<PAGE>
As filed with the Securities and Exchange Commission on August 18, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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eMed Technologies Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7374 04-3155965
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification No.)
of Incorporation or Classification Code
Organization) Number)
25 Hartwell Avenue, Lexington, MA 02421, (781) 862-0000
(Address, including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------
Scott S. Sheldon, Chief Executive Officer
25 Hartwell Avenue, Lexington, MA 02421, (781) 862-0000
(Name, Address, including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies To:
Joel F. Freedman, esq. Paul Model, esq. David J. Goldschmidt,
Ropes & Gray 477 Madison Avenue esq.
One International Place New York, New York 10022 Skadden, Arps, Slate,
Boston, Massachusetts (212) 751-8438 Meagher & Flom LLP
02110-2624 919 Third Avenue
(617) 951-7000 New York, New York 10022
(212) 735-3000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price (1) Registration Fee
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<S> <C> <C>
common stock, par value $.01, per
share.......................... $57,500,000 $15,985
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 (o) under the Securities Act of 1933.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
Shares
eMed Technologies Corporation
Common Stock
-----------
We anticipate that the initial public offering price for our common stock will
be between $ and $ per share. We have applied to have our common stock
approved for quotation on the Nasdaq National Market System under the symbol
"EMDT."
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 5 to read about risks that you should consider
before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to eMed.............................. $ $
</TABLE>
The underwriters may, under some circumstances, also purchase up to an
additional shares of common stock from us at the public offering price less
the underwriting discount. The underwriters expect to deliver the shares
against payment in New York, New York on , 1999.
-----------
Bear, Stearns & Co. Inc. Donaldson, Lufkin & Jenrette
SG Cowen
Wit Capital Corporation
-----------
The date of this Prospectus is , 1999.
<PAGE>
PROSPECTUS SUMMARY
The following summary contains basic information about eMed and this
offering. It may not contain all the information that may be important to you.
You should read the entire prospectus, including the financial statements and
related notes, before making an investment decision. Except as otherwise noted,
all information in this prospectus (1) assumes no exercise of the underwriters'
over-allotment option and (2) assumes the conversion of all outstanding classes
of preferred stock into common stock.
Overview
Our Company
We are a leading provider of workflow solutions for electronically managing
and distributing medical images and related patient information. Our products
and services are used by radiologists, technicians, referring physicians and
other health care professionals to improve the efficiency of the practice of
medicine by allowing them to access, transmit and review medical images and
related patient information quickly and easily. Our products capture, compress,
transmit, route, and store medical images, including x-rays, MRIs, CTs,
ultrasounds and others. Our offerings permit the coordinated transmission and
review of images and information over both proprietary networks and the
internet. Our customers are providers of radiology imaging and interpretive
services, including radiologists, hospitals and outpatient imaging facilities
and often operate as part of complex health care networks. With systems
installed in approximately one of four U.S. imaging facilities and
radiologists' homes, we believe that we have the largest installed user base of
any company in our business.
Our new internet-based offerings capitalize on the internet's open
architecture and universal accessibility to enable our customers to reduce
costs and improve their service. We recently introduced FrameWave Web and
intend to introduce eMed_Web later this year. FrameWave Web permits our
customers to manage and distribute medical images and related information over
the internet. eMed_Web is a website development and hosting service through
which we intend to establish and manage co-branded websites for our customers.
Through these eMed_Web sites, our customers will have FrameWave Web's
integrated image and report management capabilities, as well as the opportunity
to incorporate other clinically relevant information and customer-specific
marketing information. In addition, we intend eMed_Web to serve as a platform
for offering additional workflow solutions.
As part of our solutions, we provide our customers remote, comprehensive
support services through our network operations center, which is fully staffed
24 hours a day, seven days a week. Because medical imaging is critical to
patient diagnosis and care, we believe that our customers highly value
comprehensive support services that increase the reliability of their medical
image distribution and management systems. Our network operations center
personnel are able to remotely monitor and manage customer systems and identify
and resolve system problems, including problems related to systems and system
components provided by third parties. The level of service we provide enables
many customers to outsource the technical management of their image
distribution and management systems to us.
Our Strategy
Our objective is to become the leading supplier of comprehensive, medical
imaging workflow solutions to health care providers by leveraging our advanced
technology and experience. Elements of our strategy to achieve this objective
include:
. Introducing our eMed_Web co-branded website development and hosting
service.
. Bringing to market additional medical imaging workflow solutions.
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. Leveraging our relationships with our significant base of installed
users to increase sales.
. Expanding our sales and marketing efforts.
. Engaging in strategic acquisitions and relationships to obtain
technology and expand our user base.
Our Market Opportunity
Our market opportunity is characterized by several important elements:
. The 1998 overall U.S. radiology services market was approximately $69
billion. Based on historical data, we believe that more than 350 million
radiology studies are conducted annually.
. The number of studies has grown due to the increasing usefulness of
radiology as a non-invasive diagnostic technique and the general aging
of the U.S. population.
. Medical images and related information are utilized in forming patient
diagnosis and care judgements by a broad cross-section of health care
professionals at disparate locations.
. The current method for capturing, analyzing, distributing and storing
medical images and associated medical reports is inefficient and
represents a significant opportunity to offer improvements and cost
savings.
. Radiology providers are subject to increasing pressure from their
customers and health care payors to reduce costs and improve the
timeliness and availability of interpretations and related patient
images.
. The internet represents a significant advance in the technology
available to radiologists and other health care professionals to improve
the cost-effectiveness and efficiency of the services they provide.
eMed Solutions
Based on our extensive experience and insight into medical imaging workflow,
we have been able to focus our efforts on solutions that provide our customers
with cost savings, increased efficiencies and competitive advantages. Our
products and services incorporate advanced technology and offer our customers:
. Improved cost effectiveness.
. Enhanced ability to market their services and serve their customers.
. Solutions tailored to meet functionality and cost requirements.
. High quality, comprehensive customer support.
Corporation Information
Our headquarters are located at 25 Hartwell Avenue, Lexington, MA 02421. We
were formerly known as ACCESS Radiology Corporation. Our telephone number is
(781) 862-0000 and our internet website address on the Worldwide Web is
www.eMed.com. The contents of our website are not part of this prospectus. In
this prospectus we refer to eMed Technologies Corporation as "eMed," "we" and
"us."
eMed, FrameWave and PACSPro are trademarks of eMed Technologies Corporation.
AWARE is a trademark of AWARE Corporation. All other brand names or trademarks
appearing in this prospectus are the property of their respective owners.
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The Offering
<TABLE>
<S> <C>
Common Stock offered by eMed...... shares
Common Stock outstanding after the
offering......................... shares
Use of Proceeds................... We estimate that the net proceeds from this
offering, without exercise of the over-
allotment option, will be approximately $
million. We intend to use these net
proceeds to repay approximately $3.0
million of indebtedness and for general
corporate purposes, including the expansion
of our sales, marketing and development
efforts and possibly acquisitions and
partnerships.
Risk Factors...................... See "Risk Factors" for a discussion of
factors you should carefully consider
before deciding to invest in shares of our
common stock.
Proposed Nasdaq National Market
symbol........................... "EMDT"
</TABLE>
The number of shares of common stock outstanding after the offering is based
on the number outstanding as of August 17, 1999, and excludes:
. 4,145,694 shares of our common stock subject to options outstanding as
of August 17, 1999 at a weighted average exercise price of $0.65 per
share;
. 1,698,906 shares of our common stock subject to 1,289,815 warrants to
purchase common stock and 409,091 warrants to purchase Series J
preferred stock outstanding as of August 17, 1999 at exercise prices
from $0.01 to $1.10 per share. The warrants to purchase Series J
preferred stock will become warrants to purchase 409,091 shares of
common stock.
. 657,991 additional shares of our common stock that have been reserved
for issuance under our stock plans.
3
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes thereto included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 139 $ 466 $ 1,009 $ 8,027 $12,594 $ 6,218 $ 11,369
Cost of revenue......... (141) (313) (1,404) (7,012) (8,976) (4,131) (6,351)
------- ------- ------- ------- ------- -------- --------
Gross margin............ (2) 153 (395) 1,015 3,618 2,087 5,018
------- ------- ------- ------- ------- -------- --------
Operating expenses:
Research and
development........... -- 239 610 1,300 2,362 1,031 1,655
Sales and marketing.... 423 571 1,319 2,912 3,498 1,764 2,519
General and
administrative........ 1,443 1,476 1,331 1,982 2,722 1,121 1,851
------- ------- ------- ------- ------- -------- --------
Total operating
expenses............. 1,866 2,286 3,260 6,194 8,582 3,916 6,025
------- ------- ------- ------- ------- -------- --------
Loss from operations.... (1,868) (2,133) (3,655) (5,179) (4,964) (1,829) (1,007)
Interest income
(expense), net......... (14) (119) (70) (204) (106) (19) (68)
Other income (expense).. (15) 218 (21) (242) (43) (6) (82)
------- ------- ------- ------- ------- -------- --------
Net loss................ $(1,897) $(2,034) $(3,746) $(5,625) $(5,113) $ (1,854) $ (1,157)
======= ======= ======= ======= ======= ======== ========
Basic and diluted net
loss per share......... $ (3.79) $ (2.12) $ (3.50) $ (5.19) $ (4.88) $ (1.79) $ (1.03)
Shares used in computing
basic and diluted net
loss per share......... 501 960 1,071 1,084 1,049 1,034 1,121
Unaudited proforma basic
and diluted net loss
per share.............. $ (0.32) $ (0.06)
Shares used in computing
unaudited proforma
basic and diluted net
loss per share......... 15,761 19,976
</TABLE>
<TABLE>
<CAPTION>
As of June 30, 1999
-------------------
Actual As Adjusted
------- -----------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $ 5,118 $
Working capital............................................. 4,573
Total assets................................................ 13,559
Total long-term liabilities................................. 210
Total stockholders' equity.................................. 5,312
</TABLE>
The as adjusted balance sheet data and pro forma per share data reflects the
conversion of all preferred stock into common stock. The as adjusted balance
sheet data also reflects the sale by us of shares of common stock at a
public offering price of $ per share in the offering, after deducting the
underwriters' discount and our estimated offering expenses.
4
<PAGE>
RISK FACTORS
Investing in our common stock will provide you with an equity ownership
interest in eMed. As an eMed stockholder, you will be subject to risks inherent
in our business. The value of your investment may increase or decline and could
result in a loss to you. You should carefully consider the following factors as
well as other information contained in this prospectus before deciding to
invest in shares of our common stock.
Risks Related to Our Company
We may not become profitable.
Since our inception, we have incurred significant losses from operations and
negative cash flow. In implementing our strategy, we will significantly
increase our operating expenses as we aggressively market our products and
services and develop new products and services. We are incurring these expenses
under the assumption that the sales we obtain from increased marketing and
developing efforts will permit us to earn revenues in excess of these
additional expenses. If we are unsuccessful in generating revenues to offset
these expenditures, we may continue to incur losses from operations and
negative cash flow. We cannot assure you that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.
We may be unable to manage growth effectively.
The implementation of our business strategy could result in a period of
rapid growth. This growth could place a strain on our managerial, operational
and financial resources and on our information systems. Our future operating
results will depend on the ability of our senior management to manage rapidly
changing business conditions, and to implement and improve our technical,
administrative, financial control and reporting systems. We may not succeed in
these efforts. The failure to effectively manage and improve these systems
could increase our costs and adversely affect our ability to sell and deliver
our products and services.
We may be unable to hire, retain, motivate or train the key personnel, upon
whom the success of our business will depend.
Loss of any senior management or other key personnel could have a disruptive
effect on the implementation of our business strategy and the efficient running
of our day-to-day operations. Also, as we continue to grow, we will need to
hire additional personnel in all operational areas. In particular, we will need
to hire additional sales people and technical staff. Competition for personnel
throughout the health care, information technology and internet industries is
intense. We may be unable to retain our key employees or attract, assimilate,
retain or train other needed qualified employees in the future.
Our market is highly competitive, and we may not be able to compete effectively
because many of our competitors have greater resources and better recognition
in the marketplace.
We operate in a highly competitive environment. Many of our competitors are
larger than we are, have been in business longer than we have, and have greater
financial, technical, research and development, and sales and marketing
resources than we do. Further, additional internet-based products and services
providers may enter into the medical imaging workflow solutions market. Larger
competitors may have the resources to offer competitive products at greatly
discounted prices or at no charge, sometimes in connection with the sale of
related or complementary products or systems. Customer decisions to purchase
our products are often influenced by the perceived stability and market
recognition of the vendor. We may be at a disadvantage because many of our
competitors are better known and may be perceived as less risky than we are. We
also may not effectively compete against smaller competitors. For additional
information, please see the section "Business -- Competition."
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<PAGE>
We may be unable to sell new products and services to our installed user base.
A key part of our strategy is to sell to our existing installed user base
additional products and services that we currently offer, as well as products
and services that we intend to develop. We expect that this effort will require
intensive marketing and sales efforts. Customers that have invested substantial
resources in other products may be reluctant to adopt a new product that may
replace or make redundant their existing systems. Because we acquired a large
portion of our installed base when we acquired the medical imaging business of
E-Systems Medical Electronics, a division of Raytheon, in November 1998, we
have limited experience with these users, and we cannot predict what our
success will be in selling new products and services to them.
We may not achieve broad acceptance of our internet-based products and services
by radiologists, technicians, referring physicians and other health care
professionals.
Our success, in part, depends upon our ability to gain acceptance of our
internet-based products and services by a large number of radiologists,
technicians, referring physicians and other health care professionals.
Achieving market acceptance for our internet-based applications will require
substantial marketing efforts and the expenditure of significant financial and
other resources to create brand awareness and demand by physicians and health
care organizations. In addition, the rate at which physicians and health care
organizations will replace existing medical imaging management products and
systems with more advanced technologies is uncertain. Failure to achieve broad
acceptance of our internet-based applications by physicians and health care
organizations as a preferred medium for medical imaging would have a material
adverse effect on our operating results.
Our target customers may not accept our subscription fee pricing model for
internet-based offerings.
Our new subscription fee pricing model for internet-based offerings is
untested and will require our target customers to make recurring subscription
fee payments. Currently, customers buy medical systems as a one-time capital
investment with a yearly fee for maintenance and support. Accepting our
subscription fee pricing model may be particularly difficult for larger health
care institutions. If we are unable to convince our existing base and new
target customers to accept this new pricing model, sales of our new internet-
based offerings could suffer.
Our business may be difficult for you to evaluate because the internet
component of our business model is evolving and is unproven.
We only began offering internet products in June 1999 with the introduction
of our FrameWave Web product. We intend to begin marketing our eMed_Web
internet-based service later this year. We have not yet offered or implemented
any of the subscription services we expect to include for use with the eMed_Web
offering. In extending our business into internet-based products and services,
we are significantly changing our business operations, sales and marketing
strategies, pricing models and management focus. We are also facing new risks
and challenges, including a lack of meaningful historical financial data upon
which to plan future budgets and the other risks described in this prospectus.
You must consider our prospects in light of the uncertainties encountered by
companies adopting a modified business strategy, particularly one that depends
on the internet.
Any future strategic acquisitions and partnerships may result in disruptions to
our business and/or the distraction of our management.
We cannot assure you that we will be able to identify suitable acquisition
candidates, or if we do identify suitable candidates, that we will be able to
make such acquisitions on commercially acceptable terms or at all. If we
acquire another company, we will only receive the anticipated benefits if we
successfully integrate the
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acquired business into our existing business in a timely and non-disruptive
manner. We may have to devote a significant amount of time and management and
financial resources to do so. Even with this investment of management and
financial resources, an acquisition may not produce the revenue, earnings or
business synergies that we anticipated. If we fail to integrate the acquired
business effectively or if key employees of that business leave, the
anticipated benefits of the acquisition would be jeopardized. The time,
capital, management and other resources spent on an acquisition that failed to
meet our expectations could cause our business and financial condition to be
materially and adversely affected. In addition, from an accounting perspective,
acquisitions can involve non-recurring charges and amortization of significant
amounts of goodwill that could adversely affect our results of operations.
If our strategic relationship with AWARE is disrupted, our ability to use
important technologies could be halted or delayed.
We currently have arrangements in place with AWARE Corporation for elements
of our compression and web server technology. These technologies are an
integral component of our offerings. Any disruption in our relationship with
AWARE could limit our ability to use these technologies and could increase our
costs or have a material adverse effect on our revenue.
Technological change may render our products and services obsolete.
We expect that the market for our offerings will continue to be
characterized by rapidly changing technology, evolving industry standards,
frequent new product announcements and enhancements and changing customer
demands. The introduction of new products and services embodying new
technologies and the emergence of new industry standards can render existing
products and services obsolete. Our success depends on our ability to adapt to
rapidly changing technologies and to improve the performance, features and
reliability of our products and services in response to changing customer and
industry demands. Furthermore, we may experience difficulties that could delay
or prevent the successful design, development, testing, introduction or
marketing of our products and services. Our new products and services, or
enhancements to our existing products and services, may not adequately meet the
requirements of our current and prospective customers or achieve any degree of
significant market acceptance.
Concerns about integrating our products into their networks may influence the
customer's decision to buy our products or services.
We often must integrate our products with the networks that exist either at
a customer site or between customer sites. We do not control these proprietary
networks. Concerns about the risks of integrating our products into their
networks may influence the customer's decision to buy our products or services.
If our computer systems fail or overload, we could lose customers.
The success of our network-based comprehensive customer service depends on
the uninterrupted, efficient operation of our computer network. The servers
that will host eMed_Web sites will be located at customer sites and supported
by us at our headquarters. The occurrence of fires, floods, earthquakes, power
losses and similar events could cause damage or cause interruptions in these
systems. Computer viruses, worms, electronic break ins or similar disruptions
could also adversely affect our network and, if highly publicized, could
materially damage our reputation and efforts to build brand awareness. If our
systems are affected by any of these occurrences, our business could be
materially and adversely affected. Our insurance policies may not adequately
cover any losses.
Our quarterly and annual results may fluctuate.
Our operating results may fluctuate significantly on a quarterly basis due
to a variety of factors, including the size and timing of significant orders,
variations in filling orders, the demand for and market acceptance
7
<PAGE>
of our products and services, the length of our sales cycles, and possible
delays or deferrals of customer implementation. Also, our revenue and other
financial and operating results may not meet the expectations of securities
analysts and our stockholders. Our revenue is not predictable with any
significant degree of certainty. Revenue is difficult to forecast because,
among other things, the market for our products is rapidly evolving, sales
cycles are long and vary substantially from customer to customer and we are
initiating a new subscription fee pricing model for our eMed_Web service. The
sales cycle is subject to a number of factors over which we have little or no
control, including customers' budgetary constraints, the timing of budget
cycles, concerns about the introduction of new products by us or our
competitors. Potential downturns in general economic conditions may cause
reductions in demand for medical imaging workflow management systems. As a
result of such fluctuation or failure to meet expectations, the price of our
common stock could be materially adversely affected.
We may need additional capital in the future to support our growth and such
additional financing may not be available to us.
We expect that the net proceeds from this offering, combined with our
current cash resources, will be sufficient to meet our funding requirements for
at least the next 12 months. However, as we continue our efforts to grow our
business in a rapidly changing and highly competitive market, we may need to
raise additional financing to support expansion, develop new or enhanced
products and services, respond to competitive pressures, acquire complementary
businesses or technologies or take advantage of unanticipated business
opportunities. We may need to raise additional funds by selling debt or equity
securities, by entering into strategic relationships or through other
arrangements. We may be unable to raise any additional amounts on reasonable
terms when they are needed. Any additional equity financing may cause investors
to experience dilution, and any additional debt financing may result in
restrictions on our operations or our ability to pay dividends in the future.
Any disruption of our relations with our suppliers could increase our costs and
adversely affect our assembling process.
We purchase a number of the proprietary software and hardware components of
our offerings from limited sources. Any disruption of our relationships with
any of our suppliers of these components could increase our costs and adversely
affect our assembling operations and delay or halt our filling customer orders.
We have substantial product liability risk and limited insurance coverage.
Our business entails significant risks of product liability claims. Although
no such claims have ever been asserted against us, we cannot assure you that
our insurance coverage limits would be adequate to protect us against any
product liability claims that may arise. We may require additional product
liability insurance coverage as we commercialize new or improved products. This
insurance is expensive and may not be available on acceptable terms, or at all.
Uninsured product liability claims could have a material adverse effect on our
business, results of operations and financial condition.
We may not be able to successfully protect our intellectual property rights.
We cannot assure you that the steps we have taken to protect our
intellectual property rights will prevent misappropriation of our technology.
We rely to some extent on unpatented trade secrets and know-how to develop and
maintain our competitive position and to protect our intellectual property. No
assurance can be given that others will not independently develop or otherwise
acquire comparable trade secrets or know-how or otherwise gain access to our
proprietary technology or disclose such technology or that we can meaningfully
protect our rights to such unpatented proprietary technology. Although we
require our employees, certain contractors, consultants and parties to
collaboration agreements to execute confidentiality agreements to
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<PAGE>
protect our trade secrets and other unpatented know-how, these agreements may
be breached by the other party to the agreement or may otherwise be of limited
effectiveness. Misappropriation of our intellectual property could have a
material adverse effect on our business, financial condition, results of
operations and prospects. In addition, we may have to engage in litigation in
the future to enforce or protect our intellectual property rights or to defend
against claims of invalidity, and we may incur substantial costs as a result.
For more information, please see the section "Business -- Intellectual
Property."
If we are forced to defend against intellectual property infringement claims,
we could incur significant expenses and our business could be adversely
affected.
We may become subject to claims alleging that we infringe the proprietary
rights of others. In the United States, a significant number of software and
business method patents have been issued over the past decade and the holders
of these patents have been actively seeking out potential infringers. If any
element of our products or services violates third party proprietary rights, we
might not be able to obtain licenses on commercially reasonable terms to
continue offering our products or services without substantial reengineering
and any effort to undertake such reengineering might not be successful. In
addition, any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. Any judgment against us could require us to
pay substantial damages and could also include an injunction or other court
order that could prevent us from offering our products and services.
We may be liable for information retrieved from or transmitted over the
internet.
We may be sued for defamation, negligence, personal injury or other legal
claims relating to information that is published or made available on our
websites. These types of claims have been brought against providers of
internet-based services in the past. We could also be sued for the content that
is accessible from our websites through links to other internet websites. We
could incur significant costs in investigating and defending such claims, even
if we ultimately are not found liable. Our insurance coverage limits may not be
adequate to protect us against liability.
Our business may be adversely affected by Year 2000 problems.
Year 2000 problems may adversely affect our operations and increase our
costs. Among other things, Year 2000 problems could cause us to:
. fail to fulfill our contractual obligations with our customers;
. face substantial claims by such customers and loss of revenue;
. experience increased expenses associated with litigation, stabilization
of operations after critical system failures and execution of
contingency plans;
. fail to bill our customers accurately and on a timely basis; and
. be subject to the inability by customers and others to pay, on a timely
basis or at all, obligations owed to us.
Although the effects of any or all of these events are not quantifiable at this
time, any of these events could have an adverse effect on our business and
operating results.
9
<PAGE>
Risks Related to Our Industry
If the internet is not accepted as a medium for medical imaging, our sales will
suffer.
Our future success depends upon the acceptance of the internet as a medium
for medical imaging. Because the internet-based medical imaging market is new,
we cannot yet gauge its effectiveness as compared to current electronic medical
imaging distribution methods. Most physicians and health care organizations
have little or no experience using the internet for medical imaging
transmission and distribution. The adoption of internet-based medical imaging
systems requires radiologists and other health care professionals to accept a
new way of conducting business and exchanging information. If these users
believe that internet-based medical imaging systems are less effective than
traditional medical imaging distribution methods, our sales will suffer.
Security concerns may keep physicians and health care organizations from
allowing confidential patient information to be made available on the internet.
Internet security remains a critical concern to many consumers. Physicians
and health care organizations may be reluctant to allow confidential patient
information to be made available on the eMed_Web sites. Any well publicized
compromise of security on the internet, or on any of the eMed_Web sites in
particular, could deter people from using the internet or from using the
eMed_Web sites. Any reluctance for security reasons on the part of physicians
or health care organizations to use the internet or the eMed_Web sites for
internet-based medical imaging would adversely affect our business.
Uncertainty associated with the regulation of the health care industry may
cause our target customers to curtail or delay purchases of our products.
The health care industry is highly regulated and is subject to changing
political, economic and regulatory influences that may affect the procurement
practices and operation of health care organizations. Changes in current health
care financing and reimbursement systems could result in delays or
cancellations of orders. Federal and state legislatures have periodically
considered programs to reform or amend the U.S. health care system at both the
federal and state level. These programs may contain proposals to increase
governmental involvement in health care, lower reimbursement rates or otherwise
change the environment in which the health care industry participants operate.
Health care industry participants may react to these proposals and the
uncertainty surrounding such proposals by curtailing or deferring investments,
including investments in our products and services. We cannot predict what
impact, if any, such proposals or health care reforms might have on us.
Consolidation in the health care industry may adversely affect our business.
Many health care providers are consolidating to create integrated health
care delivery systems with greater market power. As the number of health care
delivery enterprises decreases due to further industry consolidation, each new
customer will become more significant and competition for these customers will
become greater. These larger health care enterprises could have greater
bargaining power, which might lead to price erosion for our products and
services.
We may be unable to obtain regulatory clearances and approvals.
Because our products and services are subject to regulation as Class II
medical devices in the United States by the Food and Drug Administration and in
other countries by corresponding regulatory authorities, our ability to market
new products and improvements to existing products will depend upon when we
receive premarket clearance or approval from the Food and Drug Administration
or any foreign counterparts. Failure to
10
<PAGE>
comply with applicable domestic or foreign regulatory requirements at any time
during the production, marketing or distribution of products regulated by the
Food and Drug Administration or its foreign counterparts could result in, among
other things, warning letters, seizures of products, total or partial
suspension of production, refusal of the Food and Drug Administration to grant
clearances or approvals, withdrawal of existing clearances or approvals, or
criminal prosecution. See "Business -- Government Regulation."
Government regulation of the internet could limit our operations or increase
our costs.
Laws and regulations directly applicable to internet communications,
commerce and advertising are becoming prevalent, but the legislative and
regulatory treatment of the internet remains largely unsettled. The U.S.
Congress recently adopted internet laws regarding copyrights, taxation and the
protection of children. In addition, a number of other legislative and
regulatory proposals under consideration by federal, state, local and foreign
governments could lead to additional laws and regulations affecting the right
to collect and use personally identifiable information, internet-based content,
user privacy, taxation, access charges and liability for third party
activities, among other things. For example, the growth and development of the
market for internet commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business over the internet. These
measures could decelerate the growth in use of the internet and could reduce
the demand for our services or increase our cost of doing business.
State governments or foreign countries might attempt to regulate the content
of our websites or levy sales or other taxes relating to our activities. The
European Union recently enacted its own privacy regulations that may result in
limits on the collection and use of user information. Courts may seek to apply
existing laws not explicitly relating to the internet in ways that could impact
the internet, and it may take years to determine whether and how laws such as
those governing intellectual property, privacy, libel and taxation will affect
the internet and the internet-based medical imaging workflow management
industry.
Risks Related to This Offering
We may allocate the proceeds of this offering in ways with which you may not
agree.
Our management will have significant flexibility in applying the net
proceeds of this offering, including ways with which you may disagree. You will
not have the opportunity to evaluate the economic, financial or other
information on which we base our decisions on how to use the proceeds.
Our stock price is likely to be highly volatile and could drop unexpectedly and
investors may not be able to resell their shares at or above the offering
price.
Following this offering, the price at which our common stock will trade is
likely to be highly volatile and may fluctuate substantially. We cannot predict
the extent to which investors' interest in us will lead to the development of a
trading market or how liquid the market might become. If you purchase shares of
our common stock in this offering, you will pay a price that was not
established in a competitive market, but was negotiated between us and the
underwriters. The price of the common stock that will prevail in the market
after the offering may be higher or lower than the price you pay, depending on
several factors, including our quarterly variations in results of operations,
estimates of securities analysts, competitive developments and general economic
conditions. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the securities of health care and technology companies, particularly
internet companies. As a result, investors in our common stock may experience a
decrease in the value of their common stock regardless of our operating
performance or prospects. Fluctuations in our common stock price may affect our
visibility and credibility in our market and may affect our ability to secure
additional financing on acceptable terms, if at all.
11
<PAGE>
Shares eligible for public sale after this offering could adversely affect our
stock price.
The market price of our common stock could decline as a result of sales of
shares by our existing stockholders after this offering, or the perception that
such sales will occur. These sales also might make it difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. You should refer to the information in the section entitled
"Shares Eligible for Future Sale" for more information.
Our charter documents and Delaware law may inhibit a takeover that stockholders
may consider favorable.
The health care industry has recently experienced significant consolidation.
There are provisions in our charter and by-laws that may have the effect of
delaying or preventing a change of control or changes in our management that
stockholders consider favorable or beneficial. You should refer to the
information in the section entitled "Description of Capital Stock" for more
information. If a change of control or change in management is delayed or
prevented, the market price of our common stock could suffer.
A small group of existing stockholders, whose interests may differ from other
stockholders, will be able to exert significant influence over us.
After this offering, our officers and directors and parties related to them
will own approximately % of the outstanding shares of our common stock.
Accordingly, they will have significant influence in determining the outcome of
any corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations and the sale of all or
substantially all of our assets, and also the power to prevent or cause a
change in control. The interests of these stockholders may differ from the
interests of the other stockholders.
You will suffer immediate and substantial dilution in the book value of your
investment.
The initial public offering price per share will significantly exceed the
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of $ per share
in their investment, assuming an initial public offering price of $ per
share. Investors will suffer additional dilution of $ per share if the
underwriters exercise their over-allotment option in full. This dilution is due
in large part to the fact that our earlier investors paid substantially less
than the public offering price when they purchased their shares of our common
stock. The exercise of outstanding options and warrants to purchase our common
stock will result in additional dilution per share. You should refer to the
information in the section entitled "Dilution" for more information.
You should not purchase our common stock with the expectation of receiving cash
dividends.
We intend to retain any future earnings for funding growth and, as a result,
do not expect to pay any cash dividends in the foreseeable future.
Forward-looking statements are inherently uncertain.
Certain statements about us and our industry under the captions "Prospectus
Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" and
elsewhere in this prospectus are "forward-looking statements." These forward-
looking statements include, but are not limited to, statements about our plans,
objectives, expectations, intentions and assumptions, the industry in which we
operate and other statements in this prospectus that are not historical facts.
When we use the words "estimate," "project," "believe," "anticipate," "intend,"
"plan," "expect" and similar expressions in this prospectus, we generally
intend to identify forward-looking
12
<PAGE>
statements. Because these forward-looking statements involve risks and
uncertainties, including those described in this "Risk Factors" section, actual
results could differ materially from those expressed or implied by these
forward-looking statements. We caution you not to place undue reliance on these
forward-looking statements. These forward-looking statements speak only as of
the date of this prospectus. We do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect new
information, future events or otherwise.
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of the shares of common
stock we are offering will be approximately $ million, assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and our estimated offering expenses. If the underwriters
exercise their over-allotment option in full, we estimate that the net proceeds
would be approximately $ million. Our principal reasons for this offering are
to provide us working capital, to create a public market for our common stock
and to facilitate our future access to public capital markets.
We intend to use approximately $3.0 million of the net proceeds of this
offering to repay indebtedness outstanding under our credit facility. We have
used borrowings incurred under this facility within the past 12 months to fund
our working capital requirements as well as a portion of the purchase price for
the medical imaging business of E-Systems Medical Electronics, a division of
Raytheon, that we acquired in November 1998. As of June 30, 1999, the interest
rate on the working capital portion of this facility was 9.75% and the interest
rate on the equipment line portion was 8.75%.
We intend to use the remaining net proceeds from this offering for general
corporate purposes, including the expansion of our sales, marketing and
development efforts, and for potential acquisitions and partnerships. We are
not currently participating in any active negotiations and have no commitments
or agreements with respect to any acquisition, partnership or investment. We
have not determined the amount of net proceeds to be used for each of the
specific purposes indicated. Accordingly, our management will have significant
flexibility in applying the net proceeds of the offering. Pending any use, we
plan to invest the net proceeds of this offering in short-term, investment-
grade interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid a cash dividend on our common stock and we do
not intend to do so in the foreseeable future. We currently intend to retain
earnings to finance future operations.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999 on an
actual basis and as adjusted to reflect (1) the conversion of all of our
outstanding classes of preferred stock into common stock, and (2) the sale of
the shares of common stock offered by us at an assumed initial public offering
price of $ per share, after deducting the estimated underwriting discount and
our estimated offering expenses. The following table assumes no exercise of the
underwriters' over-allotment option. This table contains unaudited information
and should be read in conjunction with the financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
June 30, 1999
----------------------------
Actual As Adjusted
------------- -------------
(dollars in thousands)
<S> <C> <C>
Long-term debt.................................... $ 210
-------------
Stockholders' equity:
Convertible preferred stock, $0.01 par value,
15,000,000 shares authorized; 11,877,492
shares issued and outstanding; no shares issued
and outstanding as adjusted ..................... 119
Common stock, $0.01 par value, 35,000,000 shares
authorized; 1,153,213 shares issued and
outstanding; shares issued and outstanding as
adjusted......................................... 12
Additional paid-in capital........................ 28,796
Deferred compensation............................. (2,598)
Treasury stock ................................... (50)
Accumulated deficit............................... (20,967)
-------------
Total stockholders' equity...................... 5,312
-------------
Total capitalization............................ $ 5,522
=============
</TABLE>
The share information in the table is based on our shares of common stock
outstanding as of June 30, 1999. This table excludes:
. 3,970,694 shares of our common stock subject to options outstanding as
of June 30, 1999 at a weighted average exercise price of $0.64 per
share; and
. 1,785,906 shares of our common stock subject to 1,376,815 warrants to
purchase common stock and 409,091 warrants to purchase Series J
preferred stock outstanding as of June 30, 1999 at exercise prices from
$0.01 to $1.10 per share. The warrants to purchase Series J preferred
stock will become warrants to purchase 409,091 shares of common stock.
15
<PAGE>
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$5.2 million or $0.26 per share of common stock. Our pro forma net tangible
book value per share represents our total tangible assets less total
liabilities divided by the pro forma total number of shares of common stock
outstanding at such date, assuming the conversion of all outstanding classes of
our preferred stock into an aggregate of 18,855,068 shares of common stock.
After giving effect to the sale of the shares of common stock offered by us
at an assumed initial public offering price of $ per share, after deducting
the estimated underwriting discount and our estimated offering expenses, our
pro forma net tangible book value as of June 30, 1999 would have been
approximately $ million or $ per share. This amount represents an immediate
increase in pro forma net tangible book value of $ per share to the existing
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing shares in this offering. If the
initial public offering price is higher or lower, the dilution to new investors
will be greater or less. The following table illustrates the dilution in pro
forma net tangible book value per share to new investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share as of June 30, 1999.. $
Increase in net tangible book value per share attributable to new
investors.......................................................
---
Pro forma net tangible book value per share after the offering.....
---
Dilution per share to new investors................................ $
===
</TABLE>
The following table summarizes on a pro forma basis, as of June 30, 1999,
the number of shares of common stock purchased from us, the aggregate cash
consideration paid to us and the average price per share paid by existing
stockholders and to be paid by new investors purchasing the shares of common
stock in this offering at an assumed initial public offering price of $ per
share, before deducting estimated underwriting discounts and our estimated
offering expenses.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 20,008,281 % $25,685,000 % $1.28
New investors..........
---------- ----- ----------- ----- -----
Total................ % $ % $
========== ===== =========== ===== =====
</TABLE>
The above information assumes no exercise of (1) the underwriters' over-
allotment option and (2) stock options or warrants after June 30, 1999. As of
June 30, 1999, we had reserved 3,970,694 shares of our common stock for
issuance upon exercise of outstanding options at a weighted average exercise
price of $0.64 per share and 1,785,906 shares for issuance upon exercise of
outstanding warrants at exercise prices from $0.01 to $1.10 per share. To the
extent any of those options or warrants are exercised, there will be further
dilution to new investors.
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with our financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The statement of operations data for the years
ended December 31, 1996, 1997 and 1998, and the balance sheet data as of
December 31, 1997 and 1998, are derived from and are qualified by reference to
the audited financial statements included elsewhere in this prospectus. The
statement of operations data for the two years ended December 31, 1994 and
1995, and the balance sheet data as of December 31, 1994, 1995 and 1996, have
been derived from audited financial statements of eMed that do not appear in
this prospectus. The statement of operations data for the six months ended June
30, 1998 and 1999 and the balance sheet data as of June 30, 1999 are derived
from unaudited financial statements included elsewhere in this prospectus. The
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of our management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The historical results
are not necessarily indicative of the operating results to be expected in the
future.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
------------------------------------------- ---------------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------ -------
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data
Revenue................. $ 139 $ 466 $ 1,009 $ 8,027 $12,594 $ 6,218 $11,369
Cost of revenue......... (141) (313) (1,404) (7,012) (8,976) (4,131) (6,351)
------- ------- ------- ------- ------- ------- -------
Gross margin............ (2) 153 (395) 1,015 3,618 2,087 5,018
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... -- 239 610 1,300 2,362 1,031 1,655
Sales and marketing.... 423 571 1,319 2,912 3,498 1,764 2,519
General and
administrative........ 1,443 1,476 1,331 1,982 2,722 1,121 1,851
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1,866 2,286 3,260 6,194 8,582 3,916 6,025
------- ------- ------- ------- ------- ------- -------
Loss from operations.... (1,868) (2,133) (3,655) (5,179) (4,964) (1,829) (1,007)
Interest income
(expense), net......... (14) (119) (70) (204) (106) (19) (68)
Other income (expense).. (15) 218 (21) (242) (43) (6) (82)
------- ------- ------- ------- ------- ------- -------
Net loss................ $(1,897) $(2,034) $(3,746) $(5,625) $(5,113) $(1,854) $(1,157)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (3.79) $ (2.12) $ (3.50) $ (5.19) $ (4.88) $ (1.79) $ (1.03)
Shares used in computing
basic and diluted net
loss per share......... 501 960 1,071 1,084 1,049 1,034 1,121
Unaudited pro forma
basic and diluted net
loss per share......... $ (0.32) $ (0.06)
Shares used in computing
unaudited pro forma
basic and diluted net
loss per share......... 15,761 19,976
<CAPTION>
As of December 31, As of June 30, 1999
------------------------------------------- -------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- ------- (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 326 $ 42 $ 2,201 $ 4,421 $ 2,259 $ 5,118
Working capital
(deficit).............. 193 (124) 1,889 5,541 (1,248) 4,573
Total assets............ 1,057 1,022 3,978 9,890 11,506 13,559
Total long-term
liabilities............ 961 1,278 177 963 342 210
Total stockholders'
equity (deficit)....... (343) (810) 2,549 5,503 388 5,312
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and notes thereto. The following discussion contains forward-looking
statements. Our actual results could differ materially from those discussed in
forward-looking statements. See "Risk Factors."
Overview
We are a leading provider of workflow solutions for electronically managing
medical images and related patient information. Our products permit the
capture, compression, transmission, routing, review and storage of medical
images and the coordinated transmission and review of related patient
information over both proprietary networks and the internet. Prior to 1996, our
business consisted primarily of providing teleradiology network management
services. We began selling FrameWave products in late 1996.
Product sales currently constitute a substantial portion of our revenue. We
recognize revenue from the sale of our products upon shipment to the customer.
We also derive revenue from installing our products at customer sites. Our
standard installation fee is based on a percentage of the product sales price.
We provide a one year warranty on all products. We generate recurring revenue
from contracts to provide network-based comprehensive support and post-warranty
product maintenance to customers. We recognize revenue from these contracts
ratably over their lives. Recurring fees constituted approximately 10% of
revenue for the year ended December 31, 1998 and 14% of revenue for the six
months ended June 30, 1999. As our customer base grows, we expect recurring
fees from service contracts to increase more quickly than our product sales.
Most of our products are sold under written contracts with our customers.
These contracts generally provide for payment of a portion of the purchase
price upon signing, an additional installment upon shipment, and a final
payment upon acceptance. Sales to independent sales and service organizations
require payment in full upon delivery.
We intend to offer our eMed_Web service, which we expect to introduce later
this year, on a subscription fee basis to our current installed base and to new
customers. The result, we believe, will be the gradual decrease of non-
recurring revenue from system sales as a percentage of revenue and the gradual
increase of recurring subscription fees derived from our eMed_Web service as a
percentage of revenue. However, we expect to continue to generate a material
portion of revenue from sales of FrameWave products and our support and other
services, which we anticipate will be used with our internet products.
Customers using our internet services will continue to need products like our
image acquisition devices, servers, workstations and archive products. We
believe we will ultimately derive additional revenue from expanding the medical
imaging workflow management capabilities of our eMed_Web sites.
Costs of product revenue consist primarily of costs of purchased material
and license fees. Costs of service revenue consist primarily of employee-
related costs and the cost of outsourcing services. Historically, our operating
expenses have consisted principally of employee-related costs associated with
the sales, marketing, and research and development of our FrameWave products.
As we seek to increase our customer base and implement our internet strategy,
we expect our operating expenses to increase significantly.
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<PAGE>
We have incurred net operating losses and negative cash flows since our
inception. As a result, we have recorded no income tax expense or benefit to
date. We expect to continue to incur net losses and negative cash flows as we
seek to rapidly grow our business and continue to implement our internet-based
strategy. We cannot assure you that our customer base or revenue will grow or
that we will achieve or sustain net operating income or positive cash flow.
During the six-month period ended June 30, 1999, we issued stock options to
non-employees and to employees which are exercisable at less than the fair
market value on the date of grant. The issuance of these stock options results
in non-cash compensation charges in the period that the options were granted
and will result in additional non-cash charges over future periods as the
options vest. These charges will be allocated across the various expense
categories as appropriate.
In November 1998, we acquired the assets of the medical imaging business of
E-Systems Medical Electronics, a division of the Raytheon Company, for an
aggregate purchase price of $3.2 million. E-Systems Medical Electronics and its
predecessors have been providing medical imaging products since 1985. The E-
Systems Medical Electronics installed base primarily consists of users who
capture and transmit medical images from an imaging facility to a radiologist's
home for off-hours review. The acquisition was accounted for using the purchase
method of accounting. In February 1999, we sold some non-core assets which we
acquired as part of the transaction for $861,000. The E-Systems Medical
Electronics business, excluding the non-core assets we sold, had net sales of
approximately $8.1 million and a net loss of approximately $6.0 million for the
period from January 1, 1998 to November 23, 1998. Since acquiring E-Systems
Medical Electronics, we have integrated its operations into our existing
business and have eliminated redundant functions. In connection with this
action, we established a reserve of approximately $412,000, of which we have
utilized approximately $331,000 as of June 30, 1999. In addition, we have
discontinued many of the business practices of E-Systems Medical Electronics
which represented a substantial portion of its pre-acquisition revenues.
Therefore, the revenue of E-Systems Medical Electronics prior to acquisition is
not indicative of the incremental revenue to be generated by us as a result of
this acquisition.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenue. Revenue increased by 83% to $11.4 million for the six months ended
June 30, 1999 from $6.2 million for the six months ended June 30, 1998. Product
revenue increased by 71% to $9.8 million for the six months ended June 30, 1999
from $5.7 million for the six months ended June 30, 1998. This increase was
attributable to the increased sale of our FrameWave products as well as the
sale of PACSPro products, a product line that we acquired in the E-Systems
Medical Electronics transaction described above. Service revenue increased by
223% to $1.6 million for the six months ended June 30, 1999 from $487,000 for
the six months ended June 30, 1998. This increase was primarily due to the
growth in our installed user base. Approximately $840,000, or 77% of the
service revenue increase is due to increased sales of service to users of our
FrameWave products.
Gross Margin. Gross margin increased to $5.0 million, or 44% of revenue, for
the period ended June 30, 1999 from $2.1 million, or 34% of revenue, for the
period ended June 30, 1998. Gross margin from product revenue increased to $5.1
million, or 52% of product revenue, for the period ended June 30, 1999 from
$2.3 million, or 41% of product revenue, for the period ended June 30, 1998.
The increase in gross margin is attributable to a reduction in the material
cost of products sold and an increase in the selling price of products sold.
Gross margin from service improved to a loss of $76,000 for the period ended
June 30, 1999 from a loss of $242,000 for the period ended June 30, 1998. This
improvement is primarily the result of an increase in the volume of products
sold, which resulted in an increase in recurring revenue generated from service
contracts.
19
<PAGE>
Research and Development Expense. Research and development expense increased
by 61% to $1.7 million for the six months ended June 30, 1999 from $1.0 million
for the six months ended June 30, 1998. This increase was primarily the result
of our continued expansion of personnel to support our growth and to position
us to expand our internet-based product and service offerings. As a percentage
of revenue, research and development expense decreased to 15% of revenue for
the six months ended June 30, 1999 from 17% of revenue for the six months ended
June 30, 1998.
Sales and Marketing Expense. Sales and marketing expense increased by 43% to
$2.5 million for the six months ended June 30, 1999 from $1.8 million for the
six months ended June 30, 1998. This increase was primarily the result of our
continued expansion of personnel to support our growth and to position us to
expand our internet-based product and service offerings. As a percentage of
revenue, sales and marketing expense decreased to 22% for the six months ended
June 30, 1999 from 28% of revenue for the six months ended June 30, 1998.
General and Administrative Expense. General and administrative expense
increased by 65% to $1.8 million for the six months ended June 30, 1999 from
$1.1 million for the six months ended June 30, 1998. Approximately $240,000, or
33%, of this increase is due to a non-cash compensation charge relating
primarily to the issuance of stock options to employees and non-employees
exercisable at less than the fair market value on the date of grant. The
remainder of this increase results primarily from our continued expansion of
personnel to support our growth. As a percentage of revenue, general and
administrative expense decreased to 16% for the six months ended June 30, 1999
from 18% of revenue for the six months ended June 30, 1998.
Interest Expense -- Net. Interest expense, net, increased to $69,000 for the
six months ended June 30, 1999 from $19,000 for the six months ended June 30,
1998. This increase was primarily a result of increased borrowing under lines
of credit, which was partially offset by interest earned on short-term
investments.
Year Ended December 31, 1998 Compared with Year Ended December 31, 1997
Revenue. Revenue increased by 57% to $12.6 million for the year ended
December 31, 1998 from $8.0 million for the year ended December 31, 1997.
Product revenue increased by 58% to $11.3 million for the year ended December
31, 1998 from $7.2 million for the year ended December 31, 1997. This increase
was a result of continued growth in shipments of our FrameWave products.
Service revenue increased by 50% to $1.3 million for the year ended December
31, 1998 from $863,000 for the year ended December 31, 1997. This increase was
primarily due to the growth in our installed user base.
Gross Margin. Gross margin increased to $3.6 million, or 29% of revenue, for
the period ended December 31, 1998 from $1.0 million, or 13% of revenue, for
the period ended December 31, 1997. Gross margin from product revenue increased
to $4.1 million, or 36% of product revenue, for the year ended December 31,
1998 from $1.6 million, or 22% of product revenue for the year ended December
31, 1997. The increase in gross margin was attributable to an increase in the
volume of products sold. Gross margin from service revenue improved to a loss
of $458,000 for the year ended December 31, 1998 from a loss of $596,000 for
the year ended December 31, 1997. This improvement was primarily the result of
an increase in the volume of products sold which resulted in an increase in
recurring revenue generated from service contracts.
Research and Development Expense. Research and development expense increased
by 82% to $2.4 million for the year ended December 31, 1998 from $1.3 million
for the year ended December 31, 1997. This increase was primarily the result of
our continued development of our FrameWave products. As a percentage of
revenue, research and development expense increased to 19% for the year ended
December 31, 1998 from 16% of revenue for the year ended December 31, 1997.
Sales and Marketing Expense. Sales and marketing expense increased by 20% to
$3.5 million for the year ended December 31, 1998 from $2.9 million for the
year ended December 31, 1997. This increase was
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primarily the result of our continued expansion of personnel to support our
growth. As a percentage of revenue, sales and marketing expense decreased to
28% for the year ended December 31, 1998 from 36% of revenue for the year ended
December 31, 1997.
General and Administrative Expense. General and administrative expense
increased by 37% to $2.7 million for the year ended December 31, 1998 from $2.0
million for the year ended December 31, 1997. This increase was primarily the
result of our continued expansion of personnel to support our growth. As a
percentage of revenue, general and administrative expense decreased to 22% for
the year ended December 31, 1998 from 25% of revenue for the year ended
December 31, 1997.
Interest Expense -- Net. Interest expense, net, decreased to $106,000 for
the year ended December 31, 1998 from $204,000 for the year ended December 31,
1997. This decrease was primarily a result of an increase in interest earned on
short-term investments, which was partially offset by increased borrowing under
lines of credit.
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
Revenue. Revenue increased to $8.0 million for the year ended December 31,
1997 from $1.0 million for the year ended December 31, 1996. Product revenue
increased to $7.2 million for the year ended December 31, 1997 from $570,000
for the year ended December 31, 1996. This increase was primarily the result of
the successful launch of our FrameWave products. Service revenue increased by
96% to $863,000 for the year ended December 31, 1997 from $439,000 for the year
ended December 31, 1996. This increase was primarily due to the growth in our
installed user base.
Gross margin. Gross margin increased to $1.0 million or 13% of revenue for
the period ended December 31, 1997 from a loss of $394,000 for the period ended
December 31, 1996. Gross margin from product revenue increased to $1.6 million
for the year ended December 31, 1997 from $198,000 for the year ended December
31, 1996. As a percentage of product revenue, gross margin decreased to 22% for
the year ended December 31, 1997 from 35% for the year ended December 31, 1996.
Gross margin from service revenue decreased to a loss of $596,000 for the year
ended December 31, 1997 from a loss of $592,000 for the year ended December 31,
1996.
Research and Development Expense. Research and development expense increased
by 113% to $1.3 million for the year ended December 31, 1997 from $610,000 for
the year ended December 31, 1996. This increase was primarily the result of our
continued expansion of personnel to support our growth. As a percentage of
revenue, research and development expense decreased to 16% for the year ended
December 31, 1997 from 60% of revenue for the year ended December 31, 1996.
Sales and Marketing Expense. Sales and marketing expense increased by 121%
to $2.9 million for the year ended December 31, 1997 from $1.3 million for the
year ended December 31, 1996. This increase was primarily the result of our
continued expansion of personnel to support our growth. As a percentage of
revenue, sales and marketing expense decreased to 36% for the year ended
December 31, 1997 from 131% of revenue for the year ended December 31, 1996.
General and Administrative Expense. General and administrative expense
increased by 49% to $2.0 million for the year ended December 31, 1997 from $1.3
million for the year ended December 31, 1996. This increase was primarily the
result of our continued expansion of personnel to support our growth. As a
percentage of revenue, general and administrative expense decreased to 25% for
the year ended December 31,1997 from 132% of revenue for the year ended
December 31, 1996.
Interest Expense -- Net. Interest expense, net, increased to $204,000 for
the year ended December 31, 1997 from $70,000 for the year ended December 31,
1996. This increase was primarily a result of increased borrowing under lines
of credit, which was partially offset by interest earned on short-term
investments.
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Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
equity and debt financings. During the period from inception through June 30,
1999, we received net proceeds from the sale of our capital stock and
convertible notes of $25.7 million. None of the convertible notes remain
outstanding. As of June 30, 1999, we had $5.1 million of cash and cash
equivalents and approximately $674,000 was available under our credit facility.
Cash used in operating activities for the six months ended June 30, 1999 of
$1.2 million consisted primarliy of net operating losses of $1.3 million and an
increase in accounts receivable of $1.3 million, offset in part by a decrease
in inventories. Cash used in operating activities for the six months ended June
30, 1998 of $1.9 million was due primarily to net operating losses of $1.9
million and an increase in accounts receivable of $853,000, offset by an
increase in other current assets of $513,000. Cash used in operating activities
for the year ended December 31, 1998 of $2.7 million was due primarily to net
operating losses of $5.1 million offset by a decrease in inventories and
prepaid expenses of $638,000 and $554,000, respectively, and an increase in
deferred revenue of $690,000. Cash used in operating activities for the year
ended December 31, 1997 of $6.1 million was due primarily to net operating
losses of $5.6 million and an increase in accounts receivable, prepaid expenses
and inventories of $2.5 million, $715,000, and $399,000, respectively, offset
by increases in accounts payable, accrued expenses and deferred revenue of $1.3
million, $677,000 and $284,000, respectively.
Cash provided by investing activities for the six months ended June 30, 1999
of $569,000 consisted primarily of proceeds from sale of assets held for sale,
offset in part by capital expenditures for computer equipment and other fixed
assets. Cash used in investing activities for the six months ended June 30,
1998 of $315,000 consisted primarily of capital expenditures for computer
equipment and other fixed assets. Cash used in investing activities for the
year ended December 31, 1998 of $1.5 million consisted primarily of $999,000
used for the acquisition of E-Systems Medical Electronics and $465,000 used to
fund capital expenditures for computer equipment and other fixed assets. Cash
used in investing activities for the year ended December 31, 1997 of $841,000
consisted primarily of capital expenditures for computer equipment and other
fixed assets.
Cash provided by financing activities for the six months ended June 30, 1999
of $3.5 million consisted primarily of $5.8 million received from the issuance
of 4,142,857 shares of Series K preferred stock and warrants to purchase
1,121,333 shares of common stock. This amount was offset in part by $2.2
million payment of the remaining purchase price owed to Raytheon for our
purchase of E-Systems Medical Electronics. The Series K preferred stock will be
converted into 4,142,857 shares of common stock upon the closing of this
offering. Cash provided by financing activities of $1.1 million for the six
months ended June 30, 1998 consisted primarily of $1.2 million received from
additional bank borrowing from lines of credit, offset by debt repayment. Cash
provided by financing activities of $2.1 million for the year ended December
31, 1998 consisted primarily of $2.4 million received from additional bank
borrowing from lines of credit. Cash provided by financing activities for the
year ended December 31, 1997 of $9.2 million consisted primarily of $8.4
million received from the issuance of 7,730,909 shares of Series J preferred
stock and warrants to purchase 409,091 shares of Series J preferred stock and
$885,000 from additional bank borrowings from lines of credit. The Series J
preferred stock will be converted into 7,730,909 shares of common stock and the
Series J warrants will become warrants to purchase 409,091 shares of common
stock upon the closing of this offering. During 1996, we received $5.8 million
from the issuance of 2,216 shares of preferred stock and 155,482 warrants, all
of which preferred stock will be converted into 6,208,382 shares of common
stock upon the closing of this offering.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. We may require additional capital in the
future. Our capital requirements are expected to include the funding of
operating losses, working capital requirements and other general corporate
purposes, including expansion of our network, advertising and content
development. We intend to repay our current credit facility and may pursue one
or more strategic alliances, partnerships, or
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acquisition transactions, although, as of the date of this prospectus, we have
no agreement to enter into any material investment or acquisition transaction.
We may need to raise additional funds, however, to respond to business
contingencies which may include the need to:
. fund more rapid expansion;
. fund additional marketing expenditures;
. develop or acquire content, technology or services;
. enhance our operating infrastructure;
. respond to competitive pressures; or
. acquire complementary businesses.
Inflation
We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods reflected above.
Year 2000 Disclosure
Many existing computer programs use only two digits, rather than four, to
represent a year. Accordingly, date-sensitive software or hardware written or
developed in this fashion may not be able to distinguish between 1900 and 2000,
and programs written in this manner that perform arithmetic operations,
comparisons or sorting of date fields may yield incorrect results when
processing a Year 2000 date. This Year 2000 problem could potentially cause
system failures or miscalculations that could disrupt operations.
Our State of Readiness
We have completed an initial analysis and risk assessment aimed at
identifying Year 2000 issues. Though it is impossible to be certain, we believe
that our mission critical systems and equipment are Year 2000 compliant.
Financial and Information Technology Systems. We have assessed all of our
key financial and information technology systems, and we believe that the
actions required to correct any non-compliant financial and information
technology systems have been completed. There can be no assurance that we will
identify all Year 2000 problems in these systems or that any necessary
corrective actions will be completed in a timely manner.
Third Party Vendors, Suppliers and Customers. We continue to contact all of
our significant suppliers and customers to determine the extent to which our
networks and systems are vulnerable to the failure of those third parties to
resolve their own Year 2000 issues. We are continuing to comply with federal
guidelines related to the registration and availability of Year 2000 status
information for our products. We have completed and made available all planned
software and system upgrades related to Year 2000 readiness for fielded
products. We have sent notices to known customers with appropriate information
relative to Year 2000 non-compliance of those legacy systems that represent the
highest risk for Year 2000 non-compliance, and instructions on how to contact
us. We have not undertaken, and will not undertake, an in-depth evaluation of
the Year 2000 preparedness of our suppliers and customers or such other third
parties, as their ability to adequately address Year 2000 issues is outside our
control. There can be no guarantee that their systems will be timely converted,
or that any such converted systems will interact properly with our systems, or
that such conversions, if not completed or improperly implemented, would not
have a material adverse effect on our systems.
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Our Year 2000 Risk
Based on the efforts described above, we currently believe that our systems
are Year 2000 compliant. If our systems or those of our suppliers, vendors or
other third parties on which we rely are not Year 2000 compliant, we could,
among other things, fail to fulfill our contractual obligations with customers
in new or existing markets, face substantial claims by such customers and loss
of revenue, fail to bill our customers accurately and on a timely basis,
experience increased expenses associated with litigation, stabilization of
operations after critical systems failures and execution of contingency plans,
and be subject to the inability by customers and others to pay, on a timely
basis or at all, obligations owed to us. Although the adverse effects of any or
all of these events are not quantifiable at this time, any of these events
could have a material adverse effect on our business and operating results.
Our Contingency Plans
We have begun to develop contingency plans which anticipate our most likely
worst case Year 2000 scenarios, which have not yet been identified fully. We
intend to take appropriate actions to mitigate the effects of Year 2000 issues.
Such actions may include having arrangements for alternate suppliers and using
manual intervention where necessary. If it becomes necessary for us to take
these corrective actions, it is uncertain whether this would result in
significant interruptions in service or delays in business operations or
whether it would have a material adverse effect on our results of operations,
financial position or cash flow.
Our Year 2000 Remediation Costs
Our costs incurred to date in addressing the Year 2000 problem have not been
material. We have not deferred information technology projects due to Year 2000
expenses, and we do not expect our costs associated with the Year 2000 problem
to have a material adverse impact on our business. However, there can be no
assurance that the costs associated with the Year 2000 problem will not be
material.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board, or FASB, issued a
Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The new standard establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments imbedded in other contracts (collectively
referred to as derivatives), and for hedging activities. In June 1999, the FASB
issued SFAS No. 137 which deferred the effective date of SFAS No. 133 for one
year. SFAS No. 133 is now effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. We do not expect SFAS No. 133 to have a material
effect on our financial position or results of operations.
In February 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SoP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SoP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. SoP 98-1 will be
effective for us beginning in fiscal 1999, and we do not expect adoption of
this SoP to have a material effect on our financial position or results of
operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of Start-
Up Activities." Start-up activities are defined broadly as those one-time
activities related to the opening of a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, commencing some new operation or organizing a new
entity. SoP 98-5 requires that the cost of start-up activities be expensed as
incurred. SoP 98-5 is effective for us beginning in 1999, and we do not expect
adoption of this SoP to have a material effect on our financial position or
results of operations.
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BUSINESS
Overview
We are a leading provider of workflow solutions for electronically managing
and distributing medical images and related patient information. Our products
and services are used by radiologists, technicians, referring physicians and
other health care professionals to improve the efficiency of the practice of
medicine by allowing them to access, transmit and review medical images and
related patient information quickly and easily. Our products capture, compress,
transmit, route and store medical images, including x-rays, MRIs, CTs and
ultrasounds. Our offerings also permit the coordinated transmission and review
of images and related patient information over both proprietary networks and
the internet. Our customers are providers of radiology imaging and interpretive
services, including radiologists, hospitals and outpatient imaging facilities,
and often operate as part of complex health care networks. We believe that we
have the largest installed user base of any company in our business. Our
products are installed in approximately one of four U.S. imaging facilities and
provide image viewing capabilities in one of four U.S. radiologists' homes.
