by registered or certified mail to Borrower once at least ten (10)
days prior to the date of such sale, and having first given any other notice
which may be required by law, sell and dispose of the Collateral, or any part
thereof, at a private sale or at public auction, to the highest bidder, in one
lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as Lender may determine, and at any place (whether or not it be the
location of the Collateral or any part thereof) designated in the notice
referred to above. To the extent permitted by applicable law, any such sale or
sales may be adjourned from time to time by announcement at the time and place
appointed for such sale or sales, or for any such adjourned sale or sales,
without further published notice, and Borrower, Lender or the holder or holders
of the Notes, or of any interest therein, may bid and become the purchaser at
any such sale.
(c) Lender may proceed to protect and enforce this
Agreement and the other Operative Documents by suit or suits or proceedings in
equity, at law or in bankruptcy, and whether for the specific performance of any
covenant or agreement herein contained or in execution or aid of any power
herein granted; or for foreclosure hereunder, or for the appointment of a
receiver or receivers for any real property security or any part thereof, or for
the recovery of judgment for the Obligations or for the enforcement of any other
proper, legal or equitable remedy available under applicable law.
9.04. WAIVER BY BORROWER. Upon the occurrence of an Event of
Default, to the extent permitted by law, Borrower covenants that it will not at
any time insist upon or plead, or in any manner whatsoever claim or take any
benefit or advantage of, any stay or extension law now or at any time hereafter
in force, nor claim, take nor insist upon any benefit or advantage of or from
any law now or hereafter in force providing for the valuation or appraisement of
the Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower, acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.
-22-
9.05. EFFECT OF SALE. Any sale, whether under any power of sale
available to Lender or by virtue of judicial proceedings, shall operate to
divest all right, title, interest, claim and demand whatsoever, either at law or
in equity, of Borrower in and to the property sold, and shall be a perpetual
bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all persons claiming the property sold or any part thereof
under, by or through Borrower, its successors or assigns.
9.06. APPLICATION OF COLLATERAL PROCEEDS. The proceeds and/or avails
of the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) FIRST, to the payment of reasonable costs and
expenses, including all amounts expended to preserve the value of the
Collateral, of foreclosure or suit, if any, and of such sale and the exercise of
any other rights or remedies, and of all proper fees, expenses, liability and
advances, including reasonable legal expenses and attorneys' fees, incurred or
made hereunder by Lender;
(b) SECOND, to the payment to Lender of the amount then
owing or unpaid on the Notes, and in case such proceeds shall be insufficient to
pay in full the whole amount so due, owing or unpaid upon the Notes, then FIRST,
to the unpaid interest thereon, SECOND, to unpaid principal thereof and third to
the remaining balance of the Obligations under the Notes; such application to be
made upon presentation of the Notes, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully paid;
(c) THIRD, to the payment of other amounts then payable
to Lender under any of the Operative Documents; and
(d) FOURTH, to the payment of the surplus, if any, to
Borrower, its successors and assigns, or to whomsoever may be lawfully entitled
to receive the same.
9.07. REINSTATEMENT OF RIGHTS. If Lender shall have proceeded to
enforce any right under this Agreement or any other Operative Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lender shall be restored to its former position and
rights hereunder with respect to the property subject to the security interest
created under this Agreement.
ARTICLE X
MISCELLANEOUS
10.01. MODIFICATIONS, AMENDMENTS OR WAIVERS. The provisions of any
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
-23-
10.02. NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED. No
delay or failure of Lender in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any further exercise thereof or of any other
right, power or remedy. The rights and remedies hereunder of Lender are
cumulative and not exclusive of any rights or remedies which it would otherwise
have. Any waiver, permit, consent or approval of any kind or character on the
part of Lender of any breach or default under this Agreement or any such waiver
of any provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
10.03. EXPENSES; INDEMNIFICATION. Borrower agrees upon demand to pay
or reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents, and in connection with any amendment or modification of the
Operative Documents or any "work-out" in connection with the Operative
Documents. Borrower shall indemnify, reimburse and hold Lender, each of Lender's
partners, and each of their respective successors, assigns, agents, officers,
directors, shareholders, servants, agents and employees harmless from and
against all liabilities, losses, damages, actions, suits, demands, claims of any
kind and nature (including claims relating to environmental discharge, cleanup
or compliance), all costs and expenses whatsoever to the extent they may be
incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "CLAIM"), directly or indirectly relating to or
arising out of the use of the proceeds of the Loans or otherwise, the falsity of
any representation or warranty of Borrower or Borrower's failure to comply with
the terms of this Agreement or any other Operative Document during the Term. The
foregoing indemnity shall cover, without limitation, (i) any Claim in connection
with a design or other defect (latent or patent) in any item of equipment
included in the Collateral, (ii) any Claim for infringement of any patent,
copyright, trademark or other Intellectual Property right, (iii) any Claim
resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; PROVIDED, HOWEVER, that Borrower shall not indemnify Lender
for any liability incurred by Lender as a direct and sole result of Lender's
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lender's written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of its
partners, and each of its respective, agents, employees, directors, officers,
shareholders, successors and assigns against any indemnified Claim described in
this SECTION 10.03. Borrower shall not settle or compromise any Claim against or
involving Lender without first obtaining Lender's written consent thereto, which
consent shall not be unreasonably withheld.
-24-
10.04. WAIVERS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM
LENDER UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.05. NOTICES; PAYMENTS.
(a) All notices and other communications given to or made
upon any party hereto in connection with this Agreement shall be in writing
(including telexed, telecopied or telegraphic communication) and mailed (by
certified or registered mail), telexed, telegraphed, telecopied or delivered to
the respective parties, as follows:
Borrower: At the address set forth on the cover page of this Agreement.
Lender: MMC/GATX PARTNERSHIP NO. I
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY
▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specify otherwise in writing, all
payments shall be made by wire transfer to:
GATX Capital Corporation
Bank Name: Bank of America
Bank Address: ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Account No.: 3750878673
ABA Routing No.: 111-000012
Reference: Digirad Invoice #____________
10.06. TERMINATION. This Agreement shall terminate at the end of the
Term; PROVIDED, HOWEVER, that the termination of this Agreement shall not affect
any of the rights and remedies of Lender hereunder, it being understood and
agreed that all such rights and remedies shall continue in full force and effect
until payment of all amounts owed to Lender under or in connection with the
Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. SEVERABILITY. If any provision of any Operative Document is
held invalid or unenforceable to any extent or in any application, the remainder
of such Operative Document and all other Operative Documents, or the application
of such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
-25-
10.08. SURVIVAL. All representations, warranties, covenants and
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of the Operative Documents,
the making of the Loans hereunder, the granting of security and the issuance of
the Notes.
10.09. RELATIONSHIP OF PARTIES. Borrower and Lender acknowledge,
understand and agree that:
(a) The relationship between the Borrower, on the one
hand, and Lender, on the other, is, and at all time shall remain solely that of
a borrower and lender. Lender shall not under any circumstances be construed to
be partners or joint venturers of Borrower or any of its Affiliates; nor shall
Lender under any circumstances be deemed to be in a relationship of confidence
or trust or a fiduciary relationship with Borrower or any of its Affiliates, or
to owe any fiduciary duty to Borrower or any of its Affiliates. Lender does not
undertake or assume any responsibility or duty to Borrower or any of its
Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform the Borrower or any of its Affiliates of any matter in
connection with its or their Property, any Collateral held by Lender or the
operations of Borrower or any of its Affiliates. Borrower and each of its
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by Lender in connection with such matters
is solely for the protection of Lender and neither Borrower nor any Affiliate is
entitled to rely thereon.
10.10. GOVERNING LAW. This Agreement, the other Operative Documents
and the rights and obligations of the parties hereto and thereto shall be
governed by and construed and enforced in accordance with the laws of the State
of California. Any action to enforce this Agreement against Borrower may be
brought in California or, with regard to Collateral, may also be brought
wherever such Collateral is located.
10.11. SUCCESSORS AND ASSIGNS. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Notes, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may sell
to any other financial entity (a "PARTICIPANT") participation interests in
Lender's rights under this Agreement and the other Operative Documents; provided
that notwithstanding the sale of participations, Lender shall remain solely
responsible for the performance of its obligations under this Agreement, Lender
shall remain the holder of its Note for all purposes under this Agreement and
Borrower shall continue to deal solely and directly with Lender in connection
with this Agreement and the other Operative Documents. Lender may disclose the
Operative Documents and any other financial or other information relating to
Borrower or any Subsidiary to any potential Participant, provided that such
Participant agrees to protect the confidentiality of such documents and
information using the same measures that it uses to protect its own confidential
information.
-26-
10.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.13. FURTHER ASSURANCES. Borrower will, at its own expense, from
time to time do, execute, acknowledge and deliver all further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
10.14. POWER OF ATTORNEY IN RESPECT OF THE COLLATERAL. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform but fails to perform, (b) to ask, demand, collect, receive, receipt for,
▇▇▇ for, compound and give acquittance for any and all rents, issues, profits,
avails, distributions, income, payment draws and other sums in which a security
interest is granted under SECTION 5.01 with full power to settle, adjust or
compromise any claim thereunder as fully as if Lender were Borrower itself, (c)
to receive payment of and to endorse the name of Borrower to any items of
Collateral (including checks, drafts and other orders for the payment of money)
that come into Lender's possession or under Lender's control, (d) to make all
demands, consents and waivers, or take any other action with respect to, the
Collateral, (e) in Lender's discretion, to file any claim or take any other
action or institute proceedings, either in its own name or in the name of
Borrower or otherwise, which Lender may reasonably deem necessary or appropriate
to protect and preserve the right, title and interest of Lender in and to the
Collateral, and (f) to otherwise act with respect thereto as though Lender were
the outright owner of the Collateral; PROVIDED, HOWEVER, that the power of
attorney herein granted shall be exercisable only upon the occurrence and during
the continuation of an Event of Default unless in Lender's reasonable opinion
immediate action is necessary to preserve or protect the Collateral. Borrower
agrees to reimburse Lender upon demand for all reasonable costs and expenses,
including attorneys' fees and expenses, which Lender may incur while acting as
Borrower's attorney in fact hereunder, all of which costs and expenses are
included within the Obligations.
10.15. CONFIDENTIALITY. All information (other than periodic reports
filed by Borrower with the Securities and Exchange Commission) disclosed by
Borrower to Lender in writing or through inspection pursuant to this Agreement
shall be considered confidential. Lender agrees to use the same degree of care
to safeguard and prevent disclosure of such confidential information as Lender
uses with its own confidential information, but in any event no less than a
reasonable degree of care. Lender shall not disclose such information to any
third party (other than Lender's or Lender's partner's attorneys and auditors
subject to the same confidentiality obligation set forth herein) and shall use
such information only for purposes of evaluation of its investment in Borrower
and the exercise of Lender's rights and the enforcement of its remedies under
this Agreement and the other Operative Agreements. The obligations of
confidentiality shall not apply to any information that (a) was known to the
public prior to disclosure by
-27-
Borrower under this Agreement, (b) becomes known to the public through no fault
of Lender, (c) is disclosed to Lender by a third party having a legal right to
make such disclosure, or (d) is independently developed by Lender.
-28-
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------
Title: President & CEO
-----------------------------------
MMC/GATX PARTNERSHIP NO. 1
By: GATX Capital Corporation, as
general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Title: V.P.
-----------------------------------
SCHEDULES
1 Funding Certificate
2 Disclosure Schedule
3 Conditions Precedent
EXHIBITS
A Form of Secured Promissory Note
B Form of Warrant
C Form of Opinion of Counsel
D Form of Subordination Agreement
SCHEDULE 1
FUNDING CERTIFICATE
The undersigned, being the duly elected and acting ____________________
of DIGIRAD CORPORATION, a Delaware corporation ("Borrower"), does hereby certify
to the Lender (as defined in the Loan Agreement defined below) in connection
with that certain Loan and Security Agreement dated as of October __, 1999,
among Borrower and Lender (the "Loan Agreement"; with other capitalized terms
used below having the meanings ascribed thereto in the Loan Agreement) that:
1. The representations and warranties made by Borrower in ARTICLE
III of the Loan Agreement and in the other Operative Documents
are true and correct as of the date hereof.
2. No event or condition has occurred and is continuing that
would constitute a Default or an Event of Default under the
Loan Agreement or any other Operative Document.
3. Borrower is in compliance with the covenants and requirements
contained in ARTICLES IV, V, VI AND VII of the Loan Agreement.
4. All conditions referred to in ARTICLE VIII of the Loan
Agreement to the making of the Loan to be made on or about the
date hereof have been satisfied.
5. No material adverse change in the general affairs, management,
results of operations, condition (financial or otherwise) or
prospects of Borrower, whether or not arising from
transactions in the ordinary course of business, has occurred.
Dated: _________, 199__
DIGIRAD CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SCHEDULE 2
DISCLOSURE SCHEDULE
N/A
SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
At the time of execution and delivery of this Agreement, there shall
also have been duly executed and delivered to Lender:
(a) The Warrants executed in favor of Lender and Persons specified
by Lender which are exercisable for 197,628 shares of
Borrower's preferred stock;
(b) A favorable opinion of counsel for Borrower, dated as of the
closing date, in the form attached hereto as EXHIBIT C or such
other form or forms as Lender may accept;
(c) Copies, certified by the Secretary, Assistant Secretary or
Chief Financial Officer of Borrower as of the closing date, of
Borrower's charter documents and bylaws and of all documents
evidencing corporate action taken by Borrower authorizing the
execution, delivery and performance of the Operative Documents
to which Borrower is a party, in form and substance
satisfactory to Lender and its counsel;
(d) Good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal
place of business is located, together with certificates of
the applicable governmental authorities that Borrower is in
compliance with the franchise tax laws of each such state,
each dated as of a recent date;
(e) Evidence of the insurance coverage required by SECTION 6.01(d)
of this Agreement;
(f) All necessary consents of shareholders and other third parties
with respect to the execution, delivery and performance of
this Agreement, the Warrants, the Notes and the other
Operative Documents;
(g) Form UCC-1 Financing Statements, duly executed by Borrower, or
other documents, and Borrower shall have taken such actions,
if any, as Lender shall reasonably determine are necessary or
desirable to perfect and protect its security interest in the
Collateral;
(h) Notices of Security Interest to Depository Banks in the forms
provided by Lender;
(i) A pledged collateral account control agreement, in the form
provided by Lender; and
(j) All other documents as Lender shall have reasonably requested.
PART II
On or prior to the Funding Date of the Loans, each of the items set
forth in PART I OF THIS SCHEDULE 3 shall have been delivered to such Lender and
the following conditions shall have been satisfied or waived by such Lender:
(a) Borrower shall have provided to Lender such documents,
instruments and agreements as Lender shall reasonably request
to evidence the perfection and priority of the security
interests granted to Lender pursuant to ARTICLE V;
(b) No Event of Default or Default shall have occurred and be
continuing;
(c) Borrower shall have duly executed and delivered to each Lender
a Note in the amount of such Lender's Loan;
(d) In Lender's sole discretion, there shall not have occurred any
material adverse change in the general affairs, management,
results of operations, condition (financial or otherwise) or
prospects of Borrower, whether or not arising from
transactions in the ordinary course of business, and there
shall not have occurred since the date first written on the
cover page of this Agreement any material adverse deviation by
Borrower from the business plan of Borrower presented to and
not disapproved by Lender;
(e) The representations and warranties contained in this Agreement
and the other Operative Documents to which Borrower is a party
shall be true and correct in all material respects as if made
on such Funding Date;
(f) Each of the Operative Documents remains in full force and
effect;
(g) Prior to the funding of the Second Loan, Borrower shall have
provided evidence to Lender, satisfactory to Lender, that
Borrower has successfully consummated an equity financing or
bridge loan or such other financing as Lender deems acceptable
with the net proceeds received by Borrower of such financing
equaling or exceeding Four Million Dollars ($4,000,000); and
(h) The Funding Date of the Loans shall not be later than the
respective Commitment Termination Dates; and the Funding Date
of the Second Loan shall not be prior to March 31, 2000.
-2-
EXHIBIT A
SECURED PROMISSORY NOTE
$___________ Dated: [Date]
FOR VALUE RECEIVED, the undersigned, DIGIRAD CORPORATION, a Delaware
corporation ("BORROWER"), HEREBY PROMISES TO PAY to the order of MMC/GATX
PARTNERSHIP NO. I ("LENDER") the principal amount of _____ Million Dollars
($___000,000) or such lesser amount as shall equal the outstanding principal
balance of the Loan made to Borrower by Lender pursuant to the Loan and Security
Agreement referred to below (the "LOAN AGREEMENT"), and to pay all other amounts
due with respect to the Loan on the dates and in the amounts set forth in the
Loan Agreement.
Interest on the principal amount of this Note from the date of this
Note shall accrue at the Loan Rate or, if applicable, the Default Rate. The Loan
Rate for this Note is ______% per annum based on a year of twelve 30-day months.
If the Funding Date of this Loan is not the first day of the month, Borrower
shall make a payment of accrued interest on the outstanding principal amount of
the Loan on [insert first Payment Date]. Commencing on ________, 199__, and
continuing on the first day of each subsequent month (each, a "PAYMENT DATE"),
Borrower shall make to Lender thirty-six (36) equal payments of principal plus
accrued interest on the then outstanding principal amount in the amount of
$_______.
Principal, interest and all other amounts due with respect to the Loan,
are payable in lawful money of the United States of America to Lender by wire
transfer according to the wire transfer instructions set forth in the Loan
Agreement. The principal amount of this Note and the interest rate applicable
thereto, and all payments made with respect thereto, shall be recorded by Lender
and, prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Loan and Security Agreement, dated as of October __, 1999, to
which Borrower and Lender are parties. The Loan Agreement, among other things,
(a) provides for the making of a secured Loan to Borrower, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events.
This Note may be not be prepaid except as set forth in Section 2.01(d)
of the Loan Agreement.
This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loan, plus the Applicable Premium, interest on the Loan and all
other amounts due Lender under the Loan Agreement is secured under the Loan
Agreement.
- A-1 -
Presentment for payment, demand, notice of protest and all other
demands and notices of any kind in connection with the execution, delivery,
performance and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
by one of its officers thereunto duly authorized on the date hereof.
DIGIRAD CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- A-2 -
LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL
PRINCIPAL SCHEDULED
DATE AMOUNT INTEREST RATE PAYMENT AMOUNT NOTATION BY
---- ------ ------------- -------------- -----------
EXHIBIT B
FORM OF WARRANT
- B-1 -
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
DIGIRAD CORPORATION
WARRANT TO PURCHASE SHARES
OF SERIES E PREFERRED STOCK
THIS CERTIFIES THAT, for value received, [▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
COMPANY/PRIORITY CAPITAL] and its assignees are entitled to subscribe for and
purchase [172,925/24,703] shares of the fully paid and nonassessable Series E
Preferred Stock (as adjusted pursuant to Section 4 hereof, the "Shares") of
DIGIRAD CORPORATION, a Delaware corporation (the "Company"), at the price of
$3.036 per share (such price and such other price as shall result, from time to
time, from the adjustments specified in Section 4 hereof is herein referred to
as the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, (a) the term "Series
Preferred" shall mean the Company's presently authorized Series E Preferred
Stock, and any stock into or for which such Series E Preferred Stock may
hereafter be converted or exchanged, and after the automatic conversion of the
Series E Preferred Stock to Common Stock shall mean the Company's Common Stock,
(b) the term "Date of Grant" shall mean October __, 1999, and (c) the term
"Other Warrants" shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
the
Loan and Security Agreement dated as of October __ 1999 (the "Loan
Agreement") between the Company and the lender named therein, and any warrant
issued upon transfer or partial exercise of or in lieu of this Warrant. The term
"Warrant" as used herein shall be deemed to include Other Warrants unless the
context clearly requires otherwise.
If the Company is eligible under the Loan Agreement and requests Lender
to fund the Second Loan pursuant to the terms of the Loan Agreement, but Lender
elects not to fund the Second Loan, the number of shares of the fully paid and
nonassessable Series E Preferred Stock the holder is entitled to subscribe for
and purchase as set forth above shall be reduced from [172,925/24,703] to
[115,283/16,469). The terms "Lender" and "Second Loan" shall have the meaning
given these capitalized terms in the Loan Agreement.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the later of (i) seven (7) years after the Date of Grant
or (ii) five (5) years after the closing of the Company's initial public
offering of its Common Stock ("IPO") effected pursuant to a Registration
Statement on Form S-1 (or its successor) filed under the Securities Act of 1933,
as amended (the "Act").
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased; or (c) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing shares of Series Preferred shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to
the holder hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period; provided, however, at such time as the Company is subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended,
if requested by the holder of this Warrant, the Company shall cause its transfer
agent to deliver the certificate representing Shares issued upon exercise of
this Warrant to a broker or other person (as directed by the holder exercising
this Warrant) within the time period required to settle any trade made by the
holder after exercise of this Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
to provide for the exercise of the rights represented by this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Series Preferred into Common Stock.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
-2-
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case maybe, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or
the Company shall make appropriate provision without the issuance of a new
Warrant, so that the holder of this Warrant shall have the right to receive, at
a total purchase price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Series
Preferred theretofore issuable upon exercise of this Warrant, (i) the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, merger or sale by a holder of the number of
shares of Series Preferred then purchasable under this Warrant, or (ii) in the
case of such a merger or sale in which the consideration paid consists all or in
part of assets other than securities of the successor or purchasing corporation,
at the option of the Holder of this Warrant, the securities of the successor or
purchasing corporation having a value at the time of the transaction equivalent
to the valuation of the Series Preferred at the time of the transaction. Any new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant remains outstanding and unexpired shall subdivide
or combine its outstanding shares of Series Preferred, the Warrant Price shall
be proportionately decreased and the number of Shares issuable hereunder shall
be proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to Series Preferred payable in Series Preferred,
then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (A) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (B) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution; or (ii) make any other distribution with respect
to Series Preferred (except any distribution specifically provided for in
Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the
Company such that the holder of this Warrant shall receive upon exercise of this
Warrant a proportionate share of any such dividend or distribution as though it
were the holder of the Series Preferred (or Common Stock issuable upon
conversion thereof) as of the record date fixed for the determination of the
shareholders of the Company entitled to receive such dividend or distribution.
-3-
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment
in the Warrant Price, the number of Shares of Series Preferred purchasable
hereunder shall be adjusted, to the nearest whole share, to the product obtained
by multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) ANTIDILUTION RIGHTS. The other antidilution rights
applicable to the Shares of Series Preferred purchasable hereunder are set forth
in the Company's Certificate of Incorporation, as amended through the Date of
Grant, a true and complete copy of which is attached hereto as Exhibit B (the
"Charter"). Such antidilution rights shall not be restated, amended, modified or
waived in any manner that is adverse to the holder hereof without such holder's
prior written consent. The Company shall promptly provide the holder hereof with
any restatement, amendment, modification or waiver of the Charter promptly after
the same has been made.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and the number of Shares purchasable hereunder
after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant. In addition, whenever the
conversion price or conversion ratio of the Series Preferred shall be adjusted,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the conversion price or ratio of the Series Preferred after giving effect to
such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Series Preferred
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES OF
SERIES PREFERRED.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Series Preferred to
be issued upon exercise hereof or any Common Stock issued upon conversion
thereof except under circumstances which will not result in a violation of the
Act or any applicable state securities laws.
-4-
Upon exercise of this Warrant, unless the Shares being acquired are registered
under the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all shares of Series Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's
business affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof in violation of the Act. By executing this
Warrant, the holder further represents as of the Date of Grant that the holder
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Shares or this Warrant.
(2) The holder is a holder in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its holding and has such knowledge ad
experience in financial and business matters that it is capable of evaluating
the merits and risks of the acquisition of this Warrant and the Shares.
(3) The holder understands that this Warrant has
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
-5-
(4) The holder further understands that this
Warrant must be held indefinitely unless subsequently registered under the Act
and qualified under any applicable state securities laws, or unless exemptions
from registration and qualification are otherwise available. The holder is aware
of the provisions of Rule 144, promulgated under the Act.
