EXHIBIT 10.18
DIGIRAD CORPORATION
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES F PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of August 23, 2001 by and among Digirad Corporation,
a Delaware corporation (the "Company"), and each of the persons listed on
Schedule 1 (each of which persons is referred to herein as an "Investor," and
collectively, the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF SERIES F PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF SERIES F PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) the Amended and Restated
Certificate of Incorporation in the form attached hereto as EXHIBIT A (the
"Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees to purchase as applicable at the Closing, and the Company
agrees to sell and issue to each Investor at the Closing, that number of
shares of the Company's Series F Preferred Stock set forth opposite such
Investor's name on Schedule 1 for the purchase price of $3.25 per share.
1.2 CLOSING. The purchase and sale of the Series F Preferred Stock
shall take place at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, San
Diego, California, at 10:00 a.m., on August 23, 2001, or at such other time
and place as the Company and Investors acquiring more than half the aggregate
principal amount of the Series F Preferred Stock sold pursuant hereto shall
mutually agree, in writing (which time and place are designated as the
"Closing"). At the Closing, the Company shall deliver to each Investor a
certificate representing the shares of Series F Preferred Stock that such
Investor is purchasing at the Closing (as set forth on SCHEDULE 1) against
payment of the purchase price therefor by check or wire transfer or such
other form of payment as shall be mutually agreed upon by such Investor and
the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor that, except
as set forth on a Schedule of Exceptions furnished to each Investor and
attached hereto as EXHIBIT B, specifically identifying the relevant
subparagraph(s) hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company and each of
Digirad Imaging Solutions, Inc. and Digirad Imaging Services, Inc. (each, a
"Subsidiary" and
collectively, the "Subsidiaries") is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, has
all requisite corporate power and authority to own and operate its respective
properties and assets and to carry on its respective business as now
conducted and as proposed to be conducted. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, the
Amended and Restated Investors' Rights Agreement, attached hereto as EXHIBIT
C (the "Investors' Rights Agreement") and any other agreement to which the
Company is a party, the execution and delivery of which is contemplated
hereby, to issue and sell the Series F Preferred Stock and the Common Stock
issuable upon conversion thereof or upon conversion of the Series F Preferred
Stock, and to carry out the provisions of this Agreement and the Investors'
Rights Agreement. The Company and each Subsidiary is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its respective
business, properties, prospects, or financial condition.
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 Investors' Rights Agreement and
any other agreement to which the Company is a party, the execution and
delivery of which is contemplated hereby, the performance of all obligations
of the Company hereunder and thereunder at the Closing, and the
authorization, issuance (or reservation for issuance), sale, and delivery of
the Series F Preferred Stock and the Common Stock issuable upon conversion
thereof has been taken or will be taken prior to the Closing. This Agreement
and the Investors' Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
the enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification
provisions contained therein may be limited by applicable federal or state
securities laws.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series F
Preferred Stock being purchased by the Investors hereunder, when issued, paid
for and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, and will be
free of restrictions on transfer other than restrictions on transfer under
this Agreement and the Investors' Rights Agreement and under applicable state
and federal securities laws. The Common Stock issuable upon conversion of the
Series F Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, when issued and paid for in accordance
with the terms of the Restated Certificate, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on transfer
other than restrictions on transfer set forth in this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification, order
or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection
with the Company's valid execution, delivery, or
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performance of this Agreement or the Investors' Rights Agreement, the offer,
sale or issuance of the Series F Preferred Stock or Common Stock upon
conversion of the Series F Preferred Stock, except (i) the filing of the
Restated Certificate with the Secretary of State of the State of Delaware,
(ii) such filings as have been made prior to the Closing, and (iii) any
notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or such post closing filings as may be required under
applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. Thirty Million Three Hundred Twenty One
Thousand One Hundred Eight 30,321,108 shares of Preferred Stock (the
"Preferred Stock"), of which 2,250,000 shares have been designated Series A
Preferred Stock, all of which are issued and outstanding, 2,281,000 shares
have been designated Series B Preferred Stock, all of which are issued and
outstanding, 4,800,000 shares have been designated Series C Preferred Stock,
all of which are issued and outstanding, 8,668,140 shares have been
designated Series D Preferred Stock, all of which are issued and outstanding,
9,583,506 shares have been designated Series E Preferred Stock, 9,130,428 of
which are issued and outstanding, and 2,738,462 shares have been designated
Series F Preferred Stock, up to all of which may be issued pursuant to this
Agreement. The rights, privileges and preferences of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock are as stated in
the Restated Certificate. Each of the outstanding shares of Preferred Stock
is currently convertible into one share of Common Stock pursuant to the terms
of the Restated Certificate.
(ii) COMMON STOCK. Forty Two Million Seven Hundred Thirty Eight
Thousand Four Hundred Sixty Two (42,738,462) shares of Common Stock ("Common
Stock"), of which 4,586,082 shares are issued and outstanding and up to
2,738,462 of which shall be validly reserved for issuance upon conversion of
the Series F Preferred Stock issued pursuant to this Agreement.
(iii) The outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Common Stock have been issued in accordance with the
registration or qualification provisions of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the rights created under this Agreement, (B)
the conversion privileges of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, (C) the right of first offer set forth in
Section 1.2 of the Investors' Rights Agreement, (D) currently outstanding
options granted to employees, directors, consultants or advisors of the
Company under stock option and restricted stock purchase agreements approved
by the Board of
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Directors commencing as of May 1994 (each, an "Option," and collectively,
"Options") to purchase 5,952,426 shares of Common Stock and (E) currently
outstanding warrants to purchase 403,078 shares of Series E Preferred Stock
and 100,500 shares of Common Stock, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of
first refusal), or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. Except for the voting rights of
the holders of Preferred Stock as provided for in the Restated Certificate,
the obligations provided for in that certain Amended and Restated Voting
Agreement dated August 8, 1997 and that certain Amended and Restated Series E
Voting Agreement dated November 10, 2000, as amended, and except pursuant to
this Agreement and the Investors' Rights Agreement, the Company is not a
party or subject to any agreement or understanding, and, to the best of the
Company's knowledge, there is no agreement or understanding between any other
persons that affects or relates to the voting or giving of written consents
with respect to any security or the voting by a director of the Company.
2.6 SUBSIDIARIES. Section 2.6 of the Schedule of Exceptions contains a
true and complete list of each corporation, limited liability company,
association or other business entity in which the Company owns or controls,
directly or indirectly, any interest. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS.
(a) The Company does not have, and none of the Subsidiaries has,
any contract, agreement, lease, commitment, or proposed transaction, written
or oral, absolute or contingent, to which the Company or any Subsidiary is a
party or by which it is bound other than (i) contracts for the purchase of
goods and services that were entered into in the ordinary course of business
and that do not involve more than $100,000 each, and do not extend for more
than one (1) year beyond the date hereof, (ii) sales or lease contracts
entered into in the ordinary course of business, and (iii) contracts
terminable at will by the Company or the applicable Subsidiary on not more
than thirty (30) days' notice without cost or liability to the Company or
such applicable Subsidiary and that do not involve any employment or
consulting arrangement and are not material to the conduct of the business of
the Company or the Subsidiaries. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and
license agreements and any other agreements relating to the acquisition or
disposition of any interest in the respective technology of the Company and
the Subsidiaries (other than standard end-user license agreements) shall not
be considered to be contracts entered into in the ordinary course of business.
(b) The contracts set forth on the Schedule of Exceptions are
defined herein as the "Material Contracts." Copies of all Material Contracts
have been made available to the Investors and their counsel. Each Material
Contract is in full force and effect and will continue in full force and
effect following the consummation of the transactions contemplated by this
Agreement. The Company and, as applicable, each Subsidiary has fulfilled and
performed in all material respects its obligations under each of the Material
Contracts required to be performed prior to the date hereof, and to the best
knowledge of the Company and the Subsidiaries neither the Company nor any
Subsidiary is alleged to be in breach or default under, nor to the best
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knowledge of the Company and the Subsidiaries is there alleged to be any
basis for termination of, any of the Material Contracts. To the best
knowledge of the Company and the Subsidiaries, no other party to any of the
Material Contracts has materially breached or defaulted thereunder, and no
event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a
default or breach by the Company, any of the Subsidiaries, or by any such
other party.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or the Subsidiaries or member of his or her immediate family is
indebted to the Company or the Subsidiaries, nor is the Company or any
Subsidiary indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the knowledge of the Company and the Subsidiaries,
none of such persons has any direct or indirect ownership interest in any
firm or corporation with which the Company or any Subsidiary is affiliated or
with which the Company or any Subsidiary has a business relationship, or any
firm or corporation that competes with the Company or any Subsidiary, except
that employees, officers, or directors of the Company and the Subsidiaries
and members of their immediate families may own stock in publicly traded
companies that may compete with the Company. To the knowledge of the Company
and the Subsidiaries, no officer or director of the Company or the
Subsidiaries or any member of their immediate families is, directly or
indirectly, interested in any Material Contract with the Company or the
Subsidiaries.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act
any of its presently outstanding securities or any of its securities that may
subsequently be issued, and the Company has not granted or agreed to grant
any registration rights, including piggyback registration rights, to any
person or entity.
2.10 COMPLIANCE WITH LAW; PERMITS; HEALTH-CARE REGULATORY MATTERS.
(a) The Company and each Subsidiary has since inception and
currently conducts its respective business in accordance with all laws,
rules, regulations, and governmental orders applicable to the Company and
each Subsidiary or any of their respective assets or businesses. Neither the
Company nor any Subsidiary has received any notice alleging any default or
violation of any such law, rule, regulation or governmental order or has
knowledge of any events or conditions which may constitute potential defaults
or violations.
(b) The Company and each Subsidiary has, and all professional
employees or agents of each of the Company and its Subsidiaries have, all
licenses, franchises, permits, authorizations, including certificates of
need, or approvals from all Governmental Authorities required for the conduct
of the business of each of the Company and its Subsidiaries as now being
conducted by them, the lack of which could materially and adversely affect
the respective business, properties, prospects, or financial condition of the
Company or any Subsidiary and can obtain, without undue burden or expense,
any similar authority for the conduct of its respective business as planned
to be conducted. Neither the Company nor any Subsidiary or the
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professional employees or agents of either is in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
(c) FRAUD AND ABUSE MATTERS. Neither the Company nor any
Subsidiary, nor the officers, directors, employees or agents of any of the
Company or any Subsidiary, have engaged in any activities which are
prohibited, or are cause for criminal or civil penalties or mandatory or
permissive exclusion from Medicare, Medicaid or any other Federal Health Care
Program, under xx.xx. 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of
the United States Code, the Federal Employees Health Benefits program
statute, or the regulations promulgated pursuant to such statutes or
regulations or related state or local statutes or which are prohibited by any
private accrediting organization from which the Company or any its
Subsidiaries seeks accreditation or by generally recognized professional
standards of care or conduct, including but not limited to the following
activities:
(i) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for
any benefit or payment;
(ii) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) presenting or causing to be presented a claim for
reimbursement under Medicare, Medicaid or any other Federal Health Care
Program that is (i) for an item or service that the person presenting or
causing to be presented knows or should know was not provided as claimed, or
(ii) for an item or service and the person presenting knows or should know
that the claim is false or fraudulent;
(iv) knowingly and willfully offering, paying, soliciting
or receiving any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (i) in return
for referring, or to induce the referral of, an individual to a person for
the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare, Medicaid, or any
other Federal Health Care Program, or (iii) in return for, or to induce, the
purchase, lease, or order, or the arranging for or recommending of the
purchase, lease, or order, of any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid or any other
Federal Health Care Program; or
(v) knowingly and willfully making or causing to be made
or inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading)
or a material fact with respect to (i) the conditions or operations of a
facility in order that the facility may qualify for Medicare, Medicaid or any
other Federal Health Care Program certification, or (ii) information required
to be provided under SSA ss. 1124A.
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(d) MEDICARE/MEDICAID PARTICIPATION. Neither the Company nor to the
best knowledge of the Company (without having performed any investigation or
due diligence) any other person who after the Closing will have a direct or
indirect ownership interest (as those terms are defined in 42 C.F.R. ss.
1001.1001(a)(2)) in the Company or any Subsidiary, or who will have an
ownership or control interest (as defined in SSA ss. 1124(a)(3) or any
regulations promulgated thereunder) in the Company or any Subsidiary, or who
will be an officer, director, agent (as defined in 42 C.F.R. ss.
1001.1001(a)(2)), or managing employee (as defined in SSA ss. 1126(b)) of the
Company or any Subsidiary has, as of the date of this Agreement: (1) had a
civil monetary penalty assessed against it under SSA ss. 1128A; (2) been
excluded from participation under Medicare, Medicaid or any other Federal
Health Care Program; (3) been convicted (as that term is defined in 42 C.F.R.
ss. 1001.2) of any of the following categories of offenses as described in
SSA ss. 1128(a) and (b)(1), (2), (3):
(i) criminal offenses relating to the delivery of an item
or service under Medicare, Medicaid or any other Federal Health Care Program;
(ii) criminal offenses under federal or state law relating
to patient neglect or abuse in connection with the delivery of a health care
item or service;
(iii) criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary responsibility,
or other financial misconduct in connection with the delivery of a health
care item or service or with respect to any act or omission in a program
operated by or financed in whole or in part by any federal, state or local
government agency;
(iv) federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense described
in (a) through (c) above; or
(v) criminal offenses under federal or state law relating
to the unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
(e) DEFINITIONS. For purposes of this section 2.10, the following
definitions apply:
(i) "Federal Health Care Program" has the meaning set
forth in SSA Section 1128B(f).
(ii) "Governmental Authority" means any branch, component,
agency or instrumentality of federal, state or local government.
(iii) "SSA" means the federal Social Security Act and all
regulations promulgated pursuant thereto.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any
Subsidiary is in violation or default of any provision of its respective
Restated Certificate or Bylaws or in any material respect of any provision of
any mortgage, indenture, agreement, instrument, or
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contract to which it is a party or by which it is bound or any federal or
state judgment, order, writ, decree applicable to the Company or the
Subsidiaries. The execution, delivery, and performance by the Company of this
Agreement and the Investors' Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage
of time or the giving of notice, either a default under any such provision or
an event that results in the creation of any lien, charge, or encumbrance
upon any assets of the Company or the Subsidiaries (except as contemplated in
this Agreement and the Investors' Rights Agreement) or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any permit, license,
authorization, or approval applicable to the Company or any of the
Subsidiaries, its respective business or operations, or any of its respective
assets or properties, which suspension, revocation, impairment, forfeiture,
or nonrenewal would be materially adverse to the Company or any of the
Subsidiaries.
2.12 LITIGATION. There is no action, suit, proceeding, or investigation
pending or currently threatened against the Company that questions the
validity of this Agreement or the Investors' Rights Agreement or the right of
the Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or
in the aggregate, in any material adverse change in the assets, business,
properties, prospects, or financial condition of the Company or the
Subsidiaries, or in any change in the current equity ownership of the Company
or the Subsidiaries. The foregoing includes, without limitation, any action,
suit, proceeding, or investigation pending or currently threatened involving
the prior employment of any of the respective employees of the Company or any
Subsidiary, their use in connection with the business of the Company or any
Subsidiary of any information or techniques allegedly proprietary to any of
their former employers, their obligations under any agreements with prior
employers, or negotiations by the Company or any Subsidiary with potential
backers of, or investors in, the Company or its proposed business. Neither
the Company nor any Subsidiary is a party to, nor to the best of its
respective knowledge, named in any order, writ, injunction, judgment, or
decree of any court, government agency, or instrumentality. There is no
action, suit, or proceeding by the Company or any Subsidiary currently
pending or that the Company or any Subsidiary currently intends to initiate.
2.13 RETURNS AND COMPLAINTS. Neither the Company nor any Subsidiary has
received customer or beta test participant complaints concerning alleged
defects in its respective products (or the design thereof) that, if true,
would materially adversely affect the assets, business, properties, prospects
or financial condition of the Company or any Subsidiary.
2.14 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it that such Investor has requested for
deciding whether to purchase the Series F Preferred Stock and all information
that the Company believes is reasonably necessary to enable such Investor to
make such decision. Neither this Agreement nor any other written statements
or certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements herein or therein not misleading.
