EXHIBIT 10.14
CONVERTIBLE PROMISSORY NOTE AND
WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (the
"Agreement") is made as of September 29, 2000, among Digirad Corporation, a
Delaware corporation (the "Company"), and each of the investors listed on
EXHIBIT A attached hereto (each individually, an "Investor" and collectively,
the "Investors").
RECITALS
WHEREAS, each Investor desires to purchase from the Company, and the
Company desires to issue to each Investor, a Convertible Promissory Note in the
form attached hereto as EXHIBIT B (each a "Note," and collectively the "Notes")
in the principal amount set forth opposite the Investor's name on EXHIBIT A
attached hereto under the heading "Principal Amount of Notes"; and
WHEREAS, each Investor desires to purchase from the Company, and the
Company desires to issue to each Investor, a Warrant in the form attached hereto
as EXHIBIT C to purchase a certain number of shares of the Company's Preferred
Stock on the terms and conditions set forth in this Agreement and the Warrant
(each a "Warrant," and collectively the "Warrants").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
1.1 PURCHASE AND SALE OF NOTES AND WARRANTS. Subject to
the terms and conditions of this Agreement, each Investor agrees to purchase
at the Closing and the Company agrees to sell and issue to each Investor at
the Closing (a) a Note in the principal amount set forth opposite that
Investor's name on EXHIBIT A attached hereto under the heading "Principal
Amount of Note" at a price equal to 100% of the principal amount thereof and
(b) a Warrant to purchase that number of shares of the Company's Preferred
Stock as set forth in such Warrant.
1.2 CLOSING. The purchase and sale of the Notes and
Warrants shall take place at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP,
00000 Xx Xxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx at 10:00 a.m. on September 29,
2000, or at such other time and place as the Company and Investors shall
mutually agree in writing (which time and place are designated as the
"Closing"). At the Closing, the Company shall deliver to each Investor
participating in the Closing, the Note and Warrant that such Investor is
purchasing against payment of the Principal Amount of Note set forth across
from such Investor's name on attached EXHIBIT A by check or wire transfer of
same day funds.
1.3 CONVERSION OF NOTE. Each Note may be converted into
shares of the Company's equity securities under the terms and conditions set
forth in Section 2 of each Note.
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1.4 ALLOCATION OF PURCHASE PRICE TO WARRANT. The Company
hereby allocates to each Warrant a purchase price of $0.001 for each share of
Preferred Stock into which such Warrant is exercisable.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to and for the benefit of each Investor, with
knowledge that each Investor is relying thereon in entering into this
Agreement and purchasing the Note and Warrant from the Company, that the
following are true and correct:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so
to qualify would have a material adverse effect on the operation of its
business or properties.
2.2 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Notes, the
Warrants and the performance of all obligations of the Company thereunder has
been taken or will be taken prior to the Closing, and this Agreement, the
Notes and the Warrants constitute valid and legally binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies and (c) to the extent the indemnification provisions, if
any, contained in any of such documents may be limited by applicable federal
or state securities laws.
2.3 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement, except for the filing
pursuant to Section 25102(f) of the California Corporate Securities Law of
1968, as amended, and the rules thereunder, which filing shall be effected by
the Company within fifteen (15) days of the sale of the Notes and Warrants
pursuant to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants to and for the benefit of the Company, with
knowledge that the Company is relying thereon in entering into this Agreement
and issuing the Note and Warrant to such Investor, as follows:
3.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. By each Investor's
execution of this Agreement, such Investor hereby confirms that the Note and
Warrant to be received by such Investor and the Preferred Stock issuable upon
conversion of the Note and exercise of the Warrant (collectively, the
"Securities") shall be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in,
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or otherwise distributing the same. By executing this Agreement, each
Investor further represents that such Investor 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 Securities. Each Investor represents that it has full power and
authority to enter into this Agreement.
3.2 INVESTMENT EXPERIENCE. Each Investor is an investor 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 investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the
Securities.
3.3 ACCREDITED INVESTOR. Each Investor is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as now in
effect.