(5) The holder is an "accredited investor" as
such term is defined in Rule 501 of Regulation D promulgated under the Act.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Series
Preferred acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or shares, the holder hereof agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, or other evidence, if
reasonably satisfactory to the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state securities law then in effect)
of this Warrant or such shares of Series Preferred or Common Stock and
indicating whether or not under the Act certificates for this Warrant or such
shares of Series Preferred to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with such law. Upon receiving such written notice and
reasonably satisfactory opinion or other evidence, the Company, as promptly as
practicable but no later than fifteen (15) days after receipt of the written
notice, shall notify such holder that such holder may sell or otherwise dispose
of this Warrant or such shares of Series Preferred or Common Stock, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the foregoing, this
Warrant or such shares of Series Preferred or Common Stock may, as to such
federal laws, be offered, sold or otherwise disposed of in accordance with Rule
144 or 144A under the Act, provided that the Company shall have been furnished
with such information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the shares of Series
Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A)
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with such laws, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions.
(c) APPLICABILITY OF RESTRICTIONS. Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 7(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Series Preferred or Common Stock obtainable
upon exercise thereof) or any part hereof (i) to a partner of the holder if the
holder is a partnership or to a member of the holder if the holder is a limited
liability company, (ii) to a partnership of which the holder is a partner or to
a limited liability company of which the holder is a member, or (iii) to any
affiliate of the holder if the holder is a corporation; PROVIDED,
-6-
HOWEVER, in any such transfer, if applicable, the transferee shall on the
Company's request agree in writing to be bound by the terms of this Warrant as
if an original holder hereof.
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Series Preferred or any other securities of the Company which may
at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Shares purchasable upon the exercise hereof shall
have become deliverable, as provided herein. Notwithstanding the foregoing, the
Company will transmit to the holder of this Warrant such information, documents
and reports as are generally distributed to the holders of any class or series
of the securities of the Company concurrently with the distribution thereof to
the shareholders.
9. MARKET STAND-OFF AGREEMENT. During the time period not to
exceed 180 days specified by the Company and an underwriter of securities of the
Company, following the effective date of a registration statement of the Company
filed under the Act (the "Lock-up"), the holder shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
transferees or donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except Common Stock included
in such registration; PROVIDED, HOWEVER, that this Section 9 shall be applicable
(a) only to the first such registration statement of the Company pursuant to
which Common Stock (or other securities) of the Company are to be sold on its
behalf to the public in an underwritten offering, and (b) only if all officers
and directors of the Company enter into similar agreements, and (c) such
underwriters certify to the holder of this Warrant in writing that (1) they have
determined that the holder must be so bound during the Lock-up or it would have
a material negative impact on the offering, and (2) all other holders of
warrants of the Company have agreed to be similarly restricted. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
restrictions with respect to the Shares of the holder (and the shares or
securities of every person subject to the foregoing restriction) until the end
of such period
10. ADDITIONAL RIGHTS.
10.1 ACQUISITION TRANSACTIONS. The Company shall provide
the holder of this Warrant with at least twenty (20) days' written notice prior
to closing thereof of the terms and conditions of any of the following
transactions (to the extent the Company has notice thereof): (i) the sale,
lease, exchange, conveyance or other disposition of all or substantially all of
the Company's property or business, or (ii) its merger into or consolidation
with any other corporation (other than a wholly-owned subsidiary of the
Company), or any transaction (including a merger or other reorganization) or
series of related transactions, in which more than 50% of the voting power of
the Company is disposed of.
-7-
10.2 RIGHT TO CONVERT WARRANT INTO STOCK: NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without
limiting the rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion thereof (the
"Conversion Right") into shares of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as provided
in this Section 10.2 at any time or from time to time during the term of this
Warrant. Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder of any
exercise price or any cash or other consideration) that number of shares of
fully paid and nonassessable Series Preferred (or Common Stock if the Series
Preferred has been automatically converted into Common Stock) as is determined
according to the following formula:
X= B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common
Stock if the Series Preferred has been automatically
converted to Common Stock) that shall be issued to
holder
Y = the fair market value of one share of Series
Preferred (or Common Stock if the Series Preferred
has been automatically converted to Common Stock)
A = the aggregate Warrant Price of the specified number
of Converted Warrant Shares immediately prior to the
exercise of the Conversion Right (i.e., the number of
Converted Warrant Shares multiplied by the Warrant
Price)
B = the aggregate fair market value of the specified
number of Converted Warrant Shares (i.e., the number
of Converted Warrant Shares MULTIPLIED BY the fair
market value of one Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal office
of the Company together with a written statement (which may be in the form of
Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.2(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written
-8-
statement, or on such later date as is specified therein (the "Conversion
Date"), and, at the election of the holder hereof, may be made contingent upon
the closing of the sale of the Company's Common Stock to the public in a public
offering pursuant to a Registration Statement under the Act (a "Public
Offering"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 10.2, "fair market value" of a share of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent upon a Public Offering, and if the Company's
Registration Statement relating to such Public Offering ("Registration
Statement") has been declared effective by the Securities and Exchange
Commission, then the initial "Price to Public" specified in the final prospectus
with respect to such offering.
(ii) If the Conversion Right is not exercised in
connection with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market
value of the Common Stock shall be deemed to be the average of the closing
prices of the Common Stock on such exchange over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible;
(B) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall be
deemed to be the average of the closing bid prices of the Common Stock over the
30-day period ending five business days prior to the Determination Date, and the
fair market value of the Series Preferred shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares of Common Stock
into which each share of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined by the Board of Directors of the
Company acting in good faith.
10.3 EXERCISE PRIOR TO EXPIRATION. To the extent this Warrant is
not previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.2 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this
-9-
Section 10.3, the Company agrees to promptly notify the holder hereof of the
number of Shares, if any, the holder hereof is to receive by reason of such
automatic exercise.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Series Preferred and the holders thereof are as
set forth in the Charter, and on the Date of Grant, each share of the Series
Preferred represented by this Warrant is convertible into one share of Common
Stock;
(d) The shares of Common Stock issuable upon conversion
of the Shares have been duly authorized and reserved for issuance by the Company
and, when issued in accordance with the terms of the Charter will be validly
issued, hilly paid and nonassessable;
(e) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's Charter or
by-laws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not
conflict with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations
or proceedings pending or, to the knowledge of the Company, threatened against
the Company in any court or before any governmental commission, board or
authority which, if adversely determined, will have a material adverse effect on
the ability of the Company to perform its obligations under this Warrant.
(g) The number of shares of Common Stock of the Company
outstanding on the date hereof, on a fully diluted basis (assuming the
conversion of all outstanding convertible securities and the exercise of all
outstanding options and warrants), does not exceed [________] shares.
-10-
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Series Preferred issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which parry drafted this
Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of
California (without giving effect to principles of conflicts of
laws).
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not
-11-
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
21. SEVERABILITY. The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
22. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
23. ENTIRE AGREEMENT; MODIFICATION. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and undertakings of the parties, whether oral or written, with respect to such
subject matter.
-12-
The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.
DIGIRAD CORPORATION
By
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Title
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Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY
By
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Title
------------------------------------
Address: ▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-13-
EXHIBIT A-1
NOTICE OF EXERCISE
To:
DIGIRAD CORPORATION (the "Company")
1. The undersigned hereby:
/ / elects to purchase_________ shares of [Series
Preferred Stock] [Common Stock] of the Company
pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of
such shares in full, or
/ / elects to exercise its net issuance rights pursuant
to Section 10.2 of the attached Warrant with respect
to __________ Shares of [Series Preferred Stock]
[Common Stock].
2. Please issue a certificate or certificates representing
_________ shares in the name of the undersigned or in such other name or names
as are specified below:
------------------------------------
(Name)
------------------------------------
------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
--------------------------------------
(Signature)
---------------------------
(Date)
EXHIBIT A-2
NOTICE OF EXERCISE
To: DIGIRAD CORPORATION (the "Company")
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S___, filed ________, 19___, the undersigned
hereby:
/ / elects to purchase __________ shares of [Series Preferred
Stock] [Common Stock] of the Company (or such lesser number of shares as may be
sold on behalf of the undersigned at the Closing) pursuant to the terms of the
attached Warrant, or
/ / elects to exercise its net issuance rights pursuant to Section
10.2 of the attached Warrant with respect to _______ Shares of [Series Preferred
Stock] [Common Stock].
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such _________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_______or, if less, the net proceeds due
the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
-------------------------------------
(Signature)
-----------------
(Date)
EXHIBIT B
CHARTER
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF DIGIRAD CORPORATION,
a Delaware Corporation
Digirad Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors
of the Corporation setting forth a proposed amendment to the existing Amended
and Restated Certificate of Incorporation of the Corporation, and declaring said
amendment to be advisable and recommended for approval by the stockholders of
the Corporation. The resolutions setting forth the proposed amendment are as
follows:
RESOLVED, FURTHER, that Paragraph A and Paragraph B, Section 1 of
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
this Corporation is hereby amended to read in its entirety as follows:
A. CLASSES OF STOCK. This Corporation is
authorized to issue two (2) classes of shares, to be
designated "Common" and "Preferred" and referred to herein as
the "Common Stock" or the "Preferred Stock" respectively. The
total number of shares of Common Stock the Corporation is
authorized to issue is Twenty-Seven Million (27,000,000). The
par value is $0.001 per share. The total number of shares of
Preferred Stock the Corporation is authorized to issue is
Eighteen Million Six Hundred Ninety Thousand Eight Hundred
Thirty-Nine (18,690,839). The par value is $0.001 per share.
The Board of Directors of the Corporation
may divide the Preferred Stock into any number of series. The
Board of Directors shall fix the designation and number of
shares of each such series. The Board of Directors may
determine and alter the rights, preferences, privileges and
restrictions granted to and imposed upon any wholly unissued
series of the Preferred Stock. The Board of Directors (within
the limits and restrictions of any resolution adopted by it,
originally fixing the number of shares of any series) may
increase or decrease the number of shares of any such series
after the issue of shares of that series, but not below the
number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and
Restrictions of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock.
1. Designation of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.
Two Million Two Hundred Fifty
Thousand (2,250,000) shares of Preferred Stock are designated
Series A Preferred Stock (the "Series A Preferred Stock") with
the rights, preferences and privileges specified herein. Two
Million Two Hundred Eighty-One Thousand (2,281,000) shares of
Preferred Stock are designated Series B Preferred Stock (the
"Series B Preferred Stock") with the rights, preferences and
privileges specified herein. Four Million Eight Hundred
Thousand (4,800,000) shares of Preferred Stock are designated
Series C Preferred Stock (the "Series C Preferred Stock") with
the rights, preferences and privileges specified herein. Eight
Million Six Hundred Sixty-Eight Thousand One Hundred Forty
(8,668,140) shares of Preferred Stock are designated Series D
Preferred Stock (the "Series D Preferred Stock"). Six Hundred
Ninety-One Thousand Six Hundred Ninety-Nine (691,699) shares
of Preferred Stock are designated Series E Preferred Stock
(the "Series E Preferred Stock"). As used in this Article IV,
Division B, the term "Preferred Stock" shall refer to the
Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock."
SECOND: That, thereafter, the stockholders of said Corporation
approved the amended by written consent in accordance with Section 228 of the
Delaware General Corporation Law.
THIRD: That said amendment was duly approved in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced
under or by reason of said amendment.
-2-
IN WITNESS WHEREOF, Digirad Corporation, has caused this certificate to
be signed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, its President, on this 27th day of October, 1999.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
-3-
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIGIRAD CORPORATION
Digirad Corporation, a corporation organized and existing under the
laws of the state of Delaware, hereby certifies as follows:
1. The name of the corporation is Digirad Corporation. The date
the Corporation filed its original Certificate of Incorporation with the
Secretary of State was January 2, 1997.
2. This Amended and Restated Certificate of Incorporation
restates and amends the provisions of the original Certificate of Incorporation
of this Corporation as heretofore in effect and was duly adopted by the
Corporation's Board of Directors in accordance with Sections 241 and 245 of the
General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation is hereby amended
and restated to read as herein set forth in full:
ARTICLE I
The name of the Corporation (hereinafter called "Corporation") is
Digirad Corporation.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is ▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ of Kent 19901, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
A. CLASSES OF STOCK. This Corporation is authorized to issue two
(2) classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Stock" or the "Preferred Stock" respectively. The total
number of shares of Common Stock the Corporation is authorized to issue is
twenty-five million four hundred ninety-four thousand seventy-one (25,494,071).
The par value is $0.001 per share. The total number of shares of Preferred Stock
the Corporation is authorized to issue is eighteen million four hundred
ninety-three thousand two hundred eleven (18,493,211). The par value is $0.001
per share.
The Board of Directors of the Corporation may divide the
Preferred Stock into any number of series. The Board of Directors shall fix the
designation and number of shares of each such series. The Board of Directors may
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon any wholly unissued series of the Preferred Stock. The Board
of Directors (within the limits and restrictions of any resolution adopted by
it, originally fixing the number of shares of any series) may increase or
decrease the number of shares of any such series after the issue of shares of
that series, but not below the number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and Restrictions of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
1. Designation of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
Two Million Two Hundred Fifty Thousand (2,250,000)
shares of Preferred Stock are designated Series A Preferred Stock (the "Series A
Preferred Stock") with the rights, preferences and privileges specified herein.
Two Million Two Hundred Eighty-One Thousand (2,281,000) shares of Preferred
Stock are designated Series B Preferred Stock (the "Series B Preferred Stock")
with the rights, preferences and privileges specified herein. Four Million Eight
Hundred Thousand (4,800,000) shares of Preferred Stock are designated Series C
Preferred Stock (the "Series C Preferred Stock") with the rights, preferences
and privileges specified herein. Eight million six hundred sixty-eight thousand
one hundred forty (8,668,140) shares of Preferred Stock are designated Series D
Preferred Stock (the "Series D Preferred Stock"). Four hundred ninety-four
thousand seventy-one (494,071) shares of Preferred Stock are designated Series E
Preferred Stock (the "Series E Preferred Stock"). As used in this Article IV,
Division B, the term "Preferred Stock" shall refer to the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
2. DIVIDEND PROVISIONS.
The holders of shares of Preferred Stock shall be
entitled to receive non-cumulative dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock of this Corporation) on the Common
Stock or any other junior equity security of this Corporation, at the rate of
$.10 per share of Series A Preferred Stock, $.11 per share of Series B Preferred
Stock, $.125 per share of Series C Preferred Stock, $.23073 per share of Series
D Preferred Stock and $.3036 per share of Series E Preferred Stock per annum
plus an amount equal to that paid on outstanding shares of Common Stock of this
Corporation, whenever funds are legally available therefor, payable quarterly
when, as and if declared by the Board of Directors and shall be non-cumulative.
Dividends, if declared, must be declared and paid with respect to all series of
Preferred Stock contemporaneously, and if less than full dividends are declared,
the same percentage of the dividend rate will be payable to each series of
Preferred Stock.
-2-
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution
or winding up of this Corporation, either voluntary or involuntary, the holders
of Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of Common
Stock or any other junior equity security by reason of their ownership thereof
an amount for each share of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock,
respectively, held by such holder equal to the sum of (i) $1.00 for each such
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price"), (ii) $1.10 for each such outstanding share of Series B Preferred Stock
(the "Original Series B Issue Price"), (iii) $1.25 for each such outstanding
share of Series C Preferred Stock (the "Original Series C Issue Price"), (iv)
$2.3073 for each outstanding share of Series D Preferred Stock (the "Original
Series D Issue Price"), (v) $3.036 for each outstanding share of Series E
Preferred Stock (the "Original Series E Issue Price") and (vi) in each case, an
amount equal to all declared but unpaid dividends on each such share. If upon
the occurrence of such an event the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amounts, then the entire assets
and funds of this Corporation legally available for distribution shall be
distributed, ratably among the holders of the Preferred Stock in proportion to
the product of the liquidation preference of each such share and the number of
such shares owned by each such holder.
(b) Upon the completion of the distribution
required by subsection 3(a) above, if assets remain in the Corporation, the
holders of the Common Stock shall receive an amount equal to $.21 per share
(adjusted to reflect any subsequent stock splits, stock dividends, or other
recapitalizations) for each share of Common Stock held by them. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Common Stock shall be insufficient to permit payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution (after giving
effect to the distribution referred to in Section 3(a) hereof) shall be
distributed ratably among the holders of the Common Stock in proportion to the
amount of such stock owned by each such holder.
(c) After the distributions described in
subsections 3(a) and (b) have been paid, the remaining assets of this
Corporation available for distribution to stockholders shall be distributed
among the holders of Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Preferred Stock).
4. REDEMPTION.
(a) The outstanding Preferred Stock shall be
redeemable as provided in this Section 4. The Series A Redemption Price shall be
the total amount equal to $1.00 per share of Series A Preferred Stock to be
redeemed together with any declared but unpaid dividends on such shares to the
Redemption Date (as such term is hereinafter defined). The Series B Redemption
Price shall be the total amount equal to $1.10 per share of Series B Preferred
Stock to be redeemed together with any declared but unpaid dividends on such
shares
-3-
to the Redemption Date. The Series C Redemption Price shall be the total amount
equal to $1.25 per share of Series C Preferred Stock to be redeemed together
with any declared but unpaid dividends on such shares to the Redemption Date.
The Series D Redemption Price shall be the total amount equal to $2.3073 per
share of Series D Preferred Stock to be redeemed together with any declared but
unpaid dividends on such shares to the Redemption Date. The Series E Redemption
Price shall be the total amount equal to $3.036 per share of Series E Preferred
Stock to be redeemed together with any declared but unpaid dividends on such
shares to the Redemption Date.
(b) On or at any time after July 31, 2004, upon
the receipt by this Corporation from the holders of at least 66-2/3% of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting
as a single class, of a written request for redemption hereunder of their
respective shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (the
"Redemption Request"), this Corporation shall, from any source of funds legally
available therefor, redeem all of the shares of Preferred Stock by paying in
cash therefor a sum equal to the Series A Redemption Price, the Series B
Redemption Price, the Series C Redemption Price, the Series D Redemption Price
and the Series E Redemption Price, respectively.
(c) (i) At least 15, but no more than 30,
days prior to the date fixed for any redemption of the Preferred Stock (the
"Redemption Date"), which Redemption Date shall be no later than 45 days
following the Corporation's receipt of the Redemption Request, written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be
redeemed at the address last shown on the records of this Corporation for such
holder or given by the holder to this Corporation for the purpose of notice or
if no such address appears or is given, at the place where the principal
executive office of this Corporation is located, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Series A Redemption Price, the Series B
Redemption Price, the Series C Redemption Price, the Series D Redemption Price
or the Series E Redemption Price as the case may be, the place at which payment
may be obtained and the date on which such holder's Conversion Rights (as
hereinafter defined) as to such shares, terminating and calling upon such holder
to surrender to this Corporation, in the manner and at the place designated,
such holder's certificate or certificates representing the shares to be redeemed
(the "Redemption Notice"). Except as provided in subsection 4(c)(iii), on or
after the Redemption Date, each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Series A Redemption
Price, Series B Redemption Price, Series C Redemption Price, the Series D
Redemption Price or the Series E Redemption Price, as the case may be, of such
shares shall be payable, to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
-4-
(ii) If the funds of the Corporation
legally available for redemption of outstanding shares of Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares of
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of (A) first, such shares of Series B, Series C,
Series D and Series E Preferred Stock to be redeemed, and (B) second, such
shares of Series A Preferred Stock to be redeemed. The shares of Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
this Corporation are legally available for the redemption of shares of Preferred
Stock, such funds shall immediately be used to redeem the balance of the shares
which this Corporation has become obligated to redeem on any Redemption Date but
which it has not redeemed.
(iii) From and after the Redemption Date,
unless there shall have been a default in payment of the applicable Series A
Redemption Price, Series B Redemption Price, Series C Redemption Price, Series D
Redemption Price or the Series E Redemption Price, all rights of the holders of
such shares as holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
(except the right to receive the Series A Redemption Price, Series B Redemption
Price, Series C Redemption Price, Series D Redemption Price or the Series E
Redemption Price, without interest, upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever.
(iv) At least three days prior to the
Redemption Date, this Corporation shall deposit the Series A Redemption Price,
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
and Series E Redemption Price of all outstanding shares of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, designated for redemption in the
Redemption Notice, and not yet redeemed or converted, with a bank or trust
company having aggregate capital and surplus in excess of $50,000,000, as a
trust fund for the benefit of the holders of the shares designated for
redemption and not yet redeemed. Simultaneously, this Corporation shall deposit
irrevocable instructions and authority to such bank or trust company to pay, on
and after the Redemption Date or prior thereto, the Series A Redemption Price,
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
and Series E Redemption Price, as the case may be, to the holders thereof upon
surrender of their certificates. Any monies deposited by this Corporation
pursuant to this subsection 4(c)(iv) for the redemption of shares which are
thereafter converted into shares of Common Stock pursuant to Section 5 hereof no
later than the close of business on the Redemption Date shall be returned to
this Corporation forthwith upon such conversion. The balance of any monies
deposited by this Corporation pursuant to this subsection 4(c)(iv) remaining
unclaimed at the expiration of two years following the Redemption Date shall
thereafter be returned to this Corporation, provided that the stockholder to
which such monies would be payable hereunder shall be entitled, upon proof of
its ownership of the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the
case may be, and payment of any bond requested by this Corporation, to receive
such monies but without interest from the Redemption Date.
-5-
5. CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) Subject to subsection 5(c), each
outstanding share of Preferred Stock shall be convertible, at the option of the
holder thereof at any time after the date of issuance of such share (and on or
prior to the fifth day prior to the Redemption Date, if any, as may have been
fixed in any Redemption Notice), at the office of this Corporation or any
transfer agent for such series of Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price, the Original Series B Issue Price, the Original
Series C Issue Price, the Original Series D Issue Price and the Original Series
E Issue Price, respectively, by the Conversion Price at the time in effect for
such series or shares of such series. The initial Conversion Price per share for
shares of Preferred Stock shall be the Original Series A Issue Price, the
Original Series B Issue Price, the Original Series C Issue Price, the Original
Series D Issue Price and the Original Series E Issue Price, respectively,
provided, however, that the Conversion Prices for the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock shall be subject to adjustment
as set forth in subsection 5(c).
(ii) Each outstanding share of Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such shares immediately upon:
(A) the closing of this
Corporation's sale of its Common Stock in a bona fide, firm commitment
underwritten public offering registered under the Securities Act of 1933, as
amended (the "Securities Act"), which results in aggregate gross offering
proceeds to this Corporation of at least $15,000,000, at a public offering price
of not less than $7.50 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations) (a "Qualifying Public Offering");
or
(B) the approval of (i)
holders of at least 75% of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, voting together as a single class and (ii)
holders of not less than 60% of the Series D Preferred Stock voting as a class.
(b) MECHANICS OF CONVERSION. Before any holder
of Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Corporation or of any transfer agent for
such stock, and shall be given written notice by mail postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of such series of Preferred
-6-
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act, the conversion may, at the option of
any holder tendering shares of such series of Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of shares of such series of Preferred
Stock shall not be deemed to have converted such shares of such series of
Preferred Stock until immediately prior to the closing of such sale of
securities.
(c) CONVERSION PRICE ADJUSTMENTS OF THE
PREFERRED STOCK. The Conversion Prices of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) If this Corporation shall
issue any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for shares of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock in effect immediately prior to the
issuance of such Additional Stock, the new Conversion Price for such shares of
such series of Preferred Stock shall be determined by multiplying the Conversion
Price for such series of Preferred Stock in effect immediately prior to the
issuance of Additional Stock by a fraction:
(x) the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (for purposes of this calculation
only, including the number of shares of Common Stock then issuable upon
the conversion of all outstanding shares of Preferred Stock at the
Conversion Price for such shares in effect immediately prior to such
issuance of Additional Stock) plus the number of shares of Common Stock
equivalents which the aggregate consideration received by this
Corporation for the shares of such Additional Stock so issued would
purchase at the Conversion Price in effect at the time for the shares
of the series of Preferred Stock with respect to which the adjustment
is being made; and
(y) the denominator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (for purposes of this calculation
only, including the number of shares of Common Stock then issuable upon
the conversion of all outstanding shares of Preferred Stock at the
Conversion Price for such shares in effect immediately prior to such
issuance of Additional Stock) plus the number of such shares of
Additional Stock so issued.