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2.15 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series F Preferred Stock, and the Common Stock issuable upon
conversion of the Series F Preferred Stock, as contemplated by this Agreement
are exempt from the registration requirements of the Securities Act and
applicable state securities laws, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause
the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. Except (i) as reflected in
the Financial Statements (defined in paragraph 2.17), (ii) for liens for
current taxes not yet delinquent, (iii) for liens imposed by law and incurred
in the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (iv) for liens in respect
of pledges or deposits under workers' compensation laws or similar
legislation or (v) for minor defects in title, none of which, individually or
in the aggregate, materially interferes with the use of such property, the
Company and each Subsidiary owns its respective property and assets free and
clear of all mortgages, liens, claims, and encumbrances. With respect to the
property and assets it leases, the Company and each Subsidiary is in
compliance with such leases and holds a valid leasehold interest free of any
liens, claims, or encumbrances, which would be materially adverse to the
Company or any Subsidiary, subject to clauses (i)-(v) above.
2.17 FINANCIAL STATEMENTS. The Company has delivered to each Investor
its audited financial statements (balance sheet and profit and loss
statement, statement of stockholders equity and statement of cash flows
including notes thereto) at December 31, 2000, and for the fiscal year then
ended and its unaudited financial statements (balance sheet and profit and
loss statement) as at, and for the six-month period ended June 30, 2001
(collectively, the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of
the dates, and for the periods, indicated therein, subject in the case of the
unaudited Financial Statements to normal year-end audit adjustments. Except
as set forth in the Financial Statements, neither the Company nor any
Subsidiary has any liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to June
30, 2001 which are individually not in excess of $50,000 and in the aggregate
not in excess of $200,000 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the
Company or any Subsidiary. Except as disclosed in the Financial Statements,
neither the Company nor any Subsidiary is a guarantor or indemnitor of any
indebtedness of any other person, firm, partnership, joint venture or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with
generally accepted accounting principles.
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2.18 CHANGES. Since June 30, 2001, there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company or any Subsidiary from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company or any Subsidiary (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company or any Subsidiary of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company or any Subsidiary,
except in the ordinary course of business and that is not material to the
business, properties, prospects, or financial condition of the Company or any
Subsidiary (as such business is presently conducted and as it is proposed to
be conducted);
(e) any material change to a contract or arrangement by or to which
the Company or any Subsidiary or any of its respective assets is bound or
subject;
(f) any change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(g) any sale, assignment, or transfer of any interest in any
patents, trademarks, copyrights, or trade secrets;
(h) any resignation or termination of employment of any key officer
of the Company or any Subsidiary; and neither the Company nor any Subsidiary
knows of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or any Subsidiary;
(j) any mortgage, pledge, transfer of a security interest in, or
creation of a lien by the Company or any Subsidiary with respect to any of
its properties or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company or any Subsidiary
to or for the benefit of its respective employees, officers, or directors, or
any members of their immediate families, other than travel advances and other
similar advances made in the ordinary course of its respective business;
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(l) any declaration, setting aside, or payment or other
distribution in respect of any of the capital stock of the Company or any
Subsidiary, or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by the Company or any Subsidiary;
(m) to the knowledge of the Company or the Subsidiaries, any
other event or condition of any character that might materially and adversely
affect the respective business, properties, prospects, or financial condition
of the Company or the Subsidiaries (as such business is presently conducted
and as it is proposed to be conducted); or
(n) any agreement or commitment by the Company or any
Subsidiary to do any of the things described in this paragraph 2.18.
2.19 INTELLECTUAL PROPERTY RIGHTS. The Company and each Subsidiary
owns or possesses all rights, title and interest in all patents, trademarks,
service marks, trade names, and any applications or registrations therefor,
both foreign and domestic, copyrights, trade secrets, information, and
proprietary rights and processes, (collectively, "Intellectual Property
Rights") and owns or possesses sufficient rights, title, and interest in all
licenses necessary for its business as now conducted and as proposed to be
conducted without any conflict with, or infringement of the rights of,
others. To the Company's knowledge, all Intellectual Property Rights are
valid and enforceable. The Schedule of Exceptions contains a complete list of
patents and pending patent applications of the Company. Except for agreements
with its own respective employees or consultants, substantially in the form
referenced in paragraph 2.22 below, and standard end-user license agreements,
there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company or any Subsidiary bound by or a
party to any options, licenses, or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, and proprietary rights and processes of any other
person or entity which options, licenses or agreements are material to the
Company or any Subsidiary or its respective business as now conducted and as
proposed to be conducted. The Company and each Subsidiary has taken all
reasonable and appropriate steps, including without limitation the filing and
prosecution of patent, copyright, and trademark applications to perfect and
protect its interest in the Intellectual Property Rights in all countries in
which the Company and each Subsidiary conducts business or proposes to
conduct business; and the Company and each Subsidiary has the exclusive right
to file, prosecute and maintain such applications and the patents and
registrations that issue therefrom. The Company and each Subsidiary has taken
appropriate steps to protect and preserve the confidentiality of all
inventions, algorithms, formulas, schematics, technical drawings, ideas,
know-how, processes not otherwise protected by patents or patent
applications, source code, program listings, and trade secrets ("Confidential
Information"), including without limitation the marking of all such
Confidential Information with appropriate "Proprietary" or "Confidential"
legends and the acquisition of duly executed nondisclosure agreements from
any party receiving Confidential Information. To the Company's knowledge, no
person has used, divulged or appropriated Confidential Information to the
detriment of the Company or any Subsidiary other than pursuant to the terms
of written agreements between the Company or any Subsidiary and such other
-11-
persons. Neither the Company nor any Subsidiary has received any
communication challenging the ownership, validity, or enforceability of the
Intellectual Property Rights or alleging that the Company or any Subsidiary
has violated or, by conducting its respective business as proposed, would
violate any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets, or other proprietary rights or processes of any
other person or entity and to the knowledge of the Company and the
Subsidiaries without further investigation, neither the Company nor any
Subsidiary is in such violation. Neither the Company nor any Subsidiary is
aware of any unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any third party, including without
limitation, any respective employee or consultant of the Company or any
Subsidiary. Neither the Company nor any Subsidiary has brought any actions or
lawsuits alleging infringement of any Intellectual Property Rights or breach
of any license, sublicense or other agreement authorizing another party to
use the Intellectual Property Rights. Neither the Company nor any Subsidiary
has entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Intellectual Property Right. Neither the Company nor any
Subsidiary is aware that any of the respective employees of the Company or
any Subsidiary is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to
any judgment, decree, or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or any Subsidiary or that would conflict with the
business of the Company or any Subsidiary as proposed to be conducted. No
Intellectual Property Right is subject to any outstanding order, judgment,
decree, stipulation, agreement, lien, encumbrance or security interest
related to or restricting in any manner the licensing, assignment, transfer
or conveyance thereof by the Company or any Subsidiary. The Company and each
Subsidiary has secured valid written assignments from all respective
consultants and employees who contributed to the creation or development of
Intellectual Property Rights or the rights to such contributions that the
Company or any Subsidiary does not already own by operation of law. Neither
the execution nor delivery of this Agreement, nor the carrying on of the
Company's or any Subsidiary's business by the respective employees of the
Company or any Subsidiary, nor the conduct of the Company's or any
Subsidiary's business as proposed, will, to the knowledge of the Company or
any Subsidiary, conflict with or result in a breach of the terms, conditions,
or provisions of, or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated. Neither the
Company nor any Subsidiary believes it is or will be necessary to use any
inventions of any of its respective employees (or persons it currently
intends to hire) made prior to their employment by the Company or any
Subsidiary.
2.20 MANUFACTURING AND MARKETING RIGHTS. Neither the Company nor any
Subsidiary has granted rights to manufacture, produce, assemble, license,
market, or sell its respective products to any other person and is not bound
by any agreement that affects the exclusive right of the Company or any
Subsidiary to develop, manufacture, assemble, distribute, market, or sell its
respective products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the best of the knowledge
of the Company and any Subsidiary, there is no strike, or labor dispute or
union organization activities
-12-
pending or threatened between it and its respective employees. To the best
knowledge of the Company and any Subsidiary, none of its employees belongs to
any union or collective bargaining unit. To the best of the knowledge of the
Company and any Subsidiary, it has complied in all material respects with all
applicable state and federal equal employment opportunity and other laws
related to employment. To the best knowledge of the Company and any
Subsidiary, no employee of the Company or any Subsidiary is or will be in
violation of any judgment, decree, or order, or any term of any employment
contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of such employee with the Company or any
Subsidiary, or any other party, because of the nature of the business
conducted or to be conducted by the Company or to the use by the employee of
his best efforts with respect to such business. Neither the Company nor any
Subsidiary is a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement
other than with respect to agreements regarding Options, as defined in
Section 2.5(iv) above, including the 1997 and 1998 Stock Option Plans
(collectively with all Options, "Stock Option Plans"), and options granted
thereunder. Neither the Company nor any Subsidiary is aware that any
respective officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company or any Subsidiary, nor
does the Company or any Subsidiary have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and
employee of the Company or any Subsidiary is terminable at the will of the
Company or any Subsidiary.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each
employee and officer of the Company and each Subsidiary has executed a
Proprietary Information and Inventions Agreement substantially in the form or
forms which have been delivered to the Investors.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company and each
Subsidiary has filed all tax returns and reports as required by law. These
returns and reports are true and correct in all material respects. The
Company and each Subsidiary has paid all taxes and other assessments due,
except those contested by it in good faith. The provision for taxes of the
Company as shown in the Financial Statements is adequate for taxes due or
accrued as of the date thereof. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended ("Code"), to be treated as an S
corporation or a collapsible corporation pursuant to Section 1362(a) or
Section 341(o) of the Code, nor has it made any other election pursuant to
the Code (other than elections that relate solely to methods of accounting,
depreciation, or amortization) that would have a material effect on the
business, properties, prospects, or financial condition of the Company.
Neither the Company nor any Subsidiary has had any tax deficiency proposed or
assessed against it and neither the Company nor any Subsidiary has executed
any waiver of any statute of limitations on the assessment or collection of
any tax or governmental charge. None of the Company's or any Subsidiary's
federal income tax returns and none of its respective state income or
franchise tax or sales or use tax returns has ever been audited by
governmental authorities. Since the date of the Financial Statements, the
Company and each
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Subsidiary has made adequate provisions on its respective books of account
for all taxes, assessments, and governmental charges with respect to its
respective business, properties, and operations for such period. The Company
and each Subsidiary has withheld or collected from each payment made to each
of its respective employees the amount of all taxes, including, but not
limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositories.
2.24 ENVIRONMENTAL AND SAFETY LAWS.
(a) All of the real estate owned, leased, subleased, or used by
the Company and the Subsidiaries (collectively, the "Real Estate") is free of
contamination from any Hazardous Material except for such contamination that
would not result in Environmental Liabilities that could reasonably be
expected to have a material adverse effect on the Company or the Investors;
(ii) neither the Company nor any Subsidiary has caused or suffered to occur
any Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate; (iii) the Company and the Subsidiaries are and
have been in compliance with all Environmental Laws; (iv) the Company and the
Subsidiaries have obtained, and are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, and all
such Environmental Permits are valid, uncontested and in good standing; (v)
neither the Company nor any Subsidiary is involved in operations or knows of
any facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of the
Company or any Subsidiary that could reasonably be expected to have a
material adverse effect on the Company or the Investors; (vi) no notice has
been received by the Company or any Subsidiary identifying it as a
"potentially responsible party" or requesting information under any
Environmental Law, and to the knowledge of the Company and the Subsidiaries,
there are no facts, circumstances or conditions that may result in the
Company or any Subsidiary being identified as a "potentially responsible
party" under CERCLA or analogous state statutes; and (vii) the Company and
its Subsidiaries have provided to Investors copies of all existing
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to the Company and the Subsidiaries.
(b) The following capitalized terms have the definitions
ascribed to them below:
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined
as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance. "Environmental Laws" means
all applicable federal, state, local and foreign laws, statutes, ordinances,
codes, rules, standards and regulations, now or hereafter in effect, and any
applicable
-14-
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).
"Environmental Laws" includes the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et
seq.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of
1994 (49 U.S.C. Sections 5101 et seq.); the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. Sections 136 et seq.); the Solid Waste Disposal
Act (42 U.S.C. Sections 6901 et seq.); the Toxic Substance Control Act (15
U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 et
seq.); the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.); the Occupational Safety and Health Act (29 U.S.C. Sections 651 et
seq.); and the Safe Drinking Water Act (42 U.S.C. Sections 300(f) et seq.),
and any and all regulations promulgated thereunder, and all analogous state,
local and foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"Environmental Liabilities" means, with respect to the Company and
each of the Subsidiaries, all liabilities, obligations, responsibilities,
response, remedial and removal costs, investigation and feasibility study
costs, capital costs, operation and maintenance costs, losses, damages,
punitive damages, property damages, natural resource damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants), fines,
penalties, sanctions and interest incurred as a result of or related to any
claim, suit, action, investigation, proceeding or demand by any person,
whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising
under or related to any Environmental Laws, Environmental Permits, or in
connection with any Release or threatened Release or presence of a Hazardous
Material whether on, at, in, under, from or about or in the vicinity of any
real or personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any governmental
authority under any Environmental Laws.
"Release" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water
or property.
2.25 SECTION 83(b) ELECTIONS. To the best of the Company's
knowledge, all individuals who have purchased shares of the Company's Common
Stock have timely filed elections under Section 83(b) of the Internal Revenue
Code and any analogous provisions of applicable state tax laws.
-15-
2.26 MINUTE BOOKS. The minute books of the Company and each
Subsidiary made available to Investors contain a complete summary of all
meetings of directors and stockholders since its respective incorporation and
reflect all transactions referred to in such minutes accurately in all
material respects.
2.27 REAL PROPERTY HOLDING COMPANY. Neither the Company nor any
Subsidiary is a real property holding company within the meaning of Internal
Revenue Code Section 897.
2.28 INSURANCE. The Company and its Subsidiaries maintain in full
force and effect insurance in such amounts and against such losses and risks
as is sufficient and reasonable given the nature of their respective
businesses. There are currently no claims pending under any insurance
policies of the Company and its Subsidiaries, and all premiums due and
payable with respect to the policies maintained by the Company and its
Subsidiaries have been paid to date.
2.29 ERISA.
(a) Section 2.29 of the Schedule of Exceptions lists all
material employee benefit plans (as defined in Section 3(3) of ERISA) and all
material bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements maintained or contributed to
by the Company or any Subsidiaries for the benefit of or relating to any
employee of the Company, or any Subsidiaries (together the "Benefit Plans").
The Company has made available to each Investor a copy of the documents and
instruments governing each such Benefit Plan. No event has occurred and, to
the knowledge of the Company, there currently exists no condition or set of
circumstances in connection with which the Company or any Subsidiaries would
be subject to any material liability (other than for routine benefit
liabilities) under the terms of any Benefit Plans, ERISA, the Code or any
other applicable law, including, without limitation, any liability under
Title IV of ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(b) There will be no material payment, accrual of additional
benefits, acceleration of payments or vesting in any benefit under any
Benefit Plan solely by reason of entering into or in connection with the
transactions contemplated by this Agreement.
(c) No Benefit Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA (other than a plan covering only one
individual employee or former employee and his or her dependents) provides
material benefits to former employees of the Company or its ERISA Affiliates
other than pursuant to Section 4980B of the Code.
2.30 CO-SALE AGREEMENT. The Amended and Restated Co-Sale Agreement
dated November 10, 2000, as amended from time to time, by and among the
Company and the parties thereto (the "Co-Sale Agreement") has lapsed by its
own terms pursuant to Section 3(b) as each Founder (as defined in the Co-Sale
Agreement) holds less than 5% of the Company's outstanding shares.
-16-
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby represents warrants, covenants and agrees that:
3.1 AUTHORIZATION. Such Investor has full power and authority to
enter into this Agreement and that this Agreement constitutes a valid and
legally binding obligation of such Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series F Preferred Stock or the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will 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, 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, distribute or
grant participation to such person, or to any third person, with respect to
any of the Securities.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the issuance of the Securities may not be registered under
the Securities Act on the ground that the sale provided for in this Agreement
and the issuance of the Securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof and that the
Company's reliance on such exemption is predicated on the Investors'
representations set forth herein.