Our FrameWave products are modular in design and allow us to tailor
solutions to our customers' needs. This could entail providing an entire image
management workflow solution or individual applications that can be integrated
with the customer's existing products. FrameWave incorporates our advanced
proprietary software including our compression technology. We believe our
FrameWave technology provides us with a significant competitive advantage.
Building from this FrameWave technology, we have developed internet-based
offerings that provide secure access to images and other medical information
quickly and easily using any commercially available internet browser. Our
internet-based offerings take advantage of the internet's open architecture and
universal accessibility to provide expanded access to medical images and
related information. This functionality allows various health care
professionals to securely access medical images and related information in an
organized and efficient manner from any location. We believe it will also
expand the use of electronic image management tools.
Our internet offerings enable our customers to reduce costs and improve
their service. We recently introduced FrameWave Web and intend to introduce
eMed_Web later this year. FrameWave Web permits a customer to manage and make
available medical images and related information over the internet. eMed_Web is
a website development and hosting service, through which we intend to establish
and manage co-branded websites for our customers. Through these eMed_Web sites,
our customers will have FrameWave Web's integrated image and report management
capabilities as well as the opportunity to incorporate other clinically
relevant information and customer-specific marketing information. In addition,
we intend eMed_Web to serve as a platform for offering additional workflow
solutions.
As part of our solutions, we provide our customers remote comprehensive
support services through our network operations center, which is fully staffed
24 hours a day, seven days a week. Because medical imaging is critical to
patient diagnosis and care, we believe that our customers highly value
comprehensive support services that increase the reliability of their medical
image management systems. Our network operations center personnel are able to
remotely monitor and manage customer systems in order to identify and resolve
system problems. These support services include the ability to remotely
diagnose problems related to portions of a customer's system provided by third
parties. The level of service we provide enables many customers to outsource
the technical management of their image distribution and management systems to
us.
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Strategy
Our objective is to become the leading supplier of comprehensive, medical
imaging workflow solutions to health care providers by leveraging our advanced
technology and experience. Elements of our strategy to achieve this objective
include:
. Introducing eMed_Web co-branded websites. We intend to introduce our
eMed_Web website development and hosting service later this year. We
believe that eMed_Web will increase our market penetration, build a
recurring revenue base and generate other sources of revenue. We believe
that offering the ability to cost-effectively manage the accessibility
and distribution of imaging, marketing and other information over the
internet will drive the adoption of our eMed_Web sites.
. Expanding our sales by continuing to develop additional medical imaging
workflow solutions. We intend to expand our suite of medical imaging
workflow products and services. For example, the reports that accompany
medical images are generally prepared and stored through inefficient
dictation and transcription procedures. To address this inefficiency, we
intend to incorporate a speech-to-text transcription capability into our
workflow solutions. Also, reporting, scheduling and billing are
currently maintained on separate information systems from medical
images. We believe that efficiencies can be achieved by eliminating the
need for redundant information systems. We intend eMed_Web to serve as a
platform for offering these additional workflow solutions.
. Leveraging our relationships with our installed users to increase
sales. We recently acquired E-Systems Medical Electronics in order to
access a significant installed user base which we believe is ripe for
upgrade. We will continue to aggressively market our internet-based and
other products to our installed user base. We believe that our installed
base of over 1,800 hospitals and outpatient imaging centers and over
7,000 radiologists provides us with a significant advantage in gaining
acceptance of and selling our current products and services, the
eMed_Web service and planned enhancements to our current workflow
solutions.
. Expanding our sales and marketing efforts. We believe there is a
significant opportunity for us to increase our revenues through expanded
sales and marketing efforts. Our success to date has been achieved with
modest sales and marketing efforts and we believe that by investing
additional resources, we can increase sales significantly. We intend to
devote significant additional resources to market and sell our products
and services to both new customers and our installed user base. We also
intend to expand the scope of our sales and marketing efforts into
promising international markets.
. Engaging in strategic acquisitions and relationships. We intend to
engage in acquisitions and enter into strategic relationships to
accelerate the implementation of elements of our strategy. We may pursue
acquisitions, partnerships or licensing arrangements to obtain
technology if we determine that to do so would be more cost effective or
timely than developing our own. We also may selectively continue to
broaden our user base through acquisitions to improve our economies of
scale.
Market Opportunity
Growing Market for Radiology Services. According to the Health Care
Financing Administration, or HCFA, total expenditures on health care services
in the United States were approximately $1.1 trillion in 1997 and are expected
to reach approximately $2.1 trillion by the year 2007. Industry studies
estimate that the 1998 U.S. market for radiology services was approximately $69
billion. Based on historical data, we believe that over 350 million radiology
studies are conducted annually. The number of studies has grown due to the
increasing usefulness of radiology as a non-invasive diagnostic technique and
the general aging of the U.S. population. Medical imaging is critical to
patient diagnosis and care across a broad spectrum of health care
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procedures and disease states. Moreover, an increasing proportion of these
studies is produced in digital format from devices such as MRIs and CTs. All
states have record retention regulations which require radiology images to be
stored for several years.
Fragmented Industry Complicates Communications and Transactions. Radiology
images and information are used by a broad cross-section of industry
participants including radiologists, referring physicians, hospitals and
outpatient imaging centers. Today there are over 29,000 radiologists organized
into approximately 3,200 radiology practice groups serving more than 2,800
imaging centers and over 5,000 hospitals. Referring physicians are a
particularly disparate group. Of the 740,000 physicians in the United States,
60% of them are either sole practitioners or practice in partnerships of only
two physicians. Efficient systems for the distribution, management and storage
of radiology images and information is critical to all of these constituencies.
The inability to easily access and the failure to appropriately manage this
information can result in unnecessary expense. HCFA estimates that
approximately 10% of all health care expenditures are the result of a
duplication of care due to missing patient information.
Inefficiencies in Workflow and Information Technology. Radiology images,
even those generated in a digital format, are typically printed to film for the
radiologist's interpretation. The current paradigm for a typical radiology
procedure is as follows: a technician produces the radiology images; the images
are printed to film and copies of the images are provided to the radiologist
for review and diagnosis; the radiologist dictates a report into a recorder; a
clerk transcribes the oral report into a first draft written report for the
radiologist's review; a final report is generated and distributed to the
referring physician and any consulting specialist; duplicate copies of the
images are produced and are delivered by courier to the referring physician and
any consulting specialist. Under this paradigm, it often takes 2 to 3 days to
produce a final report and to deliver the images and related report to the
referring physician. The significant costs associated with creating duplicate
film images for multiple users, delivering images to remote locations by
courier, creating reports using conventional transcription services, storing
reports and storing images on film represent inefficiencies in medical imaging
workflow which can be rectified with improved use of information and workflow
technology. Based on a 1996 Mayo Clinic report, for radiology images generated
each year, more than $5.6 billion is spent on radiology film and processing
costs and costs associated with the handling and storing of these films over
their lifetime. We estimate that the cost of conventional transcription of
dictated reports is approximately $950 million annually.
Competitive Pressure on Radiology Providers. Radiology, like other medical
specialties, has been fundamentally affected by change in the structure and
economics of U.S. health care. Health care payors and providers are forcing
radiologists and imaging facilities to reduce unit fees, improve the timeliness
and availability of interpretations and related patient images, and ensure the
availability of sub-specialist radiologists. This pressure has driven radiology
providers to look for ways to enhance their efficiency and to provide better
service to referring physicians and other constituencies. Many of these
improvements can be achieved through the use of electronic medical imaging
workflow solutions.
Growth of the Internet. The internet's open architecture, universal
accessibility and growing acceptance make it an increasingly important
environment for business-to-business and business-to-consumer interaction. Use
of the internet is rapidly expanding from simple information publishing,
messaging, and data gathering to critical business transactions and
confidential communications. The power and ability of the internet to connect
various participants in the health care industry, from physicians, to
hospitals, to patients, creates an opportunity to advance the state of
information technology in the health care industry. Internet-based workflow
solutions permit more efficient distribution of information over a broader
range of remote locations than proprietary dedicated networks. We believe that
physicians are increasingly using internet-based medical applications. We
believe that medical imaging workflow management is uniquely suited to benefit
from internet-based tools, given the fragmentation of the health care industry,
the amount and complexity of the data produced and the need for timely access
to medical imaging information.
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eMed Solutions
We have worked with providers of radiology imaging and interpretive services
since 1992 to understand the inefficiencies in medical imaging workflow and to
design cost-effective solutions. Based on this insight, we have been able to
focus our efforts on solutions that provide our customers with cost savings,
increased efficiencies and competitive advantages. Our products and services
incorporate advanced technology and offer our customers the following
advantages:
Our advanced technology improves our customers' cost effectiveness. Our
advanced proprietary technology allows our customers to reduce their costs. For
example, we have pioneered the utilization in medical imaging of a file
compression technology known as "wavelet." This compression technology permits
users to compress very large data files required for film images like x-rays
into files as small as one-fiftieth the original size, without visible loss of
image quality. Other compression technologies typically achieve compression
ratios of one-half or one-third of their original size. Our compression
technology significantly reduces our customers' network transmission and data
storage costs. Using our FrameWave products, a medical image transmission which
would otherwise take up to 27 minutes in uncompressed form can be completed in
as little as 30 seconds.
Our products and services enable our customers to enhance their
competitiveness. Our products and services are designed to enhance our
customers' ability to market their services and to serve their customer base of
referring physicians. By designing our products to operate over the internet
with any commercially available internet browser, we enable our customers to
quickly and easily:
. provide remote access to medical images and related information; and
. communicate medical and marketing information to their referring
physicians and other constituencies.
We believe this enhanced access to images and information will allow our
customers to provide faster, higher quality and more responsive service to
their referring physicians and other constituencies.
The modularity of our products and services permits us to tailor solutions
to our customers' needs. Our FrameWave products and eMed_Web are modular in
design and allow us to conform our products and services to our customers'
functionality and budget requirements. We can provide an entire image
management workflow solution. Alternatively, customers can integrate our
products and services on an application-by-application basis with systems
previously acquired from other vendors. For example, customers can obtain the
benefits of our internet offerings without replacing their existing medical
imaging management systems, modalities, or film printer networks.
We provide our customers with comprehensive support. Our comprehensive
support services increase the cost effectiveness and reliability of our
customers' medical imaging information systems. Because medical imaging is
critical to patient diagnosis and care, we believe that our customers highly
value comprehensive support services that increase the reliability of their
medical image management systems. Our network operations center personnel are
able to remotely monitor and manage customers' systems and identify and resolve
system problems. These services include the ability to remotely diagnose
problems throughout a customer's image distribution and management system,
including components of a system provided by the customer or other third party
vendors. Our comprehensive support service enables many customers to outsource
the technical management of their image distribution and management systems to
us.
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Products and Services
Our products and services are sold as solutions tailored to the specific
needs of our customers. Our products generally consist of industry standard
hardware, elements of third party software and our proprietary software. Our
flagship products and services are currently marketed and sold under the
FrameWave brand name. In addition, we market some of the PACSPro product line
we acquired through the E-Systems Medical Electronics acquisition. Our
internet-based offerings are designed to enhance our customers' image
management systems. Image management systems are typically comprised of image
acquisition devices, image management servers, image review workstations and
electronic image archives, all of which we sell individually or in larger
configurations.
Products
FrameWave Web. Our FrameWave Web product is an internet-based image and
report distribution system which enables access to images, together with
reports about the images, in an integrated presentation. FrameWave Web also
includes multiple security features for protection of the confidentiality of
patient information, including access control, information control and
transaction logging.
Image Acquisition Devices. We offer a variety of image acquisition devices
including devices that convert hard-copy x-rays into digital form and others
that directly obtain images from digital sources. These images can then be
electronically distributed and managed in compliance with industry standards.
All of our image acquisition products feature graphical user interfaces for
ease of use.
Servers. We offer a variety of servers with advanced proprietary software
that compress, decompress, store and manage medical images and interface with
different medical information systems to provide an integrated view of related
patient information over a variety of networks. Our servers can be configured
in a variety of ways to meet the workflow and budget requirements of our
customers.
Clinical Image Viewers. Our viewers are self-installable software products
that permit users to view medical images on personal computers while at home or
in the office through a telephone connection to a hospital. FrameWave viewers
support direct telephone connections to our network operations center enabling
remote support service.
Diagnostic Workstations. We offer high performance image display
workstations suitable for primary diagnostic use. Our workstations offer a wide
variety of image manipulation tools and are designed to comply with the
American College of Radiology Standards for Teleradiology. Our workstation
products are intended for use in a hospital, imaging center or similar facility
where patient diagnosis is performed.
Archives. We offer archives that provide cost-effective storage of digital
images. An archive includes short-term and long-term storage capacity, both of
which may be expanded through upgrades following an initial purchase. The
archives serve as economical alternatives to the storage of hard copy films
that health care professionals are required by law to retain for several years.
Services
eMed_Web. eMed_Web is a website development and hosting service which
incorporates our FrameWave Web technology. With our eMed_Web service, we intend
to establish and manage individual co-branded customer websites. Through these
eMed_Web sites, health care professionals, including radiologists, will be able
to view images at home over an internet connection. Also, eMed_Web sites will
provide customers with image and report management capabilities as well as the
opportunity to incorporate other clinically relevant information and customer-
specific marketing information. In addition, we intend eMed_Web to serve as a
platform from which we can offer additional workflow solutions and offer
information of interest to health care professionals.
Customer Service and Training. Comprehensive, system-wide support is an
integral part of the solutions we offer our customers. Our network operations
center is staffed 24 hours a day, 7 days a week with a complement of network
engineers, application specialists, clinical coordinators and development
engineers.
29
<PAGE>
Our products include remote diagnostics technology which permits our network
operations center to remotely assume operation of a customer's equipment. This
permits us to offer a high level of support at relatively low cost. We market
this comprehensive network-based support service as a separate, purchasable
offering, not included in the customer's first-year warranty. Approximately 85%
of our FrameWave customers have purchased this enhanced service offering.
Our products are typically sold with a one year warranty. After the
expiration of the warranty, we encourage our customers to purchase annual
service contracts. Approximately 75% of our customers with FrameWave
applications have purchased post-warranty annual service contracts.
We sell installation services in connection with the sale of our products.
Upon completion of installation, we conduct formal training at the customer's
site in group settings and teach our customers through "hands on" instruction
on our products. We are certified by the American Association of Radiology
Technologists to train customer technologists in the use of our medical imaging
management systems. This training satisfies three hours of required continuing
education certification. The average time from the beginning of installation
through acceptance testing is less than two weeks.
Sales and Marketing
We employ a direct sales force and we utilize independent sales and service
organizations. We manage our independent sales and service organizations to
complement our direct sales force. Members of our direct sales force are
assigned to regional territories and are responsible for customer activity
within their regions.
The independent sales and service organizations purchase products from us
and resell to their customers at prices they determine. Their customers execute
contracts directly with us covering warranty and other service and support. We
have also begun to train and engage some of these organizations to provide
certain on-site service to customers under our supervision.
Our marketing activities include telemarketing, advertisements in trade
journals and news releases to the trade press. The focus of our telemarketing
efforts is our installed user base. We also present our products at multiple
trade shows throughout the year. The most significant of these trade shows is
the Radiological Society of North America meeting held in late November of each
year.
Technology
We have historically developed products and services through our own
research and development, acquisitions and strategic relationships. As of
August 1, 1999, our engineering group included approximately one-fourth of our
employees. We will continue to pursue product and service development
internally as well as through strategic relationships.
The core technology employed in our internet application is what is referred
to as dynamic HTML, with highly integrated wavelet compression technology. This
technology, which we license from AWARE Corporation, differs from typical HTML-
based applications due to the number, size, and grayscale characteristics of
the images. For example, one 14"X17" film, digitized at the resolution standard
adopted by the American College of Radiology Standards for Teleradiology,
results in excess of ten megabytes of data. Our internet server technology
delivers images, text, and voice over any internet connection, including dial-
up modem connections, with acceptable clinical performance. Our internet server
technology is browser-independent and employs layered security defenses against
unauthorized access, as well as secure socket layers, to ensure secure transfer
of information over the internet. Our internet server technology has been
jointly developed under an exclusive relationship with AWARE Corporation.
All of our products except our archive products operate on computers with
Intel Pentium processors that run the Microsoft Windows NT or Windows SQL
Server operating systems. Our archive products are built on
30
<PAGE>
the Sun Sparc platform. We believe that the use of a well known and highly
developed hardware and operating system platform simplifies manufacturing and
support, encourages customer acceptance, and reduces the risks of technological
obsolescence.
All of our FrameWave products are fully DICOM-compliant and all of our
current PACSPro products can be upgraded to be DICOM-compliant. DICOM, or
Digital Imaging Communications for Medicine, is an industry standard network
communications protocol that allows DICOM-compliant imaging modalities and
other image-related devices to directly communicate with each other without
proprietary interfaces or translations. In addition, our products comply with
the benchmarks for quality and professional practice established by the
American College of Radiology Standards for Teleradiology. Our comprehensive
support services facilitate our customers' quality assurance requirements
within these standards.
Intellectual Property
We generally do not rely on patent protection for our products and services.
Instead, we rely on a combination of copyright and trade secret law, employee
and third party nondisclosure agreements, and other protective measures to
protect our intellectual property rights. Our policy is to require our
employees, certain contractors, consultants, and parties to collaboration
agreements to execute confidentiality agreements upon the commencement of
employment, consulting relationships or collaborations. We also seek to
continuously develop and improve our products and services in order to offer
features not available from our competitors. We also rely on licensing
opportunities to develop and maintain our competitive positions.
Some of the software included in our products is licensed from third parties
under long term licensing agreements. Our agreements with vendors of this
software provide for payment of license fees based upon the number of copies of
the software we use, and require us to obtain signed agreements from our
customers containing specified software licensing provisions. In some cases we
have prepaid, or committed to pay, license fees for software not yet utilized
in order to obtain improved pricing or other benefits. Each of these contracts
provide us with a right to continue to purchase software at set prices for a
period following termination, other than for breach. If any of these agreements
were terminated, we believe we would be able to obtain suitable replacement
vendors or internally develop substitute software during these periods.
We have registered the names "eMed," "FrameWave" and "PACSPro" as trademarks
with the United States Patent and Trademark Office and have reserved the
internet address: www.eMed.com.
We own three issued U.S. patents covering automated distribution of medical
images over data processing networks. Since this functionality is not yet
necessary in the way medical imaging applications are currently utilized, we
have not yet incorporated these into our products and services.
Competition
Competition in the medical image management market is intense. Competition
in our markets is based on price, functionality, reliability, reputation of the
vendor, and service. Our ability to maintain our competitive position will
depend on our ability to continue to innovate while maintaining quality and
customer satisfaction.
A large number of companies offer medical imaging management and
distribution products that are competitive with ours. A number of smaller
vendors offer products which compete with a portion of our current product
line. In addition, many of our competitors are larger than we are, have been in
business longer than we have, and have greater financial, technical, research
and development and sales and marketing resources than we do. Several large
multinational corporations, including Agfa, Siemens, General Electric Medical
Systems and Kodak compete in our market. Many of our competitors have the
resources to offer their products at greatly discounted prices, or to offer
functionality competitive with our products at no charge in
31
<PAGE>
connection with the sale of related or complementary products or systems.
Customer decisions to purchase our products are often influenced by the
perceived stability and market recognition of the vendor. We may be at a
disadvantage because many of our competitors are better known and perceived as
less risky than we are.
Our current and future internet-based products and services will compete in
a market that is rapidly growing and not yet fully defined. A number of
companies have recently entered the field of medically related internet
services including Healtheon, CareInsite, and Medscape. We expect this trend to
continue. We also expect our business plan and the business plans of these
companies to overlap in time, creating both increased competition and
opportunities for strategic relationships.
Government Regulation
The manufacturing and marketing of our products are subject to FDA medical
device regulations in the United States and to similar regulations in other
countries by corresponding regulatory authorities. The FDA regulations govern
the testing, manufacture, labeling, record keeping, approval, advertising and
promotion of our products and services. The process of obtaining and
maintaining required regulatory clearances and approvals is lengthy, expensive
and uncertain. Our ability to market new products and improvements to existing
products will depend on obtaining new clearances and approvals in the future.
The FDA requires that a manufacturer seeking to market a new medical device
or an existing medical device for a new indication obtain either a premarket
notification clearance under section 510(k) of the Federal Food, Drug and
Cosmetic Act or the approval of a premarket approval application under this Act
prior to the marketing of the new device or commercializing the new indication.
Material changes to existing medical devices are also subject to FDA review and
clearance or approval prior to commercialization in the United States. Although
it is believed to be a shorter, less costly regulatory path than the process to
obtain approval of a premarket approval application, the process of obtaining a
510(k) clearance generally requires supporting data, which can be extensive and
can extend the regulatory review process for a considerable length of time. All
of our commercially available products have received 510(k) clearance from the
FDA.
We are also required to register as a medical device manufacturer with the
FDA and as a medical device distributor with the Texas Department of Health.
The FDA requires us to maintain detailed manufacturing records, device history
records and complaint logs. We are subject to inspection and audit by the FDA
for compliance with Good Manufacturing Practices (as defined by FDA rules) and
other applicable regulations. Our most recent FDA inspection and audit was
completed in the second quarter of 1999 and did not identify material problems.
Even after market introduction, the FDA continues to regulate the design,
manufacture and labeling of our medical products. Failure to comply with
applicable regulatory requirements could result in, among other things, warning
letters, seizures of products, total or partial suspension of production,
refusal of the FDA to grant clearances or approvals, withdrawal of existing
clearances or approvals, or criminal prosecution.
Sales of our products and services outside of the United States are subject
to foreign regulatory requirements that vary widely from country to country. In
Europe, we will be required to obtain the certificates necessary to enable the
CE Mark, an international symbol of adherence to quality assurance standards
and compliance with applicable European Union Medical Device Directives, to be
affixed to our products for sales in member countries.
Employees
As of August 1, 1999, we employed 111 persons. None of our employees are
represented by unions.
32
<PAGE>
Properties
We maintain our headquarters in leased space in Lexington, Massachusetts. At
this facility, we also assemble and test components and subassemblies acquired
from vendors, and integrate our application software programs. We also maintain
a sales and service facility in leased space in San Antonio, Texas. We can
provide all of our support services from either our Lexington or San Antonio
location. We believe that our properties are adequate and suitable for their
intended purposes.
Litigation
We are party to suits and regulatory proceedings arising in the ordinary
course of our business, none of which we believe are material.
33
<PAGE>
MANAGEMENT
The following table sets forth information concerning our executive officers
and directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Chief Executive Officer, President and
Scott S. Sheldon.......... 38 Director
Christine L. Chung........ Vice President -- Business Operations,
32 Corporate Secretary
Jerry Froelich, M.D....... 47 Chief Medical Officer
Gary A. Lortie............ Chief Financial Officer, Vice President --
40 Finance and Administration
David J. Mahoney.......... 36 Vice President -- Sales
Howard Pinsky............. 45 Chief Technology Officer
John Strauss.............. 44 Vice President -- Marketing
James J. Bochnowski....... 56 Director, Chairman of the Board
Thomas B. Neff............ 45 Director
Thomas O. Pyle............ 59 Director
Michael Schmertzler....... 47 Director
Donald E. Strange......... 55 Director
</TABLE>
Scott S. Sheldon has served as our President, Chief Executive Officer, and a
Director since he co-founded eMed in March 1992. From 1987 through 1992, he
held various positions in the Mergers and Acquisitions and Corporate Finance
Departments at Morgan Stanley.
Christine L. Chung has served in various senior capacities since joining
eMed in September 1992. She currently serves as Vice President of Business
Operations and Corporate Secretary. Prior to joining eMed, she served as a
strategy consultant for Monitor Company.
Jerry Froelich, M.D. has served as our Chief Medical Officer since August
1999. From 1990 until joining eMed, Dr. Froelich had been a partner in
Radiology Imaging Associates in Denver, Colorado. Radiology Imaging Associates
is a group of 42 sub-specialty radiologists which provides radiology service to
10 hospitals and 15 clinics. He was Medical Director of Radiology at the
Columbia Swedish Medical Center in Englewood, Colorado, and a Clinical
Associate Professor of Medicine at the University of Colorado.
Gary A. Lortie has served as our Chief Financial Officer and Vice President
of Finance and Administration since May 1998. From 1997 until joining eMed, Mr.
Lortie served as the Director of Corporate Development for the Biomedical
Division of Thermo Electron Corporation. From 1996 to 1997, Mr. Lortie served
as President for the Moisture Systems Division of Thermo Electron. From 1993 to
1995, he served as Director of Finance and Administration for Thermedics
Detection, a subsidiary of Thermo Electron. Mr. Lortie is a certified public
accountant.
David J. Mahoney has served as our Vice President of Sales since February
1998. Since 1988, Mr. Mahoney has held various sales and sales management
positions in the electronic medical imaging management industry. From 1997
until joining eMed, Mr. Mahoney was America's Sales Manager for General
Electric's Medical Systems Integrated Imaging Solutions Division. From 1996 to
1997, Mr. Mahoney held the position of Vice President of Sales for Lockheed
Martin's Medical Systems business until it was acquired by General Electric.
From 1995 to 1996, Mr. Mahoney held the position of National Sales Manager with
Loral's Medical Imaging Systems business until it was acquired by Lockheed
Martin. From 1988 until 1995, Mr. Mahoney held various positions with Advanced
Video Products/E-Systems, a predecessor company to eMed.
34
<PAGE>
Howard Pinsky has served as our Chief Technology Officer since January 1993.
From 1992 until joining eMed, Mr. Pinsky was Vice President of Customer Service
for RSTAR, Inc., an electronic medical imaging management technology spin-off
of the Massachusetts General Hospital Department of Radiology. From 1987 to
1992, Mr. Pinsky was Senior Systems Consultant for Digital Equipment
Corporation's health care group.
John Strauss has served as our Vice President of Marketing since May 1999.
From 1990 until joining eMed, Mr. Strauss was Director of Marketing, Imaging
and Information Networks for Fuji Medical Systems U.S.A., Inc. and was
responsible for the electronic medical imaging and computed radiography product
lines.
James J. Bochnowski has served as one of our directors since July 1996 and
currently serves as our Chairman. Mr. Bochnowski has been a General Partner
with Delphi Ventures, a private venture capital firm providing financing and
supportive business expertise to young biomedical and health care companies,
since he co-founded Delphi Ventures in 1988.
Thomas B. Neff has served as one of our directors since November 1995. Mr.
Neff has been Chairman and Chief Executive Officer of FibroGen, Inc. which
produces recombinant collagen and gelatin and develops anti-fibrosis therapies,
since 1993. Mr. Neff has also been General Partner of Three Arch Bay Health
Sciences Fund, a private investment fund focused on emerging biomedical
companies, since 1993. Mr. Neff has also been General Partner of Pharmaceutical
Partners I and Pharmaceutical II Partners since 1993 and 1994.
Thomas O. Pyle has served as one of our directors since June 1993. He has
been the Chairman of Interstudy, a leading health policy organization, and
Chairman of its affiliate, The Jackson Hole Group. From 1972 to 1991, Mr. Pyle
held various senior management positions at Harvard Community Health Plan,
becoming its President, Chief Executive Officer and a member of its Board of
Directors in 1978. From October 1993 to September 1994, Mr. Pyle served as
Chief Executive Officer of MetLife HealthCare Management Corp., Inc. He serves
as a director of Millipore Corporation, Lincare Holdings Inc. and various other
private companies.
Michael Schmertzler has served as a director since he co-founded eMed in
March 1992. Since 1997, Mr. Schmertzler has served as a Managing Director of
Credit Suisse First Boston and co-head of the United States and Canadian
investment activities of the Private Equity Division of the Credit Suisse
Group. From 1992 to 1994, Mr. Schmertzler was a Managing Director of MS
Partners Inc., a general partner of MSX Public Life Sciences Fund. Prior to
that, he was a Managing Director of Morgan Stanley and Lehman Brothers Kuhn
Loeb.
Donald E. Strange has served as one of our directors since June 1993. From
1996 until 1998, Mr. Strange served as Chief Executive Officer, President and
Chairman of the Board of First New England Dental Centers, Inc. Prior thereto,
Mr. Strange served as Chairman and Chief Executive Officer of TRANSCare, a
leading provider of patient transportation services. Since 1974, Mr. Strange
has served in various senior management capacities at Hospital Corporation of
America, Avon's Health Care Group, and EPIC Health Care Group. He currently
serves on the Board of Directors of Bon Secours Health System Inc. First New
England Dental Centers, Inc. filed for bankruptcy in February 1998.
Board of Directors
Upon consummation of this offering, our board of directors will be divided
into three classes, with each class of directors to serve three-year staggered
terms (after their initial terms), subject to election and qualification of
their successors or their earlier death, resignation or removal. Messrs.
Sheldon and Schmertzler will serve for an initial one-year term expiring at our
annual meeting in 2000. Messrs. Bochnowski and Pyle will serve for an initial
two-year term expiring at our annual meeting in 2001. Messrs. Neff and Strange
will serve for an initial three-year term expiring in 2002. Our executive
officers are elected by the board of directors and serve at the discretion of
the Board.
35
<PAGE>
Committees
The board of directors has established a compensation committee and an audit
committee. The compensation committee, consisting of Messrs. Bochnowski, Neff
and Strange recommends salaries and bonuses and other compensation matters for
our officers and makes recommendations regarding our stock plans. None of these
members has served as an officer of eMed. The audit committee, consisting of
Messrs. Pyle and Schmertzler, has the authority to recommend the appointment of
our independent auditors and to review the results and scope of audits,
internal accounting controls and tax and other accounting-related matters.
Director Compensation
Non-employee directors are reimbursed for their expenses of attending
meetings, but currently do not receive any cash compensation for their
services. We expect, however, that in the future, non-employee directors will
be paid an annual cash retainer in addition to being reimbursed for all
reasonable expenses incurred in attending meetings. On February 4, 1999, we
granted Messrs. Bochnowski, Neff, Pyle, Schmertzler and Strange options to
purchase 15,000 shares of our common stock at a purchase price of $0.50 per
share. On June 30, 1999, we granted Messrs. Bochnowski, Neff, Pyle, Schmertzler
and Strange options to purchase 15,000 shares of our common stock at a purchase
price of $0.85 per share.
Executive Compensation
The following table shows the cash compensation paid or accrued for the year
ended December 31, 1998, to our Chief Executive Officer and to each of our
three highest paid executive officers other than the Chief Executive Officer
who received more than $100,000 in salary and bonus during the year ended
December 31, 1998 (the "Named Executive Officers"). No other executive officer
received more than $100,000 in salary and bonus during this period.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ----------------
Shares of Common
Stock Underlying All Other
Name and Principal Position Salary($) Options (#) Compensation ($)
- --------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Scott S. Sheldon................ $160,500 537,894 $ 1,538(3)
Chief Executive Officer and
President
Howard Pinsky................... $136,800 458,370 $ 8,656(4)
Chief Technology Officer
David J. Mahoney(1)............. $107,100 60,000 $12,880(5)
Vice-President -- Sales
Howard B. Kaufman(2)............ $106,700 30,000 $ 1,143(3)
Vice-President -- Operations
</TABLE>
- --------
(1) Mr. Mahoney joined eMed in February 1999.
(2) Mr. Kaufman resigned his position as an officer of eMed in March 1999.
(3) Represents premiums paid on term life insurance policies.
(4) Represents an annual car allowance of $7,200 and premiums of $1,456 paid on
a term life insurance policy.
(5) Represents commissions of $11,747 and premiums of $1,133 paid on a term
life insurance policy.
36
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth grants of stock options to the Named
Executive Officers for the year ended December 31, 1998. We have not granted
any stock appreciation rights during 1998. The potential realizable value is
calculated based on the term of the option at its date of grant. It is
calculated assuming that the fair market value of our common stock on the date
of grant appreciates at the indicated annual rates compounded annually for the
entire term of the option and that the option is exercised and sold on the last
day of its term for the appreciated stock price. These numbers are calculated
based on the requirements of the Securities and Exchange Commission and do not
reflect our estimate of future stock price growth. The percentage of total
options granted to employees in the last fiscal year is based on options to
purchase an aggregate of shares of common stock granted to employees for the
year ended December 31, 1998. All options were granted at fair market value on
the date of grant as determined by the board of directors, unless otherwise
indicated.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------- ------------------
Shares of
Common Percent of
Stock Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year Share Date 5% 10%
- ---- ---------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Scott S. Sheldon........ 400,000(1) 30% $0.50 3/31/08 124,000 320,000
Howard Pinsky........... 300,000(1) 22% $0.50 3/31/08 93,000 240,000
David J. Mahoney........ 60,000(2) 5% $0.50 1/1/06 14,400 34,200
Howard B. Kaufman....... 10,000(3) 1% $0.50 3/31/08 3,100 8,000
</TABLE>
- --------
(1) Options vest 6.25% each fiscal quarter following the date of grant.
(2) Options vest 100% on the fourth anniversary of the date of grant, provided
that, if Mr. Mahoney is terminated without cause, a portion of the options
will vest equal to 6.25% multiplied by the number of fiscal quarters since
the date of grant to termination.
(3) 3,125 of the options vested and were exercised by Mr. Kaufman. The
remaining 6,875 options were canceled on March 31, 1999.
Fiscal Year-End Option Values
The table below sets forth information for the Named Executive Officers with
respect to options exercised during the fiscal year ended December 31, 1998 and
options held as of December 31, 1998. There was no public trading market for
our common stock as of December 31, 1998. Accordingly, the values in the table
have been calculated on the basis of an initial public offering price of $ per
share less the applicable exercise price.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Underlying Value of Unexercised
Common Unexercised Options In-the-Money Options at
Stock at Fiscal Year End (#) Fiscal Year End
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott S. Sheldon........ 0 -- 203,050 334,844
Howard Pinsky........... 0 -- 179,932 278,438
David J. Mahoney........ 0 -- 0 60,000
Howard B. Kaufman....... 0 -- 2,500 7,500
</TABLE>
37
<PAGE>
Employment Contracts
Scott S. Sheldon. We are a party to an employment agreement with Scott S.
Sheldon. The term of the agreement is until December 31, 2000, although we may,
by mutual agreement, extend the agreement for successive one-year terms.
Pursuant to the agreement, we are obligated to pay Mr. Sheldon an annual salary
of at least $175,000. Mr. Sheldon is eligible to earn incentive compensation in
an amount and on terms mutually agreed upon. In the event that we elect not to
renew Mr. Sheldon's agreement or he is terminated without cause or on some
other events, he would receive a severance payment of $95,000. However, if that
termination occurs within 12 months after a change in control, he would receive
12 monthly installments of his base salary. If Mr. Sheldon's employment
terminates due to his death, his beneficiaries would receive six monthly
installments of his base salary after his death. If Mr. Sheldon's employment is
terminated for any of the foregoing reasons, or if his employment is terminated
due to disability, then he or his legal representative would maintain the right
to exercise any stock option which is then exercisable, other than an incentive
stock option, for the remainder of its term.
Howard Pinsky. We are a party to an employment agreement with Howard Pinsky.
The term of the agreement is until December 31, 2000, although we may, by
mutual agreement, extend the agreement for successive one-year terms. Pursuant
to the agreement, we are obligated to pay Mr. Pinsky an annual salary of at
least $160,000. Mr. Pinsky is eligible to earn incentive compensation in an
amount and on terms mutually agreed upon. In the event that we elect not to
renew Mr. Pinsky's agreement or he is terminated without cause or on some other
events, he would receive a severance payment of $86,000. However, if that
termination occurs within 12 months after a change in control, he would receive
12 monthly installments of his base salary. If Mr. Pinsky's employment
terminates due to his death, his beneficiaries would receive six monthly
installments of his base salary after his death. If Mr. Pinsky's employment is
terminated for any of the foregoing reasons, or if his employment is terminated
due to disability, then he or his legal representative would maintain the right
to exercise any stock option which is then exercisable, other than an incentive
stock option, for the remainder of its term.
1994 Stock Plan
Our 1994 Stock Plan provides for the grant of incentive stock options and
non-qualified stock options, stock awards and stock purchase rights for the
purchase of shares of our common stock. The number of shares issuable pursuant
to the 1994 Stock Plan is 4,950,000. Our board of directors is responsible for
the administration of the plan and determines the term of each option, the
option exercise price, the number of shares for which each option may be
granted and the rate at which each option is exercisable. The board may grant
incentive stock options only to employees, at an exercise price per share of
not less than the fair market value per share on the date of grant and not less
than 110% of fair market value in the case of holders of more than 10% of our
voting stock. Non-qualified stock options, awards and stock purchase rights may
be granted to any officer, employee, consultant or director. Grants under the
1994 Stock Plan cannot be made after August 10, 2004. As of August 17, 1999,
657,991 options are available for grant under the 1994 Stock Plan.
38
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of August 17, 1999 and as adjusted to reflect
the sale of the shares offered by us in this offering for (1) each person who
is known by us to own beneficially more than five percent (5%) of our
outstanding shares of common stock, (2) each director and Named Executive
Officer, and (3) all directors and executive officers as a group. As of August
17, 1999, there were 20,095,281 shares of outstanding common stock. The table
assumes the conversion of all outstanding preferred stock into common stock.
Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock, except to the extent authority is shared by spouses under applicable
law. Unless otherwise indicated, each entity or person listed below maintains a
mailing address of c/o eMed Technologies, 25 Hartwell Avenue, Lexington, MA
02421.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Beneficially Owned
Shares ------------------
Beneficially Prior to After the
Name of Beneficial Owner Owned Offering Offering
- ------------------------ ------------ -------- ---------
<S> <C> <C> <C>
Scott S. Sheldon(1)........................... 621,644 3.0% %
Howard Pinsky(2).............................. 269,620 1.3% %
Howard B. Kaufman............................. 0 * *
David J. Mahoney.............................. 0 * *
James J. Bochnowski........................... 2,247,348 11.0% %
Delphi Ventures III, L.P. and affiliated
entities(3)
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Thomas B. Neff................................ 2,232,607 11.0% %
Three Arch Bay Health Sciences Fund and
affiliated entities(4)
c/o FibroGen, Inc.
225 Gateway Blvd.
South San Francisco, CA 94080
Thomas O. Pyle(5)............................. 75,774 * *
Michael Schmertzler(6)........................ 767,333 3.8% %
Donald E. Strange(7).......................... 80,536 * *
Bedrock Capital Partners I, L.P. and affili- 2,067,586 10.3% %
ated entities(8).............................
One Maritime Plaza, Suite 500
San Francisco, CA 94111
Bessemer Venture Partners IV L.P. and related 1,681,450 8.3% %
entities(9)..................................
83 Walnut Street
Wellesley Hills, MA 02481
Pacific Venture Group, L.P. and affiliated en- 3,203,810 15.9% %
tities(10)...................................
15635 Alton Parkway, Suite 230
Irvine, CA 92618
Seaflower BioVenture Fund II, LLC and affili- 1,790,795 8.7% %
ated entities(11)............................
1000 Winter Street, Suite 1000
Waltham, MA 02451
All directors and executive officers as a
group (12 persons)(12)....................... 6,459,368 30.0% %
</TABLE>
- --------
* Less than one percent
39
<PAGE>
The number of shares beneficially owned by each stockholder is determined
in accordance with the rules of the Securities and Exchange Commission and
are not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes those shares of
common stock that the stockholder has sole or shared voting or investment
power and any shares of common stock that the stockholder has right to
acquire within 60 days after August 17, 1999 through the exercise of any
option, warrant or other right. The percentage ownership of the
outstanding common stock, however, is based on the assumption, expressly
required by the rules of the Securities and Exchange Commission, that only
the person or entity whose ownership is being reported has converted
options or warrants into shares of common stock.
(1) Includes 349,144 shares issuable to Mr. Sheldon upon the exercise of
options exercisable within 60 days of August 17, 1999, 200,000 shares
held by Scott Sheldon and Kimberly Howard-Sheldon as joint tenants with
right of survivorship and 72,500 shares held by the Sheldon Children's
1999 Irrevocable Trust.
(2) Includes 269,620 shares issuable to Mr. Pinsky upon the exercise of
options exercisable within 60 days of August 17, 1999.
(3) Represents:
. 58,750 shares issuable to Mr. Bochnowski upon the exercise of options
exercisable within 60 days of August 17, 1999.
. 1,961,776 shares held by Delphi Ventures III, L.P. and 188,128 shares
issuable to Delphi Ventures III, L.P. upon the exercise of warrants
exercisable within 60 days of August 17, 1999.
. 35,307 shares held by Delphi Bioinvestments III, L.P. and 3,387 shares
issuable to Delphi Bioinvestments III, L.P. upon the exercise of
warrants exercisable within 60 days of August 17, 1999.
Mr. Bochnowski, a director of eMed and a managing member of Delphi
Management Partners III, L.L.C., which is the general partner of the
partnerships listed above, shares voting and dispositive power with
respect to the shares not held by him individually, and disclaims
beneficial ownership of such shares.
(4) Represents:
. 98,524 shares held by Mr. Neff.
. 61,250 shares issuable to Mr. Neff upon the exercise of options
exercisable within 60 days of August 17, 1999.
. 1,740,925 shares held by Three Arch Bay Health Sciences Fund.
. 204,018 shares held by Thomas B. Neff Family Partnership and 127,890
shares issuable to Thomas B. Neff Family Partnership upon the exercise
of warrants exercisable within 60 days of August 17, 1999.
Mr. Neff is a director of eMed and general partner of Three Arch Bay
Health Sciences Fund and Thomas B. Neff Family Partnership.
(5) Includes 75,774 shares issuable to Mr. Pyle upon the exercise of options
exercisable within 60 days of August 17, 1999.
(6) Includes 129,631 shares issuable to Mr. Schmertzler upon the exercise of
options and warrants exercisable within 60 days of August 17, 1999.
40
<PAGE>
(7) Includes 75,774 shares issuable to Mr. Strange upon the exercise of
options exercisable within 60 days of August 17, 1999.
(8) Represents:
. 1,802,928 shares held by Bedrock Capital Partners I, L.P. and 45,083
shares issuable to Bedrock Capital Partners I, L.P. upon the exercise of
warrants exercisable within 60 days of August 17, 1999.
. 181,818 shares held by Bedrock Capital Partners Side-By-Side, L.P.
. 6,979 shares held by Credit Suisse First Boston Bedrock Fund, L.P. and
1,889 shares issuable to Credit Suisse First Boston Bedrock Fund, L.P.
upon the exercise of warrants exercisable within 60 days of August 17,
1999.
. 5,028 shares held by VBW Employee Bedrock Fund, L.P. and 1,361 shares
issuable to VBW Employee Bedrock Fund, L.P. upon the exercise of
warrants exercisable within 60 days of August 17, 1999.
. 22,500 shares issuable to a person related to the above entities upon
the exercise of options exercisable within 60 days of August 17, 1999.
(9) Represents:
. 573,911 shares held by Bessemer Venture Partners IV L.P. and 17,554
shares issuable to Bessemer Venture Partners IV L.P. upon the exercise
of warrants exercisable within 60 days of August 17, 1999.
. 572,850 shares held by Bessec Ventures IV L.P. and 17,267 shares
issuable to Bessec Ventures IV L.P. upon the exercise of warrants
exercisable within 60 days of August 17, 1999.
. 163,312 shares held by Bessemer Venture Investors L.P. and 4,833 shares
issuable to Bessemer Venture Investors L.P. upon the exercise of
warrants exercisable within 60 days of August 17, 1999.
. 68,511 shares held by BVP IV Special Situations L.P. and 2,028 shares
issuable to BVP IV Special Situations L.P. upon the exercise of warrants
exercisable within 60 days of August 17, 1999.
. 254,534 shares held by, and 6,650 shares issuable to upon the exercise
of warrants exercisable within 60 days of August 17, 1999, various other
individuals or entities that are either managers or former members of
Deer IV & Co. LLC or employees of Deer II & Co. LLC.
Deer IV & Co. is the general partner of each of the partnerships listed
above. Deer II & Co. is related to Deer IV & Co.
(10) Represents:
. 2,946,289 shares held by Pacific Venture Group, L.P. and 92,336 shares
issuable to Pacific Venture Group, L.P. upon the exercise of warrants
exercisable within 60 days of August 17, 1999.
. 138,127 shares held by PVG Associates, L.P. and 4,331 shares issuable to
PVG Associates, L.P. upon the exercise of warrants exercisable within 60
days of August 17, 1999.
. 22,727 shares held by trusts of which Managing Directors of PVG Equity
Partners, L.L.C. are beneficiaries. PVG Equity Partners, L.L.C. is the
general partner of the two partnerships listed above.
41
<PAGE>
(11) Represents:
. 696,429 shares held by Seaflower BioVenture Fund II, LLC and 188,500
shares issuable to Seaflower BioVenture Fund II, LLC upon the exercise
of warrants exercisable within 60 days of August 17, 1999.
. 505,578 shares held by Seaflower Health and Technology Fund, LLC and
65,242 shares issuable to Seaflower Health and Technology Fund, LLC upon
the exercise of warrants exercisable within 60 days of August 17, 1999.
. 261,042 shares held by, and 74,004 shares issuable to the general
manager of the two limited liability companies listed above and a
limited liability company established for the benefit of his family upon
the exercise of warrants exercisable within 60 days of August 17, 1999.
(12) Represents:
. Shares described in notes 1, 2, 3, 4, 5, 6 and 7 above.
. 52,705 shares held by, and 111,801 shares issuable to upon exercise of
options exercisable within 60 days of August 17, 1999, officers of eMed
not listed in the table above.
42
<PAGE>
CERTAIN TRANSACTIONS
Series G Preferred Stock
From March through June 1996, we sold an aggregate of 771 shares of Series G
preferred stock for net proceeds of $3,848,000 including $217,000 in face
amounts of convertible debt and redeemable preferred stock that were exchanged
for shares of Series G preferred stock. On the closing of this offering, each
share of Series G preferred stock will convert into 3,333.33 shares of common
stock. The early investors in the Series G financing also received warrants to
purchase an aggregate of 155,482 shares of common stock at an exercise price of
$0.50 per share. Three Arch Bay and related persons purchased an aggregate of
540 shares of Series G preferred stock, together with warrants to purchase
120,000 shares of common stock. Michael Schmertzler received 23.3 shares of
Series G preferred stock and warrants to purchase 4,666 shares of common stock
in exchange for $117,000 in face amount of our Series A redeemable preferred
stock then held by Mr. Schmertzler.
1997 Convertible Note Transaction, Series J Preferred Stock
In June 1997, we sold $1.5 million in principal amount of convertible
subordinated notes for aggregate proceeds of $1.5 million. These notes were
automatically convertible, upon our sale of new equity securities for gross
proceeds of at least $1.5 million, into securities having the same price and
terms as the new equity securities. Purchasers of the notes also received
warrants to purchase an additional amount of the new equity securities having
an aggregate purchase price of 30% of the amount of the purchaser's note, in
exchange for their commitments to purchase the notes, at the same price that
such new equity securities were issued to other investors. The notes had a
maturity date of October 31, 1997 and bore interest at the rate of 6.0% per
annum. Accrued interest converted on the same terms as the principal amount of
the notes. In September 1997, these notes were automatically converted into
1,384,460 shares of our Series J preferred stock at a conversion price of $1.10
per share of Series J preferred stock. The warrants issued with the notes
became warrants to purchase 409,091 shares of Series J preferred stock at an
exercise price of $1.10 per share. On the closing of this offering, each share
of Series J preferred stock will convert into one share of common stock and the
Series J warrants will become rights to purchase common stock.
Three Arch Bay and certain related persons committed to purchase $750,000 in
principal amount of the convertible subordinated notes and received warrants to
purchase 204,545 shares of Series J preferred stock at an exercise price of
$1.10 per share. These convertible notes were converted into 691,240 shares of
Series J preferred stock. Delphi Ventures and Delphi Bioinvestments purchased
an aggregate of $525,000 in principal amount of convertible subordinated notes,
which were converted into 477,273 shares of Series J preferred stock, and
received warrants exercisable for 143,182 shares of Series J preferred stock at
an exercise price of $1.10 per share.
Series K Preferred Stock
In July 1998, various investors entered into commitments with us to purchase
shares of our Series K preferred stock for an aggregate price of $2.5 million
if we notified them of our election to sell the shares. These commitments
provided that the Series K preferred stock would be issued at a price per share
of either $1.40 or $1.50 per share depending on when we delivered notice of our
election to sell. On the closing of this offering, each share of Series K
preferred stock will convert into one share of our common stock. The investors
who made these commitments were eligible to receive warrants at the time of
their commitments to purchase in the aggregate 483,333 shares of our common
stock at an exercise price of $0.01 per share as consideration for their
commitments. The exercisability of the warrants was made subject to
satisfaction of the Series K preferred stock purchase commitment if we elected
to sell the shares. Three Arch Bay Health Sciences Fund, which holds more than
5% of our common stock and for which Thomas Neff, our director, has management
authority, committed to purchase shares of Series K preferred stock for an
aggregate of $500,000 and was eligible to receive as consideration warrants to
purchase 96,666 shares of common stock.
43
<PAGE>
In January 1999 we elected to draw upon the initial investors' commitments
to purchase Series K preferred stock. We sold additional shares of Series K
preferred stock together with warrants to purchase additional shares of our
common stock at an exercise price of $0.01 per share to other investors. In
January we sold, in the aggregate, 2,500,000 shares of Series K preferred stock
together with warrants to purchase 676,667 shares of common stock. Delphi
Ventures III, L.P. and Delphi Bioinvestments III, L.P., which collectively hold
more than 5% of our common stock and for each of which James Bochnowski, our
director, has management authority, purchased 178,571 shares of Series K
preferred stock and warrants to purchase 48,333 shares of common stock for
aggregate consideration of $250,000. Bedrock Capital Partners I, L.P., VBW
Employee Bedrock Fund, L.P. and Credit Suisse First Boston Bedrock Fund L.P.,
which collectively own more than 5% of our common stock and for each of which
Jason Rosenbluth, who was at the time a director, has management authority,
purchased 178,571 shares of Series K preferred stock and warrants to purchase
48,333 shares of common stock for aggregate consideration of $250,000. Pacific
Venture Group, L.P. and PVG Associates, L.P., which collectively hold more than
5% of our common stock, purchased 357,142 shares of Series K preferred stock
and warrants to purchase 96,666 shares of common stock for aggregate
consideration of $500,000. Bessemer Venture Partners IV, L.P., Bessec Ventures
IV, L.P., and certain associated investors, who collectively hold more than 5%
of our common stock, purchased 178,571 shares of Series K preferred stock and
warrants to purchase 48,333 shares of common stock for aggregate consideration
of $250,000. We and Three Arch Bay amended Three Arch Bay's commitment to
purchase Series K preferred stock to release Three Arch Bay from its obligation
to purchase Series K preferred stock and to void the warrants previously issued
to it.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our amended and restated certificate of incorporation, which will become
effective upon the closing of this offering, authorizes the issuance of up to
35,000,000 shares of common stock, par value $0.01 per share and 15,000,000
shares of preferred stock, par value $0.01 per share, the rights and
preferences of which may be established from time to time by our board of
directors. As of August 17, 1999, 20,095,281 shares of common stock were
outstanding, held of record by 161 stockholders.
Common Stock
Under our amended and restated certificate of incorporation, holders of our
common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders, including the election of
directors. They do not have cumulative voting rights. Subject to preferences
that may be applicable to any outstanding series of preferred stock, holders of
our common stock are entitled to share ratably in any dividends that may be
declared by the board of directors out of legally available funds. In case of a
liquidation, dissolution or winding up of eMed, the holders of common stock
will be entitled to share ratably in the net assets legally available for
distribution to shareholders, in each case after payment of all of our
liabilities and subject to preferences that may be applicable to any series of
preferred stock then outstanding. The holders of common stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. The
rights, preferences and privileges of holders of common stock are subject to
the rights of the holders of shares of any series of preferred stock that we
may designate and issue in the future. After the closing of this offering,
there will be no shares of preferred stock outstanding.
Preferred Stock
Under our amended and restated certificate of incorporation, our board of
directors has the authority, without further action by the stockholders, to
issue from time to time, shares of preferred stock in one or more series. The
board of directors may fix the number of shares, designations, preferences,
powers and other special rights of the preferred stock. The preferences,
powers, rights and restrictions of different series of preferred stock may
differ. The issuance of preferred stock could decrease the amount of earnings
and assets available for distribution to holders of common stock or affect
adversely the rights and powers, including voting rights, of the holders of
common stock. The issuance may also have the effect of discouraging, delaying
or preventing a change in control of eMed, regardless of whether the
transaction may be beneficial to stockholders. We have no current plans to
issue any additional shares of preferred stock.
Liability of Directors
Our amended and restated certificate of incorporation provides that our
directors shall not be liable to eMed or its stockholders for monetary damages
for any breach of fiduciary duty, except to the extent otherwise required by
the Delaware General Corporation Law. This provision will not prevent our
stockholders from obtaining injunctive or other relief against our directors.
This provision also does not shield our directors from liability under federal
or state securities laws.
Antitakeover Effects of Delaware Law and Our Amended and Restated Certificate
of Incorporation and By-laws
Certain provisions of the Delaware General Corporation Law and our amended
and restated certificate of incorporation and amended and restated by-laws may
be deemed to have an antitakeover effect and may discourage, delay or prevent a
tender offer or takeover attempt that a stockholder might consider to be in its
45
<PAGE>
best interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders. These provisions are
summarized in the following paragraphs.
Delaware Anti-Takeover Laws. We will be subject to Section 203 of the
Delaware General Corporation Law. This statute will prohibit us from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the time of the transaction in which one person became an
interested stockholder, unless:
. the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder was approved by our board
of directors before the stockholder became an interested stockholder,
. upon consummation of the transaction that made the stockholder an
interested stockholder, the interested stockholder owns at least 85% of
the voting stock of the corporation outstanding at the time the
transaction commenced, excluding shares owned by directors who are also
officers or held in employee benefit plans in which the employees do not
have a confidential right to tender stock held by the plan in a tender
or exchange offer, or
. the business combination is approved by the board of directors of the
corporation and authorized at a meeting by two-thirds of the voting
stock, other than voting stock owned by the interested stockholder.
A "business combination" generally includes mergers or consolidations
between us and an interested stockholder, transactions with an interested
stockholder involving our assets or stock or assets or stock of our majority-
owned subsidiaries, if any, and transactions which increase an interested
stockholder's percentage ownership of stock.
An "interested stockholder" generally includes those stockholders who become
beneficial owners of 15% or more of our voting stock, together with affiliates
or associates of that stockholder.
Cumulative Voting. Our amended and restated certificate of incorporation
does not provide stockholders the right to cumulate votes in the election of
directors.
Stockholder Action; Special Meeting of Stockholders. Our amended and
restated certificate of incorporation eliminates the ability of stockholders to
act by written consent. Our by-laws provide that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
chief executive officer or a majority of the board of directors or at the
direction of stockholders holding in the aggregate at least 20% of our common
stock. These provisions could have the effect of delaying for 90 days or until
the next annual meeting of stockholders those actions which are favored by the
holders of a majority of our outstanding voting securities. These provisions
may also discourage another person from making a tender offer for our common
stock, because that person, even if it acquired a majority of our outstanding
voting securities, would be able to take action as a stockholder, such as
electing new directors or approving a merger, only at a duly called meeting of
stockholders and not by written consent.
Advance Notice Requirements for Stockholder Proposals and Directors
Nominations. Our amended and restated by-laws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be received at our principal executive offices not less than (1) 60 days
in advance of the meeting if it is held within 30 days before the anniversary
of the previous year's annual meeting or (2) 90 days in advance of the meeting
if it is held on or after the anniversary of the previous year's annual
meeting. In any other event, in order to be timely, notice from the stockholder
must be received no later than the fifteenth day following the date on which
notice of the annual meeting was mailed to stockholders or made public,
whichever occurred earlier. Our amended and restated by-laws also specify
certain requirements as to the form and content of a stockholder's notice.
46
<PAGE>
These provisions may preclude stockholders from bringing matters before an
annual meeting of stockholders or from making nominations for directors at an
annual meeting of stockholders. However, in the case of any meeting called at
the direction of stockholders, the stockholders requesting the meeting be
called must give us at least 90 days notice of any matter to be presented at
that meeting.
Authorized but Unissued Shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued shares of common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.
Amendments; Supermajority Vote Requirements. The Delaware General
Corporation Law provides generally that the affirmative vote of a majority of
the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
Our amended and restated certificate of incorporation imposes supermajority
vote requirements in connection with the amendment of provisions of our amended
and restated certificate of incorporation relating to the classification of our
board of directors. Our by-laws impose supermajority vote requirements in
connection with the amendment of various provisions of our by-laws related to
our corporate structure.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is expected to be
American Stock Transfer & Trust Company.
Listing
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol "EMDT."
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial amount of our common stock in the public market
after this offering could adversely affect the prevailing market price of our
common stock. Furthermore, because few shares will be available for sale
shortly after this offering due to the contractual and legal restrictions on
resale described below, the sale of a substantial amount of common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price of our common stock and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of the underwriters'
overallotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless the shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. Any shares purchased by an affiliate may not be resold except
pursuant to an effective registration statement or an applicable exemption from
registration, including an exemption under Rule 144 of the Securities Act. The
remaining shares of common stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act. These
restricted securities may be sold in the public market only if they are
registered or if they qualify for an exemption from registration under Rule 144
or Rule 701 under the Securities Act. These rules are summarized below.
Upon the expiration of the lock-up agreements described under "Underwriting"
and subject to the provisions of Rule 144 and Rule 701, restricted shares
totaling will be available for sale in the public market 180 days after the
date of this prospectus. The sale of these restricted securities is subject, in
the case of shares held by affiliates, to the volume restrictions contained in
those rules.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year from the later of the date those shares of
common stock were acquired from us or from an affiliate of ours would be
entitled to sell within any three month period a number of shares that does not
exceed the greater of:
(1) one percent of the number of shares of common stock then
outstanding, which will equal approximately shares immediately after this
offering; or
(2) the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common stock.
The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us. Affiliates may sell shares not
constituting restricted securities in accordance with the foregoing volume
limitations and other restrictions, but without regard to the one-year holding
period.
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years from the later of the date
such shares of common stock were acquired from us or from an affiliate of ours,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted pursuant to the lock-up agreements or otherwise,
those shares may be sold immediately upon the completion of this offering.
48
<PAGE>
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is
eligible to resell those shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144.
No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of our common stock prevailing from time to time. We are unable to
estimate the number of our shares that may be sold in the public market
pursuant to Rule 144 or Rule 701 because this will depend on the market price
of our common stock, the personal circumstances of the sellers and other
factors. Nevertheless, sales of significant amounts of our common stock in the
public market could adversely affect the market price of our common stock.
Stock Plans
We intend to file a registration statement under the Securities Act covering
4,950,000 shares of common stock reserved for issuance under the eMed 1994
Stock Plan. This registration statement is expected to be filed as soon as
practicable after the effective date of this offering.
At August 17, 1999, there were options to purchase 4,145,694 shares
outstanding under our stock option plans and otherwise. All of these shares
will be eligible for sale in the public market from time to time, subject to
vesting provisions, Rule 144 volume limitations applicable to our affiliates
and, in the case of some of the options, the expiration of lock-up agreements.
49
<PAGE>
UNDERWRITING
General
Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, SG Cowen Securities Corporation and Wit Capital Corporation are
acting as representatives of each of the underwriters named below. Subject to
the terms and conditions set forth in an underwriting agreement among us and
the underwriters we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us the
number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Bear, Stearns & Co. Inc............................................
Donaldson, Lufkin & Jenrette Securities Corporation................
SG Cowen Securities Corporation....................................
Wit Capital Corporation............................................
----
Total..........................................................
====
</TABLE>
In the underwriting agreement, the several underwriters have agreed, subject
to the terms and conditions set forth in the underwriting agreement, to
purchase all of the shares of common stock being sold under the terms of the
underwriting agreement if any of the shares of common stock being sold under
the terms of the agreement are purchased. In the event of a default by an
underwriter, the underwriting agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting underwriters may
be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against some liabilities,
including some liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those
liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and
certain other conditions. The underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part.