3.4 RESTRICTED SECURITIES. Each Investor understands that
the Securities it is and shall be purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, each
Investor represents that it is familiar with Rule 144 promulgated under the
Act, as now in effect, and understands the resale limitations imposed thereby
and by the Act.
3.5 LEGENDS. Each Investor understands that the
certificates evidencing the Securities may bear one or all of the following
legends:
(a) "The securities evidenced by this certificate
have not been registered under the Securities Act of 1933, as amended (the
"Act") or the securities laws of any state of the United States. The
securities evidenced by this certificate may not be offered, sold or
transferred for value directly or indirectly, in the absence of such
registration under the Act and qualification under applicable state laws, or
pursuant to an exemption from registration under the Act and qualification
under applicable state laws, the availability of which is to be established
to the reasonable satisfaction of the Company."
(b) Any legend required by the laws of any state.
4. RESTRICTIONS ON DISPOSITION. Without in any way limiting the
representations set forth in Section 3 above, each Investor further agrees
not to make any disposition of all or any portion of the Securities unless
and until the transferee has agreed in writing for the benefit of the Company
to be bound by this Section 4 and such Investor receives the prior written
consent of the Company, and in addition thereto, one of the following
conditions is satisfied:
4.1 SECURITIES REGISTERED. There is then in effect a
registration statement under the Act covering such proposed disposition and
such disposition is made in accordance with such registration statement.
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4.2 REGISTRATION NOT REQUIRED. Such Investor shall have
(i) notified the Company of the proposed disposition and shall have furnished
the Company with a detailed statement of the circumstances surrounding the
proposed disposition, and (ii) if reasonably requested by the Company,
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
securities under the Act. No opinion of counsel will be required for sales
made in accordance with Rule 144 under the Act, except in unusual
circumstances.
4.3 OTHER PERMITTED TRANSFERS. Notwithstanding the
provisions of Sections 4.1 and 4.2 above, no such registration statement or
opinion of counsel shall be necessary for a transfer by an Investor which is
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate
succession of any partner to his spouse or to the siblings, lineal
descendants including adopted children or ancestors of such partner or his
spouse, if, prior to such transfer, the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he were the original
Investor hereunder, or to an "affiliate" of an Investor as
4.4 that term is defined in Rule 405 promulgated by the
Securities and Exchange Commission under the Act.
5. CALIFORNIA COMMISSIONER OF CORPORATIONS.
5.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
6. GENERAL PROVISIONS.
6.1 VALID ISSUANCE OF PREFERRED STOCK. The Company hereby
covenants that the shares of Preferred Stock of the Company issuable upon the
conversion of the Notes or the exercise of the Warrants which may be
purchased by the Investors pursuant to this Agreement (i) have been or will
be duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Notes and Warrants, and (ii) shall be duly and validly
issued, fully paid and nonassessable, and issued in compliance with all
applicable securities laws, as presently in effect, of the United States and
each of the states whose securities laws govern the issuance of the Notes and
Warrants pursuant to this Agreement.
6.2 CONSTRUCTION. This Agreement shall be governed,
construed and enforced in accordance with the internal laws of the State of
California, without giving effect to its conflicts of laws principles.
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6.3 ENTIRE AGREEMENT. This Agreement, together with the
agreements and documents referred to herein, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous negotiations, agreements and
understandings.
6.4 NOTICES. All payments, notices, requests, demands and
other communications hereunder shall be in writing and shall be deemed to
have been duly given at the earlier of (i) the time of actual delivery or
(ii) on the third business day following the date deposited with the United
States Postal Service, postage prepaid, certified with return receipt
requested, to the parties at the following addresses or at such other address
as shall be given in writing by a party to the other parties:
Investors: At the address set forth below their
names on EXHIBIT A attached hereto.
The Company: Digirad Corporation
0000 Xxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attn: Chief Executive Officer
6.5 SUCCESSORS AND ASSIGNS. This Agreement, and the rights
and obligations of each of the parties hereunder, may not be assigned by any
Investor without the prior written consent of the Company. Subject to the
foregoing sentence, this Agreement shall inure to the benefit of, and shall
be binding upon, the parties and their successors and assigns.
