<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1999
Registration No. 333-85481
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
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. [_]
----------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 SEPTEMBER , 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 also purchase up to an additional shares of common
stock from us to cover any over-allotment 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 systems that improve the process of
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 universal
accessibility to enable our customers to reduce costs and improve their
service. We introduced FrameWave Web in June 1999 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 individual 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 marketing information targeted at their
customers. In addition, we intend eMed_Web to serve as a platform for offering
products and services that further improve the workflow of medical imaging.
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 systems to health care providers by leveraging our advanced
technology and experience. Elements of our strategy to achieve this objective
include:
. Introducing our eMed_Web website development and hosting service.
. Bringing to market additional products and services for improving
medical imaging workflow.
1
<PAGE>
. 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:
. 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 judgments 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 with and insight into the workflow of
medical imaging, we have been able to focus our efforts on products and
services 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.
Until August 1999, we were 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.
eMed, FrameWave and PACSPro are trademarks of eMed Technologies Corporation.
AWARE is a trademark of AWARE, Inc. All other brand names or trademarks
appearing in this prospectus are the property of their respective owners.
2
<PAGE>
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. Upon completion of this offering, the
warrants to purchase Series J preferred stock will become warrants to
purchase 409,091 shares of common stock.
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 revenue 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.
Our senior management team consists of only seven individuals. 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 and we may not be able to
compete effectively. 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 market for products and services that improve the workflow of medical
imaging. 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. For additional information, please see the section
"Business -- Competition."
5
<PAGE>
We may be unable to sell new products and services to our installed user base,
which is a key part of our growth strategy.
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 user 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.
Our future growth may suffer if we do 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.
We may be unable to sell our planned eMed_Web service if our target customers
do not accept our subscription fee pricing model.
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.
Engaging in strategic acquisitions and relationships is a key part of our
strategy. 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,
6
<PAGE>
we will only receive the anticipated benefits if we successfully integrate the
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, Inc. for elements of our
technology for compressing large data files and our 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. For more information about our relationship with AWARE, please see
the section entitled "Business--Production."
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 cause customers
to decide not 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 cause customers to decide not to buy our products or services.
If our computer systems upon which we depend to provide our services 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.
7
<PAGE>
Fluctuations in our quarterly and annual results and any failure to meet market
expectations may adversely affect the price of our common stock.
Our operating results may fluctuate significantly on a quarterly basis due
to a variety of factors, including our plans to devote significant additional
financial resources to expand our business and to introduce our new eMed_Web
service. Other factors which may cause our operating results to fluctuate
include the size and timing of significant orders, variations in filling
orders, the demand for and market acceptance 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 our insurance coverage may not
be adequate to cover any claims.
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.
These intellectual property rights, which we rely upon to develop and
8
<PAGE>
maintain our competitive position, are important elements of our products and
services. We rely partly on unpatented trade secrets and know-how 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 generally require our employees,
contractors and consultants who may have access to our confidential
information, and parties to collaboration agreements to execute confidentiality
agreements to protect our unpatented trade secrets and other 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.
Our products include our proprietary intellectual property and intellectual
property rights licensed from others. 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.
In conducting our business, we rely on computer systems to manage our
business and to service our customers. Further, all of our products include
computer hardware and/or software components. 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;
. 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 a material 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 medical
images and related patient information to be made available to healthcare
professionals through 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 introduce new products or services if we fail 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. Approximately % of our total outstanding shares of common stock
will be freely tradable, subject to Securities Act rules, 180 days after the
date of this prospectus. 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.
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
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.
12
<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.
13
<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 $0.61 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. Upon completion of this offering, the warrants
to purchase Series J preferred stock will become warrants to purchase
409,091 shares of common stock.
14
<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 $0.61 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.
15
<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 June 30,
As of December 31, 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>
16
<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 that improve the process of
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 network management
services for systems that permit healthcare professionals to access, transmit
and review medical images at remote locations. 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.
Revenue from our recently introduced FrameWave Web product has not been
material to date. 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, generally 10% of the purchase price, 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.
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.
17
<PAGE>
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 the practice of selling the PACSPro product line at margins below
levels acceptable to us. We generally provide PACSPro products only to existing
users that wish to expand their systems. 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. We
achieved material cost reductions through our negotiations with suppliers and
by re-engineering our products to incorporate better and less expensive
components and sub-assemblies. Gross margin from service revenue 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.
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 personnel added 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.
18
<PAGE>
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 the
expansion of our sales force and related support staff. 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 increased personnel cost,
recruiting expense and facilities expense. 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
personnel added to continue the 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 primarily the result of our
sales force expansion. 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.
19
<PAGE>
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 increased personnel cost and facilities expenses. 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.
The increase in gross margin was attributable to an increase in the volume of
products sold. The decrease in gross margin as a percentage of revenue was
attributable to the fixed costs of establishing and operating a full-scale
assembly and test operation. 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. The incremental revenue generated from
service activities was offset by an increase in personnel related costs.
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
personnel added to continue the development of our FrameWave products. 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
sales force expansion. 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 increased personnel expenses. 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.