Commissions and Discounts and Public Offering Price
The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this prospectus, and to certain
dealers at such price less a concession not in excess of $ per share of
common stock. The underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per share of common stock to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may change.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount.................. $ $ $
Proceeds, before expenses, to eMed..... $ $ $
</TABLE>
We estimate our offering expenses, exclusive of the underwriting discount,
will be $ .
50
<PAGE>
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between us and the representatives. The factors to be considered in determining
the initial public offering price, in addition to prevailing market conditions,
are the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us, certain of our financial
information, the history, of, and the prospects for, our company and the
industry in which we compete, and an assessment of our management, its past and
present operations, the prospects for, and timing of, future revenues of our
company, the present state of our development, and the above factors in
relation to market values and various valuation measures of other companies
engaged in activities similar to ours. There can be no assurance that an active
trading market will develop for our common stock or that our common stock will
trade in the public market subsequent to the offering at or above the initial
public offering price.
The underwriters do not expect sales of the common stock to any accounts
over which they exercise discretionary authority to exceed five percent of the
number of shares being offered in this offering.
Over-allotment Option
We have granted an option to the underwriters, exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of additional
shares of our common stock at the public offering price set forth on the cover
page of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters
exercise this option, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares of our common stock
proportionate to such underwriter's initial amount reflected in the foregoing
table.
Lock-up Agreements
We, our directors and executive officers and our stockholders have entered
into lock-up agreements with the underwriters. Under those agreements, neither
we nor any of our directors or executive officers nor any of those stockholders
may dispose of or hedge any shares of common stock or securities convertible
into or exchangeable for shares of common stock. These restrictions will be in
effect for a period of 180 days after the date of this prospectus, subject to
limited exceptions. At any time and without notice, Bear, Stearns & Co. Inc.
may, in its sole discretion, release all or some of the securities from these
lock-up agreements.
Price Stabilization, Short Positions and Penalty Bids
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the common stock during and after this offering.
Specifically, the underwriters may over-allot or otherwise create a short
position in the common stock for their own account by selling more shares of
common stock than we have sold to them. The underwriters may elect to cover any
such short position by purchasing shares of common stock in the open market or
by exercising the over-allotment option granted to the underwriters. In
addition, the underwriters may stabilize or maintain the price of the common
stock by bidding for or purchasing shares of common stock in the open market
and may impose penalty bids, under which selling concessions allowed to
syndicate members or other broker-dealers participating in this offering are
reclaimed if shares of common stock previously distributed in this offering are
repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the market price
at a level above that which might otherwise prevail in the open market. The
imposition of a penalty bid may also affect the price of the common stock to
the extent that it discourages resales thereof. No representation is made as to
the magnitude or effect of any such stabilization or other transactions. Such
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
51
<PAGE>
Internet Distribution
A prospectus in electronic format is being made available on an internet
website maintained by Wit Capital Corporation. In addition, all dealers
purchasing shares from Wit Capital in this offering have agreed to make a
prospectus in electronic format available on websites maintained by each of
these dealers. Purchases of shares from Wit Capital are to be made through an
account at Wit Capital in accordance with Wit Capital's procedures for opening
an account and transacting in securities.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc., approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager or selected dealer in over 120 public offerings. Except for its
participation as a manager in this offering, Wit Capital has no relationship
with us, or any of its founders or significant stockholders.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for eMed
by Ropes & Gray, Boston, Massachusetts. Various legal matters in connection
with this offering will be passed upon for the underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The financial statements of eMed at December 31, 1997 and 1998 and for the
three years in the period ended December 31, 1998, included in this prospectus,
and the financial statements of E-Systems Medical Electronics, a division of
Raytheon, at December 31, 1997 and November 23, 1998 and for the year ended
December 31, 1997 and the period from January 1, 1998 through November 23,
1998, included in this prospectus, have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement or the
exhibits and schedules which are part of the registration statement. Any
statements made in this prospectus as to the contents of any contract,
agreement or other document are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, we refer you to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus shall
be deemed qualified in its entirety by this reference.
You may read and copy all or any portion of the Registration Statement or
any reports, statements or other information in the files at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee by writing
to the Commission. You may call the Commission at 1-800-SEC-0330 for further
information on the operation of its public reference rooms. Our filings,
including the Registration Statement, will also be available to you on the
internet website maintained by the Commission at http://www.sec.gov.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
eMed Technologies Corporation
Report of Independent Accountants....................................... F-2
Balance Sheet as of December 31, 1997 and 1998 and as of June 30, 1999
(unaudited)............................................................ F-3
Statement of Operations for the years ended December 31, 1996, 1997 and
1998 and the six months ended June 30, 1998 (unaudited) and June 30,
1999 (unaudited)....................................................... F-4
Statement of Changes in Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998 and the six months ended June 30, 1999
(unaudited)............................................................ F-5
Statement of Cash Flows for the years ended December 31, 1996, 1997 and
1998 and the six months ended June 30, 1998 (unaudited) and June 30,
1999 (unaudited)....................................................... F-6
Notes to Financial Statements........................................... F-7
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Report of Independent Accountants....................................... F-17
Balance Sheet as of December 31, 1997 and November 23, 1998............. F-18
Statement of Operations and Accumulated Deficit for the year ended
December 31, 1997 and for the period from January 1, 1998 through
November 23, 1998...................................................... F-19
Statement of Cash Flows for the year ended December 31, 1997 and for the
period from January 1, 1998 through November 23, 1998.................. F-20
Notes to Financial Statements........................................... F-21
Unaudited Pro Forma Combined Statement of Operations
Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1998...................................................... F-25
Notes to Unaudited Pro Forma Combined Statement of Operations........... F-26
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
eMed Technologies Corporation:
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of eMed Technologies
Corporation at December 31, 1997 and 1998 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 22, 1999, except for the last paragraph of
Note 7, as to which the date is August 10, 1999
F-2
<PAGE>
eMed Technologies Corporation
Balance Sheet
<TABLE>
<CAPTION>
Pro Forma
December 31, June 30, June 30,
-------------------------- ------------ ------------
1997 1998 1999 1999
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 4,420,714 $ 2,259,052 $ 5,117,591
Accounts receivable,
net of allowance for
doubtful accounts of
$35,000 and $487,073
at December 31, 1997
and 1998,
respectively, and
$422,461 at June 30,
1999 (unaudited)...... 2,665,415 4,926,216 6,217,453
Inventories............ 1,080,264 2,011,410 961,823
Prepaid expenses and
other current assets.. 798,442 330,641 313,134
------------ ------------ ------------
Total current assets... 8,964,835 9,527,319 12,610,001
Fixed assets, net....... 892,450 991,181 816,027
Goodwill................ -- 77,016 72,523
Other assets............ 32,756 49,810 60,888
Assets held for sale.... -- 861,000 --
------------ ------------ ------------
Total assets........... $ 9,890,041 $ 11,506,326 $ 13,559,439
============ ============ ============
Liabilities and
Stockholders' Equity
Current liabilities:
Current portion of
capital lease
obligations........... $ 153,356 $ 45,796 $ 12,347
Short-term debt........ -- 2,797,359 2,797,359
Note payable to
Raytheon.............. -- 2,200,000 --
Accounts payable....... 1,971,964 2,372,307 1,815,838
Accrued employee
benefits.............. 244,871 351,150 542,978
Accrued warranty
expenses.............. 100,657 478,888 629,112
Other accrued
expenses.............. 668,413 811,470 900,983
Accrued acquisition
reserves.............. -- 335,842 81,136
Deferred revenue....... 284,375 1,382,887 1,257,464
------------ ------------ ------------
Total current
liabilities........... 3,423,636 10,775,699 8,037,217
Capital lease
obligations............ 78,707 6,521 --
Long-term debt.......... 884,527 335,893 210,164
------------ ------------ ------------
Total liabilities...... 4,386,870 11,118,113 8,247,381
------------ ------------ ------------
Commitments (Note 12)
Stockholders' equity:
Convertible preferred
stock, $0.01 par
value.................. 77,346 77,346 118,775 $ --
Common stock, $0.01 par
value; Authorized:
35,000,000 shares;
Issued: 1,085,584 and
1,165,572 shares at
December 31, 1997 and
1998, respectively, and
1,253,213 shares at
June 30, 1999 actual
(unaudited): 20,108,281
shares issued at June
30, 1999 pro forma
(unaudited);
Outstanding: 1,085,584
and 1,065,572 shares at
December 31, 1997 and
1998, respectively,
1,153,213 shares at
June 30, 1999 actual
(unaudited): 20,008,281
shares outstanding at
June 30, 1999 pro forma
(unaudited)............ 10,856 11,656 12,532 201,083
Additional paid-in
capital................ 20,120,082 20,159,276 28,796,488 28,726,712
Deferred compensation... (8,002) -- (2,598,296) (2,598,296)
Treasury stock.......... -- (50,000) (50,000) (50,000)
Accumulated deficit..... (14,697,111) (19,810,065) (20,967,441) (20,967,441)
------------ ------------ ------------ ------------
Total stockholders'
equity................ 5,503,171 388,213 5,312,058 5,312,058
------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity.. $ 9,890,041 $ 11,506,326 $ 13,559,439 $ 13,559,439
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
eMed Technologies Corporation
Statement of Operations
<TABLE>
<CAPTION>
Year ended Six months ended
December 31, June 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Product............... $ 570,273 $ 7,164,242 $11,299,756 $ 5,730,260 $ 9,793,624
Service............... 439,182 862,762 1,294,411 487,242 1,575,777
----------- ----------- ----------- ----------- -----------
Total revenue....... 1,009,455 8,027,004 12,594,167 6,217,502 11,369,401
----------- ----------- ----------- ----------- -----------
Cost of revenue:
Product............... 372,681 5,553,543 7,223,230 3,401,750 4,698,982
Service............... 1,031,107 1,458,579 1,752,909 729,125 1,652,093
----------- ----------- ----------- ----------- -----------
Total cost of
revenue............ 1,403,788 7,012,122 8,976,139 4,130,875 6,351,075
----------- ----------- ----------- ----------- -----------
Gross margin........ (394,333) 1,014,882 3,618,028 2,086,627 5,018,326
----------- ----------- ----------- ----------- -----------
Operating expenses:
Research and
development.......... 610,189 1,300,360 2,361,430 1,030,630 1,654,635
Sales and marketing... 1,318,696 2,912,125 3,498,169 1,763,734 2,519,051
General and
administrative....... 1,331,297 1,981,861 2,722,340 1,120,800 1,851,731
----------- ----------- ----------- ----------- -----------
Total operating
expenses........... 3,260,182 6,194,346 8,581,939 3,915,164 6,025,417
----------- ----------- ----------- ----------- -----------
Loss from operations.... (3,654,515) (5,179,464) (4,963,911) (1,828,537) (1,007,091)
Interest expense, net... (69,686) (203,566) (105,611) (19,243) (68,518)
Other expense........... (21,560) (242,139) (43,432) (6,125) (81,767)
----------- ----------- ----------- ----------- -----------
Net loss............ $(3,745,761) $(5,625,169) $(5,112,954) $(1,853,905) $(1,157,376)
=========== =========== =========== =========== ===========
Basic and diluted net
loss per share......... $ (3.50) $ (5.19) $ (4.88) $ (1.79) $ (1.03)
Shares used in computing
basic and diluted net
loss per share......... 1,071,427 1,084,022 1,048,678 1,034,024 1,121,334
Unaudited pro forma
basic and diluted net
loss per share......... $ (0.32) $ (0.06)
Shares used in computing
unaudited pro forma
basic and diluted net
loss per share......... 15,760,889 19,976,402
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
eMed Technologies Corporation
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Convertible
preferred stock Common stock Total
------------------- ----------------- Additional stockholders'
Par Par paid-in Deferred Treasury Accumulated equity
Shares value Shares value capital compensation stock deficit (deficit)
---------- -------- --------- ------- ----------- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1995......... 1,510 $ 15 1,054,000 $10,540 $ 4,505,830 $ -- $ -- $ (5,326,181) $ (809,796)
Exercise of common
stock options.... 27,834 278 13,639 13,917
Issuance of 1,000
shares of Series
F convertible
preferred stock.. 1,000 10 999,990 1,000,000
Issuance of 816
shares of Series
G convertible
preferred stock.. 816 8 4,070,341 4,070,349
Issuance of 400
shares of Series
H convertible
preferred stock.. 400 4 1,999,997 2,000,001
Issuance of stock
options to
nonemployees..... 20,000 20,000
Net loss.......... (3,745,761) (3,745,761)
---------- -------- --------- ------- ----------- ----------- -------- ------------ -----------
Balance, December
31, 1996......... 3,726 37 1,081,834 10,818 11,609,797 -- -- (9,071,942) 2,548,710
Exercise of common
stock options.... 3,750 38 1,837 1,875
Issuance of
409,091 warrants
to purchase
Series J
convertible
preferred stock.. 161,000 161,000
Issuance of
7,730,909 shares
of Series J
convertible
preferred stock.. 7,730,909 77,309 8,333,868 8,411,177
Issuance of stock
options to
nonemployees..... 13,580 (8,002) 5,578
Net loss.......... (5,625,169) (5,625,169)
---------- -------- --------- ------- ----------- ----------- -------- ------------ -----------
Balance, December
31, 1997......... 7,734,635 77,346 1,085,584 10,856 20,120,082 (8,002) -- (14,697,111) 5,503,171
Exercise of common
stock options.... 79,988 800 39,194 39,994
Purchase of common
stock held as
treasury shares.. (50,000) (50,000)
Amortization of
deferred
compensation..... 8,002 8,002
Net loss.......... (5,112,954) (5,112,954)
---------- -------- --------- ------- ----------- ----------- -------- ------------ -----------
Balance, December
31, 1998......... 7,734,635 77,346 1,165,572 11,656 20,159,276 -- (50,000) (19,810,065) 388,213
Exercise of common
stock options
(unaudited)...... 87,641 876 42,944 43,820
Issuance of
4,142,857 shares
of Series K
convertible
preferred stock
(unaudited)...... 4,142,857 41,429 5,756,037 5,797,466
Issuance of stock
options
(unaudited)...... 2,838,231 (2,838,231) --
Amortization of
deferred
compensation
(unaudited)...... 239,935 239,935
Net loss
(unaudited)...... (1,157,376) (1,157,376)
---------- -------- --------- ------- ----------- ----------- -------- ------------ -----------
Balance, June 30,
1999
(unaudited)...... 11,877,492 $118,775 1,253,213 $12,532 $28,796,488 $(2,598,296) $(50,000) $(20,967,441) $ 5,312,058
========== ======== ========= ======= =========== =========== ======== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
eMed Technologies Corporation
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year ended Six months ended
December 31, June 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(3,745,761) $(5,625,169) $(5,112,954) $(1,853,905) $(1,157,376)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization......... 364,946 469,488 521,006 259,844 374,725
Amortization of debt
discount............. -- 119,000 -- -- --
Loss on disposal of
fixed assets......... 20,032 236,764 50,933 12,339 85,763
Compensation expense
associated with
issuance of stock
options.............. 20,000 5,578 8,002 -- 239,935
Preferred stock
issued in lieu of
cash payment for
interest............. 5,381 22,906 -- -- --
Changes in operating
assets and
liabilities, net of
effects from
acquisition of E-
Systems Medical
Electronics:
Accounts receivable.. (2,389) (2,489,335) 36,664 (853,039) (1,291,237)
Inventories.......... (681,064) (399,200) 638,428 293,751 1,049,587
Prepaid expenses and
other current
assets.............. 12,874 (715,014) 553,719 512,581 17,507
Accounts payable..... 669,905 1,302,059 19,673 (296,930) (556,469)
Accrued employee
benefits............ 35,193 209,678 (19,382) 50,858 191,828
Accrued warranty
expenses............ -- 100,657 178,231 40,017 150,224
Other accrued
expenses............ 145,183 366,210 (302,859) (146,547) 89,513
Accrued acquisition
reserves............ -- -- -- -- (254,706)
Deferred revenue..... -- 284,375 689,532 110,830 (125,423)
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities......... (3,155,700) (6,112,003) (2,739,007) (1,870,201) (1,186,129)
----------- ----------- ----------- ----------- -----------
Cash flows from
investing activities:
Purchases of fixed
assets................ (532,796) (853,122) (465,274) (335,838) (280,841)
Change in other
assets................ 15,935 11,596 (17,054) 21,192 (11,078)
Cash paid for the
acquisition of E-
Systems Medical
Electronics, net of
cash acquired......... -- -- (999,300) -- --
Proceeds from sale of
assets held for
sale.................. -- -- -- -- 861,000
----------- ----------- ----------- ----------- -----------
Net cash (used in)
provided by
investing
activities......... (516,861) (841,526) (1,481,628) (314,646) 569,081
----------- ----------- ----------- ----------- -----------
Cash flows from
financing activities:
Proceeds from sale-
leaseback
transactions.......... 138,709 -- -- -- --
Principal payments of
capital lease
obligations........... (174,897) (189,842) (179,746) (92,067) (39,970)
Cash received for
fixed assets.......... 5,600 46,028 -- -- --
Proceeds from issuance
of convertible notes
and warrants.......... -- 1,500,000 -- -- --
Borrowings from lines
of credit............. -- 884,527 2,390,039 1,242,522 --
Principal payments of
debt.................. -- -- (141,314) (55,756) (125,729)
Payment of note
payable due to
Raytheon for the
acquisition of E-
Systems Medical
Electronics........... -- -- -- -- (2,200,000)
Proceeds from issuance
of convertible
preferred stock....... 5,848,302 6,930,271 -- -- 5,797,466
Proceeds from exercise
of common stock
options............... 13,917 1,875 39,994 35,655 43,820
Purchase of common
stock held in
treasury.............. -- -- (50,000) (50,000) --
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing
activities......... 5,831,631 9,172,859 2,058,973 1,080,354 3,475,587
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents........... 2,159,070 2,219,330 (2,161,662) (1,104,493) 2,858,539
Cash and cash
equivalents, beginning
of period............. 42,314 2,201,384 4,420,714 4,420,714 2,259,052
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period................ $ 2,201,384 $ 4,420,714 $ 2,259,052 $ 3,316,221 $ 5,117,591
=========== =========== =========== =========== ===========
Supplemental cash flow
disclosures:
Cash paid for
interest.............. $ 148,573 $ 122,458 $ 240,343 $ 100,721 $ 148,953
=========== =========== =========== =========== ===========
</TABLE>
Non-cash financing and investing activities:
During 1996, eMed incurred capital lease obligations of $138,709 in connection
with the sale and leaseback of fixed assets.
During 1996, eMed exchanged $116,667 of redeemable preferred stock for
convertible preferred stock.
During 1996 and 1997, eMed converted $1,105,381 and $1,480,906, respectively,
of convertible notes and long-term debt into convertible preferred stock.
During 1998, in connection with the acquisition of E-Systems Medical
Electronics, eMed issued $2,200,000 of notes payable, acquired assets of
$5,020,053 and assumed liabilities of $1,897,069.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements
1. Nature of Business
eMed Technologies Corporation ("eMed"), formerly known as ACCESS Radiology
Corporation, was incorporated under the laws of Delaware in March 1992. As a
provider of workflow solutions for electronically managing and distributing
medical images and related patient information, eMed markets and sells
electronic medical imaging systems and provides related support services to
healthcare providers primarily within the United States. eMed operates in one
business segment.
2. Summary of Significant Accounting Policies
Cash Equivalents
eMed invests its excess cash in money market funds of major financial
institutions. These investments are subject to minimal credit and market risk.
eMed considers all highly liquid investments purchased with an initial maturity
of three months or less to be cash equivalents. Cash equivalent investments are
classified as available-for-sale in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115. At December 31, 1997 and 1998, cash
equivalents totaled $3,582,865 and $2,384,686, respectively, and are carried at
cost, which approximates fair value.
Fair Value of Financial Instruments
The carrying amounts of eMed's financial instruments, which include cash and
cash equivalents, accounts receivable, accounts payable, accrued expenses and
short- and long-term debt, approximate their fair values at December 31, 1997
and 1998.
Revenue Recognition, Significant Customers and Concentration of Credit Risk
Revenue from product sales is recognized upon shipment to the customer
provided that risk of loss has passed to the customer and collection of the
related receivable is probable. Customer payments received in advance of
product shipments are recorded as deferred revenue. eMed typically provides a
one-year warranty on all products sold.
Service revenue consists of customer fees from installation and training,
network-based comprehensive support and post-warranty product maintenance.
Revenue from installation and training is recognized as the work is performed.
Revenue from support agreements and post-warranty product maintenance contracts
is deferred and recognized ratably over the applicable periods.
Financial instruments which potentially expose eMed to concentration of
credit risk include accounts receivable. eMed performs ongoing evaluations of
customers' financial condition and does not generally require collateral. At
December 31, 1997 and 1998, accounts receivable from one customer accounted for
approximately 13% and 11%, respectively, of the total amounts due to eMed.
There were no customers with accounts receivable greater than 10% of the total
amounts due to eMed at June 30, 1999.
In 1996, sales with three customers accounted for approximately 23%, 20% and
13% of eMed's total revenue. In 1997, sales with one customer accounted for
approximately 18% of eMed's total revenue. In 1998, sales with two customers
accounted for approximately 10% and 11% of eMed's total revenue. During the six
months ended June 30, 1999, no customers accounted for greater than 10% of
eMed's total revenue.
Inventories and Concentration of Suppliers
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) method.
F-7
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
eMed purchases certain components of eMed's products from limited suppliers.
A change in or loss of these suppliers could cause a delay in filling customer
orders and a possible loss of sales, which could adversely affect results of
operations; however, management believes that suitable replacement suppliers
could be obtained in such an event.
Fixed Assets
Fixed assets are recorded at cost and depreciated using the straight-line
method over their estimated useful lives. Repair and maintenance costs are
expensed as incurred.
Research and Development and Software Development Costs
Costs incurred in the research and development of eMed's products are
expensed as incurred. Costs associated with the development of computer
software are expensed prior to establishing technological feasibility, as
defined by SFAS No. 86, and capitalized thereafter until commercial release of
the products. Software development costs eligible for capitalization have not
been significant to date.
Stock-Based Compensation
eMed accounts for stock-based awards to employees using the intrinsic value
method as prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. eMed
has adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," for disclosure purposes only (Note 9).
Advertising Costs
Advertising costs are charged to operations as incurred. Advertising costs
were approximately $31,000, $114,000 and $106,000 in the years ended December
31, 1996, 1997 and 1998, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Unaudited Pro Forma Balance Sheet
Upon the closing of eMed's anticipated initial public offering, all shares
of convertible preferred stock outstanding at June 30, 1999 (Note 7) will
automatically convert into 18,855,068 shares of common stock. This conversion
has been reflected in the unaudited pro forma balance sheet as of June 30,
1999.
Unaudited Interim Financial Data
The interim financial data as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 have been derived from unaudited financial statements of
eMed. Management believes eMed's unaudited financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations in such
periods. Results for the six months ended June 30, 1999 are not necessarily
indicative of results to be expected for the full fiscal year.
F-8
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
Actual and Unaudited Pro Forma Net Loss Per Share
Net loss per share is computed in accordance with SFAS No. 128, "Earnings
Per Share." Basic net loss per share is computed by dividing net loss
attributable to common stockholders by the weighted average number of shares of
common stock outstanding. Diluted net loss per share does not differ from basic
net loss per share since potential common shares from conversion of preferred
stock and exercise of stock options and warrants are anti-dilutive for all
periods presented. Unaudited pro forma basic and diluted net loss per share
have been calculated assuming the conversion of all outstanding shares of
preferred stock into common shares, as if the shares had converted immediately
upon their issuance.
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. In June 1999, the FASB issued SFAS
No. 137 which deferred the effective date of SFAS No. 133 for one year. SFAS
No. 133 is now effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. eMed does not expect SFAS No. 133 to have a material
effect on its financial position or results of operations.
In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SoP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SoP 98-1 establishes
the accounting for costs of software products developed or purchased for
internal use, including when such costs should be capitalized. SoP 98-1 will be
effective for eMed beginning in 1999, and eMed does not expect adoption of this
SoP to have a material effect on its financial position or results
of operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of Start-
Up Activities." Start- up activities are defined broadly as those one-time
activities related to the opening of a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, commencing some new operation or organizing a new
entity. SoP 98-5 requires that the cost of start-up activities be expensed as
incurred. SoP 98-5 is effective for eMed beginning in 1999 and eMed does not
expect adoption of this SoP to have a material effect on its financial position
or results of operations.
3. Acquisition
On November 23, 1998, eMed purchased certain assets and assumed certain
liabilities of E-Systems Medical Electronics, a division of Raytheon, for total
consideration of $3,200,000. E-Systems Medical Electronics was engaged in the
business of designing, manufacturing and marketing electronic medical imaging
hardware and software systems and providing technical and network services to
healthcare providers within the United States. The acquisition was funded by a
$2,200,000 note payable to Raytheon (Note 6) and $1,000,000 in cash which was
obtained from eMed's working capital facility (Note 6).
The acquisition was accounted for under the purchase method of accounting
and, accordingly, operating results of this business subsequent to the date of
acquisition have been included in eMed's financial statements. The purchase
price was allocated to the assets acquired and liabilities assumed based on
their fair values at the date of acquisition. The excess of the purchase price
over the fair value of the net assets acquired of $77,016 was recorded as
goodwill and is being amortized over a period of ten years using the straight-
line method. In February 1999, certain assets, primarily inventory, purchased
in the acquisition were sold for total consideration of $861,000. These assets
were classified as assets held for sale at December 31, 1998.
F-9
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
The following unaudited pro forma data summarizes the results of operations
for the years ended December 31, 1997 and 1998 as if the acquisition of E-
Systems Medical Electronics had been completed on January 1, 1997 and 1998,
respectively. The pro forma data gives effect to actual operating results prior
to the acquisition with adjustments for interest expense and amortization of
goodwill and the sale of assets held for sale at December 31, 1998. These pro
forma amounts do not purport to be indicative of the results that would have
actually been obtained if the acquisition had occurred on January 1, 1997 and
1998 or that may be obtained in the future.
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------
1997 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Revenue............................................ $19,451,507 $20,708,044
Net loss........................................... (16,302,719) (11,457,663)
Net loss per share:
Basic and diluted.................................. ($15.04) ($10.93)
</TABLE>
In connection with the acquisition of E-Systems Medical Electronics, eMed
has undertaken a restructuring of the acquired business. In accordance with
Emerging Issues Task Force ("EITF") No. 95-3 "Recognition of Liabilities in
Connection with a Purchase Business Combination," eMed established a reserve of
approximately $412,000, primarily related to severance and other employee
related costs of $339,000 and other exit costs of $73,000. From the date of
acquisition through December 31, 1998, eMed has paid approximately $76,000 of
the planned costs. As of June 30, 1999, eMed has paid approximately $331,000 of
the planned costs.
4. Inventories
<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
1997 1998 1999
---------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
Raw materials and purchased components... $ 678,005 $1,545,650 $789,264
Work-in-process.......................... 20,654 107,336 126,396
Finished goods........................... 381,605 358,424 46,163
---------- ---------- --------
$1,080,264 $2,011,410 $961,823
========== ========== ========
</TABLE>
5. Fixed Assets
<TABLE>
<CAPTION>
December 31,
Estimated -------------------
Useful lives 1997 1998
(years) --------- ---------
<S> <C> <C> <C>
Furniture and fixtures.................... 5 $ 152,181 $ 194,503
Office equipment and computers............ 3 368,070 256,957
Electronic medical imaging equipment...... 3 1,205,597 1,558,018
Leasehold improvements.................... Lease term 57,066 90,940
--------- ---------
1,782,914 2,100,418
Less - Accumulated depreciation and
amortization............................. 890,464 1,109,237
--------- ---------
$ 892,450 $ 991,181
========= =========
</TABLE>
At December 31, 1997 and 1998, furniture and electronic medical imaging
equipment held under capital leases totaled $499,425 and $321,770,
respectively. Accumulated amortization of furniture and electronic
F-10
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
medical imaging equipment held under capital leases was $420,096 and $319,074
at December 31, 1997 and 1998, respectively. Depreciation and amortization
expense on fixed assets was $364,946, $469,488 and $521,006, of which $244,824,
$187,838 and $54,727 related to amortization of assets held under capital
leases in 1996, 1997 and 1998, respectively.
6. Borrowings
Notes Payable
In connection with the acquisition of certain assets and liabilities of E-
Systems Medical Electronics (Note 3), eMed issued a $2,200,000 short-term note
payable to Raytheon. In accordance with the terms of the note, a payment of
$1,500,000 was made in January 1999. The remaining balance of $700,000 was paid
in May, 1999.
At various dates through September 1997, eMed issued $1,500,000 in 6.0%
convertible subordinated notes ("Notes") maturing on October 31, 1997. On
September 30, 1997, in connection with the Series J convertible preferred stock
offering, the Notes, together with accrued interest, were converted into
1,384,460 shares of Series J convertible preferred stock. In connection with
the issuance of the Notes, eMed issued warrants to purchase 409,091 shares of
Series J convertible preferred stock at an exercise price of $1.10. The
warrants expire on June 30, 2002. These warrants were ascribed a value of
approximately $161,000 which was reflected as a debt discount to be amortized
to interest expense over the term of the Notes. Approximately $119,000 of the
debt discount was amortized to interest expense for the year ended December 31,
1997.
Loan Facilities
In May 1997, eMed entered into an agreement with a bank under which it may
borrow up to $2,000,000 for working capital purposes ("Working Capital
Facility") and $500,000 for purchases of fixed assets ("Equipment Facility"),
subject to certain limitations. All borrowings under the agreement are
collateralized by substantially all of eMed's assets. Under the terms of the
agreement, eMed is required to comply with certain restrictive covenants,
including the maintenance of certain financial ratios and limitations on
indebtedness, liens, guaranties, mergers and payments of dividends.
In April 1998, the terms of the Working Capital Facility were amended
whereby eMed can borrow up to $3,000,000, subject to certain limitations,
through March 31, 1999, at which time, all outstanding principal and interest
is due. The interest rate on outstanding borrowings under the new Working
Capital Facility fluctuates monthly between the bank's prime rate plus 0.5% to
1.75% based on certain financial ratios. The interest rate at December 31, 1998
was 9.3%. Additionally, eMed is required to pay a fee equal to 0.75% of the
average unused Working Capital Facility, payable quarterly (the "Facility
Fee"). Borrowings under the Working Capital Facility totaled $550,000 and
$2,550,000 at December 31, 1997 and 1998, respectively.
In January and March 1999, the terms of the Working Capital Facility were
further amended whereby eMed can borrow up to $4,000,000, subject to certain
limitations, through September 30, 1999, at which time all outstanding
principal and interest is due. The amended interest rate on outstanding
borrowings fluctuates monthly between the bank's prime rate plus 0.5% to 2.0%
based on certain financial ratios and the Facility Fee was increased to 1.0%.
Additionally, the amended Working Capital Facility requires eMed to raise $2.0
million of additional capital by June 30, 1999. This additional capital was
obtained as discussed in Note 7.
Borrowings under the Equipment Facility bear interest, payable monthly, at
the bank's prime rate plus 1.0% (8.8% at December 31, 1998). In April 1998, the
terms of the Equipment Facility were amended whereby eMed could borrow up to
$750,000, subject to certain limitations. At December 31, 1998, outstanding
borrowings of $583,252 under the Equipment Facility converted to a three-year
term loan payable in 36 monthly installments of principal and interest.
F-11
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
As of December 31, 1998, future minimum principal payments under the
Equipment Facility are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999............................................................ $247,359
2000............................................................ 247,359
2001............................................................ 88,534
--------
$583,252
========
</TABLE>
7. Preferred Stock
Shares authorized, issued and outstanding and the carrying values of eMed's
preferred stock are as follows:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Series B:
716 shares authorized, issued and outstanding
at December 31, 1997 and 1998 and June 30,
1999 ........................................ $ 700,228 $700,228 $ 700,228
Series C:
450 shares authorized, issued and outstanding
at December 31, 1997 and 1998 and June 30,
1999 ........................................ 2,245,000 2,245,000 2,245,000
Series E:
345 shares authorized at December 31, 1997
and 1998 and June 30, 1999; 344 shares issued
and outstanding at December 31, 1997 and 1998
and June 30, 1999 ........................... 1,566,656 1,566,656 1,566,656
Series F:
1,000 shares authorized, issued and
outstanding at December 31, 1997 and 1998 and
June 30, 1999 ............................... 1,000,000 1,000,000 1,000,000
Series G:
816 shares authorized, issued and outstanding
at December 31, 1997 and 1998 and June 30,
1999 ........................................ 4,070,349 4,070,349 4,070,349
Series H:
400 shares authorized , issued and
outstanding at December 31, 1997 and 1998 and
June 30, 1999 ............................... 2,000,001 2,000,001 2,000,001
Series J:
8,140,000 shares authorized at December 31,
1997 and 1998 and June 30, 1999; 7,730,909
shares issued and outstanding at December 31,
1997 and 1998 and June 30, 1999 ............. 8,411,177 8,411,177 8,411,177
Series K:
No shares authorized, issued or outstanding
at December 31, 1997; 1,785,800 and 4,145,000
shares authorized at December 31, 1998 and
June 30, 1999, respectively; 0 and 4,142,857
shares issued and outstanding at December 31,
1998 and June 30, 1999, respectively ........ -- -- 5,797,466
Undesignated:
6,856,275 shares authorized at December 31,
1997;
5,070,475 shares authorized at December 31,
1998;
and 2,711,275 shares authorized at June 30,
1999 ........................................ -- -- --
</TABLE>
F-12
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
The convertible preferred stock has the following characteristics:
Dividends
No dividends have been declared or paid by eMed through December 31, 1998.
The holders of Series B, Series C, Series E, Series F, Series G and Series H
convertible preferred stock ("Series Preferred") are entitled to receive
noncumulative dividends whenever eMed declares a dividend on its common stock,
in such an amount as they would be entitled to receive if the convertible
preferred stock had been converted into common stock on the date the dividend
was declared. The holders of Series J convertible preferred stock ("Series J")
are entitled to receive noncumulative, annual cash dividends of $0.11 per share
when and if declared by eMed, in preference to the holders of Series Preferred
or common stock.
Voting
The holders of Series Preferred and Series J are entitled to vote, together
with holders of common stock, as a single class on all matters. Each
stockholder is entitled to the number of votes equal to the number of shares of
common stock into which such holder's shares are convertible.
Conversion
Each share of Series B, Series C, Series E, Series F, Series G, Series H,
and Series J convertible preferred stock may be converted at any time, at the
option of the stockholder, into 240, 952.38, 952.38, 2,000, 3,333.33, 3,333.33
and one shares of common stock, respectively, subject to certain anti-dilution
adjustments. All outstanding shares of Series Preferred automatically convert
into common stock, at their respective conversion rate, upon the closing of an
initial public offering of eMed's common stock or, in the case of Series H
convertible preferred stock and Series J, automatically upon the closing of an
initial public offering of eMed's common stock with gross proceeds of at least
$15,000,000 to eMed and at a price to the public of at least $3.00 per common
share.
Liquidation Preference
In the event of any liquidation, dissolution or winding-up of eMed, the
holders of Series J are entitled to receive, prior to any distribution to
holders of Series Preferred or common stock, up to the amount of $1.10 per
share, plus any declared but unpaid dividends. After the payment of the full
liquidation preference of Series J, the holders of Series B, Series C, Series
E, Series F, Series G and Series H are entitled to receive, prior to any
distribution to holders of common stock, up to the amount of $1,000, $5,000,
$5,000, $1,000, $5,000 and $5,000 per share, respectively, plus any declared
but unpaid dividends. The aggregate liquidation preference of the convertible
preferred stock is approximately $20,265,000 at December 31, 1998.
Subsequent Preferred Stock Issuance
In January and May 1999, eMed sold 4,142,857 shares of Series K Convertible
Preferred Stock ("Series K") for net proceeds of $5,797,466. Each share of
Series K is convertible into one share of common stock subject to certain anti-
dilution adjustments. The holders of Series K will participate on an as-
converted basis in any dividends paid on common stock and are entitled to vote
together with all other classes of voting stock as a single class on all
matters. The liquidation preference is equal to the issue price. In connection
with the Series K issuance, eMed issued 1,121,333 warrants to purchase common
stock at an exercise price of $0.01. The warrants expire in 2009.
8. Common Stock
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of eMed's stockholders. Common stockholders are entitled to
receive dividends, if any, as may be declared by the Board of Directors,
subject to any preferential dividend rights of the preferred stockholders.
F-13
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
Reserved Shares
As of December 31, 1998 and June 30, 1999, eMed has 21,453,073 and
24,844,659 shares of common stock reserved for issuance upon the exercise of
common stock options and warrants and conversion of the outstanding convertible
preferred stock, respectively.
9. Stock Plans
Prior to adoption of the 1994 Stock Plan described below, eMed granted
70,558 non-qualified stock options to certain employees, directors and
consultants of eMed of which 1,000 options have been exercised and 8,330 have
been canceled. The stock options vested at various dates through January 1998.
In 1994, eMed adopted the 1994 Stock Plan (the "1994 Plan") which provides
for the grant of incentive stock options and non-qualified stock options, stock
awards and stock purchase rights for the purchase of shares of eMed's common
stock by officers, employees, consultants and directors of eMed. At December
31, 1998, the number of shares issuable pursuant to the 1994 Plan was
2,850,000. In February 1999, the stockholders approved an increase in the
number of shares issuable pursuant to the 1994 Plan to 4,350,000. The Board of
Directors is responsible for administration of the 1994 Plan. The Board
determines the term of each option, the option exercise price, the number of
shares for which each option is granted and the rate at which each option is
exercisable. Incentive stock options may be granted to any employee at an
exercise price per share of not less than the fair value per common share on
the date of the grant (not less than 110% of fair value in the case of holders
of more than 10% of eMed's voting stock) and with a term not to exceed ten
years from the date of the grant (five years for incentive stock options
granted to holders of more than 10% of eMed's voting stock).
No compensation cost has been recognized for employee stock-based
compensation in 1996, 1997 or 1998. Had compensation cost attributable to the
1994 Plan and other options been determined based on the fair value of the
options at the grant date consistent with the provisions of FAS 123, eMed's net
loss and net loss per share would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net loss
As reported........................ $(3,745,761) $(5,625,169) $(5,112,954)
Pro forma.......................... (3,782,260) (5,653,283) (5,180,199)
Basic and diluted net loss per share
As reported........................ $ (3.50) $ (5.19) $ (4.88)
Pro forma.......................... (3.53) (5.22) (4.94)
</TABLE>
Because the determination of the fair value of all options granted after
eMed becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1998, and most options vest over several years, the above pro forma effects are
not necessarily indicative of the pro forma effects on future years.
Under SFAS No. 123, the fair value of each employee option grant is
estimated on the date of grant using the Black-Scholes option pricing model to
apply the minimum value method with the following weighted-average assumptions
used for grants made during the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Expected option term (years)................... 5 5 5
Risk-free interest rate........................ 6.2% 6.4% 5.0%
Dividend yield................................. 0.0% 0.0% 0.0%
</TABLE>
F-14
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
A summary of the status of eMed's stock options as of December 31, 1996,
1997 and 1998, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------
1996 1997 1998
------------------------ ------------------------- -------------------------
Weighted- Weighted- Weighted-
average average average
Shares exercise price Shares exercise price Shares exercise price
-------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 265,085 $0.88 565,948 $0.48 1,224,472 $0.49
Granted................. 568,169 $0.50 795,687 $0.50 1,355,274 $0.50
Exercised............... (27,834) $0.50 (3,750) $0.50 (79,988) $0.50
Canceled................ (239,472) $0.98 (133,413) $0.50 (130,237) $0.50
-------- ----- --------- ----- --------- -----
Outstanding at end of
year................... 565,948 $0.48 1,224,472 $0.49 2,369,521 $0.50
======== ===== ========= ===== ========= =====
Options exercisable at
end of year............ 390,060 627,705 1,131,257
======== ========= =========
Weighted-average fair
value of options
granted during the
year................... $ 0.13 $ 0.14 $ 0.14
======== ========= =========
Options available for
grant at end of year... 789,331 1,600,522 421,805
======== ========= =========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Weighted-average
Options remaining Options
Exercise price outstanding contractual life exercisable
-------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.01 15,952 4.4 15,952
$0.42 34,286 4.1 34,286
$0.50 2,319,283 7.5 1,081,019
--------- ---------
2,369,521 1,131,257
========= =========
</TABLE>
Deferred Compensation
During the six months ended June 30, 1999, eMed granted stock options to
purchase 425,750 shares of its common stock with an exercise price of $0.50 per
share and 1,323,250 shares of its common stock with an exercise price of $0.85
per share. eMed recorded deferred compensation relating to these options
totaling approximately $2,838,231, representing the differences between the
estimated fair market value of the common stock on the date of grant and the
exercise price. Compensation expense related to these options is being
amortized over the related vesting periods. For the six months ended June 30,
1999, eMed recorded approximately $240,000 of compensation expense related to
these options.
F-15
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
10. Income Taxes
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................. $ 5,914,557 $ 7,532,342
Other............................................ 134,336 624,489
----------- -----------
Deferred tax assets................................ 6,048,893 8,156,831
Deferred tax asset valuation allowance............. (6,048,893) (8,156,831)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
Realization of deferred tax assets is dependent upon the generation of
future taxable income. eMed has provided a valuation allowance for the full
amount of its deferred tax assets since realization of these future benefits is
not sufficiently assured.
At December 31, 1998, eMed has net operating loss carryforwards of
approximately $18,371,000 to offset future federal taxable income. If not
utilized, these carryforwards will expire at various dates ranging from 2013 to
2018. Under the provisions of the Internal Revenue Code, certain substantial
changes in eMed's ownership may have limited, or may limit in the future, the
amount of net operating loss carryforwards which could be used annually to
offset future taxable income and income tax liability. The amount of any annual
limitation is determined based upon eMed's value prior to an ownership change.
11. 401(k) Plan
During 1995, eMed established a defined contribution savings plan under
Section 401(k) of the Internal Revenue Code. This plan covers substantially all
employees who meet minimum age and service requirements and allows participants
to defer a portion of their annual compensation on a pre-tax basis. eMed
contributions to the plan may be made at the discretion of the Board of
Directors. There were no contributions made to the plan by eMed during the
years ended December 31, 1996, 1997 and 1998.
12. Commitments
Leases
eMed leases office space and certain fixed assets under noncancelable
operating and capital leases. The future minimum lease commitments under all
noncancelable leases at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Lease Leases
---------- -------
<S> <C> <C>
1999..................................................... $ 641,239 $52,919
2000..................................................... 584,980 6,966
2001..................................................... 567,780 --
2002..................................................... 520,465 --
---------- -------
Total minimum lease payments............................. $2,314,464 59,885
==========
Less--amount representing interest....................... 7,568
-------
Present value of minimum lease payments.................. $52,317
=======
</TABLE>
Total rent expense under noncancelable operating leases was approximately
$257,000, $287,000 and $562,000 in 1996, 1997 and 1998, respectively.
F-16
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
eMed Technologies Corporation:
In our opinion, the accompanying balance sheet and the related statements of
operations and accumulated deficit and of cash flows present fairly, in all
material respects, the financial position of E-Systems Medical Electronics (a
division of Raytheon E-Systems, Inc.) at December 31, 1997 and November 23,
1998 and the results of its operations and its cash flows for the year ended
December 31, 1997 and for the period from January 1, 1998 through November 23,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 9, 1999
F-17
<PAGE>
E-Systems Medical Electronics
(a division of Raytheon E-Systems, Inc.)
Balance Sheet
<TABLE>
<CAPTION>
December 31, November 23,
1997 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash............................................. $ 90,888 $ 1,009
Accounts receivable, net of allowance for
doubtful accounts of $46,000 and $150,000 at
December 31, 1997 and November 23, 1998,
respectively.................................... 2,978,522 2,332,937
Inventories...................................... 1,175,196 2,430,573
Prepaid expenses and other current assets........ 363,432 54,653
------------ ------------
Total current assets........................... 4,608,038 4,819,172
Fixed assets, net.................................. 681,576 205,398
Other assets....................................... 37,200 --
------------ ------------
Total assets................................... $ 5,326,814 $ 5,024,570
============ ============
Liabilities and Accumulated Deficit
Current liabilities:
Accounts payable................................. $ 1,363,258 $ 1,156,310
Accrued employee benefits........................ 253,010 161,798
Accrued warranty................................. 200,000 200,000
Other accrued expenses........................... 575,679 390,958
Deferred revenue................................. 465,322 432,035
------------ ------------
Total current liabilities...................... 2,857,269 2,341,101
Long-term payable to Raytheon...................... 29,993,246 36,213,392
------------ ------------
Total liabilities.............................. 32,850,515 38,554,493
Commitments (Note 7)
Accumulated deficit................................ (27,523,701) (33,529,923)
------------ ------------
Total liabilities and accumulated deficit...... $ 5,326,814 $ 5,024,570
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
E-Systems Medical Electronics
(a division of Raytheon E-Systems, Inc.)
Statement of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
Period from
January 1, 1998
Year ended through
December 31, November 23,
1997 1998
------------ ---------------
<S> <C> <C>
Revenue........................................... $ 15,006,266 $ 11,217,121
Cost of revenue................................... 16,055,320 9,928,411
------------ ------------
Gross margin.................................... (1,049,054) 1,288,710
------------ ------------
Operating expenses:
Research and development........................ 2,369,445 3,365,301
Sales and marketing............................. 3,145,504 2,599,950
General and administrative...................... 2,277,301 1,323,836
------------ ------------
Total operating expenses...................... 7,792,250 7,289,087
------------ ------------
Loss from operations.............................. (8,841,304) (6,000,377)
Other expense..................................... (80,895) (5,845)
------------ ------------
Net loss........................................ (8,922,199) (6,006,222)
Accumulated deficit, beginning of period.......... (18,601,502) (27,523,701)
------------ ------------
Accumulated deficit, end of period................ $(27,523,701) $(33,529,923)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
E-Systems Medical Electronics
(a division of Raytheon E-Systems, Inc.)
Statement of Cash Flows
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Period from
January 1, 1998
Year ended through
December 31, November 23,
1997 1998
------------ ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (8,922,199) $ (6,006,222)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation................................... 649,650 517,453
Loss on disposal of fixed assets............... -- 3,730
Allocation of costs by Raytheon................ 5,057,882 3,551,205
Changes in operating assets and liabilities:
Accounts receivable........................... 2,132,522 645,585
Inventories................................... 834,282 (1,255,377)
Prepaid expenses and other current assets..... (346,327) 308,779
Accounts payable.............................. 815,510 (206,948)
Accrued employee benefits..................... 23,112 (91,212)
Accrued warranty.............................. 118,300 --
Other accrued expenses........................ 463,955 (184,721)
Deferred revenue.............................. (611,628) (33,287)
Cash provided by Raytheon..................... 18,406,307 15,008,634
Cash remitted to Raytheon..................... (17,222,106) (12,339,693)
------------ ------------
Net cash (used in) provided by operating
activities.................................. 1,399,260 (82,074)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets....................... (629,604) (45,005)
Change in other assets.......................... (37,200) 37,200
------------ ------------
Net cash used in investing activities........ (666,804) (7,805)
------------ ------------
Cash flows from financing activities:
Cash paid in reorganization (Note 1)............ (9,545,942) --
------------ ------------
Decrease in cash................................. (8,813,486) (89,879)
Cash, beginning of period........................ 8,904,374 90,888
------------ ------------
Cash, end of period.............................. $ 90,888 $ 1,009
============ ============
</TABLE>
Supplemental cash flow disclosure:
No cash was paid for interest or taxes for the year ended December 31, 1997
or for the period from January 1, 1998 through November 23, 1998.
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements
1. Organization and Nature of Business
E-Systems Medical Electronics markets and sells electronic medical imaging
systems and provides related services to healthcare providers primarily within
the United States. E-Systems Medical Electronics operates in one business
segment.
E-Systems Medical Electronics was established as a wholly owned subsidiary
of E-Systems. In 1995, E-Systems was acquired by Raytheon Company ("Raytheon")
and subsequently became Raytheon E-Systems, Inc., a wholly owned subsidiary of
Raytheon. In February 1997, E-Systems Medical Electronics was reorganized as a
division of Raytheon E-Systems, Inc. As part of the reorganization, the assets,
liabilities and capital of E-Systems Medical Electronics were transferred to
Raytheon E-Systems, Inc. E-Systems Medical Electronics operated as a division
of Raytheon E-Systems, Inc. from the date of transfer through November 23,
1998.
2. Summary of Significant Accounting Policies
Cash
E-Systems Medical Electronics maintains minimal levels of cash. Cash needs
are funded by Raytheon and cash receipts are remitted to Raytheon on a regular
basis.
Fair Value of Financial Instruments
The carrying amount of E-Systems Medical Electronics's financial
instruments, which include cash, accounts receivable, accounts payable, accrued
expenses and long-term payable, approximate their fair values at December 31,
1997 and November 23, 1998.
Revenue Recognition, Significant Customers and Concentration of Credit Risk
Revenue from the sale of electronic medical imaging systems and equipment is
recognized upon shipment to the customer provided that the risk of loss has
passed to the customer and collection of the related receivable is probable.
Service revenue, consisting of installation, training, and support services, is
recognized as the work is performed.
Financial instruments that potentially expose E-Systems Medical Electronics
to concentration of credit risk include accounts receivable. E-Systems Medical
Electronics performs ongoing evaluations of customers' financial condition and
does not generally require collateral. At December 31, 1997 and November 23,
1998, accounts receivable from one customer accounted for 13% and 26%,
respectively, of the total amounts due to E-Systems Medical Electronics.
In 1997, sales with two customers accounted for approximately 15% and 11% of
E-Systems Medical Electronics's total revenue. In 1998, sales with one customer
accounted for approximately 12% of E-Systems Medical Electronics's total
revenue.
Inventories
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) method.
F-21
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements--(Continued)
Fixed Assets
Fixed assets are recorded at cost and depreciated using the straight-line
method over their estimated useful lives. Repair and maintenance costs are
expensed as incurred.
Advertising Costs
Advertising costs are charged to operations as incurred. Advertising costs
were approximately $121,000 and $32,000 in the year ended December 31, 1997 and
the period ended November 23, 1998, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
As a division of Raytheon, E-Systems Medical Electronics does not operate as
a stand-alone taxable entity; however, for purposes of these financial
statements, income tax information has been calculated in accordance with
Statement of Accounting Standards No. 109, "Accounting for Income Taxes", as if
E-Systems Medical Electronics were a stand-alone taxable entity (Note 6).
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to
as derivatives) and for hedging activities. In June 1999, the FASB issued SFAS
No. 137 which deferred the effective date of SFAS No. 133 for one year. SFAS
No. 133 is now effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. E-Systems Medical Electronics does not expect SFAS No. 133
to have a material effect on its financial position or results of operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of Start-
Up Activities." Start-up activities are defined broadly as those one-time
activities related to the opening of a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, commencing some new operation or organizing a new
entity. SoP 98-5 requires that the cost of start-up activities be expensed as
incurred. SoP 98-5 is effective for E-Systems Medical Electronics beginning in
1999, and E-Systems Medical Electronics does not expect adoption of this SoP to
have a material effect on its financial position or results of operations.
3. Inventories
<TABLE>
<CAPTION>
December 31, 1997 November 23, 1998
----------------- -----------------
<S> <C> <C>
Raw materials and purchased
components.......................... $1,053,037 $2,430,573
Work-in-process...................... 91,646 --
Finished goods....................... 30,513 --
---------- ----------
$1,175,196 $2,430,573
========== ==========
</TABLE>
F-22
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements--(Continued)
4. Fixed Assets
<TABLE>
<CAPTION>
Estimated
Useful life (years) December 31, 1997 November 23, 1998
------------------- ----------------- -----------------
<S> <C> <C> <C>
Furniture and fixtures.. 5 $ 70,330 $ 63,156
Office equipment and
computers.............. 3 613,085 620,720
Electronic imaging
equipment.............. 3 2,368,227 2,231,065
---------- ----------
3,051,642 2,914,941
Less -- Accumulated
depreciation........... 2,370,063 2,709,543
---------- ----------
$ 681,579 $ 205,398
========== ==========
</TABLE>
5. Intercompany Transactions
E-Systems Medical Electronics had a liability due to Raytheon in the amount
of $29,993,246 and $36,213,392 at December 31, 1997 and November 23, 1998,
respectively. The average balance of the liability due to Raytheon during the
year ended December 31, 1997 and the period ended November 23, 1998 was
$29,303,294 and $32,377,065, respectively. The liability due to Raytheon
results from cash transfers between E-Systems Medical Electronics and Raytheon
and the allocation of costs to E-Systems Medical Electronics consisting of
direct costs, such as insurance premiums, payroll services and legal services,
and other allocated services. Other allocated services consist of indirect
costs related to E-Systems Medical Electronics, such as corporate governance
and other general and administrative activities. Such allocations are based
upon estimated support provided to E-Systems Medical Electronics. Management
believes these estimates are reasonable. No interest has been charged on
intercompany liabilities.
The following table summarizes intercompany transactions during the year
ended December 31, 1997 and the period January 1, 1998 through November 23,
1998
<TABLE>
<S> <C>
Balance at December 31, 1996................................. $ 23,751,163
Allocation of costs to E-Systems Medical Electronics....... 5,057,882
Cash transferred from Raytheon to E-Systems Medical
Electronics............................................... 18,406,307
Cash transferred from E-Systems Medical Electronics to
Raytheon.................................................. (17,222,106)
------------
Balance at December 31, 1997................................. 29,993,246
Allocation of costs to E-Systems Medical Electronics....... 3,551,205
Cash transferred from Raytheon to E-Systems Medical
Electronics............................................... 15,008,634
Cash transferred from E-Systems Medical Electronics to
Raytheon.................................................. (12,339,693)
------------
Balance at November 23, 1998................................. $ 36,213,392
============
</TABLE>
6. Income Taxes
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
December 31, November 23,
1997 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 6,062,000 $ 8,482,000
Other.......................................... 19,000 62,000
----------- -----------
Deferred tax assets.............................. 6,081,000 8,544,000
Deferred tax asset valuation allowance........... (6,081,000) (8,544,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
F-23
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements--(Continued)
Realization of deferred tax assets is dependent upon the generation of
future taxable income. E-Systems Medical Electronics has provided a valuation
allowance for the full amount of its deferred tax assets since realization of
these future benefits is not sufficiently assured.
7. Commitments
Leases
E-Systems Medical Electronics leases office space under noncancelable
operating leases. Future minimum lease payments under these leases are as
follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999.......................................................... $73,191
2000.......................................................... 20,483
2001.......................................................... 274
-------
Total minimum lease payments................................ $93,948
=======
</TABLE>
Total rent expense was approximately $579,348 and $538,683 in 1997 and 1998,
respectively.
8. Subsequent Event
On November 23, 1998, E-Systems Medical Electronics was purchased by eMed
Technologies Corporation for $3,200,000. The acquisition was funded by a
$2,200,000 note payable to Raytheon and $1,000,000 in cash.
F-24
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma statement of operations gives effect to
the acquisition by eMed Technologies Corporation ("eMed") of E-Systems Medical
Electronics, a division of Raytheon E-Systems, Inc., in a transaction accounted
for as a purchase. The unaudited pro forma statement of operations is based on
the individual statements of operations of eMed and E-Systems Medical
Electronics appearing elsewhere in this registration statement, and combines
the results of operations of eMed and of E-Systems Medical Electronics
(acquired by eMed as of November 23, 1998) for the year ended December 31, 1998
as if the acquisition occurred on January 1, 1998. The unaudited pro forma
statement of operations for the year ended December 31, 1998 should be read in
conjunction with the historical financial statements and notes thereto of eMed
and E-Systems Medical Electronics included elsewhere in this registration
statement.
The pro forma information is presented for illustrative purposes only and is
not indicative of the operating results that would have occurred had the
acquisition been consummated at the beginning of the period presented, nor is
it indicative of future operating results.
Pro Forma Combined Statement of Operations
Year ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
E-Systems
Medical Pro forma Pro forma
eMed Electronics Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue................. $12,594,167 $11,217,121 $(3,103,244)a $ 20,708,044
Cost of Revenue......... 8,976,139 9,928,411 (3,093,517)a 15,811,033
----------- ----------- ----------- ------------
Gross margin.......... 3,618,028 1,288,710 (9,727) 4,897,011
----------- ----------- ----------- ------------
Operating expenses:
Research and develop-
ment................. 2,361,430 3,365,301 -- 5,726,731
Sales and marketing... 3,498,169 2,599,950 -- 6,098,119
General and adminis-
trative.............. 2,722,340 1,323,836 7,704 b 4,053,880
----------- ----------- ----------- ------------
Total operating ex-
penses............. 8,581,939 7,289,087 7,704 15,878,730
----------- ----------- ----------- ------------
Loss from operations.... (4,963,911) (6,000,377) (17,431) (10,981,719)
Interest expense, net... (105,611) -- (321,056)c (426,667)
Other expense........... (43,432) (5,845) -- (49,277)
----------- ----------- ----------- ------------
Net loss.............. $(5,112,954) $(6,006,222) $ (338,487) $(11,457,663)
=========== =========== =========== ============
Pro forma basic and di-
luted net loss per
share.................. $ (4.88) -- -- $ (10.93)
Shares used in computing
pro forma basic
and diluted net loss per
share.................. 1,048,678 -- -- 1,048,678
</TABLE>
F-25
<PAGE>
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
The unaudited pro forma combined statement of operations gives effect to the
following pro forma adjustments necessary to reflect the acquisition as if it
had occurred on January 1, 1998:
a. Elimination of revenue and cost of revenue directly associated with
certain assets acquired by eMed as part of E-Systems Medical Electronics
and classified as assets held for sale by eMed at December 31, 1998.
These assets were subsequently sold in February 1999.
b. Additional amortization of goodwill on a straight-line basis over 10
years.
c. Increase in interest expense on debt incurred in connection with the
acquisition of E-Systems Medical Electronics. A change in the interest
rate on variable rate debt by 1/8% would not have a material effect on
the pro forma combined statement of operations.
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Prospective investors may rely only on the information contained in this
prospectus. Neither eMed nor any underwriter has authorized any other person
to provide prospective investors with different or additional information.
This prospectus is not an offer to sell nor is it seeking an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
The information contained in this prospectus is correct only as of the date of
this prospectus, regardless of the time of the delivery of this prospectus or
any sale of these securities.
---------------
TABLE OF CONTENTS
---------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 25
Management............................................................... 34
Certain Transactions..................................................... 43
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Legal Matters............................................................ 52
Experts.................................................................. 52
Where You Can Find Additional Information................................ 52
Index to Financial Statements............................................ F-1
</TABLE>
Dealer Prospectus Delivery Obligation:
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell, or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
eMed Technologies
Corporation
Common Stock
---------------
PROSPECTUS
---------------
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
---------------
SG Cowen
Wit Capital Corporation
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
Item Amount
---- -------
<S> <C>
Securities and Exchange Commission Registration Fee................. $15,985
National Association of Securities Dealers Filing Fee............... 6,250
Nasdaq National Market Listing Fee.................................. *
Blue Sky Fees and Expenses.......................................... *
Transfer Agent and Registrar Fees................................... *
Accounting Fees and Expenses........................................ *
Legal Fees and Expenses............................................. *
Printing Expenses................................................... *
Miscellaneous....................................................... *
-------
Total............................................................. $
*
=======
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers
The Registrant's Amended and Restated Certificate of Incorporation provides
that the Registrant's Directors shall not be liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that the exculpation from liabilities is not permitted
under the Delaware General Corporation Law as in effect at the time such
liability is determined. The Amended and Restated By-Laws provide that the
Registrant shall indemnify its directors to the full extent permitted by the
laws of the State of Delaware. Each of the Registrant's Directors has entered
into an agreement with the Registrant whereby the Registrant has agreed to
indemnify such Director to the full extent permitted by the laws of the State
of Delaware.
Item 15. Recent Sales of Unregistered Securities
The following information is furnished with regard to all Securities sold by
the Registrant within the past three years which were not registered under the
Securities Act.