6.6 SEVERABILITY. If any term, covenant or condition of
this Agreement is held to be invalid, void or otherwise unenforceable by any
court of competent jurisdiction, the remainder of this Agreement shall not be
affected thereby and each term, covenant and condition of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
6.7 MODIFICATION. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least fifty-one percent (51%) of the aggregate principal amount of the Notes
then outstanding. Any amendment or waiver effected in accordance with this
Section 6.7 shall be binding upon all parties to this Agreement, including
without limitation, any Investors who may not have executed such amendment or
waiver, and each future holder of any equity security in to which the Notes
are convertible and/or any Preferred Stock that the holder of any Warrant is
entitled to receive upon exercise of such Warrant.
6.8 ATTORNEY'S FEES. If any action of law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to an award of its reasonable attorneys' fees, costs
and disbursements in addition to any other relief to which such party may be
entitled.
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6.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COMPANY: DIGIRAD CORPORATION
a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxxx
-------------------------------------------
Xxxxx Xxxxxxxxxx,
President
INVESTORS: XXXXXXXXX CAPITAL PARTNERS, L.P. III
By: Xxxxxxxxx Associates, L.P.
its General Counsel
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxx
its General Partner
OCEAN AVENUE INVESTORS, LLC
By: /s/ illegible
-------------------------------------------
Name: Ocean Avenue Investors, LLC
-------------------------------------------
Anacapa Fund
Its: Manager
-------------------------------------------
[SIGNATURE PAGE TO THE CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT]
VECTOR LATER-STAGE EQUITY FUND II (QP), LP.
By: Vector Fund Management II, L.L.C.
its General Partner
By: /s/ Xxxxxxx Xxxx
--------------------------------------------
Name: Xxxxxxx Xxxx, M.D.
------------------------------------------
Title: Managing Director
-----------------------------------------
VECTOR LATER-STAGE EQUITY FUND II, LP.
By: Vector Fund Management II, L.L.C.
its General Partner
By: /s/ Xxxxxxx Xxxx
--------------------------------------------
Name: Xxxxxxx Xxxx, M.D.
------------------------------------------
Title: Managing Director
-----------------------------------------
[SIGNATURE PAGE TO THE CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT]
XXXXXXXXX CAPITAL PARTNERS, X.X. XX
By: Xxxxxxxxx Associates, L.P.
its General Counsel
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxx
its General Partner
[SIGNATURE PAGE TO THE CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT]
EXHIBIT A
SCHEDULE OF INVESTORS
PRINCIPAL AMOUNT PURCHASE PRICE ALLOCATED TO
INVESTOR NAME AND ADDRESS OF NOTES WARRANTS
-------------------------------------------------------- ---------------- ---------------------------
Xxxxxxxxx Capital Partners, L.P. III $300,000.00 $300.00
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Xxxxxxxxx Capital Partners, X.X. XX $700,000.00 $700.00
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Ocean Avenue Investors, LLC $500,000.00 $500.00
-Anacapa Fund I
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Vector Later-Stage Equity Fund II (QP), L.P. $375,000.00 $375.00
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxx
Vector Later-Stage Equity Fund II, L.P. $125,000.00 $125.00
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxx
TOTAL $2,000,000.00 $2,000.00
A-1
EXHIBIT B
FORM OF CONVERTIBLE PROMISSORY NOTE
B-1
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR
ITS OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE
MADE A PUBLIC DISTRIBUTION OF ALL OR ANY PORTION THEREOF. SUCH SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
$________ San Diego, CA
September 29, 2000
DIGIRAD CORPORATION
CONVERTIBLE PROMISSORY NOTE
Digirad Corporation, a Delaware corporation (the "Company"), for value
received, hereby promises to pay to _____________ ("Holder"), the principal
amount of __________ ($_______) (the "Issue Price"), from the date hereof until
paid or converted in accordance with the terms hereof.
1. CONVERTIBLE PROMISSORY NOTE ("NOTE").
1.1 NOTE AND WARRANT PURCHASE AGREEMENT. This Note is one of a
series of Convertible Promissory Notes (collectively, the "Notes") issued by the
Company in connection with that certain
Convertible Promissory Note and Warrant
Purchase Agreement dated as of the date hereof (the "Agreement") by and among
the Company, Holder and the holders of the other Notes, and is subject to, and
Holder and the Company shall be bound by, all the terms, conditions and
provisions of the Agreement.