20
<PAGE>
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 primarily of net operating losses of $1.2 million and an
increase in accounts receivable of $1.3 million, offset in part by a decrease
in inventories. The increase in accounts receivable is attributable to the
increase in revenue and the decrease in inventory resulted from our ability to
liquidate inventory acquired as part of our acquisition of E-Systems Medical
Electronics. 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 a
decrease in prepaid expenses and other current assets of $513,000. The increase
in accounts receivable is attributable to the increase in revenue, and the
decrease in prepaid expenses and other current assets is attributable to a
reduction in prepaid software licenses. 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. The decrease in inventory is attributable to
improvements in the materials purchasing process and the decrease in other
current assets is attributable to a reduction in prepaid software licenses. The
increase in deferred revenue is primarily due to an increase in customer
deposits related to a single customer order. 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. These
increases are the result of the increased sales activity during the period.
Cash provided by investing activities for the six months ended June 30, 1999
of $569,000 consisted primarily of proceeds from the sale of non-core assets
that we acquired as part of the acquisition of E-Systems Medical Electronics,
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.
21
<PAGE>
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 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, Information Technology and Non-Information Technology Systems. We
have assessed all of our key financial, information technology and non-
information technology systems, and we believe that the actions required to
correct any non-compliant financial, information technology and non-information
technology systems have been completed. There can be no assurance that we have
identified all Year 2000 problems in these systems or that any necessary
corrective actions have been successfully completed.
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 have not received any responses that
indicate our networks and systems are vulnerable to such failures. 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 believe that all of our current
products are Year 2000 compliant and we have available upgrades for our fielded
legacy systems that represent the highest risk for Year 2000 non-compliance. We
have sent
22
<PAGE>
notices to known customers with appropriate information relative to Year 2000
non-compliance of these legacy systems, and instructions on how to contact us.
We have not and do not plan to evaluate the risks to us presented by
noncompliant fielded products. 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.
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 remediating any Year
2000 problems 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.
23
<PAGE>
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.
24
<PAGE>
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 individual 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 marketing information targeted at their customers. 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.
25
<PAGE>
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 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
26
<PAGE>
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.
27
<PAGE>
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.
28
<PAGE>
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,
third-party hardware, elements of third party software and our proprietary
software. Our flagship products and services described below are currently
marketed and sold under the FrameWave brand name. In addition, we market
PACSPro image acquisition devices which 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 can be
purchased from us individually or in larger configurations.
FrameWave 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. Our image acquisition devices that convert hard-
copy x-rays into digital form include high-resolution scanners and our
proprietary software. Others use our proprietary software to directly obtain
images from equipment that creates them in electronic format. 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. Diagnostic workstations
consist of two or more high resolution, grayscale monitors and a workstation
running proprietary image manipulation and display software. 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 a database management application for the
organization and retrieval of medical images. An archive permits 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 image and report management technology. With our
eMed_Web service, we intend to establish and manage individual customer
websites. Through these eMed_Web sites, our customers will be able
29
<PAGE>
to make available images and related patient information remotely over the
internet. Health care professionals, including radiologists, will be able to
access these images and information with authorizing passwords. Also, eMed_Web
sites will provide customers the opportunity to incorporate other clinically
relevant information and marketing information targeted at their customers. In
addition, we intend eMed_Web to serve as a platform from which we can offer
additional workflow solutions and other information of interest to health care
professionals. The servers that will host the eMed_Web sites will be located at
customer sites and supported from our headquarters in Lexington, Massachusetts.
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 engineers, application
specialists and clinical coordinators. 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. Because of this certification, training provided by our
employees satisfies three hours of required continuing education certification.
The average time from the beginning of installation through acceptance testing
is less than two weeks.
We outsource a portion of the on-site installation, training and repair
services described above to third party contractors as well as our independent
sales and service organizations.
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 on-
site service to customers under our supervision. These services include
installation, training and on-site repair.
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.
30
<PAGE>
The core technology employed in our internet application is what is referred
to as dynamic HTML, which is integrated with our 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 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.
Production
Most of our products include some hardware components, our proprietary
software, and software licensed from others. All of the hardware components of
our products are acquired from third parties. We assemble and test components
and sub-assemblies acquired from vendors, and integrate our proprietary and
licensed application software programs. We operate under FDA Good Manufacturing
Practices rules, and we have registered with the FDA as a medical device
manufacturer. We have elected to rely on a limited number of suppliers for
certain components in order to achieve more advantageous pricing through
increased volume. However, we believe that additional suppliers are available
for our hardware components.
Our licensing agreement with AWARE regarding jointly developed web server
technology provides that we will have exclusive rights to this technology for
medical use through its termination on December 31, 2005 and have non-exclusive
rights for a period following termination. This agreement also provides that,
until the same date, AWARE will be our exclusive supplier of web-based image
viewing and distribution software for use in our products. We have agreed to
pay license fees to AWARE based upon the sales we make to our customers. We
have agreed to devote resources to marketing, support and further development
of our web product, and AWARE has agreed to devote engineering resources to
develop new features, applications and technology at our request. The web
server technology agreement provides that AWARE will have exclusive rights to
this technology for non-medical use, and will make royalty payments to us for
any licenses granted by AWARE to customers for non-medical use.
We license compression technology from AWARE under a separate agreement that
provides that we will have rights to this technology for medical use on a non-
exclusive basis through December 31, 2004. We have agreed to pay license fees
for compression technology to AWARE based upon the sales we make to our
customers.