(a) From August 1, 1996 to August 17, 1999, the Registrant issued a
total of 252,129 shares of common stock for an aggregate consideration of
$126,065 pursuant to the exercise of stock options and warrants by
employees, directors, consultants and their affiliates.
(b) In June 1997, the Registrant sold $1,500,000 in principal amount of
convertible subordinated notes for aggregate proceeds of $1,500,000. These
notes were issued to Delphi Ventures III, L.P., Seaflower Health and
Technology Fund, LLC and certain other private investors. These notes were
automatically convertible, upon the Registrant's sale of new equity
securities for gross proceeds of at least $1,500,000, into securities
having the same price and terms as the new equity securities. Purchasers of
the notes also received warrants to purchase an additional amount of the
new equity securities having an aggregate purchase price of 30% of the
amount of the purchaser's note, at the same price that such new equity
securities were issued to other investors. The notes had a maturity date of
October 31, 1997 and
II-1
<PAGE>
bore interest at the rate of 6% per annum. Accrued interest converted on
the same terms as the principal amount of the notes. In September 1997,
these notes were automatically converted into 1,384,460 shares of Series J
preferred stock at a conversion price of $1.10 per share of Series J
preferred stock. The warrants issued with the notes became warrants to
purchase 409,091 shares of Series J preferred stock at an exercise price of
$1.10 per share. The Series J preferred stock will be converted into
7,730,909 shares of common stock and the Series J warrants will become
warrants to purchase 409,091 shares of common stock upon the closing of
this offering.
(c) In September through December of 1997, the Registrant sold an
aggregate of 6,346,449 shares of Series J preferred stock (excluding the
shares issued upon the conversion of the notes described above) for
aggregate proceeds of $6,981,094. These shares were issued to Bedrock
Capital Partners, Pacific Venture Group, L.P., Bessemer Venture Partners IV
L.P., and certain other private investors.
(d) In July 1998, various investors entered into commitments with the
Registrant to purchase shares of Series K preferred stock for an aggregate
price of $2,500,000 if the Registrant notified them of its election to sell
the shares. The investors who made these commitments also received warrants
to purchase in the aggregate 483,333 shares of common stock at an exercise
price of $.01 per share as consideration for their commitments.
In January 1999, the Registrant elected to draw upon the initial
investors' commitments to purchase Series K preferred stock and sold
additional shares of Series K preferred stock together with warrants to
purchase additional shares of our common stock at an exercise price of $.01
per share to other investors. In the aggregate (including the securities
discussed in the preceding paragraph), the Registrant issued 2,500,000
shares of Series K preferred stock together with warrants to purchase
676,667 shares of common stock for proceeds of $3,500,000. These shares and
warrants were issued to Bedrock Capital Partners, Pacific Venture Group,
L.P., Delphi Ventures III, L.P., Seaflower Bioventure Fund II, LLC,
Bessemer Venture Partners IV L.P., and certain other private investors.
In May 1999, the Registrant sold 1,642,856 additional shares of Series K
preferred stock and warrants to purchase an additional 444,667 shares of
common stock for aggregate proceeds of $2,300,000. These shares and
warrants were issued to Zero Stage Capital VI, L.P. and certain other
private investors.
All of the above securities were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of the Securities and Exchange Commission promulgated
thereunder, as transactions by an issuer not involving a public offering.
Item 16. Exhibits and Financial Statement Schedules
The following is a list of exhibits filed as a part of this registration
statement.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1 Form of underwriting agreement.*
3.1 Form of Amended and Restated Certificate of Incorporation.*
3.2 Form of Amended and Restated By-Laws.*
4.1 Specimen Certificate for Common Stock.*
5 Opinion of Ropes & Gray.*
10.1 eMed 1994 Stock Plan.
10.2 Securities Purchase Agreement dated as of September 30, 1997 between
the Registrant and each of the investors named therein.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.3 Investors Rights Agreement dated as of September 30, 1997 among the
Registrant and each of the holders of the Company's Series J Preferred
Stock parties thereto.
10.4 Amendment No. 1 dated as of November 13, 1997 to the Investors Rights
Agreement.
10.5 Securities Purchase Agreement dated as of July 28, 1998 between the
Registrant and each of the investors named therein.
10.6 Amendment to Securities Purchase Agreement dated as of January 14,
1999.
10.7 Securities Purchase Agreement dated as of January 20, 1999 between the
Registrant and each of the investors named therein.
10.8 Amendment to the Securities Purchase Agreement dated as of May 7,
1999.
10.9 Registration Rights Agreement dated as of July 28, 1998 between the
Registrant and the parties named therein.
10.10 Acquisition Agreement dated as of November 23, 1998 by and between
Raytheon E-Systems, Inc. and the Registrant.
10.11 Commercial Lease as of September 26, 1997 by and between Hartwell
Group LLC and the Registrant.
10.12 Amendment 1 to Commercial Lease dated as of November 28, 1997.
10.13 Employment Agreement dated as of March 31, 1999 by and between Scott
S. Sheldon and the Registrant.
10.14 Employment Agreement dated as of April 30, 1999 by and between Howard
Pinsky and the Registrant.
10.15 Form of Director Indemnity Agreement.
10.16 Form of Director Work Product Agreement.
10.17 Form of Director Confidentiality Agreement.
10.18 Form of Common Stock Warrant.
10.19 Form of Series K Common Stock Warrant.
10.20 Form of Series J Preferred Warrant.
23.1 Consent of Ropes & Gray (Exhibit 5).*
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included on page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To Be Filed by Amendment
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts.
<TABLE>
<CAPTION>
Balance at Balance at
beginning of Charged to end of
Description period Operations Deductions period
- ----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Reserves and allowances
deducted from
asset accounts...............
Allowance for doubtful
accounts.................... $ -- 25,000 -- $ 25,000
Year ended December 31, 1997
Reserves and allowances
deducted from
asset accounts ..............
Allowances for doubtful
accounts ................... $25,000 10,000 -- $ 35,000
Year ended December 31, 1998
Reserves and allowances
dededucted from
asset accounts ..............
Allowances for doubtful
accounts ................... $35,000 460,000 (7,927)(1) $487,073
</TABLE>
- --------
(1) Uncollectible accounts written off.
II-3
<PAGE>
All other schedules are omitted because they are not applicable or the
required information is shown in the other Financial Statements or Notes
thereto.
Item 17. Undertakings
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the purchase agreements, certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lexington, MA on this
18th day of August 1999.
eMed Technologies Corporation
/s/Scott S. Sheldon
By: _________________________________
Scott S. Sheldon
Chief Executive Officer and
President
Power of Attorney
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes Scott S. Sheldon and Gary A. Lortie, jointly and
severally, with full power to each, to execute in the name and on behalf of
such person any amendment (including any post-effective amendment) to this
Registration Statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act) and to file the same, with exhibits thereto, and other
documents in connection therewith, making such changes in this Registration
Statement as the person(s) so acting deems appropriate, and appoints each of
such persons, each with full power of substitution, attorney-in-fact to sign
any amendment (including any post-effective amendment) to this Registration
Statement (or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act) and
to file the same, with exhibits thereto, and other documents in connection
therein.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Scott S. Sheldon President, Chief Executive August 18, 1999
______________________________________ Officer and Director
Scott S. Sheldon
/s/Gary A. Lortie Chief Financial Officer August 18, 1999
______________________________________
Gary A. Lortie
/s/James J. Bochnowski Director August 18, 1999
______________________________________
James J. Bochnowski
/s/ Thomas B. Neff Director August 18, 1999
______________________________________
Thomas B. Neff
/s/Thomas O. Pyle Director August 18, 1999
______________________________________
Thomas O. Pyle
/s/Michael Schmertzler Director August 18, 1999
______________________________________
Michael Schmertzler
/s/Donald E. Strange Director August 18, 1999
______________________________________
Donald E. Strange
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1 Form of underwriting agreement.*
3.1 Form of Amended and Restated Certificate of Incorporation.*
3.2 Form of Amended and Restated By-Laws.*
4.1 Specimen Certificate for Common Stock.*
5 Opinion of Ropes & Gray.*
10.1 eMed 1994 Stock Plan.
10.2 Securities Purchase Agreement dated as of September 30, 1997 between
the Registrant and each of the investors named therein.
10.3 Investors Rights Agreement dated as of September 30, 1997 among the
Registrant and each of the holders of the Company's Series J Preferred
Stock parties thereto.
10.4 Amendment No. 1 dated as of November 13, 1997 to the Investors Rights
Agreement.
10.5 Securities Purchase Agreement dated as of July 28, 1998 between the
Registrant and each of the investors named therein.
10.6 Amendment to Securities Purchase Agreement dated as of January 14,
1999.
10.7 Securities Purchase Agreement dated as of January 20, 1999 between the
Registrant and each of the investors named therein.
10.8 Amendment to the Securities Purchase Agreement dated as of May 7,
1999.
10.9 Registration Rights Agreement dated as of July 28, 1998 between the
Registrant and the parties named therein.
10.10 Acquisition Agreement dated as of November 23, 1998 by and between
Raytheon E-Systems, Inc. and the Registrant.
10.11 Commercial Lease as of September 26, 1997 by and between Hartwell
Group LLC and the Registrant.
10.12 Amendment 1 to Commercial Lease dated as of November 28, 1997.
10.13 Employment Agreement dated as of March 31, 1999 by and between Scott
S. Sheldon and the Registrant.
10.14 Employment Agreement dated as of April 30, 1999 by and between Howard
Pinsky and the Registrant.
10.15 Form of Director Indemnity Agreement.
10.16 Form of Director Work Product Agreement.
10.17 Form of Director Confidentiality Agreement.
10.18 Form of Common Stock Warrant.
10.19 Form of Series K Common Stock Warrant.
10.20 Form of Series J Preferred Warrant.
23.1 Consent of Ropes & Gray (Exhibit 5).*
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney (included on page II -5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To Be Filed by Amendment
<PAGE>
EXHIBIT 10.1
ACCESS RADIOLOGY CORPORATION
1994 STOCK PLAN
---------------
1. Purpose. The purpose of the ACCESS Radiology Corporation 1994 Stock
-------
Plan (the "Plan") is to encourage superior performance by key employees of
ACCESS Radiology Corporation (the "Company") and of any present or future parent
or subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"); (c) awards of stock in the Company ("Awards"); and
(d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. Administration of the Plan.
--------------------------
A. Board or Committee Administration. The Plan shall be administered
---------------------------------
by the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"); provided that the Plan shall be
administered to the extent required by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor
provision ("Rule 16b-3"), by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to the ratification of the grant or
authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and
<PAGE>
Awards and to make Purchases) Non-Qualified Options, Awards and
authorizations to make Purchases may be granted; (ii) determine the time or
times at which Options or Awards shall be granted or Purchases made; (iii)
determine the purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price specified in
paragraph 6; (iv) determine whether each Option granted shall be an ISO or
a Non-Qualified Option; (v) determine (subject to paragraph 7) the time or
times when each Option shall become exercisable, the conditions (if any)
under which such exercisability may be accelerated, and the duration of the
exercise period; (vi) extend the period during which outstanding Options
may be exercised; (vii) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options, Awards and
Purchases and the nature of such restrictions, if any, and (viii) interpret
the Plan and prescribe and rescind rules and regulations relating to it. If
the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not
treated as an ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted under it shall be
final unless otherwise determined by the Board. The Committee may from time
to time adopt such rules and regulations for carrying out the Plan as it
may deem advisable. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Stock Right granted under it.
B. Committee Actions. The Committee may select one of its members as
-----------------
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law); shall
be the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Subject to the provisions
--------------------------------------
of the first sentence of paragraph 2(A) above, if applicable, Stock Rights
may be granted to members of the Board. All grants of Stock
-2-
<PAGE>
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Consistent with the provisions of the first sentence of Paragraph
2(A) above, members of the Board who either (i) are eligible to receive
grants of Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the Plan or
the grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Stock Rights,
but any such member may be counted in determining the existence of a quorum
at any meeting of the Board during which action is taken with respect to
the granting to such member of Stock Rights.
3. Eligible Employees and Others. ISOs may be granted only to employees
-----------------------------
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation, or any member of the Company's Medical and Technical
Advisory Board. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
-----
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 4,950,000, subject to adjustment as provided in paragraph 13. If any Stock
Right granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares of Common
Stock subject to such Stock Right shall again be available for grants of Stock
Rights under the Plan. Shares of Common Stock underlying Stock Rights granted in
assumption of, or in substitution for, outstanding options or other rights
previously granted by a company acquired by the Company or with which the
Company combines shall not, except in the case of shares with respect to which
Stock Rights are granted to employees who are officers or directors of the
Company for purposes of Section 16 of the Exchange Act, be counted against
shares of Common Stock available for the grant of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be
------------------------
-3-
<PAGE>
granted under the Plan at any time on or after August 11, 1994 and prior to
August 10, 2004. The date of grant of a Stock Right under the Plan will be the
date specified by the Committee at the time it grants the Stock Right; provided,
however, that such date shall not be prior to the date on which the Committee
acts to approve the grant.
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. Price for Non-Qualified Options, Awards and Purchases. The
-----------------------------------------------------
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted, and the purchase price per share of stock granted
in any Award or authorized as a Purchase under the Plan shall in no event
be less than the minimum legal consideration required therefor under the
laws of any jurisdiction in which the Company or its successors in interest
may be organized.
B. Price for ISOs. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible employee
-----------------------------------------
may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior
to the date such Option is granted and
-4-
<PAGE>
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of
the Common Stock on the Nasdaq National Market, if the Common Stock is not
then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the
Common Stock is not reported on the Nasdaq National Market. If the Common
Stock is not publicly traded at the time an Option is granted under the
Plan, "fair market value" shall mean the fair value of the Common Stock as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at
arm's length.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
------------------
12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. Each Option shall be exercisable at such times and
-------
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the agreement granting each Option or otherwise. The
Committee may impose such conditions with respect to the exercise of
Options, including without limitation any relating to the application of
federal or state securities laws, as it may deem necessary or advisable.
B. Acceleration of Vesting. The Committee shall have the right to
-----------------------
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment
-5-
<PAGE>
of any Option granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph 16) if such
acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in paragraph 6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
-------------------------
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the
earlier of (a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into Non-
Qualified Options pursuant to paragraph 16. For purposes of this paragraph 9,
employment shall be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. Death; Disability.
-----------------
A. Death. If an ISO optionee ceases to be employed by the Company
-----
and all Related Corporations by reason of his or her death, any ISO owned
by such optionee may be exercised, to the extent otherwise exercisable on
the date of death, by the estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified expiration date of the
ISO or (ii) 180 days from the date of the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the
----------
Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her
on the
-6-
<PAGE>
date of termination of employment, for the number of shares for which he or
she could have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. Assignability. No Stock Right shall be assignable or transferable by
-------------
the grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The designation of a beneficiary by a
grantee does not constitute a transfer. Except as set forth in the previous
sentence, during the lifetime of a grantee each Stock Right shall be exercisable
only by such grantee.
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. In the event that the Committee determines that any
-----------
dividend or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust
-7-
<PAGE>
any or all of (i) the number of shares of Common Stock or other securities of
the Company (or number and kind of other securities or property) with respect to
which Stock Rights may be granted, (ii) the number of shares of Common Stock or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Stock Rights, and (iii) the grant or exercise
price with respect to any Stock Rights or, if deemed appropriate, make provision
for a cash payment to the holder of an outstanding Stock Right; provided, in
each case, that with respect to ISOs no such adjustment shall be authorized to
the extent that such authority would cause the Plan to violate Section 422(b)(1)
of the Code, as from time to time amended.
14. Means of Exercising Options. An Option (or any part or installment
---------------------------
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option (provided that any such shares
of stock acquired through exercise of options or otherwise as compensation from
the Company shall have been held for at least six months), (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of the exercise,
or (e) at the discretion of the Committee, by any combination of (a), (b), (c)
above. If the Committee exercises its discretion to permit payment of the
exercise price of an ISO by means of the methods set forth in clauses (b), (c),
(d) or (e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of an Option
shall not have the rights of a shareholder with respect to the shares covered by
such Option until the date of issuance of a stock certificate to such holder for
such shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
-8-
<PAGE>
15. Term and Amendment of Plan. This Plan was adopted by the Board on
--------------------------
August 11, 1994, subject, with respect to the validation of ISOs granted under
the Plan, to the approval of the Plan by the stockholders of the Company at the
next Meeting of Stockholders or, in lieu thereof, by written consent. If the
approval of stockholders is not obtained prior to August 11, 1995, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on August 10, 2004 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be materially increased (except by adjustment pursuant to paragraph
13); (b) the benefits accruing to participants under the Plan may not be
materially increased; (c) the requirements as to eligibility for participation
in the Plan may not be materially modified; (d) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (e) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. Conversion of ISOs into Non-Qualified Options. The Committee, at
---------------------------------------------
the written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of any portion of such ISOs. At the time
of such conversion, the Committee (with the consent of the optionee) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into
-9-
<PAGE>
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action.
17. Application of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
----------------------------------------------
granted under the Plan, each optionee agrees to notify the Company in writing,
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a
--------------------------------------
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of any Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such arrangement may include payment by the grantee in cash or
by check of the amount of the withholding taxes or, to the extent (if any) of
minimum legal withholding requirements and at the discretion of the Committee,
by the grantee's delivery of previously held shares of Common Stock (provided
that any such shares of stock acquired through exercise of options or otherwise
as compensation from the Company shall have been held for at least six months)
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of an Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
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<PAGE>
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing Options shall be governed by the laws of Delaware, or the
laws of any other jurisdiction in which the Company or its successors in
interest may be organized.
22. Cancellation. Any provisions of this Plan or any Stock Right to the
------------
contrary notwithstanding, the Committee may cause any Stock Right granted
hereunder to be cancelled in consideration of a cash payment or alternative
Stock Right granted to the holder of such cancelled Stock Right equal in value
to the fair market value of such cancelled Stock Right.
23. No Rights to Awards. No employee or other person eligible to receive
-------------------
Stock Rights shall have any claim to be granted any Stock Rights, and there is
no obligation for uniformity of treatment of persons eligible to receive Stock
Rights or holders or beneficiaries of Stock Rights. The terms and conditions of
Stock Rights need not be the same with respect to each recipient.
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<PAGE>
EXHIBIT 10.2
ACCESS RADIOLOGY CORPORATION
SERIES J PREFERRED STOCK PURCHASE AGREEMENT
SEPTEMBER 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. Purchase And Sale Of Stock....................................................... -1-
1.1 Sale And Issuance Of Series J Preferred Stock..................... -1-
1.2 Closing........................................................... -1-
2. REPRESENTATIONS AND WARRANTEES OF THE COMPANY.................................... -2-
2.1 Organization; Good Standing; Qualification........................ -2-
2.2 Authorization..................................................... -3-
2.3 Valid Issuance Of Preferred And Common Stock...................... -3-
2.4 Governmental Consents............................................. -3-
2.5 Capitalization And Voting Rights.................................. -3-
2.6 Subsidiaries...................................................... -4-
2.7 Contracts And Other Commitments................................... -5-
2.8 Related Party Transactions........................................ -5-
2.9 Registration Rights............................................... -5-
2.10 Clearances, Approvals, Etc........................................ -6-
2.11 Compliance With Other Instruments................................. -6-
2.12 Litigation........................................................ -6-
2.13 Disclosure........................................................ -6-
2.14 Offering.......................................................... -7-
2.15 Title To Property And Assets; Leases.............................. -7-
2.16 Financial Statements.............................................. -7-
2.17 Changes........................................................... -8-
2.18 Intangibles....................................................... -9-
2.19 Employees; Employee Compensation.................................. -9-
2.20 Tax Returns, Payments, And Elections.............................. -10-
2.21 Insurance......................................................... -10-
2.22 Environmental And Safety Laws..................................... -11-
2.23 Minute Books...................................................... -11-
3. Representations And Warranties of The Investors.................................. -11-
3.1 Authorization..................................................... -11-
3.2 Purchase Entirely For Own Account................................. -11-
3.3 Reliance Upon Investors' Representations.......................... -11-
3.4 Receipt Of Information............................................ -12-
3.5 Investment Experience............................................. -12-
3.6 Accredited Investor............................................... -12-
3.7 Restricted Securities............................................. -12-
</TABLE>
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<TABLE>
<S> <C>
4. Conditions Of Investors' Obligations At Closing.................................. -12-
4.1 Representations And Warranties.................................... -12-
4.2 Performance....................................................... -13-
4.3 Qualifications.................................................... -13-
4.4 Proceedings And Documents......................................... -13-
4.5 Board Of Directors................................................ -13-
4.6 Opinions Of Counsel............................................... -13-
4.7 Investors Rights Agreement........................................ -13-
4.8 Officer's Certificate............................................. -13-
4.9 Good Standing Certificates........................................ -13-
5. Conditions of the Company's Obligations at Closing............................... -14-
5.1 Representations And Warranties.................................... -14-
5.2 Performance....................................................... -14-
5.3 Qualifications.................................................... -14-
5.4 Proceedings And Documents......................................... -14-
5.5 Investors Rights Agreement........................................ -14-
6. Miscellaneous.................................................................... -14-
6.1 Governing Law..................................................... -14-
6.2 Survival.......................................................... -14-
6.3 Successors And Assigns............................................ -15-
6.4 Severability...................................................... -15-
6.5 Amendment And Waiver.............................................. -15-
6.6 Delays Or Omissions............................................... -15-
6.7 Notices........................................................... -15-
6.8 Attorneys' Fees................................................... -16-
6.9 Titles And Subtitles.............................................. -16-
6.10 Counterparts...................................................... -16-
6.11 Entire Agreement.................................................. -16-
6.12 Finder's Fees..................................................... -16-
6.13 Expenses.......................................................... -16-
</TABLE>
Exhibits:
A Schedule of Investors
B Restated Certificate
C Schedule of Exceptions
D Investors Rights Agreement
ii
<PAGE>
ACCESS RADIOLOGY CORPORATION
SERIES J PREFERRED STOCK PURCHASE AGREEMENT
This Series J Preferred Stock Purchase Agreement (this "Agreement") is made
as of September 30, 1997 by and between Access Radiology Corporation, a Delaware
corporation (the "Company"), and each of the persons and entities listed on
Exhibit A (individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. Purchase And Sale Of Stock.
1.1 Sale And Issuance Of Series J Preferred Stock.
(a) The Company will adopt and file with the Secretary of State of
the State of Delaware on or before the Initial Closing (as defined in Section
1.2(a)) an Amended and Restated Certificate of Incorporation in the form
attached hereto as Exhibit B (the "Restated Certificate").
(b) On the terms and subject to the conditions of this Agreement,
each Investor will purchase and the Company will sell and issue to each Investor
that number of shares of the Company's Series J Preferred Stock set forth
opposite each Investor's name on Exhibit A at a purchase price of $1.10 per
share. The Series J Preferred Stock will have the rights, preferences,
privileges and restrictions set forth in the Restated Certificate. The
obligations of the Investors under this Agreement are several and not joint.
1.2 Closing.
(a) The purchase and sale of the Series J Preferred Stock, by the
Investors listed on Exhibit A as of the date hereof, will take place at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California at 10:00 a.m. on the date hereof or at such other time and place as
the Company and Bedrock Capital Partners I, L.P. mutually agree, either orally
or in writing (which time and place are designated as the "Initial Closing"). In
addition, the purchase and sale of the Series J Preferred Stock by and to the
Additional Investors (as defined in Section 1.3) in accordance with Section 1.3
will take place at the offices of the Company or at such other places and at
such times as the Company and Additional Investors mutually agree, either orally
or in writing (together with the Initial Closing, each such time and place is
designated as a "Closing").
(b) At each Closing, the Company will deliver to each Investor a
certificate representing the shares of Series J Preferred Stock that such
Investor is purchasing at such
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<PAGE>
Closing against payment of the purchase price therefor by check, wire transfer
or as otherwise set forth on Exhibit A.
1.3 Subsequent Sale of Series J Preferred Stock.
If less than all of the authorized number of shares of Series J Preferred
Stock are sold at the Initial Closing, then, subject to the terms and conditions
of this Agreement, the Company may sell, on or before the 45th day after the
date hereof, up to the balance of the authorized but unissued Series J Preferred
Stock to such persons as the Board of Directors of the Company may determine at
the same price per share as the Series J Preferred Stock purchased and sold at
the Initial Closing. Any such sale shall be made upon the same terms and
conditions as those contained herein, and such persons or entities ("Additional
Investors") shall become parties to this Agreement and the Investors Rights
Agreement (as defined in Section 2.1), and will be an Investor for all purposes
hereunder and thereunder.
2. REPRESENTATIONS AND WARRANTEES OF THE COMPANY.
The Company hereby represents and warrants to each Investor that, except as
set forth on the schedule of exceptions attached as Exhibit C (the "Schedule of
Exceptions"):
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on the
business, properties or financial condition of the Company and its Subsidiaries
(as defined in Section 2.6) taken as a whole (a "Material Adverse Effect"). The
Company has no material assets or properties owned or leased by it situated in,
or employees or representatives authorized to bind it by contract resident in
jurisdictions other than Massachusetts, Georgia and Texas. The Company's sales
are made F.O.B. at the Company's principal offices in Massachusetts. Each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, and is duly qualified and
authorized to transact business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect. Each of the Company and its Subsidiaries has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as presently proposed to be
conducted. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and at each Closing will have all requisite
corporate power and authority to execute and deliver the Investors Rights
Agreement attached hereto as Exhibit D (the "Investors Rights Agreement"), to
issue and sell the Series J Preferred Stock pursuant to this Agreement and the
Common Stock (as defined in Section 2.5) issuable upon conversion thereof and to
carry out the provisions of this Agreement, the Investors Rights Agreement and
the Restated Certificate.
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<PAGE>
2.2 Authorization. All corporate action on the part of the Company and its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Investors Rights Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Series J Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the Initial Closing.
This Agreement and the Investors Rights Agreement, when executed and delivered,
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
2.3 Valid Issuance Of Preferred And Common Stock. The Series J Preferred
Stock that is being purchased by the investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
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 J Preferred Stock being purchased under this Agreement at each
Closing will have been duly and validly reserved for issuance and, upon issuance
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 under 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 or any of its Subsidiaries in
connection with the Company's execution, delivery or performance of this
Agreement or the Investors Rights Agreement, the offer, sale or issuance of the
Series J Preferred Stock by the Company or the issuance of Common Stock upon
conversion of the Series J Preferred Stock, except (a) the filing of the
Restated Certificate with the Secretary of State of the State of Delaware and
(b) such filings as have been made prior to the Initial Closing, except 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"), and such post-closing filings as may be required under applicable state
securities laws, all of which will be timely filed within the applicable periods
therefor.
2.5 Capitalization And Voting Rights. The authorized capital of the
Company will consist immediately prior to the Initial Closing of:
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,081,834 shares are issued and outstanding.
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of
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<PAGE>
which are issued and outstanding); (2) 450 of which have been designated as
Series C Preferred Stock (all of which are issued and outstanding); (3) 345 of
which have been designated as Series E Preferred Stock (344.39 of which are
issued and outstanding); (4) 1,000 of which have been designated as Series F
Preferred Stock (all of which are issued and outstanding); (5) 816 of which have
been designated as Series G Preferred Stock (815.87 of which are issued and
outstanding); (6) 400 of which have been designated as Series H Preferred Stock
(all of which are issued and outstanding); and (7) 7,230,000 of which have been
designated as Series J Preferred Stock (none of which will be issued or
outstanding immediately prior to the Initial Closing and up to 6,820,909 of
which will be sold pursuant to this Agreement).
(c) The outstanding shares of Common Stock and Preferred Stock are owned
by the stockholders and in the numbers specified in Section 2.5 of the Schedule
of Exceptions.
(d) The outstanding shares of Common Stock and Preferred Stock have been
duly authorized and validly issued, are fully paid and nonassessable and were
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.
(e) Except for (1) the conversion privileges of the Preferred Stock, (2)
the rights provided in the Investors Rights Agreement and (3) currently
outstanding options to purchase 1,267,657 shares of Common Stock granted to
employees pursuant to the Company's 1994 Stock Plan (the "Option Plan") and
currently outstanding options to purchase 59,228 shares of Common Stock granted
to employees outside of the Option Plan, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. In addition
to the aforementioned options, the Company has reserved an additional 1,582,343
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan. The Company is not a party or subject to
any agreement or understanding, and to 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 of the
Company or the voting by a director of the Company.
2.6 Subsidiaries. Set forth in Section 2.6 of the Schedule of Exceptions
is a description of each corporation owned by the Company (collectively, the
"Subsidiaries") and the security ownership thereof. The Company does not own or
control, directly or indirectly, any interest in any other corporation,
partnership, limited liability company, association or other business entity.
The Company is not a participant in any joint venture, partnership or similar
arrangement. All of the outstanding equity securities (including securities or
instruments exercisable for or convertible into equity securities) of each of
the Subsidiaries are owned by the Company beneficially and of record and are not
subject to any mortgages, liens, claims or encumbrances. There are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of
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<PAGE>
any kind for the purchase or acquisition from the Company or any of the
Subsidiaries of any securities of any of the Subsidiaries.
2.7 Contracts And Other Commitments. Neither the Company nor any of its
Subsidiaries has or is bound by any contract, agreement, lease or commitment,
written or oral, absolute or contingent, other than (a) contracts for the
purchase of supplies and services that were entered into in the ordinary course
of business, do not involve more than $50,000 and do not extend for more than
one year beyond the date hereof, (b) sales contracts entered into in the
ordinary course of business and (c) contracts terminable at will by the Company
on no more than 30 days' notice without cost or liability to the Company or one
of its Subsidiaries that are not material to the conduct of the business of the
Company and its Subsidiaries. For the purpose of this Section 2.7, employment
and consulting contracts, contracts with labor unions, license agreements and
any other agreements relating to the acquisition or disposition of Intangibles
(as defined in Section 2.18) other than standard end-user license agreements
will not be considered to be contracts entered into in the ordinary course of
business.
2.8 Related Party Transactions. No employee, officer, consultant,
stockholder or director of the Company or any of its Subsidiaries or member of
his or her immediate family is indebted to the Company, nor is the Company or
any of its Subsidiaries indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than for (a) payment of salary for
services rendered, (b) reimbursement for reasonable expenses incurred on behalf
of the Company or any of its Subsidiaries and (c) other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under the Option Plan). To the Company's knowledge
(without making an investigation as to persons who are not officers or
directors), none of such persons has any direct or indirect ownership interest
in any firm or corporation with which the Company or any of its Subsidiaries is
affiliated or with which the Company or any of its Subsidiaries has a business
relationship, or any firm or corporation that competes with the Company or any
of its Subsidiaries, except that employees, stockholders, consultants, officers
or directors of the Company or any of its Subsidiaries and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company or any of its Subsidiaries. To the Company's knowledge, no
officer, director, consultant, employee or stockholder of the Company or any of
its Subsidiaries or any member of his or her immediate family is, directly or
indirectly, interested in any material contract with the Company or any of its
Subsidiaries (other than such contracts as relate to any such person's
employment with the Company or one of its Subsidiaries or ownership of capital
stock or other securities of the Company).
2.9 Registration Rights. Except as provided in the Investors Rights
Agreement, the Company is presently not under any obligation and has not granted
any rights to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
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<PAGE>
2.10 Clearances, Approvals, Etc. The Company and its Subsidiaries have all
clearances, approvals, franchises, permits, licenses and any similar authority
including, without limitation, all approvals and clearances from the U.S. Food
and Drug Administration necessary for the conduct of their business as now being
conducted, and the Company believes they can obtain, without undue burden or
expense, any similar authority for the conduct of the business of the Company
and its Subsidiaries as presently proposed to be conducted. Neither the Company
nor any of its Subsidiaries is in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
2.11 Compliance With Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (a) any provision of its certificate
of incorporation or bylaws, (b) any provision of any mortgage, indenture,
agreement, instrument or contract to which it is a party or by which it is bound
or (c) to the best of the Company's knowledge, any judgment, order, writ,
decree, statute, rule, regulation or restriction applicable to it including,
without limitation, the U.S. Federal Food, Drug and Cosmetic Act, as amended,
and regulations promulgated thereunder, which default or violation has had or
could reasonably be expected to have a Material Adverse Effect. 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 material conflict
with or constitute, with or without the passage of time or giving of notice,
either a material default under any such provision or an event that results in
the creation of any material lien, charge or encumbrance upon any assets of the
Company or any of its Subsidiaries or the suspension, revocation, impairment,
forfeiture or nonrenewal of any material franchise, permit, license or similar
authority applicable to the Company or any of its Subsidiaries, any of their
business or operations or any of their assets or properties.
2.12 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
or any of its Subsidiaries 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 a Material
Adverse Effect or in any change in the current equity ownership of the Company.
Neither the Company nor any of its Subsidiaries is a party to or, to the best of
its knowledge, named in or subject to any order, writ, injunction, judgment or
decree of any court, government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company currently intends to initiate.
2.13 Disclosure. The Company has provided each Investor with all
information reasonably available to it without undue expense that such Investor
has requested in writing for deciding whether to purchase the Series J Preferred
Stock. To the best of the Company's knowledge after reasonable investigation,
neither this Agreement nor the Investors Rights Agreement nor the other written
materials made or delivered in connection with the transactions contemplated
hereby, taken as a whole, contain any untrue statement of a material fact or
omit to
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<PAGE>
state a material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made or otherwise, not
misleading.
2.14 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 J Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, 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.
2.15 Title To Property And Assets; Leases. Except for (a) liens reflected
in the Financial Statements (as defined in Section 2.16), (b) liens for current
taxes not yet due or payable, (c) 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, (d) liens in respect of
pledges or deposits under workers' compensation laws or similar legislation or
(e) minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use of such property, the Company and its
Subsidiaries have good and marketable title to their property and assets free
and clear of all mortgages, liens, claims and encumbrances. With respect to the
property and assets they lease, the Company and its Subsidiaries are in
compliance with such leases and, to the best of the Company's knowledge, hold a
valid leasehold interest free of any mortgages, liens, claims or encumbrances,
subject to clauses (a)-(d) above.
2.16 Financial Statements. The Company has delivered to each Investor its
audited consolidated financial statements (balance sheet and profit and loss
statement, statement of stockholders' equity and statement of cash flows
including notes thereto) at December 31, 1996 and for the fiscal years then
ended and its unaudited financial statements (balance sheet and profit and loss
statement and statement of cash flows) at June 30, 1997 and for the six months
then ended (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 the unaudited
Financial Statements omit notes thereto required by generally accepted
accounting principles. The Financial Statements fairly present the financial
condition and operating results of the Company and each of the Subsidiaries on a
consolidated basis as of the dates and for the periods indicated therein
(subject in the case of unaudited financial statements to normal year end
adjustments). Except as set forth in the Financial Statements, neither the
Company nor any of its Subsidiaries has any material liabilities, contingent or
otherwise, other than (a) liabilities incurred in the ordinary course of
business subsequent to June 30, 1997 and (b) 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 that in both cases, individually or in the aggregate, are not
material to the business, properties or financial condition of the Company and
its Subsidiaries, taken as a whole. Except as disclosed in the Financial
Statements, neither the Company nor any of its Subsidiaries is a guarantor or
indemnitor of any indebtedness of any other person or entity. Each of the
Company and its Subsidiaries maintains and will continue to
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maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.17 Changes. Since June 30, 1997 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries from that reflected
in the Financial Statements, except changes in the ordinary course of business
that have not had a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c) any waiver or compromise by the Company or any of its
Subsidiaries 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 of its Subsidiaries, except
to the extent such satisfaction or discharge will not have a Material Adverse
Effect;
(e) any material change to a material contract or arrangement by
which the Company or any of its Subsidiaries or any of their assets is bound or
subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, consultant, director or stockholder of the Company
or any of its Subsidiaries;
(g) any sale, assignment or transfer of any material Intangibles of
the Company or any of its Subsidiaries;
(h) any resignation or termination of employment of any key employee
or key consultant of the Company or any of its Subsidiaries;
(i) any receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or any of its
Subsidiaries;
(j) any mortgage, lien, claim, encumbrance, pledge or security
interest created by the Company or any of its Subsidiaries with respect to any
of its material properties or assets, except liens for taxes not yet due or
payable;
(k) any declaration, setting aside or payment of any dividend or
other distribution of the Company's assets in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock by the Company;
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(l) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to have a Material Adverse Effect;
or
(m) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.17.
2.18 Intangibles. To the best of its knowledge, the Company and its
Subsidiaries own or possess sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes (collectively, "Intangibles") necessary for
their business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. Except for standard end-
user license agreements and licenses set forth in Section 2.18 of the Schedule
of Exceptions (the "Material Licenses"), there are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
or any of its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the Intangibles of any other person or
entity. To the Company's knowledge, each Material License is valid and in full
force and effect, and is enforceable by the Company or one of its Subsidiaries
in accordance with its terms. To the Company's knowledge, no person or entity
has violated or breached, or declared or committed any default under, any
Material License. To the Company's knowledge, no event has occurred, and no
circumstance or condition exists, that might (with or without notice or lapse of
time) (a) result in a violation or breach of any of the provisions of any
Material License, (b) give any person or entity the right to declare a default
or exercise any remedy under any Material License, (c) give any person or entity
the right to accelerate the maturity or performance of any Material License or
(d) give any person or entity the right to cancel, terminate or modify any
Material License. Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated or breached any provision of a Material License or misappropriated or
by conducting its business as proposed would misappropriate any of the
Intangibles of any other person or entity.
2.19 Employees; Employee Compensation. To the best of the Company's
knowledge, there is no strike, labor dispute or union organization activities
pending or threatened between the Company or any of its Subsidiaries and any of
their employees. None of the employees of the Company or any of its Subsidiaries
belongs to any union or collective bargaining unit. To the best of the Company's
knowledge, the Company and its Subsidiaries have complied in all material
respects with all applicable state and federal equal opportunity and other laws
related to employment. To the best of the Company's knowledge, no employee of
the Company or any of its Subsidiaries 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 any such employee with the Company or any of its Subsidiaries, or any other
party because of the nature of the business conducted or presently proposed to
be conducted by the Company or any of its Subsidiaries or to the use by the
employee of his or her best efforts with respect to such business. Neither the
execution nor delivery of this Agreement or the Investor Rights Agreement nor
the carrying on of the business of the Company and its
-9-
<PAGE>
Subsidiaries by their employees nor the conduct of such business as proposed
will, to the Company's knowledge, 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 of its Subsidiaries is a party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan (other than the Option Plan), profit sharing plan,
retirement agreement or other employee compensation agreement. The Company is
not aware that any officer or key employee or consultant, or that any group of
key employees or consultants, of the Company or any of its Subsidiaries intends
to terminate their employment or service with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment or service of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each employee of the Company or any of its Subsidiaries is
terminable at the will of the employer.
2.20 Tax Returns, Payments, And Elections. The Company and each of its
Subsidiaries have timely filed all tax returns and reports (federal, foreign,
state and local) as required by law. These returns and reports are true and
correct in all material respects. The Company and each of its Subsidiaries have
paid all takes and other assessments due, except those contested in good faith.
The provision for taxes as shown in the Financial Statements is adequate for
taxes due or accrued as of the dates thereof. Neither the Company nor any of its
Subsidiaries has elected pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation, or amortization) that
would have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has had any tax deficiency proposed or assessed against it or has
executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the income tax returns of
the Company or any of its Subsidiaries and none of their state income or
franchise tax or sales or use tax returns has ever been audited by governmental
authorities . Since the end of the Company's last fiscal year, the Company and
its Subsidiaries have made adequate provisions on its books of account for all
taxes, assessments and governmental charges with respect to their business,
properties and operations. The Company and its Subsidiaries have withheld or
collected from each payment made to each of its 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 depositaries.
2.21 Insurance. The Company and its Subsidiaries have in full force and
effect fire and casualty insurance policies sufficient in amount (subject to
reasonable deductibles) to allow them to replace any properties that might be
damaged or destroyed, the loss of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. The Company and its
Subsidiaries have in full force and effect products liability and errors and
omissions insurance in amounts customary for companies similarly situated.
-10-
<PAGE>
2.22 Environmental And Safety Laws. To the Company's knowledge, neither
the Company nor any of its Subsidiaries is in violation of any applicable
statute, law or regulation relating to the environment or occupational health
and safety, which violation has had or could reasonably be expected to have a
Material Adverse Effect. To the Company's knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law,
or regulation.
2.23 Minute Books. The copy of the minute books of the Company provided to
Cooley Godward LLP contains minutes of all meetings of directors and
stockholders and all actions by written consent without a meeting by the
directors and stockholders since the date of incorporation and accurately
reflects all actions by the directors (and any committee of directors) and
stockholders with respect to all transactions referred to in such minutes in all
material respects.
3. Representations And Warranties Of The Investors.
Each Investor hereby represents and warrants to the Company that:
3.1 Authorization. Such Investor has full power and authority to enter
into this Agreement and the Investors Rights Agreement, and this Agreement and
the Investors Rights Agreement, when executed and delivered, will constitute
valid and legally binding obligations of such Investor.
3.2 Purchase Entirely For Own Account. The Series J Preferred Stock to be
purchased by such Investor and 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. Such Investor does not have any contract, undertaking,
agreement or arrangement with any person or entity to sell, transfer or grant
participations to such person or to any third party with respect to any of the
Securities.
3.3 Reliance Upon Investors' Representations. Such Investor understands
that the Series J Preferred Stock is not, and any Common Stock acquired on
conversion thereof at the time of issuance may not be, registered under the
Securities Act on the ground that the sale provided for in this Agreement and
the issuance of 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. Such Investor realizes that the basis for the exemption may not be
present if, notwithstanding such representations, the Investor has in mind
merely acquiring shares of the Series J Preferred Stock for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. Such Investor has no such intention.
-11-
<PAGE>
3.4 Receipt Of Information. Such Investor believes it has received all
the information such Investor considers necessary or appropriate for deciding
whether to purchase the Series J Preferred Stock. 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 J 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. Such Investor is experienced in evaluating and
investing in private placement transactions of securities of companies in a
similar stage of development and acknowledges that such Investor is able to fend
for 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 J Preferred Stock. If other than an individual, such Investor has not
been organized for the purpose of acquiring the Series J Preferred Stock.
3.6 Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act.
3.7 Restricted Securities. Such Investor understands that the Securities
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 Securities or an available
exemption from registration under the Securities Act, the Securities must be
held indefinitely. In particular, such Investor is aware that the Securities 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.
4. Conditions Of Investors' Obligations At Closing.
The obligations of each Investor under Section 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of such Investor's purchase
of each of the following conditions, the waiver of which will not be effective
against any Investor who does not consent in writing thereto:
4.1 Representations And Warranties. The representations and warranties of
the Company contained in Section 2 will be true on and as of such Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
-12-
<PAGE>
4.2 Performance. The Company will 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 such Closing.
4.3 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series J Preferred Stock pursuant to this Agreement will be duly obtained and
effective as of such Closing, except for the filing of a Form D pursuant to
Regulation D promulgated under the Securities Act and for the filing of any
required state securities or blue sky filings.
4.4 Proceedings And Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Initial Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to Cooley Godward LLP, which will have received all such counterpart original
and certified or other copies of such documents as it may reasonably request.
4.5 Board Of Directors. Effective as of the Initial Closing, the
directors of the Company will be James Bochnowski, Thomas Neff, Thomas Pyle,
Michael Schmertzler, Scott Sheldon, Donald Strange and Dr. Jason Rosenbluth.
4.6 Opinions Of Counsel. Each Investor purchasing on the date hereof will
have received from Ropes & Gray, corporate counsel for the Company, an opinion,
dated the date of the Initial Closing, in form and substance satisfactory to
Cooley Godward LLP.
4.7 Investors Rights Agreement. The Company and each Investor will have
entered into the Investors Rights Agreement.
4.8 Officer's Certificate. The President of the Company will have
delivered to each Investor purchasing on the date hereof a certificate, dated as
of the Initial Closing, to the effect that the conditions specified in Sections
4.1, 4.2, 4.3 and 4.5 have been fulfilled with respect to the Initial Closing.
4.9 Good Standing Certificates. The Company will have delivered to Cooley
Godward LLP good standing certificates, dated as of the Initial Closing, from
each jurisdiction in the United States in which the ownership of its property or
the conduct of its business requires qualification as a foreign corporation and
where the failure to so qualify would have a Material Adverse Effect.
-13-
<PAGE>
5. Conditions Of The Company's Obligations At Closing.
The obligations of the Company to each Investor under Section 1.1(a) of
this Agreement are subject to the fulfillment on or before the Closing of such
Investor's purchase 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 will be true on and as of such Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
5.2 Performance. The Investors will have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before such Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series J Preferred Stock pursuant to this Agreement will be duly obtained and
effective as of such Closing.
5.4 Proceedings And Documents. All corporate and other proceedings in
connection with the transactions completed at such Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to Ropes
& Gray, which will have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.
5.5 Investors Rights Agreement. The Company and each Investor will have
entered into the Investors Rights Agreement.
6. Miscellaneous.
6.1 Governing Law. This Agreement will 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.
6.2 Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Investor and for two
years after the closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate delivered by or on behalf of
the Company pursuant hereto at the Initial Closing in connection with the
transactions contemplated hereby will be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
-14-
<PAGE>
6.3 Successors And Assigns. Except as otherwise expressly provided herein,
the provisions hereof will inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
6.4 Severability. In case any provision of this Agreement is invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
6.5 Amendment And Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least 66 2/3% of the Series J Preferred Stock sold hereunder.
(b) Except as otherwise expressly provided, (1) the obligations of
the Company and the rights of the Investors under this Agreement may be waived
by any Investor only in writing and for all Investors only with the written
consent of the holders of at least 66 2/3% of the Series J Preferred Stock sold
hereunder, and (2) the obligations of the Investors and the rights of the
Company under this Agreement may be waived only with the written consent of the
Company.
6.6 Delays Or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party hereto upon any breach, default or noncompliance
of any other party under this Agreement will impair any such right, power or
remedy, nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on the part of any party hereto of any breach, default or
noncompliance under the Agreement or any waiver on such Investor's part of any
provisions or conditions of this Agreement must be in writing and will be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law or otherwise afforded to the
parties hereto, will be cumulative and not alternative.
6.7 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party to
be notified at the address as set forth on the signature pages hereof or at such
other address as such party may designate by 10 days' advance written notice to
the other parties hereto.
-15-
<PAGE>
6.8 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
6.9 Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
6.11 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party will 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.
6.12 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 will indemnify and hold harmless the Company from any
liability for any 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 will 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.
6.13 Expenses. Irrespective of whether the Initial Closing is effected,
the Company will pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Initial Closing is effected, the Company will, at the Initial Closing, reimburse
the reasonable fees of Cooley Godward LLP and will, upon receipt of a reasonably
detailed bill therefor, reimburse the reasonable out-of-pocket expenses of such
counsel.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
The parties have executed this Agreement as of the date first above written.
Access Radiology Corporation
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
Bedrock Capital Partners I, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
Bedrock Capital Partners Side-By-Side, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
SIGNATURE PAGE TO SERIES J PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
VBW Partners, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Seaflower Health and Technology
Fund, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
J&L Sherblom Family, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredit Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO SERIES J PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
ICD, Ltd.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Guadamur LTD.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO SERIES J PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp. #2
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO SERIES J PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Gole Inc. A
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO SERIES J PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Pacific Venture Group, L.P.
By: PVG Equity Partners, L.L.C
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
PVG Associates, L.P.
By: PVG Equity Partners, L.L.C.
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
Delphi Ventures III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Delphi BioInvestments III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
<PAGE>
Exhibit A
Schedule of Investors
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Number of Shares of
Series J Preferred
Total Stock Purchased
Investor Name Investment*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bedrock Capital Partners I, L.P. $1,800,000.40 1,636,364
- ----------------------------------------------------------------------------------------------------------------
Bedrock Capital Partners Side-By-Side, L.P. 199,999.80 181,818
- ----------------------------------------------------------------------------------------------------------------
Pacific Venture Group, L.P. 2,865,660.60 2,605,146
- ----------------------------------------------------------------------------------------------------------------
PVG Associates, L.P. 134,339.70 122,127
- ----------------------------------------------------------------------------------------------------------------
Delphi BioInvestments III, L.P. 9,440.10 8,582
- ----------------------------------------------------------------------------------------------------------------
Delphi Ventures III, L.P. 524,255.48 476,596
- ----------------------------------------------------------------------------------------------------------------
J&L Sherblom Family, LLC 76,282.19 69,347
- ----------------------------------------------------------------------------------------------------------------
Privat Kredir Bank 101,561.64 92,329
- ----------------------------------------------------------------------------------------------------------------
Pictet Bank 101,479.45 92,254
- ----------------------------------------------------------------------------------------------------------------
Pictet Bank 101,512.33 92,284
- ----------------------------------------------------------------------------------------------------------------
ICD, Ltd. 50,608.22 46,007
- ----------------------------------------------------------------------------------------------------------------
Guadamur Ltd. 101,594.52 92,359
- ----------------------------------------------------------------------------------------------------------------
Privat Kredir Bank 50,904.11 46,276
- ----------------------------------------------------------------------------------------------------------------
Rigel Investment Corp. 50,180.82 45,619
- ----------------------------------------------------------------------------------------------------------------
Rigel Investment Corp. #2 50,180.82 45,619
- ----------------------------------------------------------------------------------------------------------------
Privat Kredir Bank 101,561.64 92,329
- ----------------------------------------------------------------------------------------------------------------
Gole Inc. A 50,780.82 46,164
- ----------------------------------------------------------------------------------------------------------------
TOTALS 6,522,907.04 5,929,915
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Assumes conversion of certain convertible notes on September 30, 1997.
A-1
<PAGE>
EXHIBIT 10.3
INVESTORS RIGHTS AGREEMENT
--------------------------
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") is made as of September
30, 1997 by and among ACCESS RADIOLOGY CORPORATION, a Delaware corporation (the
"Company"), and the undersigned holders of the Company's Series J Preferred
Stock (individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. GENERAL.
1.1 Definitions. As used in this Agreement, the following terms will have
the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of this
Agreement.
(c) "Equity Securities" means (1) any Common Stock, Preferred Stock or
other equity security of the Company, (2) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock or other equity
security of the Company (including any option to purchase such a convertible
security), (3) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, Preferred Stock or other equity security of the
Company or (4) any such warrant or right.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Holder" means any person owning of record Registrable Securities
or any assignee of record of such Registrable Securities in accordance with
Section 2.10 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(g) "Initiating Holders" means the Holders of at least 30% of the
Registrable Securities then outstanding.
(h) "Investor" has the meaning set forth in the first paragraph of
this Agreement.
1
<PAGE>
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company in which the offering price per share is at least
$3.00 and the aggregate offering price to the public is in excess of
$15,000,000.
(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
(k) "Registrable Securities" means (1) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (2) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities will not include any securities sold by a person to the public either
pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferror's rights under Section 2 of this Agreement
are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed $15,000
of a single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which will
be paid in any event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale.
(p) "Shares" means the Company's Series J Preferred Stock issued
pursuant to that certain Series J Preferred Stock Purchase Agreement, dated as
of the date hereof, between the Company and the Investors (the "Purchase
Agreement").
(q) "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
2
<PAGE>
(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.9(a) of this
Agreement.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions On Transfer.
(a) No Holder will make any disposition of all or any portion of the
Shares or Registrable Securities unless and until:
(1) 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
(2) (A) The transferee has agreed in writing to be bound by this
Section 2.1, (B) such Holder has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder has 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. The Company
will not require opinions of counsel for transactions made pursuant to Rule
144(k) except in unusual circumstances.
(3) Notwithstanding the provisions of Sections 2.1(a)(1) and
2.1(a)(2), no such registration statement or opinion of counsel will be
necessary for a transfer by a Holder that is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interests in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interests in the limited liability company, or (D) to a Holder's family
member or trust for the benefit of an individual Holder or a Holder's family
member or members, provided that the transferee will be subject to the terms of
this Section 2.1 to the same extent as if he, she or it were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable Securities
will (unless otherwise permitted by the provisions of this Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED,
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ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
(c) The Company will reissue promptly unlegended certificates at the
request of any holder thereof if the holder has obtained an opinion of counsel
(which counsel may be counsel to the Company) reasonably acceptable to the
Company to the effect that the securities represented by such certificate, may
lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement under the Securities Act
covering the sale of Registrable Securities that, if completed, would result in
a public offering of equity securities of the Company having an aggregate
offering price to the public in excess of $15,000,000, then the Company will,
within 30 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it will, within 15 days
after the above-described notice from the Company, so notify the Company in
writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company will include such information in the written notice referred to
in Section 2.2(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company (which underwriter or underwriters will be reasonably acceptable to a
majority in interest of the Initiating Holders). Notwithstanding any other
provision of this Section 2.2, if the underwriter advises the Company that
marketing factors require a limitation of the number
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of securities to be underwritten (including Registrable Securities) then the
Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting will be
withdrawn from the registration.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.2:
(1) during the period starting with the date of filing of, and
ending on the date 180 days following the effective date of the registration
statement pertaining to the Initial Offering, provided that the Company is
making reasonable and good faith efforts to cause such registration statement to
become effective;
(2) if, within 30 days of receipt of a written request from the
Initiating Holders pursuant to Section 2.2(a), the Company notifies the Holders
of its intention to file a registration statement with respect to a public
offering of its Common Stock (excluding a registration relating to an employee
benefit plan or with respect to a corporate reorganization or other transaction
under Rule 145 of the Securities Act) within 90 days, during the period
beginning on the date of such notice from the Company and ending 90 days
thereafter;
(3) after the Company has effected two registrations pursuant to
this Section 2.2 and such registrations have been declared or ordered effective;
or
(4) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 90 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company no
more than twice in any one-year period.
2.3 Piggyback Registrations.
(a) The Company will notify all Holders of Registrable Securities in
writing at least 30 days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and
will afford each such Holder an opportunity to include in such registration
statement all or part of
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such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it will, within 15 days after the above-described notice from the
Company, so notify the Company in writing. Such notice will state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder will nevertheless
continue to have the right to include any Registrable Securities in any
subsequent such registration statement or registration statements as may be
filed by the Company with respect to offerings of its securities, all upon the
terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives notice
under this Section 2.3 is for an underwritten offering, the Company will so
advise the Holders of Registrable Securities as a part of such notice. In such
event, the right of any Holder to be included in a registration pursuant to this
Section 2.3 will be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting will enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated: first, to the Company; second, to the Holders on a pro rata basis
based on the total number of Registrable Securities proposed to be sold by the
Holders (assuming conversion of all Shares); and third, to any other shareholder
of the Company on a pro rata basis (assuming conversion of all Preferred Stock).
(c) The Company will have the right to terminate or withdraw any
registration initiated or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration will be borne by the Company in
accordance with Section 2.5.
2.4 Form S-3 Registration.
(a) If the Company receives a written request from a Holder or Holders
that the Company file a registration statement on Form S-3 under the Securities
Act covering the registration of Registrable Securities having an aggregate
offering price to the public in excess of $500,000, then the Company will,
within 10 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration on Form
S-3 under the Securities Act of all Registrable Securities that the Holders
request to be registered. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
will, within 15 days after the above-described notice from the Company, so
notify the Company in writing.
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(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.4
and the Company will include such information in the written notice referred to
in Section 2.4(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters will be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 2.4, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company will so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting will be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting will be withdrawn from the registration.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.4:
(1) if Form S-3 (or any similar form) is not available for such
offering by the Holders;
(2) if the Company has effected two or more registrations
pursuant to this Section 2.4 within the 12 months preceding receipt of the
request described in Section 2.4(a); or
(3) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 90 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company nor
more than twice in any one-year period.
2.5 Expenses Of Registration. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4
will be borne by the Company. All Selling Expenses incurred in connection with
any registrations hereunder will be borne by the holders
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of the securities so registered pro rata on the basis of the number of shares so
registered. The Company will not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
in the case of a registration pursuant to Section 2.2, the Holders of a majority
of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right will be
forfeited by all Holders. If the Holders are required to pay the Registration
Expenses, such expenses will be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
2.6 Obligations Of The Company. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to 120 days or, if earlier, until the participating
Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders,
provided that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriting of such offering. Each
Holder participating in such underwriting will also enter into and perform its
obligations under such an agreement.
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(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2) a letter,
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 Termination Of Registration Rights. All registration rights granted
under this Section 2 will terminate and be of no further force and effect as to
any Holder if (a) the Company has completed its Initial Offering and is subject
to the provisions of the Exchange Act and (b) all Registrable Securities held by
such Holder (together with its affiliates, partners and former partners) may be
sold under Rule 144 during any 90-day period.
2.8 Delay Of Registration; Furnishing Information.
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the Company
to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders
will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Section 2.2, 2.3 or 2.4:
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(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, shareholders, officers, stockholders,
directors and legal counsel of such Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, or liabilities (joint or several) to
which any of such persons may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (individually a
"Violation") by the Company: (1) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto; (2) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, not misleading; or (3) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law in connection with the offering covered by such
registration statement; and the Company will reimburse each such Holder,
partner, shareholder, officer, director, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.9(a)
will not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent will not be unreasonably withheld, nor will the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that (i) it arises out of or is based upon a Violation that occurs
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder or (ii) in the case
of a sale directly by a Holder of Registrable Securities (including a sale of
such Registrable Securities through any underwriter retained by such Holder to
engage in a distribution solely on behalf of such Holder), such untrue statement
or alleged untrue statement or omission or alleged omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus (a copy of
which was delivered to such Holder by the Company at or prior to confirmation of
such sale), and such Holder failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of such sale of the Registrable
Securities to the person asserting any such loss, claim, damage or liability in
any case where such delivery is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors, stockholders, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such other Holder's partners, shareholders, directors, officers or legal
counsel, any
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underwriter (as defined in the Securities Act) for such Holder or any person who
controls such Holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of such persons may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation by the Company, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 2.9(b) will not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent will not be unreasonably
withheld; provided further, that in no event will any indemnity under this
Section 2.9(b) exceed the proceeds from the offering received by the
indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, will to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation or Violations that resulted
in such loss, claim, damage or liability, as well as
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any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party will be determined by a court of
law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
will any contribution by a Holder hereunder exceed the proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
will survive completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation with respect to which indemnification has been sought hereunder,
will, except with the consent of each indemnified party seeking indemnification
hereunder, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
2.10 Assignment Of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may only be assigned
by a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member or members, or (c) acquires at
least 25,000 shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee will agree to be
subject to all restrictions set forth in this Agreement.
2.11 Amendment Of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof 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 a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2.11 will be binding upon each Holder and the Company.
2.12 Limitation On Subsequent Registration Rights. After the date of this
Agreement, the Company will not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any equity securities of the Company
that would grant such holder registration fights that (a) would permit such
holder to cause the registration of equity securities held by such holder at a
time when the Holders would not be permitted hereunder to cause a registration
of Registrable Securities or (b) calls for any Registrable Securities to be
excluded from a registration statement pursuant to Section 2.3.
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2.13 "Market Stand-Off" Agreements. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed 180 days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that the obligations described in this Section 2.13
will not apply to a registration relating solely to employee benefit plans or a
registration relating solely to a SEC Rule 145 transaction. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of said
period. The Company will use all commercially reasonable efforts to require
each other person who has acquired or in the future acquires Common Stock or
Preferred Stock from the Company to be subject to the same or a substantially
equivalent market stand-off agreement.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company will use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder promptly upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information And Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and
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reserves as will be required under generally accepted accounting principles
consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, the Company will furnish
each Investor an audited consolidated balance sheet of the Company as at the end
of such fiscal year, and audited consolidated statements of income, cash flows
and shareholders' equity of the Company for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements will be
accompanied by a report thereon by independent public accountants of national
standing selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within 45 days thereafter, a
consolidated balance sheet of the Company as of the end of each such quarterly
period, and a consolidated statement of income and a consolidated statement of
cash flows of the Company for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments need not have been made.