3.4 RECEIPT OF INFORMATION. Each Investor believes such Investor has
received all the information such Investor considers necessary for deciding
whether to purchase the Series F Preferred Stock to be issued to it. Each
Investor further represents that such Investor has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series F Preferred Stock, and the business,
properties, prospects, and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information
or could acquire it without unreasonable effort or expense) necessary to
verify the accuracy of any information furnished to such Investor or to which
such Investor had access. The foregoing, however, does not limit or modify
the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that such
Investor is experienced in evaluating and investing in securities of
companies in the development state and acknowledges that such Investor is
able to fend for himself, herself or itself, can bear the economic risk of
such Investor's investment, and has such knowledge and experience in
financial and business matters that such Investor is capable of evaluating
the merits and risks of the investment in the Series F Preferred Stock. If
other than an individual, Investor also represents such Investor has not been
organized for the purpose of acquiring the Series F Preferred Stock,
-17-
or if such Investor has been organized for the purpose of acquiring the
Series F Preferred Stock that all investors in such fund are accredited.
3.6 ACCREDITED INVESTOR. Except as otherwise disclosed to the
Company in writing, Investor either is (a) an accredited investor as defined
in Rule 501(a) of Regulation D of the SEC under the Securities Act, or (b)
neither (x) a national or resident of the United States, its territories,
possessions or any area subject to its jurisdiction, nor (y) a corporation,
partnership, trust or other entity created or organized in the United States,
its territories, possessions or any area subject to its jurisdiction, nor (z)
a corporation, partnership, trust or other entity, any of the equity owners
of which is described in clause (x) or (y) above and agrees not to sell,
hypothecate, pledge or otherwise dispose of any interest in the Securities in
the United States, its territories, possessions or any area subject to its
jurisdiction, or to any person who is a national thereof or resident therein
(including any estate of such person), or any corporation, partnership or
other entity created or organized therein, unless such securities have been
either registered under the Securities Act, or are exempt from the
registration requirements of the Securities Act, in the opinion of the
Company's counsel, and Investor has complied with any restrictions on
transfer contained in this Agreement.
3.7 RESTRICTED SECURITIES. Each Investor understands that the Series
F Preferred Stock (and any Common Stock issued on conversion thereof) may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Preferred Stock or Common Stock
issued on conversion thereof or an available exemption from registration
under the Securities Act, the Series F Preferred Stock (and any Common Stock
issued on conversion thereof) must be held indefinitely. In particular, each
Investor is aware that the Series F Preferred Stock (and any Common Stock
issued on conversion thereof) may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that
Rule are met. Among the conditions for use of Rule 144 may be the
availability of current information to the public about the Company. Such
information is not now available, and the Company has no present plans to
make such information available.
3.8 CONFIDENTIALITY. Except for GE Capital Equity Investments, Inc.
who shall be bound by the confidentiality provisions in that certain letter
agreement between the Company and GE Capital Equity Investments, Inc. dated
of even date herewith, each Investor hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use or disclose
without the prior written consent of the Company, any information identified
as confidential that is furnished to it by the Company in connection with
this Agreement, including (without limitation) all financial statements,
budget and other information delivered or provided to such Investor. This
obligation of confidentiality shall not apply, however, to any information
(i) in the public domain through no unauthorized act or failure to act by
Investor, (ii) lawfully disclosed to Investor by a third party who possessed
such information without any obligation of confidentiality, (iii) known
previously by Investor or lawfully developed by Investor independent of any
disclosure by the Company or (iv) required to be disclosed by law. Each
Investor (other
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than GE Capital Equity Investments, Inc.) further covenants that such
Investor shall return to the Company all tangible materials containing such
information upon request by the Company.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Preferred Stock or Common Stock
issued on conversion thereof without the consent of the Company, unless and
until the transferee has agreed in writing for the benefit of the Company to
be bound by this Section 3 and the Investors' Rights Agreement, provided and
to the extent that such sections are applicable, and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
(b) The Investor shall have 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, if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144, as currently in
existence, except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel or consent of the
Company shall be necessary for a transfer by an Investor to an affiliated
entity which controls, is controlled by, or under common control with, the
Investor, provided that the transferee agrees in writing for the benefit of
the Company to be bound by this Section 3 and the Investors' Rights Agreement.
4. CONDITIONS OF INVESTORS' OBLIGATIONS AT THE CLOSING.
The obligations of each Investor under subparagraph 1.1(b) of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in paragraphs 4.1 and 4.2 have been fulfilled.
-19-
4.4 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the Company, an opinion,
dated as of the Closing, substantially in the form attached hereto as EXHIBIT D.
4.5 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement, the
form of which is attached hereto as EXHIBIT C.
4.6 STATE SECURITIES LAWS. The Company shall have obtained all
necessary state securities law permits and qualifications, or have the
availability of exemptions therefrom, required by any state for the offer and
sale of the Series F Preferred Stock and the Common Stock issuable upon
conversion of the Series F Preferred Stock.
4.7 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Delaware Secretary of State.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to each Investor under this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions by that Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor contained in Section 3 hereof shall be true on
and as of the Closing.
5.2 STATE SECURITIES LAWS. The Company shall have obtained all
necessary state securities law permits and qualifications, or have the
availability of exemptions therefrom, required by any state for the offer and
sale of the Series F Preferred Stock and the Common Stock issuable upon
conversion of the Series F Preferred Stock.
5.3 PAYMENT OF PURCHASE PRICE. Each Investor shall have delivered
the purchase price specified in Section 1.1.
5.4 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Delaware Secretary of State.
6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. This Agreement, a letter agreement between the
Company and GE Capital Equity Investments, Inc. dated of even date herewith
and the documents referred to herein constitute the entire agreement among
the parties hereto and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
6.2 SURVIVAL OF WARRANTIES. The warranties, representations, and
covenants of the Company and the Investors contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing.
-20-
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any Series F Preferred Stock or Common Stock issued
upon conversion thereof or upon conversion of Series F Preferred Stock).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
6.4 GOVERNING LAW; JURY TRIAL WAIVER. This Agreement shall be
governed by and construed under the laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California. THE PARTIES HERETO IRREVOCABLY WAIVE
ALL RIGHTS TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING
INSTITUTED BY OR AGAINST THE PARTY IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
6.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified (or upon
the date of attempted delivery where delivery is refused) or, if sent by
telecopier, telex, telegram, or other facsimile means, upon receipt of
appropriate confirmation of receipt, or upon deposit with the United States
Postal Service, by registered or certified mail, or next day air courier,
with postage and fees prepaid and addressed to the party entitled to such
notice at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by 10 days' advance
written notice to the other parties to this Agreement.
6.8 FINDER'S FEES. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the
Company from any liability for and commission or compensation in the nature
of a finder's fee (and the cost and expenses of defending against such
liability or asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees, or
representatives is responsible.
-21-
6.9 EXPENSES. Irrespective of whether the Closing is effected, each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery, and performance of this Agreement;
provided, however, that if the Closing is effected, the Company shall
reimburse GE Capital Equity Investments, Inc. for up to Fifteen Thousand
Dollars ($15,000) in expenses incurred in connection with the transactions
contemplated by this Agreement, including attorneys' fees and expenses.
6.10 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or any other agreement contemplated hereby, 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.
6.11 AMENDMENTS AND WAIVERS. 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), only with the written consent of the Company and the holders
of at least sixty-six and two-thirds percent (66 2/3%) of the Common Stock
not previously sold to the public that is issued or issuable upon conversion
of the Series F Preferred Stock purchased pursuant to this Agreement. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities have
been converted), each future holder of all such securities, and the Company.
6.12 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
6.13 EXCULPATION AMONG INVESTORS. Each Investor acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company
and its officers and directors, in making its investment or decision to
invest in the Company. Each Investor agrees that no Investor nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Investor shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Series F Preferred Stock or Common Stock issued upon conversion thereof.
6.14 PUBLICITY. No party hereto shall originate any publicity, news
release, or other disclosure or announcement, written or oral (a "Press
Release"), relating to this Agreement, or to performance hereunder or the
existence of an arrangement between the parties hereto without the prior
written approval of each other party hereto, except where such Press Release
is required by applicable law; provided that in such event the party
intending to issue the Press Release shall consult with the other party or
parties with respect to the text thereof and such other party or parties
shall be provided with a copy of the Press Release prior to its release.
-22-
6.15 INDEMNIFICATION.
(a) The Company shall indemnify each Investor and its
respective directors, officers, employees and affiliates from and against any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, attorneys' fees, expenses and disbursements of any kind
("Losses") which may be imposed upon, incurred by or asserted against such
Investor or any other indemnified party, relating to or arising out of any
untrue representation, breach of warranty or failure to perform any covenants
or agreement by the Company contained herein or in any certificate or
document delivered pursuant hereto (including, without limitation, the
Investors' Rights Agreement).
(b) The Company shall indemnify each Investor and its
respective directors, officers, employees and affiliates from and against any
Losses resulting from or related to any claims by third parties relating to
or arising out of the transactions contemplated hereby (including, without
limitation, the Investors' Rights Agreement).
(c) If any Investor shall believe that such Investor is
entitled to indemnification pursuant to this Section 6.15 in respect of any
Losses, such Investor shall give the Company prompt written notice thereof.
Any such notice shall set forth in reasonable detail and to the extent then
known the basis for such claim for indemnification. The failure of such
Investor to give notice of any claim for indemnification promptly shall not
adversely affect such Investor's right to indemnity hereunder except to the
extent that such failure materially adversely affects the right of the
Company to assert any reasonable defense to such claim. Each such claim for
indemnity shall expressly state that the Company shall have only the ten (10)
day period referred to in the next sentence to dispute or deny such claim.
The Company shall have ten (10) days following its receipt of such notice
either (y) to acquiesce in such claim and its respective responsibilities to
indemnify the Investor in respect thereof in accordance with the terms of
this Section 6.15 by giving such Investor written notice of such acquiescence
or (z) to object to the claim by giving such Investor written notice of the
objection. If the Company does not object thereto within such ten (10) day
period, the Company shall be deemed to have acquiesced in such claim and its
responsibility to indemnify the Investor in respect thereof in accordance
with the terms of this Section 6.15.
(d) The Company shall reimburse the Investors for any
attorneys' fees and expenses constituting Losses pursuant to this Section
6.15 promptly and in no event later than fifteen (15) days following receipt
of a written invoice therefor.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-23-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
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 Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxxx,
General Partner
XXXXXXXXX CAPITAL PARTNERS, L.P., IV
By: Xxxxxxxxx Associates, L.P.,
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxxxx,
General Partner
Address: 0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
SORRENTO VENTURES III, L.P.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
President, Sorrento Associates, Inc.
General Partner, Sorrento Equity
Partners III, L.P.
General Partner, Sorrento Ventures III,
L.P.
SORRENTO VENTURES CE, L.P.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
President, Sorrento Associates, Inc.
General Partner, Sorrento Equity
Partners III, L.P.
General Partner, Sorrento Ventures
CE, L.P.
Address: 0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
VECTOR LATER-STAGE EQUITY FUND II
(QP), L.P.
By: Vector Fund Management II, L.L.C.
Its General Partner
By: /s/ Xxxx Xxxx
-----------------------------------
Xxxx Xxxx
Managing Director
VECTOR LATER-STAGE EQUITY FUND II, L.P.
By: Vector Fund Management II, L.L.C.
Its General Partner
By: /s/ Xxxx Xxxx
-----------------------------------
Xxxx Xxxx
Managing Director
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
ANACAPA INVESTORS, LLC -
ANACAPA I
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx
Manager
Address: 00 X. Xxxxxxx Xxxxxx, #000
Xxxxx Xxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
XXXXXXX XXXXX VENTURES, L.P. 2001
By: Xxxxxxx Xxxxx Ventures LLC
Its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxx
Vice President
Address: 2 World Financial Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxx
All Notices: Xxxxxxx Xxxxx Ventures, L.P. 2001
Attn: Xxxxxx X. Xxxxx
00 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000-0000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
INGLEWOOD VENTURES, L.P.
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
Title: Member
---------------------------------
Address: 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
XXXXXXX X. XXXXX TRUST DATED 3/16/89
By: X. Xxxxx
---------------------------------
Name: Trustee
---------------------------------
Title:
---------------------------------
Address: 000 Xxxxxx Xxxxx Xxxx
Xxx Xxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
D. XXXXXXXX XXXXXXXXX
/s/ D. Xxxxxxxx Xxxxxxxxx
-------------------------------------------
Signature
Address: 00 Xxxx Xxxx
Xxxxxxxx, XX 00000
XXXXXXXXX 1998 DYNASTIC TRUST
By: /s/ D. Xxxxxxxx Xxxxxxxxx
----------------------------------------
D. Xxxxxxxx Xxxxxxxxx as Financial Advisor
Address: 00 Xxxx Xxxx
Xxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
XXXXX X. XXXXX
/s/ Xxxxx X. Xxxxx
-------------------------------------------
Signature
Address: 000 Xxxxxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
PALIVACINNI PARTNERS, LP
By: /s/ Xxxx Xxxx
---------------------------------
Xxxx Xxxx
Managing Director
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
MID-CAROLINA CARDIOLOGY, PA
By: /s/ Xxxxxxx X. XxXxxxx
----------------------------------
Xxxxxxx X. XxXxxxx, M.D.
Chief Executive Officer
Address: 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
XXXXXXX X. XXXXXXX AND XXX XXX XXXXXXX
/s/ Xxxxxxx X. XxXxxxx
-------------------------------------------
Xxxxxxx X. XxXxxxx
/s/ Xxx Xxx XxXxxxx
-------------------------------------------
Xxx Xxx XxXxxxx
Address: 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
IMPERIAL VENTURES, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx
President
Address: 00000 Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
XXXXXXX X. XXXXXXX ROLLOVER XXX
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------
Xxxxxxx X. XxXxxxx
Address: 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
W. AUGUST XXXXXXXXXXX
/s/ W. August Xxxxxxxxxxx
-------------------------------------------
Signature
Address: 000 X.X. 00X
Xxxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
TAH & H INVESTORS, LP
By: Investment Committee
Brickyard Holdings. Inc.
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Investment Committee Member
KKH & C INVESTORS, LP
By: Investment Committee
Brickyard Holdings. Inc.
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Investment Committee Member
WAH & M INVESTORS, LP
By: Investment Committee
Brickyard Holdings. Inc.
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Investment Committee Member
Address: 0 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
MLH & T INVESTORS, LP
By: Investment Committee
Brickyard Holdings. Inc.
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Investment Committee Member
RDH & S INVESTORS, LP
By: Investment Committee
Brickyard Holdings. Inc.
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
Investment Committee Member
Address: 0 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------------------------
Xxxxx Xxxxx
Senior Vice President
Address: 000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES F STOCK PURCHASE AGREEMENT]
SCHEDULE 1
SCHEDULE OF INVESTORS
CLOSING - AUGUST 23, 2001
INVESTOR SHARES TO BE PURCHASED PURCHASE PRICE
-------- ---------------------- --------------
Xxxxxxxxx Capital Partners, L.P., III 55,385 $180,001.25
Xxxxxxxxx Capital Partners, L.P., IV 129,231 $420,000.75
Sorrento Ventures III, L.P. 63,900 $207,675.00
Sorrento Ventures CE, L.P. 13,023 $42,324.75
Vector Later-Stage Equity Fund II, L.P. 38,462 $125,001.50
Vector Later-Stage Equity Fund II (QP), L.P. 115,385 $375,001.25
Palivacinni Partners, LP 20,000 $65,000.00
Xxxxxxx X. Xxxxx Trust 30,769 $99,999.25
Anacapa Investors, LLC - Anacapa I 76,923 $249,999.75
Imperial Ventures, Inc. 153,846 $499,999.50
Xxxxxxx Xxxxx Ventures, LP 2001 107,692 $349,999.00
Inglewood Ventures, LP 76,923 $249,999.75
D. Xxxxxxxx Xxxxxxxxx 113,846 $369,999.00
Xxxxxxxxx 1998 Dynastic Trust 113,846 $369,999.50
Xxxxx X. Xxxxx 76,923 $249,999.75
Mid-Carolina Cardiology, PA 52,308 $170,001.00
Xxxxxxx X. and Xxx Xxx XxXxxxx 41,538 $134,998.50
Xxxxxxx X. XxXxxxx Rollover XXX 76,923 $249,999.75
W. August Xxxxxxxxxxx 184,615 $599,998.75
TAH & H Investors, LP 30,769 $99,999.25
KKH & C Investors, LP 30,769 $99,999.25
WAH & M Investors, LP 30,769 $99,999.25
MLH & T Investors, LP 30,769 $99,999.25
RDH & S Investors, LP 30,770 $100,002.50
GE Capital Equity Investments, Inc. 923,077 $3,000,000.25
TOTALS 2,618,461 8,509,998.25
========= ============
SCHEDULE 1
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Filed separately as an Exhibit to this Registration Statement
EXHIBIT B
SCHEDULE OF EXCEPTIONS
EXHIBIT B
SCHEDULE OF EXCEPTIONS
AUGUST 23, 2001
THIS SCHEDULE OF EXCEPTIONS IS MADE AND GIVEN WITH RESPECT TO SECTION 2
OF THE
SERIES F PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF AUGUST 23, 2001,
BY AND AMONG
DIGIRAD CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"), AND
THE INVESTORS LISTED ON SCHEDULE 1 ATTACHED THERETO (THE "PURCHASE AGREEMENT").