2. CONVERSION.
2.1 CONVERSION. If the Company completes a subsequent equity
financing on or before June 30, 2001 in which the Company receives in cash
proceeds from the sale of shares of its capital stock an amount equal to or
greater than five million dollars ($5,000,000) (a "Qualified Equity Financing"),
the Issue Price of this Note (the "Conversion Amount") shall be converted into
that number of fully paid and nonassessable shares of the equity security of the
Company sold in the Qualified Equity Financing (the "New Equity Shares") as is
equal to the
Conversion Amount divided by the per share purchase price of the New Equity
Shares (the "New Equity Per Share Price"), with any fraction of a share to be
rounded up to the next whole share of the New Equity Shares. The Holder shall
have no right to negotiate any of the terms or conditions upon which the New
Equity Shares will be issued, which negotiation shall be conducted solely
among the Company and the purchasers of the New Equity Shares.
Notwithstanding the foregoing, the following provision shall apply:
(a) If on or before June 30, 2001 (a) the
Company has not yet completed a Qualified Equity Financing, and (b) the Company
is acquired, whether by means of a merger, sale of all or substantially all of
the assets of the Company, sale of more than fifty percent (50%) of the
Company's outstanding securities or otherwise (an "Acquisition"), the Company
may elect to convert the Conversion Amount into that number of fully paid and
nonassessable shares of the Series E Preferred Stock of the Company as is equal
to the Conversion Amount divided by $3.036 per share (the "Acquisition Per Share
Price"), with any fraction of a share to be rounded up to the next whole share
of Series E Preferred Stock.
(b) If on July 1, 2001 (a) the Company has not
yet completed a Qualified Equity Financing or (b) completed an Acquisition, the
Conversion Amount shall be converted into that number of fully paid and
nonassessable shares of the Company's Series C Preferred Stock as is equal to
the Conversion Amount divided by $1.25 per share, with any fraction of a share
to be rounded up to the next whole share of Series C Preferred Stock.
2.2 CONVERSION PROCEDURE. Written notice of any applicable conversion
event heretofore described in Section 2.1 (each, a "Conversion Event") shall be
delivered to the Holder of this Note at least ten (10) days in advance of the
applicable Conversion Event (the "Conversion Date"), at the address last shown
on the records of the Company for the Holder or given by the Holder to the
Company for the purpose of notice (or, if no such address appears or is given,
at the place where the principal executive office or residence of the Holder is
located), notifying the Holder of the Conversion Event, including specifying (i)
the Conversion Amount (calculated as of the Conversion Date), (ii) the New
Equity Per Share Price, if applicable, (iii) a term sheet setting forth the
rights, preferences, privileges and terms and conditions of issuance and sale of
the New Equity Shares, if applicable, and (iv) the Conversion Date. The Note
shall automatically convert upon the Conversion Event without any further action
by the Holder hereof.
2.3 TERMINATION OF RIGHTS UPON CONVERSION. Conversion shall be
deemed effective upon the Conversion Event, and the Holder of this Note shall
have no further rights under this Note, whether or not this Note is surrendered.
2.4 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable
after any Conversion Event, the Company at its expense will issue and deliver to
the Holder of this Note a certificate or certificates evidencing the number of
full shares of the Company's capital stock issuable to Holder upon any such
Conversion Event.
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3. MISCELLANEOUS.
3.1 TRANSFER OF NOTE. This Note shall not be
transferable or assignable in any manner by the Holder without the express
written consent of the Company, and any such attempted disposition of this
Note or any portion hereof shall be of no force or effect unless such
disposition is in compliance with the Agreement.
3.2 TITLES AND SUBTITLES. The titles and subtitles
used in this Note are for convenience only and are not to be considered in
construing or interpreting this Note.
3.3 NOTICES. Any notice required or permitted under
this Note shall be given in writing and in accordance with Section 6.4 of the
Agreement (for purposes of which the term "Investor" shall mean the Holder
hereunder), except as otherwise expressly provided in this Note.