Our licensing agreement for our image viewing software expires on March 31,
2000. Other software included in our products is licensed under a long-term
agreement which terminates on December 31, 2004. Both of these agreements
provide for payment of license fees based upon the number of copies of the
software
31
<PAGE>
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. If any of these agreements
expire or are terminated, we believe we would be able to obtain suitable
replacement vendors or internally develop substitute software.
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, contractors and consultants who may have access to our confidential
information, 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.
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, including internet-based
products. 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 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.
32
<PAGE>
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, which has
been minimal to date, 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.
Properties
We maintain our headquarters and assembling facility in approximately 25,500
square feet of leased space in Lexington, Massachusetts. We also maintain a
sales and service facility in approximately 8,000 square feet of 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 its Private Equity Division. 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................ $160,500 400,000 $ 1,538(3)
Chief Executive Officer and
President
Howard Pinsky................... $136,800 300,000 $ 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 10,000 $ 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>
Compensation Committee Interlocks and Insider Participation
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 Health
Sciences Fund, which holds more than 5% of our common stock and for which
Thomas Neff, our director, has management authority, 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.
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 related persons received warrants to purchase 204,545
shares of Series J preferred stock at an exercise price of $1.10 per share in
connection with their commitment to purchase $750,000 in principal amount of
the convertible subordinated notes. These convertible notes were converted into
691,240 shares of Series J preferred 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 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 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.
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 and Delphi Bioinvestments purchased 178,571 shares of Series K
38
<PAGE>
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.
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 beginning in April 1999. 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 other events which would constitute a constructive termination
without cause, 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 beginning in April 1999. 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 other events which would constitute a constructive termination
without cause, 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.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth 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 an affiliated 3,181,083 15.8% %
entity(10)...................................
15635 Alton Parkway, Suite 230
Irvine, CA 92618
Seaflower BioVenture Fund II, LLC and an af- 1,455,749 7.1% %
filiated entity(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
40
<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, may be deemed to share voting and dispositive
power with respect to the shares listed above and 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.
41
<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.
. 97,888 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.
. 95,937 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 Jason Rosenbluth upon the exercise of options
exercisable within 60 days of August 17, 1999.
All of the partnerships listed above are managed by Bedrock General Partner
I, LLC. Bedrock Capital Partners I shares voting and dispositive power over
the shares held by Mr. Rosenbluth pursuant to contractual arrangements and
therefore may be considered the beneficial owner of these shares.
(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.
. An aggregate of 254,534 shares held by, and 6,650 shares issuable to
upon the exercise of warrants exercisable within 60 days of August 17,
1999 William T. Burgin, Neill H. Brownstein, Robert H. Buescher, G.
Felda Hardymon, Christopher Gabrieli, the Gabrieli Family Foundation,
Michael I. Barach, David J. Cowan, Bruce K. Graham, Ravi B. Mhatre,
Gautam A. Prakash, Robi L. Soni, Joanna A. Strober, Craighall
Corporation, Richard R. Davis, Conaly Partners, Lindsay 1994 Family
Partnership, L.P., Rothfeld 1994 Family Partnership, L.P., John G.
MacDonald, Howard S. Markowitz, Edward Park, Robert J.S. Roriston,
Steven L. Williamson, and Woods 1994 Family Partnership, L.P.
Deer IV & Co. LLC is the general partner of each of the partnerships listed
in the first four paragraphs of this footnote. The individuals and entities
listed in the fifth paragraph of this footnote are managers, members,
former members or employees of, or otherwise associated with, Deer IV &
Co., Deer II & Co. LLC (a company engaging in activities similar to those
of Deer IV & Co.) or Bessemer Securities Corporation, or entities in which
such persons hold beneficial interests. Bessemer Securities Corporation and
its related entities comprise the limited partners of Bessemer Venture
Partners IV and Bessec Ventures IV. The limited partners of BVP IV Special
Situations are non-employee directors of Bessemer Securities Corporation.
Pursuant to the rules of the Securities and Exchange Commission, each of
the above individuals and entities may be deemed to be members of a group.
42
<PAGE>
(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.
PVG Equity Partners, L.L.C. is the general partner of both of the
partnerships listed above.
(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.
James Sherblom is the general manager of both of the limited liability
companies listed above.
(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.
43
<PAGE>
CERTAIN TRANSACTIONS
In addition to the transactions described under "Compensation Committee
Interlocks and Insider Participation" the following describes transactions in
which our directors and principal shareholders have participated.
Series G Preferred Stock
In 1996, 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.
Series K Preferred Stock
Pursuant to their July 1998 commitments, in January 1999 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.
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. As of August 17, 1999, options
were outstanding which are exercisable for 4,145,694 shares of common stock at
a weighted average exercise price of $0.65 per share. Also as of August 17,
1999, there were outstanding 1,289,815 warrants to purchase common stock and
409,091 warrants to purchase Series J preferred stock at exercise prices from
$0.01 to $1.10 per share. Upon the closing of this offering, the warrants to
purchase Series J preferred stock will become warrants to purchase 409,091
shares of common stock. Also, as of August 17, 1999, 657,991 additional shares
of our common stock had been reserved for issuance under our stock plans.
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.
45
<PAGE>
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
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
46
<PAGE>
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. 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.
Classified Board of Directors. Our amended and restated certificate of
incorporation provides that our board of directors shall be divided into three
classes which serve staggered three-year terms (after their initial terms). As
a result of this classification, no more than one third of the board of
directors will be elected each year. This may make it more difficult for an
acquiring party to take control of the board of directors.