ALTHOUGH THE SECTION NUMBERS SET FORTH BELOW CORRESPOND TO THE SECTION NUMBERS
IN THE PURCHASE AGREEMENT, ANY INFORMATION DISCLOSED HEREIN UNDER ANY SECTION
NUMBER SHALL BE DEEMED TO BE DISCLOSED AND INCORPORATED INTO ANY OTHER SECTION
NUMBER UNDER THE PURCHASE AGREEMENT WHERE SUCH DISCLOSURES WOULD BE APPROPRIATE.
WHERE THE TERMS OF A LEASE, CONTRACT OR OTHER DISCLOSURE ITEM HAVE BEEN
SUMMARIZED OR DESCRIBED IN THIS SCHEDULE, SUCH SUMMARY OR DESCRIPTION DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE MATERIAL TERMS OF SUCH LEASE, CONTRACT
OR OTHER ITEM. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL CAPITALIZED TERMS
SHALL HAVE THE SAME MEANING AS DEFINED IN THE PURCHASE AGREEMENT. UNLESS
OTHERWISE INDICATED BELOW, ALL REFERENCES TO THE CLOSING OR THE CLOSING DATE
SHALL BE DEEMED TO REFER TO SUCH TERMS AS THEY ARE DEFINED IN THE PURCHASE
AGREEMENT.
SECTION 2.5
CAPITALIZATION
(a) Pursuant to the terms of that certain Consulting Agreement by and
between Digirad Imaging Systems, Inc. and Xxxxxxx Xxxxxxx dated September 29,
2000 (the "Xxxxxxx Consulting Agreement"), the Company may be obligated to issue
up to 150,000 shares of its common stock. The Company may be obligated to issue
a minimum of 100,000 of such 150,000 shares of its common stock to Xxxxxxx
Xxxxxxx so long as Xxxxxxx Xxxxxxx does not breach either the non-competition
provisions in the Xxxxxxx Consulting Agreement or that certain Non-Competition
and Non-Disclosure Agreement by and between Xxxxxxx Xxxxxxx and DIS (hereinafter
defined) dated as of September 29, 2000.
Pursuant to the terms of that certain Asset Purchase Agreement by and
among the Company, Orion Imaging Systems, Inc., Florida Cardiology and Nuclear
Medicine Group, P.A. and Dr. Xxxx Xxxxxxx, dated August 31, 2000, as amended
(the "Florida Cardiology Agreement"), the Company may be obligated to issue (a)
up to 100,000 shares of its common stock in connection with the achievement by
the Mobile Business (as defined in the Florida Cardiology Agreement) of certain
net revenues by August 2001 and (b) additional shares of its stock based upon
certain EBITDA revenues (the "Earn Out Payment"). The amount of the Earnout
Payment shall be determined by the following formula:
"E = 3.5 (X - $900,000)
E = Earnout Payment amount in dollars
X = 2 times the Adjusted EBITDA actually achieved during the period
(the "Earnout Period")commencing six (6) months after the Closing Date and
ending on the first anniversary of the Closing Date (the "Earnout Determination
Date").
Fifty percent (50%) of the amount of the Earnout Payment, when and if
paid, shall be payable in cash and fifty percent (50%) of the amount of the
Earnout Payment shall be payable
in shares of capital stock of Digirad (the "Earnout Shares"). The value of the
Earnout Shares shall be the fair market value of such Earnout Shares on the
Earnout Determination Date, as determined in good faith and in the sole
discretion of the Board of Directors of Digirad. The Earnout Shares may consist
of common stock of Digirad or preferred stock of Digirad, or any combination
thereof, as determined in the sole discretion of the Board of Directors of
Digirad."
Pursuant to terms of that certain Consulting Agreement with XxXxxxx
and Xxxxxx Consulting ("MWC") dated July 31, 2001 (the "MWC Agreement"), the
Company is obligated to issue MWC (a) a warrant to purchase up to 100,000
shares of its common stock, currently exercisable for 40,000 shares of its
common stock with subsequent vesting of 20,000 shares a year for the next
three years, (b) a warrant to purchase 10,000 shares of its common stock for
every three of its digital cameras sold by MWC up to a maximum of 100,000
shares, and thereafter (c) a warrant to purchase 1,500 shares of its common
stock for each of its digital cameras sold by MWC.
SECTION 2.6
SUBSIDIARIES
Digirad Imaging Solutions, Inc, a Delaware corporation ("DIS"), is a
wholly-owned subsidiary of the Company and Digirad Imaging Systems, Inc., a
Delaware corporation, is a wholly-owned subsidiary of DIS.
SECTION 2.7
CONTRACTS AND OTHER COMMITMENTS
The Company has, from time to time, entered into the following
Consulting Agreements:
Xxxx Xxxxxxxx Medical Director Agreement dated November 6, 2000.
Reference is made to the Xxxxxxx Consulting Agreement. See Section 2.5
above.
Makago Electronics, Inc. Project Consulting Agreement dated January 27,
1998.
Xxxxxx Xxxxx Consulting Agreement dated June 24, 1998.
Xxxxxx Xxxx Project Consulting Agreement dated July 1, 1998.
Xxx Xxxxx Consulting Agreement dated July 20, 1998.
Xxxxxxx Xxxxxx Consulting Agreement dated August 8, 1998.
Xxxxxxx Xxxxxxx, CPA Consulting Agreement dated August 14, 1998.
Xxxxxxx Xxxxxxx Consulting Agreement dated August 14, 1998.
Xxxxx Xxxxxxxx Mechanical Design Consulting Agreement dated June 19,
2000.
Xxxxx X. Xxxxxxxxxxxxx, MD, PhD Consulting Service Agreement dated
March 4, 1999.
Xxx Xxxxxxxxxxx Mechanical Design Consulting Agreement dated June 14,
1999.
C4S Consulting Agreement dated July 26, 1999.
Xxxxx & Associates Consulting Agreement dated September 13, 1999.
Xxxxxxx Xxxxxxx Consulting Agreement dated October 4, 1999.
Xxxx Xxxx Consulting Agreement dated December 3, 1999.
Xxxxx Xxxxxxx Consulting Agreement dated February 25, 2000.
Design & Development with Xxxxx Xxxxx & Associates dated February 18,
1998.
Xxxxx Xxxxxxxxx Consulting Agreement dated March 14, 2001.
Xxxxxx Xxxxxxx Independent Contractor Agreement dated July 8, 1999.
Xxxxxx XxXxxxxx Consulting Agreement dated December 14, 2000 (executed
in connection with the Florida Cardiology Agreement).
Reference is made to that certain Employment Agreement by and between
Dr. Xxxx Xxxxxxx and Digirad Imaging Systems, Inc. dated December 14, 2000 (the
"Xxxxxxx Employment Agreement") (executed in connection with the Florida
Cardiology Agreement).
Reference is made to that certain Separation and General Release
Agreement with Xxxxx Xxxxxxxx dated May 11, 2001 (the "Mehrberg Separation
Agreement").
Reference is made to the MWC Agreement. See Section 2.5 above.
Reference is made to that certain Asset Purchase Agreement by and among
Digirad Imaging Systems, Inc., Nuclear Imaging Systems, Inc. and Cardiovascular
Concepts, P.C. dated September 29, 2000 and its associated transaction documents
(the "NIS Agreement").
Reference is made to the Florida Cardiology Agreement. See Section 2.5
above.
Reference is made to the Right of First Refusal in favor of the Company
as set forth in Article VII of the Company's bylaws.
The Company has outstanding agreements involving amounts in excess of
$100,000 with the following entities:
COMPANY DESCRIPTION AMOUNT
-------------------------------------------------------------------
XXXXXX *** $895,400
SEGAMI *** Expect to pay $82,500
on a monthly basis, as
units are installed in
the field
MULTEK *** $156,865
PHOTOPEAK *** $848,436
QUIKSIL *** $192,645
CROWN CIRCUITS *** $140,406
KEARNY MESA FORD *** $144,000
ABILITY CENTER *** $105,701
The Company has from time to time entered into standard common stock
purchase agreements and option agreements for common stock with its employees
and directors (the "Common Stock Agreements"). Forms of the Common Stock
Agreements are attached hereto as Exhibits A & B.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
The Company has entered into standard indemnification agreements with
each of its directors (the "Indemnification Agreements"). A form of the
Indemnification Agreements is attached hereto as Exhibit C.
The Company currently has outstanding warrant agreements for the
purchase of shares of its common stock with the following individuals and/or
entities:
Cardiovascular Consultants 10,000
Xxxxxx XxXxxxxx 500
Xxxxxxx XxXxxxx 30,000
Xxxx Xxxxxx 30,000
Oklahoma Cardiovascular Associates 20,000
Austin Heart 10,000
The Company currently has outstanding warrant agreements for the
purchase of shares of its Series E Preferred Stock with the following entities:
MMC/GATX Ventures, Inc. 257,874
Priority Capital 36,839
Silicon Valley Bank 42,490
Xxxxxxxxx Capital Partners, L.P. III 9,881
Xxxxxxxxx Capital Partners, X.X. XX 23,057
Ocean Avenue Investors LLC - Anacapa Fund I /
Anacapa Investors LLC - Anacapa Fund I 16,469
Vector Later-Stage Equity Fund II (QP), L.P. 12,351
Vector Later-Stage Equity Fund II, L.P. 4,117
Reference is made to that certain Amended and Restated Investors'
Rights Agreement with the investors listed therein dated November 10, 2000, as
amended (the "Investors' Rights Agreement").
Reference is made to that certain Amended and Restated Co-Sale
Agreement with the investors listed therein dated November 10, 2000, as amended
(the "Co-Sale Agreement").
Reference is made to that certain Amended and Restated Voting Agreement
with investors listed therein dated August 8, 1997, as amended (the "Voting
Agreement").
Reference is made to that certain Amended and Restated Series E Voting
Agreement with the investors listed therein dated November 10, 2000, as amended
(the "Series E Voting Agreement").
Reference is made to that certain Contract V797P6897a with Department
of Veteran Affairs dated September 20, 2000.
Reference is made to that certain Service Agreement with Universal
Servicetrends, Inc. dated August 25, 2000.
Reference is made to that certain Development and supply agreement with
QuickSil, Inc. dated June 18, 1999 (the "Quicksil Agreement").
Reference is made to that certain Master Lease Agreement with GE
Healthcare Financial Services dated September 26, 2000 (the "GE Healthcare
Agreement").
Reference is made to that certain Irrevocable Standby Letter of Credit
with Silicon Valley Bank for the benefit of GE Company dated December 21, 2000
in amount of $205,000.
Reference is made to that certain Equipment Lease with MarCap
Corporation dated as of October 1, 2000 (the "MarCap Agreement").
Reference is made to that certain Master Equipment Lease with DVI
Financial Services, Inc. dated as of May 24, 2001 (the "DVI Agreement").
Reference is made to that certain Loan and Security Agreement with
Silicon Valley Bank dated as of April 1, 2000, as amended (the "First SVB
Agreement").
Reference is made to that certain Loan and Security Agreement with
Silicon Valley Bank dated as of July 31, 2001 (the "Second SVB Agreement").
Reference is made to that certain Loan and Security Agreement with
Xxxxxx Healthcare Finance dated January 9, 2001 (the "Xxxxxx Healthcare
Agreement").
Reference is made to that certain Loan and Security Agreement with
MMC/GATX Partnership No. I dated October 27, 1999 (the "MMC/GATX Agreement").
Reference is made to that certain First Amendment to Loan and Security
Agreement with MMC/GATX Partnership No. I dated August 14, 2000 (the "First
Amendment to MMC/GATX Agreement").
Reference is made to that certain Second Amendment to Loan and Security
Agreement with MMC/GATX Partnership No. I dated November 27, 2000 (the "Second
Amendment to MMC/GATX Agreement").
Reference is made to that certain Third Amendment to Loan and Security
Agreement with MMC/GATX Partnership No. I dated May 2, 2001 (the "Third
Amendment to MMC/GATX Agreement").
Reference is made to that certain Fourth Amendment to Loan and Security
Agreement with MMC/GATX Partnership No. I effective as of July 31, 2001 (the
"Fourth Amendment to MMC/GATX Agreement").
Reference is made to that certain Loan Agreement with Xxxx X. Xxxxxx in
an aggregate amount of $245,000 dated September 1, 1993, as amended (the "Xxxxxx
Loan").
Reference is made to that certain Loan Agreement with Xxxxxxx X.
Xxxxxxx in an aggregate amount of $245,000 dated September 1, 1993, as amended
(the "Xxxxxxx Loan").
Reference is made to that certain Loan Agreement with Xxxxxx X. Xxxxx
(as sole trustee of the Xxxxxx X. Xxxxx Revocable Trust) in an aggregate amount
of $245,000 dated September 1, 1993, as amended (the "Xxxxx Loan").
Reference is made to that certain License agreement for Detector with the
Regents of the University of
California through the Xxxxxx Xxxxxxx Xxxxxxxx
Berkeley National Laboratory dated May 19, 1999, as amended (the "Berkeley
License").
Reference is made to that certain Termination Agreement with Ethicon
Endo-Surgery, Inc. dated June 22, 1999 (the "Ethicon Agreement").
Reference is made to that certain Software License Agreement with
Segami Corporation dated June 16, 1999 (the "Segami Agreement").
Reference is made to that certain License Agreement with Science
Applications International Corporation dated April 7, 2000 (the "SAIC
Agreement").
Reference is made to that certain Software Products License Agreement
with Strategic Information Group, Inc. dated December 31, 1998 (the "SIG
Agreement").
Reference is made to that certain Software License Agreement with
Corporate Management Solutions, Inc. dated July 21, 1999 (the "CMS Agreement").
Reference is made to that certain Software License and Maintenance
Agreement with Cadence Design Systems, Inc. dated November 16, 1999 (the "CDS
Agreement").
Reference is made to that certain Software Products License Agreement with QAD,
Inc. dated January 6, 1999 (the "QAD Agreement").
The Company has entered into Distribution and Supply Agreements with
the following entities (the "D&S Agreements"):
CMS Imaging, Inc.
Performance Medical Group
ADN CanadaMitsui & Co.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxx, Xxxxx X,
Xxx Xxxxx, XX dated January 27, 1998 with Xxxx/King No. 1.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxx, Xxx
Xxxxx, XX dated February 21, 2001 with Xxxx Xxxxxxx, Trustee.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxxxx X,
Xxx Xxxxx, XX dated September 1, 1997 with Xxxxxxx Xxxxxxxxx.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxx
Xxxxx, XX dated May 26, 1996 with Research Diversified.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxx
Xxxxx, XX dated August 1, 1997 with Xxxxx and Xxx Xxxx Family Trust.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxx
Xxxxx, XX dated January 10, 1997 with X.X. Xxxxxx Company.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxxxx X,
Xxx Xxxxx, XX dated August 13, 1997 with Xxxxxx Xxxxxxxxx.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxx
Xxxxx, XX dated May 1, 1997 with Xxxx and Xxxxx Xxxxxxx.
Reference is made to that certain Lease for 0000X Xxxxxxxx Xxxx.,
Xxxxx, XX between Orion Imaging Systems and Xxxx and Xxxxxx Xxxxxx dated
December 21, 2000.
Reference is made to that certain Lease for 0 Xxxxxx Xxxxx, Xxxx 0,
Xxxxxxxx, XX 00000 between Digirad Imaging Solutions and Xxxxxxx and Xxxxxxxx
Xxxxxxxxx dated March 29, 2001.
Reference is made to that certain Lease for 000 X. Xx., Xxx. 000,
Xxxxxxxxx, XX between Orion Imaging Systems and Fourth Street Development, LP
dated February 21, 2001.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxxx, Xxx
Xxxxx, XX with X.X. Xxxxxx Company dated August 6, 2001.