3.4 ATTORNEYS' FEES. If any action at law or in
equity is necessary to enforce or interpret the terms of this Note, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which such party may be
entitled.
3.5 AMENDMENTS AND WAIVERS. Other than the right to
the payment of the Issue Price, which may only be amended or waived with the
written consent of the Holder, any other term of this Note may be amended and
the observance of any other term of this Note may be waived (either generally
or in a particular instance and either retroactively or prospectively), with
the written consent of the Company and the holders of at least fifty-one
percent (51%) of the aggregate principal amount of the Notes then outstanding
and in accordance with the Agreement. Any amendment or waiver effected in
accordance with this Section 3.5 shall be binding upon the Holder of this
Note (and of any securities into which this Note is convertible), each future
holder of all such securities and the Company.
3.6 SEVERABILITY. If one or more provisions of this
Note are held to be unenforceable under applicable law, such provision shall
be excluded from this Note and the balance of the Note shall be interpreted
as if such provision were so excluded and shall be enforceable in accordance
with its terms.
3.7 GOVERNING LAW. This Note shall be governed by and
construed and enforced in accordance with the laws of the State of
California, without giving effect to its conflicts of laws principles.
3.8 MARKET STAND-OFF AGREEMENT. The Holder and any
future transferee acknowledge and agree that, upon the conversion of this
Note, Holder or any future transferee shall be bound by the market standoff
provision, agreed to between the Company and the investors in the Qualified
Equity Financing. In the absence of such a market standoff provision the
Holder and any future transferee acknowledge and agree that upon conversion
of this Note, the following provisions shall apply to the rights of the
Holder and any future transferee as a holder of Common Stock: During the
period of duration specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, the Holder or any
future transferee will not, to the extent requested by the Company and such
underwriter, directly or indirectly sell,
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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 such
agreement shall not exceed one hundred eighty (180) days.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Preferred
Stock or Common Stock of the Holder or any future transferee (and the shares
or securities of every other person subject to the foregoing restriction)
until the end of such period.
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3.9 COUNTERPARTS. This Note may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Date: September 29, 2000
DIGIRAD CORPORATION,
a Delaware corporation
By:
-------------------------------------
Xxxxx Xxxxxxxxxx
President
ACKNOWLEDGED AND AGREED:
By:
------------------------------------
Title:
---------------------------------
5
EXHIBIT C
FORM OF WARRANT TO PURCHASE PREFERRED STOCK
C-1
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR
ITS OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE
MADE A PUBLIC DISTRIBUTION OF ALL OR ANY PORTION THEREOF. SUCH SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
PS-_____ Warrant to Purchase
Shares of Preferred Stock
(Subject to Adjustment)
DIGIRAD CORPORATION
PREFERRED STOCK PURCHASE WARRANT
VOID AFTER SEPTEMBER 29, 2005
Digirad Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, ________________________ (including any
successors and assigns, "Holder"), is entitled, and subject to the terms set
forth below, to purchase from the Company at any time (A) after the earlier to
occur of (i) the completion of a Qualified Equity Financing (as defined in the
Notes), (ii) ten (10) days prior to the completion of an Acquisition (as defined
in the Notes) or (iii) July 1, 2001, and (B) before the earlier to occur of (i)
5:00 PM Pacific time, on September 29, 2005 (the "Expiration Date"), (ii) the
initial underwritten public offering of the Company's Common Stock or (iii) the
completion of an Acquisition, shares of Preferred Stock of the Company, with the
number of shares and the exercise price of the Warrant to be determined as
follows:
(a) If the Company completes a Qualified Equity Financing or
Acquisition on or before January 1, 2001, then (i) the exercise price of the
Warrant will be the New Equity Per Share Price or Acquisition Per Share Price,
as the case may be, and (ii) this Warrant will be exercisable into that
aggregate number of New Equity Shares or Acquisition Shares, as the case may be,
equal to (A) ten percent (10%) of the Issue Price of the Note issued to the
Holder divided by (B) the New Equity Per Share Price or the Acquisition Per
Share Price, as the case may be.