Any series of issuances of Additional Stock
consisting of Common Stock or the same series of Preferred
Stock, issued at the same price and within a six-month period,
shall be treated as one issuance of Additional Stock for the
purposes of this calculation.
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(B) No adjustment of the
Conversion Price for such series of Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections 5(c)(i)(E)(3) and (c)(i)(E)(4), no adjustment
of such Conversion Price for such series of Preferred Stock pursuant to this
subsection 5(c)(i) shall have the effect of increasing the Conversion Price for
such series of Preferred Stock above the Conversion Price for such series in
effect immediately prior to such adjustment.
(C) In the case of the issuance
of Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by this Corporation for any
underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance
of the Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance
of options to purchase or rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable securities
(which are not excluded from the definition of Additional Stock), the following
provisions shall apply:
(1) The aggregate
maximum number of shares of Common Stock deliverable upon exercise of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 5(c)(i)(C) and (c)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum purchase price provided
in such options or rights for the Common Stock covered thereby.
(2) The aggregate
maximum number of shares of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by this Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by this Corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subsections 5(c)(i)(C) and
(c)(i)(D)).
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(3) In the event of
any change in the number of shares of Common Stock deliverable or any increase
in the consideration payable to this Corporation upon exercise of such options
or rights or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a change resulting from
the anti-dilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, obtained with
respect to the adjustment which was made upon the issuance of such options,
rights or securities, and any subsequent adjustments based thereon shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities; provided, however, that this section shall not have any effect on
any conversion of such series of Preferred Stock prior to such change or
increase.
(4) Upon the
expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, obtained with
respect to the adjustment which was made upon the issuance of such options,
rights or securities or options or rights related to such securities, and any
subsequent adjustments based thereon, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities; provided, however, that this section shall not have any effect on
any conversion of such series of Preferred Stock prior to such expiration or
termination.
(ii) "Additional Stock" shall mean any
shares of Common Stock issued (or deemed to have been issued pursuant to
subsection 5(c)(i)(e)) by this Corporation after June 22, 1998, other than:
(A) Common Stock issued
pursuant to a transaction described in subsection 5(c)(iii) hereof, or
(B) 3,454,860 shares of Common
Stock, net of repurchases and the cancellation or expiration of options, issued
or issuable to employees, directors, consultants or advisors of this Corporation
under stock option and restricted stock purchase agreements approved by the
Board of Directors commencing as of May 1994, and such other number of shares of
Common Stock as may be fixed from time to time by the Board of Directors and
approved by a majority of then outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, voting as a single class, issued or issuable to employees,
directors, consultants or advisors of this Corporation under stock option and
restricted stock purchase agreements approved by the Board of Directors, or
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(C) Common Stock issued or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
(iii) In the event this Corporation
should at any time or from time to time after the effective date hereof fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock, as the case may be, shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 5(c)(i)(E).
(iv) If the number of shares of Common
Stock outstanding at any time after the effective date hereof is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be decreased in proportion
to such decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this
Corporation shall declare a distribution payable in securities of other
persons, evidences of indebtedness issued by this Corporation or other
persons, assets (excluding cash dividends) or options or rights not referred
to in subsection 5(c)(iii), then, in each such case for the purpose of this
subsection 5(d), the holders of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of
Common Stock of this Corporation into which their shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, are
convertible as of the record date fixed for the determination of the holders
of Common Stock of this Corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or
from time to time there shall be a recapitalization of the Common Stock
(other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 5 or Section 6) provision
shall be made so that the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, shall thereafter be entitled to receive upon
conversion of such series of Preferred Stock the number of shares of stock or
other securities or property of this Corporation or otherwise, to which a
holder of
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Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 5 with respect to the
rights of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, after the recapitalization to the end that the provisions of this
Section 5 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of such series of Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) NO IMPAIRMENT. This Corporation will
not, by amendment of its Certificate of Incorporation or through any
reorganization, revitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by this Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock against impairment.
(g) FRACTIONAL SHARES AND CERTIFICATE AS TO
ADJUSTMENTS.
(i) No fractional shares shall be
issued upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of such series of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each
adjustment or, readjustment of the Conversion Price of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock, as the case may be, pursuant to this
Section 5, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, or instrument convertible into shares of any such series of
Preferred Stock, as the case may be, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion Price
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the conversion of a share of such series of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of
any taking by this Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
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distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right, this Corporation shall mail to each holder of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock or Series E Preferred Stock at least 20 days prior to the
date specified therein, a notice specifying the date on which by such record
is to be taken for the purpose of such dividend, distribution or right and
the amount and character of such dividend, distribution or right.
(i) RESERVATION OF COMMON STOCK ISSUABLE UPON
CONVERSION. This Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
authorized shares of such series of Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then authorized shares of such
series of Preferred Stock, in addition to such other remedies as shall be
available to the holders of such series of Preferred Stock, this Corporation
will take such corporate action as may, in the opinion of its counsel be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the
provisions of this Section 5 to be given to the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be deemed given if
deposited in the United States postage prepaid, and addressed to each holder
of record at such holder's address appearing on the books of this Corporation.
6. MERGER; CONSOLIDATION.
(a) If at any time after the effective date
hereof there is a merger, consolidation or other corporate reorganization in
which stockholders of this Corporation immediately prior to such transaction
own less than 50% of the voting securities of the surviving or controlling
entity immediately after the transaction, or sale of all or substantially all
of the assets of this Corporation (hereinafter, an "Acquisition"), then, as a
part of such Acquisition, provision shall be made so that the holders of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and Series E Preferred Stock
shall be entitled to receive, prior to any distribution to holders of Common
Stock or other junior equity security of the Corporation, the number of
shares of stock or other securities or property to be issued to this
Corporation or its stockholders resulting from such Acquisition in an amount
per share equal to the Original Series A Issue Price, Original Series B Issue
Price, Original Series C Issue Price, Original Series D Issue Price and
Original Series E Issue Price, as applicable, plus a further amount equal to
any dividends declared but unpaid on such shares. Subject to the following
sentence, the holders of Common Stock shall thereafter be entitled to
receive, pro rata, the remainder of the number of shares of stock or other
securities or property to be issued to this Corporation or its stockholders
resulting from such Acquisition. Notwithstanding anything to the contrary in
this Section 6, in the event the aggregate value of stock, securities and
other property to be distributed to this Corporation or its stockholders with
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respect to an Acquisition is less than $5.25 per share (such dollar amount to
be appropriately adjusted to reflect any subsequent stock splits, stock
dividends or other recapitalizations) of Common Stock outstanding (for
purpose of this calculation only, including in the number of shares of Common
Stock outstanding the number of shares of Common Stock then issuable upon
conversion of all outstanding Preferred Stock), then the stock, securities or
other property shall be distributed among the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, the Series D
Preferred Stock, Series E Preferred Stock and the Common Stock according to
the provisions of Section 3 hereof as if such Acquisition were deemed a
liquidation.
(b) Any securities to be delivered to the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, the Series D Preferred Stock, Series E Preferred Stock and
Common Stock pursuant to subsection 6(a) above shall be valued as follows:
(i) Securities not subject to
investment letter or other similar restrictions on free marketability;
(A) If traded on a
securities exchange, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the 30-day period
ending three days prior to the closing;
(B) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing
bid or sale prices (whichever are applicable) over the 30-day period ending
three days prior to the closing; and
(C) If there is no active
public market, the value shall be the fair market value thereof, as mutually
determined by the Corporation and the holders of not less than a majority of
the then outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, the Series D Preferred Stock and Series E
Preferred Stock.
(ii) The method of valuation of
securities subject to investment letter or other restrictions on free
marketability shall be to make an appropriate discount from the market value
determined as above in subsections 6(b)(i)(A), (B) or (C) to reflect the
approximate fair market value thereof, as mutually determined by this
Corporation and the holders of a majority of the then outstanding shares of
Series A Preferred Stock, Series B Preferred, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, voting as a single
class.
(c) In the event the requirements of
subsection 6(a) are not complied with, this Corporation shall forthwith
either:
(i) cause such closing to be
postponed until such time as the requirements of this Section 6 have been
complied with, or
(ii) cancel such transaction, in which
event the rights, preferences and privileges of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall revert to and be the same
as such rights, preferences and privileges existing immediately prior to the
date of the first notice referred to in subsection 6(d) hereof.
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(d) This Corporation shall give each holder
of record of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock written
notice of such impending transaction not later than 20 days prior to the
stockholders' meeting called to approve such action, or 20 days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 6, and this
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place earlier than 20 days
after the Corporation has given the first notice provided for herein or
earlier than 10 days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of a majority of the then
outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock voting
as a class.
(e) The provisions of this Section 6 are in
addition to the protective provisions of Section 8 hereof.
7. VOTING RIGHTS; DIRECTORS.
(a) The holder of each outstanding share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock shall have the right to
one vote for each share of Common Stock into which such outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock could be converted on the record
date for the vote or written consent of stockholders. In all cases any
fractional share, determined on an aggregate conversion basis, shall be
rounded to the nearest whole share. With respect to such vote, such holder
shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled, notwithstanding
any provision hereof to notice of any stockholders' meeting in accordance
with the bylaws of this Corporation, and shall be entitled to vote, together
with holders of Common Stock, with respect to any question upon which holders
of Common Stock have the right to vote.
(b) Notwithstanding subsection 7(a), (i) so
long as at least fifty percent (50%) of the shares of Series A Preferred
Stock and Series B Preferred Stock originally issued remain issued and
outstanding, the holders of Series A Preferred Stock and Series B Preferred
Stock, voting together as a separate class, shall be entitled to elect one
member of the Board of Directors, (ii) so long as at least fifty percent
(50%) of the shares of Series C Preferred Stock originally issued remain
issued and outstanding, the holders of Series C Preferred Stock, voting as a
separate class, shall be entitled to elect one member of the Board of
Directors, and (iii) so long as at least fifty percent (50%) of the shares of
Series D Preferred Stock originally issued remain issued and outstanding, the
holders of Series D Preferred Stock, voting as a separate class, shall be
entitled to elect either one or two members of the Board of Directors, as set
forth in that certain Amended and Restated Voting Agreement between the
Corporation and its stockholders dated on or about August 8, 1997. Any
additional directors shall be elected by the holders of Preferred Stock and
Common Stock, voting together as one class. In the case of any vacancy in the
office of a director elected by the holders of the Series A Preferred Stock
and
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Series B Preferred Stock, the Series C Preferred Stock or the Series D
Preferred Stock pursuant to this subsection 7(b), the holders of a majority
of the then voting power of the Series A Preferred Stock and Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock, as applicable, shall, within sixty (60) days of such vacancy, elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In the case of a vacancy in the office of any other
director, the successor of that director shall be elected within sixty (60)
days of such vacancy to hold office for the unexpired term of the director
whose place shall be vacant, and such successor director shall be elected by
the holders of Preferred Stock and Common Stock, voting together as one
class. Any director who shall have been so elected may be removed during the
aforesaid term of office, whether with or without cause, only by the
affirmative vote of the holders of a majority of the voting power of the
Series of Preferred Stock which first elected him. This subsection 7(b) shall
be void and of no further effect thereafter upon the occurrence of either of
the following events:
(i) the closing of a Qualifying
Public Offering;
(ii) upon the distribution to the
stockholders pursuant to Section 3 or Section 6 hereof of the net proceeds of
the sale of all or substantially all the assets of the Corporation.
8. PROTECTIVE PROVISIONS.
(a) In addition to any approvals required by
law, so long as shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock are outstanding, this Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the then outstanding voting power of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock (voting, as one class, in
accordance with Section 7):
(i) sell, convey, or otherwise
dispose of all or substantially all of its property or business or merge into
or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) in which this Corporation is not the surviving
corporation or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of this Corporation
is disposed of, provided, however, that this restriction shall not apply to
any mortgage, deed of trust, pledge or other encumbrance or hypothecation of
the Corporation's or any of its subsidiaries' assets for the purpose of
securing any contract or obligation; or
(ii) alter or change the rights,
preferences, privileges or restrictions of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock; or
(iii) increase the authorized number of
shares of Common Stock or Preferred Stock; or
(iv) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series A Preferred Stock,
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Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
or Series E Preferred Stock with respect to voting, dividends, redemption or
conversion or upon liquidation; or
(v) pay or declare any dividend on
its Common Stock or any other junior equity security other than a dividend in
Common Stock of this Corporation; or
(vi) change the authorized number of
directors; or
(vii) do any act or thing which would
result in taxation of the holders of shares of Preferred Stock under section
305(b) of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time
amended).
(b) In addition to any approvals required by
law, so long as shares of Series C Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series C Preferred Stock voting as a
single class:
(i) alter or change the rights,
preferences, privileges or restrictions of the shares of Series C Preferred
Stock; or
(ii) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series C Preferred Stock with respect to voting,
dividends, redemption or conversion or upon liquidation.
(c) In addition to any approvals required by
law, so long as shares of Series D Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series D Preferred Stock voting as a
single class:
(i) sell, convey, or otherwise
dispose of all or substantially all of its property or business or merge into
or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) in which this Corporation is not the surviving
corporation or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of this Corporation
is disposed of, provided, however, that this restriction shall not apply to
any mortgage, deed of trust, pledge or other encumbrance or hypothecation of
the Corporation's or any of its subsidiaries' assets for the purpose of
securing any contract or obligation; or
(ii) alter or change the rights,
preferences, privileges or restrictions of the shares of Series D Preferred
Stock; or
(iii) increase the authorized number of
shares of Series D Preferred Stock; or
(iv) increase the authorized number of
directors; or
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(v) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series D Preferred Stock with respect to voting,
dividends, redemption or conversion or upon liquidation.
(d) In addition to any approvals required by
law, so long as shares of Series E Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series E Preferred Stock voting as a
single class:
(i) materially or adversely alter or
change the rights, preferences or privileges of the shares of Series E
Preferred Stock as a separate series in a manner that is dissimilar and
disproportionate relative to the manner in which the rights, preferences or
privileges of the other series of Preferred Stock are altered, or
(ii) increase the authorized number of
shares of Series E Preferred Stock.
9. STATUS OF REDEEMED OR CONVERTED STOCK. In the event
any shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall be
redeemed or converted pursuant to Section 4 or 5 hereof the shares so redeemed
or converted shall be cancelled and shall not be issuable by this Corporation,
and the Certificate of Incorporation of this Corporation shall be appropriately
amended to effect the corresponding reduction in this Corporation's authorized
capital stock.
10. REPURCHASE OF SHARES. In connection with repurchases
by this Corporation of its Common Stock pursuant to agreements with certain of
the holders thereof approved by this Corporation's Board of Directors, each
holder of Preferred Stock shall be deemed to have waived the application, in
whole or in part, of any provisions of the Delaware General Corporation Law or
any applicable law of any other state which might limit or prevent or prohibit
such repurchases.
C. COMMON STOCK.
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK.
All rights preferences, voting powers, relative, participating optional or other
special rights and privileges, and qualifications, limitations, or restrictions
of the Common Stock are expressly made subject and subordinate to those that may
be fixed with respect to any shares of the Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or
this Certificate of Incorporation, each holder of Common Stock shall have one
vote in respect of each share of stock held by such holder of record on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation.
3. DIVIDENDS. Subject to the preferential rights of the
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation which are by law available therefor, dividends payable either
in cash, in property or in shares of capital stock.
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4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event
of any dissolution, liquidation or winding up of the affairs of the Corporation,
after distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Preferred Stock, holders of Common
Stock shall be entitled to participate in any distribution of the assets of the
Corporation in accordance with Section 3 of Article IV, Division B hereof.
5. NO PREEMPTIVE RIGHTS. The holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Common Stock shall not have any
preemptive rights. The foregoing shall not, however, prohibit the Corporation
from granting contractual rights of first refusal to purchase securities to
holders of Preferred Stock.
ARTICLE V
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the bylaws of the Corporation; provided,
however, that the bylaws may only be amended in accordance with the provisions
thereof and, provided further that, the authorized number of directors may be
changed only with the approval of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (voting
as one class) in accordance with Section 7 of Article IV Division B.
B. Elections of directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within
or without the State of Delaware as the bylaws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
ARTICLE VI
A. EXCULPATION.
1.
CALIFORNIA. The liability of each and every director
of this Corporation for monetary damages shall be eliminated to the fullest
extent permissible under
California law.
2. DELAWARE. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further
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reduce or to authorize, with the approval of the Corporation's stockholders,
further reductions in the liability of the Corporation's directors for breach
of fiduciary duty, then a director of the Corporation shall not be liable for
any such breach to the fullest extent permitted by the Delaware General
Corporation Law as so amended.
3. CONSISTENCY. In the event of any inconsistency
between Sections 1 and 2 of this Division A, the controlling Section, as to
any particular issue with regard to any particular matter, shall be the one
which provides to the director in question the greatest protection from
liability.
B. INDEMNIFICATION.
1.
CALIFORNIA. This Corporation is authorized to
indemnify the directors and officers of this Corporation to the fullest extent
permissible under California law. Moreover, this Corporation is authorized to
provide indemnification of (and advancement of expenses to) agents (as defined
in Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code, with
respect to actions for breach of duty to the Corporation and its stockholders.
2. DELAWARE. To the extent permitted by applicable law,
this Corporation is also authorized to provide indemnification of (and
advancement of expenses to) such agents (and any other persons to which Delaware
law permits this Corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of stockholders
or disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders and others.
3. CONSISTENCY. In the event of any inconsistency
between Sections 1 and 2 of this Division B, the controlling Section, as to any
particular issue with regard to any particular matter, shall be the one which
authorizes for the benefit of the agent or other person in question the
provision of the fullest, promptest, most certain or otherwise most favorable
indemnification and/or advancement.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification
of any of the foregoing provisions of this Article VI shall not adversely affect
any right or protection of a director, officer, agent or other person existing
at the time of, or increase the liability of any director of the Corporation
with respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VII
The Corporation shall have perpetual existence.
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ARTICLE VIII
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed as of this 22nd day of June 1998.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
[SIGNATURE PAGE TO
RESTATED CERTIFICATE OF INCORPORATION]
EXHIBIT C
FORM OF OPINION OF COUNSEL
[Date]
MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation, Agent
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel for Digirad Corporation (the "Borrower") in
connection with (i) the execution of the
Loan and Security Agreement of even
date herewith (the "Loan Agreement") between Borrower and MMC/GATX
PARTNERSHIP NO. I ("Lender"), (ii) the issuance of warrants to purchase
Borrower's Series E Preferred Stock (the "Warrants") and (iii) the
transactions contemplated thereby. This opinion is being rendered to you
pursuant to Section 8.01 of the Loan Agreement. Capitalized terms not
otherwise defined in this opinion have the meaning given them in the Loan
Agreement.
In connection with this opinion and our representation, we have
examined originals, or copies certified or otherwise identified to our
satisfaction, of the following:
(i) The Loan Agreement;
(ii) The Warrants;
(iii) The Note dated as of [Date];
(iv) The Restated Articles of Incorporation and the Bylaws of
Borrower, each as in effect on the date hereof;
(v) The certificate of an officer of Borrower as to certain
factual matters ("Officer Certificate");
(vi) Certificates issued by the Secretary of State of the State of
[state of incorporation] dated ____________________ 199__,
certifying the good standing of Borrower;
(vii) Such other documents, records, and certificates as we have
deemed necessary or appropriate as a basis for the opinions
hereafter expressed.
The Loan Agreement, the Note and the Warrants are hereinafter
referred to as the "Transaction Documents."
In such examinations we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals
and the conformity to originals of all documents submitted to us as
certified, facsimile, telecopied or photostatic copies thereof. As to certain
matters of fact material to our opinion, we have relied upon the Officer
Certificate and upon your representations in the Transaction Documents.
As used in this opinion, the expression "to the best of our
knowledge," means the actual present knowledge or belief of those attorneys
in our firm who have or who are currently representing Borrower. We have not
undertaken any independent investigation to determine the existence or
nonexistence of other facts, and no inference as to our knowledge of the
existence or nonexistence of other facts should be drawn from the fact of
this firm's representation of Borrower in connection with the Transaction
Documents.
Based upon and subject to the foregoing and subject to the
qualifications contained herein, we are of the opinion that:
(a) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of [state of incorporation].
(b) Borrower has the requisite corporate power and authority to
execute, deliver and perform the Transaction Documents and to issue the
Warrants. All action on the part of Borrower, its directors and its shareholders
necessary for the authorization, execution, delivery and performance of the
Transaction Documents, has been taken. The Transaction Documents have been duly
executed and delivered by an authorized officer of Borrower.
(c) The execution, delivery and performance of the Transaction
Documents do not conflict with or violate any provision of Borrower's Restated
Articles of Incorporation or Bylaws or of applicable law.
(d) The Transaction Documents constitute legal, valid and binding
obligations of Borrower, enforceable in accordance with their respective terms.
To our knowledge, no filing need be made with any governmental authority with
respect to the Transaction Documents in connection with an exemption from state
usury laws or in connection with any other matter. [usury may be excepted]
(e) The shares of Series E Preferred Stock issuable upon exercise
of the Warrants have been duly authorized and reserved for issuance upon such
exercise, and when issued in accordance with the terms of the Warrants, will be
duly authorized, validly issued, fully paid and non-assessable.
(f) The shares of Common Stock issuable upon conversion of the
Series E Preferred Stock into which the Warrants are convertible, have been duly
authorized and reserved for
issuance, when so issued in accordance with the terms of Borrower's Restated
Articles of Incorporation, will be duly authorized, validly issued, fully paid
and non-assessable.
The opinions set forth above are subject to the following additional
qualifications, assumptions, limitations and exceptions:
(A) The effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws relating to or
affecting the rights and remedies of creditors generally.
(B) Limitations imposed by general equitable principles upon the
specific enforceability of any of the provisions of the Transaction Documents
and upon the availability of injunctive relief or other equitable remedies.
(C) We express no opinion as to the enforceability of any choice
of law provision in the documents.
(D) We express no opinion as to the compliance or noncompliance
with applicable antifraud statutes under the rules and regulations of state and
federal securities laws concerning the issuance of the Warrant.
(E) We express no opinion herein concerning any law other than the
law of the State of California, [the General Corporation Law of the State of
Delaware] and the federal laws of the United States of America.
This opinion is furnished to you solely for your benefit and may not
be relied upon by any other person (other than assignees of any of your
rights) without our prior written consent, which consent shall not be
unreasonably withheld or delayed.
Very truly yours,
EXHIBIT D
FORM OF SUBORDINATION AGREEMENT
This Subordination Agreement (this "AGREEMENT") is made as of this
_____ day of _______ 1999, by and between _________ Bank ("SENIOR CREDITOR")
having its principal place of business at
________________________________________________, and MMC/GATX Partnership
No. I, a California general partnership, having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("CREDITOR").
RECITALS
A. Digirad Corporation ("BORROWER") has a _______________________
Dollars ($___________) revolving line of credit from Senior Creditor which is or
may be from time to time secured by assets and property of Borrower, pursuant to
the [
Loan and Security Agreement, dated as of _________ 1999], between Borrower
and Senior Creditor (as the same may from time to time be amended, modified,
supplemented, restated or replaced, the "SENIOR LOAN AGREEMENT") and the other
documents executed in connection therewith (together with the Senior Loan
Agreement, the "SENIOR CREDIT DOCUMENTS").