(d) So long as an Investor (with its affiliates) owns not less than
250,000 shares of Registrable Securities (as adjusted for stock splits,
combinations and the like), the Company will furnish such Holder (1) within 60
days after the beginning of each fiscal year an annual budget and operating
plans for such fiscal year (and as soon as available, any subsequent revisions
thereto); and (2) as soon as practicable after the end of each month, and in any
event within 30 days thereafter, a consolidated balance sheet of the Company as
of the end of each such month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month and for the
current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Holder will have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company will not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information that is confidential and should not, therefore, be disclosed.
14
<PAGE>
3.3 Reservation Of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Series J Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.4 Termination Of Covenants. All covenants of the Company contained in
Section 3 will expire and terminate on the effective date of the registration
statement pertaining to a Qualified Public Offering.
4. BOARD OF DIRECTORS.
4.1 Election. At any annual or special meeting called, or any other
action taken, for the purpose of electing persons to or removing persons from
the Company's Board of Directors, the Holders will vote all of their Shares and
Registrable Securities during the term of this Agreement so as to cause the
representative of the Series J Preferred Stock required by Section 4.3(c)(5) of
the Certificate of Incorporation to be elected to the Board of Directors to be a
nominee of Bedrock Capital Partners I, L.P. (the "Bedrock Nominee").
4.2 Removal. In the event of any removal or resignation of the Bedrock
Nominee from the Board of Directors, the Holders will take all actions necessary
and appropriate to cause such vacancy to be filled in accordance with the
provisions of Section 4.1.
4.3 Best Efforts. The Company will use its best efforts to ensure that
the rights granted to the parties under this Section 4 are effective and that
the parties enjoy the benefits thereof. Such actions include, without
limitation, the use of the Company's best efforts to cause the nomination and
election of the Bedrock Nominee. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all of the provisions of this Section 4 and in the taking
of all such actions as may be necessary, appropriate or reasonably requested by
Bedrock Capital Partners I, L.P.
4.4 Grant of Proxy; Voting Trust. In the event the Holders do not vote
their Shares and Registrable Securities in accordance with this Section 4, each
Holder, to the extent necessary to carry out the terms of this Section 4, hereby
grants to Thomas Volpe an irrevocable proxy pursuant to the Delaware General
Corporation Law to vote such Holder's Shares and Registrable Securities in
accordance with the terms of this Section 4. To the extent this Section 4 or
any provision hereof is deemed illegal, invalid or unenforceable, the parties
hereto agree to enter into a voting trust agreement and to take all action
necessary to cause such voting trust agreement to become legal, valid, binding
and enforceable and to effectuate the terms and provisions thereof.
4.5 Amendment. This Section 4 may be amended only with the written
consent of the Company, Bedrock Capital Partners I, L.P. and the holders of 66
2/3% of the Registrable Securities.
15
<PAGE>
4.6 Termination. This Section 4 will terminate and be of no further force
and effect upon the later of (a) the second anniversary of the date hereof and
(b) the date on which the covenants contained in this Section 4 are not, in the
reasonable judgment of Bedrock Capital Partners I, L.P., necessary to maintain
the status of Bedrock Capital Partners I, L.P. as a "venture capital operating
company" for ERISA purposes. Bedrock Capital Partners I, L.P. will notify the
Company of the occurrence of the date described in clause (b) above.
Notwithstanding the foregoing, this Section 4 will terminate and be of no
further force and effect on such date as Bedrock Capital Partners I, L.P. ceases
to own any shares of capital stock of the Company.
5. RIGHT OF FIRST REFUSAL.
5.1 Subsequent Offerings By The Company. Each Investor will have a right
of first refusal to purchase its pro rata share of all Equity Securities that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 5.4. Each
Investor's pro rata share is equal to the ratio of (a) the number of shares of
the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) that such Investor is deemed to be a
holder of immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares)
immediately prior to the issuance of the Equity Securities.
5.2 Notice. If the Company proposes to issue any Equity Securities, it
will give each Investor written notice of its intention, describing the Equity
Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Each Investor will have 15 days from the giving of
such notice to agree to purchase its pro rata share of the Equity Securities for
the price and upon the terms and subject to the conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased. Notwithstanding the foregoing, the
Company will not be required to offer or sell such Equity Securities to any
Investor who would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale.
5.3 Unsubscribed Equity Securities. If not all of the Investors elect to
purchase their pro rata share of the Equity Securities, then the Company will
promptly notify in writing the Investors who do so elect and will offer such
Investors the right to acquire such unsubscribed shares. The Investors will
have five days after receipt of such notice to notify the Company of its
election to purchase all or a portion thereof of the unsubscribed shares. If
the Investors fail to exercise in full the foregoing right of first refusal, the
Company will have 60 days thereafter to sell the Equity Securities in respect of
which the Investors' rights were not exercised, at a price and upon general
terms and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Investors pursuant to Section 4.1. If
the Company has not sold such Equity Securities within said 60-day period, the
16
<PAGE>
Company will not thereafter issue or sell any Equity Securities without first
offering such securities to the Investors in the manner provided above.
5.4 Excluded Equity Securities. The right of first refusal established by
this Section 5.1 will have no application to any of the following Equity
Securities:
(a) 2,850,000 shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants or
other rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to the
Company's 1994 Stock Plan;
(b) 255,482 shares of Common Stock and 409,091 shares of Series J
Preferred Stock issuable upon exercise of warrants outstanding on the date
hereof;
(c) 59,228 shares of Common Stock issuable upon exercise of stock
options granted to employees, outstanding on the date hereof and not otherwise
described in Section 5.4(a);
(d) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(e) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued upon conversion of the Shares or any
other shares of Preferred Stock outstanding as of the date hereof; and
(g) any Equity Securities issued pursuant to any equipment leasing
arrangement or debt financing approved by the Board of Directors.
5.5 Termination. The right of first refusal set forth in this Section 5
will not apply to, and will expire upon the closing of, a Qualified Public
Offering.
6. RESTRICTION ON SECURITIES ISSUANCES.
Until January 1, 1999, the Company will not issue or grant any of its
securities as compensation (pursuant to its stock option plans or otherwise) to
any person that is not then an employee of the Company and then owns 1% of more
of the outstanding Common Stock of the Company (assuming exercise of all stock
options and other rights to acquire equity securities and conversion of all
Preferred Stock to Common Stock).
17
<PAGE>
7. MISCELLANEOUS.
7.1 Governing Law. This Agreement will 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.
7.2 Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Holder and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby will be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
7.3 Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the parties
hereto and will inure to the benefit of and be enforceable by each person who is
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes.
7.4 Severabi1ity. In case any provision of the Agreement is invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
7.5 Amendment And Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least 66 2/3% of the Registrable Securities.
(b) Except as otherwise expressly provided, (1) the obligations of the
Company and the rights of the Holders under this Agreement may be waived by any
Holder only in writing and for all Holders only with the written consent of the
holders of at least 66 2/3% of the Registrable Securities and (2) the
obligations of the Holders and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include Additional Investors (as
defined in Section 1.3 of that certain Series J Stock Purchase Agreement of even
date herewith) as "Investors," "Holders" and parties hereto.
18
<PAGE>
7.6 Delays Or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach, default or
noncompliance of any other party under this Agreement will impair any such
right, power or remedy, nor will it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of any similar
breach, default or noncompliance thereafter occurring. Any waiver, permit,
consent, or approval of any kind or character on the part of any party hereto of
any breach, default or noncompliance under the Agreement or any waiver on such
Holder's part of any provisions or conditions of this Agreement must be in
writing and will be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law or otherwise
afforded to the parties hereto, will be cumulative and not alternative.
7.7 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by 10 days' advance written
notice to the other parties hereto.
7.8 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
7.9 Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
7.11 Antidilution Provisions. The Holders agree that for purposes of
Section 4.3(f) of the Restated Charter (as defined in the Purchase Agreement),
"Additional Shares of Common Stock" will not include up to 2,850,000 (the "Cap")
shares of the Company's Common Stock and/or options or other rights to purchase
the Company's Common Stock and the Company's Common Stock issued pursuant to
such options or other rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) issued pursuant to the existing Company
1994 Stock Option Plan, whether previously or hereafter issued, provided,
however, that if any options or other rights to purchase the Company's Common
Stock lapse
19
<PAGE>
unexercised, such options or rights will not be counted toward such Cap. Each
Holder agrees to vote in favor of, and to consent to, any amendment proposed by
the Company to the Restated Charter, the sole purpose of which is to amend the
Restated Charter to provide for the foregoing.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE>
The parties have executed this Agreement as of the date first above written.
The Company:
Access Radiology Corporation
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
The Investors:
Bedrock Capital Partners I, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
Bedrock Capital Partners Side-By-Side, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Pacific Venture Group, L.P.
By: PVG Equity Partners, L.L.C
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
PVG Associates, L.P.
By: PVG Equity Partners, L.L.C.
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
Delphi Ventures III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Delphi BioInvestments III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
<PAGE>
VBW Partners, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Seaflower Health and Technology
Fund, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
J&L Sherblom Family, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredit Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
ICD, Ltd.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Guadamur LTD.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp. #2
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Gole Inc. A
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
EXHIBIT 10.4
AMENDMENT NO.1 TO
ACCESS RADIOLOGY CORPORATION
INVESTORS RIGHTS AGREEMENT.
This is Amendment No. 1 (the "Amendment"), dated as of November 13, 1997,
to the Investors Rights Agreement dated as of September 30, 1997 among ACCESS
Radiology Corporation ("the Company") and each of the holders of the Company's
Series J Preferred stock parties thereto (the "Investors").
The parties agree as follows:
1. Amendment of Section 5.4 of the Investors Rights Agreement. Section
-------------------------------------------------------------
5.4 of the Investors Rights Agreement, "Excluded Equity Securities", is amended
by adding a new clause (h) as follows:
(h) Shares of Series J Preferred Stock sold pursuant to the Series J
Preferred Stock Purchase Agreement dated as of September 30, 1997
among the Company and the Investors parties thereto, as amended from
time to time.
2. General. This Amendment may be executed in any number of counterparts,
--------
each of which will be an original, but all of which together will constitute the
same instrument. This Amendment shall become effective as of the date set forth
above when executed as required by Section 7.5 of the Investors Rights
Agreement. Except as expressly amended hereby, all of the terms of the Purchase
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1.
ACCESS Radiology Corporation
by_________________________
Scott Sheldon
President
Name of Investor:
by________________________
Name:
Title (if any):
<PAGE>
EXHIBIT 10.5
ACCESS RADIOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
THIS Securities PURCHASE AGREEMENT (this "Agreement") is made as of July
28, 1998 by and between ACCESS RADIOLOGY CORPORATION, a Delaware corporation
(the "Company"), and each of the persons and entities listed on the signature
pages hereof (individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. PURCHASE AND SALE OF Securities.
Sale and Issuance of Securities.
(a) The Company has filed with the Secretary of State of the State of
Delaware a Certificate of Designations, Preferences and Relative, Participating,
Optional or Other Special Rights of the Series K Preferred Stock in the form
attached hereto as Exhibit A (the "Certificate of Designation").
(b) On the terms of this Agreement, each Investor agrees to purchase,
if the Company delivers a Drawdown Notice as provided in Section 1.2(a), shares
of the Company's Series K Preferred Stock at a purchase price determined
pursuant to subsection (c) below. Each Investor agrees to purchase a number of
shares of the Company's Series K Preferred Stock equal to the amount of the
commitment (the "Commitment") set forth opposite each Investor's name on the
signature pages hereof divided by the Series K Purchase Price as defined in
subsection (c) below (rounded downward to the nearest whole share). The Series K
Preferred Stock will have the rights, privileges, and restrictions set forth in
the Certificate of Designation and the Company's Certificate of Incorporation.
The obligations of the Investors under this Agreement are several and not joint.
(c) If a Drawdown Notice is delivered on or before December 31, 1998,
the Series K Purchase Price will be $1.40 per share. If a Drawdown Notice is
delivered after December 31, 1998, the Series K Purchase Price will be $1.50 per
share.
(d) Upon the execution of this Agreement, the Company is delivering
to each Investor a warrant in the form of Exhibit B (each a "Warrant" and
collectively the "Warrants") to purchase a number of shares of Common Stock of
the Company equal to such Investor's Commitment multiplied by 290/1500 (rounded
downward to the nearest whole share).
Closing.
<PAGE>
(a) At any time on or after the date hereof and on or before March
31, 1999, the Company may deliver to each Investor a notice (the "Drawdown
Notice") stating that the Company has irrevocably elected to sell all of the
shares of Series K Preferred Stock subject to this Agreement to the Investors.
The closing of the purchase and sale of the Series K Preferred Stock (the
"Closing") will take place at the principal offices of the Company at 10:00 a.m.
(or at such other location and time of day as shall be agreed to by all of the
parties hereto) on the date that is 45 calendar days after the date of the
Drawdown Notice (or, if such 45th day is not a business day, on the next
succeeding business day, or any other date agreed to by all of the parties
hereto). If any Investor or Investors shall default on their obligations to
purchase Series K Preferred Stock at the Closing, all other Investors shall
nonetheless remain obligated to proceed with the Closing and to purchase Series
K Preferred Stock as set forth herein. If any Investor or Investors shall
default on their obligations to purchase Series K Preferred Stock at the
Closing, the Company shall promptly notify the non-defaulting Investors, each of
whom shall then have the option to take up and pay for (on the terms set forth
in this Agreement) all or part of such non-defaulting Investor's pro-rata share
(based upon the Commitments of all of the non-defaulting Investors) of the
shares of Series K Preferred Stock that the defaulting Investor or Investors
have failed to purchase.
(b) At the Closing, the Company will deliver to each Investor a
certificate representing the shares of Series K Preferred Stock that such
Investor is purchasing at Closing against payment of the purchase price
therefore by check or wire transfer to be made at the Closing by each Investor.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor as of the date
of this Agreement that, except as set forth on the schedule of exceptions
attached as Exhibit C (the "Schedule of Exceptions"):
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
business, properties or financial condition of the Company (a "Material Adverse
Effect"). The Company has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as now proposed to be conducted. The Company has all requisite corporate
power and authority to execute and deliver the Registration Rights Agreement in
substantially the form attached hereto as Exhibit D (the "Registration Rights
Agreement"), to issue and sell the Series K Preferred Stock and the Warrants
pursuant to this Agreement and the Common Stock (as defined in Section 2.5)
issuable upon conversion or exercise thereof (as the case may be) and to carry
out the provisions of this Agreement, the Warrants, the Registration Rights
Agreement and the Certificate of Designation.
-2-
<PAGE>
2.2 Authorization. All corporate action on the part of the Company and
its officers, directors and stockholders for the authorization, execution and
delivery of this Agreement, the Warrants and the Registration Rights Agreement,
the performance of all of the obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance), sale
and delivery of the Series K Preferred Stock and the Warrants issued or issuable
hereunder and the Common Stock issuable upon conversion or exercise thereof (as
the case may be) has been taken or will be taken prior to the Closing. This
Agreement, the Warrants and the Registration Rights Agreement, when executed and
delivered, will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
2.3 Valid Issuance Of Preferred And Common Stock. The Series K Preferred
Stock to be purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion or
exercise (as the case may be) of the Series K Preferred Stock and the Warrants
issued or issuable under this Agreement will have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Company's
Certificate of Incorporation, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration 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 for the execution, delivery or
performance of this Agreement, the Warrants or the Registration Rights
Agreement, and the offer, sale or issuance of the Series K Preferred Stock and
the Warrants, except (a) the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware and (b) such filings as have been
made prior to the date of this Agreement, except 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"), and such post-closing
filings as may be required under applicable state securities laws, all of which
will be timely filed within the applicable periods therefor.
2.5 Capitalization And Voting Rights. The authorized capital of the
Company consists on the date of this Agreement of:
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,056,698 shares are issued and outstanding.
-3-
<PAGE>
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of which are issued and outstanding); (2) 450 of which have been
designated as Series C Preferred Stock (all of which are issued and
outstanding); (3) 345 of which have been designated as Series E Preferred Stock
(344.39 of which are issued and outstanding); (4) 1,000 of which have been
designated as Series F Preferred Stock (all of which are issued and
outstanding); (5) 816 of which have been designated as Series G Preferred Stock
(815.87 of which are issued and outstanding); (6) 400 of which have been
designated as Series H Preferred Stock (all of which are issued and
outstanding); (7) 8,140,000 of which have been designated as Series J Preferred
Stock (7,730,909 of which are issued and outstanding); and (8) 1,785,800 have
been designated as Series K Preferred Stock (none of which are issued and
outstanding).
(c) The capitalization table attached to the Schedule of Exceptions
is accurate.
(d) The outstanding shares of Common Stock and Preferred Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
were 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.
(e) Except for (1) this Agreement, (2) the conversion privileges of
the Preferred Stock, (3) the Investors Rights Agreement dated as of September
30, 1997 among the Company and certain holders of the Company's Series J
Preferred Stock, (4) currently outstanding options to purchase 2,334,706 shares
of Common Stock granted to employees pursuant to the Company's 1994 Stock Plan
(the "Option Plan") and currently outstanding options to purchase 52,898 shares
of Common Stock granted to employees outside of the Option Plan, (5) warrants to
purchase 255,482 shares of Common Stock (not including the Warrants) granted in
connection with private placements of the Company's securities, and (6) warrants
to purchase 409,091 shares of Series J Preferred Stock, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. In addition to the aforementioned options, the company has
reserved an additional 412,596 shares of Common Stock for purchase upon exercise
of options to be granted in the future under the Option Plan. The Company is not
a party or subject to any agreement or understanding, and to 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 of the Company or the voting by a director of the Company.
2.6 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other business entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
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2.7 Contracts And Other Commitments. The Company is not bound by any
contract, agreement, lease or commitment, written or oral, absolute or
contingent, other than (a) contracts for the purchase or license of supplies,
software and services that were entered into in the ordinary course of business
that do not extend for more than one year from the date hereof, (b) sales
contracts entered into the ordinary course of business and (c) contracts
terminable at will by the Company on no more than 30 days' notice without cost
or liability to the Company. For the purpose of this Section 2.7, employment and
consulting contracts, contracts with labor unions, license agreements and any
other agreements relating to the acquisition or disposition of Intangibles (as
defined in Section 2.18) other than standard end-user license agreements will
not be considered to be contracts entered into the ordinary course of business.
2.8 Related Party Transactions. No employee, officer, consultant,
stockholder or director of the Company or member of his or her immediate family
is indebted to the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than for (a) payment
of salary for services rendered, (b) reimbursement for reasonable expenses
incurred on behalf of the Company and (c) other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under the Option Plan). To the Company's knowledge, no officer,
director, or employee of the Company or any member of his or her immediate
family is, directly or indirectly, interested in any material contract with the
Company (other than such contracts as relate to any such person's employment
with the Company or ownership of capital stock or other securities of the
Company).
2.9 Registration Rights. Except as provided in (1) the Investors Rights
Agreement dated as of September 30, 1997 among the Company and certain holders
of the Company's Series J Preferred Stock, and (2) Registration Rights
Agreements in substantially the form of the Registration Rights Agreement
attached hereto as Exhibit D, the Company is not under any obligation and has
not granted any rights to register under the Securities Act any of its
outstanding securities or any of its securities that may subsequently be issued.
2.10 Clearances, Approvals, Etc. The Company has all the clearances,
approvals, franchises, permits, licenses and any similar authority including,
without limitation, all approvals and clearances from the U.S. Food and Drug
Administration, the absence of which would have a Material Adverse Effect, and
the Company believes it can obtain, without undue burden or expense, any similar
authority the absence of which would have a Material Adverse Effect with respect
to the business of the Company as now proposed to be conducted. The Company is
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.11 Compliance With Other Instruments. The Company is not in violation
or default of (a) any provision of its certificate of incorporation or bylaws,
(b) any provision of any mortgage, indenture, agreement, instrument or contract
to which it is a party or by which
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it is bound or (c) to the best of the Company's knowledge, any judgment, order,
writ, decree, statute, rule, regulation or restriction applicable to it
including, without limitation, the U.S. Federal Food, Drug and Cosmetic Act, as
amended, and regulations promulgated thereunder, which default or violation has
had or could reasonably be expected to have a Material Adverse Effect. The
execution, delivery and performance by the Company of this Agreement, the
Warrants and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in material conflict with or constitute, with or without the
passage of time or giving of notice, either a material default under any such
provision or an event that results in the creation of any material lien, charge
or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material franchise, permit, license
or similar authority applicable to the Company, its business, operations or any
of its material assets or properties.
2.12 Litigation. There is no action, suit proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Warrants or the Registration
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 a Material Adverse Effect or
in any change in the current equity ownership of the Company. The Company is not
a party to or, to its knowledge, named in or subject to any material order,
writ, injunction, judgment or decree of any court, government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company currently intends to initiate.
2.13 Disclosure. The Company has provided each Investor with all
information reasonably available to it without undue expense that such Investor
has requested in writing for deciding whether to purchase the Series K Preferred
Stock.
2.14 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 K Preferred Stock and the Warrants as contemplated by
this Agreement are exempt from the registration requirements of the Securities
Act, and neither the Company nor any authorized agent acting on its behalf will
take action hereafter that would cause the loss of such exemption.
2.15 Title To Property And Assets; Leases. Except for (a) liens
reflected in the Financial Statements (as defined in Section 2.16), (b) liens
for current taxes not yet due or payable, (c) 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, (d) liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, (e)
liens securing money borrowed from a bank or other financial institution, or (f)
minor defects in title, the Company has good and marketable title to its
property and assets free and
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clear of all material mortgages, liens, claims and encumbrances. With respect to
the property and assets it leases, the Company is in compliance with such leases
in all material respects and, to the Company's knowledge, hold a valid leasehold
interest free of any mortgages, liens, claims or encumbrances, subject to
clauses (a)-(f) above.
2.16 Financial Statements. The Company has delivered to each Investor
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholder's equity and statement of cash flows including notes
thereto) at December 31, 1997 and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement and
statement of cash flows) at March 31, 1998 and for the three months then ended (
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 the unaudited Financial
Statements omit notes thereto required by generally accepted accounting
principles. The Financial Statements fairly represent the financial condition
and operating results of the Company as of the dates and for the periods
indicated therein (subject in the case of unaudited financial statements to
normal year end adjustments). Except as set forth in the Financial Statements,
the Company has no material liabilities, contingent or otherwise, other than (a)
liabilities incurred in the ordinary course of business subsequent to March 31,
1998 and (b) obligations under contracts and commitments not required under
generally accepted accounting principles to be reflected in the Financial
Statements that in both cases, individually or in the aggregate, are not
material to the business, properties or financial condition of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person or entity. The Company
maintains a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.17 Changes. Since March 31, 1998 there has not been:
(a)any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not had
a Material Adverse Effect;
(b)any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c)any waiver of compromise by the Company of a valuable right or a
material debt owed to it, other than in the ordinary course of business;
(d)any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except to the extent such satisfaction
or discharge will not have a Material Adverse Effect;
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(e)any material change to a material contract or arrangement by which
the Company or any of its assets is bound or subject;
(f)any material change in any compensation arrangement or agreement
with any officer, consultant, director or stockholder of the Company or any of
its Subsidiaries;
(g)any sale, assignment or transfer of any material Intangibles of the
Company or any of its Subsidiaries, other than in the ordinary course of
business;
(h)any resignation or termination of employment of any key employee or
key consultant of the Company or any of its Subsidiaries;
(i) any mortgage, lien, claim encumbrance, pledge or security interest
created by the Company with respect to any of its material properties or assets,
except liens for taxes not yet due or payable and liens securing debt for money
borrowed to a bank or other financial institution;
(j) any declaration, setting aside or payment of any dividend or other
distribution of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(k) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to have a Material Adverse Effect;
or
(l) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.17.
2.18 Intangibles. To the best of its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and proprietary
rights and processes (collectively, "Intangibles") necessary for its business as
now conducted and as now proposed to be conducted without any conflict with or
infringement of the rights of others. Except for end-user license agreements,
confidentiality agreements, and licenses set forth in Section 2.18 of the
Schedule of Exceptions (the "Material Licenses"), there are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or party to any options, licenses or agreements of any kind
with respect to the Intangibles of any other person or entity. To the Company's
knowledge, each Material License is valid and in full force and effect, and is
enforceable by the Company in accordance with its terms. To the Company's
knowledge, no person or entity has materially violated or breached, or declared
or committed any default under, any Material License. To the Company's
knowledge, no event has occurred, and no circumstance or condition exists, that
could reasonably be expected to (with or without notice or lapse of time) (a)
result in a material violation or breach of any of the provisions of any
Material License, (b) give any person or entity the right to declare a default
or exercise any
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remedy under any Material License, (c) give any person or entity the right to
accelerate the maturity or performance of any Material License or (d) give any
person or entity the right to cancel, terminate or modify any Material License.
Neither the Company nor any of its Subsidiaries has received any communications
alleging that the Company or any of its Subsidiaries has violated or breached
any provision of a Material License or misappropriated or by conducting its
business as proposed would misappropriate any of the Intangibles of any other
person or entity.
2.19 Employees; Employee Compensation. To the Company's knowledge, there
is no strike, labor dispute or union or union organization activities pending or
threatened between the Company and any of its employees. None of the employees
of the Company belongs to any union or collective bargaining unit. To the
Company's knowledge, the Company has complied in all material respects with all
applicable state and federal equal opportunity and other laws related to
employment. To the Company's knowledge, no employee of the Company 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 any such employee with the Company, or any other party
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Neither the execution nor delivery of
this Agreement or the Registration Rights Agreement nor the carrying on of
business of the Company nor the conduct of such business as proposed will, to
the Company's knowledge, conflict with or result in a breach of terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan (other
than the Option Plan), profit sharing plan, retirement agreement or other
employee compensation agreement. The Company is not aware that any officer or
key employee or consultant, or that any group of key employees or consultants,
of the Company intends to terminate their employment or service with the
Company, nor does the Company have a present intention to terminate the
employment or service of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each employee of
the Company or any of its Subsidiaries is terminable at the will of the
employer.
2.20 Tax Returns, Payments, And Elections. The Company has timely filed
all material tax returns and reports (federal, foreign, state and local) as
required by law. These returns and reports are true and correct in all material
respects. The Company has paid all material taxes and other assessments due,
except those contested in good faith. The provision for taxes as shown in the
Financial Statements is adequate for taxes due or accrued as of the dates
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "code"), to be treated as an S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to Code (other than elections
that relate solely to methods of accounting, depreciation, or amortization) that
would have a Material Adverse Effect. The Company has
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not had any tax deficiency proposed or assessed against it and has not has
executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the income tax returns of
the Company and none of its state income or franchise tax or sales or use of tax
returns has ever been audited by governmental authorities. Since the end of the
Company's last fiscal year, the Company has made adequate provisions on its
books of account for all taxes, assessments and governmental charges with
respect to its business, properties and operations.
2.21 Environmental And Safety Laws. To the Company's knowledge, the Company
is not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, which violation has had or could
reasonably be expected to have a Material Adverse Effect. To the Company's
knowledge, no material expenditures are or will be required in order to comply
with any such statute, law, or regulation.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby represents and warrants to the Company as of the date
of this Agreement that:
3.1 Authorization. Such Investor has full power and authority to enter
into this Agreement and the Registration Rights Agreement, and this Agreement
and the Registration Rights Agreement, when executed and delivered, will
constitute valid and legally binding obligations of such Investor.
3.2 Purchase Entirely For Own Account. The Series K Preferred Stock and
Warrants to be purchased by such Investor and the Common Stock issuable upon
conversion or exercise thereof (as the case may be) 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 such Investor
has no present intention of selling, granting any participating in or otherwise
distributing the same. Such Investor does not have any contract, undertaking,
agreement or arrangement with any person or entity to sell, transfer or grant a
participation to any third party with respect to any of such securities.
3.3 Reliance Upon Investors' Representations. Such Investor understands
that the Series K Preferred Stock and the Warrants are not, and any Common Stock
acquired on conversion or exercise thereof (as the case may be) may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of 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. Such Investor realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Investor has in mind merely acquiring shares of the Series K Preferred Stock,
Warrants, or Common Stock for a fixed or
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determinable period in the future, or for a market rise, or for sale if the
market does not rise. Such Investor has no such intention.
3.4 Receipt Of Information. Such Investor believes it has received all
the information such Investor considers necessary or appropriate for deciding
whether to purchase the Series K Preferred Stock and Warrants. 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 K Preferred
Stock and Warrants 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.
3.5 Investment Experience. Such Investor is experienced in evaluating and
investing in private placement transactions of securities of companies in a
similar stage of development to the Company and acknowledges that such Investor
is able to fend for 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 K Preferred Stock. If other than an individual, such
Investor has not been organized for the purpose of acquiring the Series K
Preferred Stock.
3.6 Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act.
3.7 Restricted Securities. Such Investor understands that the Series K
Preferred Stock, the Warrants, and the Common Stock issuable upon conversion or
exercise thereof (as the case may be) may not be sold, transferred or otherwise
disposed of without registration under the Securities Act or exemption
therefrom, and that in the absence of an effective registration statement
covering such securities or an available exemption from registration under the
Securities Act, such securities must be held indefinitely. In particular, such
Investor is aware that such securities 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.
4. DELIVERIES AT SIGNING.
The Company and the Investors have made the following deliveries to each
other upon the execution of this Agreement:
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4.1 Registration Rights Agreement. The Company and each Investor have
executed and delivered the Registration Rights Agreement.
4.2 Officer's Certificate. The President of the Company has delivered to
the Investors a certificate, dated as of the date of this Agreement, to the
effect that the representations and warranties of the Company contained in this
Agreement are true as of the date of this Agreement.
4.3 Secretary's Certificate. The Company has delivered to the Investors a
certificate of the Secretary of the Company, dated the date of this Agreement,
in form and substance satisfactory to the Investors.
4.4 Good Standing Certificate. The Company has delivered to the Investors
a long form good standing certificate with respect to the Company from the State
of Delaware dated as of a date not more than seven days prior to the date of
this Agreement.
4.5 Opinion of Counsel. Ropes & Gray, counsel to the Company, has
delivered to the Investors an opinion of counsel in form and substance
satisfactory to Palmer & Dodge LLP.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement will be governed by and under the laws
of the State of Delaware.
5.2 Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of and be binding upon,
the successors, assigns, heirs executors and administrators of the parties
hereto.
5.3 Severability. In case any provision of this Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
5.4 Amendment And Waiver.
(a)Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and Investors
representing at least 66 2/3% of the Commitments hereunder.
(a)Except as otherwise expressly provided, (1) the obligations of the
Company and the rights of the Investors under this Agreement may be waived by
any Investor only in writing and for all Investors only with the written consent
of Investors representing at least 66 2/3% of the Commitments hereunder, and (2)
the obligations of the Investors and the rights
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of the Company under this Agreement may be waived only with written consent of
the Company.
5.5 Delays Or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party hereto upon any breach, default or noncompliance
of any other party under this Agreement will impair any such right, power or
remedy, nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach, default or
noncompliance under the Agreement must be in writing and will be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law or otherwise afforded to the parties hereto, will be
cumulative and not alternative.
5.6 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of delivery. All communications will be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by 10 days' advance written
notice to the other parties hereto.
5.7 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
5.8 Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
5.10 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party will 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.
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5.11 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 will indemnify and hold harmless the Company from any
liability for any 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 will 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
liability or asserted liability) for which the Company or any of its officers,
employees, or representatives is responsible.
5.12 Expenses. The Company will pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement, and will pay the reasonable fees and expenses of Palmer & Dodge LLP
in connection with this Agreement upon presentation of a written statement
therefor and up to $2500 of the reasonable fees and expenses of Cooley Godward
in connection with this Agreement.
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The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Seaflower BioVenture Fund II, LLC
COMMITMENT: $1,600,000.00
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices: c/o Seaflower Associates, Inc.
1000 Winter Street, Ste. 1000
Waltham, MA 02451-1248
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: J and L Sherblom Family, LLC
COMMITMENT: $100,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices: c/o Seaflower Associates, Inc.
1000 Winter Street, Ste. 1000
Waltham, MA 02451-1248
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Seaflower Health & Technology Fund, LLC
COMMITMENT: $100,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices: c/o Seaflower Associates, Inc.
1000 Winter Street, Ste. 1000
Waltham, MA 02451-1248
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Three Arch Bay
COMMITMENT: $500,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices:
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Sweetwater Partners
COMMITMENT: $125,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices:
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Michael Schmertzler
COMMITMENT: $50,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices:
<PAGE>
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
Signature:___________________________
Printed Name:________________________
Title:_______________________________
NAME OF INVESTOR: Paul Felton
COMMITMENT: $25,000
Signature:________________________
Printed Name: ____________________
Title:____________________________
Address For Notices:
<PAGE>
EXHIBIT 10.6
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This is an amendment (this "Amendment"), dated as of January 14, 1999, to
the Securities Purchase Agreement (the "Purchase Agreement") dated as of July
28, 1998 among ACCESS Radiology Corporation (the "Company") and the Investors
listed on the signature pages of the Purchase Agreement.
The parties agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
have the meanings set forth in the Purchase Agreement.
2. A new subsection (c) is added to Section 1 of the Purchase Agreement
under the heading "Closing", to read as follows:
(c) Notwithstanding anything else contained in this Agreement, the
obligation of Three Arch Bay Health Sciences Fund ("Three Arch Bay") to
purchase Series K Preferred Stock under its Commitment of $500,000 shall be
subject to the following special terms. Irrespective of the date of
delivery of the Drawdown Notice, Three Arch Bay may delay its purchase of
Series K Preferred Stock hereunder until March 31, 1999. Three Arch Bay
agrees to pay to the Company an amount in cash equal to interest on a
principal sum of $1,000,000 at the rate of 1% per month, accruing from the
date of closing of the sale by the Company of additional Series K Preferred
Stock and warrants expected to occur in January of 1999 (under a separate
Securities Purchase Agreement), until the earlier of (i) the date on which
Three Arch Bay and/or its related investors shall have purchased Series K
Preferred Stock (including pursuant to Three Arch Bay's Commitment
hereunder) from the Company for an aggregate price of at least $1,000,000
and (ii) March 31, 1999. Such amount shall be payable on the date that it
ceases to accrue pursuant to the preceding sentence. If Three Arch Bay
purchases Series K Preferred Stock for an aggregate price of less than
$1,000,000, the amount payable by Three Arch Bay under this subsection (c)
shall continue to accrue on the shortfall until payable as provided above.
Any portion of the Commitment of Three Arch Bay that is not satisfied by
March 31, 1999 shall lapse and be of no further effect, without any
requirement that the Company offer the shares subject thereto to the other
Investors pursuant to subsection (a) above. In such event, the Warrants
issued to Three Arch Bay shall void and not exercisable to the extent of a
number of the common shares subject thereto equal to the product of (i) the
portion of the Commitment of Three Arch Bay that remains unsatisfied
multiplied by (ii) 290/1500 (rounded upward to the nearest whole share).
3. This amendment shall become effective as of the date first above
written upon the satisfaction of the requirements of Section 5.4(a) of the
Purchase Agreement. This Amendment may be executed in counterparts, each of
which shall constitute an original, but all of which shall constitute a single
instrument. Except as expressly amended hereby, all provisions of the Purchase
Agreement shall remain in full force and effect. To the extent that any
provision of this Amendment conflicts with the Warrants held by Three Arch Bay,
this Amendment shall be deemed to be an amendment to such Warrants to conform
such Warrants to the provisions hereof.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as set
forth below.
ACCESS Radiology Corporation
by:
------------------------------
Name:
Title:
Three Arch Bay Health Sciences Fund
by:
------------------------------
Name:
Title:
Seaflower BioVenture Fund II, LLC
by:
------------------------------
J and L Sherblom Family, LLC
by:
------------------------------
Seaflower Health and Technology Fund,
LLC
by:
------------------------------
<PAGE>
EXHIBIT 10.7
ACCESS RADIOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of January
20, 1999 by and between ACCESS RADIOLOGY CORPORATION, a Delaware corporation
(the "Company"), and each of the persons and entities listed on Exhibit A
(individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. Purchase And Sale Of Stock
1.1. Sale and Issuance of Securities.
(a) The Company will adopt and file with the Secretary of State of the
State of Delaware on or before the Initial Closing (as defined in Section
1.2(a)) an Amendment to its Certificate of Incorporation in the form attached
hereto as Exhibit B (the "Charter Amendment").
(b) On the terms and subject to the conditions of this Agreement, each
Investor will purchase and the Company will sell and issue to each Investor a
number of shares of the Company's Series K Preferred Stock, and a warrant (a
"Warrant") to purchase a number of shares of Common Stock, in each case
determined in accordance with this subsection (b). The aggregate amount of the
purchase price to be paid by each Investor is set forth opposite the Investor's
name on Exhibit A. The number of shares of Series K Preferred Stock purchased
by each Investor shall be determined by dividing such Investor's aggregate
purchase price by $1.40. The number of shares of Common Stock issuable upon
exercise of the Warrant issued to each Investor shall be determined by
multiplying such Investor's aggregate purchase price by a fraction equal to
290/1500 (rounded down to the nearest whole share). The Series K Preferred
Stock will have the rights, privileges, and restrictions set forth in the
Charter Amendment and the existing Certificate of Designations, Preferences and
Relative, Participating, Optional or Other Special Rights of the Series K
Preferred Stock (the "Series K Designation"). The Warrants will be in the form
attached hereto as Exhibit C. The obligations of the Investors under this
Agreement are several and not joint.
1.2. Closing.
(a) The purchase and sale of the Series K Preferred Stock and
Warrants, by the Investors listed on Exhibit A as of the date hereof, will take
place at the offices of the Company at 10:00 a.m. on the date hereof or at such
other time and place as the Company and the Investors mutually agree, either
orally or in writing (which time and place are designated as the "Initial
Closing"). In addition, the purchase and sale of Series K Preferred Stock and
Warrants by and to the Additional Investors (as defined in Section 1.3) in
accordance with
<PAGE>
Section 1.3 will take place at the offices of the Company or at such other place
and at such times as the Company and the Additional Investors mutually agree,
either orally or in writing (together with the Initial closing, each such time
and place is designated as a "Closing").
(b) At each Closing, the Company will deliver to each Investor a
certificate representing the shares of Series K Preferred Stock that such
Investor is purchasing at Closing, and a Warrant to purchase the number of
shares of Common Stock determined in accordance with Section 1.1(b), against
payment of the purchase price therefor by check, wire transfer or as otherwise
set forth on Exhibit A.
1.3. Subsequent Sale of Securities.
If less than all of the authorized and unissued shares of Series K
Preferred Stock are sold at the Initial Closing, then, subject to the terms and
conditions of this Agreement, the Company may sell up to the balance of the
authorized and unissued Series K Preferred Stock to such persons as the Board of
Directors of the Company may determine at the same price per share as the Series
K Preferred purchased and sold at the Initial Closing, together with warrants to
purchase an amount of Common Stock determined in accordance with Section 1.1(b).
Shares of Series K Preferred Stock and warrants so issued may include shares and
warrants previously subject to the Securities Purchase Agreement dated as of
July 28, 1998 that have not been purchased and paid for pursuant thereto. Any
such sale shall be made pursuant to this Agreement upon the same terms and
conditions as those contained herein, and the purchasing persons or entities
("Additional Investors") shall become parties to this Agreement, and will be
Investors for all purposes hereunder and thereunder.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Investor as of the date
of this Agreement that, except as set forth on the schedule of exceptions
attached as Exhibit D (the "Schedule of Exceptions"):
2.1. Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
business, properties or financial condition of the Company (a "Material Adverse
Effect"). The Company has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as now proposed to be conducted. The Company has all requisite corporate
power and authority to execute and deliver the Registration Rights Agreement
dated as of July 28, 1998 among the Company and certain holders of its equity
Securities (the "Registration Rights Agreement"), to issue and sell the Series K
Preferred Stock and the Warrants pursuant to this Agreement and the Common Stock
(as defined in Section 2.5) issuable upon conversion or exercise thereof (as the
case may be) and
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<PAGE>
to carry out the provisions of this Agreement, the Warrants, the Registration
Rights Agreement, the Charter Amendment and the Series K Designation.
2.2. Authorization. All corporate action on the part of the Company and
its officers, directors and stockholders for the authorization, execution and
delivery of this Agreement, the Warrants and the Registration Rights Agreement,
the performance of all of the obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance), sale
and delivery of the Series K Preferred Stock and the Warrants issued or issuable
hereunder and the Common Stock issuable upon conversion or exercise thereof (as
the case may be) has been taken or will be taken prior to the Initial Closing.
This Agreement, the Warrants and the Registration Rights Agreement, when
executed and delivered, will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity.
2.3. Valid Issuance Of Preferred And Common Stock. The Series K Preferred
Stock to be purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion or
exercise (as the case may be) of the Series K Preferred Stock and the Warrants
issued or issuable under this Agreement will have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Company's
Certificate of Incorporation, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration 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 for the execution, delivery or
performance of this Agreement, the Warrants or the Registration Rights
Agreement, and the offer, sale or issuance of the Series K Preferred Stock and
the Warrants, except (a) the filing of the Charter Amendment with the Secretary
of State of the State of Delaware and (b) such filings as have been made prior
to the date of this Agreement, except 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"), and such post-closing filings as
may be required under applicable state securities laws, all of which will be
timely filed within the applicable periods therefor.
2.5. Capitalization And Voting Rights. The authorized capital of the
Company consists on the date of this Agreement of:
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<PAGE>
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,059,322 shares are issued and outstanding.
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of which are issued and outstanding); (2) 450 of which have been
designated as Series C Preferred Stock (all of which are issued and
outstanding); (3) 345 of which have been designated as Series E Preferred Stock
(344.39 of which are issued and outstanding); (4) 1,000 of which have been
designated as Series F Preferred Stock (all of which are issued and
outstanding); (5) 816 of which have been designated as Series G Preferred Stock
(815.87 of which are issued and outstanding); (6) 400 of which have been
designated as Series H Preferred Stock (all of which are issued and
outstanding); (7) 8,140,000 of which have been designated as Series J Preferred
Stock (7,730,909 of which are issued and outstanding); and (8) 3,935,000 will
have been designated as Series K Preferred Stock upon filing of the Charter
Amendment (1,428,571 of which are issued and outstanding giving effect to the
closing under the Securities Purchase Agreement dated July 28, 1998 ).
(c) The capitalization table attached to the Schedule of Exceptions is
accurate.
(d) The outstanding shares of Common Stock and Preferred Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
were 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.
(e) Except for (1) this Agreement, (2) the conversion privileges of
the Preferred Stock, (3) the Investors Rights Agreement dated as of September
30, 1997 among the Company and certain holders of the Company's Series J
Preferred Stock, (4) currently outstanding options to purchase 2,316,623 shares
of Common Stock granted to employees pursuant to the Company's 1994 Stock Plan
(the "Option Plan") and currently outstanding options to purchase 52,898 shares
of Common Stock granted to employees outside of the Option Plan, (5) warrants to
purchase 1, 147,903 shares of Common Stock (not including the Warrants) granted
in connection with private placements of the Company's securities, and (6)
warrants to purchase 409,091 shares of Series J Preferred Stock, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. In addition to the aforementioned options, the company has
reserved an additional 420,805 shares of Common Stock for purchase upon exercise
of options to be granted in the future under the Option Plan. The Company is
not a party or subject to any agreement or understanding, and to 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 of the Company or the voting by a director of the Company.
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<PAGE>
2.6. Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other business entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
2.7. Contracts And Other Commitments. The Company is not bound by any
contract, agreement, lease or commitment, written or oral, absolute or
contingent, other than (a) contracts for the purchase or license of supplies,
software and services that were entered into in the ordinary course of business
that do not extend for more than one year from the date hereof, (b) sales
contracts entered into the ordinary course of business and (c) contracts
terminable at will by the Company on no more than 30 days' notice without cost
or liability to the Company. For the purpose of this Section 2.7, employment and
consulting contracts, contracts with labor unions, license agreements and any
other agreements relating to the acquisition or disposition of Intangibles (as
defined in Section 2.18) other than standard end-user license agreements will
not be considered to be contracts entered into the ordinary course of business.
2.8. Related Party Transactions. No employee, officer, consultant,
stockholder or director of the Company or member of his or her immediate family
is indebted to the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than for (a) payment
of salary for services rendered, (b) reimbursement for reasonable expenses
incurred on behalf of the Company and (c) other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under the Option Plan). To the Company's knowledge, no officer,
director, or employee of the Company or any member of his or her immediate
family is, directly or indirectly, interested in any material contract with the
Company (other than such contracts as relate to any such person's employment
with the Company or ownership of capital stock or other securities of the
Company).
2.9. Registration Rights. Except as provided in (1) the Investors Rights
Agreement dated as of September 30, 1997 among the Company and certain holders
of the Company's Series J Preferred Stock, and (2) the Registration Rights
Agreement, the Company is not under any obligation and has not granted any
rights to register under the Securities Act any of its outstanding securities or
any of its securities that may subsequently be issued.
2.10. Clearances, Approvals, Etc. The Company has all the clearances,
approvals, franchises, permits, licenses and any similar authority including,
without limitation, all approvals and clearances from the U.S. Food and Drug
Administration, the absence of which would have a Material Adverse Effect, and
the Company believes it can obtain, without undue burden or expense, any similar
authority the absence of which would have a Material Adverse Effect with respect
to the business of the Company as now proposed to be conducted. The Company is
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
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<PAGE>
2.11. Compliance With Other Instruments. The Company is not in violation
or default of (a) any provision of its certificate of incorporation or bylaws,
(b) any provision of any mortgage, indenture, agreement, instrument or contract
to which it is a party or by which it is bound or (c) to the best of the
Company's knowledge, any judgment, order, writ, decree, statute, rule,
regulation or restriction applicable to it including, without limitation, the
U.S. Federal Food, Drug and Cosmetic Act, as amended, and regulations
promulgated thereunder, which default or violation has had or could reasonably
be expected to have a Material Adverse Effect. The execution, delivery and
performance by the Company of this Agreement, the Warrants and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby will not result in any such violation or be in material conflict
with or constitute, with or without the passage of time or giving of notice,
either a material default under any such provision or an event that results in
the creation of any material lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any material franchise, permit, license or similar authority applicable to the
Company, its business, operations or any of its material assets or properties.
2.12. Litigation. There is no action, suit proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Warrants or the Registration
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 a Material Adverse Effect or
in any change in the current equity ownership of the Company. The Company is
not a party to or, to its knowledge, named in or subject to any material order,
writ, injunction, judgment or decree of any court, government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company currently intends to initiate.
2.13. Disclosure. The Company has provided each Investor with all
information reasonably available to it without undue expense that such Investor
has requested in writing for deciding whether to purchase the Series K Preferred
Stock.
2.14. 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 K Preferred Stock and the Warrants as contemplated by
this Agreement are exempt from the registration requirements of the Securities
Act, and neither the Company nor any authorized agent acting on its behalf will
take action hereafter that would cause the loss of such exemption.
2.15. Title To Property And Assets; Leases. Except for (a) liens
reflected in the Financial Statements (as defined in Section 2.16), (b) liens
for current taxes not yet due or payable, (c) liens imposed by law and incurred
in the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen, landlords and the like, (d) liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, (e) liens securing money borrowed from a bank or other financial
institution, or (f) minor defects in title,
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<PAGE>
the Company has good and marketable title to its property and assets free and
clear of all material mortgages, liens, claims and encumbrances. With respect to
the property and assets it leases, the Company is in compliance with such leases
in all material respects and, to the Company's knowledge, hold a valid leasehold
interest free of any mortgages, liens, claims or encumbrances, subject to
clauses (a)-(f) above.
2.16. Financial Statements. The Company has delivered to each Investor
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholder's equity and statement of cash flows including notes
thereto) at December 31, 1997 and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement and
statement of cash flows) at November 30, 1998 and for the eleven months then
ended ( 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 the unaudited
Financial Statements omit notes thereto required by generally accepted
accounting principles and the unaudited statement of cash flows is not in a
format consistent with generally accepted accounting principles. The Financial
Statements fairly represent the financial condition and operating results of the
Company as of the dates and for the periods indicated therein (subject in the
case of unaudited financial statements to normal year end adjustments). Except
as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (a) liabilities incurred in the
ordinary course of business subsequent to November 30, 1998 and (b) obligations
under contracts and commitments not required under generally accepted accounting
principles to be reflected in the Financial Statements that in both cases,
individually or in the aggregate, are not material to the business, properties
or financial condition of the Company. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person or entity. The Company maintains a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
2.17. Changes. Since November 30, 1998 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not had
a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c) any waiver Of Compromise by the Company of a valuable right or a
material debt owed to it, other than in the ordinary course of business;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except to the extent such
satisfaction or discharge will not have a Material Adverse Effect;
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<PAGE>
(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any officer, consultant, director or stockholder of the Company or any of
its Subsidiaries;
(g) any sale, assignment or transfer of any material Intangibles of
the Company or any of its Subsidiaries, other than in the ordinary course of
business;
(h) any resignation or termination of employment of any key employee
or key consultant of the Company or any of its Subsidiaries;
(i) any mortgage, lien, claim encumbrance, pledge or security
interest created by the Company with respect to any of its material properties
or assets, except liens for taxes not yet due or payable and liens securing debt
for money borrowed to a bank or other financial institution;
(j) any declaration, setting aside or payment of any dividend or
other distribution of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(k) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to have a Material Adverse Effect;
or
(l) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.17.
2.18. Intangibles. To the best of its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and proprietary
rights and processes (collectively, "Intangibles") necessary for its business as
now conducted and as now proposed to be conducted without any conflict with or
infringement of the rights of others. Except for end-user license agreements,
confidentiality agreements, and licenses set forth in Section 2.18 of the
Schedule of Exceptions (the "Material Licenses"), there are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or party to any options, licenses or agreements of any kind
with respect to the Intangibles of any other person or entity. To the Company's
knowledge, each Material License is valid and in full force and effect, and is
enforceable by the Company in accordance with its terms. To the Company's
knowledge, no person or entity has materially violated or breached, or declared
or committed any default under, any Material License. To the Company's
knowledge, no event has occurred, and no circumstance or condition exists, that
could reasonably be expected to (with or without notice or lapse of time) (a)
result in a material violation or breach of any of the provisions of any
Material
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<PAGE>
License, (b) give any person or entity the right to declare a default or
exercise any remedy under any Material License, (c) give any person or entity
the right to accelerate the maturity or performance of any Material License or
(d) give any person or entity the right to cancel, terminate or modify any
Material License. Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated or breached any provision of a Material License or misappropriated or
by conducting its business as proposed would misappropriate any of the
Intangibles of any other person or entity.
2.19. Employees; Employee Compensation. To the Company's knowledge, there
is no strike, labor dispute or union or union organization activities pending or
threatened between the Company and any of its employees. None of the employees
of the Company belongs to any union or collective bargaining unit. To the
Company's knowledge, the Company has complied in all material respects with all
applicable state and federal equal opportunity and other laws related to
employment. To the Company's knowledge, no employee of the Company 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 any such employee with the Company, or any other party
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Neither the execution nor delivery of
this Agreement or the Registration Rights Agreement nor the carrying on of
business of the Company nor the conduct of such business as proposed will, to
the Company's knowledge, conflict with or result in a breach of terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan (other
than the Option Plan), profit sharing plan, retirement agreement or other
employee compensation agreement. The Company is not aware that any officer or
key employee or consultant, or that any group of key employees or consultants,
of the Company intends to terminate their employment or service with the
Company, nor does the Company have a present intention to terminate the
employment or service of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each employee of
the Company or any of its Subsidiaries is terminable at the will of the
employer.
2.20. Tax Returns, Payments, And Elections. The Company has timely filed
all material tax returns and reports (federal, foreign, state and local) as
required by law. These returns and reports are true and correct in all material
respects. The Company has paid all material taxes and other assessments due,
except those contested in good faith. The provision for taxes as shown in the
Financial Statements is adequate for taxes due or accrued as of the dates
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "code"), to be treated as an S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to Code (other than elections
that relate solely to methods of accounting, depreciation, or amortization) that
would have a Material Adverse Effect. The Company has not had any tax
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deficiency proposed or assessed against it and has not has executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the income tax returns of the Company and none of
its state income or franchise tax or sales or use of tax returns has ever been
audited by governmental authorities. Since the end of the Company's last fiscal
year, the Company has made adequate provisions on its books of account for all
taxes, assessments and governmental charges with respect to its business,
properties and operations.
2.21. Environmental And Safety Laws. To the Company's knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, which violation
has had or could reasonably be expected to have a Material Adverse Effect. To
the Company's knowledge, no material expenditures are or will be required in
order to comply with any such statute, law, or regulation.
3. Representations and Warranties of the Investors.
Each Investor hereby represents and warrants to the Company that:
3.1. Authorization. Such Investor has full power and authority to enter
into this Agreement and the Registration Rights Agreement, and this Agreement
and the Registration Rights Agreement, when executed and delivered, will
constitute valid and legally binding obligations of such Investor.
3.2. Purchase Entirely For Own Account. The Series K Preferred Stock and
Warrant to be purchased by such Investor and the Common Stock issuable upon
conversion or exercise 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. Such Investor does not have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer or grant participations to such person or to any third party with
respect to any of the Securities.
3.3. Reliance Upon Investors' Representations. Such Investor understands
that the Series K Preferred Stock and the Warrants are not, and any Common Stock
acquired on conversion or exercise thereof at the time of issuance may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of 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. Such Investor realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Investor has in mind merely acquiring shares of the Series K Preferred Stock or
Warrants for a fixed or determinable period in the future, or for a market rise,
or for sale if the market does not rise. Such Investor has no such intention.
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3.4. Receipt Of Information. Such Investor believes it has received all
the information such Investor considers necessary or appropriate for deciding
whether to purchase the Series K Preferred Stock and Warrants. 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 K Preferred
Stock and Warrants 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. Such Investor is experienced in evaluating and
investing in private placement transactions of securities of companies in a
similar stage of development and acknowledges that such Investor is able to fend
for 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 K Preferred Stock and Warrants. If other than an individual, such
Investor has not been organized for the purpose of acquiring the Series K
Preferred Stock and warrants.
3.6. Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act.
3.7. Restricted Securities. Such Investor understands that the Securities
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Securities, the Securities must be held
indefinitely. In particular, such Investor is aware that the Securities 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.
4. Conditions Of Investors' Obligations At Closing
The obligations of each Investor under Section 1.1(b) of this agreement are
subject to the fulfillment on or before the Closing of such Investor's purchase
of each of the following conditions, the waiver of which will not be effective
against any Investor who does not consent in writing thereto:
4.1. Representations And Warranties. The representations and warranties of
the Company contained in Section 2 will be true on and as of such Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
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<PAGE>
4.2. Performance. The Company will 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 such Closing.
4.3. Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series K Preferred Stock and Warrants pursuant to this Agreement will be duly
obtained and effective as of such Closing, except for the filing of a Form D
pursuant to Regulation D promulgated under the Securities Act and the filing of
any required state securities or blue sky filings.
4.4. Proceedings And Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to Cooley
Godward LLP, which will have received all such counterpart original and
certified or other copies of such documents as it may reasonably request.
4.5. Registration Rights Agreement. The Company and each Investor that is
not a party to the Registration Rights Agreement prior to such Closing will have
executed counterpart signature pages to the Registration Rights Agreement.
4.6. Officer's Certificate. The President of the Company will have
delivered to each Investor purchasing on the date hereof a certificate, dated as
of the Initial Closing, to the effect that the conditions specified in Sections
4.1, 4.2, and 4.3 have been with respect to the Closing.
4.7. Good Standing Certificates. The Company will have delivered to Cooley
Godward LLP good standing certificates, dated as of the Closing, from each
jurisdiction in the United States in which the ownership of its property or the
conduct of its business requires qualifications as a foreign corporation and
where the failure to so qualify would have a Material Adverse Effect.
5. Conditions Of The Company's Obligations At Closing
The obligations of the Company to each Investor under Section 1 -1 (b) of
this Agreement are subject to the fulfillment on or before the Closing of such
Investor's purchase 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 will be true on and as of such Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
-12-
<PAGE>
5.2. Performance. The Investors will have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before such Closing.
5.3. Qualifications. All authorizations, approvals or permits, if any, of
governmental authority or regulatory body of the United States or any state that
are required in connection with the lawful issuance and sale of the Series K
Preferred Stock and Warrants pursuant to this Agreement will be duly obtained
and effective as of such Closing.
5.4. Proceeding And Documents. All corporate and other proceedings in
connection with the transactions completed at such Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to the
Company, which will have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.
5.5. Registration Rights Agreement. Each Investor that is not a party to
the Registration Rights Agreement prior to such Closing will have executed
counterpart signature pages to the Registration Rights Agreement.
6. Miscellaneous.
6.1. Governing Law. This Agreement will be governed by and under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.2. Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Investor and for two
years after the closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate delivered by or on behalf of
the Company pursuant hereto at the Initial Closing in connection with the
transactions contemplated hereby will be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
6.3. Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of and be binding upon,
the successors, assigns, heirs executors and administrators of the parties
hereto.
6.4. Severability. In case any provision of this Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
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<PAGE>
6.5 Amendment And Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least 66 2/3% of the Series K Preferred Stock sold hereunder.
(b) Except as otherwise expressly provided, (1) the obligations of the
Company and the rights of the Investors under this Agreement may be waived by
any Investor only in writing and for all Investors only with the written consent
of the holders of at least 66 2/3% of the Series K Preferred Stock sold
hereunder, and (2) the obligations of the Investors and the rights of the
Company under this Agreement may be waived only with written consent of the
Company.
6.6. Delays Or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach, default or
noncompliance of any other party under this Agreement will impair any such
right, power or remedy, nor will it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of any similar
breach, default or noncompliance thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach, default or noncompliance under this Agreement or any waiver on such
Investor's part of any provisions or conditions of this Agreement must be in
writing and will be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law or otherwise
afforded to the parties hereto, will be cumulative and not alternative.
6.7. Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party to
be notified at the address as set forth on the signature pages hereof or at such
other address as such party may designate by 10 days' advance written notice to
the other parties hereto.
6.8. Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
6.9. Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
-14-
<PAGE>
6.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
6.11. Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party will 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.
6.12. 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 will indemnify and hold harmless the Company from
any liability for any 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 will 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
liability or asserted liability) for which the Company or any of its officers,
employees, or representatives is responsible
[THIS SPACE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
6.13. Expenses. Irrespective of whether the Initial Closing is Effected,
the Company will pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Initial Closing is effected, the Company will reimburse the reasonable fees and
expenses of Cooley Godward LLP upon receipt of a reasonably detailed bill
therefor.
The parties have executed this Agreement as of the date first above written.