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 18,365,352 will be available for sale in the public market 180 days
after the date of this prospectus. Of those shares, 6,432,130 will be available
pursuant to Rule 144(k) and 159,117 will be available pursuant to Section 701.
The sale of restricted securities is subject, in the case of shares held by
affiliates and shares held by non-affiliates for between one and two years, 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.
Registration Rights
We have entered into two agreements with groups of holders of approximately
14,824,567 shares of our common stock that entitle those holders to require us
to register their shares for resale under the Securities Act of 1933.
Under the agreement with holders of our Series J preferred stock, holders of
at least 30% of the common stock issued on conversion of the Series J preferred
stock can require us to register the sale of their common stock two separate
times. We only must register those shares if they would have an aggregate
offering price of at least $15 million and if the request is made after 180
days following the effective date of this prospectus. After we have satisfied
the requirements for using the shorter S-3 registration form, holders offering
to sell at least $500,000 of common stock can require us to register their
common stock on that form. We would not be required to file more than two of
these registrations in any 12 month period. These holders also have the right
to require us to include their shares in any future registered offering of
securities by us, subject to market conditions.
Under our other registration rights agreement, other holders of our equity
securities have rights similar to those described in the previous paragraph.
However, this agreement provides that if in any registered offering, shares
must be excluded from the offering because of marketing factors, shares covered
by this agreement will be excluded before any shares issuable on conversion of
the Series J preferred stock are excluded.
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 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. eMed accrues the estimated costs to be
incurred in connection with product warranty upon product shipment.
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. The restructuring
plan consists of the sale of certain monitor inventory and the exit of related
activities and a reduction in acquired headcount. eMed has terminated the
direct sales activity of the acquired company and discontinued shipping and
manufacturing certain acquired product lines. From the date of acquisition
through December 31, 1998, eMed has paid approximately $76,000 of the planned
costs which related solely to severance payments. As of June 30, 1999, eMed has
paid approximately $331,000 of the planned costs which is comprised of $73,000
of other exit costs and $258,000 of severance and other employee related costs.
The remaining reserve of $81,000 at June 30, 1999 is related to the settlement
of certain employment agreements and is expected to be paid in December 1999.
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>
F-10
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
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 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
F-11
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
borrowings of $583,252 under the Equipment Facility converted to a three-year
term loan payable in 36 monthly installments of principal and interest.
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
============ ============
Supplemental cash flow disclosure:
</TABLE>
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.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 25
Management............................................................... 34
Certain Transactions..................................................... 44
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.**
10.21 Web Software Licensing and Development Agreement dated as of September
10, 1999 between the Registrant and AWARE, Inc.***
10.22 Software Licensing and Development Agreement dated as of May 30, 1997
between the Registrant and AWARE, Inc.***
10.23 Amended and Restated Reseller Agreement dated as of May 30, 1997
between the Registrant and ISG Technologies, Inc.***
10.24 Amendment No. 1 to Amended and Restated Reseller Agreement dated as of
April 30, 1998 between the Registrant and ISG Technologies, Inc.***
10.25 Letter Agreement dated as of December 29, 1998 between the Registrant
and ISG Technologies, Inc.***
10.26 Access Radiology Corporation Confidentiality Agreement dated as of
March 31, 1995 between the Registrant and ISG Technologies, Inc.
10.27 OEM Development Software Agreement dated as of November 9, 1995
between the Registrant and Mitra Imaging Incorporated.***
10.28 Amendment to OEM Development Software Agreement dated as of May 20,
1995 between the Registrant and Mitra Imaging Incorporated.***
10.29 Amendment to OEM Development Software Agreement dated as of April 28,
1999 between the Registrant and Mitra Imaging Incorporated.***
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
**Previously Filed
*** Portions have been omitted pursuant to a request for confidential treatment
dated September 10, 1999
II-3
<PAGE>
(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.
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
10th day of September 1999.
eMed Technologies Corporation
/s/ Scott S. Sheldon
By: _________________________________
Scott S. Sheldon
Chief Executive Officer and
President
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 September 10, 1999
______________________________________ Officer and Director
Scott S. Sheldon
/s/Gary A. Lortie Chief Financial Officer September 10, 1999
______________________________________
Gary A. Lortie
* Director September 10, 1999
______________________________________
James J. Bochnowski
* Director September 10, 1999
______________________________________
Thomas B. Neff
* Director September 10, 1999
______________________________________
Thomas O. Pyle
* Director September 10, 1999
______________________________________
Michael Schmertzler
* Director September 10, 1999
______________________________________
Donald E. Strange
</TABLE>
By: /s/ Gary A. Lortie
-----------------------------
Attorney in fact
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.**
10.21 Web Software Licensing and Development Agreement dated as of September
10, 1999 between the Registrant and AWARE, Inc.