Reference is made to that certain Lease for 0000 Xxxxxxxxx Xxxxx,
Xxxxxxxxxxxx, XX with Xxxxx Realty, LLC dated June 25, 2001.
Reference is made to that certain Lease for 0000 Xxxxx Xxxxx Xxxx,
Xxxxxxxxx, XX with Xxxxx Limited Partnership dated March 16, 2001.
Reference is made to that certain Lease for 0000-X Xxxx Xxxx,
Xxxxxxxxxx, XX with Xxxxxx Enterprises, Inc. dated August 15, 2000.
Reference is made to that certain Lease for 0000 Xxxxxxxx Xxxx, XX with
GMC Investments, Co., Ltd. dated May 31, 2001.
Reference is made to that certain Lease for 0000 Xxxxxxxx Xxxxx,
Xxxxxxx, XX with AMB Property, LP dated April 20, 2001.
Reference is made to that certain Lease for 000-000 Xxxxxxxx Xxxxx,
Xxxxxxxxxxx, XX with Best & Associates dated June 13, 2001.
See also disclosures in Section 2.19 with respect to Patents, Trademarks or
other technology of the Company.
SECTION 2.8
RELATED-PARTY TRANSACTIONS
Reference is made to the Common Stock Purchase Agreements, the
Indemnification Agreements, the Co-Sale Agreement, the Investors' Rights
Agreement, the Voting Agreement and the Series E Voting Agreement. See Section
2.7 above.
Reference is made to the Xxxxxx Loan. See Section 2.7 above.
Reference is made to the Xxxxxxx Loan. See Section 2.7 above.
Reference is made to the Xxxxx Loan. See Section 2.7 above.
Reference is made to the Xxxxxxx Employment Agreement. See Section 2.7
above.
Reference is made to that certain Promissory Note Secured by Stock
Pledge Agreement with Xxxxx Xxxxxxxxx dated May 15, 2000 in the amount of
$33,419.
Reference is made to that certain Promissory Note Secured by Stock
Pledge Agreement with Xxxxxxx Xxxxxxxx dated January 16, 2001 in the amount of
$3,500.
Reference is made to that certain Promissory Note Secured by Stock
Pledge Agreement with Xxxx Xxxxxx dated September 22, 2000 in the amount of
$17,500.
Reference is made to that certain Promissory Note Secured by Stock
Pledge Agreement with Xxxx Xxxxxx dated December 22, 2000 in the amount of
$17,500.
Reference is made to that certain Promissory Note Secured by Stock
Pledge Agreement with Xxxxxxx Xxxxxx dated January 11, 2001 in the amount of
$5,000.
The Company has, from time to time, issued shares of its Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, and Series E Preferred Stock pursuant to Stock Purchase
Agreements with investors affiliated with certain members of its Board of
Directors as follows:
SERIES A MARCH 1995
Xxxxxxxxx Capital Partners 1,550,000
Xxxxxxxxx Capital Partners II 50,000
SERIES B DECEMBER 1995
Xxxxxxxxx Capital Partners 917,364
Xxxxxxxxx Capital Partners II 1,363,636
SERIES C AUGUST 1997
Xxxxxxxxx Capital Partners 600,000
Xxxxxxxxx Capital Partners II 600,000
Sorrento Growth Partners I 960,000
Sorrento Ventures II 400,000
Sorrento Ventures III 1,200,000
Sorrento Ventures CE 240,000
SERIES D AUGUST 1997
Xxxxxxxxx Capital Partners 433,407
Sorrento Growth Partners I 457,350
Sorrento Ventures II 184,457
Sorrento Ventures III 544,721
Sorrento Ventures CE 113,693
Vector Later-Stage Equity Fund 2,167,035
Vector Later-Stage Equity Fund II 2,275,389
SERIES E JUNE 1998, MARCH & NOVEMBER 2000, JANUARY 2001
Xxxxxxxxx Capital Partners 64,000
Xxxxxxxxx Capital Partners II 61,000
Xxxxxxxxx Capital Partners III 428,194
Xxxxxxxxx Capital Partners IV 230,566
Sorrento Growth Partners I 113,859
Sorrento Ventures II 46,951
Sorrento Ventures III 140,157
Sorrento Ventures CE 28,413
Vector Later-Stage Equity Fund 160,671
Vector Later-Stage Equity Fund II 83,349
Vector Later-Stage Equity Fund II (QP) 250,048
The Company has issued warrants to purchase up to 49,406 shares of its
Series E Preferred Stock to investors affiliated with certain members of its
Board of Directors as follows:
SEPTEMBER 29, 2000
Xxxxxxxxx Capital Partners III 9,881
Xxxxxxxxx Capital Partners IV 23,057
Vector Later-Stage Equity Fund II 4,117
Vector Later-Stage Equity Fund II (QP) 12,351
SECTION 2.9
REGISTRATION RIGHTS
Reference is made to a certain warrant for 42,490 shares of Series E
Preferred Stock with Silicon Valley Bank dated July 31, 2001. Provided a
majority of the Registrable Securities to the Investors' Rights Agreement
consent, Silicon Valley Bank will be added as a signatory thereto as required
under the terms of the warrant.
SECTION 2.10
COMPLIANCE WITH LAW; PERMITS; HEALTH-CARE REGULATORY MATTERS
The Company is aware of certain sales tax deficiencies in connection
with the sale of its products in certain states in an aggregate amount which it
believes do not exceed $153,000 (the "Sales Tax Deficiencies"). The Sales Tax
Deficiencies were incurred in connection with the sale of Company products in
states in which the Company did not have resale permits. The Company has
collected the Sales Tax Deficiencies and is in the process of securing resale
permits.
SECTION 2.12
LITIGATION
In June 2001, the Company received a letter from an attorney
representing American Medical Systems ("AMS") alleging that the Company breached
the terms of an exclusive distributorship agreement and demanding payment of
approximately $210,000.
In July 2001, the Company was served with a Writ of Garnishment with
respect to GENESIS PHARMACY SERVICES V. FLORIDA CARDIOLOGY AND NUCLEAR MEDICINE
GROUP, P.A. ET AL., a case currently pending in Hillsborough County, Florida
Civil Court. The plaintiff in the cause of action, Genesis Pharmacy Services
("Genesis"), is seeking approximately $157,600 plus interest from the defendants
("Florida Cardiology"). The Company has not been named as party to the
litigation. The Company purchased certain of the assets of Florida Cardiology
pursuant to a certain Asset Purchase Agreement executed with the defendants.
Through the Writ of Garnishment, Genesis is apparently attempting to determine
what funds Florida Cardiology and/or Xx. Xxxxxxx may be owed by the Company. The
Company has engaged Florida counsel to assist with the Company's possible
involvement in the dispute.
In July 2001, the Company was served notice that MEDICAL MANAGEMENT CONCEPTS,
INC. V.
DIGIRAD CORPORATION, ET AL. (the "Complaint") had been filed in the
United States District Court for the Eastern District of Pennsylvania. The
Complaint alleges, among other things, breach of the terms of a certain Services
Agreement and Employee Lease Agreement, each dated September 2000 and entered
into by and between Digirad Imaging Systems, Inc. and Medical Management
Concepts, and seeks recovery of damages in an amount in excess of $150,000, more
specifically, approximately $81,000 plus 12.5% of the adjusted Estimated Net
Revenue generated from gross sums billed to the Company's mobile nuclear imaging
customers from May 1, 2001 to October 31, 2003, as more fully described in the
NIS Agreement referenced in Section 2.5 (a) above. The Company has engaged
Pennsylvania counsel to assist in responding to the litigation.
SECTION 2.16
TITLE TO PROPERTY AND ASSETS; LEASES
Certain of the Company's assets, including but not limited to, Company
equipment and inventory is subject to security interests and liens pursuant to
the MMC/GATX Agreement as referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
licenses and intellectual property are subject to security interests and liens
pursuant to the First Amendment to MMC/GATX Agreement and the Fourth Amendment
to MMC/GATX Agreement as referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
equipment is subject to security interests and liens pursuant to the Second
Amendment to MMC/GATX Agreement and the Third Amendment to MMC/GATX Agreement as
referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
inventory, goods and equipment are subject to security interests and liens
pursuant to the First SVB Agreement as referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
equipment, receivables and intellectual property are subject to security
interests and liens pursuant to the Second SVB Agreement as referenced under
Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
equipment is subject to security interests and liens pursuant to the GE
Healthcare Agreement as referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
accounts and associated items are subject to security interests and liens
pursuant to the Xxxxxx Healthcare Agreement as referenced under Section 2.7
above.
Certain of the Company's assets, including but not limited to, Company
equipment is subject to security interests and liens pursuant to the MarCap
Agreement as referenced under Section 2.7 above.
Certain of the Company's assets, including but not limited to, Company
equipment is subject to security interests and liens pursuant to the DVI
Agreement as referenced under Section 2.7 above.
SECTION 2.17
FINANCIAL STATEMENTS
The following are liabilities subsequent to June 30, 2001 individually
in excess of $50,000 and in the aggregate in excess of $200,000:
COMPANY DESCRIPTION AMOUNT
-----------------------------------------------------------------------------------------
Xxxxxxx, Phleger & Xxxxxxxx Legal services approximately $210,000
Crown Circuits, Inc. *** $82,937
Xxxxxx Crystals, Ltd. *** $127,439
X.X. Marketing Inc. *** $141,578
Multek, Inc. *** $78,854
Newmark Systems *** $182,294
Nycomed Amersham Imaging *** $144,884
Segami Corporation *** $67,090
Supercool Thermoelectric *** $60,298
Syncor International *** $194,074
Vista Industrial Products *** $143,431
SECTION 2.18
CHANGES
(e) Reference is made to the First SVB Agreement, as amended. See
Section 2.7 above.
(e), (j) Reference is made to the Second SVB Agreement. See Section 2.7
above. Reference is made to the Fourth Amendment to MMC/GATX Agreement. See
Section 2.7 above.
(f) Reference is made to the addition of Xx. Xxxx Xxxxxx to the
Company's Board of Directors. In addition, reference is made to the anticipated
resignation of Xx. Xxxxxxx Xxxxxxx from the Company's Board of Directors.
(h) Reference is made to the replacement of Xx. Xxxxx Xxxxxxxx with Xx.
Xxxx Xxxxxxxx as the Company's Chief Financial Officer and Secretary.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
SECTION 2.19
PATENTS AND TRADEMARKS
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
***
***
***
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
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Registration of "Digirad Imaging Solutions"
Filed Application.....................................................March 6, 2001
Registration of "Notebook Imager"
Application Serial No. 75/202,360 filed...........................November 22, 1996
Registration of "SPECTour"
Application Serial No. 75/799,823 filed..........................September 14, 1999
Registration of "2020TC Imager"
Application Serial No. 75/799,499 filed..........................September 14, 1999
Registration of "Agile"
Application Serial No. 76/064,092 filed................................June 5, 2000
Reference is made to the QuickSil Agreement. See Section 2.7 above.
Reference is made to the Ethicon Agreement. See Section 2.7 above.
Reference is made to the Berkeley License. See Section 2.7 above.
Reference is made to the Segami Agreement. See Section 2.7 above.
Reference is made to the SAIC Agreement. See Section 2.7 above.
Reference is made to the SIG Agreement. See Section 2.7 above.
Reference is made to the CMS Agreement. See Section 2.7 above.
Reference is made to the CDS Agreement. See Section 2.7 above.
Reference is made to the QAD Agreement. See Section 2.7 above.
Reference is made to the First Amendment to MMC/GATX Agreement. See
Section 2.7 above.
Reference is made to the Fourth Amendment to MMC/GATX Agreement. See
Section 2.7 above.
Reference is made to the First SVB Agreement. See Section 2.7 above.
Reference is made to the Second SVB Agreement. See Section 2.7 above.
SECTION 2.20
MANUFACTURING AND MARKETING RIGHTS
Reference is made to that certain Quicksil Agreement. See Section 2.7
above.
Reference is made to the D&S Agreements. See Section 2.7 above.
SECTION 2.21
EMPLOYEES; EMPLOYEE COMPENSATION
Reference is made to the Company's 401k Retirement Plan, 125 Plan and
2001 Leadership Bonus Plan (collectively, the "Company Benefit Plans").
Reference is made to the Xxxxxxx Employment Agreement. See Section 2.7
above.
Reference is made to the Mehrberg Separation Agreement. See Section 2.7
above.
SECTION 2.23
TAX RETURNS, PAYMENTS, AND ELECTIONS
The Company was audited by the
California Franchise Tax Board for 1993,
1994 and 1995 in routine examinations. No deficiencies were noted.
The Company paid a $1,180.31 penalty assessed against it by the IRS for
a tax deficiency that occurred in 1991.
Reference is made to the Sales Tax Deficiencies.
SECTION 2.29
ERISA
Reference is made to the Company Benefit Plans. See Section 2.21 above.
Reference is made to the Company's medical and dental insurance, long
term disability, paid time off, and Stock Option Plans.
Reference is made to the Mehrberg Separation Agreement. See Section 2.7
above.
EXHIBIT A
IMMEDIATELY EXERCISABLE
DIGIRAD CORPORATION
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ___ day of ___________, 19__, by and among
Digirad Corporation, (the "Corporation"), _____________________, the holder of
a stock option (the "Optionee") under the Corporation's 1997 Stock Option/Stock
Issuance Plan and _______________, the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 EXERCISE. Optionee hereby purchases ______________ shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1997 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement
to the Corporate Secretary of the Corporation, Optionee shall pay the Option
Price for the Purchased Shares in accordance with the provisions of the
agreement between the Corporation and Optionee evidencing the Option (the
"Option Agreement") and shall deliver whatever additional documents may be
required by the Option Agreement as a condition for exercise, together with a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing
the Purchased Shares hereunder shall be held in escrow by the Corporate
Secretary of the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation
actually exercises its repurchase right, rights of first refusal or special
purchase right under this Agreement, Optionee (or any successor in interest)
shall have all the rights of a shareholder (including voting and dividend
rights) with respect to the Purchased Shares, including the Purchased Shares
held in escrow under Article VII, subject, however, to the transfer restrictions
of Article IV.
II. SECURITIES LAW COMPLIANCE
2.1 EXEMPTION FROM REGISTRATION. The Purchased Shares have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
and are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form
of Exhibit C to the Notice of Grant of Stock Option (the "Grant Notice")
accompanying the Option Agreement.
2.2 RESTRICTED SECURITIES.
A. Optionee hereby confirms that Optionee has been informed
that the Purchased Shares are restricted securities under the 1933 Act and may
not be resold or transferred unless the Purchased Shares are first registered
under the Federal securities laws or unless an exemption from such registration
is available. Accordingly, Optionee hereby acknowledges that Optionee is
prepared to hold the Purchased Shares for an indefinite period and that Optionee
is aware that Rule 144 of the Securities and Exchange Commission issued under
the 1933 Act is not presently available to exempt the sale of the Purchased
Shares from the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period
immediately following the date on which the Corporation first becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Purchased Shares, to the extent vested under Article
V, may be sold (without registration) pursuant to the applicable requirements of
Rule 144. If Optionee is at the time of such sale an affiliate of the
Corporation for purposes of Rule 144 or was such an affiliate during the
preceding three (3) months, then the sale must comply with all the requirements
of Rule 144 (including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.3 DISPOSITION OF SHARES. Optionee hereby agrees that
Optionee shall make no disposition of the Purchased Shares (other than a
permitted transfer under paragraph 4.1) unless and until there is compliance
with all of the following requirements:
(a) Optionee shall have notified the Corporation of
the proposed disposition and provided a written summary of the terms
and conditions of the proposed disposition.
(b) Optionee shall have complied with all
require-ments of this Agreement applicable to the disposition of the
Purchased Shares.
-2-
(c) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (i) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (ii) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(d) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares pursuant to the provisions of the Commissioner Rules identified
in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its
books any Purchased Shares which have been sold or transferred in violation of
the provisions of this Article II nor (ii) to treat as the owner of the
Purchased Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
2.4 RESTRICTIVE LEGENDS. In order to reflect the restrictions
on disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested
and accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written agreement
dated ____________, 19 __ between the Corporation and the registered holder of
the shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
3.1 SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF A
NON-STATUTORY STOCK OPTION. If the Purchased Shares are acquired hereunder
pursuant to the exercise of a non-statutory stock option, as specified in the
Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the fair
market value of the Purchased Shares on the
-3-
date any forfeiture restrictions applicable to such shares lapse over the
Option Price paid for such shares will be reportable as ordinary income on
such lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right provided under Article V of this Agreement.