B. Creditor has extended or will extend loans in the aggregate
original principal amount of Three Million and 00/100 Dollars ($3,000,000.00) as
evidenced by one or more Secured Promissory Notes (and as the same may from time
to time be amended, modified, supplemented, extended, renewed, restated or
replaced, the "SUBORDINATED NOTES") made by Borrower in favor of Creditor.
Borrower's obligations to Creditor evidenced by the Subordinated Notes are
secured by the personal property collateral granted by the Borrower to Creditor
pursuant to a
Loan and Security Agreement dated as of October __ 1999 (as the
same may from time to time be amended, modified, supplemented or restated, the
"SUBORDINATED SECURITY AGREEMENT").
(a) Pursuant to the terms and conditions of this
Agreement, Creditor is willing to subordinate: (i) all of Borrower's
indebtedness and obligations to Creditor, whether presently existing or arising
in the future under or relating to the Subordinated Security Agreement and
Subordinated Notes (collectively, the "SUBORDINATED DEBT") to Borrower's
indebtedness and obligations to Senior Creditor in a principal amount not to
exceed the lesser of: (1) a borrowing base calculated as a percentage (not
exceeding 100%) of qualified accounts receivable plus eligible inventory, or (2)
$2,500,000.00 (the "SENIOR PRINCIPAL AMOUNT"), plus interest thereon at the
standard rate (and not the default rate) set forth in the Senior Credit
Documents (including all interest accruing after the commencement by or against
Borrower of a bankruptcy, reorganization or similar proceeding), plus, without
limitation, the cost of collecting such obligations (including attorneys' fees)
(collectively, the "SENIOR DEBT"); and (ii) all of Creditor's security interests
in Borrower's property (other than Financed Equipment) (the "COLLATERAL") to all
of Senior Creditor's security interests in Borrower's property. Notwithstanding
anything to the contrary contained in the definition of "Subordinated Debt",
there shall be expressly excluded from such definition any warrant(s) to
purchase securities of Borrower executed by Borrower in favor of Creditor or its
assignee ("WARRANTS") and all rights of the holder thereunder.
For purposes of this Agreement, the term "Financed Equipment" shall mean all
right, title, interest, claims and demands of Borrower in and to each and
every item of equipment, fixtures or personal property, whether now owned or
hereafter acquired, together with all substitutions, renewals or replacements
of and additions, improvements, accessions, replacement parts and
accumulations to any and all of such equipment, fixtures or personal
property, together with all proceeds thereof, including, without limitation,
insurance, condemnation, requisition or similar payments, and all proceeds
from sales, renewals, releases or other dispositions thereof, which is
financed with or is designated as collateral for Borrower's obligations to
Creditor under, and on and after the date of, the Subordinated Security
Agreement by the designation of such equipment, fixtures and personal
property on a UCC financing statement listing Borrower as "debtor" and
Creditor as "secured party."
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Notwithstanding the respective dates of attachment or
perfection of the security interest of Creditor and the security interest of
Senior Creditor: (i) the security interest of Creditor in the property of
Borrower (other than Financed Equipment), shall at all times be subordinate to
the security interest of Senior Creditor; provided, that if the security
interest of Senior Creditor in certain assets or property of Borrower is not
valid or perfected then the lien subordination set forth in this Section 1 shall
not be effective with respect to such assets or property of Borrower, and (ii)
all security interests now or hereafter acquired by Creditor in Financed
Equipment shall at all times be prior and superior to any security interests now
held or hereafter acquired by Senior Creditor in the Financed Equipment.
Creditor shall turn over to Senior Creditor any payments received from the sale,
liquidation, other disposition or exercise of remedies with respect to any
property of Borrower (other than Financed Equipment). Senior Creditor shall turn
over to Creditor any payments or proceeds received from the sale, liquidation,
other disposition or exercise of remedies with respect to the Financed
Equipment.
2. Nothing herein shall be deemed to subordinate, waive
or restrict the performance of the obligations arising under the Warrants or
subordinate any interest in stock issuable upon exercise of the Warrants or
subordinate any interest in the Financed Equipment. Nothing herein shall be
deemed to restrict or prevent Borrower from making any payment to Creditor under
the Subordinated Debt.
3. If the Senior Creditor delivers to Creditor a written
notice (a "BLOCKAGE NOTICE") which states a specific default has occurred under
the Senior Credit Documents and continues to exist after the giving of any
required notice and the expiration of any applicable grace or cure period, then
during any Blockage Period (as defined below), Creditor shall not exercise any
remedy with respect to the Collateral, or commence, or cause to be commenced or
prosecuted, or participate in any administrative, legal or equitable action
against Borrower. As used herein, "Blockage Period" means a period of time
beginning on the date a Blockage Notice is delivered to Creditor and terminating
on the earlier of: (1) 60 days thereafter, or (2) Senior Creditor's written
consent to such termination, or (3) when Senior Creditor has commenced a
judicial proceeding or non-judicial actions to collect or enforce the Senior
Debt or a case or proceeding by or against Borrower is commenced under the
federal Bankruptcy Code or any other insolvency law. After the termination of
any Blockage Period pursuant to the terms hereof
and until Creditor's receipt of a subsequent Blockage Notice from Senior
Creditor, Creditor may exercise any remedy with respect to the Collateral and
the Subordinated Debt, or commence, or cause to be commenced or prosecuted, or
participate in any administrative, legal or equitable action against Borrower.
Senior Creditor shall not collect, take possession of, foreclose upon, or
exercise any rights or remedies with respect to the Financed Equipment,
judicially or nonjudicially, or attempt to do any of the foregoing, without the
prior written consent of Creditor, which shall be a matter of Creditor's sole
discretion.
4. (a) Upon an event of default under the
Subordinated Security Agreement, a sale or disposition of any of the Financed
Equipment whether or not approved by Creditor, the bankruptcy or insolvency of
Borrower, or Creditor's exercise of remedies against Borrower (a "Release
Event"), Senior Creditor's security interests in the Financed Equipment shall be
automatically terminated without further deed or act. The proceeds of any
Financed Equipment so sold or disposed of shall be applied, after the deduction
of any and all costs relating to such sale or disposition (including attorneys'
fees, advertising costs and auctioneer's fees) to any and all indebtedness
evidenced by the Subordinated Security Agreement in such order as Creditor may,
in its discretion, determine, and only if all obligations owed to Creditor by
Borrower under the Subordinated Security Agreement have been paid in full, then
to all or any part of the present or future indebtedness, liabilities,
guaranties or other obligations of Borrower to Senior Creditor in such order as
Senior Creditor may, in its discretion, determine.
(b) Senior Creditor agrees to execute and
deliver to Creditor, promptly upon Creditor's request, appropriate UCC
termination statements or partial releases with respect to any Financed
Equipment on or after a Release Event; although Senior Creditor acknowledges
that its security interests in the Financed Equipment would be released in
any event pursuant to Section (a).
(c) Senior Creditor hereby irrevocably
appoints Creditor as Senior Creditor's attorney-in-fact, and grants to
Creditor a power of attorney with full power of substitution, in the name of
Senior Creditor, for the use and benefit of Creditor, without notice to
Senior Creditor, on or after a Release Event to execute and file UCC
termination statements or partial releases with respect to any Financed
Equipment; although Senior Creditor acknowledges that its security interests
in the Financed Equipment would be released in any event pursuant to Section
(a).
(d) Senior Creditor acknowledges and agrees
that Creditor has no fiduciary, agent, bailee or duty to Senior Creditor
with regard to the Financed Equipment. Senior Creditor acknowledges and
agrees that Creditor has no obligations to Senior Creditor as a junior
lienholder except only those obligations specifically assumed by Creditor
under this Agreement and Senior Creditor waives any other junior lienholder
rights, claims and defenses. Senior Creditor shall not resist or take any
action to prevent Creditor from exercising any remedies with respect to the
Financed Equipment and Senior Creditor shall turn over to Creditor any
Financed Equipment coming into Senior Creditor's possession or custody.
Except as provided in this Agreement, at any time and from time to time,
without notice to Senior Creditor, Creditor may take such actions with
respect to the Subordinated Security Agreement and the Financed Equipment as
Creditor, in its sole discretion, may deem appropriate, including, without
limitation, terminating advances to Borrower, increasing the principal amount
of the Subordinated Notes, extending the time of payment, increasing
applicable interest rates, renewing, compromising or otherwise amending the
terms of any documents affecting the Subordinated Notes, the Subordinated
Security Agreement, and the Financed Equipment, and enforcing or failing to
enforce any rights against Borrower or any other person. Senior Creditor
waives the benefits, if any, of any statutory or common law rule that may
permit a subordinating creditor to assert any defenses of a surety, guarantor
or junior lienholder, or that may give the subordinating creditor the right
to require a senior creditor to marshal assets, give notice or maximize
value, and Senior Creditor agrees that it shall not assert any such defenses,
claims or rights.
4. At any time and from time to time, without notice to
Creditor, Senior Creditor may take such actions with respect to the Senior Debt
as Senior Creditor, in its sole discretion, may deem appropriate, including,
without limitation, terminating advances to Borrower, increasing the principal
amount in an amount not to exceed the Senior Principal Amount, extending the
time of payment, increasing applicable interest rates, renewing, compromising or
otherwise amending the terms of any documents affecting the Senior Debt and any
collateral securing the Senior Debt, and enforcing or failing to enforce any
rights against Borrower or any other person, but in no event shall the principal
amount be increased in an amount exceeding the Senior Principal Amount. Creditor
waives the benefits, if any, of any statutory or common law rule that may permit
a subordinating creditor to assert any defenses of a surety or guarantor, or
that may give the subordinating creditor the right to require a senior creditor
to marshal assets, and Creditor agrees that it shall not assert any such
defenses or rights inconsistent with the provisions of this Agreement.
5. In the event of Borrower's insolvency, reorganization
or any case or proceeding under any bankruptcy or insolvency law or laws
relating to the relief of debtors, these provisions shall remain in full force
and effect. This Agreement shall remain effective until the earlier of: (i)
Borrower no longer owes any amounts under the Senior Credit Documents, or (ii)
Creditor has received payment of all amounts owed Creditor under the
Subordinated Notes and the Subordinated Security Agreements.
6. This Agreement shall bind any successors or
assignees of the parties. This Agreement is solely for the benefit of
Creditor and Senior Creditor and not for the benefit of Borrower or any other
party.
7. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument. This Agreement shall become effective
only when it shall have been executed by Creditor and Senior Creditor (provided,
however, in no event shall this Agreement become effective until signed by an
officer of Senior Creditor in California).
8. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
conflicts of law principles. Creditor and Senior Creditor submit to the
exclusive jurisdiction of the state and federal courts located in the Northern
District of California. CREDITOR AND SENIOR CREDITOR WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN.
9. This Agreement represents the entire agreement with
respect to the subject matter hereof, and supersedes all prior negotiations,
agreements and commitments. Creditor is not relying on any representations by
Senior Creditor or Borrower in entering into this Agreement, and Creditor has
kept and will continue to keep itself fully apprised of the financial and other
condition of Borrower. Senior Creditor is not relying on any representations by
Creditor or Borrower in entering into this Agreement or the Senior Credit
Documents, and Senior Creditor has kept and will continue to keep itself fully
apprised of the financial and other condition of Borrower. This Agreement may be
amended only by written instrument signed by Creditor and Senior Creditor.
10. In the event of any legal action to enforce the
rights of a party under this Agreement, the party prevailing in such action
shall be entitled, in addition to such other relief as may be granted, all
reasonable costs and expenses, including reasonable attorneys' fees, incurred in
such action.
11. Promptly upon an event of default under the
Subordinated Security Agreement and the Subordinated Notes, Creditor shall
endeavor to provide Senior Creditor with written notice of such default, but
Creditor's failure to do so shall not result in any breach of this Agreement or
affect the rights of the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
"SENIOR CREDITOR" "CREDITOR"
_____________ BANK MMC/GATX PARTNERSHIP NO. 1,
BY: GATX CAPITAL CORPORATION,
ITS GENERAL PARTNER
By: By:
-------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
THE UNDERSIGNED APPROVES OF THE TERMS OF THIS AGREEMENT.
"BORROWER"
DIGIRAD CORPORATION
By:
--------------------------
Title:
-----------------------
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ("First
Amendment"), dated as of August 14, 2000, is entered into by and between
DIGIRAD CORPORATION, a Delaware corporation ("Borrower"), and MMC/GATX
PARTNERSHIP NO. 1, a California general partnership ("Lender").
RECITALS
A. Borrower and Lender are parties to a Loan and Security
Agreement, dated as of October 27, 1999 (the "Loan Agreement") pursuant to
which Lender has financed certain equipment.
B. Borrower has now requested that the amount of funding
available under the Loan Agreement be increased by $1,000,000. Lender is
willing to amend the Loan Agreement upon the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS; INTERPRETATION. Unless otherwise defined
herein, all capitalized terms used herein and defined in the Loan Agreement
shall have the respective meanings given to those terms in the Loan Agreement.
Other rules of construction set forth in the Loan Agreement, to the extent not
inconsistent with this First Amendment, apply to this First Amendment and are
hereby incorporated by reference.
2. AMENDMENTS TO LOAN AGREEMENT.
(a) The cover page of the Loan Agreement
shall be amended to read in its entirety as set forth in Exhibit A to this
First Amendment.
(b) Section 1.01 of the Loan Agreement shall
be amended to add the following defined terms in appropriate alphabetical
order:
"CREDIT AMOUNT" shall mean, as it applies to the
Facility A Loans or the Facility B Loan, respectively, the
maximum aggregate amount of the Loans under this Agreement (if
the conditions specified in Schedule 3 are satisfied), which
amount is set forth following such term on the cover page of
this Agreement.
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"FACILITY A LOANS" shall mean Loans made on the terms
set forth under the heading Facility A on the cover page of
this Agreement.
"FACILITY B LOAN" shall mean the Loan made on the
terms set forth under the heading Facility B on the cover page
of this Agreement.
"LOAN" means each advance of credit by Lender to
Borrower under this Agreement. Each reference to a Loan shall
be deemed to refer to a Facility A Loan or a Facility B Loan
and the respective terms thereof as is specified on the cover
page of this Agreement.
(c) The definition of Applicable Premium in
Section 1.01 of the Loan Agreement shall be changed to read as follows:
"APPLICABLE PREMIUM" shall mean
for Facility A Loans, an amount equal to: (i) 4% of
the amount being prepaid or accelerated more than
twelve (12) months after, but on or before
twenty-four (24) months after the first Payment Date,
or (ii) 3% of the amount being prepaid or accelerated
more than twenty-four (24) months after the first
Payment Date; PROVIDED THAT if an Event of Default
occurs within twelve (12) months of the first Payment
Date (other than an Event of Default specified in
Section 9.01 h, i, j, k or 1), the Applicable Premium
shall be 4% of the amount being prepaid or
accelerated.
for the Facility B Loan, an amount equal to: (i) 2%
of the amount being prepaid or accelerated more than
twelve (l2) months after, but on or before
twenty-four (24) months after the first Payment Date,
or (ii) 1.5% of the amount being prepaid or
accelerated more than twenty-four (24) months after
the first Payment Date; PROVIDED THAT if an Event of
Default occurs within twelve (12) months of the first
Payment Date (other than an Event of Default
specified in Section 9.01 h, i, j, k or 1), the
Applicable Premium shall be 2% of the amount being
prepaid or accelerated.
(d) Section 2.01(a) of the Agreement will be
changed to read as follows:
(a) THE CREDIT AMOUNT. Subject to
the terms and conditions of this Agreement and relying upon the
representations and warranties herein set forth as and when made or deemed to
be made, Lender agrees to lend to Borrower a maximum of two Facility A Loans
(respectively, the "First Loan" and the "Second Loan") in an aggregate amount
not to exceed the Credit Amount and one Facility B Loan in the amount of One
Million Dollars ($1,000,000). The First Loan shall be in the amount of Two
Million Dollars ($2,000,000) and the Second Loan shall be in the amount of
One Million Dollars ($1,000,000). The Loans may be prepaid only as set forth
in SECTION 2.01(d).
-2-
(e) Section 2.01(d) of the Agreement will be
changed to read as follows:
(d) OPTIONAL PREPAYMENT WITH PREMIUM.
Borrower may not prepay any Loan within twelve (12) months of its first
Payment Date; thereafter, upon ten (10) Business Days' prior written notice
to Lender, Borrower may, at its option, at any time, prepay all, and not less
than all, of a Loan in full at a prepayment price equal to the principal
amount of the Loan, plus interest accrued on the Loan through and including
the date of such prepayment, plus a premium on the Loan equal to the
Applicable Premium. If an Event of Default occurs and is continuing (other
than an Event of Default specified in Section 9.01 h, i, j, k or 1, in which
case no Applicable Premium is due and payable), and Lender exercises its
right under Section 9.02 to accelerate the Loans or the Loans are
automatically accelerated, Borrower expressly agrees that the amount then due
and payable shall include the Applicable Premium as of the date of such
acceleration. In the event that Borrower and the lender of the Indebtedness
permitted by clause (e) of the definition of Permitted Indebtedness request
Lender's agreement that there be an increase in the amount of such
Indebtedness and Lender does not consent (which consent shall be at Lender's
sole discretion), Borrower shall be permitted to prepay all Indebtedness
hereunder without payment of any Applicable Premium.
(f) The following representation and
warranty of Borrower is added to Section 3.01 as Section 3.01(n):
(n) INTELLECTUAL PROPERTY.
Any registrations or application of Borrower's Intellectual Property with the
US Patent and Trademark Office or the US Copyright Office are listed in the
Exhibit C to this Agreement.
(g) Section 5.01 of the Agreement
will be changed to read as follows:
5.01 GRANT OF SECURITY
INTEREST. Borrower, in order to secure the payment of the principal and
interest with respect to the Loans made pursuant to this Agreement, all other
sums due under and in respect hereof and of the other Operative Documents,
including fees, charges, expenses and attorneys' fees and costs and the
performance and observance by Borrower of all other terms, conditions,
covenants and agreements herein and in the other Operative Documents (all
such amounts and obligations being herein sometimes called the
"OBLIGATIONS"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"COLLATERAL"): All right, title, interest, claims and demands of Borrower in
and to:
(a) All goods and
equipment now owned or hereafter acquired, including, without limitation, all
laboratory equipment, computer equipment, office equipment, machinery,
fixtures, vehicles (including motor vehicles and trailers), and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located;
-3-
(b) All inventory
now owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is
temporarily out of Borrower's custody or possession or in transit and
including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
(c) All contract
rights and general intangibles (including Intellectual Property), now owned
or hereafter acquired, including, without limitation, goodwill, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer disks, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;
(d) All now
existing and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Borrower arising out of
the sale or lease of goods, the licensing of technology or the rendering of
services by Borrower (subject, in each case, to the contractual rights of
third parties to require funds received by Borrower to be expended in a
particular manner), whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
(e) All documents,
cash, deposit accounts, letters of credit, certificates of deposit,
instruments, chattel paper and investment property, including, without
limitation, all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or
otherwise, wherever located, now owned or hereafter acquired and Borrower's
books relating to the foregoing; and
(f) Any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof, including, without
limitation, insurance, condemnation, requisition or similar payments and
proceeds of the sale or licensing of Intellectual Property.
(g) Any and all of
the following equipment collateral (collectively, "EQUIPMENT COLLATERAL"):
All right, title, interest, claims and
demands of Borrower in and to each and every
item of equipment, fixtures or personal
property, whether now owned or hereafter
acquired, together with all substitutions,
renewals or replacements of and additions,
improvements, accessions, replacement parts
and accumulations to any and all of such
equipment, fixtures or personal property
(collectively, the "EQUIPMENT"), together
with all proceeds thereof,
-4-
including, without limitation, insurance,
condemnation, requisition or similar
payments, and all proceeds from sales,
renewals, releases or other dispositions
thereof, which is financed with or is
designated as collateral for the Obligations
on and after the date of this Agreement by
designating such equipment, fixtures and
personal property on a UCC financing
statement listing Borrower as "debtor" and
Lender as "secured party."
(h) Sections 5.04 and
5.05 of the Agreement shall be changed to read as follows:
5.04 EQUIPMENT COLLATERAL.
On or prior to its execution and delivery of this Agreement, Borrower shall
provide Lender with a listing, in detail to Lender's satisfaction, of all of
Borrower's equipment, fixtures and personal property (collectively, an
"Equipment List"), which, at Lender's option, shall be attached as an exhibit
to a UCC financing statement filed by Lender naming Borrower as "debtor" and
Lender as "secured party." Within thirty days after the end of every quarter
after the date hereof, Borrower shall provide Lender with an Equipment List
of equipment, fixtures and personal property acquired by Borrower during such
quarter through and including April 27, 2001, and such Equipment List shall,
at Lender's option, be attached as an exhibit to a UCC financing statement
filed by Lender naming Borrower as "debtor" and Lender as "secured party."
Borrower agrees to execute and deliver to Lender any and all such financing
statements to Lender. Borrower's equipment, fixtures and personal property
acquired after April 27, 2001 may become Third Party Equipment.
5.05 LIEN SUBORDINATION.
Lender agrees that the Liens granted to it hereunder (except for Liens in
Equipment Collateral) shall be subordinate to the Liens granted in connection
with Indebtedness permitted by clause (e) of the definition of Permitted
Indebtedness. Lender agrees to enter into a subordination agreement with the
lender of the Indebtedness permitted by clause (e) of the definition of
Permitted Indebtedness substantially in the form of EXHIBIT D and to
negotiate in good faith any changes thereto as long as they are acceptable to
Lender. Lender agrees that the Liens granted to it hereunder in Third Party
Equipment shall be subordinate to the Liens of future lenders providing
equipment financing and equipment lessors for equipment and other personal
property acquired by Borrower after April 27, 2001 ("THIRD PARTY EQUIPMENT");
PROVIDED, that, in the case of equipment financings and leasing such Liens
are confined solely to the equipment so financed and the proceeds thereof.
Notwithstanding the foregoing, the Obligations hereunder shall not be
subordinate in right of payment to any obligations to other lenders,
equipment lenders or equipment lessors and Lender's rights and remedies
hereunder shall not in any way be subordinate to the rights and remedies of
any such lender or equipment lessors. Lender agrees to execute and deliver
such agreements and documents as may be reasonably requested by Borrower from
time to time which set forth the lien subordination described in this SECTION
5.05 and are reasonably acceptable to Lender. Lender shall have no obligation
to execute any agreement or document which would impose obligations,
restrictions or lien priority on Lender which are less favorable to Lender
than those described in this SECTION 5.05.
-5-
(i) New Section 5.06 and
5.07 shall be added to the Agreement, which read as follows:
5.06 INTELLECTUAL PROPERTY.
(a) Within 30 days of the date of this Agreement, Borrower shall register or
cause to be registered with the United States Copyright Office any software
(material to the business of Borrower) developed or acquired by Borrower in
connection with any product developed or acquired for sale or licensing. (b)
While any Obligations remain outstanding, Borrower shall register or cause to
be registered with the United States Copyright Office (i) any software
(material to the business of Borrower) developed or acquired by Borrower
hereafter from time to time in connection with any product developed or
acquired for sale or licensing and (ii) any major revisions or upgrades to
any software that has previously been registered with the United States
Copyright Office. Borrower shall file for registration within 30 days from
the development or acquisition of such software, major revision or upgrade.
(c) If Borrower has or will federally register any Intellectual Property with
the United States Copyright Office or the United States Patent and Trademark
Office, then Borrower shall execute and deliver to Lender, for filing with
the United States Copyright Office or the United States Patent and Trademark
Office, as the case may be, a grant of security interest in such Intellectual
Property, in form acceptable to Lender, within 30 days of the date Borrower
registers such Intellectual Property. (d) If, on or before December 31, 2000,
Borrower raises at least Fifteen Million Dollars ($15,000,000) in the next
equity round, and no Default or Event of Default shall exist at such time,
then Lender agrees to release its security interest in Intellectual Property.