(b) If the Company completes a Qualified Equity Financing or
Acquisition between January 2, 2001 and on or before February 1, 2001, then (i)
the exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will be
exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) twenty percent (20%) of the Issue Price
of the Note
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issued to the Holder divided by (B) the New Equity Per Share Price or the
Acquisition Per Share Price, as the case may be.
(c) If the Company completes a Qualified Equity Financing or
Acquisition between February 2, 2001 and on or before March 1, 2001, then (i)
the exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will
be exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) thirty percent (30%) of the Issue
Price of the Note issued to the Holder divided by (B) the New Equity Per
Share Price or the Acquisition Per Share Price, as the case may be.
(d) If the Company completes a Qualified Equity Financing or
Acquisition between March 2, 2001 and on or before June 30, 2001, then (i)
the exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will
be exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) forty percent (40%) of the Issue
Price of the Note issued to the Holder divided by (B) the New Equity Per
Share Price or the Acquisition Per Share Price, as the case may be.
(e) In the event the Company has not completed a Qualified Equity
Financing or Acquisition as of July 1, 2001, then (i) the exercise price of
the Warrant will be $3.036 per share, and (ii) this Warrant will be
exercisable into that aggregate number of the Company's Series E Preferred
Stock equal to (A) forty percent (40%) of the Issue Price of the Note issued
to the Holder divided by (B) $3.036 per share.
Holder acknowledges that each of the warrant thresholds heretofore
described in sections (a) through (e) are not cumulative and that upon each
increase in the amount of warrants to be issue to Holder, Holder is receiving
the maximum aggregate amount of warrants to which it is entitled. (For
example, if the Company completes a Qualified Equity Financing as of February
4, 2001, Holder is entitled to a MAXIMUM aggregate of number of New Equity
Shares equal to thirty percent (30%) of the Issue Price of the Note issued to
the Holder divided by the Per Share Price.)
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Preferred Stock" shall mean the Preferred Stock of the
Company, and any other securities or property of the Company or of any other
person (corporate or otherwise) which the holder of this Warrant at any time
shall be entitled to receive on the exercise hereof, in lieu of or in
addition to Preferred Stock, or which at any time shall be issuable in
exchange for or in replacement of Preferred Stock.
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(c) The term "Purchase Agreement" shall mean the
Convertible
Promissory Note and Warrant Purchase Agreement dated as of the date hereof by
and among the Company, the Holder and the purchasers of the other Warrants.
(d) The term "Warrant" shall mean one of a series of warrants issued
pursuant to the Purchase Agreement (which warrants together are designated, the
"Warrants").
1. INITIAL EXERCISE DATE; EXPIRATION. This Warrant may be
exercised at any time within the time periods described in the preamble and
Section 5.3 (the "Exercise Period").
2. EXERCISE OF WARRANT; PARTIAL EXERCISE. This Warrant may be
exercised in full by the Holder by surrender of this Warrant, together with
the Holder's duly executed form of subscription attached hereto as SCHEDULE
1, to the Company at its principal office, accompanied by payment, in cash or
by certified or official bank check payable to the order of the Company, of
the aggregate exercise price (as determined above) of the shares of Preferred
Stock to be purchased hereunder. The exercise of this Warrant pursuant to
this Section 2 shall be deemed to have been effected immediately prior to the
close of business on the business day on which this Warrant is surrendered to
the Company as provided in this Section 2, and at such time the person in
whose name any certificate for shares of Preferred Stock shall be issuable
upon such exercise shall be deemed to be the record holder of such Preferred
Stock for all purposes. As soon as practicable after the exercise of this
Warrant, the Company at its expense will cause to be issued in the name of
and delivered to the Holder, or as the Holder may direct, a certificate or
certificates for the number of fully paid and nonassessable full shares of
Preferred Stock to which the Holder shall be entitled on such exercise,
together with cash, in lieu of any fraction of a share, equal to such
fraction of the current market value of one full share of Preferred Stock as
determined in good faith by the Board of Directors, and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to the Warrant.