ACCESS RADIOLOGY CORPORATION
by: ___________________________
Name:
Title:
Address:
25 Hartwell Avenue
Lexington, MA 02421
BEDROCK CAPITAL PARTNERS I, L.P.
by: BEDROCK GENERAL PARTNER I, LLC
by: ___________________________
Title: Managing Member
Address:
VBW EMPLOYEE BEDROCK FUND, L.P.
by: BEDROCK GENERAL PARTNER I, LLC
by: ___________________________
Title: Managing Member
Address:
CREDIT SUISSE FIRST BOSTON BEDROCK
FUND, L.P.
by: BEDROCK GENERAL PARTNER I, LLC
Attorney in Fact
by: ___________________________
Title: Managing Member
Address:
-16-
<PAGE>
PACIFIC VENTURE GROUP, L.P.
by: PVG Equity Partners, L.L.C., General Partner
by:__________________________
Name:
Title:
Address:
PVG ASSOCIATES, L.P.
by: PVG Equity Partners, L.L.C., General Partner
by:__________________________
Name:
Title:
Address:
DELPHI VENTURES III, L.P.
by: Delphi Management Partners III,
L.L.C., General Partner
by:__________________________
Name:
Managing Member
Address:
DELPHI BIOINVESTMENTS III, L.P.
by: Delphi Management Partners III,
L.L.C., General Partner
by:__________________________
Name:
Managing Member
Address:
<PAGE>
CHILD HEALTH INVESTMENT CORPORATION
by:_________________________
Name:
Title:
Address:
BESSEC VENTURES IV L.P.
by:_________________________
Name:
Title:
Address:
BESSEMER VENTURE PARTNERS IV, L.P.
by:_________________________
Name:
Title:
Address:
WILLIAM T. BURGIN
by:_________________________
Name:
Title:
Address:
NEIL H. BROWNSTEIN
by:_________________________
Name:
Title:
Address:
<PAGE>
ROBERT H. BUESCHER
by:_________________________
Name:
Title:
Address:
G. FELDA HARDYMON
by:_________________________
Name:
Title:
Address:
CHRISTOPHER GABRIELI
by:_________________________
Name:
Title:
Address:
DAVID J. COWAN
by:_________________________
Name:
Title:
Address:
<PAGE>
BRUCE K. GRAHAM
by:_________________________
Name:
Title:
Address:
GAUTAM A. PRAKASH
by:_________________________
Name:
Title:
Address:
ROBI L. SONI
by:_________________________
Name:
Title:
Address:
JOANNA A. STROBER
by:_________________________
Name:
Title:
Address:
CRAIGHILL CORPORATION
by:_________________________
Name:
Title:
Address:
<PAGE>
RICHARD R. DAVIS
by:_________________________
Name:
Title:
Address:
CONALY PARTNERS
by:_________________________
Name:
Title:
Address:
LINDSAY 1994 FAMILY PARTNERSHIP, L.P.
by:_________________________
Name:
Title:
Address:
JOHN G. MACDONALD
by:_________________________
Name:
Title:
Address:
HOWARD S. MARKOWITZ
by:_________________________
Name:
Title:
Address:
<PAGE>
EDWARD PARK
by:_________________________
Name:
Title:
Address:
ROBERT J.S. RORISTON
by:_________________________
Name:
Title:
Address:
STEVEN L. WILLIAMSON
by:_________________________
Name:
Title:
Address:
WOODS 1994 FAMILY PARTNERSHIP, L.P.
by:_________________________
Name:
Title:
Address:
BVP IV SPECIAL SITUATIONS L.P.
by:_________________________
Name:
Title:
Address:
<PAGE>
BESSEMER VENTURE INVESTORS L.P.
by:_________________________
Name:
Title:
Address:
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Zero Stage
Capital VI, L.P.
Aggregate Purchase Amount: $1,000,000
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 10, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement') and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement'). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor" and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 10, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 10, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: S. Tyagi
Aggregate Purchase Amount: $50,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: J. Andrew Bugas &
Maryann Horgan Bugas
Aggregate Purchase Amount: $50,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: David MacGregor Malcolm
Aggregate Purchase Amount: $200,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Steven Ezzes
Aggregate Purchase Amount: $1,000,000
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 10, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement') and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement'). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor" and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 10, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 10, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Ian Hardington
Aggregate Purchase Amount: $50,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Nimil R. Parekm
Aggregate Purchase Amount: $220,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: David M. Feinman
Aggregate Purchase Amount: $110,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Stefan M. Selig
Aggregate Purchase Amount:
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Kim S. Fennebresque
Aggregate Purchase Amount: $75,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Curtis R. Welling
Aggregate Purchase Amount: $100,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Matthew J. Grayson
Aggregate Purchase Amount: $100,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Eric Cohen
Aggregate Purchase Amount: $50,000
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: Bradford C. Yates and
Sarah M. Yates as JTWROS
Aggregate Purchase Amount: $100,000
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
ACCESS RADIOLOGY CORPORATION
COUNTERPART SIGNATURE PAGE
SECURITIES PURCHASE AGREEMENT DATED JANUARY 20, 1999
REGISTRATION RIGHTS AGREEMENT
By execution of this Signature Page dated as of May 17, 1999, the
undersigned (the "Investor") agrees to purchase, and ACCESS Radiology
Corporation (the "Company") agrees to sell to the Investor, a number of shares
(the "Shares") of Series K Preferred Stock of the Company equal to the aggregate
purchase amount set forth below, divided by $1.40 per Share, together with a
Warrant to purchase a number of shares of Common Stock determined by multiplying
the purchase amount by a fraction equal to 290/1500 (rounded down to the nearest
whole share). The purchase and sale of the Shares and Warrant shall be on the
terms set forth in the Securities Purchase Agreement dated January 20, 1999, as
amended (the "Purchase Agreement") and the Registration Rights Agreement dated
July 28, 1998 (the "Registration Rights Agreement"). Copies of each of the
Purchase Agreement and the Registration Rights Agreement have been delivered to
the undersigned. By execution of this counterpart signature page to the Purchase
Agreement and the Registration Rights Agreement, the Investor will become a
party to the Purchase Agreement and the Registration Rights Agreement and will
be bound by all the terms thereof as an "Investor"and a "Holder" thereunder.
The closing of the purchase and sale of the Shares and the Warrant
hereunder shall take place at the offices of the Company on May 17, 1999 or such
later date as shall be designated by the Company. At the closing, the Investor
will deliver payment of the purchase price set forth below by check or wire
transfer, and the Company shall deliver the Warrant and a certificate for the
Shares. The Company shall have no obligation to proceed with the closing if this
executed Counterpart Signature Page and payment in full of the purchase price of
the Shares and the Warrant have not been received by the Company on or before
May 17, 1999.
Capitalized terms used in this instrument and not otherwise defined have
the meanings set forth in the Purchase Agreement and the Registration Rights
Agreement.
IN WITNESS WHEREOF, the Investor and the Company have executed this
Counterpart Signature Page as of the date set forth above.
ACCESS Radiology Corporation Name of Investor: William B. Buchanan, Jr.
Aggregate Purchase Amount: $20,000.00
by_________________________ by_______________________
Scott S. Sheldon Name:
President Title (if any):
<PAGE>
EXHIBIT 10.8
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This is an amendment (this "Amendment"), dated as of May 7, 1999, to the
Securities Purchase Agreement (the "Purchase Agreement") dated as of January 20,
1999 among ACCESS Radiology Corporation (the "Company") and the Investors listed
on the signature pages of the Purchase Agreement.
The parties agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined have
the meanings set forth in the Purchase Agreement.
2. The first sentence of Section 1.3 of the Purchase Agreement is amended
to read in its entirety as follows:
Subject to the terms and conditions of this Agreement, the Company may sell
such additional shares of Series K Preferred Stock as may be authorized and
unissued from time to time to such persons as the Company may determine at
the same price per share as the Series K Preferred Stock purchased and sold
at the Initial Closing, together with warrants to purchase an amount of
Common Stock determined in accordance with Section 1.1(b).
3. This amendment shall become effective as of the date first above written
upon the satisfaction of the requirements of Section 6.5(a) of the Purchase
Agreement. This Amendment may be executed in counterparts, each of which shall
constitute an original, but all of which shall constitute a single instrument.
Except as expressly amended hereby, all provisions of the Purchase Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as set forth
below.
ACCESS Radiology Corporation
By: ________________________
Name:
Title:
BEDROCK CAPITAL PARTNERS I, L.P.
By: _______________________________
Title: Managing Member
<PAGE>
VBW EMPLOYEE BEDROCK FUND, L.P.
By: ________________________________
Title: Managing Member
CREDIT SUISSE FIRST BOSTON BEDROCK
FUND, L.P.
By: Bedrock General Partner I, LLC,
Attorney in Fact
By: __________________________________
Title: Managing Member
PACIFIC VENTURE GROUP, L.P.
By: PVG Equity Partners, L.L.C., General Partner
By: __________________________________
Name:
Title:
PVG ASSOCIATES, L.P.
By: PVG Equity Partners, L.L.C., General Partner
by: _____________________________________
Name:
Title:
DELPHI VENTURES III, L.P.
By: Delphi Management Partners III, L.L.C.,
General Partner
by: ________________________________
Name:
Managing Member:
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<PAGE>
DELPHI BIOINVESTMENTS III, L.P.
by: Delphi Management Partners III, L.L.C.,
General Partner
by: __________________________
Name
Managing Member
CHILD HEALTH CORPORATION OF AMERICA
By: __________________________
Name:
Title:
BESSEC VENTURES IV L.P.
By: __________________________
Name:
Title:
BESSEMER VENTURE PARTNERS IV, L.P.
By: ___________________________
Name:
Title:
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<PAGE>
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT is made as of July 28, 1998 by and
among ACCESS RADIOLOGY CORPORATION, a Delaware corporation (the "Company"), and
such holders of the Company's equity securities as shall execute a counterpart
signature page to this Agreement from time to time.
The parties agree as follows:
1. GENERAL
1.1 Definitions. As used in this Agreement, the following terms will have
the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of
this Agreement.
(c) "Equity Security" means (1) any Common Stock, Preferred Stock or
other equity security of the Company, (2) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock or other equity
security of the Company (including any option to purchase such a convertible
security), (3) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, Preferred Stock or other equity security of the
Company, or (4) any such warrant or right; provided that "Equity Security" shall
not include (i) the Series J Preferred stock of the Company or any Common Stock
issued or issuable upon conversion thereof, or (ii) any security issued or
issuable after May 31, 1998 (other than upon conversion or exercise of an Equity
Security issued or issuable on such date) that is excluded from the definition
of Equity Security by action of the Company's Board of Directors (provided that
no Series K Security may be so excluded).
(d) "Exchange Act" means the Securities Exchange of 1934, as amended.
(e) "Holder" means any Investor owning of record Registrable
Securities or any assignee of record of such Registrable Securities in
accordance with Section 2.10 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
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<PAGE>
(g) "Initiating Holders" means the Holders of at least 50% of the
Registrable Securities then outstanding.
(h) "Investor" means a holder of Equity Securities that is a party to
this Agreement.
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company in which the offering price per share is at least
$3.00 and the aggregate offering price to the public is in excess of
$15,000,000.
(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or documents.
(k) "Registrable Securities" means (1) Common Stock of the Company
issued from time to time to any Investor or issuable upon conversion or exercise
of any Equity Securities held by an Investor; and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities will not
include (1) Common Stock issued or issuable upon exercise of stock options
granted by the Company as compensation, (2) any Common Stock issued or issuable
after May 31, 1998 (other than upon conversion or exercise of an Equity Security
issued or issuable on such date) that is excluded from the definition of
Registrable Securities by action of the Company's Board of Directors (provided
that no Series K Security may be so excluded), (3) any Common Stock issued or
issuable upon conversion of the Series J Preferred stock of the Company, or (4)
any securities sold by a Person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed $15,000 of a single special counsel for the Holders, blue sky fees and
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<PAGE>
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which will be paid in any event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale.
(p) "Series K Securities" means the Series K Preferred Stock of the
Company, the Common Stock issued or issuable upon conversion thereof, the Common
Stock Purchase Warrants issued under agreements to purchase the Series K
Preferred Stock, and the Common Stock issued or issuable upon exercise of such
warrants.
(q) "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.9(a) of this
Agreement.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions On Transfer.
(a) No Investor will make any disposition of Equity Securities unless
and until:
(1) 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;
(2) (A) The transferee has agreed in writing to be bound by this
Section 2.1, (B) such Investor has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Investor has furnished the Company with an
opinion of counsel, reasonably satisfactory
-3-
<PAGE>
to the Company, that such disposition will not require registration of such
shares under the Securities Act; or
(3) The disposition is a disposition of Common Stock made in
compliance with Rule 144 under the Securities Act and the transferor has
provided to the Company reasonably detailed confirmation of such
compliance. Such confirmation will include an opinion of counsel if
reasonably requested by the Company, except that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144(k)
except in unusual circumstances.
(4) Notwithstanding the provisions of Sections 2.1(a)(1),
2.1(a)(2), and 2.1(a)(3), no registration statement or opinion of counsel
will be necessary for a transfer by an Investor that is (A) a partnership
to its partners or former partners in accordance with the partnership
interests, (B) a corporation to its shareholders in accordance with their
interests in the corporation, (C) a limited liability company to its
members or former members in accordance with their interests in the limited
liability company, (D) to a Investor's family member or trust for the
benefit of an individual Investor or a Investor's family member or members,
or (E) made without consideration to an entity that is controlled by,
controls, or is under common control with the transferring Investor,
provided that the transferee will be subject to the terms of this Section
2.1 to the same extent as if he, she or it were an original Investor
hereunder.
(b) Each certificate representing Equity Securities subject to this
Agreement issued after May 31, 1998 will (unless otherwise permitted by the
provisions of this Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL
FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
(c) The Company will reissue promptly unlegended certificates at the
request of any holder thereof if the holder has obtained an opinion of counsel
(which counsel may be counsel to the Company) reasonably acceptable to the
Company to the effect that the securities represented by such certificate, may
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lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement under the Securities Act
covering the sale of Registrable Securities that, if completed, would result in
a public offering of equity securities of the Company having an aggregate
offering price to the public in excess of $15,000,000, then the Company will,
within 30 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it will, within 15 days
after the above-described notice from the Company, so notify the Company in
writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company will include such information in the written notice referred to
in Section 2.2(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 2.2, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated first, to the holders of Common
Stock issued or issuable upon conversion of Series J Preferred Stock who have
exercised Registration rights pursuant to Section 2.3 of the Investors Rights
Agreement dated as of September 30, 1997; and, second, to the Holders of
Registrable
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Securities that would otherwise be underwritten pursuant hereto on a pro rata
basis based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting will be withdrawn from the registration.
Notwithstanding the foregoing, the Company may, if approved by its Board of
Directors, unilaterally amend this Section from time to time to provide
purchasers of Equity Securities issued after May 31, 1998 with allocation rights
prior to those of Holders; provided that such rights may not have priority over
the rights of Holders to register Series K Securities hereunder.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.2:
(1) during the period starting with the date of filing of, and
ending on the date 180 days following the effective date of the
registration statement pertaining to the Initial Offering, provided that
the Company is making reasonable and good faith efforts to cause such
registration statement to become effective;
(2) if, within 30 days of receipt of a written request from the
Initiating Holders pursuant to Section 2.2(a), the Company notifies the
Holders of its intention to file a registration statement with respect to a
public offering of its Common Stock (excluding a registration relating to
an employee benefit plan or with respect to a corporate reorganization or
other transaction under Rule 145 of the Securities Act) within 90 days,
during the period beginning on the date of such notice from the Company and
ending 90 days thereafter;
(3) after the Company has effected two registrations pursuant to
this Section 2.2 and such registrations have been declared or ordered
effective (provided that there shall not be counted for purposes of this
clause (3) any registration in which there are included, as a result of the
operation of Section 2.2(b), less than 75% of the securities for which
Holders requested inclusion under Section 2.2(a)); or
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(4) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration to be effected at such
time, in which event the Company will have the right to defer such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided that such right to delay a request will be
exercised by the Company no more than twice in any one-year period.
(d) Notwithstanding anything else contained in this Agreement, no
Holder shall be permitted to cause the registration of any Registrable
Securities at any time when holders of Series J Preferred Stock of the Company
would not be permitted to cause registration of Common Stock issued or issuable
upon conversion thereof pursuant to the Investors Rights Agreement dated as of
September 30, 1997 among such holders and the Company.
2.3 Piggyback Registrations.
(a) The Company will notify all Holders of Registrable Securities in
writing at least 30 days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and
will afford each such Holder an opportunity to include in such registration
statement all or part of such Registrable Securities held by such Holder. Each
Holder desiring to include in any such registration statement all or any part of
the Registrable Securities held by it will, within 15 days after the above-
described notice from the Company, so notify the Company in writing. Such notice
will state the intended method of disposition of the Registrable Securities by
such Holder. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder will nevertheless continue to have the right to include any Registrable
Securities in any subsequent such registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company will
so advise the Holders of Registrable Securities as a part of such notice. In
such event, the right of any Holder to be included in a registration pursuant to
this Section 2.3 will be conditioned upon such Holder's participation
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in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting will enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
such provision of this Agreement, if the underwriter determines in good faith
that marketing factors require a limitation of the numbers of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated: first, to the Company; second, to the holders of Common Stock
issued or issuable upon conversion of Series J Preferred Stock of the Company
who have exercised registration rights pursuant to the Investors Rights
Agreement dated as of September 30, 1997; third, to the Holders on a pro rata
basis based on the total number of Registrable Securities proposed to be sold by
the Holders (assuming conversion of all Shares); and fourth, to any other
shareholder of the Company on a pro rata basis (assuming conversion of all
Preferred Stock). Notwithstanding the foregoing, the Company may, if approved by
its Board of Directors, unilaterally amend this Section from time to time to
provide purchasers of Equity Securities issued after May 31, 1998 with
allocation rights prior to those of Holders; provided that such rights may not
have priority over the rights of Holders to register Series K Securities
hereunder.
(c) The Company will have the right to terminate or withdraw any
registration initiated or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration will be borne by the Company in
accordance with Section 2.5.
2.4 Form S-3 Registration.
(a) If the Company receives a written request from a Holder or
Holders that the Company file a registration statement on Form S-3 under the
Securities Act covering the registration of Registrable Securities having an
aggregate offering price to the public in excess of $500,000, then the Company
will, within 10 days of the receipt thereof, given written notice of such
request to all other Holders and effect, as soon as practicable, the
registration on Form S-3 under the Securities Act of all Registrable Securities
that the Holders request to be registered. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it will, within 15 days after the above-described notice from the
Company, so notify the Company in writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an
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underwriting, they will so advise the Company as part of their request made
pursuant to this Section 2.4 and the Company will include such information in
the written notice referred to in Section 2.4(a). In such event, the right of
any Holder to include its Registrable Securities in such registration will be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting will enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters will be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.4, if the underwriter
advises the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated first, to the holders of Common
Stock issued or issuable upon conversion of Series J Preferred Stock who have
exercised registration rights pursuant to Section 2.3 of the Investors Rights
Agreement dated as of September 30, 1997; and, second, to the Holders of
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting will be
withdrawn from the registration. Notwithstanding the foregoing, the Company may,
if approved by its Board of Directors, unilaterally amend this Section from time
to time to provide purchasers of Equity Securities issued after May 31, 1998
with allocation rights prior to those of Holders; provided that such rights may
not have priority over the rights of Holders to register Series K Securities
hereunder.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.4:
(1) if Form S-3 (or any similar form) is not available for such
offering by the Holders;
(2) if the Company has effected two or more registrations
pursuant to this Section 2.4 within the 12 months preceding receipt of the
request described in Section 2.4(a); or
(3) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company
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and its shareholders for such registration to be effected at such time, in
which event the Company will have the right to defer such filing for a
period of not more than 90 days after receipt of the request of the
Initiating Holders; provided that such right to delay a request will be
exercised by the Company no more than twice in any one-year period.
(d) Notwithstanding anything else contained in this Agreement, no
Holder shall be permitted to cause the registration of any Registrable
Securities at any time when holders of Series J Preferred Stock of the Company
would not be permitted to cause registration of Common Stock issued or issuable
upon conversion thereof pursuant to the Investors Rights Agreement dated as of
September 30, 1997 among such holders and the Company.
(e) the Company covenants that it will, at any time when the Company
is otherwise eligible to register securities on Form S-3, use its best efforts
to timely file all reports required to be filed with the SEC under the
Securities Exchange Act of 1934.
2.5 Expenses of Registration. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4
will be borne by the Company. All Selling Expenses incurred in connection with
any registrations hereunder will be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company will not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request, or (b) in the
case of a registration pursuant to Section 2.2, the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right will be
forfeited by all Holders. If the Holders are required to pay the Registration
Expenses, such expenses will be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
2.6 Obligations Of The Company. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all
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reasonable efforts to cause such registration statement to become effective and
keep such registration statement effective for up to 120 days or, if earlier,
until the participating Holder or Holders have completed the distribution
related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statements and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders,
provided that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such state or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriter or underwriters of such
offering. Each Holder participating in such underwriting will also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly provide to each Holder a
corrected prospectus.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a
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majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities, and (2) a letter, dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 will terminate and be of no further force and effect as to
any Holder if (a) the Company has completed its Initial Offering and is subject
to the provisions of the Exchange Act, and (b) all Registrable Securities held
by such Holder (together with its affiliates, partners and former partners) may
be sold under Rule 144 during any 90-day period.
2.8 Delay Of Registration; Furnishing Information.
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the
Company to take an action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Section 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, shareholders, officers, stockholders,
directors and legal counsel of such Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages or liabilities (joint or several) to
which any of such persons may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (indi-
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vidually a "Violation") by the Company; (1) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (2) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading; or (3) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, shareholder, officer, director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 2.9(a) will not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent will not be unreasonably withheld, nor
will the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that (i) it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder, or (ii) in the case of a sale directly by a Holder of Registrable
Securities (including a sale of such Registrable Securities through any
underwriter retained by such Holder to engage in a distribution solely on behalf
of such Holder), such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus (a copy of which was delivered to such Holder by the
Company at or prior to confirmation of such sale), and such Holder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of such sale of the Registrable Securities to the person asserting
any such loss, claim, damage or liability in any case where such delivery is
required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors, stockholders, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such Holder's partners, shareholders, directors, officers or legal counsel,
any underwriter (as defined in the Securities Act) for such
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Holder or any person who controls such Holder or underwriter, against any
losses, claims, damages or liabilities (joint or several) to which any of such
persons may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation by the
Company, in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information furnished by
such Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 2.9(b) will not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent will not be unreasonably
withheld; provided, further, that in no event will any indemnity under this
Section 2.9(b) exceed the proceeds from the offering received by the
indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be
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unavailable to an indemnified party with respect to any losses, claims, damage
or liabilities referred to herein, the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, will to the extent permitted by
applicable law contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation or Violations that resulted in such loss, claim, damage or liability,
as well as any other relevant equitable considerations. The relative fault of
the indemnifying party and the indemnifying party will be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
will any contribution by a Holder hereunder exceeds the proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
will survive completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation with respect to which indemnification has been sought hereunder,
will, except with the consent of each indemnified party seeking indemnification
hereunder, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
2.10 Assignment Of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may only be assigned
by a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member or members, (c) is controlled by,
controls, or is under common control with the transferring Holder and acquires
Registrable Securities for no consideration, or (d) acquires at least 25,000
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee with agree to be
subject to all restrictions set forth in this Agreement.
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2.11 "Market Stand-Off" Agreements. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Investor will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Investors (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed 180 days following the
effective date of the registration statement of the Company filed under the
Securities Act; provided that each officer and director of the Company that
holds more than 5000 shares of Common Stock (on an as-converted basis) shall
have entered into a similar agreement and provided, further, that the
obligations described in this Section 2.13 will not apply to a registration
relating solely to employee benefit plans or a registration relating solely to a
SEC Rule 145 transaction. The Company may impose stop-transfer instructions with
respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said period. The Company will use all
commercially reasonable efforts to require each other person who has acquired or
in the future acquires Common Stock or Preferred Stock from the Company to be
subject to the same or a substantially equivalent market stand-off agreement.
3. MISCELLANEOUS
3.1 Governing Law. This Agreement will be governed by and construed under
the laws of the State of Delaware.
3.2 Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Holder and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby will be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
3.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof will inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and will inure to the benefit of and be enforceable by each person who is a
holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem
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and treat the person listed as the holder of such shares in its records as the
absolute owner and holder of such shares for all purposes.
3.4 Severability. In case any provision of the Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
3.5 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, (1) the obligations of
the Company and the rights of the Holders under this Agreement may be waived by
any Holder only in writing and for all Holders only with the written consent of
the holders of at least a majority of the Registrable Securities, and (2) the
obligations of the Holders and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
(c) Any amendment or waiver effected with the written consent of
holders of a majority of the Registrable Securities shall be binding upon all
holders of Registrable Securities.
3.6 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party hereto upon any breach, default or noncompliance
of any other party under this Agreement will impair any such right, power or
remedy, nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on the part of any party hereto of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of any
provisions or conditions of this Agreement must be in writing and will be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law or otherwise afforded to the
parties hereto, will be cumulative and not alternative.
3.7 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified
-17-
<PAGE>
mail, return receipt requested, postage prepaid, or (4) one day after deposit
with a nationally recognized overnight courier, specifying next day deliver,
with written verification of receipt. All communications will be sent to the
Company at its principal office and to any Investor at such Investor's address
appearing in the records of the Company.
3.8 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover form the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants which will include, without limitation, all fees,
costs and expenses of appeals.
3.9 Titles and Subtitles. The titles of the sections and subsections of
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
3.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessemer Venture Investors L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: VBW Employee Bedrock Fund, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Credit Suisse First Boston Bedrock Fund, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bedrock Capital Partners I, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Pacific Venture Group, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: PVG Associates, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Delphi BioInvestments III, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Delphi Ventures III, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessec Ventures IV, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessemer Venture Partners IV, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: William T. Burgin
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Neill H. Brownstein
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robert H. Buescher
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: G. Felda Hardymon
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Christopher Gabrielli
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: David J. Cowan
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bruce K. Graham
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Gautam A. Prakash
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robi L. Soni
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Joanna A. Strober
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Craighill Corporation
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Richard R. Davis
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Conaly Partners
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Lindsay 1994 Family Partnership, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: John G. McDonald
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Howard S. Markowitz
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Edward Park
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robert J.S. Roriston
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Steven L. Williamson
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Woods 1994 Family Partnership, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: BVP IV Special Situations L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Child Health Investment Corporation
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
EXHIBIT 10.10
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement"), dated as of November 23,
1998, is by and between Raytheon E-Systems, Inc., a Delaware corporation
("Seller"), and ACCESS Radiology Corporation, a Delaware corporation ("Buyer").
WHEREAS, Seller designs, develops and sells, among other things, hardware
and software solutions for teleradiology and picture archiving and
communications systems ("PACS") to health care providers through the E-Systems
Medical Electronics (also known as "E-MED") product line; and
WHEREAS, Buyer desires to purchase certain assets of Seller and assume
certain liabilities incurred by Seller relating to Seller's business, and Seller
desires to sell such assets and assign such liabilities incurred by Seller to
Buyer, upon the terms and conditions set forth herein (the "Asset Purchase');
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
Article 1.
Certain Definitions
-------------------
As used herein, unless the context otherwise requires, the following terms
(or any variant in the form thereof) have the following respective meanings.
Terms defined in the singular shall have a comparable meaning when used in the
plural, and vice versa, and the reference to any gender shall be deemed to
include all genders. Unless otherwise defined or the context otherwise clearly
requires, terms for which meanings are provided herein shall have such meanings
when used in any Schedule hereto and each collateral document and certificate
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto.
"Acquired Assets" means the assets listed on Schedule I hereto.
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency, commission or tribunal.
"Adverse", "Adversely" when used in conjunction with "Affect," "Change" and
"Effect shall mean, with respect to Seller or Buyer, whichever is the party in
the context to which such term applies, any event which could reasonably be
expected to (a) adversely affect the enforceability of this Agreement by such
party or (b) adversely affect the properties, financial
<PAGE>
condition or results of operation of such party, or (c) impair such party's
ability to fulfill its obligations under the terms of this Agreement or (d)
adversely affect the aggregate rights and remedies of such party under this
Agreement or (e) when used with respect to the Business, adversely affect the
value of the Business; and, with respect to clauses (a) through (e), unless
otherwise specifically set forth, in a material respect or manner or to a
material degree (which, for the purposes of this Agreement shall, unless
specifically stated to the contrary, be determined without regard to the fact
that various provisions of this Agreement set forth specific dollar amounts or
the basis for calculating such amounts).
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Asset Purchase" has the meaning set forth in the second recital hereto.
"Assumed Liabilities" means, except for the Retained Liabilities, all
liabilities, known unknown, incurred or accrued in connection with the E-MED
business, operations and the Acquired Assets.
"Business" means, collectively, the Acquired Assets and the Assumed
Liabilities.
"Buyer Indemnified Parties" has the meaning set forth in Section 10.2
below.
"Closing" means the consummation of the transactions contemplated by
Section 2.1 of
"Closing Date" means has the meaning set forth in Section 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto, and the rules and regulations promulgated thereunder.
"Contract" means any written note, bond, mortgage, indenture, lease,
contract, instrument, license, agreement, sales order, purchase order, open bid
or other obligation (oral or written) or binding commitment relating to the
Business and all rights therein.
"Conversion Amount" means that number of shares equal to (i) the Final
Installment divided by (ii) 50% of the Effective Price per share of the then
most recent sale of equity securities by Buyer in a transaction or group of
related transactions resulting in the receipt by Buyer of aggregate gross
proceeds of at least $ 100,000 (excluding the exercise or conversion of any
employee options or any warrants, options or convertible securities outstanding
on the date of this Agreement). The "Effective Price" means (x) in any
transaction in which only common stock is sold, the price per share of such
common stock, and (y) in any transaction in which
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<PAGE>
warrants, convertible securities or other rights to acquire common stock are
sold (whether or not in combination with common stock itself), the price
determined by dividing (q) the aggregate consideration that would be paid by an
investor to purchase the relevant securities and to exercise all warrants,
conversion privileges and other rights to acquire common stock included in such
securities by (r) the aggregate number of shares of common stock that the
investor would receive upon completion of the purchase and the exercise of all
such warrants, conversion privileges and rights to acquire common stock.
"Covered Liabilities" has the meaning set forth in Section 10.2 below.
"Entity" means any Person other than a natural Person.
"Environmental Laws" means all Federal, state, local and foreign Laws
relating to pollution or protection of the environment, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA "), 42 U.S.C. 9601 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C.
1251 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., and the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., and all analogous state Laws.
"Estimated Balance Sheet" means the October 23, 1998 balance sheet, att
Schedule 11 hereto.
"Excluded Assets" means those assets of Seller listed on Schedule III
hereto.
"Final Determination" means (a) with respect to federal Income Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal Income Taxes, any final determination of liability in respect of a Tax
that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds, amended
returns or appeals from adverse determinations), or (b) the payment of Tax by
Seller, Buyer or any of their Affiliates, whichever is responsible for payment
of such Tax liability under applicable law, with respect to any item disallowed
or adjusted by a Taxing Authority, provided that such responsible party
determines that no action should be taken to recoup such payment and the
indemnifying party, if any, agrees.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any federal, state, local or foreign Entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any court, government
authority, agency, department, board, commission, or instrumentality of the
United States, any State of the United States or political subdivision thereof,
and any tribunal or arbitral authority of competent jurisdiction, and any self
regulatory organization.
-3-
<PAGE>
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof
"Intellectual Property' means all proprietary software, designs and
documentation, patents, patent rights, copyrights, trade secrets, know-how,
service marks, maskworks and trademarks, applications for any of the foregoing,
in all countries in the world, and unfiled invention disclosures.
"Knowledge" (including the term "to the knowledge of') means the actual
knowledge of the Persons named on Schedule IV hereto.
"Laws" means statutes, regulations, ordinances, rules and other laws
promulgated by a Governmental Authority.
"Licenses" means permits, registrations, approvals, franchises or other
authorizations.
"Lien" means a restriction on voting or transfer or pledge, lien, mortgage,
hypothecation, collateral assignment, charge, encumbrance, easement, covenant,
restriction, title defect, encroachment or security interest of any kind.
"MegaScan" means the series of high definition monitors manufactured and
sold by Seller.
"Orders" means judgments, orders, injunctions, decrees, stipulations or
awards (whether rendered by a court, administrative agency, arbitrator or other
tribunal) and whether imposed or entered by consent.
"PACS" has the meaning set forth in the first recital hereto.
"Permits" has the meaning set forth in Section 3.15.
"Permitted Liens" means any Liens (i) for Taxes attributable to any taxable
period beginning on or prior to the Closing Date and not yet due or payable or
being contested in good faith, (ii) that are not material and constitute
mechanics', carriers', workers' or like liens incurred in the ordinary course of
business, or (iii) that, individually or in the aggregate, are not material.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
-4-
<PAGE>
"Purchase Price" means Three Million Eight Hundred Thousand Dollars
($3,800,000), subject to adjustment pursuant to Schedule 2.3(b) and Section 2.5.
"Retained Liabilities" means those liabilities of Seller listed on Schedule
V hereto.
"Raytheon Indemnified Parties" has the meaning set forth in Section 10.3
below.
"Returns" means returns, reports and forms required to be filed with any
Governmental Authority.
"Schedule" or "Scheduled" means any Schedule hereto or of or pertaining to
any such Schedule.
"Taxes" means all taxes (whether federal, state, local or foreign) based
upon or measured by income and any other tax whatsoever, including, but not
limited to, gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, employment, excise or
property taxes, together with any interest or penalties imposed with respect
thereto.
"Third Party Claim" means any Action by or before any Governmental
Authority asserted by a Person other than any party hereto or their respective
Affiliates which gives rise to a right of indemnification hereunder.
Article II.
Sale of Assets: Closing
------------------------
Section 2. 1. Purchase and Sale.
------------------
(a) On the basis of the representations, warranties, covenants and
agreements and subject to the satisfaction or waiver of the conditions set forth
herein, at the Closing, Buyer hereby agrees to purchase from Seller and Seller
hereby agrees to sell, convey, transfer, assign and deliver to Buyer, free and
clear of all Liens, other than Permitted Liens, the Acquired Assets, and Seller
hereby agrees to assign and Buyer hereby agrees to unconditionally assume and
agree to pay, satisfy and discharge when due in accordance with their terms, and
Buyer shall fully and forever hold Seller and any of its Affiliates harmless
against, any and all Assumed Liabilities. All transactions at the Closing shall
be deemed to be effective as of the close of business on the Closing Date, and
events taking place and periods ending thereafter shall be deemed to have taken
place or ended after the Closing Date.
(b) Seller shall retain all rights under and liabilities with respect to
the Excluded Assets and the Retained Liabilities and Buyer shall have no rights
under, and no liabilities with respect to, the Excluded Assets and the Retained
Liabilities and Seller shall fully and forever hold Buyer and any of its
Affiliates harmless against any and all Retained Liabilities.
-5-
<PAGE>
Section 2.2. Closing Documents, Payment of First Installment. At the Closing:
-----------------------------------------------
(a) Seller shall assign and transfer to Buyer the Acquired Assets, and
Buyer shall assume from Seller the due payment, performance and discharge of the
Assumed Liabilities by delivery of (i) a General Assignment, Assumption and Bill
of Sale in substantially the form attached hereto as Exhibit A (the "Bill of
Sale"), duly executed by Seller and Buyer, (ii) all such other good and
sufficient instruments of conveyance, assignment and transfer, and such
affidavits and other instruments in form and substance reasonably acceptable to
Buyer's counsel, as shall be effective to transfer to Buyer the Acquired Assets,
and (iv) such other good and sufficient instruments of assumption, in form and
substance reasonably acceptable to Seller's counsel, as shall be effective to
cause Buyer to assume the Assumed Liabilities.
(b) Buyer shall pay to Seller by wire transfer One Million Dollars
($ 1,000,000) (the "First Installment"), in immediately available funds to the
account specified by Seller.
(c) Seller and Buyer shall deliver the certificates and other documents
required to be delivered under Articles VIII and IX.
Section 2.3. Post-Closing Installments of the Purchase Price. (a) Fifty
-----------------------------------------------
(50) days following the Closing, Buyer shall pay to Seller by wire transfer One
Million Five Hundred Thousand Dollars ($1,500,000), adjusted as provided in
Section 2.5, of the Purchase Price (the "Second Installment").
(b) No later than the First Anniversary (as defined on Schedule 2.3(b)),
Buyer shall pay by wire transfer to Seller the balance of the Purchase Price
(the "Final Installment") in the amount obtained from Schedule 2.3(b). For the
purposes of this Agreement, the Purchase Price shall consist of the First
Installment, the Second Installment and the Final Installment.
(c) In the event that Buyer fails to pay to Seller the Final Installment
prior to the First Anniversary, Seller may, within thirty days of the First
Anniversary, elect to convert the Final Installment into the right to an amount
of shares of capital stock of Seller equal to the Conversion Amount and, upon
such election, and subject to customary securities laws and representations
given by Seller, Buyer shall issue to Seller the Conversion Amount. Buyer shall
furnish Seller such information concerning Buyer, its properties, financial
condition and operations (subject to reasonable confidentiality undertakings),
as Seller may reasonably request to evaluate the advisability of converting the
Final Installment. In such event, the obligation of Buyer to pay to Seller the
Final Installment shall be extinguished. Otherwise, the Final Installment shall
be due and payable within five days from the date Seller notifies Buyer of its
intent not to elect conversion or thirty days after the First Anniversary,
whichever occurs first. The Final Installment shall bear interest until paid at
three percent above the prime rate of The Bank of Boston, N.A. (or its
successor) as of the First Anniversary, and Buyer shall indemnify and hold
Seller harmless against all reasonable costs of collection (including counsel
fees).
-6-
<PAGE>
Section 2.4. Time and Place of Closing. The Closing shall take place on
-------------------------
November 23, 1998 (the "Closing Date") at 10:00 A.M., local time, at the offices
of Sullivan & Worcester LLP, or such other place or time as the parties may
agree.
Section 2.5. Determination of Adjusted Purchase Price. As promptly as
----------------------------------------
practicable, but in no event more than five (5) business days following the
Closing, the Buyer shall deliver to Seller an unaudited balance sheet of the
Business as of the close of business on the Closing Date (the "Closing Balance
Sheet"). Buyer shall prepare the Closing Balance Sheet substantially consistent
with the format of, and in accordance with accounting principles, policies and
practices of those used in the preparation of, the Estimated Balance Sheet.
Within five days of Buyer's delivery of the Closing Balance Sheet to Seller,
Buyer and Seller shall resolve any differences. The Second Installment shall be
increased or decreased, as the case may be, by the amount by which the sum of
line items specified on Schedule I in the Closing Balance Sheet are greater or
less than the sum of the same line items on the Estimated Balance Sheet.
Section 2.6. Allocation of Asset Purchase Consideration. (a) The Purchase
------------------------------------------
Price and the Assumed Liabilities and all other capitalizable costs
(hereinafter, the "Consideration"), to the extent properly taken into account
under Section 1060 of the Code, shall be allocated among each of the Acquired
Assets in the manner set forth on Schedule 2.6(a) hereto (the"Allocation").
(b) Except as required by a Final Determination, Seller and Buyer agree to
(i) be bound by the Allocation, (ii) act in accordance with the Allocation in
the preparation of financial statements and filing of all Returns (including
filing Form 8594 with its Income Tax Return for the taxable year that includes
the Closing Date) and in the course of any Tax audit, Tax review or Tax
litigation relating thereto, and (iii) take no position and cause their
Affiliates to take no position inconsistent with the Allocation for federal and
state Income Tax purposes.
(c) If an adjustment is made with respect to the Purchase Price pursuant
to Section 2.5, the Allocation shall be adjusted in accordance with Code Section
1060 and the regulations promulgated thereunder, and in accordance with Schedule
I or as otherwise mutually agreed by Seller and Buyer. Seller and Buyer agree to
file any additional information return required pursuant to the regulations
under Code Section 1060 and to reallocate the Purchase Price as adjusted
pursuant to Section 2.5.
(d) Not later than thirty (30) days prior to the filing of their
respective Forms 8594 relating to this transaction, Buyer and Seller shall
deliver each to the other a copy of its Form 8594.
Section 2.7. Nonassignable Contracts. Anything in this Agreement to the
-----------------------
contrary notwithstanding, this Agreement shall not require Seller to assign
(prior to the time, if ever, assignment is otherwise consented to) any claim,
contractual obligation, authorization of a Governmental Authority, lease,
commitment, sales, service or purchase order, or any claim, right or benefit
arising thereunder or resulting therefrom, if the Asset Purchase would be deemed
an
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<PAGE>
attempted assignment thereof without the required consent of a third party
thereto or Governmental Authority and would constitute a breach thereof or in
any way affect the rights of Raytheon Company, Seller or Buyer thereunder. If
such consent is not obtained, or if the consummation of the Asset Purchase would
affect the rights of Seller thereunder so that Buyer would not in fact receive
the benefit of all such rights, Seller shall cooperate with Buyer in any
arrangement designed to provide for the benefits thereof to Buyer, including
subcontracting, sublicensing or subleasing to Buyer or enforcement for the
benefit of Buyer of any and all rights of Seller against a third party thereto
or Governmental Authority arising out of the performance, breach or cancellation
by such third party or Governmental Authority or otherwise; and any assumption
by Buyer of obligations thereunder whether by operation of Law in connection
with the Asset Purchase which shall require the consent or approval of any third
party shall be made subject to such consent or approval being obtained.
Section 2.8. Licenses. Buyer hereby grants Seller a non-exclusive,
--------
perpetual, irrevocable, royalty-free, fully paid up license, with the right to
sublicense to third parties, to the Intellectual Property associated with the
PACS Controller (the assembly described by E-MED Product Number 170-0226-6 Rev A
and Raytheon Part Number 431-90000) for use in any nonmedical application
(including commercial, non-commercial, aerial, spatial and hydrographical.
applications). Seller may transfer this license to any successor in interest to
all or substantially all of the business to which the license relates.
Article III.
Representations and Warranties of Seller
----------------------------------------
Seller hereby represents and warrants to Buyer as follows:
Section 3.1. Incorporation. Authorization, Etc. (a) Seller is a
---------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to transact business in each
jurisdiction in which the nature of property leased by the Seller with respect
to the Business or the conduct of Seller with respect to the Business requires
it to be so qualified, except where the failure to be in good standing or to be
duly qualified to transact business, would not, individually or in the
aggregate, reasonably be expected to have an Adverse Effect on Seller.
(b) Seller has all requisite corporate power and authority to own the
properties and assets employed by Seller, to carry on Seller's business as it is
now being conducted, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby by Seller. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate proceedings on the part
of Seller. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of Seller's certificate of incorporation or bylaws, (ii) except as
disclosed in Schedule 3.1 (b), violate any provision of, or be an event that is
----------------
(or with the passage of time will result in) a
-8-
<PAGE>
violation of, or result in the acceleration of or entitle any Person to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the imposition of any Lien (except Permitted
Liens) upon any of the Acquired Assets, pursuant to any Contract or Order to
which Seller or any of its Affiliates is a party or by which it is bound, or
(iii) except as listed on Schedule 3.1(b), violate or conflict with any other
---------------
material restriction of any kind or character to which Seller is subject, that,
in the case of any of clauses (ii) and (iii), would, individually or in the
aggregate, reasonably be expected to Adversely Affect the Business. This
Agreement has been duly executed and delivered by Seller, and, assuming the due
execution hereof by Buyer, this Agreement constitutes the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms.
(c) Except as otherwise provided in this Agreement, at the Closing, Seller
will deliver to Buyer good title to the Acquired Assets free and clear of all
Liens, except Permitted Liens.
Section 3.2. Financial Statements. Attached hereto as Schedule 3.2 are true
--------------------
and complete copies of the unaudited balance sheet and the related statements of
income and cash flows of the Business for the year ended December 3 1, 1997 and
for the ten (10) months ended October 23, 1998 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in each case in
accordance with Seller's internal financial reporting policies and procedures.
Section 3.3. Properties: Title to Assets. With the exception of properties
---------------------------
disposed of in the ordinary course of business, Seller has good title to, or
holds by valid and existing lease or license, all tangible personal property,
receivables and Contracts constituting Acquired Assets, free and clear of all
Liens except Permitted Liens. The Acquired Assets constitute, and on the
Closing Date will constitute, substantially all of the assets used or held for
use in the operations of the Business.
Section 3.4. Litigation: Orders. Except as disclosed in Schedule 3.4, there
------------------
are no Actions pending, or to Seller's knowledge, threatened against it that
would, individually or in the aggregate, reasonably be expected to have an
Adverse Effect on the Acquired Assets. Except as disclosed in Schedule 3.4, as
of the date hereof, there are no Orders against Seller or its properties or
business that would, individually or in the aggregate, reasonably be expected to
have an Adverse Effect on the Business. Except as disclosed in Schedule 3.4. to
Seller's knowledge, there. are no events or conditions' which would reasonably
be expected to result in an Action against it that would, individually or in the
aggregate, reasonably be expected to have an Adverse Effect on the Business.
Section 3.5. Contracts. Schedule 3.5 has been prepared by Buyer and, to
---------
Seller's knowledge, includes all of the Contracts which are material to the
Business. Seller is not, and to Seller's knowledge, no other party to any such
contract is in material breach thereof or material default thereunder, and there
does not exist under any provision thereof, as of the date hereof, any event
that, with the giving of notice or the lapse of time or both, would constitute
such a breach or default, or would give rise thereunder to any indemnity
obligation of Seller, except for
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<PAGE>
such breaches, defaults, indemnities and events as to which requisite waivers or
consents have been or are obtained or which would not, individually or in the
aggregate, reasonably be expected to have an Adverse Effect on the Business.
Section 3.6. Environmental Matters. Except as set forth on Schedule 3.6:
---------------------
(a) Seller is in compliance with all applicable Environmental Laws except
where the failure to be in compliance would not, individually or in the
aggregate, reasonably be expected to have an Adverse Effect on the Acquired
Assets, or, to Seller's knowledge, would impose liability on Buyer under any
Environmental Law for any act or omission of Seller prior to the Closing Date.
(b) Seller has or has applied for all Licenses required under
Environmental Laws for the operation of Seller's business (to the extent such
business relates to Seller's use of the Acquired Assets) as presently conducted
(the "Environmental Permits") and there are no violations, and no pending, or,
to the knowledge of Seller, threatened, investigations or proceedings with
respect to such Environmental Permits except where the failure to have such
Environmental Permits or where the violation, investigation or proceeding
relating thereto would not, individually or in the aggregate, reasonably be
expected to have an Adverse Effect on the Acquired Assets or, to Seller's
knowledge, would impose liability on Buyer under any Environmental Law for any
act or omission of Seller prior to the Closing Date.
(c) Since January 1, 1995, and, to Seller's knowledge, before that date,
Seller has not received any written notice, notification, demand, request for
information, citation, summons, complaint or Order, nor is there pending, or, to
the knowledge of Seller, threatened by any Person against Seller in connection
with Seller's business (to the extent such business relates to Seller's use of
the Acquired Assets) nor has any material penalty been assessed against Seller
for any alleged violation of any Environmental Law or liability thereunder,
other than where such notice, notification, demand, request for information,
citation, summons, complaint or Order has been fully resolved, or where
resolution would not, individually or in the aggregate, reasonably be expected
to have an Adverse Effect on the Acquired Assets.
(d) To the knowledge of Seller, no hazardous substance has been released
in violation of Environmental Laws at, on or under any real property used in the
Business. There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which Seller has knowledge in relation to
any Acquired Asset which has not been delivered to Buyer.
Section 3.7. Consents, Approvals, Other Authorizations. No filing with,
-----------------------------------------
notice to or authorization, consent or approval of, any Governmental Authority
is required to be made, filed, given or obtained by Seller or any of its
Affiliates, in connection with the consummation of the Asset Purchase except for
(i) those set forth on Schedule 3.7, (ii) those that become applicable solely as
a result of the specific regulatory status of Buyer, or (iii) the failure to
make, file, give
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<PAGE>
or obtain which would not, individually or in the aggregate, reasonably be
expected to have an Adverse Effect on the Business.
Section 3.8. Condition of Assets. The Acquired Assets are in the state of
-------------------
repair and operating condition normally kept by Seller in the ordinary course of
its business, reasonable wear and tear excepted.
Section 3.9. Intellectual Property. Schedule 3.9(i) lists, as of the date
---------------------
hereof, all material Intellectual Property of Seller constituting part of the
Acquired Assets. Seller is the owner of all right, title and interest in and to
all Scheduled Intellectual Property (other than the licensed third party
Intellectual Property set forth on Schedule 3.9(ii)), free and clear of all
Liens. Except as set forth on Schedule 3.2(iii), to Seller's knowledge, as of
the date hereof, no claims of infringement of the intellectual property rights
of any third parties exist based upon the use by Seller of the Scheduled
Intellectual Property that would, individually or in the aggregate, reasonably
be expected to have an Adverse Effect on the Acquired Assets.
Section 3.10. Inventory. The inventory included in the Acquired Assets was
---------
produced or acquired by Seller in the ordinary course of business and, except as
disclosed in Schedule 3. 10, is in good and useable condition. The physical
inventory schedule dated included in Schedule I is accurate, and no items of
inventory identified on such list have been disposed of except in the ordinary
course of business.
Section 3.11. Accounts Receivable. The accounts receivable included in the
-------------------
Acquired Assets arose from bona fide transactions.
Section 3.12. Brokers, Finders, Etc. Except for the services of Newbury, Piret
& Company, Inc., the fees of which shall be paid by Seller, Seller has not
employed nor is it subject to any valid claim of, any broker, finder, consultant
or other intermediary in connection with the Asset Purchase who might be
entitled to a fee or commission in connection therewith..
Section 3.13. No Implied Representation. Notwithstanding anything contained in
this Agreement, it is the explicit intent of each party hereto that Seller is
making no representation or. warranty whatsoever, express or implied, beyond
those expressly given in this Agreement, including any implied warranty or
representation as to condition, merchantability, or suitability as to any of the
Acquired Assets and, subject to the representations and warranties given herein,
it is understood that Buyer takes the Acquired Assets as is and where is. It is
understood that any cost estimates, projections or other predictions contained
or referred to in the Schedules or in the offering materials that have been
provided to Buyer are not and shall not be deemed to be representations or
warranties of Seller.
Section 3.14. Schedules. (a) Any matter set forth in any Schedule shall be
deemed to be referred to on all other Schedules to which such matter logically
relates and where such reference would
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<PAGE>
be appropriate and can reasonably be inferred from the matters disclosed on the
first Schedule as if set forth on such other Schedules.
(b) The inclusion of any item on any Schedule to this Agreement shall not
be construed as an indication that such item is material in any respect.
(c) Seller shall not be obligated to revise or update any Schedule
attached hereto.
Section 3.15. Licenses and Permits. Schedule 3.15 sets forth each material
--------------------
license, franchise, permit or other similar authorization by a Governmental
Authority relating to the operation of the E-MED PACS product line (the
"Permits"), together with the name of the agency or authority issuing such
Permit. Except as set forth on Schedule 3.15, all of the Permits are valid and
in full force and effect and, assuming the consents referred to in Section 3.7
have been or will be obtained, are transferable to Buyer. Assuming the receipt
of such consents, Buyer will have all right, title and interest of Seller in the
Permits.
Article IV.
Representations and Warranties of Buyer
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
Section 4.1. Incorporation, Authorization, Etc. Buyer is a corporation
---------------------------------
duly incorporated, validly existing and in good standing under the laws of
Delaware. Buyer has all requisite corporate power to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance of Buyer's obligations hereunder and the consummation of the
transactions contemplated hereby by Buyer have been duly and validly authorized
by Buyer and no further corporate proceedings or actions on the part of Buyer,
its Board of Directors or stockholders are necessary therefor. The execution,
delivery and performance of this Agreement will not (i) violate any provision of
the charter or bylaws or similar organizational instrument of Buyer, (ii)
violate any provision of, or be an event that is (or with the passage of time
will result in) a violation of, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any obligation under, or result in the imposition of any lien upon or the
creation of a security interest in any of Buyer's assets or properties pursuant
to, any Contract or Order to which Buyer is a party or by which Buyer is bound,
or (iii) violate or conflict with any other material restriction of any kind or
character to which Buyer is subject, that, in the case of clauses (ii) and
(iii), would, individually or in the aggregate, reasonably be expected to have
an Adverse Effect on Buyer or Buyer and its subsidiaries, taken as a whole. This
Agreement has been duly executed and delivered by Buyer, and, assuming the due
execution hereof by Seller, this Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Other than investors in Buyer, Buyer has no Affiliates.
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<PAGE>
Section 4.2. Brokers, Finders, Etc. Buyer has not employed, and is not
---------------------
subject to the valid claim of, any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
who might be entitled to a fee or commission from Seller in connection with such
transactions.
Section 4.3. Consents, Approvals, Other Authorizations. No filing with,
-----------------------------------------
notice to or authorization, consent or approval of, any Governmental Authority
is required to be made, filed, given or obtained by Buyer, in connection with
the consummation of the Asset Purchase except for (i) those that become
applicable solely as a result of the specific regulatory status of Seller, or
(ii) the failure to make, file, give or obtain which would not, individually or
in the aggregate, reasonably be expected to have an Adverse Effect on Buyer.
Section 4.4. Acquisition of Acquired Assets and Operation of the Business
------------------------------------------------------------
for Investment. Buyer has such knowledge and experience in financial and
- --------------
business matters that it is capable of evaluating the merits and risks of its
purchase of the Acquired Assets and operation of the business acquired
hereunder. Buyer confirms that Seller has made available to Buyer the
opportunity to ask questions of the officers of Seller and management employees
of Seller and to acquire additional information about the business and financial
condition of Seller.
Section 4.5 Financial Capability. Buyer has immediately available cash in
--------------------
the amount the First Installment.
Article V.
Covenants of Seller and Buyer
-----------------------------
Section 5.1. Investigation of Business, Access to Properties, Records and
------------------------------------------------------------
Employees. (a) Seller shall afford to representatives of Buyer reasonable access
- ---------
to the offices, plants, properties, books and records of Seller during normal
business hours, in order that Buyer may have full opportunity to make such
investigations as it desires of the affairs of Seller to the extent such affairs
relate to the Acquired Assets or to the Assumed Liabilities; provided, however,
that such investigation shall not unreasonably disrupt the personnel and
operations of Seller. If, in the course of any investigation pursuant to this
Section 5. 1, Buyer discovers any breach of any representation or warranty
contained in this Agreement or any circumstance or condition that upon Closing
would constitute such a breach, Buyer covenants and that it will promptly so
inform Seller.
(b) Any information provided to Buyer or its representatives pursuant to
this Agreement shall be held by Buyer and its representatives in accordance
with, and shall be subject to the terms of, the Confidentiality Agreement dated
July 13, 1998 by and between Raytheon and Buyer, which is hereby incorporated in
this Agreement as though fully set forth herein.
(c) Buyer agrees to (i) hold all of the books and records of Seller
acquired hereunder existing on the Closing Date and not to destroy or dispose of
any thereof for a period of four (4)
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<PAGE>
years from the Closing Date or such longer time as may be required by law, and
thereafter, if it desires to destroy or dispose of such books and records, to
offer first in writing at least sixty (60) days prior to such destruction or
disposition to surrender them to Seller and (ii) following the Closing Date to
afford Seller, its accountants and counsel, during normal business hours, upon
reasonable request, full access to such books, records and other data to the
extent that such access may be requested for any legitimate purpose, including
without limitation preparation of filings under federal and state securities
laws, responding to Governmental Authorities, defending or prosecuting
litigation and preparation of Income Tax Returns and other tax filings, at no
cost to Seller (other than for reasonable out-of-pocket expenses); provided,
however, that nothing herein shall limit any of Seller's rights of discovery.
Buyer shall have the same rights, and Seller the same obligations, as are set
forth above in this Section 5. 1 (c), with respect to any material nonprivileged
records of Seller pertaining to the Acquired Assets or to the Assumed
Liabilities that are retained by Seller, with the exception of Returns relating
to Taxes that are not the responsibility of Buyer or alleged by a Governmental
Authority to be the responsibility of Buyer.
Section 5.2. Best Efforts, Obtaining Consents. (a) Subject to the terms
--------------------------------
and conditions herein provided, each of Seller and Buyer agrees to use its best
efforts (whether before or after the Closing Date) to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable, the
transactions contemplated by this Agreement and to cooperate with the other in
connection with the foregoing, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to material
Contracts, (ii) to obtain all consents, approvals and authorizations that are
required to be obtained under any Law, (iii) to lift or rescind any Order
adversely affecting the ability of the parties hereto to consummate the Asset
Purchase, (iv) to effect all necessary registrations and filings and submissions
of information requested by Governmental Authorities, and (v) to fulfill all
conditions to this Agreement (it being understood that such efforts shall not
include any requirement of Buyer or Seller to expend more than commercially
reasonable sums of money or grant any material financial or other accommodation,
or of Buyer to accept any material modification of its rights hereunder).
Seller and Buyer further covenant and agree, with respect to a threatened or
pending Order or Law that would adversely affect the ability of the parties
hereto to consummate the Asset Purchase, to use their respective best efforts to
prevent the entry, enactment or promulgation thereof, as the case may be (it
being understood that such efforts shall not include any requirement of Buyer or
Seller to expend more than commercially reasonable sums of money or grant any
material financial or other accommodation).
(b) In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Section 5.2, the proper officers
and/or directors of Buyer, including, to the extent applicable, any Entity
designated to hold the Acquired Assets, shall take all such necessary action.
(c) Seller covenants to use its commercially reasonable efforts to effect
the assignment of any contract, permit, license, claim, demand or right which is
not now transferred or assigned
-14-
<PAGE>
and which is a part of the Business. In order that full value of every such
unassigned contract, lease, interest in property, permit, license, claim, demand
or right may be realized by and for the benefit of Buyer, Seller covenants and
agrees with Buyer that Seller will use its commercially reasonable efforts to
enforce every such contract, permit, license, claim, demand or right and to
facilitate the collection of the moneys due and payable and to become -due and
payable in and under every such contract and in respect of every such claim,
demand or right; and Seller does hereby covenant to hold in trust for and
promptly pay over to Buyer all moneys or things of value collected and paid to
Seller, its successors or assigns, after the Closing Date in respect of every
such contract, claim, demand or right. No amounts owing to Buyer by Seller under
this Section 5.2(c) shall be subject to the limitation set forth in Section
10.2.
Section 5.3. Conduct of Business. From the date hereof through the Closing,
-------------------
except as disclosed on Schedule 5.3 or otherwise provided for in, or
contemplated by, this Agreement, and, except as consented to or approved by
Buyer in writing, Seller covenants and agrees that:
(a) Seller shall make use of the Acquired Assets in the ordinary and usual
course in all material respects in accordance with past practices;
(b) Except as otherwise provided for in or contemplated by this Agreement,
Seller shall not (i) assume, incur or guarantee, except in the ordinary course
of business consistent with past practice, any obligation for borrowed money
that would constitute, or increase Buyer's obligation respecting, an Assumed
Liability, (ii) cancel or compromise, except in the ordinary course of business
consistent with past practice, any debts owed to it that would constitute, or
decrease the value of Buyer's right respecting, an Acquired Asset or (iii) waive
or release any rights of material value relating to the Acquired Assets; and
(c) Except in the ordinary course of business, Seller shall not (i) sell,
transfer, distribute as a dividend in kind or otherwise dispose of any material
Acquired Asset (other than inventory in the- ordinary course of business
consistent with past practice), (ii) create or permit to exist any new material
security interest, lien or encumbrance on Acquired Assets, or (iii) enter into
any joint venture, partnership or other similar arrangement or form any other
new material arrangement for the conduct of the business relating to the
Acquired Assets.
Section 5.4. Preservation of Business. From the date hereof to the Closing
------------------------
Date, subject to the terms and conditions of this Agreement, Seller shall use
reasonable efforts (i) to preserve the Acquired Assets intact and (ii) to
preserve the good will of customers and others having business relations with
Seller to the extent such business relations relate to the Acquired Assets.
Section 5.5. Further Assurances. Seller and Buyer agree that, from time to
-------------------
time, whether before, at or after the Closing Date, each of them will execute
and deliver such further instruments; of conveyance and transfer and take such
other action as may be reasonably required or desirable to carry out the
purposes and intent of this Agreement, including (i) allocating rights and
obligations under Contracts and other arrangements, if any, relating to
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<PAGE>
business of Seller and its Affiliates, on the one hand, and relating to the
Acquired Assets on the other, (ii) allocating rights and obligations under
Contracts and other arrangements, if any, relating to the Assumed Liabilities,
and (iii) determining whether to enter into any service or other sharing
agreements on a mutually acceptable arm's length basis that may be necessary to
assure a smooth and orderly transition. In case at any time after the Closing
Date, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary or desirable action. In addition to the
foregoing, Buyer shall, at Seller's sole cost and expense, cooperate with Seller
in the defense or prosecution of any of the Retained Liabilities.
Section 5.6. Public Announcements. Seller and Buyer will consult with
--------------------
each other before issuing, or permitting any agent or Affiliate to issue, any
press releases or otherwise making or permitting any agent or Affiliate to make,
any public statements with respect to this Agreement and the transactions
contemplated hereby, and, except as may be required by applicable law or any
listing agreement with any securities exchange, will not issue any such press
release or make any such public statement, unless the text of such statement
shall have been agreed upon by the parties, such agreement not to be
unreasonably withheld.