5.07 NIS AND FLORIDA
ACQUISITIONS; COPELCO EQUIPMENT FINANCING. Notwithstanding anything to the
contrary herein, Lender consents to Borrower entering into a $3,250,000
credit facility with Copelco or another lender to finance 10 cameras and
associated chairs and vehicle, and such equipment may be Third Party
Equipment hereunder. In addition, Lender consents to Borrower's acquisition
of (i) the mobile business of Nuclear Imaging Systems ("NIS") for the payment
to NIS of $750,000 and up to 200,000 shares of Borrower's common stock, (ii)
the fixed business of NIS on substantially the same terms as set forth in
Exhibit D to this First Amendment, and (iii) the mobile business of Florida
Cardiology and Nuclear Medicine Group ("FCNM") for the payment to FCNM of
$1,000,000 and up to 400,000 shares of Borrower's common stock; provided,
however, prior to Borrower forming any new Subsidiary to hold such assets,
Borrower shall provide to Lender documentation to Lender's satisfaction,
including without limitation, subsidiary guaranties, to ensure Lender's
perfected security interest in such assets, subject only to Permitted Liens.
(j) A new Section 6.01(e)
shall be added to the Agreement which reads as follows:
(e) EQUITY INVESTMENT.
Borrower shall permit Lender, at Lender's option, to purchase in Borrower's
next round of equity financing up to $500,000 of the securities sold in such
financing at the same price and on the same terms as paid and received by the
lead investor of the equity financing. Borrower agrees that it shall notify
each Lender promptly upon the execution by Borrower of a term sheet or letter
of intent setting forth the
-6-
terms and conditions of such financing and in any event within five (5) days
of such execution. This right of purchase may be assigned by a Lender to its
Affiliates.
3. AMENDMENT FACILITY FEE; DEPOSIT. Upon the funding of
the Facility B Loan, Borrower agrees to pay to Lender a facility fee ("AMENDMENT
FACILITY FEE") of $8,333. Borrower has paid Lender a good faith deposit of
$10,000 (the "Deposit"). The Deposit, less Lender's costs and expenses
(including in-house counsel fees of $2,500) in an aggregate amount not to exceed
$5,000, shall be applied towards the Amendment Facility Fee.
4. CONDITION TO EFFECTIVENESS. The effectiveness of
this Amendment is conditioned upon the delivery by Borrower to Lender of the
following:
(a) A certificate of the Secretary or the
Assistant Secretary of Borrower, in form and substance satisfactory to
Lender, certifying the adoption of resolutions of the Board of Directors of
Borrower approving this First Amendment and the transactions contemplated
hereby (including the issuance of the Warrants described in Section 4(b) and
4(c) below).
(b) A Warrant in the form of Exhibit B hereto.
(c) A Warrant in the form of Exhibit B
hereto, except for a total of 8,235 shares executed and delivered to Priority
Capital.
(d) This First Amendment duly executed by
Borrower.
5. EFFECT OF FIRST AMENDMENT. On and after the date
hereof, each reference to the Loan Agreement in the Loan Agreement or in any
other document shall mean the Loan Agreement as amended by this First Amendment.
The execution, delivery and effectiveness of this First Amendment shall not
operate as a waiver of any right, power, or remedy of Lender, nor constitute a
waiver of any provision of the Loan Agreement.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to Lender that:
(a) (i) Borrower is a corporation duly
organized, validly existing and in good standing under the laws of California
and is duly qualified and authorized to do business in the state(s) where
Collateral is or will be located; (ii) Borrower has the full corporate power,
authority and legal right and has obtained all necessary approvals, consents
and given all notices to execute and deliver this First Amendment and perform
the terms thereof; (iii) there is no action, proceeding or claim pending or,
insofar as Borrower knows, threatened against Borrower or any of its
subsidiaries before any court or administrative agency which might have a
materially adverse effect on the business, condition or operations of
Borrower or such subsidiary; and (iv) this First Amendment has been duly
executed and delivered by Borrower and constitutes the valid, binding and
enforceable obligation of Borrower.
-7-
(b) No Default or Event of Default under the
Loan Agreement has occurred and is continuing.
(c) As of the date hereof, the number of
"common equivalent" shares (assuming exercise of all outstanding options or
warrants to purchase securities and conversion of all convertible securities)
of Borrower outstanding is not more than 31,000,000.
7. FULL FORCE AND EFFECT. Except as amended above,
the Loan Agreement remains in full force and effect.
8. HEADINGS. Headings in this First Amendment are
for convenience of reference only and are not part of the substance hereof.
9. GOVERNING LAW. This First Amendment shall be
governed by and construed in accordance with the laws of the State of
California without reference to conflicts of law rules.
10. COUNTERPARTS. This First Amendment may be
executed in any number of identical counterparts, any set of which signed by
all of the parties hereto shall be deemed to constitute a complete, executed
original for all purposes.
[Remainder of Page Left Blank Intentionally.]
-8-
IN WITNESS WHEREOF, Borrower and Lender have caused this
First Amendment to be executed as of the day and year first above written.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------
Title: President & CEO
--------------------------
MMC/GATX PARTNERSHIP NO. I
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: VP
--------------------------
-9-
EXHIBIT A
LOAN AND SECURITY AGREEMENT
Dated as of October 27, 1999
between
MMC/GATX PARTNERSHIP NO. 1
as Lender
and
DIGIRAD CORPORATION
a Delaware corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as Borrower
FACILITY A FACILITY B
Credit Amount: $3,000,000 Credit Amount: $1,000,000
Repayment Period: 36 months Repayment Period: 36 months
Treasury Note Maturity: 36 Months Treasury Note Maturity: 36 Months
Loan Margin: 750 basis points Loan Margin: 750 basis points
Commitment Termination Date: Commitment Termination Date: August 25,2000
(First Loan) November 1, 1999
(Second Loan) June 30, 2000
The terms and information set forth on this cover page are a part of the
attached Equipment Loan and Security Agreement, dated as of the date first
written above (this "AGREEMENT"), entered into by and among MMC/GATX PARTNERSHIP
NO. I ("LENDER") and DIGIRAD CORPORATION ("BORROWER") set forth above. The terms
an conditions of this Agreement agreed to between Lender and Borrower are as
follows:
-10-
EXHIBIT B
WARRANT
-11-
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
DIGIRAD CORPORATION
WARRANT TO PURCHASE SHARES
OF SERIES E PREFERRED STOCK
THIS CERTIFIES THAT, for value received, GATX VENTURES, INC. and its
assignees are entitled to subscribe for and purchase 57,642 shares of the fully
paid and nonassessable Series E Preferred Stock (as adjusted pursuant to Section
4 hereof, the "Shares") of DIGIRAD CORPORATION, a Delaware corporation (the
"Company"), at the price of $3.036 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, (a) the
term "Series Preferred" shall mean the Company's presently authorized Series E
Preferred Stock, and any stock into or for which such Series E Preferred Stock
may hereafter be converted or exchanged, and after the automatic conversion of
the Series E Preferred Stock to Common Stock shall mean the Company's Common
Stock, (b) the term "Date of Grant" shall mean August 14, 2000, and (c) the term
"Other Warrants" shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
the Loan and Security Agreement dated as of October 27, 1999 (the "Loan
Agreement") between the Company and the lender named therein, and any warrant
issued upon transfer or partial exercise of or in lieu of this Warrant. The term
"Warrant" as used herein shall be deemed to include Other Warrants unless the
context clearly requires otherwise.
If the Company is eligible under the Loan Agreement and requests Lender
to fund the Second Loan pursuant to the terms of the Loan Agreement, but Lender
elects not to fund the Second Loan, the number of shares of the fully paid and
nonassessable Series E Preferred Stock the holder is entitled to subscribe for
and purchase as set forth above shall be reduced from 172,925 to 115,283. The
terms "Lender" and "Second Loan" shall have the meaning given these capitalized
terms in the Loan Agreement.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the later of (i) seven (7) years after the Date of Grant
or (ii) five (5) years after the closing of the Company's initial public
offering of its Common Stock ("IPO") effected pursuant to a Registration
Statement on Form S-l (or its successor) filed under the Securities Act of 1933,
as amended (the "Act").
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject
to Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased; or (c) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing shares of Series Preferred shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to
the holder hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period; provided, however, at such time as the Company is subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended,
if requested by the holder of this Warrant, the Company shall cause its transfer
agent to deliver the certificate representing Shares issued upon exercise of
this Warrant to a broker or other person (as directed by the holder exercising
this Warrant) within the time period required to settle any trade made by the
holder after exercise of this Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
to provide for the exercise of the rights represented by this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Series Preferred into Common Stock.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
-2-
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or
the Company shall make appropriate provision without the issuance of a new
Warrant, so that the holder of this Warrant shall have the right to receive, at
a total purchase price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Series
Preferred theretofore issuable upon exercise of this Warrant, (i) the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, merger or sale by a holder of the number of
shares of Series Preferred then purchasable under this Warrant, or (ii) in the
case of such a merger or sale in which the consideration paid consists all or in
part of assets other than securities of the successor or purchasing corporation,
at the option of the Holder of this Warrant, the securities of the successor or
purchasing corporation having a value at the time of the transaction equivalent
to the valuation of the Series Preferred at the time of the transaction. Any new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant remains outstanding and unexpired shall subdivide
or combine its outstanding shares of Series Preferred, the Warrant Price shall
be proportionately decreased and the number of Shares issuable hereunder shall
be proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the
Company at any time while this Warrant is outstanding and unexpired shall (i)
pay a dividend with respect to Series Preferred payable in Series Preferred,
then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (A) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (B) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution; or (ii) make any other distribution with respect
to Series Preferred (except any distribution specifically provided for in
Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the
Company such that the holder of this Warrant shall receive upon exercise of this
Warrant a proportionate share of any such dividend or distribution as though it
were the holder of the Series Preferred (or Common Stock issuable upon
conversion thereof) as of the record date fixed for the determination of the
shareholders of the Company entitled to receive such dividend or distribution.
-3-
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment
in the Warrant Price, the number of Shares of Series Preferred purchasable
hereunder shall be adjusted, to the nearest whole share, to the product obtained
by multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) ANTIDILUTION RIGHTS. The other antidilution rights
applicable to the Shares of Series Preferred purchasable hereunder are set forth
in the Company's Certificate of Incorporation, as amended through the Date of
Grant, a true and complete copy of which is attached hereto as Exhibit B (the
"Charter"). Such antidilution rights shall not be restated, amended, modified or
waived in any manner that is adverse to the holder hereof without such holder's
prior written consent. The Company shall promptly provide the holder hereof with
any restatement, amendment, modification or waiver of the Charter promptly after
the same has been made.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and the number of Shares purchasable hereunder
after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant. In addition, whenever the
conversion price or conversion ratio of the Series Preferred shall be adjusted,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the conversion price or ratio of the Series Preferred after giving effect to
such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Series Preferred
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES OF
SERIES PREFERRED.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Series Preferred to
be issued upon exercise hereof or any Common Stock issued upon conversion
thereof except under circumstances which will not result in a violation of the
Act or any applicable state securities laws. Upon exercise of this Warrant,
unless the Shares being acquired
-4-
are registered under the Act and any applicable state securities laws or an
exemption from such registration is available, the holder hereof shall
confirm in writing that the shares of Series Preferred so purchased (and any
shares of Common Stock issued upon conversion thereof) are being acquired for
investment and not with a view toward distribution or resale in violation of
the Act and shall confirm such other matters related thereto as may be
reasonably requested by the Company. This Warrant and all shares of Series
Preferred issued upon exercise of this Warrant and all shares of Common Stock
issued upon conversion thereof (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend
in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT
UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance
of this Warrant, the holder specifically represents to the Company by
acceptance of this Warrant as follows:
(1) The holder is aware of the Company's
business affairs and financial condition, and has acquired information about
the Company sufficient to reach an informed and knowledgeable decision to
acquire this Warrant. The holder is acquiring this Warrant for its own
account for investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof in violation of the
Act. By executing this Warrant, the holder further represents as of the Date
of Grant that the holder does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to
such person or to any third person, with respect to any of the Shares or this
Warrant.
(2) The holder is a holder in securities of
companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its holding and has such knowledge
ad experience in financial and business matters that it is capable of
evaluating the merits and risks of the acquisition of this Warrant and the
Shares.
(3) The holder understands that this Warrant
has not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
(4) The holder further understands that
this Warrant must be held indefinitely unless subsequently registered under
the Act and qualified under any applicable state
-5-
securities laws, or unless exemptions from registration and qualification are
otherwise available. The holder is aware of the provisions of Rule 144,
promulgated under the Act.
(5) The holder is an "accredited investor"
as such term is defined in Rule 501 of Regulation D promulgated under the Act.
(b) DISPOSITION OF WARRANT OR
SHARES. With respect to any offer, sale or other disposition of this
Warrant or any shares of Series Preferred acquired pursuant to the exercise
of this Warrant prior to registration of such Warrant or shares, the holder
hereof agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such holder's
counsel, or other evidence, if reasonably satisfactory to the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal
or state securities law then in effect) of this Warrant or such shares of
Series Preferred or Common Stock and indicating whether or not under the Act
certificates for this Warrant or such shares of Series Preferred to be sold
or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Upon receiving such written notice and reasonably satisfactory opinion or
other evidence, the Company, as promptly as practicable but no later than
fifteen (15) days after receipt of the written notice, shall notify such
holder that such holder may sell or otherwise dispose of this Warrant or such
shares of Series Preferred or Common Stock, all in accordance with the terms
of the notice delivered to the Company. If a determination has been made
pursuant to this Section 7(b) that the opinion of counsel for the holder or
other evidence is not reasonably satisfactory to the Company, the Company
shall so notify the holder promptly with details thereof after such
determination has been made. Notwithstanding the foregoing, this Warrant or
such shares of Series Preferred or Common Stock may, as to such federal laws,
be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A
under the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a
legend as to the applicable restrictions on transferability in order to
ensure compliance with such laws, unless in the aforesaid opinion of counsel
for the holder, such legend is not required in order to ensure compliance
with such laws. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(c) APPLICABILITY OF RESTRICTIONS.
Neither any restrictions of any legend described in this Warrant nor
the requirements of Section 7(b) above shall apply to any transfer of, or
grant of a security interest in, this Warrant (or the Series Preferred or
Common Stock obtainable upon exercise thereof) or any part hereof (i) to a
partner of the holder if the holder is a partnership or to a member of the
holder if the holder is a limited liability company, (ii) to a partnership of
which the holder is a partner or to a limited liability company of which the
holder is a member, or (iii) to any affiliate of the holder if the holder is
a corporation; PROVIDED, HOWEVER, in any such transfer, if applicable, the
transferee shall on the Company's request agree in writing to be bound by the
terms of this Warrant as if an original holder hereof.
-6-
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall be entitled to vote or receive dividends or be deemed
the holder of Series Preferred or any other securities of the Company which may
at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Shares purchasable upon the exercise hereof shall
have become deliverable, as provided herein. Notwithstanding the foregoing, the
Company will transmit to the holder of this Warrant such information, documents
and reports as are generally distributed to the holders of any class or series
of the securities of the Company concurrently with the distribution thereof to
the shareholders.
9. MARKET STAND-OFF AGREEMENT. During the time period not to
exceed 180 days specified by the Company and an underwriter of securities of the
Company, following the effective date of a registration statement of the Company
filed under the Act (the "Lock-up"), the holder shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
transferees or donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except Common Stock included
in such registration; PROVIDED, HOWEVER, that this Section 9 shall be applicable
(a) only to the first such registration statement of the Company pursuant to
which Common Stock (or other securities) of the Company are to be sold on its
behalf to the public in an underwritten offering, and (b) only if all officers
and directors of the Company enter into similar agreements, and (c) such
underwriters certify to the holder of this Warrant in writing that (1) they have
determined that the holder must be so bound during the Lock-up or it would have
a material negative impact on the offering, and (2) all other holders of
warrants of the Company have agreed to be similarly restricted. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
restrictions with respect to the Shares of the holder (and the shares or
securities of every person subject to the foregoing restriction) until the end
of such period.
10. ADDITIONAL RIGHTS.
10.1 ACQUISITION TRANSACTIONS. The Company shall provide
the holder of this Warrant with at least twenty (20) days' written notice prior
to closing thereof of the terms and conditions of any of the following
transactions (to the extent the Company has notice thereof): (i) the sale,
lease, exchange, conveyance or other disposition of all or substantially all of
the Company's property or business, or (ii) its merger into or consolidation
with any other corporation (other than a wholly-owned subsidiary of the
Company), or any transaction (including a merger or other reorganization) or
series of related transactions, in which more than 50% of the voting power of
the Company is disposed of.
-7-
10.2 RIGHT TO CONVERT WARRANT INTO STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and
without limiting the rights of the holder under the terms of this Warrant,
the holder shall have the right to convert this Warrant or any portion
thereof (the "Conversion Right") into shares of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as provided in this Section 10.2 at any time or from time to time
during the term of this Warrant. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) as is determined according to the following
formula:
X = B-A
---
Y
Where: X= the number of shares of Series Preferred (or Common
Stock if the Series Preferred has been automatically
converted to Common Stock) that shall be issued to
holder
Y= the fair market value of one share of Series
Preferred (or Common Stock if the Series Preferred
has been automatically converted to Common Stock)
A= the aggregate Warrant Price of the specified number
of Converted Warrant Shares immediately prior to the
exercise of the Conversion Right (I.E., the number of
Converted Warrant Shares MULTIPLIED BY the Warrant
Price)
B= the aggregate fair market value of the specified
number of Converted Warrant Shares (I.E., the number
of Converted Warrant Shares MULTIPLIED BY the fair
market value of one Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the
Conversion Right, and, if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number, the
Company shall pay to the holder an amount in cash equal to the fair market
value of the resulting fractional share on the Conversion Date (as
hereinafter defined). For purposes of Section 9 of this Warrant, shares
issued pursuant to the Conversion Right shall be treated as if they were
issued upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal office
of the Company together with a written statement (which may be in the form of
Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.2(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written
-8-
statement, or on such later date as is specified therein (the "Conversion
Date"), and, at the election of the holder hereof, may be made contingent
upon the closing of the sale of the Company's Common Stock to the public in a
public offering pursuant to a Registration Statement under the Act (a "Public
Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of
the shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30) days
following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 10.2, "fair market value" of a share of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent upon a Public Offering, and if the Company's
Registration Statement relating to such Public Offering ("Registration
Statement") has been declared effective by the Securities and Exchange
Commission, then the initial "Price to Public" specified in the final
prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised
in connection with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities
exchange, the fair market value of the Common Stock shall be deemed to be
the average of the closing prices of the Common Stock on such exchange over
the 30-day period ending five business days prior to the Determination Date,
and the fair market value of the Series Preferred shall be deemed to be such
fair market value of the Common Stock multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible;
(B) If traded on the Nasdaq
Stock Market or other over-the-counter system, the fair market value of
the Common Stock shall be deemed to be the average of the closing bid prices
of the Common Stock over the 30-day period ending five business days prior to
the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied
by the number of shares of Common Stock into which each share of Series
Preferred is then convertible; and
(C) If there is no public market for
the Common Stock, then fair market value shall be determined by the Board
of Directors of the Company acting in good faith.
10.3 EXERCISE PRIOR TO EXPIRATION. To the extent this
Warrant is not previously exercised as to all of the Shares subject hereto, and
if the fair market value of one share of the Series Preferred is greater than
the Warrant Price then in effect, this Warrant shall be deemed automatically
exercised pursuant to Section 10.2 above (even if not surrendered) immediately
before its expiration. For purposes of such automatic exercise, the fair market
value of one share of the Series Preferred upon such expiration shall be
determined pursuant to Section 10.2(c). To
-9-
the extent this Warrant or any portion thereof is deemed automatically
exercised pursuant to this Section 10.3, the Company agrees to promptly
notify the holder hereof of the number of Shares, if any, the holder hereof
is to receive by reason of such automatic exercise.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Series Preferred and the holders thereof are as
set forth in the Charter, and on the Date of Grant, each share of the Series
Preferred represented by this Warrant is convertible into one share of Common
Stock;
(d) The shares of Common Stock issuable upon conversion
of the Shares have been duly authorized and reserved for issuance by the Company
and, when issued in accordance with the terms of the Charter will be validly
issued, fully paid and nonassessable;
(e) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's Charter or
by-laws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not
conflict with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(f) There are no actions, suits, audits, investigations
or proceedings pending or, to the knowledge of the Company, threatened against
the Company in any court or before any governmental commission, board or
authority which, if adversely determined, will have a material adverse effect on
the ability of the Company to perform its obligations under this Warrant.
(g) The number of shares of Common Stock of the Company
outstanding on the date hereof, on a fully diluted basis (assuming the
conversion of all outstanding convertible
-10-
securities and the exercise of all outstanding options and warrants), does
not exceed 25,891,150 shares.
12. MODIFICATION AND WAIVER. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which enforcement
of the same is sought.
13. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Series Preferred issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The language in this Warrant
shall be construed as to its fair meaning without regard to which party
drafted this Warrant.
17. GOVERNING LAW. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of California (without giving effect to
principles of conflicts of laws).
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and
-11-
enforce their or its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
21. SEVERABILITY. The invalidity or unenforceability of
any provision of this Warrant in any jurisdiction shall not affect the
validity or enforceability of such provision in any other jurisdiction,
or affect any other provision of this Warrant, which shall remain in full
force and effect.
22. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
23. ENTIRE AGREEMENT; MODIFICATION. This Warrant
constitutes the entire agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and undertakings of the parties, whether oral or
written, with respect to such subject matter.
-12-
The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.
DIGIRAD CORPORATION
By
-------------------------------
Title
----------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GATX VENTURES, INC. (fka ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & COMPANY)
By
-------------------------------
Title
----------------------------
Address: ▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-13-
EXHIBIT A-1
NOTICE OF EXERCISE
To: DIGIRAD CORPORATION (the "Company")
1. The undersigned hereby:
|_| elects to purchase________ shares of [Series
Preferred Stock] [Common Stock] of the Company
pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of
such shares in full, or
|_| elects to exercise its net issuance rights pursuant
to Section 10.2 of the attached Warrant with respect
to _________ Shares of [Series Preferred Stock]
[Common Stock].
2. Please issue a certificate or certificates representing
_________ shares in the name of the undersigned or in such other name or names
as are specified below:
--------------------------------
(Name)
--------------------------------
--------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
--------------------------------
(Signature)
-------------------
(Date)
EXHIBIT A-2
NOTICE OF EXERCISE
To: DIGIRAD CORPORATION (the "Company")
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S___ filed __________, 19__, the undersigned
hereby:
|_| elects to purchase ___________ shares of [Series Preferred
Stock] [Common Stock] of the Company (or such lesser number of shares as may be
sold on behalf of the undersigned at the Closing) pursuant to the terms of the
attached Warrant, or
|_| elects to exercise its net issuance rights pursuant to Section
10.2 of the attached Warrant with respect to _________ Shares of [Series
Preferred Stock] [Common Stock].
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such _________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_______ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
--------------------------------
(Signature)
-------------------
(Date)
EXHIBIT B
CHARTER
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIGIRAD CORPORATION
Digirad Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the
Corporation's Board of Directors setting forth a proposed amendment to the
Corporation's existing Amended and Restated Certificate of Incorporation, and
declaring such amendment to be advisable and recommended for approval by the
Corporation's stockholders. The resolutions setting forth the proposed amendment
are as follows:
RESOLVED, FURTHER, that Paragraph A and Paragraph B, Section 1 of
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
this Corporation is hereby amended to read in its entirety as follows:
A. CLASSES OF STOCK. This Corporation is
authorized to issue two (2) classes of shares, to be
designated "Common" and "Preferred" and referred to herein as
the "Common Stock" or the "Preferred Stock" respectively. The
total number of shares of Common Stock the Corporation is
authorized to issue is Thirty One Million Six Hundred Twenty
Three Thousand One Hundred Eighty Four (31,623,184). The par
value is $0.001 per share. The total number of shares of
Preferred Stock the Corporation is authorized to issue is
Twenty Two Million Three Hundred Fourteen Thousand Twenty
Three (22,314,023). The par value is $0.001 per share.