3. NET ISSUANCE.
3.1 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 (the "Conversion Right") into shares
of Preferred Stock as provided in this Section 3 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with
respect to shares subject to the 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 Preferred Stock computed using the following
formula:
X = Y (A - B)
--------------
A
Where X = the number of shares of Preferred Stock to be
delivered to the holder
Y = the number of Converted Warrant Shares
3
A = the fair market value of one share of the Company's
Preferred Stock on the Conversion Date (as defined
below)
B = the per share exercise price of the Warrant (as
adjusted to the Conversion Date)
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 defined below). Shares issued
pursuant to the Conversion Right shall be treated as if they were issued upon
the exercise of the Warrant.
3.2 METHOD OF EXERCISE. The Conversion Right may be exercised
by the Holder by the surrender of the Warrant at the principal office of the
Company together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the total number of
shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right shall be delivered to the Holder
promptly following the Conversion Date.
3.3 DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 3, fair market value of a share of Preferred Stock on the Conversion
Date shall mean the fair market value as determined by the Board of Directors of
the Company in good faith.
4. LIMIT ON RIGHTS OF THE HOLDER UPON EXERCISE. The Holder
acknowledges and agrees that upon the exercise of this Warrant in full or in
part, the following provisions shall apply to the rights of the Holder as a
holder of Preferred Stock:
4.1 MARKET STAND-OFF AGREEMENT. During the period of duration
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Securities Act of 1933, as amended (the "Act), the
Holder or any future transferee will 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 such agreement shall not exceed one
hundred eighty (180) days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of the Holder or any
future transferee (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.
5. ADJUSTMENTS TO CONVERSION PRICE. The number and kind of shares of
Preferred Stock (or any shares of stock or other securities which may be)
issuable upon the exercise of this
4
Warrant and the exercise price hereunder shall be subject to adjustment from
time to time upon the happening of certain events, as follows:
5.1 DIVIDENDS, DISTRIBUTIONS, STOCK SPLITS OR COMBINATIONS.
If the Company shall at any time or from time to time after the date hereof
make or issue, or fix a record date for the determination of holders of
Preferred Stock entitled to receive, a dividend or other distribution payable
in additional shares of Common Stock or Preferred Stock (as the case may be),
then and in each such event the exercise price hereunder then in effect shall
be decreased as of the time of such issuance or, in the event such a record
date shall have been fixed, as of the close of business on such record date,
by multiplying the exercise price hereunder then in effect by a fraction: (a)
the numerator of which shall be the total number of shares of Common Stock
(assuming the conversion of all outstanding securities of the Company that
are convertible into Common Stock and the exercise of all options to purchase
Common Stock or securities that are convertible into Common Stock) issued and
outstanding immediately prior to the time of issuance or the close of
business on such record date; and (b) the denominator of which shall be the
total number of shares of Common Stock (assuming the conversion of all
outstanding securities of the Company that are convertible into Common Stock
and the exercise of all options to purchase Common Stock or securities that
are convertible into Common Stock) issued and outstanding immediately after
the time of issuance or the close of business on such record date. If the
Company shall at any time subdivide the outstanding shares of Preferred Stock
(or any securities into which such Preferred Stock is convertible), or if the
Company shall at any time combine the outstanding shares of Preferred Stock
(or any securities into which such Preferred Stock is convertible), then the
exercise price hereunder immediately shall be decreased proportionally (in
the case of a subdivision) or increased proportionally (in the case of a
combination). Any such adjustment shall become effective at the close of
business on the date the subdivision or combination becomes effective.
5.2 RECLASSIFICATION OR REORGANIZATION. If the Preferred
Stock (or any shares of stock or other securities which may be) issuable upon
the exercise of this Warrant shall be changed into the same or different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for in Section 5.1 above, or
a reorganization, merger, consolidation or sale of assets provided for in
Section 5.3 below), then and in each such event the Holder shall be entitled
to receive upon the exercise of this Warrant the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, to which a holder of the number of shares
of Preferred Stock (or any shares of stock or other securities which may be)
issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization,
reclassification or other change, all subject to further adjustment as
provided herein.