Optionee understands that he/she may elect under Section 83(b) of the Code to
be taxed at the time the Purchased Shares are acquired hereunder, rather than
when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of this Agreement. Even if the fair
market value of the Purchased Shares at the date of this Agreement equals the
Option Price paid (and thus no tax is payable), the election must be made to
avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE
TO MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 CONDITIONAL SECTION 83(b) ELECTION APPLICABLE TO THE
EXERCISE OF AN INCENTIVE STOCK OPTION. If the Purchased Shares are acquired
hereunder pursuant to the exercise of an incentive stock option under the
Federal tax laws, as specified in the Grant Notice, then the following tax
principles shall be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will
be recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased Shares
lapse over (ii) the Option Price paid for the Purchased Shares will be
includible in the Optionee's taxable income for alternative minimum tax
purposes.
C. If the Optionee makes a disqualifying disposition
of the Purchased Shares, then the Optionee will recognize ordinary
income in the year of such disposition equal in amount to the excess of
(i) the fair market value of the Purchased Shares on the date the
Option is exercised or (if later) on the date any forfeiture
restrictions applicable to the Purchased Shares lapse over (ii) the
Option Price paid for the Purchased Shares. Any additional gain
recognized upon the disqualifying disposition will be either short-term
or long-term capital gain depending upon the period for which the
Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right
provided under Article V of this Agreement. The term "disqualifying
disposition" means any sale or other
-4-
disposition (1/) of the Purchased Shares within two (2) years after
the Grant Date or within one (1) year after the execution date of
this Agreement.
E. In the absence of final Treasury Regulations
relating to incentive stock options, it is not certain whether the
Optionee may, in connection with the exercise of the Option for any
Purchased Shares at the time subject to forfeiture restrictions, file a
protective election under Section 83(b) of the Code which would limit
(I) the Optionee's alternative minimum taxable income upon exercise and
(II) the Optionee's ordinary income upon a disqualifying disposition,
to the excess of (i) the fair market value of the Purchased Shares on
the date the Option is exercised over (ii) the Option Price paid for
the Purchased Shares. THE APPROPRIATE FORM FOR MAKING SUCH A PROTECTIVE
ELECTION IS ATTACHED AS EXHIBIT II TO THIS AGREEMENT AND MUST BE FILED
WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS AFTER THE
DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION IF PROPERLY FILED WILL
ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY REGULATIONS PERMIT
SUCH A PROTECTIVE ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered
or certified mail, return receipt requested, and Optionee must retain two (2)
copies of the completed form for filing with his or her State and Federal tax
returns for the current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer,
assign, encumber or otherwise dispose of any of the Purchased Shares which are
subject to the Corporation's Repur-chase Right under Article V. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of disposition
in contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, PROVIDED AND ONLY if the Optionee
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a
-----------------
(1/) Generally, a disposition of shares purchased under an incentive
stock option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
-5-
transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by the Optionee in connection with the acquisition of
the Purchased Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Corporation that
such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI
and VII of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; PROVIDED, however,
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions
of this paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the
Corporation are also subject to similar arrangements.
C. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected as a class without receipt of considera-tion, then any new,
substituted or additional securities distributed with respect to the Purchased
Shares shall be immediately subject to the provisions of this paragraph 4.4, to
the same extent the Purchased Shares are at such time covered by such
provisions.
D. In order to enforce the limitations of this paragraph 4.4,
the Corporation may impose stop-transfer instruc-tions with respect to the
Purchased Shares until the end of the applicable stand-off period.
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V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Option Price all or (at the discretion of the
Corporation and with the consent of the Optionee) any portion of the Purchased
Shares in which the Optionee has not acquired a vested interest in accordance
with the vesting provisions of paragraph 5.3 (such shares to be hereinafter
called the "Unvested Shares"). For purposes of this Agreement, the Optionee
shall be deemed to remain in Service for so long as the Optionee continues to
render periodic services to the Corporation or any parent or subsidiary
corporation, whether as an employee, a non-employee member of the board of
directors, or an independent contractor or consultant.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right
shall be exercisable by written notice delivered to the Owner of the Unvested
Shares prior to the expiration of the applicable sixty (60)-day period specified
in paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one or
more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised
in more than one increment so that the Optionee is a party to one or more other
Stock Purchase Agreements ("Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting
-7-
provisions of paragraph 5.3, had all the Purchased Shares been acquired
exclusively under this Agreement.
5.5 FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly, should the Repurchase Right extend
to a fractional share (in accordance with the vesting provisions of paragraph
5.3) at the time the Optionee ceases Service, then such fractional share shall
be added to any fractional share in which the Optionee is at such time vested in
order to make one whole vested share no longer subject to the Repurchase Right.
5.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event
of any stock dividend, stock split, recapitalization or other change affecting
the Corporation's outstanding Common Stock as a class effected without receipt
of consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares and Total Purchasable Shares hereunder
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
remain the same.
5.7 CORPORATE TRANSACTION.
A. The Repurchase Rights shall automatically terminate and
cease to be exercisable upon the consummation of any Corporate Transaction,
provided that such repurchase right shall not terminate if and to the extent the
Repurchase Rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction.
B. Repurchase rights which are assigned in connection with a
Corporate Transaction shall be exercisable with respect to the property issued
to the Optionee upon consummation of such Corporate Transaction in exchange for
the Common Stock held by the Optionee subject to the repurchase rights
immediately prior to the Corporate Transaction.
C. Any Repurchase Rights which are assigned in a Corporate
Transaction and do not otherwise become vested at that time, shall automatically
terminate and cease to be exercisable in the event the Optionee's Service should
subsequently terminate by reason of an Involuntary Termination within
twenty-four (24) months following the effective date of such Corporate
Transaction.
D. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
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VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted rights of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner
desires to accept a bona fide third-party offer for the transfer of any or all
of the Purchased Shares (the shares subject to such offer to be hereinafter
called the "Target Shares"), Owner shall promptly (i) deliver to the Corporate
Secretary of the Corporation written notice (the "Disposition Notice") of the
terms and conditions of the offer, including the purchase price and the identity
of the third-party offeror, and (ii) provide satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles II and IV of this
Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of
forty-five (45) days following receipt of the Disposition Notice, have the right
to repurchase any or all of the Target Shares specified in the Disposition
Notice upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such right
shall be exercisable by delivery of written notice (the "Exercise Notice") to
Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates repre-senting
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. To the extent any of the Target Shares are at the time held in
escrow under Article VII, the certificates for such shares shall automatically
be released from escrow and delivered to the Corporation for purchase. Should
the purchase price specified in the Disposition Notice be payable in property
other than cash or evidences of indebtedness, the Corporation (or its assignees)
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If the Owner and the Corporation (or its
assignees) cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made by
an appraiser of recognized standing selected by the Owner and the Corporation
(or its assignees) or, if they cannot agree on an appraiser within twenty (20)
days after the Corporation's receipt of the Disposition Notice, each shall
select an appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared equally
by the Owner and the Corporation. The closing shall then be held on the later of
(i) the tenth business day following delivery of the Exercise Notice or (ii) the
tenth business day after such cash valuation shall have been made.
-9-
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is
not given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Dis-position Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation
(or its assignees) makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written notice
to the Corporation delivered within thirty (30) days after the date of the
Disposition Notice, to effect the sale of the Target Shares pursuant to one of
the following alternatives:
(i) sale or other disposition of all the
Target Shares to the third-party offeror identified in the Disposition
Notice, but in full compliance with the requirements of paragraph 6.4,
as if the Corporation did not exercise the First Refusal Right
hereunder; or
(ii) sale to the Corporation (or its
assignees) of the portion of the Target Shares which the Corporation
(or its assignees) has elected to purchase, such sale to be effected in
substantial conformity with the provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the
Corporation under this paragraph 6.5 shall be deemed to be an election by Owner
to sell the Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Corporation's outstanding
Common Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Corporation's
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First Refusal Right hereunder, but only to the extent the Purchased Shares
are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation
in which the Corporation is not the surviving entity,
(ii) a sale, transfer or other
disposition of all or substantially all of the Corporation's assets,
(iii) a reverse merger in which
the Corporation is the surviving entity but in which the Corporation's
outstanding voting securities are transferred in whole or in part to
person or persons other than those who held such securities immediately
prior to the merger, or
(iv) any transaction effected
primarily to change the State in which the Corporation is incorporated,
or to create a holding company structure,
the Corporation's First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the transaction
but only to the extent the Purchased Shares are at the time covered by such
right.
6.7 LAPSE. The First Refusal Right under this Article VI shall
lapse and cease to have effect upon the earliest to occur of (i) the first date
on which shares of the Corporation's Common Stock are held of record by more
than five hundred (500) persons, (ii) a determination is made by the
Corporation's Board of Directors that a public market exists for the outstanding
shares of the Corporation's Common Stock, or (iii) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Corporation's Common
Stock in the aggregate amount of at least $5,000,000. However, the market
stand-off provisions of paragraph 4.4 shall continue to remain in full force and
effect following the lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested
Shares purchased hereunder shall be deposited in escrow with the Corporate
Secretary of the Corporation- to be held in accordance with the provisions of
this Article VII. Each deposited certificate shall be accompanied by a
duly-executed Assignment Separate from Certificate in the form of Exhibit I. The
deposited certificates, together with any other assets or securities from time
to time deposited with the Corporate Secretary pursuant to the requirements of
this Agreement, shall remain in escrow until such time or times as the
certificates (or other assets and securities) are to be released or otherwise
surrendered for cancellation in accordance with paragraph 7.3. Upon delivery of
the certificates (or other assets and securities) to the Corporate Secretary of
the Corporation, the Owner shall be
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issued an instrument of deposit acknowledging the number of Unvested Shares
(or other assets and securities) delivered in escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the
Unvested Shares (or other securities at the time held in escrow) shall be paid
directly to the Owner and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its
assignees) elect to exercise the Repurchase Right under Article V with
respect to any Unvested Shares, then the escrowed certificates for such
Unvested Shares (together with any other assets or securities issued
with respect thereto) shall be delivered to the Corporation
concurrently with the payment to the Owner, in cash or cash equivalent
(including the cancellation of any purchase-money indebtedness), of an
amount equal to the aggregate Option Price for such Unvested Shares,
and the Owner shall cease to have any further rights or claims with
respect to such Unvested Shares (or other assets or securities
attributable to such Unvested Shares).
(ii) Should the Corporation (or its
assignees) elect to exercise its First Refusal Right under Article VI
with respect to any vested Target Shares held at the time in escrow
hereunder, then the escrowed certificates for such Target Shares
(together with any other assets or securities attributable thereto)
shall, concurrently with the payment of the paragraph 6.3 purchase
price for such Target Shares to the Owner, be surrendered to the
Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or
securities).
(iii) Should the Corporation (or its
assignees) elect not to exercise its First Refusal Right under Article
VI with respect to any Target Shares held at the time in escrow
hereunder, then the escrowed certificates for such Target Shares
(together with any other assets or securities attributable thereto)
shall be surrendered to the Owner for disposition in accordance with
provisions of paragraph 6.4.
(iv) As the interest of the Optionee in
the Unvested Shares (or any other assets or securities attributable
thereto) vests in accordance
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with the provisions of Article V, the certificates for such vested
shares (as well as all other vested assets and securities) shall be
released from escrow and delivered to the Owner in accordance with the
following schedule:
a. The initial release of
vested shares (or other vested assets and securities) from
escrow shall be effected within thirty (30) days following the
expiration of the initial twelve (12)-month period measured
from the Grant Date.
b. Subsequent releases of
vested shares (or other vested assets and securities) from
escrow shall be effected at semi-annual intervals thereafter,
with the first such semi-annual release to occur eighteen (18)
months after the Grant Date.
c. Upon the Optionee's
cessation of Service, any escrowed Purchased Shares (or other
assets or securities) in which the Optionee is at the time
vested shall be promptly released from escrow.
d. Upon any earlier
termination of the Corporation-'s Repurchase Right in
accordance with the applicable provisions of Article V, any
Purchased Shares (or other assets or securities) at the time
held in escrow hereunder shall promptly be released to the
Owner as fully-vested shares or other property.
(v) All Purchased Shares (or other
assets or securities) released from escrow in accordance with the
provisions of subparagraph (iv) above shall nevertheless remain subject
to (I) the Corporation's First Refusal Right under Article VI until
such right lapses pursuant to paragraph 6.7, (II) the market stand-off
provisions of paragraph 4.4 until such provisions terminate in
accordance therewith and (III) the Special Purchase Right under Article
VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the
Optionee's marriage or the legal separation of the Optionee and the Optionee's
spouse, the Corporation shall have the right (the "Special Purchase Right"),
exercisable at any time during the thirty (30)-day period following the
Corporation's receipt of the required Dissolution Notice under paragraph 8.2, to
purchase from the Optionee's spouse, in accordance with the provisions of
paragraph 8.3, all or any portion of the Purchased Shares which would otherwise
be awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolu-tion or legal separation or (ii) the execution of any contract
or agreement relating to the distribution or division of
-13-
such property rights. The Dissolution Notice shall be accompanied by a copy
of the actual decree of dissolution or settlement agreement between the
Optionee and the Optionee's spouse which provides for the award to the spouse
of one or more Purchased Shares in settlement of any community property or
other marital property rights such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase
Right shall be exercisable by delivery of written notice (the "Purchase Notice")
to the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market
value specified for the shares in the Purchase Notice, then the spouse shall
promptly notify the Corporation in writing of such disagreement and the fair
market value of such shares shall thereupon be determined by an appraiser of
recognized standing selected by the Corporation and the spouse. If they cannot
agree on an appraiser within twenty (20) days after the date of the Purchase
Notice, each shall select an appraiser of recognized standing, and the two
appraisers shall designate a third appraiser of recognized standing whose
appraisal shall be determinative of such value. The cost of the appraisal shall
be shared equally by the Corporation and the Optionee's spouse. The closing
shall then be held on the fifth business day following the completion of such
appraisal; provided, however, that if the appraised value is more than fifteen
percent (15%) greater than the fair market value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5)-business-day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII
shall lapse and cease to have effect upon the earlier to occur of (i) the first
date on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
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IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase
Right under Article V, its First Refusal Right under Article VI and/or its
Special Purchase Right under Article VIII to any person or entity selected by
the Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one
hundred percent (100%) owned subsidiary corporation of the Corporation or the
parent corporation owning one hundred percent (100%) of the Corporation, then
such assignee must make a cash payment to the Corporation, upon the assignment
of the Repurchase Right, in an amount equal to the excess (if any) of (i) the
fair market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the
Corporation shall be considered to be a parent corporation of the
Corporation, provided each such corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations
in such chain.
(ii) Each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation shall be considered to be a subsidiary of the Corporation,
provided each such corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon the Optionee any right to continue in
the Service of the Corporation (or any parent or subsidiary corporation of the
Corporation employing or retaining Optionee) for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such
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other address as such party may designate by ten (10) days advance written
notice under this paragraph 9.4 to all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right granted under
Article V, or the failure of the Corporation (or its assignees) in any instance
to exercise the First Refusal Right granted under Article VI, or the failure of
the Corporation (or its assignees) in any instance to exercise the Special
Purchase Right granted under Article VIII shall not constitute a waiver of any
other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this Agreement or any other agreement between the
Corporation and the Optionee or the Optionee's spouse. No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Purchased Shares to
be repurchased in accordance with the provisions of this Agreement, then from
and after such time, the person from whom such shares are to be repurchased
shall no longer have any rights as a holder of such shares (other than the right
to receive payment of such consideration in accordance with this Agreement), and
such shares shall be deemed purchased in accordance with the applicable
provisions hereof and the Corporation (or its assignees) shall be deemed the
owner and holder of such shares, whether or not the certificates therefor have
been delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on either
the Optionee or the Purchased Shares pursuant to the express provisions of this
Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and the Optionee and the Optionee's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and xxxxx, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
DIGIRAD CORPORATION
By:
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Title:
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Address:
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Optionee (*/)
Address:
-----------------------------------
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The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consider-ation of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
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Optionee's Spouse
Address:
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-----------------------------------
----------------------
(*/) I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and NOT the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _____________ hereby sell(s), assign(s) and
transfer(s) unto
Digirad Corporation (the "Corporation"), _____________(_______)
shares of the Common Stock of the Corporation standing in his\her name on the
books of the Corporation represented by Certificate No.__________________ and do
hereby irrevocably constitute and appoint __________________ as Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises. Dated:___________________
Signature _____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
REPURCHASE RIGHTS
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
______________ shares of the common stock of
Digirad Corporation.