10.22 Software Licensing and Development Agreement dated as of May 30, 1997
between the Registrant and AWARE, Inc.***
10.23 Amended and Restated Reseller Agreement dated as of May 30, 1997
between the Registrant and ISG Technologies, Inc.***
10.24 Amendment No. 1 to Amended and Restated Reseller Agreement dated as of
April 30, 1998 between the Registrant and ISG Technologies, Inc.***
10.25 Letter Agreement dated as of December 29, 1998 between the Registrant
and ISG Technologies, Inc.***
10.26 Access Radiology Corporation Confidentiality Agreement dated as of
March 31, 1995 between the Registrant and ISG Technologies, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.27 OEM Development Software Agreement dated as of November 9, 1995
between the Registrant and Mitra Imaging Incorporated.***
10.28 Amendment to OEM Development Software Agreement dated as of May 20,
1995 between the Registrant and Mitra Imaging Incorporated.***
10.29 Amendment to OEM Development Software Agreement dated as of April 28,
1999 between the Registrant and Mitra Imaging Incorporated.***
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
**Previously Filed
*** Portions have been omitted pursuant to a request for confidential treatment
dated September 10, 1999.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
eMED TECHNOLOGIES CORPORATION
Scott S. Sheldon and Christine Chung hereby certify that:
A. They are the duly elected and acting President and Secretary, respectively,
of eMed Technologies Corporation, a Delaware corporation.
B. The original name of this corporation is Teleradiology Services
Incorporated and the date of filing the original Certificate of Incorporation of
this corporation with the Secretary of State of the State of Delaware is March
17, 1992.
C. The Certificate of Incorporation of this corporation is hereby amended and
restated to read as follows:
1. CORPORATE NAME.
The name of the corporation is eMed Technologies Corporation (the
"Company").
2. REGISTERED AGENT.
The address of the registered office of the Company in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, New Castle County,
Delaware 19805. The name of the Company's registered agent at said address is
Corporation Service Company.
3. CORPORATE PURPOSE.
The purpose of the Company is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware.
4. CAPITAL STOCK
4.1 Authorized Stock. This Company is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares that the Company is authorized to issue is 50,000,000
shares, 35,000,000 shares of which will be Common Stock (the "Common Stock") and
15,000,000 shares of which will be Preferred Stock. The Preferred Stock will
have a par value of $0.01 per share and the Common stock will have a par value
of $0.01 per share.
4.2 Undesignated Preferred Stock. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby
authorized, within the
<PAGE>
limitations and restrictions stated in this Restated Certificate of
Incorporation, to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, the liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series will be so decreased, the shares
constituting such decrease will resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
5. BYLAWS.
The Board of Directors will have the power to adopt, amend or repeal the
bylaws of the Company, subject to any consent or approval that may be required
by the terms of any Preferred Stock.
6. ELECTIONS OF DIRECTORS.
Election of directors need not be by written ballot unless the bylaws of
the Company so provide. Except as otherwise provided in this Restated
Certificate of Incorporation, the directors shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible. One class shall originally serve for a term
expiring a the annual meeting of stockholders to be held in 2000, another class
shall originally serve for a term expiring at the annual meeting of stockholders
to be held in 2001, and another class shall originally serve for a term expiring
at the annual meeting of stockholders to be held in 2002, with each member of
each class to hold office until a successor is elected and qualified. At each
annual meeting of stockholders of the Company and except as otherwise provided
in this Restated Certificate of Incorporation, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office for
a term of three years. Notwithstanding any other provisions of this Restated
Certificate of Incorporation or the bylaws of the Company, the provisions of
this Section 6 may not be altered, amended or repealed in any respect, nor may
any provision inconsistent therewith be adopted, unless such alteration,
amendment, repeal or adoption is approved by the affirmative vote of at least
75% of the combined voting power of the then outstanding shares of the Company's
capital stock entitled to vote generally, voting together as a single class.
7. LIMITATION ON LIABILITY; INDEMNITY.
7.1 Liability. A director of the Company will not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by Delaware law.
-2-
<PAGE>
7.2 Indemnity.
(a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, will be
indemnified and held harmless by the Company to the fullest extent permitted by
Delaware law; provided, however, that the foregoing will not require the Company
to indemnify or advance expenses to any person in connection with any action,
suit, proceeding, claim or counterclaim initiated by or on behalf of such
person. The right to indemnification conferred in this Section 7.2 will include
the right to be paid by the Company the expenses incurred in connection with any
such proceeding in advance of its disposition to the fullest extent permitted by
Delaware law. The right to indemnification conferred in this Section 7.2 will be
a contract right. Any person seeking indemnification under this Section 7.2 will
be deemed to have met the standard of conduct required for indemnification
unless the contrary will be established.
(b) The Company may, by action of its Board of Directors, provide
indemnification to such of the employees and agents of the Company to such
extent and to such effect as the Board of Directors will determine to be
appropriate and permitted by Delaware law.
(c) The Company will have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his or her status
as such, whether or not the Company would have the power to indemnify such
person against such liability under Delaware law.
(d) The rights and authority conferred in this Section 7 will not be
exclusive of any other right which any person may otherwise have or hereafter
acquire.
(e) Neither the amendment nor repeal of this Section 7, nor the
adoption of any provision of the Restated Certificate of Incorporation or the
bylaws of the Company, nor, to the fullest extent permitted by Delaware law, any
modification of law, will eliminate or reduce the effect of this Section 7 in
respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
8. AMENDMENTS.
-3-
<PAGE>
The Company reserves the right to amend this Restated Certificate of
Incorporation in any manner permitted by Delaware law.
9. BOOKS.
The books of the Company may (subject to any statutory requirements) be
kept outside the State of Delaware as may be designated by the board of
directors or in the by-laws of this corporation.