5.3 MERGER, CONSOLIDATION OR SALE OF ASSETS. Subject to the
preamble, in the event of, at any time prior to the Expiration Date, an initial
public offering of securities of the Company registered under the Act, or the
consolidation or merger of the Company with or into another corporation (other
than a merger solely to effect a reincorporation of the Company into another
state), or the sale or other disposition of all or substantially all the
properties and assets
5
of the Company in its entirety to any other person, the Company shall provide
to the Holder ten (10) days advance written notice of such public offering,
consolidation, merger or sale or other disposition of the Company's assets,
and this Warrant shall terminate unless exercised prior to the date such
public offering is declared effective by the Securities and Exchange
Commission or the occurrence of such consolidation, merger or sale or other
disposition of the Company's assets. If at any time or from time to time
there shall be a capital reorganization of the Preferred Stock (other than a
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 5) of the Company, then as a part of such
reorganization, provision shall be made so that the Holder shall thereafter
be entitled to receive upon the exercise of this Warrant, the number of
shares of stock or other securities or property of the Company, resulting
from such reorganization, to which a holder of the number of shares of
Preferred Stock (or any shares of stock or other securities which may be)
issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization.
5.4 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company
shall promptly notify the Holder in writing of each adjustment or
readjustment of the exercise price hereunder and the number of shares of
Preferred Stock (or any shares of stock or other securities which may be)
issuable upon the exercise of this Warrant. Such notice shall state the
adjustment or readjustment and show in reasonable detail the facts on which
that adjustment or readjustment is based.
6. REPLACEMENT OF WARRANTS. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver to the Holder, in lieu thereof, a new
Warrant of like tenor.
7. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provisions hereof, in the absence of
affirmative action by the Holder to purchase Preferred Stock, and no
enumeration herein of the rights or privileges of the Holder, shall give rise
to any liability of the Holder as a stockholder of the Company.
8. MISCELLANEOUS.
8.1 TRANSFER OF WARRANT. This Warrant shall not be
transferable or assignable in any manner without the express written consent
of the Company, and any such attempted disposition of this Warrant or any
portion hereof shall be of no force or effect unless such disposition is in
compliance with the Agreement.
8.2 TITLES AND SUBTITLES. The titles and subtitles
used in this Warrant are for convenience only and are not to be considered in
construing or interpreting this Warrant.
8.3 NOTICES. Any notice required or permitted under this
Warrant shall be given in writing and in accordance with Section 6.4 of the
Purchase Agreement (for purposes of
6
which, the term "Investor" shall mean Holder hereunder), except as otherwise
expressly provided in this Warrant.
8.4 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Warrant, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which such party may be
entitled.
8.5 AMENDMENTS AND WAIVERS. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of
Warrants representing together the right to purchase at least fifty-one
percent (51%) of all of the Preferred Stock of the Company subject to
purchase pursuant to all of the Warrants and in accordance with the Purchase
Agreement. Any amendment or waiver effected in accordance with this Section
8.5 shall be binding upon the Holder of this Warrant (and of any securities
into which this Warrant is convertible), each future holder of all such
securities, and the Company.
8.6 SEVERABILITY. If one or more provisions of this Warrant
are held to be unenforceable under applicable law, such provision shall be
excluded from this Warrant and the balance of the Warrant shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.7 GOVERNING LAW. This Warrant shall be governed by
and construed and enforced in accordance with the laws of the State of
California, without giving effect to its conflicts of laws principles.
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8.8 COUNTERPARTS. This Warrant may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Date: September 29, 2000
DIGIRAD CORPORATION,
a Delaware corporation
By:
-------------------------------------
Xxxxx Xxxxxxxxxx
President
ACKNOWLEDGED AND AGREED:
----------------------------------------
By:
------------------------------------
Title:
---------------------------------
[SIGNATURE PAGE TO WARRANT]
8
SCHEDULE 1
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To:
DIGIRAD CORPORATION
The undersigned, the holder of the Warrant attached hereto, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, ___________ shares of Preferred Stock of
Digirad Corporation, and herewith makes payment of $______________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to ____________________, whose address is ___________________________.
------------------------------------------------------
(Signature must conform in all respects to name of the
Holder as specified on the face of the Warrant)
------------------------------------------------------
(Print Name)
------------------------------------------------------
(Address)
Dated:
---------------
* Insert here the number of shares as to which the Warrant is being exercised.