The Board of Directors of the Corporation may divide
the Preferred Stock into any number of series. The Board of
Directors shall fix the designation and number of shares of
each such series. The Board of Directors may determine and
alter the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of the
Preferred Stock. The Board of Directors (within the limits and
restrictions of any resolution adopted by it, originally
fixing the number of shares of any series) may increase or
decrease the number of shares of any such
series after the issue of shares of that series, but not below
the number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and
Restrictions of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock.
1. Designation of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E
Preferred Stock.
Two Million Two Hundred Fifty
Thousand (2,250,000) shares of Preferred Stock are
designated Series A Preferred Stock (the "Series A
Preferred Stock") with the rights, preferences and
privileges specified herein. Two Million Two Hundred
Eighty-One Thousand (2,281,000) shares of Preferred
Stock are designated Series B Preferred Stock (the
"Series B Preferred Stock") with the rights,
preferences and privileges specified herein. Four
Million Eight Hundred Thousand (4,800,000) shares of
Preferred Stock are designated Series C Preferred
Stock (the "Series C Preferred Stock") with the
rights, preferences and privileges specified herein.
Eight Million Six Hundred Sixty-Eight Thousand One
Hundred Forty (8,668,140) shares of Preferred Stock
are designated Series D Preferred Stock (the "Series
D Preferred Stock"). Four Million Three Hundred
Fourteen Thousand Eight Hundred Eighty Three
(4,314,883) shares of Preferred Stock are designated
Series E Preferred Stock (the "Series E Preferred
Stock"). As used in this Article IV, Division B, the
term "Preferred Stock" shall refer to the Series A
Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock."
RESOLVED, FURTHER, said Amendment shall also change ARTICLE IV, Section
B, Subsection 5(c)(ii)(B) thereof so that, as amended, said subsection
shall read in its entirety as follows.
-2-
"(B) 5,454,860 shares of Common Stock, net of
repurchases and the cancellation or expiration of options,
issued or issuable to employees, directors, consultants or
advisors of this Corporation under stock option and restricted
stock purchase agreements approved by the Board of Directors
commencing as of May 1994, and such other number of shares of
Common Stock as may be fixed from time to time by the Board of
Directors and approved by a majority of then outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, voting as a single class, issued or issuable
to employees, directors, consultants or advisors of this
Corporation under stock option and restricted stock purchase
agreements approved by the Board of Directors, or"
SECOND: That, thereafter, the Corporation's stockholders
approved this amendment by written consent in accordance with Section 228 of the
Delaware General Corporation Law.
THIRD: That this amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of the Corporation shall not be
reduced under or by reason of this amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
IN WITNESS WHEREOF, the Digirad Corporation. has caused this
certificate to be signed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, its President, this 28th day of
March, 2000.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
DIGIRAD CORPORATION]
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIGIRAD CORPORATION
Digirad Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the
Corporation's Board of Directors setting forth a proposed amendment to the
Corporation's existing Amended and Restated Certificate of Incorporation, and
declaring such amendment to be advisable and recommended for approval by the
Corporation's stockholders. The resolutions setting forth the proposed amendment
are as follows:
RESOLVED, FURTHER, that Paragraph A and Paragraph B, Section 1 of
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
this Corporation is hereby amended to read in its entirety as follows:
A. CLASSES OF STOCK. This Corporation is
authorized to issue two (2) classes of shares, to be
designated "Common" and "Preferred" and referred to herein as
the "Common Stock" or the "Preferred Stock" respectively. The
total number of shares of Common Stock the Corporation is
authorized to issue is Thirty One Million Two Hundred Ninety
Three Thousand Eight Hundred Seven (31,293,807). The par value
is $0.001 per share. The total number of shares of Preferred
Stock the Corporation is authorized to issue is Twenty One
Million Nine Hundred Eighty Four Thousand Six Hundred Forty
Six (21,984,646). The par value is $0.001 per share.
The Board of Directors of the Corporation may divide
the Preferred Stock into any number of series. The Board of
Directors shall fix the designation and number of shares of
each such series. The Board of Directors may determine and
alter the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of the
Preferred Stock. The Board of Directors (within the limits and
restrictions of any resolution adopted by it, originally
fixing the number of shares of any series) may increase or
decrease the number of shares of any such
series after the issue of shares of that series, but not below
the number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and
Restrictions of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock.
1. Designation of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E
Preferred Stock.
Two Million Two Hundred Fifty
Thousand (2,250,000) shares of Preferred Stock are
designated Series A Preferred Stock (the "Series A
Preferred Stock") with the rights, preferences and
privileges specified herein. Two Million Two Hundred
Eighty-One Thousand (2,281,000) shares of Preferred
Stock are designated Series B Preferred Stock (the
"Series B Preferred Stock") with the rights,
preferences and privileges specified herein. Four
Million Eight Hundred Thousand (4,800,000) shares of
Preferred Stock are designated Series C Preferred
Stock (the "Series C Preferred Stock") with the
rights, preferences and privileges specified herein.
Eight Million Six Hundred Sixty-Eight Thousand One
Hundred Forty (8,668,140) shares of Preferred Stock
are designated Series D Preferred Stock (the "Series
D Preferred Stock"). Three Million Nine Hundred
Eighty Five Thousand Five Hundred Six (3,985,506)
shares of Preferred Stock are designated Series E
Preferred Stock (the "Series E Preferred Stock"). As
used in this Article IV, Division B, the term
"Preferred Stock" shall refer to the Series A
Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock."
RESOLVED, FURTHER, said Amendment shall also change ARTICLE IV, Section
B, Subsection 5(c)(ii)(B) thereof so that, as amended, said subsection
shall read in its entirety as follows.
-2-
"(B) 4,454,860 shares of Common Stock, net of
repurchases and the cancellation or expiration of options,
issued or issuable to employees, directors, consultants or
advisors of this Corporation under stock option and restricted
stock purchase agreements approved by the Board of Directors
commencing as of May 1994, and such other number of shares of
Common Stock as may be fixed from time to time by the Board of
Directors and approved by a majority of then outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, voting as a single class, issued or issuable
to employees, directors, consultants or advisors of this
Corporation under stock option and restricted stock purchase
agreements approved by the Board of Directors, or"
RESOLVED, FURTHER, said Amendment shall also change ARTICLE IV, Section
B, Subsection 8(d) thereof so that, as amended, said subsection shall
read in its entirety as follows.
"(d) In addition to any approvals required by
law, so long as shares of Series E Preferred Stock are
outstanding, this Corporation shall not without first
obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least ninety percent
(90%) of the then outstanding voting power of and Series E
Preferred Stock voting as a single class:"
SECOND: That, thereafter, the Corporation's stockholders
approved this amendment by written consent in accordance with Section 228 of the
Delaware General Corporation Law.
THIRD: That this amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of the Corporation shall not be
reduced under or by reason of this amendment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
IN WITNESS WHEREOF, the Digirad Corporation. has caused this
certificate to be signed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, its President, this 8th day of
March, 2000.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
DIGIRAD CORPORATION]
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF DIGIRAD CORPORATION,
a Delaware Corporation
Digirad Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of
Directors of the Corporation setting forth a proposed amendment to the existing
Amended and Restated Certificate of Incorporation of the Corporation, and
declaring said amendment to be advisable and recommended for approval by the
stockholders of the Corporation. The resolutions setting forth the proposed
amendment are as follows:
RESOLVED, FURTHER, that Paragraph A and Paragraph B, Section 1 of
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
this Corporation is hereby amended to read in its entirety as follows:
A. CLASSES OF STOCK. This Corporation is
authorized to issue two (2) classes of shares, to be
designated "Common" and "Preferred" and referred to herein as
the "Common Stock" or the "Preferred Stock" respectively. The
total number of shares of Common Stock the Corporation is
authorized to issue is Twenty-Seven Million (27,000,000). The
par value is $0.001 per share. The total number of shares of
Preferred Stock the Corporation is authorized to issue is
Eighteen Million Six Hundred Ninety Thousand Eight Hundred
Thirty-Nine (18,690,839). The par value is $0.001 per share.
The Board of Directors of the Corporation
may divide the Preferred Stock into any number of series. The
Board of Directors shall fix the designation and number of
shares of each such series. The Board of Directors may
determine and alter the rights, preferences, privileges and
restrictions granted to and imposed upon any wholly unissued
series of the Preferred Stock. The Board of Directors (within
the limits and restrictions of any resolution adopted by it,
originally fixing the number of shares of any series) may
increase or decrease the number of shares of any such series
after the issue of shares of that series, but not below the
number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and
Restrictions of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock.
1. Designation of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.
Two Million Two Hundred Fifty
Thousand (2,250,000) shares of Preferred Stock are designated
Series A Preferred Stock (the "Series A Preferred Stock") with
the rights, preferences and privileges specified herein. Two
Million Two Hundred Eighty-One Thousand (2,281,000) shares of
Preferred Stock are designated Series B Preferred Stock (the
"Series B Preferred Stock") with the rights, preferences and
privileges specified herein. Four Million Eight Hundred
Thousand (4,800,000) shares of Preferred Stock are designated
Series C Preferred Stock (the "Series C Preferred Stock") with
the rights, preferences and privileges specified herein. Eight
Million Six Hundred Sixty-Eight Thousand One Hundred Forty
(8,668,140) shares of Preferred Stock are designated Series D
Preferred Stock (the "Series D Preferred Stock"). Six Hundred
Ninety-One Thousand Six Hundred Ninety-Nine (691,699) shares
of Preferred Stock are designated Series E Preferred Stock
(the "Series E Preferred Stock"). As used in this Article IV,
Division B, the term "Preferred Stock" shall refer to the
Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock."
SECOND: That, thereafter, the stockholders of said
Corporation approved the amended by written consent in accordance with Section
228 of the Delaware General Corporation Law.
THIRD: That said amendment was duly approved in accordance
with the provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be
reduced under or by reason of said amendment.
-2-
IN WITNESS WHEREOF, Digirad Corporation, has caused this
certificate to be signed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, its President, on this 27th day of
October, 1999.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
-3-
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIGIRAD CORPORATION
Digirad Corporation, a corporation organized and existing under the
laws of the state of Delaware, hereby certifies as follows:
1. The name of the corporation is Digirad Corporation. The date
the Corporation filed its original Certificate of Incorporation with the
Secretary of State was January 2, 1997.
2. This Amended and Restated Certificate of Incorporation
restates and amends the provisions of the original Certificate of Incorporation
of this Corporation as heretofore in effect and was duly adopted by the
Corporation's Board of Directors in accordance with Sections 241 and 245 of the
General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation is hereby amended
and restated to read as herein set forth in full:
ARTICLE I
The name of the Corporation (hereinafter called "Corporation") is
Digirad Corporation.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is ▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ of Kent 19901, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
A. CLASSES OF STOCK. This Corporation is authorized to issue two
(2) classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Stock" or the "Preferred Stock" respectively. The total
number of shares of Common Stock the Corporation is authorized to issue is
twenty-five million four hundred ninety-four thousand seventy-one (25,494,071).
The par value is $0.001 per share. The total number of shares of Preferred Stock
the Corporation is authorized to issue is eighteen million four hundred
ninety-three thousand two hundred eleven (18,493,211). The par value is $0.001
per share.
The Board of Directors of the Corporation may divide the
Preferred Stock into any number of series. The Board of Directors shall fix the
designation and number of shares of each such series. The Board of Directors may
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon any wholly unissued series of the Preferred Stock. The Board
of Directors (within the limits and restrictions of any resolution adopted by
it, originally fixing the number of shares of any series) may increase or
decrease the number of shares of any such series after the issue of shares of
that series, but not below the number of then outstanding shares of such series.
B. Rights, Preferences, Privileges and Restrictions of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
1. Designation of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
Two Million Two Hundred Fifty Thousand (2,250,000)
shares of Preferred Stock are designated Series A Preferred Stock (the "Series A
Preferred Stock") with the rights, preferences and privileges specified herein.
Two Million Two Hundred Eighty-One Thousand (2,281,000) shares of Preferred
Stock are designated Series B Preferred Stock (the "Series B Preferred Stock")
with the rights, preferences and privileges specified herein. Four Million Eight
Hundred Thousand (4,800,000) shares of Preferred Stock are designated Series C
Preferred Stock (the "Series C Preferred Stock") with the rights, preferences
and privileges specified herein. Eight million six hundred sixty-eight thousand
one hundred forty (8,668,140) shares of Preferred Stock are designated Series D
Preferred Stock (the "Series D Preferred Stock"). Four hundred ninety-four
thousand seventy-one (494,071) shares of Preferred Stock are designated Series E
Preferred Stock (the "Series E Preferred Stock"). As used in this Article IV,
Division B, the term "Preferred Stock" shall refer to the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
2. DIVIDEND PROVISIONS.
The holders of shares of Preferred Stock shall be
entitled to receive non-cumulative dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock of this Corporation) on the Common
Stock or any other junior equity security of this Corporation, at the rate of
$.10 per share of Series A Preferred Stock, $.11 per share of Series B Preferred
Stock, $.125 per share of Series C Preferred Stock, $.23073 per share of Series
D Preferred Stock and $.3036 per share of Series E Preferred Stock per annum
plus an amount equal to that paid on outstanding shares of Common Stock of this
Corporation, whenever funds are legally available therefor, payable quarterly
when, as and if declared by the Board of Directors and shall be non-cumulative.
Dividends, if declared, must be declared and paid with respect to all series of
Preferred Stock contemporaneously, and if less than full dividends are declared,
the same percentage of the dividend rate will be payable to each series of
Preferred Stock.
-2-
3. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution
or winding up of this Corporation, either voluntary or involuntary, the holders
of Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this Corporation to the holders of Common
Stock or any other junior equity security by reason of their ownership thereof
an amount for each share of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock,
respectively, held by such holder equal to the sum of (i) $1.00 for each such
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price"), (ii) $1.10 for each such outstanding share of Series B Preferred Stock
(the "Original Series B Issue Price"), (iii) $1.25 for each such outstanding
share of Series C Preferred Stock (the "Original Series C Issue Price"), (iv)
$2.3073 for each outstanding share of Series D Preferred Stock (the "Original
Series D Issue Price"), (v) $3.036 for each outstanding share of Series E
Preferred Stock (the "Original Series E Issue Price") and (vi) in each case, an
amount equal to all declared but unpaid dividends on each such share. If upon
the occurrence of such an event the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amounts, then the entire assets
and funds of this Corporation legally available for distribution shall be
distributed, ratably among the holders of the Preferred Stock in proportion to
the product of the liquidation preference of each such share and the number of
such shares owned by each such holder.
(b) Upon the completion of the distribution
required by subsection 3(a) above, if assets remain in the Corporation, the
holders of the Common Stock shall receive an amount equal to $.21 per share
(adjusted to reflect any subsequent stock splits, stock dividends, or other
recapitalizations) for each share of Common Stock held by them. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Common Stock shall be insufficient to permit payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution (after giving
effect to the distribution referred to in Section 3(a) hereof) shall be
distributed ratably among the holders of the Common Stock in proportion to the
amount of such stock owned by each such holder.
(c) After the distributions described in
subsections 3(a) and (b) have been paid, the remaining assets of this
Corporation available for distribution to stockholders shall be distributed
among the holders of Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Preferred Stock).
4. REDEMPTION.
(a) The outstanding Preferred Stock shall be
redeemable as provided in this Section 4. The Series A Redemption Price shall be
the total amount equal to $1.00 per share of Series A Preferred Stock to be
redeemed together with any declared but unpaid dividends on such shares to the
Redemption Date (as such term is hereinafter defined). The Series B Redemption
Price shall be the total amount equal to $1.10 per share of Series B Preferred
Stock to be redeemed together with any declared but unpaid dividends on such
shares to the Redemption Date. The Series C Redemption Price shall be the total
amount equal to $1.25 per share of Series C Preferred Stock to be redeemed
together with any declared but unpaid dividends on such shares
-3-
to the Redemption Date. The Series D Redemption Price shall be the total amount
equal to $2.3073 per share of Series D Preferred Stock to be redeemed together
with any declared but unpaid dividends on such shares to the Redemption Date.
The Series E Redemption Price shall be the total amount equal to $3.036 per
share of Series E Preferred Stock to be redeemed together with any declared but
unpaid dividends on such shares to the Redemption Date.
(b) On or at any time after July 31, 2004, upon
the receipt by this Corporation from the holders of at least 66-2/3% of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting
as a single class, of a written request for redemption hereunder of their
respective shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (the
"Redemption Request"), this Corporation shall, from any source of funds legally
available therefor, redeem all of the shares of Preferred Stock by paying in
cash therefor a sum equal to the Series A Redemption Price, the Series B
Redemption Price, the Series C Redemption Price, the Series D Redemption Price
and the Series E Redemption Price, respectively.
(c) (i) At least 15, but no more than 30,
days prior to the date fixed for any redemption of the Preferred Stock (the
"Redemption Date"), which Redemption Date shall be no later than 45 days
following the Corporation's receipt of the Redemption Request, written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be
redeemed at the address last shown on the records of this Corporation for such
holder or given by the holder to this Corporation for the purpose of notice or
if no such address appears or is given, at the place where the principal
executive office of this Corporation is located, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Series A Redemption Price, the Series B
Redemption Price, the Series C Redemption Price, the Series D Redemption Price
or the Series E Redemption Price as the case may be, the place at which payment
may be obtained and the date on which such holder's Conversion Rights (as
hereinafter defined) as to such shares, terminating and calling upon such holder
to surrender to this Corporation, in the manner and at the place designated,
such holder's certificate or certificates representing the shares to be redeemed
(the "Redemption Notice"). Except as provided in subsection 4(c)(iii), on or
after the Redemption Date, each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Series A Redemption
Price, Series B Redemption Price, Series C Redemption Price, the Series D
Redemption Price or the Series E Redemption Price, as the case may be, of such
shares shall be payable, to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
-4-
(ii) If the funds of the Corporation
legally available for redemption of outstanding shares of Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares of
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of (A) first, such shares of Series B, Series C,
Series D and Series E Preferred Stock to be redeemed, and (B) second, such
shares of Series A Preferred Stock to be redeemed. The shares of Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
this Corporation are legally available for the redemption of shares of Preferred
Stock, such funds shall immediately be used to redeem the balance of the shares
which this Corporation has become obligated to redeem on any Redemption Date but
which it has not redeemed.
(iii) From and after the Redemption Date,
unless there shall have been a default in payment of the applicable Series A
Redemption Price, Series B Redemption Price, Series C Redemption Price, Series D
Redemption Price or the Series E Redemption Price, all rights of the holders of
such shares as holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
(except the right to receive the Series A Redemption Price, Series B Redemption
Price, Series C Redemption Price, Series D Redemption Price or the Series E
Redemption Price, without interest, upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever.
(iv) At least three days prior to the
Redemption Date, this Corporation shall deposit the Series A Redemption Price,
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
and Series E Redemption Price of all outstanding shares of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, designated for redemption in the
Redemption Notice, and not yet redeemed or converted, with a bank or trust
company having aggregate capital and surplus in excess of $50,000,000, as a
trust fund for the benefit of the holders of the shares designated for
redemption and not yet redeemed. Simultaneously, this Corporation shall deposit
irrevocable instructions and authority to such bank or trust company to pay, on
and after the Redemption Date or prior thereto, the Series A Redemption Price,
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
and Series E Redemption Price, as the case may be, to the holders thereof upon
surrender of their certificates. Any monies deposited by this Corporation
pursuant to this subsection 4(c)(iv) for the redemption of shares which are
thereafter converted into shares of Common Stock pursuant to Section 5 hereof no
later than the close of business on the Redemption Date shall be returned to
this Corporation forthwith upon such conversion. The balance of any monies
deposited by this Corporation pursuant to this subsection 4(c)(iv) remaining
unclaimed at the expiration of two years following the Redemption Date shall
thereafter be returned to this Corporation, provided that the stockholder to
which such monies would be payable hereunder shall be entitled, upon proof of
its ownership of the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the
case may be, and payment of any bond requested by this Corporation, to receive
such monies but without interest from the Redemption Date.
-5-
5. CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) Subject to subsection 5(c), each
outstanding share of Preferred Stock shall be convertible, at the option of the
holder thereof at any time after the date of issuance of such share (and on or
prior to the fifth day prior to the Redemption Date, if any, as may have been
fixed in any Redemption Notice), at the office of this Corporation or any
transfer agent for such series of Preferred Stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price, the Original Series B Issue Price, the Original
Series C Issue Price, the Original Series D Issue Price and the Original Series
E Issue Price, respectively, by the Conversion Price at the time in effect for
such series or shares of such series. The initial Conversion Price per share for
shares of Preferred Stock shall be the Original Series A Issue Price, the
Original Series B Issue Price, the Original Series C Issue Price, the Original
Series D Issue Price and the Original Series E Issue Price, respectively,
provided, however, that the Conversion Prices for the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock shall be subject to adjustment
as set forth in subsection 5(c).
(ii) Each outstanding share of Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such shares immediately upon:
(A) the closing of this
Corporation's sale of its Common Stock in a bona fide, firm commitment
underwritten public offering registered under the Securities Act of 1933, as
amended (the "Securities Act"), which results in aggregate gross offering
proceeds to this Corporation of at least $15,000,000, at a public offering price
of not less than $7.50 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations) (a "Qualifying Public Offering");
or
(B) the approval of (i)
holders of at least 75% of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, voting together as a single class and (ii)
holders of not less than 60% of the Series D Preferred Stock voting as a class.
(b) MECHANICS OF CONVERSION. Before any holder
of Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Corporation or of any transfer agent for
such stock, and shall be given written notice by mail postage prepaid, to this
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of such series of Preferred
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Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act, the conversion may, at the option of
any holder tendering shares of such series of Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of shares of such series of Preferred
Stock shall not be deemed to have converted such shares of such series of
Preferred Stock until immediately prior to the closing of such sale of
securities.
(c) CONVERSION PRICE ADJUSTMENTS OF THE
PREFERRED STOCK. The Conversion Prices of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) If this Corporation shall
issue any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for shares of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock in effect immediately prior to the
issuance of such Additional Stock, the new Conversion Price for such shares of
such series of Preferred Stock shall be determined by multiplying the Conversion
Price for such series of Preferred Stock in effect immediately prior to the
issuance of Additional Stock by a fraction:
(x) the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (for purposes of this calculation
only, including the number of shares of Common Stock then issuable upon
the conversion of all outstanding shares of Preferred Stock at the
Conversion Price for such shares in effect immediately prior to such
issuance of Additional Stock) plus the number of shares of Common Stock
equivalents which the aggregate consideration received by this
Corporation for the shares of such Additional Stock so issued would
purchase at the Conversion Price in effect at the time for the shares
of the series of Preferred Stock with respect to which the adjustment
is being made; and
(y) the denominator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (for purposes of this calculation
only, including the number of shares of Common Stock then issuable upon
the conversion of all outstanding shares of Preferred Stock at the
Conversion Price for such shares in effect immediately prior to such
issuance of Additional Stock) plus the number of such shares of
Additional Stock so issued.
Any series of issuances of Additional Stock
consisting of Common Stock or the same series of Preferred
Stock, issued at the same price and within a six-month period,
shall be treated as one issuance of Additional Stock for the
purposes of this calculation.
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(B) No adjustment of the
Conversion Price for such series of Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are
not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made
prior to three years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three years from the
date of the event giving rise to the adjustment being carried forward. Except
to the limited extent provided for in subsections 5(c)(i)(E)(3) and
(c)(i)(E)(4), no adjustment of such Conversion Price for such series of
Preferred Stock pursuant to this subsection 5(c)(i) shall have the effect of
increasing the Conversion Price for such series of Preferred Stock above the
Conversion Price for such series in effect immediately prior to such
adjustment.
(C) In the case of the
issuance of Common Stock for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by this Corporation
for any underwriting or otherwise in connection with the issuance and sale
thereof.
(D) In the case of the
issuance of the Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors irrespective of any
accounting treatment.