10. ACTION BY CONSENT.
If at any time the Company shall have a class of stock registered pursuant
to the provisions of the Securities Exchange Act of 1934, for so long as such
class is so registered, any action by the stockholders of such class must be
taken at an annual or special meeting of stockholders and may not be taken by
written consent.
D. This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Company.
E. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Company. A majority of the outstanding shares of Common
Stock and at least 2/3 of the outstanding shares of each outstanding series of
Preferred Stock approved this Amended and Restated Certificate of Incorporation
by written consent in accordance with Section 228 of the General Corporation Law
of the State of Delaware and written notice of such was given by the Company in
accordance with said Section 228.
-4-
<PAGE>
The Company has caused this Amended and Restated Certificate of
Incorporation to be signed by the President and the Secretary in Lexington,
Massachusetts, this __ day of ______________, 1999.
eMED TECHNOLOGIES CORPORATION
By:_____________________________________
Name: Scott S. Sheldon
Title: President
ATTEST:
By:_______________________________
Name: Christine Chung
Title: Secretary
-5-
<PAGE>
EXHIBIT 3.2
eMed Technologies Corporation
* * * * *
BY-LAWS
* * * * *
ARTICLE 1
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall be
-----------------
held at such place within or without the State of Delaware as may be fixed from
time to time by the board of directors or the chief executive officer, or if not
so designated, at the registered office of the corporation.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
--------------
on the 1st Monday in May in each year if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 10:00 a.m., or at such other
date and time as shall be designated from time to time by the board of directors
or the chief executive officer, at which meeting the stockholders shall elect by
a plurality vote a board of directors and shall transact such other business as
may properly be brought before the meeting. If no annual meeting is held in
accordance with the foregoing provisions, the board of directors shall cause the
meeting to be held as soon thereafter as convenient, which meeting shall be
designated a special meeting in lieu of annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the board of directors, the chairman
of the board of directors or the chief executive officer and shall be called by
the chief executive officer or secretary at the request in writing of a majority
of the members of the board of directors, or at the request in writing of
stockholders owning at least 20% in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote, provided that a special
meeting called at the request of stockholders shall be held not sooner than 90
days after delivery of a request otherwise complying with this Section. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
------------------
written notice of each meeting of stockholders, annual or special, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is
<PAGE>
called, shall be given not less than ten or more than sixty days before the date
of the meeting, to each stockholder entitled to vote at such meeting.
Section 5. Voting List. The officer who has charge of the stock ledger
-----------
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city or town where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority in amount of the stock
------
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute, the certificate of incorporation or these by-laws. Where a separate
vote by a class or classes is required, a majority of the outstanding shares of
such class or classes, present or in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
Section 7. Adjournments. Any meeting of stockholders may be adjourned
------------
from time to time to any other time and to any other place at which a meeting of
stockholders may be held under these by-laws, which time and place shall be
announced at the meeting, by a majority of the stockholders present in person or
represented by proxy at the meeting and entitled to vote, though less than a
quorum, or, if no stockholder is present or represented by proxy, by any officer
entitled to preside at or to act as secretary of such meeting, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 8. Action at Meetings. When a quorum is present at any meeting,
------------------
the vote of holders of capital stock of the corporation representing a majority
in voting power of the stock present in person or by proxy and entitled to vote
on the matter shall decide any matter brought before such meeting, unless the
matter is one upon which by express provision of law, the certificate of
incorporation or these by-laws, a different vote is required, in which case such
express provision shall govern and control the decision of such matter.
-2-
<PAGE>
Section 9. Voting and Proxies. Unless otherwise provided in the
------------------
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each stockholder entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. Action Without Meeting. Unless otherwise provided in the
----------------------
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be (1) signed and dated by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and (2) delivered to the
corporation within sixty days of the earliest dated consent by delivery to its
registered office in the State of Delaware (in which case delivery shall be by
hand or by certified or registered mail, return receipt requested), its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent be given to those stockholders who have
not consented in writing.
Section 11. Annual Meetings. At an annual meeting of the stockholders,
---------------
only such business shall be conducted as shall have been properly brought before
the meeting as (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a stockholder
by the stockholder giving timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the corporation: (1) not less than 60 days in
advance of such meeting if such meeting is to be held on a day which is within
30 days preceding the anniversary of the previous year's annual meeting or 90
days in advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (2) with respect to any
other annual meeting of stockholders, on or before the close of business on the
15th day following the earliest date of public disclosure of the date of such
meeting. For purposes of this section, the date of public disclosure of a
meeting shall include, but not be limited to, the date on which disclosure of
the date of the meeting is made in a press release reported by the Dow Jones
News Services, Associated Press or a comparable national news service, or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) (or the rules and regulations
thereunder) of the Securities Exchange Act of 1934, as amended. A stockholder's
notice to the secretary shall set forth as
-3-
<PAGE>
to each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name, age and business and residential address, as they appear on the
corporation's records, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in the by-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth herein. The chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions hereof and if the
chairman should so determine, the chairman shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
Nominations. Subject to the rights of any class or series of stock having
-----------
a preference over the common stock as to dividends or upon liquidation to elect
directors under specified circumstances, nominations for the election of
directors may be made by the board of directors or a committee appointed by the
board of directors or by any stockholder entitled to vote in the election of
directors generally. However, any stockholder entitled to vote in the election
of directors generally may nominate one or more persons for election as director
at a meeting only if timely written notice of such stockholder's intent to make
such nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the secretary of the corporation. To be
timely, a stockholder's notice must be received at the principal executive
offices of the corporation: (1) not less than 60 days in advance of such
meeting if such meeting is to be held on a day which is within 30 days preceding
the anniversary of the previous year's annual meeting or 90 days in advance of
such meeting if such meeting is to be held on or after the anniversary of the
previous year's annual meeting; and (2) with respect to any other annual meeting
of stockholders, on or before the close of business on the 15th day following
the earliest date of public disclosure of the date of such meeting. For
purposes of this section, the date of public disclosure of a meeting shall
include, but not be limited to, the date on which disclosure of the date of the
meeting is made in a press release reported by the Dow Jones News Services,
Associated Press or a comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) (or the rules and regulations thereunder) of the
Securities Exchange Act of 1934, as amended. Each such notice shall set forth:
(a) the name, age and business and residential address of the stockholder who
intends to make the nomination and of the person or persons to be nominated; (b)
a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the board of directors;
and (e)
-4-
<PAGE>
the written consent of each nominee to serve as a director of the corporation if
so elected. The chairman of the meeting shall refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.