Section 5.7 Use of Raytheon Name. From and after the Closing, except for
--------------------
purposes of announcing Buyer's acquisition of the Acquired Assets or responding
reasonably to inquiries with respect thereto, Buyer and its Affiliates shall not
use or permit the use of the names or marks "E-Systems", "Raytheon E-Systems",
"ESY", "RESY", "Raytheon", "RTN", or any other trademark or trade name of Seller
or any Affiliate of Seller, for any commercial purpose or any trademarks or
trade names confusingly similar thereto, nor shall Buyer use or permit the use
of such names and marks in connection with the operation or disposition of the
Acquired Assets or the proceeds thereof, provided, however, that (1) for a
period of sixty (60) days, Buyer may make use of promotional and sales
literature, stationery, cartons and other packaging material included in the
Acquired Assets at Closing, provided, that to the extent practical such
literature is stickered or otherwise marked to indicate the change of ownership,
and (ii) nothing in this Section 5.7 shall require the amendment of any
Contracts nor limit, where relevant, any accurate and complete statement of
facts concerning ownership of the Acquired Assets prior to the Closing in any
Action or in any filing with a Governmental Authority. Notwithstanding the
foregoing, the Acquired Assets shall include, and after the Closing Date Buyer
shall have, the right to unrestricted use of the name "E-Med".
Section 5.8. Performance of Certain Obligations. Buyer agrees from and
----------------------------------
after the Closing Date to perform and fulfill (or cause to be performed and
fulfilled) all obligations and commitments incurred by Seller or any of its
Affiliates as such relate to the Business whether existing as of the Closing
Date or arising or incurred thereafter. Seller agrees from and after the
Closing Date to perform and fulfill (or cause to be performed and fulfilled) all
obligations and commitments incurred by Buyer or any of its Affiliates as such
relate to the Excluded Assets or Retained Liabilities whether existing as of the
Closing Date or arising or incurred thereafter.
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<PAGE>
Section 5.9. Buyer's Warranty Obligation. Buyer covenants and agrees that
---------------------------
it will fully honor and diligently perform all of Seller's product warranty,
guaranty and product return obligations express or implied which arise from or
are related to Seller's operation of the Acquired Assets prior to the Closing
Date. If Buyer fails reasonably to perform such obligations, Seller may, at
Buyer's expense, satisfy, or retain others to satisfy, such obligations.
Section 5.10. Sale of MegaScan. Buyer covenants and agrees that, for one
----------------
(1) year following the Closing, it will use its best efforts to sell, assign or
otherwise dispose of that portion of the Acquired Assets which consist of
MegaScan (any such sale, assignment or disposition a "MegaScan Sale") as
promptly following the Closing Date at the highest reasonable price and in a
manner consistent with reasonable commercial practices; provided that Buyer may
nonetheless dispose of and use the MegaScan assets in the ordinary course
beginning on the Closing Date or terminate or liquidate the balance of the
MegaScan business if Buyer deems such action appropriate. In the event of such a
MegaScan Sale, if the proceeds (the "MegaScan Proceeds") thereof (net of (x)
losses sustained by MegaScan during the period between the Closing Date and any
such MegaScan Sale and (y) any fees and expenses incurred by Buyer in connection
with such MegaScan Sale) exceed $900,000, then Buyer and Seller shall share
equally in such excess. Buyer further covenants that it shall, within fifteen
(15) days of any such MegaScan Sale, deliver to Seller by wire transfer such
excess in immediately available funds.
Section 5.11. Non-competition. Seller agrees that for a period of two (2)
---------------
years after the date hereof (the "Restricted Period "), Seller will not compete
with Buyer in the manufacture or marketing of medical products, whether
individually or as a consultant, partner, owner or stockholder owning more than
five percent (5%) of an Entity in the business of manufacturing or marketing of
medical products in competition with Buyer (the "Restricted Business").
Notwithstanding the foregoing, nothing herein shall prohibit Seller or any of
its Affiliates from (a) owning, directly or indirectly, less than five percent
(5%) of any class of securities of any issuer listed on a national securities
exchange or traded publicly in the over-the-counter market, (b) directly or
indirectly acquiring a business which engages in the Restricted Business if such
business is twenty-five percent (25%) or less (measured by net revenues) of a
larger business so acquired by Seller or any of its Affiliates, and (d)
continuing to produce and sell those products now being produced and sold by
Seller and its Affiliates (including within the foregoing all products that were
under development as of the date hereof).
Section 5.12. Confidentiality. From and after the Closing Date, Seller
---------------
will hold confidential proprietary information constituting Acquired Assets or
provided to Seller by Buyer with respect to the Business after the Closing Date,
and, except to the extent Seller develops such information independently,
obtains it lawfully from a third party or is ordered to disclose such
information by a Governmental Authority, will not disclose any such information
to any third party without the prior written consent of Buyer.
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Article VI
Employees, Employee Benefits and Other Transitional Matters
-----------------------------------------------------------
Section 6.1. Hiring Employees, Comparable Benefits.
-------------------------------------
(a) Subject to Section 6.2(b) hereof, Buyer will continue the employment
of those employees of Seller dedicated to the product lines being sold to Buyer
as it deems advisable, (all such employees being "Assumed Employees'). To the
extent employment of Assumed Employees is continued by Buyer during the first
six (6) months following the Closing Date, such employment shall be on
substantially the same terms and conditions in the aggregate under which the
Assumed Employees worked for Seller immediately prior to the Closing Date.
Seller represents and warrants that Schedule 6. 1 (a) is a true and complete
list of all the employees of Seller dedicated to the product lines being sold to
Buyer.
(b) Buyer agrees that, for a period of 60 days after the Closing Date, it
will not cause any of the employees of Seller dedicated to the product lines
being sold to Buyer, including the Assumed Employees, to suffer "employment
loss" for purposes of the Worker Adjustment and Retraining Notification Act, 29
U.S.C. (S)(S) 2101-2109, and related regulations (the "WARN Act") if such
employment loss could create any liability for Seller or its Affiliates, unless
Buyer delivers notices under the WARN Act in such a manner and at such a time
that Seller or its Affiliates bears no liability with respect thereto. For all
employees other than the Assumed Employees, and for all Assumed Employees
terminated within thirty (30) days of the Closing Date, Buyer will make the
severance payments set forth on Schedule 6.1 (b).
Section 6.2. Medical Benefits. Commencing as of the Closing Date, Buyer
----------------
shall provide the Assumed Employees and dependents and beneficiaries thereof
medical and dental benefit coverage on the terms generally provided to the other
employees of Buyer and their dependants and beneficiaries. Medical benefits to
be provided to all other employees dedicated to the product lines being sold to
Buyer are set forth on Schedule 6.2.
Section 6.3. Investment Plans. Buyer shall have no liability and
----------------
responsibility for the disposition of interests under the E-Systems Employee
Savings Plan (the "Savings Plan") with respect to those Assumed Employees (or
their beneficiaries) who, as of the Closing Date, are participants in the
Savings Plan. No such participant will be eligible to make any contributions to
the Savings Plan, and Raytheon will not be obligated to make any contribution
with respect to any such participant in the Savings Plan, with respect to
compensation earned by such employees on or after the Closing Date.
Section 6.4. Retention Plans. Seller has provided Buyer with information
---------------
regarding Seller's retention plans established to encourage certain employees of
Seller to remain with Seller until Closing and to accept employment and remain
with Buyer after the Closing (the "Retention Plans"). Seller agrees to be
responsible for all payments under the Retention Plans which accrue on or prior
to the Closing Date with respect to the Assumed Employees and Buyer agrees be
responsible for all payments under the Retention Plans which accrue after the
Closing Date with respect to the Assumed Employees.
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Section 6.5. Access to Books and Records. As soon as practicable, Buyer
---------------------------
shall receive from Seller (i) such information concerning each Assumed
Employee's period of employment with Raytheon and/or Seller as Buyer may
reasonably require to determine service for eligibility and benefit accrual
purposes and (ii) such information concerning the terms of Seller's welfare
benefit plans and concerning each Assumed Employee's benefit utilization under
welfare benefit plans as Buyer may reasonably require to comply with Sections
6.1 (b) and 6.2 of this Agreement.
Section 6.6 No Third Party Beneficiaries. No provision of this Article 6
----------------------------
shall create any third party beneficiary or other rights in any employee or
former employee of Seller and no provision of this Article 6 shall create any
such rights in any such employees in respect of any benefits that may be
provided, directly or indirectly, under any employee plan or benefit arrangement
that may be established or maintained by Buyer. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate any
employee plan or benefit arrangement of Buyer.
Article VII
Tax Matters
-----------
Seller covenants for the benefit of Buyer, and Buyer covenants for the
benefit of Seller, as follows:
Section 7.1 Taxes and Refunds.
-----------------
(a) Seller shall be responsible for all Taxes accruing on or before the
Closing Date and Seller shall be entitled to any refunds or credits of Taxes
attributable to or arising in all taxable periods ending on or before the
Closing Date.
(b) Buyer shall be responsible for all Taxes accruing after the Closing
Date with respect to the use of the Acquired Assets and Buyer shall be entitled
to any refunds or credits of Taxes attributable to or arising in taxable periods
beginning on or after the Closing Date.
Section 7.2. Allocation of Transfer and Property Taxes.
-----------------------------------------
(a) All excise, sales, use, value added, registration stamp, recording,
documentary, conveyancing, franchise, property, transfer, gains and similar
Taxes, levies, charges and fees including any deficiencies, interest, penalties,
additions to tax or additional amounts excluding any Income Taxes (collectively,
"Transfer Taxes") incurred in connection with the transactions contemplated by
this Agreement shall be borne by Buyer. Buyer and Seller shall use reasonable
efforts to minimize the amount of all Transfer Taxes and shall cooperate in
providing each other with any appropriate resale exemption certifications and
other similar documentation. The party that is required by applicable law to
make the filings, reports, or returns and to handle any audits
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or controversies with respect to any applicable Transfer Taxes shall do so, and
the other party shall cooperate with respect thereto as necessary.
(b) All real property taxes, personal property taxes and similar ad
--
valorem obligations levied with respect to the Acquired Assets for a taxable
- -------
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period which fall on or before the Closing
Date (this and any other tax period which includes one or more days falling on
or before the Closing Date, a "Pre-Closing Tax Period") and the number of days
of such taxable period after the Closing Date (a "Post-Closing Tax Period").
Seller shall be liable for the proportionate amount of such taxes that is
attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of, such taxes that is attributable to the Post-Closing Tax
Period. Upon receipt of any bill for real or personal property taxes relating to
the Acquired Assets, each of Seller and Buyer shall present a statement to the
other setting forth the amount of reimbursement to which each is entitled under
this Section together with such supporting evidence as is reasonably necessary
to calculate the proration amount. The proration amount shall be paid by the
party owing it to the other within 30 days after delivery of such statement. In
the event that either Seller or Buyer shall make any payment for which it is
entitled to reimbursement under this Section, the other party shall make such
reimbursement promptly but in no event later than ten (10) days after the
presentation of a statement setting forth the amount or reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
Section 7.3. Cooperation. Buyer and Seller agree to furnish or cause to be
-----------
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Acquired Assets (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. Buyer and Seller
shall retain all books and records with respect to Taxes pertaining to the
Acquired Assets for a period of at least six (6) years following the Closing
Date. At the end of such period, each party shall provide the other with at
least thirty (30) days prior written notice before destroying any such books and
records, during which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records. Seller and Buyer
shall cooperate with each other in the conduct of any audit or other proceeding
relating to Taxes involving the Acquired Assets. If either party becomes aware
of any pending or threatened assessment, official inquiry, examination or
proceeding that could result in an official determination with respect to Taxes
due or payable the responsibility for which rests with the other party hereto,
such party shall promptly so notify the other party in writing.
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Article VIII.
Conditions of Buyer's Obligation to Close
-----------------------------------------
Buyer's obligation to consummate the Asset Purchase shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions:
Section 8.1. Representations, Warranties and Covenants of Seller. (a) The
----------------------------------------------------
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties that speak as of a specific date or time,
which need only be true and correct as of such date or time), except, in the
case of any representations or warranties other than those that contain a
qualification as to "Adverse Effect," for such inaccuracies which have not had
or would not reasonably be expected to have an Adverse Effect on the Acquired
Assets.
(b) Seller shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing (other than Seller's covenants pursuant to Section 2.2 (a) and (b) with
respect to delivery of documents of transfer of the Acquired Assets at the
Closing, which shall be performed in all respects).
(c) Buyer shall receive at or prior to the Closing a certificate as to the
matters set forth in paragraphs (a) and (b), dated the Closing Date, and validly
executed by an authorized officer of Seller.
Section 8.2. Filings, Consents, Waiting Periods. All registrations,
----------------------------------
filings, applications, notices, consents, approvals, orders, qualifications and
waivers required to be obtained or made as of the Closing Date shall have been
filed, made or obtained, except for such registrations, filings, notices,
consents, approvals, orders, qualifications and waivers the lack of which would
not reasonably be expected to have an Adverse Effect on the Acquired Assets.
Section 8.3. No Injunction. At the Closing Date, there shall be no Order
-------------
of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of all or any portion of the
Asset Purchase, and no Law shall have been enacted by any Governmental Authority
which prevents consummation of the Asset Purchase.
Article IX.
Conditions to Seller's Obligation to Close
------------------------------------------
Seller's obligation to consummate the Asset Purchase is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions:
Section 9.1. Representations, Warranties and Covenants of Buyer. (a) The
--------------------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties that speak as of
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a specific date or time, which need only be true and correct as of such date or
time), except, in the case of any representations or warranties other than those
that contain a qualification as to "Adverse Effect," for such inaccuracies which
have not had or would not reasonably be expected to have an Adverse Effect on
Buyer or Buyer and its subsidiaries, taken as a whole.
(b) Buyer shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing.
(c) Seller shall receive at or prior to the Closing a certificate as to
the matters set forth in paragraphs (a) and (b), dated the Closing Date, and
validly executed by an executive officer of Buyer on behalf of Buyer.
Section 9.2. Filings: Consents: Waiting Periods. All registrations,
----------------------------------
filings, applications, notices, consents, approvals, orders, qualifications and
waivers required to be obtained or made as of the Closing Date shall have been
filed, made or obtained, except for such registrations, filings, notices,
consents, approvals, orders, qualifications and waivers the lack of which would
not reasonably be expected to have an Adverse Effect on Buyer or Buyer and its
subsidiaries, taken as a whole.
Section 9.3. No Injunction. At the Closing Date, there shall be no Order
-------------
of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of all or any portion of the
Asset Purchase, and no Law shall have been enacted by any Governmental Authority
which prevents consummation of the Asset Purchase.
Article X.
Survival: Indemnification
-------------------------
Section 10.1. Survival Periods. The representations and warranties in this
----------------
Agreement shall survive for a period of six (6) months following the Closing. A
claim by any party hereunder shall survive if notice thereof is given in
accordance with Section 10.4(a) within such six (6) month period.
Section 10.2. Indemnification by Seller. (a) From and after the Closing
-------------------------
Date, Seller shall indemnify and hold harmless Buyer, its Affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Buyer Indemnified Parties") from and against any and all damages, claims,
losses, expenses, costs, obligations and liabilities, including without
limitation liabilities for all reasonable attorneys', accountants', and experts'
fees and expenses including those incurred to enforce the terms of this
Agreement (collectively, "Covered Liabilities"), suffered, directly or
indirectly, by Buyer by reason of, or arising out of (i) any of the Retained
Assets or the Retained Liabilities, including any liability based on negligence,
gross negligence, strict liability or any other theory of liability, whether in
law (whether common or statutory) or equity or (ii) any
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breach of any representation, warranty, covenant or agreement of Seller
contained herein; provided. however, that, Seller shall not be required to
indemnify the Buyer Indemnified Parties with respect to any claim for
indemnification under clause (ii) of this Section 10.2 unless and until the
aggregate amount of all claims against Seller under clause (ii) of this Section
10.2 exceeds Two Hundred Thousand Dollars ($200,000) and then only to the extent
such aggregate amount exceeds such amount, and provided, further that in no
------- -------
event shall Seller be required to pay or otherwise be liable for an amount in
excess of One Million Dollars ($1,000,000) with respect to claims made under
clause (ii) of this Section 10.2.
(b) Anything in this Section to the contrary notwithstanding, in the event
that (i) based on a preponderance of the evidence, Seller shows that, on or
prior to the Closing Date, Buyer had knowledge of any breach, untruth,
inaccuracy of, or error in, any representation and warranty of Seller or (ii)
Seller notifies Buyer, on or prior to the Closing Date, of any breach, untruth,
inaccuracy of, or error in, any representation and warranty of Seller, and Buyer
proceeds with the Closing, Buyer shall be deemed to have waived any right
thereafter to assert any claim with respect to any such breach, untruth,
inaccuracy or error, including without limitation any right to indemnification
therefor. Except as set forth in the preceding sentence, Buyer's right to
indemnification hereunder shall not be affected by any investigation or inquiry
concerning the Business by Buyer, whether pursuant to Section 5.1 (a) hereof or
otherwise in conducting its diligence.
Section 10.3. Indemnification by Buyer. (a) From and after the Closing
------------------------
Date, Buyer shall indemnify and hold harmless Seller, its Affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Raytheon Indemnified Parties") from and against any and all Covered
Liabilities incurred by or asserted against any of the Raytheon Indemnified
Parties in connection with or arising from any Assumed Liability or arising out
of or in connection with (i) any of the Acquired Assets after the Closing Date,
including any liability based on negligence, gross negligence, strict liability
or any other theory of liability, whether in law (whether common or statutory)
or equity or (ii) any breach of any representation, warranty, covenant or
agreement of Buyer contained herein; provided. however, that Buyer shall not be
required to indemnify the. Raytheon Indemnified Parties with respect to any
claim made for indemnification under clause (ii) of this Section 10.3 unless and
until the aggregate amount of all claims against Buyer under clause (ii) of this
Section 10.3 exceeds Two Hundred Thousand Dollars ($200,000) and then only to
the extent such aggregate amount exceeds such amount, and provided further, that
in no event shall Seller be required to pay or otherwise be liable for an amount
in excess of One Million Dollars ($1,000,000) with respect to claims made under
clause (ii) of this Section 10.2; and provided further, however, that the
deductible contained in the preceding provision shall not apply to (x) the
obligations of Buyer to pay to Seller the Purchase Price pursuant to Section 2.3
or (y) any fees or expenses incurred by Seller in connection with the
enforcement of the obligations of Buyer to pay the Purchase Price to Seller.
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(b) Anything in this Section to the contrary notwithstanding, in the event
that (1) based on a preponderance of the evidence, Buyer shows that, on or prior
to the Closing Date, Seller had knowledge of any breach, untruth, inaccuracy of,
or error in, any representation and warranty of Buyer or (ii) Buyer notifies
Seller, on or prior to the Closing Date, of any breach, untruth, inaccuracy of,
or error in, any representation and warranty of Buyer, and Seller proceeds with
the Closing, Seller shall be deemed to have waived any right thereafter to
assert any claim with respect to any such breach, untruth, inaccuracy or error,
including without limitation any right to indemnification therefor.
Section 10.4. Indemnification Procedures. (a) If any indemnified party
---------------------------
receives notice of the assertion of any Third Party Claim with respect to which
an indemnifying party is obligated under this Agreement to provide
indemnification, such indemnified party shall give such indemnifying party
written notice thereof (together with a copy of such Third Party Claim, process
or other legal pleading) promptly after becoming aware of such Third Party
Claim; provided, however, that the failure of any indemnified party to give
notice as provided in this Section 10.4 shall not relieve any indemnifying party
of its obligations under this Section 10.4, except to the extent that such
indemnifying party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own expense and
through counsel chosen by such indemnifying party (which counsel shall be
reasonably acceptable to the indemnified party), may elect to defend any Third
Party Claim. If an indemnifying party elects to defend a Third Party Claim,
then, within ten (10) business days after receiving notice of such Third Party
Claim (or sooner, if the nature of such Third Party claim so requires), such
indemnifying party shall notify the indemnified party of its intent to do so,
and such indemnified party shall cooperate in the defense of such Third Party
Claim (and pending such notice and assumption of defense, an indemnified party
may take such steps to defend against such Third-Party Claim as, in such
indemnified party's good-faith judgment, are appropriate to protect its
interests). Such indemnifying party shall pay such indemnified party's
reasonable out-of-pocket expenses incurred in connection with such cooperation.
Such indemnifying party shall keep the indemnified party reasonably informed as
to the status of the defense of such Third Party Claim. After notice from an
indemnifying party to an indemnified party of its election to assume the defense
of a Third Party Claim, such indemnifying party shall not be liable to such
indemnified party under this Section 10.4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than those expenses referred to in the preceding sentence;
provided, however, that such indemnified party shall have the right to employ
one law firm as counsel, together with a separate local law firm in each
applicable jurisdiction ("Separate Counsel"), to represent such indemnified
party in any action or group of related actions (which firm or firms shall be
reasonably acceptable to the indemnifying party) if, in such indemnified party's
reasonable judgment at any time, either a conflict of interest between such
indemnified party and such indemnifying party exists in respect of such claim,
or there may be defenses available to such indemnified party which are different
from or in addition to those available to such indemnifying party and the
representation of both parties by the same
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counsel would be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be paid by such indemnifying party (it
being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one Separate Counsel (excluding local counsel) with
respect to any Third Party Claim (even if against multiple indemnified
parties)), and (ii) each of such indemnifying party and such indemnified party
shall have the right to conduct its own defense in respect of such claim. If an
indemnifying party elects not to defend against a Third Party Claim, or fails to
notify an indemnified party of its election as provided in this Section 10.4
within the period of ten (10) business days described above, the indemnified
party may defend, compromise, and settle such Third Party Claim and shall be
entitled to indemnification hereunder (to the extent permitted hereunder);
provided, however, that no such indemnified party may compromise or settle any
such Third Party claim without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the indemnifying party shall not, without the
prior written consent of the indemnified party, (i) settle or compromise any
Third Party Claim or consent to the entry of any judgment which does not include
as an unconditional term thereof the delivery by the claimant or plaintiff to
the indemnified party of a written release from all liability in respect of such
Third-Party Claim, or (ii) settle or compromise any Third Party Claim in any
manner that would reasonably be expected to have a material adverse effect on
the indemnified party.
Section 10.5. Certain Limitations. (a) The amount of any Covered
-------------------
Liabilities for which indemnification is provided. under this Agreement shall be
net of any amounts actually recovered by the indemnified party from third
parties (including amounts actually recovered under insurance policies) with
respect to such Covered Liabilities. Any indemnifying party hereunder shall be
subrogated to the rights of the indemnified party upon payment in full of the
amount of the relevant indemnifiable loss. An insurer who would otherwise be
obligated to pay any claim shall not be relieved of the responsibility with
respect thereto or, solely by virtue of the indemnification provision hereof,
have any subrogation rights with respect thereto. If any indemnified party
recovers an amount from a third party in respect of an indemnifiable loss for
which indemnification is provided in this Agreement after the full amount of
such indemnifiable loss has been paid by an indemnifying party or after an
indemnifying party has made a partial payment of such indemnifiable loss and the
amount received from the third party exceeds the remaining unpaid balance of
such indemnifiable loss, then the indemnified party shall promptly remit to the
indemnifying party the excess of (A) the sum of the amount theretofore paid by
such indemnifying party in respect of such indemnifiable loss plus the amount
received from the third party in respect thereof, less (B) the full amount of
such Covered Liabilities.
(b) No remedy under this Agreement or at law or in equity shall include,
provide for or permit the payment of multiple, exemplary, punitive or
consequential damages or any equitable equivalent thereof or substitute
therefor, and the burden shall be on the party claiming loss to show actual loss
in the amount claimed.
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Article XI.
Termination
-----------
Section 11.1. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing by:
(a) the mutual written consent of Seller and Buyer;
(b) either Seller or Buyer if the Closing has not occurred by the close of
business on November 23, 1998, and if the failure to consummate the Asset
Purchase on or before such date did not result from the failure by the party
seeking termination of this Agreement to fulfill any undertaking or commitment
provided for herein that is required to be fulfilled prior to Closing;
(c) Seller, provided it is not then in breach of any of its obligations
hereunder, if Buyer fails to perform in any material respect any covenant in
this Agreement when performance thereof is due or Buyer shall have breached in
any material respect any of the representations or warranties contained in this
Agreement and does not cure the failure or breach within thirty (30) business
days after Seller delivers written notice thereof, or
(d) Buyer, provided it is not then in breach of any of its obligations
hereunder, if Seller fails to perform in any material respect any covenant in
this Agreement when performance thereof is due or Seller shall have breached in
any material respect any of the representations and warranties contained in this
Agreement and does not cure the failure or breach within thirty (30) business
days after Buyer delivers written notice thereof.
Section 11.2. Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement by either or both of Seller and Buyer pursuant to
Section 11.1, written notice thereof shall forthwith be given by the terminating
party to the other party hereto, and this Agreement shall thereupon terminate
and become void and have no effect, and the transactions contemplated hereby
shall be abandoned without further action by the parties hereto, except that the
provisions of Sections 5.1(b) and 12.4 shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement. If this Agreement is
terminated as provided herein, all filings, applications and other submissions
made pursuant to Sections 3.7 and 4.3 shall, to the extent practicable, be
withdrawn from the agency or other persons to which they were made.
Article XII.
Miscellaneous
-------------
Section 12.1. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become
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effective when one or more counterparts have been signed by each of the parties
and delivered to the other party.
Section 12.2. Governing Law, Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts without reference to the choice of law principles thereof. Buyer
and Seller consent to and hereby submit to the jurisdiction of any state or
federal court located in the Commonwealth of Massachusetts in connection with
any action, suit or proceeding arising out of or relating to this Agreement, and
each of the parties hereto irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 12.3. Entire Agreement. This Agreement (including agreements
----------------
incorporated he-rein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein.
Section 12.4. Expenses. Except as set forth in this Agreement, whether the
--------
Asset Purchase is or is not consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses; provided
that Buyer shall pay all fees relating to the transfer of the Acquired Assets
and the Assumed Liabilities; provided further that if such fees exceed Two
Thousand Five Hundred Dollars ($2,500), then Buyer and Seller shall pay such
fees equally.
Section 12.5. Notices. All notices hereunder shall be sufficiently given
-------
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to Seller shall be addressed to:
Raytheon Company
141 Spring Street
Lexington, Massachusetts 02421
Attention: General Counsel
Telecopy No: (781) 860-2924
or at such other address and to the attention of such other Person as Seller may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
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ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, Massachusetts 02421
Attention: Scott Sheldon
Telecopy No: (781) 861-6360
or at such other address and to the attention of such other Person as Buyer may
designate by written notice to Seller.
Section 12.6. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto, except that Seller may assign this Agreement
to any Entity that succeeds to substantially all of Seller's assets and
liabilities, and Buyer may assign this Agreement (i) to any Entity that succeeds
to substantially all of Buyer's assets and liabilities, or (ii) as security to a
bank or other financial institution.
Section 12.7. Headings: Definitions. The section and article headings
---------------------
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 12.8. Amendment. This Agreement may not be amended, modified,
---------
superseded, canceled, renewed or extended except by a written instrument signed
by the party to be charged therewith.
Section 12.9. Waiver, Effect of Waiver. No provision of this Agreement may
------------------------
be waived except by a written instrument signed by the party waiving compliance.
No waiver by any party hereto of any of the requirements hereof or of any of
such party's rights hereunder shall release the other parties from full
performance of their remaining obligations stated herein. No failure to
exercise or delay in exercising on the part of any party hereto any right, power
or privilege of such party shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege by such party.
Section 12.10. Interpretation, Absence of Presumption. (a) For the purposes
--------------------------------------
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof' "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph and
Schedule references are to the Articles, Sections, paragraphs and Schedules to
this Agreement unless otherwise specified, (iii) the word "including" and words
of similar import when used in this Agreement means
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<PAGE>
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, (v) provisions
shall apply, when appropriate, to successive events and transactions, and (vi)
all references to any period of days shall be deemed to be to the relevant
number of calendar days.
(b) This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section 12.11. Specific Performance. The parties hereto each acknowledge
--------------------
that, in view of the uniqueness of the subject matter hereof, the parties hereto
would not have an adequate remedy at law for money damages in the event that
this Agreement were not performed in accordance with its terms, and therefore
agree that the parties hereto shall be entitled to specific enforcement of the
terms hereof in addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 12.12. Remedies Cumulative. Except as otherwise provided in
-------------------
Article X, all rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered, as an instrument under seal, in their names and on their
behalf by their respective officer, thereunto duly authorized, on and as of the
date first set forth above,
RAYTHEON E-SYSTEMS. INC.
By: ___________________________
Name:
Title:
ACCESS RADIOLOGY CORPORATION
By: __________________________
Name:
Title:
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<PAGE>
EXHIBIT 10.11
HARTWELL GROUP LLC COMMERCIAL LEASE
1. PARTIES: Hartwell Group LLC, a Massachusetts limited liability company
-------
located at 411 Waverley Oaks Rd., Waltham MA., LESSOR, which expression shall
include its successors and assigns where the context so admits, does hereby
lease to ACCESS Radiology Corporation, a Delaware corporation located at 313
Speen St. Natick MA 01760, LESSEE, which expression shall include its
successors, and assigns where the context so admits, and the LESSEE hereby
leases the following described Premises:
2. PREMISES: Twenty-five Thousand, Four Hundred and Four (25,404) sq. ft.,
--------
more or less, (the "Leased Premises") in the LESSOR'S Building located at 25
Hartwell Ave. Lexington MA, including exclusive use of building and grounds as
shown on Exhibit A, "Floor Plan", attached hereto. Appurtenant to the Premises
the LESSEE shall have the right to use access ways, driveways, walkways and any
other facilities necessary for access to or beneficial use of the Leased
Premises.
LESSEE shall have exclusive right to use parking spaces in the parking
areas adjacent to the Buildings on the site.
The Leased Premises shall be delivered as built out by the LESSOR to
LESSEE's requirements. See Exhibit B, "Buildout Obligations" for obligations of
each party, cost allowance to LESSEE, and contingencies.
3. TERM: The term of this lease shall be for five (5) years commencing on the
----
later of December 1, 1997 or the Commencement Date (defined below) and ending on
November 30,2002.
The Commencement Date shall be the date of completion of the LESSOR's work
and fit up of the Lease Premises. ne LESSOR's work shall be deemed complete upon
issuance of a certificate of occupancy for the Premises by the Town of Lexington
MA.
4. RENT: The LESSEE shall pay to LESSOR rent at the rates per year, shown
below, which rent shall be payable in advance in the monthly installments shown
below on the first day of each month.
<TABLE>
<CAPTION>
Years Annual Rent Mo. Rent $/SF Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1-5 $549,234.00 $45,770.00 $21.62
- -------------------------------------------------------------------------------
</TABLE>
5. SECURITY DEPOSIT: Upon the execution of this lease, the LESSEE shall pay
to the LESSOR the amount of $137,310.00, which shall be held as a security for
the LESSEE's
<PAGE>
performance as herein provided and promptly refunded to the LESSEE at the end of
this lease subject to the LESSEE'S satisfactory compliance with the conditions
hereof. In the alternative, the Security Deposit may consist of cash of
$45,770.00 and a line of credit assurance equal to two months rental rate, which
is due upon the occupancy. Such a line of credit may be reduced by one half at
the end of the thirty sixth month of the term and discharged upon conclusion of
the forty-eighth month of the lease term.
6. RENT ADJUSTMENT:
A. TAX ADJUSTMENT
In each tax year commencing in fiscal tax year 1998 (the fiscal year ending
June 30, 1998), the real estate taxes on the land and building which
comprise the Leased Premises, including any increase in value attributable
to the LESSEE's improvements, LESSEE shall pay all such real estate taxes
in excess of the base year ending June 30, 1997, as additional rent.
LESSEE will pay such real estate taxes to LESSOR as additional rent
hereunder, when and as designated by notice in writing by LESSOR. Such
real estate taxes shall be paid as may occur in each year of the term of
this lease or any extension or renewal thereof and proportionately for any
part of a fiscal year. LESSOR'S demand shall be accompanied by a copy of
the applicable tax bill or bills and a statement showing the manner of
calculation of LESSEE'S proportionate share of such taxes. If the LESSOR
obtains an abatement of any such real estate tax, such abatement, less the
reasonable fees and costs incurred in obtaining the same, if any, shall be
refunded to the LESSEE. LESSEE may itself, seek review of the assessed
valuation of the Leased Premises, or otherwise seek abatement of real
estate taxes in any year in which the LESSOR declines to seek such review
or reduction, provided it shall do so at its own cost or expense.
For purposes of this adjustment the fiscal year 1997 tax rate shall be
$1.43 per square foot, or $35,752.50 for the land and building, as-is.
LESSEE shall not be required to pay any income, profits, excise,
franchise, estate, succession, inheritance or transfer taxes of LESSOR or any
other party.
B. OPERATING COSTS:
The LESSEE shall pay to the LESSOR as additional rent hereunder within
thirty (30) days after notice in writing by LESSOR, any increases in
Operating Costs, below, in excess of Operating Costs incurred during, the
calendar year 1998. LESSOR'S demand shall be accompanied by a statement of
the applicable operating costs and a statement showing the manner of
calculation of LESSEE'S share of such costs. In the event LESSEE wishes
verification of the costs and its share, LESSOR will present substantiation
of charges, if requested, authorize its' independent C.P.A. to provide
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<PAGE>
certification of the statement and charges to the LESSEE, and LESSEE shall
bear the expense of the C.P.A. certification. In the alternative, LESSEE
may at its own expense audit LESSOR's books and records with respect to
operating costs (but only as regards this particular property, and not of
any other property or other affiliates of LESSOR). The operating costs
increase shall be prorated should this lease be in effect with respect to
only a portion of any calendar year, or which pertain to less than a fully
occupied building. Operating Costs are defined for the purpose of this
agreement as:
Maintenance Expenses of LESSOR for building structure, building
systems and exterior grounds.
Management Expenses (allocated at Five (5%) percent of gross rent)
Premiums for Casualty and public liability Insurance
Exceptions to Operating Costs are defined in Exhibit E.
C. BUILDING ACCESS
The LESSEE shall have unlimited access to the Building without charge.
7. UTILITIES: The LESSEE shall pay, as they become due, all bills for
electricity, water and sewer use and other utilities (whether they are used for
furnishing heat, cooling or other purposes) that are furnished to the Leased
Premises and which are separately metered. The LESSOR agrees to provide utility
services to the Leased Premises, all subject to interruption due to any
accident, to the making, of repairs, alterations, or improvements, to labor
difficulties, to trouble in obtaining, fuel, electricity, service, or supplies
from the sources from which they are usually obtained for said building, or to
any cause beyond the LESSOR'S control, provided LESSOR shall make reasonable and
diligent efforts to restore service in the event of any such disruption.
LESSOR shall have no obligation to provide utilities or equipment other
than the utilities and equipment within the premises as of the Commencement Date
of this lease which include the HVAC now serving the Leased Premises. In the
event LESSEE requires additional utilities or equipment the installation and
maintenance thereof shall be the LESSEE's sole obligation, provided that such
installation shall be the subject to the written consent of the LESSOR
8. USE OF LEASED PREMISES: The LESSEE shall use the Leased Premises only for
the purposes of general office and light manufacturing, storage and any other
lawful use.
9. COMPLIANCE WITH LAW: The LESSEE acknowledges that no trade or occupation
shall be conducted in the Leased Premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the Town of Lexington in which the premises are
situated. LESSEE shall not be responsible to make
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<PAGE>
alterations, installations, additions or improvements to the Leased Premises
required by applicable law except if required due to improvements installed by
or special or extraordinary uses by LESSEE.
10. FIRE INSURANCE: The LESSEE shall not permit any use of the Leased
Premises which will make voidable any insurance on the property of which the
Leased Premises are a part, or on the contents of said property or which shall
be contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants
all extra insurance premiums caused by the LESSEE's use of the premises.
11. MAINTENANCE:
A. LESSEE's Obligations
The LESSEE agrees to maintain the Leased Premises in as good condition
as at the beginning of the term, fair wear and tear and damage by fire and
other casualty excepted. Also excepted are elements which are LESSOR's
obligation to maintain hereunder. LESSEE, whenever necessary, shall replace
plate glass and other glass therein. Upon occupancy the LESSEE acknowledges
that, except for agreed exceptions or any latent defects, the Leased
Premises are then in good condition as at Lease execution, and the glass
whole. The LESSEE shall not permit the Leased Premises to be overloaded,
damaged, stripped, or defaced, nor suffer any waste. LESSEE shall obtain
written consent of LESSOR before erecting any sign on the exterior of the
Leased Premises, which consent shall not be unreasonably withheld or
delayed. LESSEE shall be responsible for replacement of expendable items,
such as lamps and ballast, and repair of damage to doors, walls, glass and
decor within the Leased Premises, and for cleaning of and trash removal
from the Leased Premises. LESSEE's obligations under this clause are
subject to and subsequent to the LESSOR's obligations under Exhibit B,
hereto, "Build Out Obligations"
B. LESSOR's Obligations
The LESSOR agrees to maintain, repair and replace, if necessary,
elements of the structure, roof, foundation, and exterior of the building
of which the Leased Premises are a part, and the Building's HVAC,
mechanical, electrical, plumbing facilities and fire protection facilities,
and the parking lot, exterior lighting, exterior window frames of the
building, in the same condition as it is at the commencement of the term or
as it may be put in during the term of this lease, but in any event in
good, clean, tenantable and working order, condition and repair, reasonable
wear and tear, damage by fire and other casualty only excepted (subject to
the provisions of Section 18, below), unless such maintenance is required
because of the LESSEE or those for whose conduct the LESSEE is legally
responsible. LESSOR shall maintain access ways and common areas of the land
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<PAGE>
in neat and orderly condition including clearance of snow and ice in the
walk ways and parking lot.
12. ALTERATIONS/ADDITIONS: Subsequent to the commencement Date LESSEE may make
no alterations and additions to the Leased Premises except as the LESSOR
consents thereto in writing. Provided, however, that LESSEE may make changes up
to $2,500.00 in value without prior approval of the LESSOR. Any such allowed
alterations shall be at LESSEE'S expense and shall be in quality at least equal
to the approved construction. LESSEE shall not permit any mechanics' liens, or
similar liens, to remain upon the Leased Premises for labor and material
furnished to LESSEE or claimed to have been furnished to LESSEE in connection
with work of any character performed or claimed to have been performed at the
direction of LESSEE and shall cause any such lien to be released of record
forthwith without cost to LESSOR. Any alterations or improvements made by the
LESSEE shall become the property of the LESSOR at the termination of occupancy
as provided herein. However, in the event LESSEE's wishes to install trade
fixtures, improvements, alterations, installations, such fixtures and equipment
which shall remain the LESSEE's property and shall be removed by LESSEE upon
termination of the Lease, with the prompt repair by LESSEE of any and all
damages occasioned by their removal. To confirm the foregoing, LESSEE will
submit its plans for any alteration or improvement to LESSOR in writing before
installation with a request for approval of removal at LESSEE'S expense upon
termination of this lease, and LESSOR'S approval of such request, shall be on
the condition that LESSEE shall restore and repair all damages caused by the
removal.
13. ASSIGNMENT SUBLEASING: The LESSEE shall not assign or sublet the whole or
any part of the Leased Premises without LESSOR'S prior written consent which
shall not be unreasonably withheld or delayed. Notwithstanding such consent,
LESSEE shall remain liable to LESSOR for the payment of all rent and for the
full performance of the covenants and conditions of this Lease. However, LESSEE
may, without obtaining such consent, make an assignment to any successor in
interest by way of merger or other reorganization, (except bankruptcy
reorganization), "going public" or "going private" transaction or acquisition of
substantially all the assets or stock of LESSEE, or an assignment of leasehold
fights as a component of security interest for a reputable financing
institution.
14. SUBORDINATION:
A. General Provision
This lease shall be subject and subordinate to any and all mortgages,
deeds of trust and other instruments in the nature of a mortgage, now or
any time hereafter, which may constitute a lien or liens on the property of
which the Leased Premises are a part and the LESSEE shall, when requested,
promptly execute and deliver such written instruments as shall be necessary
to show the subordination of this lease to said mortgages, deeds, of trust
or other such instruments in the nature of a mortgage, provided, however,
that the mortgagee executes and delivers to LESSEE a non-disturbance and
recognition
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<PAGE>
agreement providing in substance that should the mortgagee or any party
holding by, through on under the mortgagee (including without limitation
any purchaser at foreclosure) acquire title to the property, then, as long
as LESSEE is not in default, beyond any notice or grace period, the
mortgagee or such other party shall recognize this Lease and not disturb
LESSEE's rights hereunder.
B. Special Provision
So long as an affiliate or a related party to the LESSOR holds a
mortgage on the real property at 25 Hartwell Ave. this Lease shall have
priority over any such mortgage.
15. LESSOR'S ACCESS: The LESSOR or agents of the LESSOR may, at reasonable
times and upon appropriate notice, (normally one day's prior notice) enter to
view the Leased Premises and may remove placards and signs not approved and
affixed to the exterior of the Leased Premises as herein provided, and make
repairs and alterations as LESSOR should elect to do. The LESSOR may show the
Leased Premises to others, and at any time within six (6) months before the
expiration of the term, may affix to any suitable part of the lease premises a
notice for letting or selling the Leased Premises or property of which the
Leased Premises are a part and keep the same so affixed without hindrance or
molestation. LESSOR shall use best effort to minimize inconvenience and
interference with LESSEE and LESSEE's business operations.
16. INDEMNIFICATION & LIABILITY: The LESSEE shall save the LESSOR harmless from
all loss and damage occasioned by the use or escape of water or by the bursting
of pipes occasioned by the LESSEE's negligence or failure to adequately heat the
Lease Premises, or by any nuisance made or suffered on the Leased Premises,
unless such loss is caused by the neglect of the LESSOR. The removal of snow and
ice from the sidewalks bordering upon the Leased Premises shall be LESSOR'S
responsibility. LESSOR shall save the LESSEE harmless from loss or damage
occasioned by acts or omissions of the LESSOR, its employees or agent agents.
17. LESSEE'S LIABILITY INSURANCE: a) The LESSEE shall maintain with respect to
the Leased Premises and the property of which the Leased Premises are a part
comprehensive public liability insurance in the amount of $1 million Combined
Single Limit, and property damage insurance in the amount of the value of the
replacement of LESSEE's personal property and improvements, in responsible
companies qualified to do business in the state. The LESSEE shall deposit with
the LESSOR certificates for such insurance at or prior to the commencement of
the term, and thereafter within (30) days prior to the expiration of any such
policies. All such insurance certificates shall provide that such policies shall
not be canceled without at least ten (10) days prior written notice to each
assured named therein, b) All fire and property casualty insurance which either
party carries with respect to the building, Leased Premises or any property
therein, whether or not required, shall include provisions which deny to the
insurer acquisition by subrogation of rights of recovery against the other party
to the extent such rights have been waived by the insured party prior to
occurrence of loss, insofar as and to the extent that such
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<PAGE>
provisions may be effective without making it impossible to obtain insurance
coverage from responsible companies qualified to do business in the Commonwealth
of Massachusetts (even though extra premium may result therefrom). In the event
that any extra premium is payable by either party as a result of this provision,
the other party shall reimburse the party paying such premium the amount of such
extra premium. If at the request of one party, this non subrogation provision is
waived as to such party, then the obligation of reimbursement by such party
shall cease for such period of time as such waiver shall be effective. Each
party shall be entitled to have duplicates or certificates of any policies
containing such provisions.
Each party hereby waives all rights of recovery against the other for loss
or injury against which the waiving party is protected by insurance containing
said non-subrogation provisions, reserving, however, any rights with respect to
any excess of loss or injury over the amount recovered from such insurance.
18. FIRE, CASUALTY AND EMINENT DOMAIN: Should fifty (50%) percent or more of
the Leased Premises, or the property of which they are a part, be substantially
damaged by fire or other casualty, or be taken by eminent domain, the LESSOR may
elect to terminate this lease. If the LESSOR does not elect to terminate, or if
the damage is less than fifty (50%) percent of the Leased Premises or of the
property, LESSOR shall then diligently restore the building, property and Leased
Premises to substantially their condition at the inception of the Lease, as soon
as reasonably possible. When such fire, casualty, or taking renders the Leased
Premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and the LESSEE, may elect to
terminate this lease if:
(a) the LESSOR fails to give written notice within thirty (30) days of the
fire, casualty or taking of intention to restore Leased Premises, to the
condition existing at inception of the lease, and before LESSEE's improvements,
or
(b) the LESSOR fails to restore the Leased Premises to the condition
substantially the same as at inception of the Lease within on hundred and eighty
(180) days of said fire, casualty or taking, or
(c) the LESSOR's restoration cannot be completed eighteen months or more
prior to the end of the Term of the Lease
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which
the LESSEE may have for damages or injury to the Leased Premises for any taking
by eminent domain, except for damage to the LESSEE's fixtures, improvements,
additions, property, or equipment.
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<PAGE>
19. LATE PAYMENT, DEFAULT AND BANKRUPTCY:
A. LATE PAYMENT: LESSEE agrees that because actual damages for a late
payment or a dishonored check are difficult to fix or ascertain, but recognizing
that damage and injury result therefore, LESSEE agrees that if payments of rent
and other obligations are not received in hand by LESSOR five (5) business days
after the date payment is due, LESSEE agrees to pay liquidated damages of
$100.00 plus 18% per annum on the delinquent amount from the due date. LESSEE
agrees to pay a liquidated damage of $25.00 for each dishonored check. In the
event that two or more of the LESSEE's checks are dishonored in a 12 month
period, the LESSOR, in addition to other Rights, shall have the right to demand
payment by Certified Check or Money Order.
B. DEFAULT AND BANKRUPTCY: In the event that (a) the LESSEE shall default
in the payment of any installment of rent or other sum herein specified and such
default shall continue for five (5) days after written notice by LESSOR, or (b)
the LESSEE shall default in the observance or performance of any other of the
LESSEE's material covenants, agreement; or obligations hereunder and such
default shall not be corrected within thirty (30) days after written notice
thereof from LESSOR, of if such default is not susceptible to cure within thirty
days, in the event the LESSEE shall fail to commence to cure within the thirty
days or thereafter diligently to prosecute such cure to completion; or (c) the
LESSEE shall be declared bankrupt or insolvent according to law, or, if any
assignment shall be made of LESSEE's property for the benefit of creditors, then
the LESSOR shall have the right thereafter, while such default continues, to re-
enter and take complete possession of the Leased Premises, to declare the term
of this lease ended, and remove the LESSEE's effects, without prejudice to any
remedies which might be otherwise used for arrears of rent or other default. The
LESSEE shall indemnify the LESSOR against all loss of rent and other payments
which the LESSOR may incur by reason of such termination during the residue of
the term. LESSOR shall make reasonable efforts to relet the Leased Premises, and
net rents received by the LESSOR shall be credited to the LESSEE's obligations
hereunder. If the LESSEE shall default, after reasonable notice thereof, in the
observance or performance of any conditions or covenants on LESSEE's part to be
observed or performed under or by virtue of any of the provisions in any article
of this lease and shall fail to cure such default within the applicable cure
period, then the LESSOR, without being under any obligation to do so and without
thereby waiving such default, may remedy such default for the account and at the
expense of the LESSEE. If the LESSOR makes any expenditures or incurs any
obligations for the payment of money in connection therewith, including but not
limited to, reasonable attorney's fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations insured, with interest
at the rate of 12 per cent per annum and costs, shall be paid to the LESSOR by
the LESSEE as additional rent.
20. NOTICE: Any notice from the LESSOR to the LESSEE relating to the Leased
Premises or to the occupancy thereof, shall be deemed duly served, if delivered
in hand at the Leased Premises addressed to the LESSEE, or if mailed to the
Leased Premises, registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSEE. Any notice from the LESSEE to the LESSOR
relating to the Leased Premises or to the occupancy thereof, shall be deemed
duly served, if mailed to the LESSOR by registered or certified mail, return
receipt
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<PAGE>
requested, postage prepaid, addresses to the LESSOR at such address as the
LESSOR may from time to time advise in writing. Until such advice all rent shall
be paid and all notices sent to the LESSOR at 411 Waverley Oaks Road, Waltham MA
02154. All Notices under this Lease shall be in writing.
21. SURRENDER: The LESSEE shall at the expiration or other termination of this
lease remove all LESSEE'S goods and effects from the Leased Premises,
(including, without hereby limiting the generality of the foregoing all signs
and lettering affixed or painted by the LESSEE, either inside or outside the
Leased Premises). LESSEE shall deliver to the LESSOR the Leased Premises and all
keys, locks thereto, and subject to the provisions of Section 12, above, the
fixtures connected therewith and all alterations and additions made to or upon
the Leased Premises, in good condition, fair wear and tear, damage by fire or
other casualty and elements which are the LESSOR's responsibility to maintain
and repair excepted. In the event of the LESSEE's failure to remove any of
LESSEE's property from the premises, LESSOR is hereby authorized, without
liability to LESSEE for loss or damage thereto, and at the sole risk of LESSEE,
to remove and store any of the property at LESSEE's expense, or to retain same
under LESSOR's control or to sell at public or private sale, without notice, any
or all of the property not so removed and to apply the net proceeds of such sale
to the payment of any sum hereunder, or to destroy such property.
22. BROKERAGE: The Brokers named herein, Bruce Greon of the Leggat Company and
Steven James of Grubb & Ellis, warrant that they are duly licensed as such by
the Commonwealth of Massachusetts.
LESSOR agrees to pay the above named Broker(s) upon the term commencement
date a fee for professional services as agreed between LESSOR and Brokers under
a separate agreement.
Each party represents and warrants that it has not retained or dealt with
any other broker or brokers in connection with this Lease, and each party agrees
to indemnify, defend and save harmless the other party from any claims for fees
or commissions arising out of its dealings with any other broker with respect to
this Lease.
24. QUIET ENJOYMENT: LESSOR covenants and agrees that upon paying rent and
performing all the covenants and conditions of the Lease LESSEE shall and may
peacefully and quietly have, hold and enjoy the Lease Premises for the term
specified, subject to the terms of the Lease.
25. OTHER PROVISIONS: It is also understood and agreed that:
a. The attached Commercial Lease Addendum and the following Exhibits are
incorporated by reference:
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<PAGE>
Exhibits: A. Layout of Leased Premises
B. Buildout Obligations
C. INTENTIONALLY OMITTED
D. INTENTIONALLY OMITTED
E. Exclusions from Operating Expenses
b. LESSEE shall have a Five Year option to extend the term of the Lease at
market rates prevailing at the time of exercise of such option(s) for Class B
office space. Such option shall be exercised by written notice to LESSOR no less
than six months prior to the expiration of the then current term. See Addendum
Part D for procedure.
c. LESSOR reserves the right to expand the premises on the site of the
Lease Premises. Plans for any contemplated expansion shall be reviewed with
LESSEE for purpose of avoiding limitation in access or use by LESSEE. In no case
will any expansion of the building occur during the term of the Lease without
the express written assent of the LESSEE. In the event of such expansion, LESSOR
agrees to construct such additional facilities in a manner which is intended to
minimize inconvenience or interruption of LESSEE's use. In the event of such
expansion LESSEE shall have right of first refusal on the expansion space. In
the event of such expansion and the lease of such expanded facilities to a third
party, a just apportionment of real estate taxes and operating expenses shall
apply to the LESSEE's obligations under clauses 6 "Rent Adjustment", 7. "
Utilities" and 11. "Maintenance", above.
d. LESSOR approval of LESSEE requests, under any provisions of this Lease,
shall not be unreasonably withheld or delayed. Such requests must be in writing.
LESSOR shall respond to requests for approval under any provisions of this lease
within ten business days of receipt of a written request. Failure to respond
within ten days of receipt of a written request from the LESSEE shall be deemed
approval.
e. At the request of either, the parties shall mutually execute and deliver
a notice of lease in recordable form pursuant to Massachusetts General Laws,
Chapter 183, Section 4, and either party may record such notice in the
applicable registry of deeds.
f. If at any time the level of VOC's in the building reach a level which
presents a health hazard to the occupants, LESSOR will, at its expense, take all
necessary actions to abate such condition. The LESSOR shall abate any asbestos
in the building, either by removal or by encapsulation.
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<PAGE>
IN WITNESS WHEREOF, the said parties hereunto set their hand and seal as of
this 26th day of September, 1997.
ACCESS RADIOLOGY CORPORATION HARTWELL GROUP LLC
LESSEE LESSOR
______________________ _________________________
Robert L. Duffy, Jr.
Member Manager
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EXHIBIT 10.12
HARTWELL GROUP LLC
COMMERCIAL LEASE
Amendment 1
WHEREAS Hartwell Group LLC, a Massachusetts limited liability company
located at 411 Waverley Oaks Rd. Waltham MA., is LESSOR, and ACCESS Radiology
Corporation, a Delaware corporation located at 313 Speen St. Natick MA 01760, is
LESSEE of certain Premises located at 25 Hartwell Ave. Lexington MA under a
Commercial Lease dated September 26, 1997, and
WHEREAS the Lessor has provided, at this date, certain tenant improvements
in excess the improvements contemplated in the Commercial Lease, to a total of
$69,242.02, for which LESSEE is responsible, and
WHEREAS the parties have agreed that the aforesaid costs will be amortized
over the five year term of the Lease at 12% carrying cost;
NOW, THEREFORE the Parties agree to amend the Commercial Lease as follows:
Add to Clause 3 TERM the following third paragraph:
----
"The Commencement Date for the Lease is deemed 10 be December 1, 1997,
substantial completion of all Build Out having occurred."
Delete the words after the heading of Clause 4. RENT:
"The LESSEE shall pay to LESSOR rent at the rates per year, shown below,
which rent shall be payable in advance in the monthly installments shown
below on the first day of each month.
<TABLE>
<CAPTION>
Years Annual Rent Mo. Rent $/SF Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
1-5 $549,234.00 $45,770.00 $21.62
- --------------------------------------------------------------------
</TABLE>
Insert the following words:
"The LESSEE shall pay to LESSOR rent at the rates per year. shown below, which
rent shall be payable in advance in tho monthly installments shown below on the
first day of each month.
<TABLE>
<CAPTION>
Years Annual Rent Mo. Rent $/SF Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
1-5 $567,779.00 $47,315.00 $22.35
- --------------------------------------------------------------------
</TABLE>
All other terms and cond--itions of this Commercial Lease remain in effect.
AGREED this 28th day of November 1997.
Hartwell Group LLC ACCESS Radiology Corporation
LESSOR LESSEE
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of
the 31st day of March, 1999 between ACCESS Radiology Corporation (the
"Employer"), a Delaware corporation, and Scott S. Sheldon (the "Executive"),
residing at 10 Emerson Place, Charles River Park, Boston, Massachusetts 02114.
Where not otherwise defined herein, capitalized terms used herein have the
meanings set forth in Section 7.1 of this Agreement.
WHEREAS, the Employer wishes to employ the Executive in an executive
capacity, as its President and Chief Executive Officer, and Executive wishes to
accept such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, the Employer and the Executive hereby agree as
follows:
1. Term.
----
1.1 The Employer employs the Executive and the Executive accepts such
employment, for a period ending on December 31, 2000 (the "Initial Term").
1.2 This Agreement shall be automatically renewed for additional one-year
terms (a "Renewal Term") upon the expiration of the Initial Term or any Renewal
Term unless either party delivers to the other written notice of expiration
within 60 days prior to the end of the then current term.
1.3 This Agreement may be terminated prior to the expiration of the
Initial Term or any Renewal Term as provided in Section 4 of this Agreement.
2. Positions and Duties.
--------------------
2.1 During the term of this Agreement, the Employer shall employ the
Executive to serve as President and Chief Executive Officer of the Employer
subject to the terms of this Agreement and except as Executive and Employer
otherwise agree in writing. The Executive shall perform such executive,
administrative, and operational duties customary for executives in such capacity
or as may be assigned to the Executive from time to time by the Board of
Directors of the Employer.
2.2 Executive agrees to serve the Employer faithfully and to the best of
the Executive's ability and to devote substantially all of the Executive's
business time, attention and efforts to the interests and business of the
Employer and its Subsidiaries. Nothing contained herein shall preclude
Executive from serving on the board of one business corporation (other than
Employer and its subsidiaries) and on boards of not-for-profit organizations and
trade groups, nor from participating in community affairs, provided that such
activities do not materially interfere with the Executive's performance of his
duties and responsibilities to the Employer. The Executive warrants to the
Employer that the Executive is not under any contractual commitment prohibiting
or limiting Executive's employment by the Employer.
2.3 The Executive agrees at all times to perform his duties in accordance
with applicable laws, rules, and regulations and the policies and procedures of
the Employer applicable to senior executives from time to time.
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3. Compensation, Benefits, and Expenses.
------------------------------------
3.1 Salary. During the period from the Effective Date through the
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Initial Term and any Renewal Term of the Agreement, and except as otherwise
provided in Initial the Agreement, the Employer shall pay to Executive an annual
base salary of $175,000, or such greater amount as may be determined from time
to time by the Board of Directors (the "Base Salary Amount"), in installments
pursuant to the Employer's standard payroll policies and subject to such
withholding or deductions as may be mutually agreed between Employer and the
Executive or required by law. The Board of Directors shall review Executive's
salary not less frequently than annually, prior to February 1 of each year.
3.2 Incentive Compensation. In addition to the salary set forth in
----------------------
Section 3.1, Executive shall be entitled to earn incentive compensation in an
amount and on terms agreed to by the Employer and the Executive (the "Incentive
Compensation").
3.3 Benefits. During the period of his employment, Executive shall be
--------
entitled to participate in Employer's plans for the welfare and benefit of its
employees available to senior executive officers (including health, disability,
and life insurance programs, and vacation periods) as shall be established and
modified from time to time.
3.4 Expenses. During the term of this Agreement, the Employer authorizes
--------
Executive to incur reasonable and necessary out-of-pocket expenses in the course
of performing his duties and rendering services hereunder in accordance with
Employer's policies with respect thereto, and the Employer shall reimburse
Executive for all such expenses, provided (i) such expenses and the purpose for
which they were incurred are in accordance with Employer's policies, and (ii)
the Executive timely submits to the Employer expense reports and substantiation
of the expenses in accordance with Employer's policies.
3.5 Relocation. It is contemplated by the parties that Executive's
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permanent residence will remain in the greater Boston metropolitan area.
Executive will not be required to relocate his residence as a condition or term
of employment.
4. Termination.
-----------
4.1 Termination. The Executive's employment by Employer shall terminate
-----------
on the earliest Date of Termination upon the occurrence of any of the following
events:
4.1.1 the Executive's death;
4.1.2 the Executive is determined to be "permanently disabled" as defined
under the disability insurance policy covering the Executive;
4.1.3 termination of Executive by Employer for Cause, provided, however,
that the Board of Directors has given Executive written notice of its intention
to terminate Executive for Cause, specifying with particularity the grounds on
which the proposed termination for Cause is contemplated, which shall be acts or
failures to act on the part of Executive of which the Board first had knowledge
no more than six months prior to the giving of such notice;
4.1.4 termination of employment by Executive upon written notice to
Employer because of Constructive Termination Without Cause;
4.1.5 Resignation by Executive, which shall be upon 30 days' written
notice to Employer; or
4.1.6 termination of Executive by Employer without Cause.
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<PAGE>
4.2 Time of Termination. Executive's employment with Employer (including
-------------------
all positions held with Employer or its Subsidiaries or affiliates) shall
terminate immediately upon the Date of Termination without further action by
Employer.
4.3 Effect of Termination of Employment.
-----------------------------------
(a) Termination Due to Death. In the event the Executive's employment is
------------------------
terminated due to his death, his estate or designated beneficiaries shall be
entitled to the following:
(i) continuation of installments of the Base Salary Amount in
effect as of the date of death for a period of six months following the date of
death, payable on Employer's standard payroll cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) the right to exercise any stock option held by Executive which
is then exercisable (other than any option qualified as an incentive stock
option under the Internal Revenue Code (an "ISO")) on the date of death for the
remainder of its term;
(v) any other amounts payable on death pursuant to any written
plans or policies of Employer; and
(vi) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(b) Termination Due to Disability. In the event the Executive's employment
-----------------------------
is terminated due to his permanent or total disability, Executive or his legal
representative shall be entitled to the following:
(i) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(ii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iii) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(iv) continuation of medical benefits and life insurance as provided
in Section 3.3 of this Agreement for so long as such continuation may be
provided at reasonable cost to the Employer under its insurance arrangements in
effect from time to time (provided that if the Executive accepts employment with
another employer that offers medical and/or life insurance benefits, then the
Employer's obligation to provide such benefits under this clause shall
terminate);
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<PAGE>
(v) any other amounts payable according to the Employer's
disability policies; provided that disability payments that would be funded by
insurance on the date hereof shall be made to the extent that funds are
available under insurance policies maintained by the Employer which are then in
effect;
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive
(c) Termination without Cause or Constructive Termination Without Cause.