(E) In the case of the
issuance of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock
or options to purchase or rights to subscribe for such convertible or
exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
(1) The aggregate
maximum number of shares of Common Stock deliverable upon exercise of such
options to purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided
in subsections 5(c)(i)(C) and (c)(i)(D)), if any, received by the Corporation
upon the issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered thereby.
(2) The aggregate
Stock deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been issued
at the time such securities were issued or such options or rights were issued
and for a consideration equal to the consideration, if any, received by this
Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the additional consideration, if any, to be received by this Corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the
manner provided in subsections 5(c)(i)(C) and (c)(i)(D)).
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(3) In the event of
any change in the number of shares of Common Stock deliverable or any
increase in the consideration payable to this Corporation upon exercise of
such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a
change resulting from the anti-dilution provisions thereof, the Conversion
Price of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the
case may be, obtained with respect to the adjustment which was made upon the
issuance of such options, rights or securities, and any subsequent
adjustments based thereon shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities; provided, however,
that this section shall not have any effect on any conversion of such series
of Preferred Stock prior to such change or increase.
(4) Upon the
expiration of any such options or rights, the termination of any such rights
to convert or exchange or the expiration of any options or rights related to
such convertible or exchangeable securities, the Conversion Price of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock, as the case may be,
obtained with respect to the adjustment which was made upon the issuance of
such options, rights or securities or options or rights related to such
securities, and any subsequent adjustments based thereon, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities; provided, however, that this section shall not
have any effect on any conversion of such series of Preferred Stock prior to
such expiration or termination.
(ii) "Additional Stock" shall mean any
shares of Common Stock issued (or deemed to have been issued pursuant to
subsection 5(c)(i)(E)) by this Corporation after June 22, 1998, other than:
(A) Common Stock issued
pursuant to a transaction described in subsection 5(c)(iii) hereof, or
(B) 3,454,860 shares of
Common Stock, net of repurchases and the cancellation or expiration of
options, issued or issuable to employees, directors, consultants or advisors
of this Corporation under stock option and restricted stock purchase
agreements approved by the Board of Directors commencing as of May 1994, and
such other number of shares of Common Stock as may be fixed from time to time
by the Board of Directors and approved by a majority of then outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, voting as a single
class, issued or issuable to employees, directors, consultants or advisors of
this Corporation under stock option and restricted stock purchase agreements
approved by the Board of Directors, or
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(C) Common Stock issued or
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
(iii) In the event this Corporation
should at any time or from time to time after the effective date hereof fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock, as the case may be, shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 5(c)(i)(E).
(iv) If the number of shares of Common
Stock outstanding at any time after the effective date hereof is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be decreased in proportion
to such decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this
Corporation shall declare a distribution payable in securities of other
persons, evidences of indebtedness issued by this Corporation or other
persons, assets (excluding cash dividends) or options or rights not referred
to in subsection 5(c)(iii), then, in each such case for the purpose of this
subsection 5(d), the holders of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of
Common Stock of this Corporation into which their shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, as the case may be, are
convertible as of the record date fixed for the determination of the holders
of Common Stock of this Corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or
from time to time there shall be a recapitalization of the Common Stock
(other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 5 or Section 6) provision
shall be made so that the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, shall thereafter be entitled to receive upon
conversion of such series of Preferred Stock the number of shares of stock or
other securities or property of this Corporation or otherwise, to which a
holder of
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Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 5 with respect to the
rights of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, after the recapitalization to the end that the provisions of this
Section 5 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of such series of Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) NO IMPAIRMENT. This Corporation will
not, by amendment of its Certificate of Incorporation or through any
reorganization, revitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by this Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock against impairment.
(g) FRACTIONAL SHARES AND CERTIFICATE AS TO
ADJUSTMENTS.
(i) No fractional shares shall be
issued upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of such series of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each
adjustment or, readjustment of the Conversion Price of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock, as the case may be, pursuant to this
Section 5, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, or instrument convertible into shares of any such series of
Preferred Stock, as the case may be, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion Price
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the conversion of a share of such series of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of
any taking by this Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
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distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right, this Corporation shall mail to each holder of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock or Series E Preferred Stock at least 20 days prior to the
date specified therein, a notice specifying the date on which by such record
is to be taken for the purpose of such dividend, distribution or right and
the amount and character of such dividend, distribution or right.
(i) RESERVATION OF COMMON STOCK ISSUABLE UPON
CONVERSION. This Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
authorized shares of such series of Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then authorized shares of such
series of Preferred Stock, in addition to such other remedies as shall be
available to the holders of such series of Preferred Stock, this Corporation
will take such corporate action as may, in the opinion of its counsel be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the
provisions of this Section 5 to be given to the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be deemed given if
deposited in the United States postage prepaid, and addressed to each holder
of record at such holder's address appearing on the books of this Corporation.
6. MERGER; CONSOLIDATION.
(a) If at any time after the effective date
hereof there is a merger, consolidation or other corporate reorganization in
which stockholders of this Corporation immediately prior to such transaction
own less than 50% of the voting securities of the surviving or controlling
entity immediately after the transaction, or sale of all or substantially all
of the assets of this Corporation (hereinafter, an "Acquisition"), then, as a
part of such Acquisition, provision shall be made so that the holders of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and Series E Preferred Stock
shall be entitled to receive, prior to any distribution to holders of Common
Stock or other junior equity security of the Corporation, the number of
shares of stock or other securities or property to be issued to this
Corporation or its stockholders resulting from such Acquisition in an amount
per share equal to the Original Series A Issue Price, Original Series B Issue
Price, Original Series C Issue Price, Original Series D Issue Price and
Original Series E Issue Price, as applicable, plus a further amount equal to
any dividends declared but unpaid on such shares. Subject to the following
sentence, the holders of Common Stock shall thereafter be entitled to
receive, pro rata, the remainder of the number of shares of stock or other
securities or property to be issued to this Corporation or its stockholders
resulting from such Acquisition. Notwithstanding anything to the contrary in
this Section 6, in the event the aggregate value of stock, securities and
other property to be distributed to this Corporation or its stockholders with
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respect to an Acquisition is less than $5.25 per share (such dollar amount to
be appropriately adjusted to reflect any subsequent stock splits, stock
dividends or other recapitalizations) of Common Stock outstanding (for
purpose of this calculation only, including in the number of shares of Common
Stock outstanding the number of shares of Common Stock then issuable upon
conversion of all outstanding Preferred Stock), then the stock, securities or
other property shall be distributed among the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, the Series D
Preferred Stock, Series E Preferred Stock and the Common Stock according to
the provisions of Section 3 hereof as if such Acquisition were deemed a
liquidation.
(b) Any securities to be delivered to the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, the Series D Preferred Stock, Series E Preferred Stock and
Common Stock pursuant to subsection 6(a) above shall be valued as follows:
(i) Securities not subject to
investment letter or other similar restrictions on free marketability;
(A) If traded on a
securities exchange, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the 30-day period
ending three days prior to the closing;
(B) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing
bid or sale prices (whichever are applicable) over the 30-day period ending
three days prior to the closing; and
(C) If there is no active
public market, the value shall be the fair market value thereof, as mutually
determined by the Corporation and the holders of not less than a majority of
the then outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, the Series D Preferred Stock and Series E
Preferred Stock.
(ii) The method of valuation of
securities subject to investment letter or other restrictions on free
marketability shall be to make an appropriate discount from the market value
determined as above in subsections 6(b)(i)(A), (B) or (C) to reflect the
approximate fair market value thereof, as mutually determined by this
Corporation and the holders of a majority of the then outstanding shares of
Series A Preferred Stock, Series B Preferred, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, voting as a single
class.
(c) In the event the requirements of
subsection 6(a) are not complied with, this Corporation shall forthwith
either:
(i) cause such closing to be
postponed until such time as the requirements of this Section 6 have been
complied with, or
(ii) cancel such transaction, in which
event the rights, preferences and privileges of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall revert to and be the same
as such rights, preferences and privileges existing immediately prior to the
date of the first notice referred to in subsection 6(d) hereof.
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(d) This Corporation shall give each holder
of record of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock written
notice of such impending transaction not later than 20 days prior to the
stockholders' meeting called to approve such action, or 20 days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 6, and this
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place earlier than 20 days
after the Corporation has given the first notice provided for herein or
earlier than 10 days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of a majority of the then
outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock voting
as a class.
(e) The provisions of this Section 6 are in
addition to the protective provisions of Section 8 hereof.
7. VOTING RIGHTS; DIRECTORS.
(a) The holder of each outstanding share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock shall have the right to
one vote for each share of Common Stock into which such outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock could be converted on the record
date for the vote or written consent of stockholders. In all cases any
fractional share, determined on an aggregate conversion basis, shall be
rounded to the nearest whole share. With respect to such vote, such holder
shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled, notwithstanding
any provision hereof to notice of any stockholders' meeting in accordance
with the bylaws of this Corporation, and shall be entitled to vote, together
with holders of Common Stock, with respect to any question upon which holders
of Common Stock have the right to vote.
(b) Notwithstanding subsection 7(a), (i) so
long as at least fifty percent (50%) of the shares of Series A Preferred
Stock and Series B Preferred Stock originally issued remain issued and
outstanding, the holders of Series A Preferred Stock and Series B Preferred
Stock, voting together as a separate class, shall be entitled to elect one
member of the Board of Directors, (ii) so long as at least fifty percent
(50%) of the shares of Series C Preferred Stock originally issued remain
issued and outstanding, the holders of Series C Preferred Stock, voting as a
separate class, shall be entitled to elect one member of the Board of
Directors, and (iii) so long as at least fifty percent (50%) of the shares of
Series D Preferred Stock originally issued remain issued and outstanding, the
holders of Series D Preferred Stock, voting as a separate class, shall be
entitled to elect either one or two members of the Board of Directors, as set
forth in that certain Amended and Restated Voting Agreement between the
Corporation and its stockholders dated on or about August 8, 1997. Any
additional directors shall be elected by the holders of Preferred Stock and
Common Stock, voting together as one class. In the case of any vacancy in the
office of a director elected by the holders of the Series A Preferred Stock
and
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Series B Preferred Stock, the Series C Preferred Stock or the Series D
Preferred Stock pursuant to this subsection 7(b), the holders of a majority
of the then voting power of the Series A Preferred Stock and Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock, as applicable, shall, within sixty (60) days of such vacancy, elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In the case of a vacancy in the office of any other
director, the successor of that director shall be elected within sixty (60)
days of such vacancy to hold office for the unexpired term of the director
whose place shall be vacant, and such successor director shall be elected by
the holders of Preferred Stock and Common Stock, voting together as one
class. Any director who shall have been so elected may be removed during the
aforesaid term of office, whether with or without cause, only by the
affirmative vote of the holders of a majority of the voting power of the
Series of Preferred Stock which first elected him. This subsection 7(b) shall
be void and of no further effect thereafter upon the occurrence of either of
the following events:
(i) the closing of a Qualifying
Public Offering;
(ii) upon the distribution to the
stockholders pursuant to Section 3 or Section 6 hereof of the net proceeds of
the sale of all or substantially all the assets of the Corporation.
8. PROTECTIVE PROVISIONS.
(a) In addition to any approvals required by
law, so long as shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock are outstanding, this Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the then outstanding voting power of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock (voting, as one class, in
accordance with Section 7):
(i) sell, convey, or otherwise
dispose of all or substantially all of its property or business or merge into
or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) in which this Corporation is not the surviving
corporation or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of this Corporation
is disposed of, provided, however, that this restriction shall not apply to
any mortgage, deed of trust, pledge or other encumbrance or hypothecation of
the Corporation's or any of its subsidiaries' assets for the purpose of
securing any contract or obligation; or
(ii) alter or change the rights,
preferences, privileges or restrictions of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock; or
(iii) increase the authorized number of
shares of Common Stock or Preferred Stock; or
(iv) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series A Preferred Stock,
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Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
or Series E Preferred Stock with respect to voting, dividends, redemption or
conversion or upon liquidation; or
(v) pay or declare any dividend on
its Common Stock or any other junior equity security other than a dividend in
Common Stock of this Corporation; or
(vi) change the authorized number of
directors; or
(vii) do any act or thing which would
result in taxation of the holders of shares of Preferred Stock under section
305(b) of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time
amended).
(b) In addition to any approvals required by
law, so long as shares of Series C Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series C Preferred Stock voting as a
single class:
(i) alter or change the rights,
preferences, privileges or restrictions of the shares of Series C Preferred
Stock; or
(ii) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series C Preferred Stock with respect to voting,
dividends, redemption or conversion or upon liquidation.
(c) In addition to any approvals required by
law, so long as shares of Series D Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series D Preferred Stock voting as a
single class:
(i) sell, convey, or otherwise
dispose of all or substantially all of its property or business or merge into
or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) in which this Corporation is not the surviving
corporation or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of this Corporation
is disposed of, provided, however, that this restriction shall not apply to
any mortgage, deed of trust, pledge or other encumbrance or hypothecation of
the Corporation's or any of its subsidiaries' assets for the purpose of
securing any contract or obligation; or
(ii) alter or change the rights,
preferences, privileges or restrictions of the shares of Series D Preferred
Stock; or
(iii) increase the authorized number of
shares of Series D Preferred Stock; or
(iv) increase the authorized number of
directors; or
-16-
(v) create (by reclassification or
otherwise) any new class or series of stock having a preference over, or
being on a parity with, the Series D Preferred Stock with respect to voting,
dividends, redemption or conversion or upon liquidation.
(d) In addition to any approvals required by
law, so long as shares of Series E Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding voting power of and Series E Preferred Stock voting as a
single class:
(i) materially or adversely alter or
change the rights, preferences or privileges of the shares of Series E
Preferred Stock as a separate series in a manner that is dissimilar and
disproportionate relative to the manner in which the rights, preferences or
privileges of the other series of Preferred Stock are altered, or
(ii) increase the authorized number of
shares of Series E Preferred Stock.
9. STATUS OF REDEEMED OR CONVERTED STOCK. In the event
any shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall be
redeemed or converted pursuant to Section 4 or 5 hereof the shares so redeemed
or converted shall be cancelled and shall not be issuable by this Corporation,
and the Certificate of Incorporation of this Corporation shall be appropriately
amended to effect the corresponding reduction in this Corporation's authorized
capital stock.
10. REPURCHASE OF SHARES. In connection with repurchases
by this Corporation of its Common Stock pursuant to agreements with certain of
the holders thereof approved by this Corporation's Board of Directors, each
holder of Preferred Stock shall be deemed to have waived the application, in
whole or in part, of any provisions of the Delaware General Corporation Law or
any applicable law of any other state which might limit or prevent or prohibit
such repurchases.
C. COMMON STOCK.
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK.
All rights preferences, voting powers, relative, participating optional or other
special rights and privileges, and qualifications, limitations, or restrictions
of the Common Stock are expressly made subject and subordinate to those that may
be fixed with respect to any shares of the Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or
this Certificate of Incorporation, each holder of Common Stock shall have one
vote in respect of each share of stock held by such holder of record on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation.
3. DIVIDENDS. Subject to the preferential rights of the
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation which are by law available therefor, dividends payable either
in cash, in property or in shares of capital stock.
-17-
4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event
of any dissolution, liquidation or winding up of the affairs of the Corporation,
after distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Preferred Stock, holders of Common
Stock shall be entitled to participate in any distribution of the assets of the
Corporation in accordance with Section 3 of Article IV, Division B hereof.
5. NO PREEMPTIVE RIGHTS. The holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Common Stock shall not have any
preemptive rights. The foregoing shall not, however, prohibit the Corporation
from granting contractual rights of first refusal to purchase securities to
holders of Preferred Stock.
ARTICLE V
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the bylaws of the Corporation; provided,
however, that the bylaws may only be amended in accordance with the provisions
thereof and, provided further that, the authorized number of directors may be
changed only with the approval of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (voting
as one class) in accordance with Section 7 of Article IV Division B.
B. Elections of directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within
or without the State of Delaware as the bylaws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
ARTICLE VI
A. EXCULPATION.
1. CALIFORNIA. The liability of each and every
director of this Corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. DELAWARE. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further
-18-
reduce or to authorize, with the approval of the Corporation's stockholders,
further reductions in the liability of the Corporation's directors for breach
of fiduciary duty, then a director of the Corporation shall not be liable for
any such breach to the fullest extent permitted by the Delaware General
Corporation Law as so amended.
3. CONSISTENCY. In the event of any inconsistency
between Sections 1 and 2 of this Division A, the controlling Section, as to
any particular issue with regard to any particular matter, shall be the one
which provides to the director in question the greatest protection from
liability.
B. INDEMNIFICATION.
1. CALIFORNIA. This Corporation is authorized to
indemnify the directors and officers of this Corporation to the fullest extent
permissible under California law. Moreover, this Corporation is authorized to
provide indemnification of (and advancement of expenses to) agents (as defined
in Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code, with
respect to actions for breach of duty to the Corporation and its stockholders.
2. DELAWARE. To the extent permitted by applicable law,
this Corporation is also authorized to provide indemnification of (and
advancement of expenses to) such agents (and any other persons to which Delaware
law permits this Corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of stockholders
or disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders and others.
3. CONSISTENCY. In the event of any inconsistency
between Sections 1 and 2 of this Division B, the controlling Section, as to any
particular issue with regard to any particular matter, shall be the one which
authorizes for the benefit of the agent or other person in question the
provision of the fullest, promptest, most certain or otherwise most favorable
indemnification and/or advancement.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification
of any of the foregoing provisions of this Article VI shall not adversely affect
any right or protection of a director, officer, agent or other person existing
at the time of, or increase the liability of any director of the Corporation
with respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VII
The Corporation shall have perpetual existence.
-19-
ARTICLE VIII
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-20-
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed as of this 22nd day of June 1998.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
[SIGNATURE PAGE TO
RESTATED CERTIFICATE OF INCORPORATION]
EXHIBIT C
LIST OF BORROWER'S US FEDERALLY REGISTERED INTELLECTUAL PROPERTY
[NAMES, APPLICATION OR REGISTRATION NUMBERS AND APPLICATION
OR REGISTRATION DATE]
-11-
PATENTS AND TRADEMARKS
A. STATUS OF PATENT ACTIVITY
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
***
***
***
B. STATUS OF TRADEMARK ACTIVITY
I. Registration of "Digirad"
Filed Application............................................September 6, 1994
Patent Office Action..........................................February 7, 1995
Amended Application filed......................................August 14, 1995
Patent Office Action............................................April 23, 1996
Reconsideration requested.........................................July 5, 1996
Appeal filed..................................................October 18, 1996
Appeal Brief filed...........................................December 20, 1996
Examining Attorney's Appeal Brief filed.........................March 10, 1997
Notice of Acceptance of Statement of Use.........................March 2, 1999
Expected Actions
Await the issuance.
II. Registration of "SpectrumPlus"
Application Serial No. 75/202,359 filed ...................... November 22, 1996
III. Registration of "Notebook Imager"
Application Serial No. 75/202,360 filed ...................... November 22, 1996
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
EXHIBIT D
PROPOSAL FOR PURCHASE OF NIS FIXED BUSINESS - AUGUST 16, 2000
-12-
PROPOSAL FOR PURCHASE OF NIS FIXED BUSINESS
AUGUST 16, 2000
THE PROPOSED TERMS AND CONDITIONS SUMMARIZED HEREIN ARE
PROVIDED FOR DISCUSSION PURPOSES ONLY, AND DO NOT CONSTITUTE
AN OFFER, AGREEMENT, OR COMMITMENT TO PURCHASE THE ASSETS AS
DESCRIBED BELOW. THE ACTUAL TERMS AND CONDITIONS UPON WHICH
DIGIRAD CORPORATION ("DIGIRAD") MAY BE PREPARED TO PURCHASE
THE "FIXED BUSINESS," OF NUCLEAR IMAGING SYSTEMS, INC. ("NIS")
ARE SUBJECT TO SATISFACTORY COMPLETION OF DUE DILIGENCE,
REQUISITE BOARD, INVESTOR AND LENDER APPROVALS, SATISFACTORY
REVIEW OF DOCUMENTATION AND OTHER TERMS AND CONDITIONS AS ARE
DETERMINED BY DIGIRAD AND ITS COUNSEL.
Purchaser Digirad Corporation or its nominee
Seller NIS, debtor in possession in Case No. 00-19698
(the "NIS Bankruptcy Case") pending in the United
States Bankruptcy Court for the Eastern District
of Pennsylvania (the "Bankruptcy Court")
Purchase Price $3,550,000 composed of:
- $2.5 million note payable to DVI, at a
fixed rate of interest of 7% per annum
payable based on a 30-year amortization
schedule, all due and payable in 5 years;
secured by the assets currently securing
the indebtedness of NIS to DVI, which
security interest shall be of first
priority;
- $1 million note payable to the IRS, at a
fixed rate of interest of 8% per annum,
payable based on a 30-year amortization
schedule, all due and payable in 6 years;
unsecured;
- $50,000 cash payable within 30 days of the
entry of a final order approving the
purchase for distribution to general
unsecured creditors (excluding DVI and the
IRS)
Assets Purchased All assets of NIS excluding the assets that are the
subject of the pending proposal by Digirad to
purchase the "Mobile Business". Furthermore:
- Assets are to be free and clear of all
liens, claims and encumbrances;
- Leases of 16 sites are, at Digirad's
option after due diligence review, to be
either assumed and assigned to Digirad, or
re-negotiated and re-documented in a
manner acceptable to Digirad, on a
lease-by-lease basis
(i.e., some leases may be assumed and
assigned, some renegotiated and some
rejected);
- Digirad to be satisfied it has received
all necessary radiation and business
licenses, whether assumed an assigned or
assigned with the consent of the
licensor;
- Digirad to be satisfied it is receiving
the assignment and transfer of all
contracts with doctors and customers,
except as Digirad may consent in writing,
and there shall be no outstanding
liabilities relating to such contracts
that are the responsibility of Digirad;
- customer contracts are to conform
to Digirad IDTF status
- Digirad to receive all books, records, and
documents (or at least copies), including
information on and transfer of all private
payor numbers and medicare numbers
- Digirad to succeed, whether through
assumption and assignment, or consent,
to all contracts with Radiation Safety
Officers
Other Terms ▇▇▇▇ ▇▇▇▇▇▇▇ is to agree to a non-compete
agreement;
▇▇▇▇ ▇▇▇▇▇▇▇ to agree to an employment agreement
with Digirad (or its nominee) for a three year term
subject to performance standards and financial
goals.
- salary of $l50,000 year
- $25,000 bonus subject to achievement of
specified targets
- 50,000 shares/year of Digirad stock
pursuant to stock options based on
achievement of specified targets and a 3
year daily vesting schedule
There are to be no risk of additional tax
liabilities, additional liabilities to doctors or
customers, labor issues, nor other legal issues
with billing practices and company structure
Conditions Satisfactory due diligence review of financials,
contracts, equipment, and customer relationships
Bankruptcy Court shall have approved sale of Mobile
Business with final order under Bankruptcy Code
Section 363
Confirmation of a consensual plan of reorganization
(unless otherwise agreed by Digirad) pursuant to a
final order in form and substance
2
satisfactory to Digirad
MMC shall have entered into and satisfactorily
performed the MMC services agreement relating to
the Mobile Business purchase and, if Digirad so
elects, shall be willing to perform similar
services for Digirad relating to the Fixed Business
- There shall have been no defaults under
the MMC services Agreement, nor shall it
have been terminated for cause
▇▇▇▇ ▇▇▇▇▇▇▇ and MMC shall have filed bankruptcy
petitions or Digirad shall be satisfied that
bankruptcy filings are not imminent
3
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Second
Amendment"), dated as of November 27, 2000, is entered into by and between
DIGIRAD CORPORATION, a Delaware corporation ("Borrower"), and MMC/GATX
PARTNERSHIP NO. I, a California general partnership ("Lender").