Section 12. Inspectors. The directors or the person presiding at the
----------
meeting may, and shall if required by applicable law, appoint one or more
inspectors of election and any substitute inspectors to act at the meeting or
any adjournment thereof. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them.
ARTICLE 2
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The number of
------------------------------------------
directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of directors shall be determined by resolution of
the board of directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. Except as otherwise provided in the Restated
Certificate of Incorporation, the directors shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible. One class shall originally serve for a term
expiring a the annual meeting of stockholders to be held in 2000, another class
shall originally serve for a term expiring at the annual meeting of stockholders
to be held in 2001, and another class shall originally serve for a term expiring
at the annual meeting of stockholders to be held in 2002, with each member of
each class to hold office until a successor is elected and qualified, or until a
director's earlier removal or resignation. At each annual meeting of
stockholders of the Company and except as otherwise provided in this Restated
Certificate of Incorporation, the successors of the class of directors whose
term expires at that meeting shall be elected to hold office for a term of three
years. Directors need not be stockholders.
Section 2. Enlargement. The number of the board of directors may be
-----------
increased at any time by vote of a majority of the directors then in office.
-5-
<PAGE>
Section 3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. In the
event of a vacancy in the board of directors, the remaining directors, except as
otherwise provided by law or these by-laws, may exercise the powers of the full
board until the vacancy is filled.
Section 4. Resignation and Removal. Any director may resign at any time
-----------------------
upon written notice to the corporation at its principal place of business or to
the chief executive officer or secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Any director or the entire board of directors
may be removed, only with cause, by the holders of two-thirds of the shares then
entitled to vote at an action of directors, unless otherwise specified by law or
the certificate of incorporation.
Section 5. General Powers. The business and affairs of the corporation
--------------
shall be managed by its board of directors, which may exercise all powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 6. Chairman of the Board. If the board of directors appoints a
---------------------
chairman of the board, he shall, when present, preside at all meetings of the
board of directors. He shall perform such duties and possess such powers as are
customarily vested in the office of the chairman of the board or as may be
vested in him by the board of directors.
Section 7. Place of Meetings. The board of directors may hold meetings,
-----------------
both regular and special, either within or without the State of Delaware.
Section 8. Regular Meetings. Regular meetings of the board of directors
----------------
may be held without notice at such time and at such place as shall from time to
time be determined by the board; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting of the board of directors may be held without notice
immediately after and at the same place as the annual meeting of stockholders.
Section 9. Special Meetings. Special meetings of the board may be called
----------------
by the chief executive officer, secretary, chairman, three or more directors or
by one director in the event that there is only one director in office. Two
days' notice to each director, either personally or by telegram, cable,
telecopy, commercial delivery service, telex or similar means sent to his
business or home address, or by mail upon receipt, shall be given to each
director
-6-
<PAGE>
by the secretary or by the officer or one of the directors calling the meeting.
A notice or waiver of notice of a meeting of the board of directors need not
specify the purposes of the meeting.
Section 10. Quorum, Action at Meeting, Adjournments. At all meetings of
---------------------------------------
the board a majority of directors then in office shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by law or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, a majority of the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Action by Consent. Unless otherwise restricted by the
-----------------
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 12. Telephonic Meetings. Unless otherwise restricted by the
-------------------
certificate of incorporation or these by-laws, members of the board of directors
or of any committee thereof may participate in a meeting of the board of
directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. Committees. The board of directors may, by resolution passed
----------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in subsection (a) of Section 151 of the General Corporation Law of
the State of Delaware, fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation, or the conversion into, or the exchange of such
shares for, shares of any other class or series or any other series of the same
or any other class or classes of any other stock of the corporation or
-7-
<PAGE>
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation; and, unless the
resolution designating such committee or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and make such reports to the board of directors
as the board of directors may request. Except as the board of directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these by-laws for the conduct of its business by the board of
directors.