(3) The property was issued on ______________, 19___.
(4) The taxable year in which the election is being made is the calendar
year 19 .
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a four year period ending on ___________,
19___.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $________ per share.
(7) The amount paid for such property is $___________ per share.
(8) A copy of this statement was furnished to Digirad Corporation for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: ____________________.
_________________________ ___________________________
Spouse (if any)... Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restric-tions applicable to such shares. The election is to be
effective to the full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income
any excess of the fair market value of the purchased shares over the amount paid
for such shares. Accordingly, this election is also intended to be effective in
the event there is a "disqualifying disposition" of the shares, within the
meaning of Section 421(b) of the Code, which would otherwise render the
provisions of Section 83(a) of the Code applicable at that time. Consequently,
the Taxpayer hereby elects to have the amount of disqualifying disposition
income measured by the excess of the fair market value of the purchased shares
on the date of transfer to the Taxpayer over the amount paid for such shares.
Since Section 421(a) presently applies to the shares which are the subject of
this Section 83(b) election, no taxable income is actually recognized for
regular tax purposes at this time, and no income taxes are payable, by the
Taxpayer as a result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN
INCENTIVE STOCK OPTION.
EXHIBIT B
DIGIRAD CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the Digirad
Corporation 1997 Stock Option/Stock Issuance Plan (the "Plan") for the purpose
of attracting and retaining the services of persons who contribute to the growth
and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, the Corporation hereby grants to Optionee, as of
the grant date (the "Grant Date") specified in the accompanying Notice of Grant
of Stock Option (the "Grant Notice"), a stock option to purchase up to that
number of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice. Capitalized terms used herein which are
not otherwise defined shall have the meaning ascribed to such terms in the Plan.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole
or in part at any time prior to the time the Plan is approved by the
Corporation's shareholders in accordance with Paragraph 17. Provided such
shareholder approval is obtained, this option shall thereupon become exercisable
for the Option Shares in one or more installments as is specified in the Grant
Notice. As the option becomes exercisable in one or more installments, the
installments shall accumulate and the option shall remain
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
5. SPECIAL TERMINATION OF OPTION TERM. The option term specified
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in
subparagraph (ii) or (iii) below, should Optionee cease to remain in
Service while this option is outstanding, then the period for
exercising this option shall be reduced to a three (3)-month period
commencing with the date of such cessation of Service, but in no event
shall this option be exercisable at any time after the Expiration Date.
Upon the expiration of such three (3)-month period or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
outstanding.
(ii) Should Optionee die while this
option is outstanding, then the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
law of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be
exercisable upon the earlier of (A) the expiration of the twelve (12)
month period measured from the date of Optionee's death or (B) the
Expiration Date. Upon the expiration of such twelve (12) month period
or (if earlier) upon the Expiration Date, this option shall terminate
and cease to be outstanding.
(iii) Should Optionee become permanently
disabled and cease by reason thereof to remain in Service while this
option is outstanding, then the Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this option
be exercisable at any time after the Expiration Date. Optionee shall be
deemed to be permanently disabled if Optionee is unable to engage in
any substantial gainful activity for the Corporation or the parent or
subsidiary corporation retaining his/her services by reason of any
medically determinable physical or mental impairment, which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months. Upon
the expiration of such limited period of exercisability or (if earlier)
upon the Expiration Date, this option shall terminate and cease to be
outstanding.
(iv) During the limited period of
exercisability applicable under subparagraph (i), (ii) or (iii) above,
this option may be exercised for any or all of the Option Shares for
which this option is, at the time of the Optionee's cessation of
Service, exercisable in accordance with the exercise schedule specified
in the Grant Notice and the provisions of Paragraph 6 of this
Agreement.
(v) For purposes of this Paragraph 5 and
for all other purposes under this Agreement:
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A. The Optionee shall be deemed to remain in Service
for so long as the Optionee continues to render periodic services to the
Corporation or any parent or subsidiary corporation, whether as an Employee,
a non-employee member of the board of directors, or an independent contractor
or consultant.
B. The Optionee shall be deemed to be an Employee of
the Corporation and to continue in the Corporation's employ for so long as
the Optionee remains in the employ of the Corporation or one or more of its
parent or subsidiary corporations, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
C. A corporation shall be considered to be a
subsidiary corporation of the Corporation if it is a member of an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation in the chain (other than the last corporation) owns, at the time
of determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
D. A corporation shall be considered to be a parent
corporation of the Corporation if it is a member of an unbroken chain ending
with the Corporation, provided each such corporation in the chain (other than
the Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
6. EFFECT OF CORPORATE TRANSACTION.
A. Optionee shall automatically vest in full with
respect to all of the Option Shares in the event of a Corporate Transaction
so that each such option shall, immediately prior to the effective date of
the Corporate Transaction, may be exercised for any or all of the Option
Shares as fully-vested shares of Common Stock, provided that the Option
Shares shall not automatically vest in full if and to the extent: (i) this
option is, in connection with the Corporate Transaction, either to be assumed
by the successor corporation (or parent thereof) or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. To the extent not previously exercised, this
Option shall terminate and cease to be exercisable upon the consummation of a
Corporate Transaction unless it is expressly assumed by the successor
corporation or parent thereof.
C. Option Shares available under any options which
are assumed or replaced in the Corporate Transaction and do not otherwise
accelerate at that time, shall automatically vest in full in the event the
Optionee's Service should subsequently
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terminated by reason of an Involuntary Termination within twenty-four (24)
months following the effective date of such Corporate Transaction. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration
of the one (1)-year period measured from the effective date of the
Involuntary Termination.
D. This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
7. EFFECT OF CHANGE IN CONTROL
In the event of any Change in Control, Optionee shall
automatically vest in full with respect to all Option Shares so that each
such option shall, immediately prior to the effective date of the Change in
Control, be fully exercisable for any or all of Option Shares as fully-vested
shares of Common Stock.
8. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's
outstanding Common Stock by reason of any stock split, stock dividend,
combination of shares, exchange of shares, or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the total number of Option
Shares subject to this option, (ii) the number of Option Shares for which
this option is to be exercisable from and after each installment date
specified in the Grant Notice and (iii) the Option Price payable per share in
order to reflect such change and thereby preclude a dilution or enlargement
of benefits hereunder.
B. If this option is to be assumed in connection with a
Corporate Transaction described in Paragraph 6 or is otherwise to remain
outstanding, then this option shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply and pertain to the number and
class of securities which would have been issuable to the Optionee in the
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Option Price payable per share, provided the
aggregate Option Price payable hereunder shall remain the same.
9. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
10. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to
all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
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(i) Execute and deliver to the
Secretary of the Corporation a stock purchase agreement (the "Purchase
Agreement") in substantially the form of Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option
Price for the purchased shares in one or more forms approved under the
Plan.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option, if other than Optionee, have the right to exercise this option.
B. For purposes of this Agreement, the Exercise Date
shall be the date on which the executed Purchase Agreement shall have been
delivered to the Corporation, and the fair market value of a share of Common
Stock on any relevant date shall be determined in accordance with
subparagraphs (i) through (iii) below:
(i) If the Common Stock is not
at the time listed or admitted to trading on any stock exchange but is
traded on the NASDAQ National Market System, the fair market value
shall be the closing selling price of one share of Common Stock on the
date in question, as such price is reported by the National Association
of Securities Dealers through its NASDAQ system or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative
of fair market value.
(ii) If the Common Stock is at
the time listed or admitted to trading on any stock exchange, then the
fair market value shall be the closing selling price per share of
Common Stock on the date in question on the stock exchange determined
by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the fair market
value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
(iii) If the Common Stock at the
time is neither listed nor admitted to trading on any stock exchange
nor traded in the over-the-counter market, or if the Plan Administrator
determines that the value determined pursuant to subparagraphs (i) and
(ii) above does not accurately reflect the fair market value of the
Common Stock, then such fair market value shall be determined by the
Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
C. As soon after the Exercise Date as practical, the
Corporation shall mail or deliver to Optionee or to the other person or
persons exercising this option a certificate or certificates representing the
shares so purchased and paid for, with the appropriate legends affixed
thereto.
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D. In no event may this option be exercised for any
fractional shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of
Option Shares upon such exercise shall be subject to compliance by the
Corporation and the Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on which
shares of the Corporation's Common Stock may be listed at the time of such
exercise and issuance.
B. In connection with the exercise of this option,
Optionee shall execute and deliver to the Corporation such representations in
writing as may be requested by the Corporation in order for it to comply with
the applicable requirements of Federal and State securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Corporation.
13. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall
be void with respect to such excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the provisions of
Article IV, Section 3, of the Plan.
B. The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation
to be necessary to the lawful issuance and sale of any Common Stock pursuant
to this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting
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the Optionee to pay the option price for the purchased Common Stock in
installments over a period of years. The terms of any such loan or
installment method of payment (including the interest rate, the requirements
for collateral and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware without resort to that State's conflict-of-laws rules.
18. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN
WHOLE OR IN PART UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
19. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable
tax treatment as an incentive stock option under the Federal tax laws if (and
to the extent) this option is exercised for one or more Option Shares: (i)
more than three (3) months after the date the Optionee ceases to be an
Employee for any reason other than death or permanent disability (as defined
in Paragraph 5) or (ii) more than one (1) year after the date the Optionee
ceases to be an Employee by reason of permanent disability.
B. Should this option be designated as immediately
exercisable in the Grant Notice, then this option shall not become
exercisable in the calendar year in which granted if (and to the extent) the
aggregate fair market value (determined at the Grant Date) of the
Corporation's Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate fair
market value (determined as of the respective date or dates of grant) of the
Corporation's Common Stock for which this option or one or more other
incentive stock options granted to the Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or its
parent or subsidiary corporations) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would
not be contravened.
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C. Should this option be designated as exercisable in
installments in the Grant Notice, then no installment under this option
(whether annual or monthly) shall qualify for favorable tax treatment as an
incentive stock option under the Federal tax laws if (and to the extent) the
aggregate fair market value (determined at the Grant Date) of the
Corporation's Common Stock for which such installment first becomes
exercisable hereunder will, when added to the aggregate fair market value
(determined as of the respective date or dates of grant) of the Corporation's
Common Stock for which one or more other incentive stock options granted to
the Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any parent or subsidiary corporation) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
20. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation
employing Optionee for the satisfaction of all Federal, State or local income
tax withholding requirements and Federal social security employee tax
requirements applicable to the exercise of this option.
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EXHIBIT C
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of _______, 19__
between DIGIRAD CORPORATION., a Delaware corporation ("Corporation"), and
_____________________________ ("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation,
performs a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors,
agents and employees of Corporation to the maximum extent authorized by
Section 145 of the Delaware General Corporation Law, as amended (the "Law");
and
C. The Bylaws and the Law, by their non-exclusive nature,
permit contracts between Corporation and the members of its Board of
Directors with respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the
Law, Corporation may from time to time purchase and maintain a policy or
policies of Directors and Officers Liability Insurance ("D & O Insurance"),
covering certain liabilities which may be incurred by its directors and
officers in the performance of services as directors and officers of
Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board
of Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a
member of the Board of Directors of Corporation, Corporation has determined
and agreed to enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as
a director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold
harmless and indemnify Director to the fullest extent authorized or permitted
by the provisions of the Law, as may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set
forth in Section 3 hereof, Corporation hereby further agrees to hold harmless
and indemnify Director:
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Director in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including an action by or in the right of Corporation) to
which Director is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Director is, was or at any time
becomes a director, officer, employee or agent of Corporation, or is or was
serving or at any time serves at the request of Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Director by Corporation under the non-exclusivity provisions of the Bylaws of
Corporation and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant
to Section 2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Director
is indemnified pursuant to Section 1 hereof or pursuant to any D & O
Insurance purchased and maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which
judgment is rendered against Director for an accounting of profits made from
the purchase or sale by Director of securities of Corporation pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law;
(d) on account of Director's conduct which is finally adjudged
to have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section
8(b) hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or stockholder of Corporation unless
such action, suit or proceeding was authorized in the specific case by action
of the Board of Directors of Corporation;
(g) on account of any action, suit or proceeding to the extent
that Director is a plaintiff, a counter-complainant or a cross-complainant
therein (other than an action, suit or proceeding permitted by Section 3(f)
hereof); or
(h) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both Corporation and Director have been
advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities laws is
against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1
and 2 is unavailable and may not be paid to Director for any reason other
than those set forth in paragraphs (b) through (g) of Section 3, then in
respect of any threatened, pending or completed action, suit or proceeding in
which Corporation is or is alleged to be jointly liable with Director (or
would be if joined in such action, suit or proceeding), Corporation shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and
paid or payable by Director in such proportion as is appropriate to reflect
(i) the relative benefits received by Corporation on the one hand and
Director on the other hand from the transaction from which such action, suit
or proceeding arose, and (ii) the relative fault of Corporation on the one
hand and of Director on the other hand in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of
Corporation on the one hand and of Director on the other shall be determined
by reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the circumstances
resulting in such expenses, judgments, fines or settlement amounts.
Corporation agrees that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or any
other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations
of Corporation contained herein shall continue during the period Director is
a director, officer, employee or agent of Corporation (or is or was serving
at the request of Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and shall continue thereafter so long as Director shall
be subject to any possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative, by reason of
the fact that Director was serving Corporation or such other entity in any
capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty
(30) days after receipt by Director of notice of the commencement of any
action, suit or proceeding, Director will, if a claim in respect thereof is
to be made against Corporation under this Agreement, notify Corporation of
the commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Director otherwise than
under this Agreement. With respect to any such action, suit or proceeding as
to which Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, to the extent that it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Director. After notice from Corporation to
Director of its election to assume the defense thereof, Corporation will not
be liable to Director
under this Agreement for any legal or other expenses subsequently incurred by
Director in connection with the defense thereof other than reasonable costs
of investigation or as otherwise provided below. Director shall have the
right to employ his own counsel in such action, suit or proceeding but the
fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Director
unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be
a conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to
which Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall be permitted to
settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty, out-of-pocket liability, or limitation
on Director without Director's written consent. Neither Corporation nor
Director will unreasonably withhold its or his consent to any proposed
settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to
Director, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred
in investigating or defending any such action, suit or proceeding within ten
(10) days after receiving copies of invoices presented to Director for such
expenses.
(b) Director agrees that Director will reimburse Corporation
for all reasonable expenses paid by Corporation in defending any civil or
criminal action, suit or proceeding against Director in the event and only to
the extent it shall be ultimately determined by a final judicial decision
(from which there is no right of appeal) that Director is not entitled, under
the provisions of the Law, the Bylaws, this Agreement or otherwise, to be
indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be
required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Director, disclosure of confidential information in violation of Director's
fiduciary or contractual obligations to Corporation, or any other willful and
deliberate breach in bad faith of Director's duty to Corporation or its
shareholders.
8. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on
Corporation hereby in order to induce Director to continue as a director of
Corporation, and acknowledges that Director is relying upon this Agreement in
continuing in such capacity.
(b) In the event Director is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Director for all
Director's reasonable fees and expenses (including attorneys' fees) in
bringing and pursuing such action.
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director
by this Agreement shall not be exclusive of any other right which Director
may have or hereafter acquire under any statute, provision of Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Director by
this Agreement shall continue after Director has ceased to be a director,
officer, employee or other agent of Corporation or such other entity.
12. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
or all of the provisions hereof shall be held to be invalid or unenforceable
to any extent for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions hereof or the
obligation of the Corporation to indemnify the Director to the full extent
provided by the Bylaws or the Law, and the affected provision shall be
construed and enforced so as to effectuate the parties' intent to the maximum
extent possible.
13. GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Director
and upon Corporation, its successors and assigns, and shall inure to the benefit
of Director, his heirs, executors, administrators, personal representatives and
assigns and to the benefit of Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless set
forth in a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
DIRECTOR: DIGIRAD CORPORATION
By:
-------------------------------- ---------------------------------
(Signature) (Signature)
-------------------------------- -------------------------------------
Print Name Print Name and Title
EXHIBIT C
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
Filed separately as an Exhibit to this Registration Statement
EXHIBIT D
FORM OF OPINION
August 23, 1002 [LETTERHEAD]
To the Investors Listed on the
Schedule of Investors to the
Digirad Corporation Series F Stock Purchase Agreement
dated August 23, 2001
Ladies and Gentlemen:
We have acted as counsel for Digirad Corporation, a Delaware corporation (the
"Company"), in connection with the issuance and sale of shares of its Series
F Preferred Stock pursuant to the Digirad Corporation Series F Stock Purchase
Agreement dated August 23, 2001 (the "Stock Purchase Agreement") among the
Company and you. This opinion letter is being rendered to you pursuant to
Section 4.4 of the Stock Purchase Agreement in connection with the Closing of
the sale of the Series F Preferred Stock. Capitalized terms not otherwise
defined in this opinion letter have the meanings given them in the Stock
Purchase Agreement.
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as
to factual matters contained in and made by the Company pursuant to the Stock
Purchase Agreement and upon certificates and statements of government
officials and of officers of the Company. With respect to our opinion in
paragraph 3 regarding issued and outstanding capital stock of the Company,
such opinion is based solely on our review of a certificate of the Company
and of the Company's stock records and resolutions of the Company's Board of
Directors relating to such issuances. We have also examined originals or
copies of such corporate documents or records of the Company as we have
considered appropriate for the opinions expressed herein. We have assumed for
the purposes of this opinion letter the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of the documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as certified, facsimile or photostatic copies, and
the authenticity of the originals of such copies.
In rendering this opinion letter we have also assumed: (A) that the Stock
Purchase Agreement and the Amended and Restated Investors' Rights Agreement
(the "Investors' Rights Agreement") (collectively, the "Transaction
Agreements") have been duly and validly executed and delivered by you or on
your behalf, that each of you has the power to enter into and perform all
your obligations thereunder and has taken any and all necessary corporate,
partnership or other relevant action to authorize the Transaction Agreements,
and that the Transaction Agreements constitute valid, legal, binding and
enforceable obligations upon you; (B) that the representations and warranties
made in the Stock Purchase Agreement by you are true and
August 23, 2001
Page 2
correct; (C) that any wire transfers, drafts or checks tendered by you will
be honored; (D) if you are a corporation or other entity, that you have filed
any required state franchise, income or similar tax returns and have paid any
required state franchise, income or similar taxes; and (E) if you are a small
business investment company subject to the Small Business Investment Act of
1958, as amended, that you have complied with the provisions of such Act and
the regulations promulgated thereunder (the "SBIA Laws").
As used in this opinion letter, the expression "we are not aware" or the
phrase "to our knowledge," or any similar expression or phrase with respect
to our knowledge of matters of fact, means as to matters of fact that, based
on the actual knowledge of individual attorneys within the firm principally
responsible for handling current matters for the Company (and not including
any constructive or imputed notice of any information), and after an
examination of documents referred to herein and after inquiries of certain
officers of the Company, no facts have been disclosed to us that have caused
us to conclude that the opinions expressed are factually incorrect; but
beyond that we have made no factual investigation for the purposes of
rendering this opinion letter. Specifically, but without limitation, we have
not searched the dockets of any courts and we have made no inquiries of
securities holders or employees of the Company, other than such officers.
Nothing in this opinion or any inference from the fact that we represent the
Company shall be construed to imply that we are opining or representing to
you that the Transaction Agreements do not contain any untrue statement of a
material fact or do not omit to state a material fact necessary to make the
statements therein not misleading.
This opinion letter relates solely to the laws of the State of
California,
the General Corporation Law of the State of Delaware and the federal law of
the United States and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering
such laws or opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing and subject to
the limitations, exceptions, qualifications and assumptions set forth below,
we are of the opinion that as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and the Company
has the requisite corporate power and authority to own its properties and to
conduct its business as, to our knowledge, it is presently conducted. The
Company is qualified to do business as a foreign corporation in the states of
California and Florida.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform the Transaction Agreements. Each of the
Transaction Agreements has been duly and validly authorized by the Company,
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable by you against the Company in
accordance with its terms.
August 23, 2001
Page 3
3. The capitalization of the Company is as follows:
(a) PREFERRED STOCK. The Company has 30,321,108 authorized
shares of Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), of which (i) 2,250,000 shares have been designated Series A
Preferred Stock, all of which are currently issued and outstanding, (ii)
2,281,000 shares have been designated Series B Preferred Stock, all of which
are currently issued and outstanding, (iii) 4,800,000 shares have been
designated Series C Preferred Stock, all of which are currently issued and
outstanding, (iv) 8,668,140 shares have been designated Series D Preferred
Stock, all of which are currently issued and outstanding, (v) 9,583,506
shares have been designated Series E Preferred Stock, 9,130,428 shares of
which are currently issued and outstanding, and (vi) 2,738,462 shares have
been designated Series F Preferred Stock and some or all or which may be
purchased pursuant to the Stock Purchase Agreement. Such shares of
outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock have
been duly authorized and validly issued, are nonassessable and fully paid.
The shares of Series F Preferred Stock to be purchased at the Closing have
been duly authorized and, upon purchase at the Closing pursuant to the terms
of the Stock Purchase Agreement, will be validly issued, nonassessable and
fully paid. The respective rights, privileges, restrictions and preferences
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock are as stated in the Company's Amended and Restated
Certificate of Incorporation attached as Exhibit A to the Stock Purchase
Agreement.
(b) COMMON STOCK. The Company has 42,738,462 authorized
shares of Common Stock, par value $0.001 per share (the "Common Stock"),
4,526,474 shares of which are currently issued and outstanding. Such
4,526,474 shares of outstanding Common Stock have been duly authorized and
validly issued, are nonassessable, and, to our knowledge, are fully paid.
(c) The Common Stock issuable upon conversion of the Series
F Preferred Stock to be purchased at the Closing has been duly and validly
reserved for issuance and, when and if issued upon such conversion in
accordance with the Company's Amended and Restated Certificate of
Incorporation, will be validly issued, fully paid and nonassessable.
(d) There are no statutory or charter preemptive rights
nor, to our knowledge, are there any options, warrants, conversion privileges
or other rights (or agreements for any such rights) outstanding to purchase
or otherwise obtain from the Company any of the Company's equity securities,
except for (i) the conversion privileges of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock, (ii) outstanding
options to purchase 5,952,426 shares of Common Stock pursuant to options
granted to employees, directors, consultants or advisors of the Company under
stock option and restricted stock purchase agreements approved by the Board
of Directors , (iii) outstanding warrants to purchase 403,078 shares of
Series E Preferred Stock, (iv)
August 23, 2001
Page 4
warrants to purchase 100,500 shares of Common Stock, (v) the right of first
offer as set forth in Section 1.2 of the Investors' Rights Agreement, (vi)
the right to receive up to 150,000 shares of the Company's Common Stock
pursuant to that certain Consulting Agreement by and between Digirad Imaging
Systems, Inc. and Xxxxxxx Xxxxxxx dated September 9, 2000, (vii) the right to
receive up to 100,000 shares of the Company's Common Stock pursuant to that
certain Asset Purchase Agreement by and among the Company, Orion Imaging
Systems, Inc., Florida Cardiology and Nuclear Medicine Group, P.A. and Dr.
Xxxx Xxxxxxx, dated August 31, 2000, as amended (the "Florida Cardiology
Agreement"); (viii) the right to receive an indeterminate number of shares of
the Company's Common or Preferred Stock pursuant to the Florida Cardiology
Agreement; (ix) the right to receive a warrant to purchase up to 100,000
shares of the Company's Common Stock pursuant to that certain Consulting
Agreement with XxXxxxx and Xxxxxx Consulting ("MWC") dated July 31 2001 (the
"MWC Agreement"); (x) the right to receive warrants to purchase up to 100,000
shares of the Company's Common Stock pursuant to the MWC Agreement; and (xi)
the right to receive warrants to purchase an indeterminate number of shares
of the Company's Common Stock pursuant to the MWC Agreement.
4. Other than in connection with any securities laws (with respect
to which we direct you to paragraph 6 below), the Company's execution and
delivery of, and its performance and compliance as of the date hereof with
the terms of, the Transaction Agreements (including the issuance of the
Series F Preferred Stock and the Common Stock issuable upon conversion
thereof), do not violate any provision of any federal, Delaware corporate or
California law, rule or regulation applicable to the Company or any provision
of the Company's Amended and Restated Certificate of Incorporation or Bylaws
and do not conflict with or constitute a default under the provisions of any
judgment, writ, decree or order specifically identified in the Schedule of
Exceptions or the material provisions of any of the material agreements
specifically identified in the Schedule of Exceptions.
5. Other than in connection with any securities laws (with respect
to which we direct you to paragraph 6 below), all consents, approvals,
permits, orders or authorizations of, and all qualifications by and
registrations with, any federal or Delaware corporate or
California state
governmental authority on the part of the Company required in connection with
the execution and delivery of the Stock Purchase Agreement and consummation
at the Closing of the transactions contemplated by the Stock Purchase
Agreement have been obtained, and are effective, and we are not aware of any
proceedings, or written threat of any proceedings, that question the validity
thereof.
6. On the assumption that the representations of the Investors in
the Stock Purchase Agreement are correct, the offer and sale of the Series F
Preferred Stock to the Investors pursuant to the terms of the Stock Purchase
Agreement are exempt from the registration requirement of Section 5 of the
Securities Act of 1933, as amended, and from the qualification requirement of
the California Corporate Securities Law of 1968, as amended, and, under such
securities laws as they presently exist, the issuance of Common Stock to you
upon conversion of
August 23, 2001
Page 5
the Series F Preferred Stock would also be exempt from such registration and
qualification requirements.
7. We are not aware that there is any action, proceeding or
governmental investigation pending, or threatened in writing, against the
Company which questions the validity of the Transaction Agreements or the
right of the Company to enter into the Transaction Agreements nor are we
aware of, except as disclosed in Section 2.12 of the Schedule of Exceptions,
any litigation pending, or threatened in writing, against the Company by
reason of the proposed activities of the Company, the past employment
relationships of its officers, directors or employees, or negotiations by the
Company with possible investors in the Company or its business.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The legality, validity, binding nature and enforceability of the
Company's obligations under the Transaction Agreements may be subject to or
limited by (1) bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent transfer and other similar laws affecting the rights
of creditors generally; (2) general principles of equity (whether relief is
sought in a proceeding at law or in equity), including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, and the
discretion of any court of competent jurisdiction in awarding specific
performance or injunctive relief and other equitable remedies; and (3)
without limiting the generality of the foregoing, (a) principles requiring
the consideration of the impracticability or impossibility of performance of
the Company's obligations at the time of the attempted enforcement of such
obligations, and (b) the effect of California court decisions and statutes
which indicate that provisions of the Transaction Agreements which permit any
of you to take action or make determinations may be subject to a requirement
that such action be taken or such determinations be made on a reasonable
basis in good faith or that it be shown that such action is reasonably
necessary for your protection.
B. We express no opinion as to the Company's or this transaction's
compliance or noncompliance with applicable federal or state antifraud or
antitrust statutes, laws, rules and regulations or the Exon-Xxxxxx Amendment.
C. We express no opinion concerning the past, present or future fair
market value of any securities.
D. We express no opinion as to the enforceability under certain
circumstances of any provisions indemnifying a party against, or requiring
contributions toward, that party's liability for its own wrongful or
negligent acts, or where indemnification or contribution is contrary to
public policy or prohibited by law. In this regard, we advise you that in the
opinion of the Securities and Exchange Commission, provisions regarding
indemnification of directors, officers
August 23, 2001
Page 6
and controlling persons of an issuer against liabilities arising under the
Securities Act of 1933, as amended, are against public policy and are
therefore unenforceable.
E. We express no opinion as to the enforceability under certain
circumstances of any provisions prohibiting waivers of any terms of the
Transaction Agreements other than in writing, or prohibiting oral
modifications thereof or modification by course of dealing. In addition, our
opinions are subject to the effect of judicial decisions which may permit the
introduction of extrinsic evidence to interpret the terms of written
contracts.
F. We express no opinion as to the effect of Section 1670.5 of the
California Civil Code or any other California law, federal law or equitable
principle which provides that a court may refuse to enforce, or may limit the
application of, a contract or any clause thereof which the court finds to
have been unconscionable at the time it was made or contrary to public policy.
G. We express no opinion as to the effect of Sections 1203 and
1102(3) of the California Uniform Commercial Code or any other California
law, federal law or equitable principle, providing for an obligation of good
faith in the performance or enforcement of contracts and prohibiting
disclaimer of such obligation.
H. Our opinions in paragraphs 4 and 5 above are limited to laws and
regulations normally applicable to transactions of the type contemplated in
the Transaction Agreements and do not extend to licenses, permits and
approvals necessary for the conduct of the Company's business. In addition
and without limiting the previous sentence, we express no opinion herein with
respect to the effect of any land use, safety, hazardous material,
environmental or similar law, or any local or regional law. Further, we
express no opinion as to the effect of or compliance with any state or
federal laws or regulations applicable to the transactions contemplated by
the Transaction Agreements because of the nature of the business of any party
thereto other than the Company. Also, we express no opinion with respect to
any patent, copyright, trademark or other intellectual property matter, or as
to the statutes, regulations, treaties or common laws of any nation, state or
jurisdiction with regard thereto.
I. In connection with our opinion in paragraph 4 relating to the
agreements listed on the Schedule of Exceptions, we have not reviewed, and
express no opinion on, (i) financial covenants or similar provisions
requiring financial calculations or determinations to ascertain whether there
is any such conflict or (ii) provisions relating to the occurrence of a
"material adverse event" or words of similar import. In addition, our
opinions are subject to the effect of judicial decisions which may permit the
introduction of extrinsic evidence to interpret the terms of written
contracts. Moreover, to the extent that any of the agreements listed on the
Schedule of Exceptions are governed by the laws of any jurisdiction other
than the State of California our opinion relating to those agreements is
based solely upon the plain meaning of their language without regard to
interpretation or construction that might be indicated by the laws governing
those agreements.
August 23, 2001
Page 7
J. We express no opinion as to your compliance with any federal or
state law relating to your legal or regulatory status or the nature of your
business.
K. We express no opinion as to the compliance of the Company or the
sale of the Series F Preferred Stock to the Investors with the provisions of
the SBIA Laws, except to the extent that such compliance relates to the sale
of Series F Preferred Stock to Investors which are expressly identified in
the Stock Purchase Agreement as being small business investment companies.
L. We express no opinion as to the effect on our opinion in
paragraph 6 above of any subsequent public offering of securities of the
Company.
M. We express no opinion as to the effect of subsequent issuances of
securities of the Company, to the extent that further issuances which may be
integrated with the Closing may include purchasers that do not meet the
definition of "accredited investors" under Rule 501 of Regulation D and
equivalent definitions under state securities or "blue sky" laws and to the
extent that notwithstanding its reservation of shares the Company may issue
so many shares of Common Stock that there are not enough remaining authorized
but unissued shares of Common Stock for the conversion of the Series F
Preferred Stock (or may issue securities which by antidilution adjustment so
reduce the Conversion Price (as such term is defined in the Company's Amended
and Restated Certificate of Incorporation) of the Series F Preferred Stock
and/or other Company derivative securities that the outstanding shares of the
Series F Preferred Stock become convertible for more shares of Common Stock
than remain authorized but unissued).
N. We express no opinion as to:
(1) The effect on the redemption and liquidation provisions
of the Amended and Restated Certificate of Incorporation of applicable state
law, federal law or equitable principles restricting in certain circumstances
distributions by a corporation to its shareholders, relating to dissenters'
rights or relating to involuntary dissolution;
(2) The enforceability under certain circumstances of
provisions to the effect that rights or remedies may be exercised without
notice, or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy;
(3) Any provision providing for the exclusive jurisdiction
of a particular court or purporting to waive rights to trial by jury, service
of process or objections to the laying of venue or to forum on the basis of
forum NON CONVENIENS, in connection with any litigation arising out of or
pertaining to the Transaction Agreements;
August 23, 2001
Page 8
(4) Section 2.4 of the Stock Purchase Agreement and Section
5.2 of the Investors' Rights Agreement to the extent that each purports to
exclude conflict of law principles under California law;
(5) The effect of any California or Delaware law, federal
law or equitable principles which limit the amount of attorneys' fees that
can be recovered under certain circumstances.
This opinion letter is rendered as of the date first written above solely for
your benefit in connection with the Stock Purchase Agreement and may not be
delivered to, quoted or relied upon by any person other than you, or for any
other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
XXXXXXX XXXXXXX & XXXXXXXX LLP