RECITALS
A. Borrower and Lender are parties to a Loan and Security
Agreement, dated as of October 27, 1999, as amended by a First Amendment to Loan
and Security Agreement dated as of August 14, 2000 (as amended, the "Loan
Agreement") pursuant to which Lender has provided financing.
B. Borrower has now requested that Lender consent to certain
transactions. Lender is willing to do so upon the terms and conditions set
forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS; INTERPRETATION. Unless otherwise defined
herein, all capitalized terms used herein and defined in the Loan Agreement
shall have the respective meanings given to those terms in the Loan Agreement.
Other rules of construction set forth in the Loan Agreement, to the extent not
inconsistent with this Second Amendment, apply to this Second Amendment and are
hereby incorporated by reference.
2. AMENDMENTS TO LOAN AGREEMENT.
(a) CONSENTS.
(i) Lender hereby consents to
Borrower's incurrence on or about September 29, 2000 of Indebtedness in the
form of a Two Million Dollars ($2,000,000) bridge loan which is not repaid
but converts to Borrower's Equity Securities in Borrower's next equity round
(collectively the "BRIDGE LOAN").
(ii) Lender hereby consents to
Borrower's incurrence of Indebtedness after Borrower's closing of its Next
Equity Round:
(1) In the form of a One
Million Dollar ($1,000,000) equipment loan from GE Healthcare Services which
is secured only by the specific equipment
-1-
financed thereunder and the proceeds thereof and, if necessary, a $200,000
letter of credit (collectively, the "GE HEALTHCARE EQUIPMENT LOAN").
(2) In the form of one or
more equipment loans in an aggregate amount not to exceed Three Million
Dollars ($3,000,000) which is/are secured only by the specific equipment
financed thereunder and the proceeds thereof (collectively, the "ADDITIONAL
EQUIPMENT LOANS").
(3) Lender hereby consents
to the incurrence of Indebtedness by Borrower's Subsidiary, Orion Imaging
Systems ("Orion") after the Next Equity Round in the form of an accounts
receivable facility initially in the amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) but increasing to Five Million Dollars
($5,000,000) within one (1) year from ▇▇▇▇▇▇ Financial (or other comparable
lender) (collectively, the "▇▇▇▇▇▇ A/R FACILITY") provided the ▇▇▇▇▇▇ A/R
Facility is secured only by Orion's accounts receivable and the proceeds
thereof (and not any of the assets or property of Borrower) and the total
amount of the ▇▇▇▇▇▇ A/R Facility cannot exceed 85% of Orion's eligible
accounts receivable. In addition, Borrower may guaranty Orion's obligations
under the ▇▇▇▇▇▇ A/R Facility but any such guaranty must be unsecured and
subordinated on terms and conditions acceptable to Lender in its sole
discretion.
(b) The definition of Permitted
Indebtedness in Section 1.01 of the Loan and Security Agreement shall be
amended by adding the following subclauses: (g) after the closing of the Next
Equity Round, the GE Healthcare Equipment Loan, (h) after the closing of the
Next Equity Round, the Additional Equipment Loans; and (i) after the closing
of the Next Equity Round, the ▇▇▇▇▇▇ A/R Facility.
(c) Section 1.01 of the Loan Agreement
shall be amended to add the following defined terms in appropriate
alphabetical order:
"ADDITIONAL EQUIPMENT" shall have the meaning given
such term in Section 2(a) of the Second Amendment to
Loan and Security Agreement dated November 27, 2000.
"FIRST LOAN" shall have the meaning given such term
in Section 2.01(a).
"GE HEALTHCARE EQUIPMENT LOAN" shall have the meaning
given such term in Section 2(a) of the Second
Amendment to Loan and Security Agreement dated
November 27, 2000.
"▇▇▇▇▇▇ A/R FACILITY" shall have the meaning given
such term in Section 2(a) of the Second Amendment to
Loan and Security Agreement dated November 27, 2000.
"LOANS" shall have the meaning given such term in
Section 2(a) of the Second Amendment to Loan and
Security Agreement dated November 27, 2000.
-2-
"NEXT EQUITY ROUND" shall mean the Borrower's next
equity round closing after October 1, 2000 which
yields at least Eight Million Dollars ($8,000,000)
net cash proceeds.
"SECOND LOAN" shall have the meaning given such term
in Section 2.01(a).
"THIRD LOAN" shall mean the Facility B Loan.
(d) Section 2.01(c) of the Loan Agreement
will be changed to read as follows:
(c) PAYMENTS OF PRINCIPAL AND
INTEREST. If a Funding Date is not the first day of the month, Borrower
shall make an interest only payment on the first Payment Date specified in
Lender's Note. For the First Loan, Borrower shall make thirty-six (36) equal
monthly payments of principal plus accrued interest on the outstanding
principal amount of such Loan commencing on the first Payment Date as set
forth in Lender's Note. The payment schedule of the Second Loan shall be
amended such that Borrower shall make (in addition to the payments previously
made by Borrower through and including November, 2000) twenty-four (24) equal
monthly payments of principal plus accrued interest on the outstanding
principal amount of the Second Load as set forth in the Amendment to Secured
Promissory Note No. 2, executed and delivered concurrently with Borrower's
execution and delivery of this Second Amendment. The payment schedule of the
Third Loan shall be amended such that Borrower shall make (in addition to the
payments previously made by Borrower through and including November, 2000)
twenty-four (24) equal monthly payments of principal plus accrued interest on
the outstanding principal amount of the Third Loan as set forth in the
Amendment to Secured Promissory Note No. 3, executed and delivered
concurrently with Borrower's execution and delivery of this Second Amendment.
(e) Section 2.01(d) of the Agreement will be
changed to read as follows:
(d) OPTIONAL PREPAYMENT WITH PREMIUM. Upon
ten (10) Business Days' prior written notice to Lender, Borrower may, at its
option, at any time, prepay all, and not less than all, of a Loan in full at
a prepayment price equal to the principal amount of the Loan, plus interest
accrued on the Loan through and including the date of such prepayment, plus a
premium on the Loan equal to the Applicable Premium. If an Event of Default
occurs and is continuing (other than an Event of Default specified in Section
9.01 h, i, j, k or l, in which case no Applicable Premium is due and
payable), and Lender exercises its right under Section 9.02 to accelerate the
Loans or the Loans are automatically accelerated, Borrower expressly agrees
that the amount then due and payable shall include the Applicable Premium as
of the date of such acceleration. In the event that Borrower and the lender
of the Indebtedness permitted by clause (e) of the definition of Permitted
Indebtedness request Lender's agreement that there be an increase in the
amount of such Indebtedness and Lender does not consent (which consent shall
be at Lender's sole discretion), Borrower shall be permitted to prepay all
Indebtedness hereunder without payment of any Applicable Premium.
-3-
(f) Section 5.04 of the Agreement shall be
changed to read as follows:
5.04 EQUIPMENT COLLATERAL. On or
prior to its execution and delivery of this Agreement, Borrower shall
provide Lender with a listing, in detail to Lender's satisfaction, of all of
Borrower's equipment, fixtures and personal property other than the equipment
financed under the GE Healthcare Equipment Loan and the Additional Equipment
Loans (collectively, an "Equipment List"), which, at Lender's option, shall
be attached as an exhibit to a UCC financing statement filed by Lender naming
Borrower as "debtor" and Lender as "secured party." Within thirty days after
the end of every quarter after the date hereof; Borrower shall provide Lender
with an Equipment List of equipment, fixtures and personal property acquired
by Borrower during such quarter through and including April 27, 2001, and
such Equipment List shall, at Lender's option, be attached as an exhibit to a
UCC financing statement filed by Lender naming Borrower as "debtor" and
Lender as "secured party." Borrower agrees to execute and deliver to Lender
any and all such financing statements to Lender. Borrower's equipment,
fixtures and personal property acquired alter April 27, 2001 may become Third
Party Equipment.
3. INTENTIONALLY OMITTED.
4. CONDITION TO EFFECTIVENESS. The effectiveness
of this Amendment is conditioned upon the delivery by Borrower to Lender of
the following:
(a) A certificate of the Secretary or the
Assistant Secretary of Borrower, in form and substance satisfactory to
Lender, certifying the adoption of resolutions of the Board of Directors of
Borrower approving this Second Amendment and the transactions contemplated
hereby (including the documents described in Section 4(b) and 4(c) below).
(b) The Amendment to Secured Promissory Note
No. 2 duly executed and delivered by Borrower.
(c) The Amendment to Secured Promissory Note
No. 3 duly executed and delivered by Borrower.
(d) This Second Amendment duly executed and
delivered by Borrower.
5. EFFECT OF SECOND AMENDMENT. On and after the date
hereof, each reference to the Loan Agreement in the Loan Agreement or in any
other document shall mean the Loan Agreement as amended by this Second
Amendment. The execution, delivery and effectiveness of this Second Amendment
shall not operate as a waiver of any right, power, or remedy of Lender, nor
constitute a waiver of any provision of the Loan Agreement.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to Lender that:
-4-
(a) (i) Borrower is a corporation duly
organized, validly existing and in good standing under the laws of
California and is duly qualified and authorized to do business in the
state(s) where Collateral is or will be located; (ii) Borrower has the full
corporate power, authority and legal right and has obtained all necessary
approvals, consents and given all notices to execute and deliver this Second
Amendment, the Amendment to Secured Promissory Note No. 2 and the Amendment
to Secured Promissory Note No. 3 and perform the terms thereof; (iii) there
is no action, proceeding or claim pending or, insofar as Borrower knows,
threatened against Borrower or any of its subsidiaries before any court or
administrative agency which might have a materially adverse effect on the
business, condition or operations of Borrower or such subsidiary; and (iv)
this Second Amendment, the Amendment to Secured Promissory Note No. 2 and the
Amendment to Secured Promissory Note No. 3 have been duly executed and
delivered by Borrower and constitutes the valid, binding and enforceable
obligation of Borrower.
(b) No Default or Event of Default under the
Loan Agreement has occurred and is continuing.
7. FULL FORCE AND EFFECT. Except as amended above,
the Loan Agreement remains in full force and effect.
8. HEADINGS. Headings in this Second Amendment are
for convenience of reference only and are not part of the substance hereof.
9. GOVERNING LAW. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of
California without reference to conflicts of law rules.
10. COUNTERPARTS. This Second Amendment may be
executed in any number of identical counterparts, any set of which
signed by all of the parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
[Remainder of Page Left Blank Intentionally.]
-5-
IN WITNESS WHEREOF, Borrower and Lender have caused this
Second Amendment to be executed as of the day and year first above written.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Title: President and CEO
----------------------------------
MMC/GATX PARTNERS NO. I
By: GATX Capital Corporation, its
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: VP
----------------------------------
-6-
EXHIBIT A
AMENDMENT TO SECURED PROMISSORY NOTE NO. 2
This Amendment to Secured Promissory Note No. 2 (this "Amendment")
amends that certain Secured Promissory Note dated May 12, 2000 (the "Original
Note") made by Digirad Corporation ("Borrower") payable to the order of MMC/GATX
Partnership No. I, a California general partnership ("Lender") in the original
principal amount of One Million Dollars ($1,000,000). Unless otherwise defined
in this Amendment, capitalized terms have the meaning given such terms in the
Original Note.
Borrower and Lender agree that commencing December 1, 2000 (in addition
to the payments previously made by Borrower through and including November 1,
2000), Borrower shall make twenty-four (24) equal monthly payments of principal
plus accrued interest on the outstanding principal plus accrued interest on the
outstanding principal amount of the Loan in the amount of $_____________.
Except as specifically amended by this Amendment the Original Note
remains in full force and effect.
Dated: _______________
DIGIRAD CORPORATION MMC/GATX PARTNERSHIP NO. I
By: GATX Capital Corporation,
Its general partner
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
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DIGIRAD CORPORATION
AMORTIZATION SCHEDULE #2 - REVISED
Loan Amount: $885,423
Loan Interest Rate: 14.40%
Original Funding Date: 5/16/00
Revised: 11/8/00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
PAYMENT PRINCIPAL INTEREST TOTAL DEBT PRINCIPAL
NUMBER DATE REPAYMENT PAYMENT SERVICE BALANCE
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
0** 11/08/00 0.00 $ 0.00 $ 0.00 $885,422.95
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1 12/01/00 32,054.13 $10,625.08 $42,679.21 $853,368.82
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2 01/01/01 32,438.78 $10,240.43 $42,679.21 $820,930.03
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
3 02/01/01 32,828.05 $ 9,851.16 $42,679.21 $788,101.98
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
4 03/01/01 33,221.99 $ 9,457.22 $42,679.21 $754,880.00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
5 04/01/01 33,620.65 $ 9,058.56 $42,679.21 $721,259.35
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
6 05/01/01 34,024.10 $ 8,655.11 $42,679.21 $687,235.25
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
7 06/01/01 34,432.39 $ 8,246.82 $42,679.21 $652,802.86
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
8 07/01/01 34,845.58 $ 7,833.63 $42,679.21 $617,957.28
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
9 08/01/01 35,263.72 $ 7,415.49 $42,679.21 $582,693.56
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
10 09/01/01 35,686.89 $ 6,992.32 $42,679.21 $547,006.67
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
11 10/01/01 36,115.13 $ 6,564.08 $42,679.21 $510,891.54
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
12 11/01/01 36,548.51 $ 6,130.70 $42,679.21 $474,343.03
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
13 12/01/01 36,987.09 $ 5,692.12 $42,679.21 $437,355.94
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
14 01/01/02 37,430.94 $ 5,248.27 $42,679.21 $399,925.00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
15 02/01/02 37,880.11 $ 4,799.10 $42,679.21 $362,044.89
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
16 03/01/02 38,334.67 $ 4,344.54 $42,679.21 $323,710.22
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
17 04/01/02 38,794.69 $ 3,884.52 $42,679.21 $284,915.53
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
18 05/01/02 39,260.22 $ 3,418.99 $42,679.21 $245,655.31
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
19 06/01/02 39,731.35 $ 2,947.86 $42,679.21 $205,923.96
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
20 07/01/02 40,208.12 $ 2,471.09 $42,679.21 $165,715.84
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
21 08/01/02 40,690.62 $ 1,988.59 $42,679.21 $125,025.22
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
22 09/01/02 41,178.91 $ 1,500.30 $42,679.21 $ 83,846.31
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
23 10/01/02 41,673.05 $ 1,006.16 $42,679.21 $ 42,173.26
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
24 11/01/02 42,173.26 $ 506.08 $42,679.34 $ 0.00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
** ASSUMES NOVEMBER 1, 2000 PAYMENT HAS BEEN MADE.
EXHIBIT B
AMENDMENT TO SECURED PROMISSORY NOTE NO. 3
This Amendment to Secured Promissory Note No. 3 (this "Amendment")
amends that certain Secured Promissory Note dated August 21, 2000 (the "Original
Note") made by Digirad Corporation ("Borrower") payable to the order of MMC/GATX
Partnership No. I, a California general partnership ("Lender") in the original
principal amount of One Million Dollars ($1,000,000). Unless otherwise defined
in this Amendment, capitalized terms have the meaning given such terms in the
Original Note.
Borrower and Lender agree that commencing December 1, 2000 (in addition
to the payments previously made by Borrower through and including November 1,
2000), Borrower shall make twenty-four (24) equal monthly payments of principal
plus accrued interest on the outstanding principal plus accrued interest on the
outstanding principal amount of the Loan in the amount of $ _______________.
Except as specifically amended by this Amendment the Original Note
remains in full force and effect.
Dated: __________________
DIGIRAD CORPORATION MMC/GATX PARTNERSHIP NO. I
By: GATX Capital Corporation,
Its general partner
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
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DIGIRAD CORPORATION
AMORTIZATION SCHEDULE #3 - REVISED
Loan Amount: $954,511.14
Loan Interest Rate: 13.70%
Original Funding Date: 8/15/00
Revised: 11/8/00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
PAYMENT NEW PRINCIPAL INTEREST TOTAL DEBT PRINCIPAL
NUMBER DATE REPAYMENT PAYMENT SERVICE BALANCE
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
0** 11/08/00 0.00 $ 0.00 $ 0.00 $954,511.14
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1 12/01/00 34,796.33 $10,897.34 $45,693.67 $919,714.81
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2 01/01/01 35,193.59 $10,500.08 $45,693.67 $884,521.21
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
3 02/01/01 35,595.39 $10,098.28 $45,693.67 $848,925.83
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
4 03/01/01 36,001.77 $ 9,691.90 $45,693.67 $812,924.06
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
5 04/01/01 36,412.79 $ 9,280.88 $45,693.67 $776,511.27
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
6 05/01/01 36,828.50 $ 8,865.17 $45,693.67 $739,682.77
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
7 06/01/01 37,248.96 $ 8,444.71 $45,693.67 $702,433.81
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
8 07/01/01 37,674.22 $ 8,019.45 $45,693.67 $664,759.60
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
9 08/01/01 38,104.33 $ 7,589.34 $45,693.67 $626,655.27
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
10 09/01/01 38,539.36 $ 7,154.31 $45,693.67 $588,115.91
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
11 10/01/01 38,979.35 $ 6,714.32 $45,693.67 $549,136.56
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
12 11/01/01 39,424.36 $ 6,269.31 $45,693.67 $509,712.20
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
13 12/01/01 39,874.46 $ 5,819.21 $45,693.67 $469,837.75
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
14 01/01/02 40,329.69 $ 5,363.98 $45,693.67 $429,508.06
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
15 02/01/02 40,790.12 $ 4,903.55 $45,693.67 $388,717.94
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
16 03/01/02 41,255.81 $ 4,437.66 $45,693.67 $347,462.13
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
17 04/01/02 41,726.81 $ 3,966.86 $45,693.67 $305,735.32
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
18 05/01/02 42,203.19 $ 3,490.48 $45,693.67 $263,532.13
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
19 06/01/02 42,685.01 $ 3,008.66 $45,693.87 $220,847.12
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
20 07/01/02 43,172.33 $ 2,521.34 $45,693.67 $177,674.79
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
21 08/01/02 43,665.22 $ 2,028.45 $45,693.67 $134,009.57
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
22 09/01/02 44,163.73 $ 1,529.94 $45,693.67 $ 89,845.84
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
23 10/01/02 44,667.93 $ 1,025.74 $45,693.67 $ 45,177.91
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
24 11/01/02 45,177.91 $ 515.78 $45,693.69 $ .00
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
**ASSUMES NOVEMBER 1, 2000 PAYMENT HAS BEEN MADE
THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Third
Amendment"), dated as of May 2, 2001, is entered into by and between DIGIRAD
CORPORATION, a Delaware corporation ("Borrower"), and MMC/GATX PARTNERSHIP
NO. I, a California general partnership ("Lender").
RECITALS
A. Borrower and Lender are parties to a Loan and Security
Agreement, dated as of October 27, 1999, as amended by a First Amendment to Loan
and Security Agreement dated as of August 14, 2000, as further amended by a
Second Amendment to Loan and Security Agreement dated as of November 27, 2000
(as amended, the "Loan Agreement") pursuant to which Lender has provided
financing.
B. Borrower has now requested that Lender consent to certain
transactions. Lender is willing to do so upon the terms and conditions set
forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS; INTERPRETATION. Unless otherwise defined
herein, all capitalized terms used herein and defined in the Loan Agreement
shall have the respective meanings given to those terms in the Loan Agreement.
Other rules of construction set forth in the Loan Agreement, to the extent not
inconsistent with this Third Amendment, apply to this Third Amendment and are
hereby incorporated by reference.
2. AMENDMENTS TO LOAN AGREEMENT.
(a) Sub-clause (e) of the definition of
Permitted Indebtedness in Section 1.01 of the Loan Agreement shall be
amended to read in its entirety as follows:
(e) Indebtedness consisting of a revolving credit
facility in an aggregate principal amount not
exceeding the lessor of: (1) $4,300,000, or (2) a
borrowing base calculated as a percentage (not
exceeding 100%) of qualified accounts receivable plus
eligible inventory; and
(b) The address of Lender in Section 10.05(a)
of the Loan Agreement will be changed to read as follows:
-1-
MMC/GATX Partnership No. I
C/o GATX Ventures, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Contract Administration
PH: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Notwithstanding sub-clause (e) of the
definition of Permitted Liens in Section 1.01 of the Loan Agreement and
Section 5.05 of the Loan Agreement, Lender hereby consents to Borrower's
financing up to $300,000 of equipment (including $200,000 for a phone system)
with a separate lender.
4. CONDITION TO EFFECTIVENESS. The effectiveness of
this Third Amendment is conditioned upon the delivery by Borrower to Lender
of the following:
(a) A fee in the amount of Twenty-Five
Thousand Dollars ($25,000) which shall be retained as earned by Lender.
(b) The First Amendment to Intercreditor
Agreement, in the form of Exhibit A hereto executed by Silicon Valley Bank.
(c) This Third Amendment duly executed and
delivered by Borrower.
5. EFFECT OF THIRD AMENDMENT. On and after the date
hereof, each reference to the Loan Agreement in the Loan Agreement or in any
other document shall mean the Loan Agreement as amended by this Third Amendment.
The execution, delivery and effectiveness of this Third Amendment shall not
operate as a waiver of any right, power, or remedy of Lender, nor constitute a
waiver of any provision of the Loan Agreement.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to Lender that:
(a) (i) Borrower is a corporation duly
organized, validly existing and in good standing under the laws of California
and is duly qualified and authorized to do business in the state(s) where
Collateral is or will be located; (ii) Borrower has the full corporate power,
authority and legal right and has obtained all necessary approvals, consents
and given all notices to execute and deliver this Third Amendment and perform
the terms hereof; (iii) there is no action, proceeding or claim pending or,
insofar as Borrower knows, threatened against Borrower or any of its
subsidiaries before any court or administrative agency which might have a
materially adverse effect on the business, condition or operations of
Borrower or such subsidiary; and (iv) this Third Amendment has been duly
executed and delivered by Borrower and constitutes the valid, binding and
enforceable obligation of Borrower.
(b) No Default or Event of Default under the
Loan Agreement has occurred and is continuing.
-2-
7. FULL FORCE AND EFFECT. Except as amended above,
the Loan Agreement remains in full force and effect.
8. HEADINGS. Headings in this Third Amendment are
for convenience of reference only and are not part of the substance hereof.
9. GOVERNING LAW. This Third Amendment shall be
governed by and construed in accordance with the laws of the State of
California without reference to conflicts of law rules.
10. COUNTERPARTS. This Third Amendment may be
executed in any number of identical counterparts, any set of which signed by
all of the parties hereto shall be deemed to constitute a complete, executed
original for all purposes.
[Remainder of Page Left Blank Intentionally.]
-3-
IN WITNESS WHEREOF, Borrower and Lender have caused this Third
Amendment to be executed as of the day and year first above written.
DIGIRAD CORPORATION
By: /s/ ▇▇▇▇▇ Mehrbery
---------------------------
Name: ▇▇▇▇▇ Mehrbery
-------------------------
Title: CFO
------------------------
MMC/GATX PARTNERSHIP NO. I
By: GATX Capital Corporation, its
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Title: VP
------------------------
-4-
EXHIBIT A
FIRST AMENDMENT TO INTERCREDITOR AGREEMENT
This First Amendment to Intercreditor Agreement (this "Amendment")
amends that certain Intercreditor Agreement dated as of February, 2000 the
(Agreement") between MMC/GATX Partnership No. I (MMC/GATX") and Silicon Valley
Bank ("Bank"). Unless otherwise defined in this Amendment, capitalized terms
have the meaning given such terms in the Agreement.
MMC/GATX and Bank agree that the term "$2,500,000" in the first
sentence of Recital B and the third sentence of Section 1.3 shall be replaced
with the term "$4,300,000." In addition, the address for notices to MMC/GATX in
Section 5 shall be changed to read as follows:
MMC/GATX Partnership No. I
C/o GATX Ventures, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Contract Administration
PH: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Except as specifically amended by this Amendment the Agreement remains
in full force and effect.
Dated: May __, 2001
SILICON VALLEY BANK MMC/GATX PARTNERSHIP NO. I
By: GATX Capital Corporation,
Its general partner
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
-1-