-------------------------------------------------------------------
In the event of the Executive's employment is terminated by Employer without
Cause (other than by death or disability) or there is a Constructive Termination
Without Cause, Executive shall be entitled to the following:
(i) a lump sum payment of $95,000, except that if such a
termination occurs within twelve months after a Change in Control , then the
Executive shall instead be entitled to continuation of installments of the Base
Salary Amount in effect as of the Date of Termination for a period of twelve
months following the Date of Termination, payable on Employer's standard payroll
cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned
but not yet paid, payable on their standard payment date;
(iv) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(v) continuation, for (x) twelve months if termination occurs
within twelve months of a Change in Control or (y) six months, if termination
occurs more than twelve months after a Change in Control, of medical benefits
and life insurance as provided in Section 3.3 of this Agreement and
participation in other welfare benefit plans (provided that if within such
period the Executive accepts employment with another employer that offers
medical and/or life insurance benefits, then the Employer's obligation to
provide such benefits under this clause shall terminate); and
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive
(d) Termination for Cause or Resignation. In the event Executive's
------------------------------------
employment is terminated by Employer for Cause or by Executive by Resignation,
Executive shall receive:
(i) Base Salary Amount in effect on, and payable through, the Date
of Termination in accordance with Employer's standard payroll policies; and
(ii) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive.
(e) Termination due to Expiration of Term. In the event Employer elects
-------------------------------------
to not renew Executive's employment at the expiration of the Initial Term or any
Renewal Term, Executive shall receive:
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<PAGE>
(i) a lump sum payment of $95,000, except that if such a
termination occurs within twelve months after a Change in Control , then the
Executive shall instead be entitled to continuation of installments of the Base
Salary Amount in effect as of the Date of Termination for a period of twelve
months following the Date of Termination, payable on Employer's standard payroll
cycle;
(ii) the balance of any incentive awards earned but not yet paid,
payable on their standard payment date;
(iii) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(iv) continuation, for (x) twelve months if termination occurs
within twelve months of a Change in Control or (y) six months, if termination
occurs more than twelve months after a Change in Control, of medical benefits
and life insurance as provided in Section 3.3 of this Agreement and
participation in other welfare benefit plans (provided that if within such
period the Executive accepts employment with another employer that offers
medical and/or life insurance benefits, then the Employer's obligation to
provide such benefits under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
5. Return of Employer's Property.
-----------------------------
Immediately upon termination of the Executive's employment with the
Employer, the Executive shall deliver to the Employer all confidential
information of the Employer, including, but not limited to, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer discs and other electronic media) relating in any way to the
business of the employer in any way obtained by the Executive during the period
of his employment with Employer. Immediately upon termination of the
Executive's employment with the Employer, the Executive shall deliver to the
Employer all tangible property of Employer in the possession of Executive. The
obligations of Executive under this Section 5 shall survive the termination of
Executive's employment and the expiration or termination of this Agreement.
6. Remedies.
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In the event of any breach or threatened breach, the parties to this
Agreement may pursue any and all remedies available at law or in equity for any
such breach or threatened breach, including the recovery of damages. The
Executive shall be under no obligation to mitigate any damages suffered by
Executive and arising in connection with this Agreement, nor (except as provided
in Sections 4.3 (c)(v) and 4.3 (e)(iv)) shall any income or amounts payable to
Executive other than pursuant to this Agreement offset damages hereunder. No
payment due Executive under this Agreement shall be subject to any discount
based on accelerated payment or otherwise. Costs of litigation, including,
without limitation, costs of investigations, fees and expenses of attorneys,
shall be borne by the Executive (i) if the Executive or his estate or
beneficiaries shall actually receive lump sum payments or payments of Base
Salary (as the case may be) and medical, life insurance and welfare benefits
pursuant to Section 4.3 in the amounts and on the dates set forth therein (ii)
if the Executive shall have resigned or (iii) if the Executive shall have been
terminated for Cause (provided that if a court of competent jurisdiction shall
determine that Cause did not exist, then such costs of litigation shall be
repaid to the Executive). In other cases such costs of litigation shall be
borne by the Employer. Each party to this Agreement acknowledges that the
Employer would be irreparably harmed by any breach of
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<PAGE>
Section 5 and that damages alone would be an inadequate remedy for any breach of
such Section. Accordingly, the Employer shall be entitled to equitable relief,
including without limitation a preliminary and/or permanent injunction for
specific performance, with respect to any such breach, without requirement of
the posting of a bond or other surety.
7. Miscellaneous.
-------------
7.1 Certain Definitions.
-------------------
(a) "Cause" shall mean (i) breach of this Agreement or any other
agreement between the Executive and the Employer, (ii) willful refusal to
perform assigned duties, (iii) dishonesty, (iv) willful injury or attempt to do
injury to the Employer, its assets or its business, (v) substance abuse or (vi)
any act that is a felony or any violation of laws or policies relating to
harassment or discrimination.
(b) "Constructive Termination Without Cause" shall mean:
(i) the Executive shall have ceased to be the President of the
Employer, the Executive shall have been assigned to duties which are
inconsistent with his position as President or limitations shall have been
imposed on the Executive's authority that are inconsistent with his position as
President, in each case without the Executive's prior written consent, whether
as a result of a transaction after the date hereof (including without limitation
a merger, reorganization, consolidation or similar transaction) or otherwise;
(ii) a change in management structure (including the Executive
having ceased to be the Chief Executive Officer of the Employer) shall have
occurred without the prior written consent of the Executive, with the result
that the Executive does not report directly to the Board of Directors of the
Employer and, not less than three months nor more than six months after the
effectiveness of such change, the Executive shall have delivered to all members
of the Board of Directors a written statement setting forth in detail the
reasons why the Executive is not willing to work with the individual to whom he
then reports;
(iii) without the Executive's prior written consent, there shall
have been a reduction in the Executive's then current Base Salary Amount or a
reduction in the Executive's target award opportunity (if any) or other long-
term performance incentive which is proportionately greater than corresponding
reductions in base salary, target award opportunities or long term performance
incentives (as the case may be) for senior management generally, or the Employer
shall have terminated or failed to continue to provide to the Executive any
employee benefit then otherwise provided to the Employer's senior management
generally, or the Employer shall have failed to include the Executive in any
incentive compensation plan of the Employer unless a plan providing
substantially the same opportunity is substituted;
(iv) the Employer shall engage in fraudulent conduct in which
Executive is not a participant;
(v) the Employer shall materially breach this Agreement and shall
not cure such breach within thirty days after written notice of such breach is
given by Executive to the Board of Directors of Employer, including, without
limitation, by failing to obtain the confirmation or assumption of the
Employer's obligations under this Agreement as required by Section 7.5 with
respect to any transaction referred to in that Section; or
(vi) the Employer shall require that Executive relocate to a
principal place of business outside of the Boston, Massachusetts metropolitan
area.
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<PAGE>
(c) "Date of Termination" shall mean:
(i) if employment terminates because of Executive's death, the
date of death;
(ii) if employment terminates for "Cause", the date of notice
under Section 4.1.3;
(iii) if employment terminates due to "Resignation", then the
earlier of the Executive's last day of employment or 30 days from the receipt by
the Employer of notice of such Resignation;
(iv) if employment terminates because of permanent or total
disability, the date of determination that Executive is disabled as described in
Section 4.1.2 of this Agreement;
(v) if employment terminates for Constructive Termination Without
Cause, on the date set forth in Executive's notice as described in Section 4.1.4
of this Agreement; or
(vi) if employment terminates due to expiration of term, the date
of expiration.
d) "Change in Control" shall mean any transaction or series of related
transactions (including a merger, consolidation or sale of all or substantially
all assets) that results in the acquisition by any person or group of beneficial
ownership of securities of the Employer (or the entity resulting from a merger,
consolidation or sale of all or substantially all assets) representing a
majority of the aggregate voting power of the capital stock of the Employer (or
a resulting entity, calculated in all cases on a fully diluted basis); provided
that the acquisition of additional securities by any person or group that had
beneficial ownership, on January 21, 1999, of securities representing 10% or
more of the aggregate voting power of the capital stock of the Employer, shall
not be a Change in Control. The terms "group" and "beneficial ownership" shall
have the same meanings as under the Rules and Regulations of the United States
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934.
7.2 Notices. Any notices under this Agreement shall be in writing and
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shall be given by personal delivery, by local courier service, by certified or
registered letter, return receipt requested, or by a nationally recognized
overnight delivery service; and shall be deemed given when delivered in person
or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a
nationally recognized overnight delivery service at the addresses set forth
below or to such other address or addresses as either party shall have specified
in writing to the other party hereto.
If to the Employer:
ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, MA 02421
Attn.: Secretary
If to the Executive:
Scott S. Sheldon
10 Emerson Place
Charles River Park
Boston, MA 02114
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<PAGE>
7.3 Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed in
accordance with, and be governed by, the laws of the state of Massachusetts
without reference to its principles of conflicts of law.
7.4 Entire Agreement; Amendment or Modification. This Agreement, the
-------------------------------------------
Restricted Stock Purchase Agreement between Employer and Executive, the
Shareholders Agreement between Employer, Executive and certain other
shareholders of Employer, the Confidentiality and Work Product Agreement between
Employer and Executive, the Non-Competition Agreement between Employer and
Executive and the Employer's written employment manuals and policies are all of
the agreements of the parties hereto relevant to the matters contained herein.
This Agreement supersedes the Employment agreement dated as of August 28, 1997
between the Executive and the Employer. No modification or amendment of any of
the provisions of this Agreement shall be effective unless in writing and signed
by the Executive and Employer. No failure to exercise any right or remedy
hereunder shall operate as a waiver thereof. No term or condition of this
Agreement shall be deemed to have been waived, nor shall a party be estopped
from enforcing any provision of this Agreement, except by a statement in writing
signed by the Executive or Employer, whichever party against whom such waiver or
estoppel is sought. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, such provision shall
be reformed to the extent necessary to make it valid or enforceable and to carry
out the intent of the parties, or if such reformation is not possible, the
remaining provisions of this Agreement shall continue in full force and effect.
7.5 Assignability; Binding Nature. This Agreement has been duly
-----------------------------
authorized by the Board of Directors of Employer and shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs (in
the case of the Executive) and permitted assigns. No rights or obligations of
the Employer under this Agreement may be assigned or transferred by the
Employer, except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Employer is not the
continuing entity, or the sale of all or substantially all of the assets of the
Employer, provided that the assignee or transferee shall expressly assume the
liabilities, obligations and duties of the Employer, as contained in this
Agreement. If requested by Executive, Employer will, prior to the effectiveness
of any merger or consolidation of Employer with or into any other entity or any
sale of all or substantially all of the assets of Employer, provide to Executive
the express written assumption of all of Employer's obligations hereunder by the
surviving or successor entity (or express written confirmation of such
obligations if Employer is the surviving entity). Executive may not assign any
of his rights hereunder without the prior written consent of Employer.
7.6 Survival. The Executive's obligations under Sections 5 and 6 will
--------
survive the termination of Executive's employment and the termination of
expiration of this Agreement. The Employer's obligations under this Agreement
will survive the termination of Executive's employment and the termination or
expiration of this Agreement until paid in full.
7.7 Headings. The paragraph and subparagraph headings contained in this
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Agreement are for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
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<PAGE>
7.8 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
several counterparts, and all counterparts so executed shall constitute one
agreement, binding on the parties hereto, notwithstanding that both parties are
not signatory to the original or the same counterpart. This Agreement shall
become effective as of the date first set forth above when executed by the
Executive and the Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written, and will be effective for all purposes as of
the Effective Date.
ACCESS Radiology Corporation
By: ______________________
EXECUTIVE
__________________________
Scott S. Sheldon
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<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of the
30th day of April, 1999 between ACCESS Radiology Corporation (the "Employer"), a
Delaware corporation, and Howard Pinsky (the "Executive"), residing at 18 York
Road, Mansfield, MA 02048. Where not otherwise defined herein, capitalized terms
used herein have the meanings set forth in Section 7.1 of this Agreement.
WHEREAS, the Employer wishes to employ the Executive in an executive
capacity, and Executive wishes to accept such employment, on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, the Employer and the Executive hereby agree as
follows:
1. Term.
----
1.1 The Employer employs the Executive and the Executive accepts such
employment, for a period ending on December 31, 2000 (the "Initial Term").
1.2 This Agreement shall be automatically renewed for additional one-year
terms (a "Renewal Term") upon the expiration of the Initial Term or any Renewal
Term unless either party delivers to the other written notice of expiration
within 60 days prior to the end of the then current term.
1.3 This Agreement may be terminated prior to the expiration of the
Initial Term or any Renewal Term as provided in Section 4 of this Agreement.
2. Positions and Duties.
--------------------
2.1 During the term of this Agreement, the Executive shall perform such
executive, administrative, and operational as may be assigned to the Executive
from time to time by the Chief Executive Officer, President, or the Board of
Directors of the Employer.
2.2 Executive agrees to serve the Employer faithfully and to the best of
the Executive's ability and to devote substantially all of the Executive's
business time, attention and efforts to the interests and business of the
Employer and its Subsidiaries. The Executive warrants to the Employer that the
Executive is not under any contractual commitment prohibiting or limiting
Executive's employment by the Employer.
2.3 The Executive agrees at all times to perform his duties in accordance
with applicable laws, rules, and regulations and the policies and procedures of
the Employer applicable to senior executives from time to time.
3. Compensation, Benefits, and Expenses.
------------------------------------
3.1 Salary. During the period from the Effective Date through the Initial
------
Term and any Renewal Term of the Agreement, and except as otherwise provided in
the Agreement, the Employer shall pay to Executive an annual base salary of
$160,000, or such greater amount as may be determined from time to time by the
Board of Directors (the "Base Salary Amount"), in installments pursuant to the
Employer's standard payroll policies and subject to such withholding or
deductions as may be mutually agreed between Employer and the Executive or
required by
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law. The Board of Directors shall review Executive's salary not less frequently
than annually, prior to February 1st of each year.
3.2 Incentive Compensation. In addition to the salary set forth in
----------------------
Section 3.1, Executive shall be entitled to earn incentive compensation in an
amount and on terms agreed to by the Employer and the Executive (the "Incentive
Compensation").
3.3 Benefits. During the period of his employment, Executive shall be
--------
entitled to participate in Employer's plans for the welfare and benefit of its
employees available to senior executive officers (including health, disability,
and life insurance programs, and vacation periods) as shall be established and
modified from time to time.
3.4 Expenses. During the term of this Agreement, the Employer
--------
authorizes Executive to incur reasonable and necessary out-of-pocket expenses in
the course of performing his duties and rendering services hereunder in
accordance with Employer's policies with respect thereto, and the Employer shall
reimburse Executive for all such expenses, provided (i) such expenses and the
purpose for which they were incurred are in accordance with Employer's policies,
and (ii) the Executive timely submits to the Employer expense reports and
substantiation of the expenses in accordance with Employer's policies.
3.5 Relocation. It is contemplated by the parties that Executive's
----------
permanent residence will remain in the greater Boston metropolitan area.
Executive will not be required to relocate his residence as a condition or term
of employment.
4. Termination.
-----------
4.1 Termination. The Executive's employment by Employer shall terminate
-----------
on the earliest Date of Termination upon the occurrence of any of the following
events:
4.1.1 the Executive's death;
4.1.2 the Executive is determined to be "permanently disabled" as defined
under the disability insurance policy covering the Executive;
4.1.3 termination of Executive by Employer for Cause, provided, however,
that the Board of Directors has given Executive written notice of termination
for Cause, specifying with particularity the grounds on which the termination
for Cause is based;
4.1.4 resignation by Executive, which shall be upon 30 days' written
notice to Employer; or
4.1.5 termination of Executive by Employer without Cause.
4.2 Time of Termination. Executive's employment with Employer
-------------------
(including all positions held with Employer or its Subsidiaries or affiliates)
shall terminate immediately upon the Date of Termination without further action
by Employer.
4.3 Effect of Termination of Employment.
-----------------------------------
(a) Termination Due to Death. In the event the Executive's employment
------------------------
is terminated due to his death, his estate or designated beneficiaries shall be
entitled to the following:
2
<PAGE>
(i) continuation of installments of the Base Salary Amount in effect
as of the date of death for a period of six months following the date of death,
payable on Employer's standard payroll cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) any other amounts payable on death pursuant to any written plans
or policies of Employer; and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(b) Termination Due to Disability. In the event the Executive's
-----------------------------
employment is terminated due to his permanent or total disability, Executive or
his legal representative shall be entitled to the following:
(i) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(ii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iii) continuation of medical benefits and life insurance as provided
in Section 3.3 of this Agreement for so long as such continuation may be
provided at reasonable cost to the Employer under its insurance arrangements in
effect from time to time (provided that if the Executive accepts employment with
another employer that offers medical and/or life insurance benefits, then the
Employer's obligation to provide such benefits under this clause shall
terminate);
(v) any other amounts payable according to the Employer's disability
policies; provided that disability payments that would be funded by insurance on
the date hereof shall be made to the extent that funds are available under
insurance policies maintained by the Employer which are then in effect;
(vi) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive
(c) Termination without Cause. In the event of the Executive's employment
-------------------------
is terminated by Employer without Cause (other than by death or disability),
Executive shall be entitled to the following:
(i) a lump sum payment of $86,000;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the
3
<PAGE>
Date of Termination, pro rated for the portion of the calendar year elapsed
prior to the Date of Termination, and payable on the date it would otherwise
have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) continuation, for six months, of medical benefits and life
insurance as provided in Section 3.3 of this Agreement and participation in
other welfare benefit plans (provided that if within such period the Executive
accepts employment with another employer that offers medical and/or life
insurance benefits, then the Employer's obligation to provide such benefits
under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive
(d) Termination for Cause or Resignation. In the event Executive's
------------------------------------
employment is terminated by Employer for Cause or by Executive by Resignation,
Executive shall receive:
(i) Base Salary Amount in effect on, and payable through, the Date
of Termination in accordance with Employer's standard payroll policies; and
(ii) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(e) Termination due to Expiration of Term. In the event Employer elects
-------------------------------------
to not renew Executive's employment at the expiration of the Initial Term or any
Renewal Term, Executive shall receive:
(i) a lump sum payment of $86,000;
(ii) the balance of any incentive awards earned but not yet paid,
payable on their standard payment date;
(iii) continuation, for six months, of medical benefits and life
insurance as provided in Section 3.3 of this Agreement and participation in
other welfare benefit plans (provided that if within such period the Executive
accepts employment with another employer that offers medical and/or life
insurance benefits, then the Employer's obligation to provide such benefits
under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
5. Return of Employer's Property.
-----------------------------
Immediately upon termination of the Executive's employment with the
Employer, the Executive shall deliver to the Employer all confidential
information of the Employer, including, but not limited to, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer discs and other electronic media) relating in any way to the
business of the employer in any way obtained by the Executive during the period
of his employment with Employer. Immediately upon termination of the
Executive's employment with the Employer, the Executive shall deliver to the
Employer all tangible property of Employer in the possession of Executive. The
obligations of Executive under this Section 5 shall survive the termination of
Executive's employment and the expiration or termination of this Agreement.
4
<PAGE>
6. Remedies.
--------
In the event of any breach or threatened breach, the parties to this
Agreement may pursue any and all remedies available at law or in equity for any
such breach or threatened breach, including the recovery of damages. The
Executive shall be under no obligation to mitigate any damages suffered by
Executive and arising in connection with this Agreement, nor (except as provided
in Sections 4.3 (c)(iv) and 4.3 (e)(iii)) shall any income or amounts payable to
Executive other than pursuant to this Agreement offset damages hereunder. No
payment due Executive under this Agreement shall be subject to any discount
based on accelerated payment or otherwise. Costs of litigation, including,
without limitation, costs of investigations, fees and expenses of attorneys,
shall be borne by the Executive (i) if the Executive or his estate or
beneficiaries shall actually receive lump sum payments or payments of Base
Salary (as the case may be) and medical, life insurance and welfare benefits
pursuant to Section 4.3 in the amounts and on the dates set forth therein (ii)
if the Executive shall have resigned or (iii) if the Executive shall have been
terminated for Cause (provided that if a court of competent jurisdiction shall
determine that Cause did not exist, then such costs of litigation shall be
repaid to the Executive). In other cases such costs of litigation shall be borne
by the Employer. Each party to this Agreement acknowledges that the Employer
would be irreparably harmed by any breach of Section 5 and that damages alone
would be an inadequate remedy for any breach of such Section. Accordingly, the
Employer shall be entitled to equitable relief, including without limitation a
preliminary and/or permanent injunction for specific performance, with respect
to any such breach, without requirement of the posting of a bond or other
surety.
7. Miscellaneous.
-------------
7.1 Certain Definitions.
-------------------
(a) "Cause" shall mean (i) breach of this Agreement or any other agreement
between the Executive and the Employer, (ii) willful refusal to perform assigned
duties, (iii) dishonesty, (iv) willful injury or attempt to do injury to the
Employer, its assets or its business, (v) substance abuse or (vi) any act that
is a felony or any violation of laws or policies relating to harassment or
discrimination.
(c) "Date of Termination" shall mean:
(i) if employment terminates because of Executive's death, the
date of death;
(ii) if employment terminates for "Cause", the date of notice
under Section 4.1.3;
(iii) if employment terminates due to "Resignation", then the
earlier of the Executive's last day of employment or 30 days from the receipt by
the Employer of notice of such Resignation;
(iv) if employment terminates because of disability, the date of
determination that Executive is disabled as described in Section 4.1.2 of this
Agreement;
(v) if employment terminates due to expiration of term, the
date of expiration.
7.2 Notices. Any notices under this Agreement shall be in writing and
-------
shall be given by personal delivery, by local courier service, by certified or
registered letter, return receipt requested, or by a nationally recognized
overnight delivery service; and shall be deemed given when delivered in person
or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a
nationally recognized
5
<PAGE>
overnight delivery service at the addresses set forth below or to such other
address or addresses as either party shall have specified in writing to the
other party hereto.
If to the Employer:
ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, MA 02421
Attn.: Secretary
If to the Executive:
Howard Pinsky
18 York Road
------------
Mansfield, MA 02048
-------------------
7.3 Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed in
accordance with, and be governed by, the laws of the state of Massachusetts
without reference to its principles of conflicts of law.
7.4 Entire Agreement; Amendment or Modification. This Agreement, the
-------------------------------------------
Restricted Stock Purchase Agreement between Employer and Executive, the
Shareholders Agreement between Employer, Executive and certain other
shareholders of Employer, the Confidentiality and Work Product Agreement between
Employer and Executive, the Non-Competition Agreement between Employer and
Executive and the Employer's written employment manuals and policies are all of
the agreements of the parties hereto relevant to the matters contained herein.
This Agreement supersedes the Employment agreement dated as of January 31, 1996
between the Executive and the Employer. No modification or amendment of any of
the provisions of this Agreement shall be effective unless in writing and signed
by the Executive and Employer. No failure to exercise any right or remedy
hereunder shall operate as a waiver thereof. No term or condition of this
Agreement shall be deemed to have been waived, nor shall a party be estopped
from enforcing any provision of this Agreement, except by a statement in writing
signed by the Executive or Employer, whichever party against whom such waiver or
estoppel is sought. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, such provision shall
be reformed to the extent necessary to make it valid or enforceable and to carry
out the intent of the parties, or if such reformation is not possible, the
remaining provisions of this Agreement shall continue in full force and effect.
7.5 Assignability; Binding Nature. This Agreement has been duly
-----------------------------
authorized by the Board of Directors of Employer and shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs (in
the case of the Executive) and permitted assigns. No rights or obligations of
the Employer under this Agreement may be assigned or transferred by the
Employer, except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Employer is not the
continuing entity, or the sale of all or substantially all of the assets of the
Employer, provided that the assignee or transferee shall expressly assume the
liabilities, obligations and duties of the Employer, as contained in this
Agreement. If requested by Executive, Employer will, prior to the effectiveness
of any merger or consolidation of Employer with or into any other entity or any
sale of all or substantially all of the assets of Employer, provide to Executive
the express written assumption of all of Employer's obligations hereunder by the
surviving or successor entity (or express written confirmation of such
obligations if Employer is the surviving entity). Executive may not assign any
of his rights hereunder without the prior written consent of Employer.
6
<PAGE>
7.6 Survival. The Executive's obligations under Sections 5 and 6 will
--------
survive the termination of Executive's employment and the termination of
expiration of this Agreement. The Employer's obligations under this Agreement
will survive the termination of Executive's employment and the termination or
expiration of this Agreement until paid in full.
7.7 Headings. The paragraph and subparagraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
7.8 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
several counterparts, and all counterparts so executed shall constitute one
agreement, binding on the parties hereto, notwithstanding that both parties are
not signatory to the original or the same counterpart. This Agreement shall
become effective as of the date first set forth above when executed by the
Executive and the Employer.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written, and will be effective for all
purposes as of the Effective Date.
ACCESS Radiology Corporation
By: _______________________________
Scott S. Sheldon--President
EXECUTIVE
___________________________________
Howard Pinsky
7
<PAGE>
EXHIBIT 10.15
DIRECTOR INDEMNITY AGREEMENT
AGREEMENT, dated as of _________________________, by and between
ACCESS Radiology Corporation (collectively with any affiliated entity to which
Indemnitee is named, appointed or elected a director, "ACCESS" or the "Company")
and the undersigned (collectively with his estate, heirs,
--------------------
executors, administrators and other personal representatives, the "Indemnitee").
In view of the substantial increase in directors' litigation costs and
risks and the limitations of the availability and coverage of liability
insurance, and in view of the mutual desire of the parties that the Indemnitee
render valuable services to the Company as a director, this Agreement is entered
into in order to provide assurance to the Indemnitee that the Company will
indemnify the Indemnitee against such costs and risks to the fullest extent
permitted by the laws of the State of Delaware.
1. Indemnification.
---------------
(a) To the fullest extent permitted by the laws of the State
of Delaware as from time to time in effect, the Company, which for purposes of
this Agreement shall mean ACCESS and any affiliated entity to which Indemnitee
is named, appointed or elected a director, whether or not such entity executes
this Agreement or an agreement equivalent to this Agreement, the naming,
appointing or electing of Indemnitee as director being deemed equivalent to
execution of this Agreement by such entity, jointly and severally shall
indemnify the Indemnitee against any judgments, penalties, fines, amounts paid
in settlement, and Expenses (as hereinafter defined) incurred in connection with
any actual or threatened Proceeding (as hereinafter defined) in regard to which
Indemnitee is or was a director of the Company, or serves or has served any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity at the request of the Company, to the fullest
extent permitted by the Company's certificate of incorporation, by-laws and
applicable law in effect on the date hereof and to such greater extent as
applicable law may hereafter from time to time permit, and to advance to
Indemnitee, as hereinafter provided, Expenses incurred in connection therewith.
(b) "Expenses" means all reasonable attorneys' fees and
expenses, retainers, court costs, transcription costs, duplicating costs, fees
of experts, fees of witnesses, travel expenses, printing and binding costs,
telephone charges, postage incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating or being or preparing to be a
witness in a Proceeding.
(c) "Proceeding" includes, without limitation, any action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or completed proceeding,
whether civil, criminal, administrative or investigative, whether by a third
party, by or in the right of the Company or by Indemnitee to enforce any rights
under this Agreement or otherwise against the Company or its affiliates.
2. Procedure for Indemnification. To obtain indemnification under
-----------------------------
this Agreement, Indemnitee shall send to the Company a written request for any
indemnification sought under this Agreement together with such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent the Indemnitee is entitled to
indemnification. The Secretary of the Company shall as soon as practicable
advise the Board of Directors in writing that the Indemnitee has requested
indemnification. The Company shall promptly make a finding whether the
indemnification requested is permitted by the laws of the State of Delaware, the
Company's certificate of incorporation, and its by-laws and, no later than 60
days following receipt by the Company of
________________________________________________________________________________
Director Indemnity Agreement Page 1 of 4 ACCESS Radiology Corporation
<PAGE>
such request, the Company shall cause the indemnification provided hereunder to
be authorized and paid unless the finding is that the indemnification requested
is not permitted.
(a) The burden of providing that such standard has not been met
shall be on the Company. During such 60-day period, the Indemnitee shall be
given an opportunity to be heard and to present evidence in connection with
consideration by the Board of Directors, independent legal counsel or the
stockholders, as the case may be, of any findings required by applicable law.
(b) If the Company does not pay the indemnification requested by
the Indemnitee within 60 days after the receipt of such request, the
Indemnitee's right to indemnification shall be enforceable in any court of
competent jurisdiction as set forth below. In any such action, neither the
making of, nor failure to make, any finding by the Company (including its board
of Directors, its independent counsel and its stockholders) that indemnification
of the Indemnitee is proper or not proper in the circumstances, shall be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct. The Indemnitee's reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
successfully establishing the right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Company.
(c) Any action instituted by the Company or by the Indemnitee
under this Agreement may be maintained as to the Company and the Indemnitee in
any court of competent jurisdiction, including but not limited to the Chancery
Court of the State of Delaware. The Company and the Indemnitee each consents to
the exercise of jurisdiction and venue over the Company or the Indemnitee, as
the case may be, by the Chancery Court of the State of Delaware in and for the
County of Delaware.
3. Procedure for Advancement of Expenses. Promptly upon receipt by
-------------------------------------
the Company of a written request for payment of expenses incurred by the
Indemnitee in defending any action or proceeding covered by Section 1,
accompanied by documentation of the expenses incurred and by an undertaking by
the Indemnitee to repay the amount advanced as and to the extent required by
Section 145 of the Delaware General Corporation Law, the Company shall pay an
amount requested to or as directed by the Indemnitee notwithstanding the absence
of the final disposition of the action or proceeding.
4. Voluntary Proceedings. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Indemnitee shall not be entitled to indemnification or any
advance pursuant to this Agreement in connection with any claim, action, or
proceeding initiated by the Indemnitee against the Company or any director or
officer of the Company except to enforce Indemnitee's rights under this
Agreement or any other written agreement between Indemnitee and the Company
unless the institution of such claim, action or proceeding was authorized prior
to its commencement by a majority vote of the Board of Directors or the
Indemnitee is successful, in whole or, with regard to the repayment of Expenses,
substantial part, on the merits in such claim, action or proceeding.
5. Other Rights; Continuation of Right to Indemnification. The
------------------------------------------------------
indemnification and advances of Expenses provided by this Agreement shall not be
deemed exclusive of any other rights consistent with the laws of the State of
Delaware to which a director seeking indemnification may be entitled under any
law (common or statutory), provision of the Company's certificate of
incorporation or by-laws, resolution of stockholders or directors, other
agreement or otherwise, both as to action in the Indemnitee's official capacity
and as to action in another capacity for the Company, and shall continue
notwithstanding that the Indemnitee may have ceased to be a director. The
provisions of this Agreement shall inure to the benefit of
________________________________________________________________________________
Director Indemnity Agreement Page 2 of 4 ACCESS Radiology Corporation
<PAGE>
the estate, heirs, executors, administrators and other personal representatives
of the Indemnitee.
6. Amendments. This Agreement may not be amended without the
----------
agreement in writing of the Company and the Indemnitee.
7. Severability. If any portion of this Agreement shall be deemed
------------
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, and the Company shall nevertheless indemnify
the Indemnitee as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated and to the
fullest extent permitted by applicable law.
8. Survival Clause. The Company acknowledges that, in providing
---------------
services to the Company, the Indemnitee is relying on this Agreement.
Accordingly, the Company agrees that its obligation hereunder will survive (i)
any actual or purported termination of this Agreement by the Company or its
successors or assigns whether by operation of law or otherwise, (ii) any change
in the Company's certificate of incorporation or by-laws and (iii) termination
of the Indemnitee's services to the Company (whether such services were
terminated by the Company or the Indemnitee), whether or not a claim is made or
an action or proceeding is threatened or commenced before or after the actual or
purported termination of this Agreement, change in the certificate of
incorporation or by-laws or termination of the Indemnitee's services.
9. Successors and Assigns of the Company. This Agreement shall be
-------------------------------------
binding on the successors and assigns of the Company whether by operation of law
or otherwise.
10. Governing Law. This Agreement will be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflict
laws).
(Remainder of page intentionally left blank)
________________________________________________________________________________
Director Indemnity Agreement Page 3 of 4 ACCESS Radiology Corporation
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first written above.
ACCESS Radiology Corporation
By: _______________________________________
Scott S. Sheldon
President
INDEMNITEE:
By: _______________________________________
________________________________________________________________________________
Director Indemnity Agreement Page 4 of 4 ACCESS Radiology Corporation
<PAGE>
EXHIBIT 10.16
DIRECTOR WORK PRODUCT AGREEMENT
The undersigned, a member of the Board of Directors of ACCESS Radiology
Corporation (the "Company") hereby agrees with the Company as follows:
If, at any time that I am a member of the Company's Board of Directors, the
Company and I shall communicate regarding any invention, modification,
discovery, design, development, improvement, process, software program,
documentation, formula, data, technique, know-how, secret or other intellectual
property (collectively, "Developments") that relates to the business of the
Company, all Developments involved in or resulting from such communication shall
be the sole property of the Company and its assigns. I agree to take (at the
Company's expense) all such actions and execute all such documents, including
without limitation applications for and assignments of patents and copyrights,
as the Company shall reasonably request to confirm or give effect to the rights
of the Company or its assigns hereunder.
Agreed:
____________________________________
Date:
____________________________________
<PAGE>
EXHIBIT 10.17
DIRECTOR CONFIDENTIALITY AGREEMENT
In connection with my membership on the Board of Directors of ACCESS
Radiology Corporation ("ACCESS" or the "Company"), I hereby agree with the
Company as follows:
1. Confidential Information.
------------------------
(a) As used herein, "Confidential Information" shall mean all present
and future confidential information created, discovered or developed by, or
otherwise known to, the Company (including, without limitation, confidential
information created, discovered, developed or made known to me by the Company),
or in which property rights have been or may in the future be assigned or
otherwise conveyed to the Company, which information has or may in the future
include, for example, trade secrets, processes, formulae, data and know-how,
discoveries, developments, designs, improvements, inventions, techniques,
marketing plans, strategies, forecasts, new products, unpublished financial
statements, budgets, projections, licenses, prices, costs and customer and
supplier lists. Confidential Information does not include, however, information
which (i) is approved for release by written authorization of the Company, (ii)
may be required by law or an order of any court, agency or proceeding to be
disclosed, (iii) is acquired by me outside of the course of my duties for the
Company or from third party rightfully possessed of such information that is not
otherwise proprietary to the Company, or (iv) was known by me prior to my
service as a member of the Board of Directors of the Company.
(b) I agree that all Confidential Information and rights relating
thereto shall be the sole property of the Company and that I will not disclose
to anyone outside of the Company or use for my own benefit or for the benefit of
others any Confidential Information without the Company's written permission and
shall keep secret all matters entrusted to me and shall not use or attempt to
use any such information in any manner which may injure or cause loss or may be
calculated to injure or cause loss whether directly or indirectly to the
Company.
2. Specific Performance.
--------------------
I agree that any breach of this Agreement by me will cause irreparable
damage to the Company and that in the event of such breach the Company shall
have, in addition to any and all remedies at law, the right to an injunction,
specific performance or other equitable relief to prevent the violation of my
obligation hereunder.
3. Miscellaneous.
-------------
(a) No Employment Obligation. I understand that this Agreement does
------------------------
not create any obligation on the part of the Company or any other person or
entity to continue my service as a member of the Board of Directors of the
Company.
(b) Entire Agreement; Modification. This Agreement constitutes the
------------------------------
whole agreement among the parties concerning the subject matter hereof and
supersedes all prior agreements related to such subject matter, and there are no
terms other than those contained herein. No variation hereof shall be deemed
valid unless in writing and signed by the parties hereto.
________________________________________________________________________________
Director Confidentiality Agreement Page 1 of 3 ACCESS Radiology Corporation
<PAGE>
(c) Severability. The invalidity or unenforceability of any
------------
provision hereof shall in no way affect the validity or enforceability of any
other provision, and any invalid or unenforceabable provision shall be reformed
so as to be valid and enforceable to the maximum extent permitted by law.
(d) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Massachusetts.
(e) Notices. All notices hereunder shall be deemed given when sent
-------
by certified mail to the recipient's last known address.
(f) Non-Waiver. The waiver by any party of a breach of any provision
----------
of the Agreement shall not operate or be construed as a waiver of any subsequent
breach.
(g) Assignment by the Company. The Company shall have the right to
-------------------------
assign this Agreement to its successors and assigns, and all covenants and
agreements hereunder shall inure to the benefit of and be enforceable by its
successors or assigns.
(h) Acknowledgments. I hereby acknowledge and agree that the
---------------
enforcement of this Agreement is necessary to ensure the preservation,
protection and continuity of the business, trade secrets and goodwill of the
Company. I agree that, due to the proprietary nature of the Company's business,
the restrictions set forth in the Agreement are reasonable as to time and scope.
(Remainder of page intentionally left blank)
________________________________________________________________________________
Director Confidentially Agreement Page 2 of 3 ACCESS Radiology Corporation
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ACCESS Radiology Corporation DIRECTOR:
By: ____________________________ ____________________
Scott S. Sheldon--President Director Name
Date: ____________________________ Date:_______________
________________________________________________________________________________
Director Confientiality Agreement Page 3 of 3 ACCESS Radiology Corporation
<PAGE>
EXHIBIT 10.18
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.
THE WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE PROVISIONS OF A
SECURITY HOLDER'S AGREEMENT DATED AS OF MARCH 8TH, 1996, BY AND BETWEEN THE
COMPANY AND THE HOLDER NAMED THEREIN, AS IT MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION.
ACCESS RADIOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
WARRANT NO. __________ SHARES DATE:_______
HOLDER:
1. Right to Purchase; Exercise Price. Subject to the terms and conditions
---------------------------------
set forth herein, the holder of this Warrant shall have the right to purchase
from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company shall issue
and sell to ____________________ ("the Holder"),( , ) fully paid and non-
----------
assessable shares of Common Stock of the Company at a price of $.50 per share
(the "Exercise Price"). This Warrant may be exercised in whole or in part on any
business day on or after the date of issue until the close of business on March
31, 2001, after which this Warrant shall cease to be exerciseable. The Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant are subject to adjustment as provided in Section 3.
2. Procedure For Exercise. (a) This Warrant shall be exercised by
----------------------
surrender to the Company at its principal office of this Warrant, with the form
of election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. Upon receipt of this Warrant, with the
form of election to purchase set forth as Exhibit 1 duly completed and executed
by the holder, and payment of the Exercise Price as provided above, the Company
will promptly deliver to the holder a certificate for the Common Stock issuable
upon exercise, registered in the name of the holder.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Common Stock subject hereto, a new Warrant shall be
issued by the Company to the holder evidencing the right to purchase those
shares of Common Stock with respect to which this Warrant remains unexercised.
(c) If any fractional share of Common Stock would be delivered upon
exercise, the Company may issue such fractional share or pay to the holder an
amount in cash equal to the fair market value of such fractional share as
determined in good faith by the Board of Directors of the Company.
3. Adjustments. (a) In case the Company shall at any time subdivide (by
-----------
any stock split, stock dividend or otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
________________________________________________________________________________
ACCESS Radiology Corporation Page 1 of 4
Warrant
<PAGE>
(b) If any merger or consolidation of the Company with or into any other
entity, any sale or other disposition of all or substantially all of the
Company's assets, or any capital reorganization or reclassification of the
capital stock of the Company shall be effected, in any such case in such a way
that holders of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such merger or consolidation, sale or other disposition of assets or
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the exercise
of this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such exercise had such merger or consolidation, sale
or other disposition of all or substantially all assets or reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustment of the Exercise Price) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
(c) Upon each adjustment of the Exercise Price pursuant to paragraph (a) of
this Section 3, this Warrant shall, after such adjustment, represent the right
to purchase, at the adjusted Exercise Price, a number of shares of Common Stock
obtained by (i) multiplying the number of shares purchasable upon the exercise
of this Warrant prior to such adjustment by the Exercise Price in effect prior
to such adjustment and (ii) dividing the product so obtained by the Exercise
Price in effect after such adjustment.
(d) Upon any adjustment of the Exercise Price or the number of shares of
Common Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
(e) In case at any time:
(1) the Company shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Company shall offer for subscription pro rata to the
--- ----
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of said
cases, the Company shall give, by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, addressed to the holder at
the address of the holder as shown on the books of the Company, (a) at least 20
days' prior written notice of the date on which the books of the Company shall
close or a record shall be
________________________________________________________________________________
ACCESS Radiology Corporation Page 2 of 4
Warrant
<PAGE>
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up and
(b) in the case of such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
(f) The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise in full of this Warrant. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Exercise
Price in effect at the time. The Company will not take any action which results
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
(g) As used in this Warrant, the term "Common Stock" shall mean and include
the Company's authorized Common Stock, par value $.01 per share, as constituted
on the date of this Warrant, and shall also include any capital stock of any
class of the Company thereafter authorized which shall neither be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; provided that the shares of Common Stock issuable upon exercise
of this Warrant shall include only shares designated as Common Stock of the
Company on the date of this Warrant, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in paragraph 3(b).
4. Restrictions on Transfer. The holder understands that (i) this Warrant
------------------------
and the Common Stock issuable upon exercise hereof have not been registered
under the Securities Act of 1933 or any state securities law by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and such state laws,
(ii) this Warrant and the Common Stock issuable upon exercise hereof must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act and such state securities laws or is exempt from such
registration, (iii) this Warrant and the Common Stock issuable upon conversion
thereof will bear a legend to such effect, and (iv) the Company will make a
notation on its transfer books to such effect.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
(b) This Warrant may be amended or modified, and any provision hereof may
be waived, with and only with the written consent of the Company and the holder.
________________________________________________________________________________
ACCESS Radiology Corporation Page 3 of 4
Warrant
<PAGE>
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:_____________________________
Scott S. Sheldon--President
________________________________________________________________________________
ACCESS Radiology Corporation Page 4 of 4
Warrant
<PAGE>
Exhibit 1
to Form of Warrant
NOTICE OF EXERCISE
To ACCESS Radiology Corporation:
The undersigned, the holder of Common Stock Purchase Warrant No. of
--------
ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase ___________ shares of Common Stock of
the Company subject to such Warrant. The holder is delivering with this notice
the Warrant and payment of the aggregate exercise price of $__________ by
certified or official bank check or wire transfer as provided in the Warrant.
Signed:
__________________________________
Name of Holder:
__________________________________
Address:
__________________________________
__________________________________
<PAGE>
EXHIBIT 10.19
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.THE
WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE PROVISIONS OF A
SECURITIES PURCHASE AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS
OF XXXX, 1998, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON
FILE AT THE OFFICES OF THE CORPORATION.
ACCESS RADIOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
WARRANT NO.___ _______ SHARES DATE: __________, 1998
1. Right to Purchase; Exercise Price. (a) Subject to the terms and
----------------------------------
conditions set forth herein, the holder of this Warrant shall have the right to
purchase from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company
shall issue and sell to the holder, __________ (______) fully paid and non-
assessable shares of Common Stock of the Company at a price of $.01 per share
(the "Exercise Price"). The Exercise Price and the number of shares of Common
Stock issuable upon exercise of this Warrant are subject to adjustment as
provided in Section 3.
(b) This Warrant may be exercised in whole or in part on any business day
on or after the first to occur of (i) payment in full of the purchase price of
Series K Preferred Stock of the Company issuable to the initial holder of this
Warrant under the Securities Purchase Agreement pursuant to which this Warrant
was issued, or (ii) expiration of the period during which the Company may elect
to sell Series K Preferred Stock pursuant to such Securities Purchase Agreement
without the Company having made any such election. This Warrant will expire at
the close of business on May 31, 2008, after which this Warrant shall cease to
be exercisable; provided that if the initial holder of this Warrant shall breach
or default under its obligation to purchase securities of the Company under the
Securities Purchase Agreement under which this Warrant was issued, then this
Warrant shall, immediately upon such breach or default and without further
action by the Company or any other party, be void and of no effect.
2. Procedure For Exercise. (a) This Warrant shall be exercised by surrender
-----------------------
to the Company at its principal office of this Warrant, with the form of
election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. The holder may, in lieu of
<PAGE>
payment of the Exercise Price, authorize the Company to withhold from the shares
of Common Stock deliverable upon exercise a number of shares of Common Stock
having a Fair Market Value (as defined below) as of the date of notice of
exercise equal to the Exercise Price that would otherwise be payable. Upon
receipt of this Warrant, with the form of election to purchase set forth as
Exhibit 1 duly completed and executed by the holder, and (if applicable) payment
of the Exercise Price as provided above, the Company will promptly deliver to
the holder a certificate for the Common Stock issuable upon exercise, registered
in the name of the holder. For purposes of this Section 2(a), the "Fair Market
Value" of a share of Common Stock means the closing price per share of the
Common Stock on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading or, if not then listed or admitted
to trading on any such exchange, on the Nasdaq National Market, or if not then
listed or traded on any such exchange or system, the average of the bid and
offer price per share on Nasdaq, in each case averaged over the ten trading days
consisting of the day as of which the current fair market value of the Common
Stock is being determined and the nine consecutive business days prior to such
day. If at any time such quotations are not available, the Fair Market Value of
a share of Common stock shall mean the highest price per share that the Company
could obtain from a willing buyer (not a current employee or director) for
Common Stock sold by the Company, as determined in good faith by the Company,
unless (i) the Company shall become subject to a merger, acquisition or other
consolidation pursuant to which the Company is not the surviving party, in which
case the Fair Market Value of a share of Common Stock shall mean the value
received by the holders of the Company's Common Stock for each share of Common
Stock in such transaction; or (ii) the holder shall exercise this Warrant within
15 days prior to the closing date of the initial underwritten public offering of
the Common Stock registered under the Securities Act, in which case the Fair
Market Value of a share of Common Stock shall mean shall mean the price per
share at which Common Stock is sold in such offering.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Common Stock subject hereto, a new Warrant on the same
terms as this one shall be issued by the Company to the holder evidencing the
right to purchase those shares of Common Stock with respect to which this
Warrant remains unexercised.
(c) If any fractional share of Common Stock would be delivered upon
exercise, the Company may issue such fractional share or pay to the holder an
amount in cash equal to the fair market value of such fractional share as
determined in good faith by the Company.
3. Adjustments. (a) In case the Company shall at any time subdivide (by any
------------
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased.
-2-
<PAGE>
(b) If any merger or consolidation of the Company with or into any other
entity, any sale or other disposition of all or substantially all of the
Company's assets, or any capital reorganization or reclassification of the
capital stock of the Company shall be effected, in any such case in such a way
that holders of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such merger or consolidation, sale or other disposition of assets or
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock that would otherwise be receivable upon the exercise
of this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock that would
otherwise be receivable upon such exercise had such merger or consolidation,
sale or other disposition of all or substantially all assets or reorganization
or reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustment of the Exercise Price) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
(c) Upon each adjustment of the Exercise Price pursuant to paragraph (a) of
this Section 3, this Warrant shall, after such adjustment, represent the right
to purchase, at the adjusted Exercise Price, a number of shares of Common Stock
obtained by (i) multiplying the number of shares purchasable upon the exercise
of this Warrant prior to such adjustment by the Exercise Price in effect prior
to such adjustment and (ii) dividing the product so obtained by the Exercise
Price in effect after such adjustment.
(d) Upon any adjustment of the Exercise Price or the number of shares of
Common Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
(e) In case at any time prior to the expiration of the term of this
Warrant:
(1) the Company shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Company shall offer for subscription pro rata to the holders
--- ----
of its Common Stock any additional shares of stock of any class or other rights;
-3-
<PAGE>
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to the holder at the address of the holder as shown on the
books of the Company, (a) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(f) The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise in full of this Warrant. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Exercise
Price in effect at the time. The Company will not take any action which results
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
(g) As used in this Warrant, the term "Common Stock" shall mean and include
the Company's authorized Common Stock, par value $.01 per share, as constituted
on the date of this Warrant, and shall also include any capital stock of any
class of the Company thereafter authorized which shall neither be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; provided that the
-4-
<PAGE>
shares of Common Stock issuable upon exercise of this Warrant shall include only
shares designated as Common Stock of the Company on the date of this Warrant, or
in case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in paragraph 3(b).
4. Securities Laws. The holder understands that (i) this Warrant and the
----------------
Common Stock issuable upon exercise hereof have not been registered under the
Securities Act of 1933 or any state securities law by reason of their issuance
in a transaction exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act") and such state laws, (ii) this
Warrant and the Common Stock issuable upon exercise hereof must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and such state securities laws or is exempt from such
registration, (iii) this Warrant and the Common Stock issuable upon conversion
thereof will bear a legend to such effect, and (iv) the Company will make a
notation on its transfer books to such effect. Notwithstanding anything else
contained in the Warrant, this Warrant may not be exercised if such exercise
would result in a violation of federal or state securities laws; provided that,
notwithstanding the foregoing, if the Investor shall be an "Accredited Investor"
(as defined Regulation D under the Securities Act) at the time of exercise and
shall make written representations to the Company of appropriate facts to
determine such status, then the Investor may exercise this Warrant.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of Delaware.
(b) This Warrant is part of a series of warrants originally issued pursuant
to a Securities Purchase Agreement dated __, 1998 (the "Series K Warrants").
This Warrant may be amended or modified only with the written consent of the
Company and the holders of outstanding and unexercised Series K Warrants
exercisable for at least two thirds of all of the shares of Common Stock for
which all outstanding and unexercised Series K Warrants are then exercisable in
the aggregate. Any amendment or waiver effected with the written consent of the
Company and such holders shall be binding upon all holders of Series K Warrants.
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:________________________________
Scott S. Sheldon-President
-6-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To ACCESS Radiology Corporation:
The undersigned, the holder of Common Stock Purchase Warrant No.__ of
ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase ___________ shares of Common Stock of
the Company subject to such Warrant. Unless the "cashless exercise" box is
checked below, the holder is delivering with this notice the Warrant payment of
the aggregate exercise price of $__________ by certified or official bank check
or wire transfer as provided in the Warrant.
CHECK BOX BELOW FOR CASHLESS EXERCISE:
/ / By checking this box, the holder authorizes the Company, in lieu of
- -------
receiving payment of the Exercise Price, to withhold from the shares of Common
Stock deliverable hereunder a number of shares of Common Stock having a fair
market value (as defined in the Warrant) equal to the Exercise Price that would
otherwise be payable.
Signed:___________________________
Name of Holder:
Address:
-7-
<PAGE>
EXHIBIT 10.20
(Form of Preferred Stock Purchase Warrant)
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.
THIS WARRANT MAY NOT BE TRANSFERRED SEPARATELY FROM CONVERTIBLE UNSECURED NOTES
OF ACCESS RADIOLOGY CORPORATION. THE WARRANT REPRESENTED BY THIS INSTRUMENT IS
SUBJECT TO THE PROVISIONS OF A SECURITY HOLDER'S AGREEMENT DATED AS OF JUNE
_____, 1997, BY AND BETWEEN THE COMPANY AND THE HOLDER NAMED THEREIN, AS IT MAY
BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE OFFICES OF
ACCESS RADIOLOGY CORPORATION.
ACCESS RADIOLOGY CORPORATION
PREFERRED STOCK PURCHASE WARRANT
WARRANT NO.________ DATE:___________, 1997
1. Right to Purchase; Exercise Price. Subject to the terms and conditions
---------------------------------
set forth herein, the holder of this Warrant shall have the right to purchase
from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company shall issue
and sell to the holder, that number of fully paid and non-assessable shares of
Preferred Stock (as defined below) equal to the number of shares of Preferred
Stock that would be received by a purchaser in the Equity Financing (as defined
below) upon payment of an aggregate purchase price of $[30% OF HOLDERS NOTE] at
a price per share of Preferred Stock equal to the purchase price of a share of
Preferred Stock in the Equity Financing (the "Exercise Price"). This Warrant may
be exercised in whole or in part on any business day on or after the date of the
Closing of the sale of the Preferred Stock in the Equity Financing until the
close of business on June 30, 2002, after which this Warrant shall cease to be
exercisable. The Exercise Price and the amount and kind of securities issuable
upon exercise of this Warrant are subject to adjustment as provided in Section
3. This Warrant is one of a series of warrants to purchase the Preferred Stock
issued by the Company (collectively, the "Warrants"). "Equity Financing" means
the first issuance by the Company, after the date of this Warrant, of equity
securities for gross proceeds (including cash or cancellation of outstanding
indebtedness) of at least $3,500,000. An Equity Financing shall be deemed to
have completed on the first day that the aggregate level of $3,500,000 in gross
proceeds specified in the preceding sentence shall have been reached. "Preferred
Stock" shall mean securities having the same terms as those issued to investors
in the Equity Financing.
-1-
<PAGE>
2. Procedure for Exercise. (a) This Warrant shall be exercised by
----------------------
surrender to the Company at its principal office of this Warrant, with the form
of election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. Upon receipt of this Warrant, with the
form of election to purchase set forth as Exhibit 1 duly completed and executed
by the holder, and payment of the Exercise Price as provided above, the Company
will promptly deliver to the holder a certificate for the Preferred Stock
issuable upon exercise, registered in the name of the holder.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Preferred Stock subject hereto, a new Warrant shall be
issued by the Company to the holder evidencing the right to purchase those
shares of Preferred Stock with respect to which this Warrant remains
unexercised.
(c) Fractional shares of Preferred Stock shall be issued and delivered
upon the exercise of this Warrant, except that this Warrant may not be partially
exercised for any amount of Preferred Stock that includes fractional shares.
3. Adjustments. (a) In case the Company shall at any time after the
-----------
completion of the Equity Financing, subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Preferred Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Preferred Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.
(b) Upon each adjustment of the Exercise Price pursuant to paragraph (a)
of this Section 3, this Warrant shall, after such adjustment, represent the
right to purchase, at the adjusted Exercise Price, a number of shares of
Preferred Stock obtained by (i) multiplying the number of shares purchasable
upon the exercise of this Warrant prior to such adjustment by the Exercise Price
in effect prior to such adjustment and (ii) dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(c) Upon any adjustment of the Exercise Price or the number of shares of
Preferred Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
-2-
<PAGE>
(d) In case at any time:
(1) the Company shall declare any dividend upon its common stock
payable in cash or stock or make any other distribution to the holders of its
common stock;
(2) the Company shall offer for subscription pro rata to the holders
--- ----
of its common stock any additional shares of stock of any class or other rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to the holder at the address of the holder as shown on the
books of the Company, (a) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of common
stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of common stock
shall be entitled to exchange their common stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(e) From and after the completion of the Equity Financing, the Company
will at all times reserve and keep available, solely for the purpose of issuance
upon the exercise of this Warrant as herein provided, such number of shares of
Preferred Stock as shall then be issuable upon the exercise in full of this
Warrant. The Company covenants that all shares of Preferred Stock which shall
be so issued shall be duly and validly issued and fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, the Company covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Preferred Stock is at all times equal
to or less than the Exercise Price in effect at the time. The Company will not
take any action which results in any adjustment of the Exercise Price if the
total number of shares of Preferred Stock issued and issuable after such action
upon exercise of this Warrant would exceed the total number of shares of
Preferred Stock then authorized by the Certificate of Incorporation.
-3-
<PAGE>
(f) The Company covenants with the holder of this Warrant that the Company
shall give effect to any relevant provisions of the Certificate of Incorporation
of the Company relating to the Preferred Stock, commencing on the date of the
completion of the Equity Financing, so that upon conversion of any Preferred
Stock issued upon exercise of this Warrant the converting holder shall receive
the number of shares of common stock (or such other securities or assets) that
such holder would have received had such Preferred Stock been outstanding from
the date of the completion of the Equity Financing until the date of conversion.
Notwithstanding anything else contained in this Warrant, if the Preferred Stock
shall become automatically convertible into common stock pursuant to the terms
of the Certificate of Incorporation prior to the exercise of this Warrant, then
on and after the date of such event this Warrant shall be exercisable for, and
upon exercise the holder will receive, that number of shares of common stock
into which the Preferred Stock that would otherwise have been purchased upon
exercise would have been convertible on the date of such event.
(g) From and after the completion of the Equity Financing, the Company
will not amend the terms of the Preferred Stock in a manner adverse to holder of
Preferred Stock without the prior written consent of holders of a number of
shares of Preferred Stock, and/or holders of Warrants entitling the holders to
purchase a number of shares of Preferred Stock equal in the aggregate to at
least two-thirds of the aggregate number of shares of Preferred Stock that are
either then outstanding or then subject to purchase upon the exercise of
Warrants.
4. Restrictions on Transfer. (a) This Warrant may not be assigned,
pledged or otherwise transferred except upon the simultaneous transfer of
$10,000 in principal amount of Convertible Subordinated Notes of the Company for
every transfer of Warrants with an aggregate Exercise Price of $3,000.
(b) The holder understands that (i) this Warrant, the Preferred Stock
issuable upon exercise hereof, and any common stock issuable upon conversion of
the Preferred Stock, have not been registered under the Securities Act of 1933
or any state securities law by reason of their issuance in a transaction except
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") and such state laws, (ii) this Warrant, the Preferred
Stock issuable upon exercise hereof, and any common stock issuable upon
conversion of the Preferred Stock, must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and such state
securities laws or is exempt from such registration, (iii) this Warrant, the
Preferred Stock issuable upon exercise hereof, and any common stock issuable
upon conversion of the Preferred Stock, will bear a legend to such effect, and
(iv) the Company will make a notation on its transfer books to such effect.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
(b) This Warrant may be amended or modified, and any provision hereof may
be waived, with and only with the written consent of the Company and the holder.
-4-
<PAGE>
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:__________________________________
Scott S. Sheldon - President
-5-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To ACCESS RADIOLOGY CORPORATION
The undersigned, the holder of Preferred Stock Purchase Warrant No. _____
of ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase _____________ shares of Preferred Stock
of the Company subject to such Warrant. The holder is delivering with this
notice the Warrant and payment of the aggregate exercise price of
$_________________ by certified or official bank check or wire transfer as
provided in the Warrant:
Signed: ___________________________________
Name of Holder:
Address:
-6-
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 22, 1999, except
for the last paragraph of Note 7 which is as of August 10, 1999, relating to
the financial statements of eMed Technologies Corporation, which appears in
such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended December 31, 1998 listed
under Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included this schedule. We also consent to the
reference to us under the headings "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 18, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 9, 1999 relating
to the financial statements of E-Systems Medical Electronics (a division of
Raytheon E-Systems, Inc.) which appears in such Prospectus.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 18, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 JUN-30-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 2,259,052 5,117,591
<SECURITIES> 0 0
<RECEIVABLES> 5,413,289 6,639,914
<ALLOWANCES> 487,073 422,461
<INVENTORY> 2,011,410 961,823
<CURRENT-ASSETS> 9,527,319 12,610,001
<PP&E> 2,100,418 2,249,141
<DEPRECIATION> 1,109,237 1,433,114
<TOTAL-ASSETS> 11,506,326 13,559,439
<CURRENT-LIABILITIES> 10,775,699 8,037,217
<BONDS> 0 0
0 0
77,346 118,775
<COMMON> 11,656 12,532
<OTHER-SE> 299,211 5,180,751
<TOTAL-LIABILITY-AND-EQUITY> 11,506,326 13,559,439
<SALES> 11,299,756 9,793,624
<TOTAL-REVENUES> 12,594,167 11,369,401
<CGS> 7,223,230 4,698,982
<TOTAL-COSTS> 17,558,078 12,376,492
<OTHER-EXPENSES> 43,432 81,767
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 105,611 68,518
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,112,954) (1,157,376)
<EPS-BASIC> (4.88) (1.03)
<EPS-DILUTED> (4.88) (1.03)
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