Section 14. Compensation. Unless otherwise restricted by the certificate
------------
of incorporation or these by-laws, the board of directors shall have the
authority to fix from time to time the compensation of directors. The directors
may be paid their expenses, if any, of attendance at each meeting of the board
of directors and the performance of their responsibilities as directors and may
be paid a fixed sum for attendance at each meeting of the board of directors
and/or a stated salary as director. No such payment shall preclude any director
from serving the corporation or its parent or subsidiary corporations in any
other capacity and receiving compensation therefor. The board of directors may
also allow compensation for members of special or standing committees for
service on such committees.
ARTICLE 3
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen
-----------
by the board of directors and shall be a president, a secretary and a treasurer
and such other officers with such titles, terms of office and duties as the
board of directors may from time to time determine, including a chairman of the
board, one or more vice-presidents, and one or more assistant secretaries and
assistant treasurers. If authorized by resolution of the board of directors, the
chief executive officer may be empowered to appoint from time to time assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
Section 2. Election. The board of directors at its first meeting after
--------
each annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers
-8-
<PAGE>
may be appointed by the board of directors at such meeting, at any other
meeting, or by written consent.
Section 3. Tenure. The officers of the corporation shall hold office until
------
its successors are chosen and qualify, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation or
removal. Any officer elected or appointed by the board of directors or by the
chief executive officer may be removed at any time by the affirmative vote of a
majority of the board of directors or a committee duly authorized to do so,
except that any officer appointed by the chief executive officer may also be
removed at any time by the chief executive officer. Any vacancy occurring in any
office of the corporation may be filled by the board of directors, at its
discretion. Any officer may resign by delivering his handwritten resignation to
the corporation at its principal place of business or to the chief executive
officer or the secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Section 4. President. The president shall be the chief operating officer
---------
of the corporation. He shall also be the chief executive officer unless the
board of directors otherwise provides. The president shall, unless the board of
directors provides otherwise in a specific instance or generally, preside at all
meetings of the stockholders and, in the chairman's absence, the board of
directors, have general and active management of the business of the corporation
and see that all orders and resolutions of the board of directors are carried
into effect. The president shall execute bonds, mortgages, and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
Section 5. Vice-Presidents. In the absence of the president or in the
---------------
event of his inability or refusal to act, the vice-president, or if there be
more than one vice-president, the vice-presidents in the order designated by the
board of directors or the chief executive officer (or in the absence of any
designation, then in the order determined by their tenure in office) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The vice-
presidents shall perform such other duties and have such other powers as the
board of directors or the chief executive officer may from time to time
prescribe.
Section 6. Secretary. The secretary shall have such powers and perform
---------
such duties as are incident to the office of secretary. He shall maintain a
stock ledger and prepare lists of stockholders and their addresses as required
and shall be the custodian of corporate records. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be for that purpose and shall perform like duties for
the
-9-
<PAGE>
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be from time to time
prescribed by the board of directors or chief executive officer, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. The assistant secretary, or if there be
---------------------
more than one, the assistant secretaries in the order determined by the board of
directors, the chief executive officer or the secretary (or if there be no such
determination, then in the order determined by their tenure in office), shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors,
the chief executive officer or the secretary may from time to time prescribe. In
the absence of the secretary or any assistant secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary or acting secretary to keep a record of the meeting.
Section 8. Treasurer. The treasurer shall perform such duties and shall
---------
have such powers as may be assigned to him by the board of directors or the
chief executive officer. In addition, the treasurer shall perform such duties
and have such powers as are incident to the office of treasurer. The treasurer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the chief executive officer and the board of
directors, when the chief executive officer, chairman or board of directors so
requires, an account of all his transactions as treasurer and of the financial
condition of the corporation.
Section 9. Assistant Treasurers. The assistant treasurer, or if there
--------------------
shall be more than one, the assistant treasurers in the order determined by the
board of directors, the chief executive officer or the treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors, the chief executive officer or the treasurer may from time to time
prescribe.
-10-
<PAGE>
Section 10. Bond. If required by the board of directors, any officer
----
shall give the corporation a bond in such sum and with such surety or sureties
and upon such terms and conditions as shall be satisfactory to the board of
directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of or of the
--------
certificate of incorporation or these by-laws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
Section 2. Waiver of Notice. Whenever any notice is required to be given
----------------
under the provisions of law or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation. The
--------------------------------------------------------
corporation shall indemnify any person who was threatened or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
-11-
<PAGE>
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceedings, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
---- ----------
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding the foregoing, the corporation shall not indemnify
any agent of the corporation in any action, suit or proceeding arising from such
agent's own negligence.
Section 2. Actions by or in the Right of the Corporation. The corporation
---------------------------------------------
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
Section 3. Success on the Merits. To the extent that any person described
---------------------
in Section 1 or 2 of this Article V has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1 or
----------------------
2 of this Article V (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of any person as described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of
-12-
<PAGE>
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders of the corporation.
Section 5. Advance Payment. Expenses incurred in defending a civil or
---------------
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any person described in said Section to repay
such amount if it shall ultimately be determined that he is not entitled to
indemnification by the corporation as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement of
---------------
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The board of directors may authorize the
---------
corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article V.
Section 8. Continuation of Indemnification and Advancement of Expenses.
-----------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9. Severability. If any word, clause or provision of this Article
------------
V or any award made hereunder shall for any reason be determined to be invalid,
the provisions hereof shall not otherwise be affected thereby but shall remain
in full force and effect.
Section 10. Intent of Article. The intent of this Article V is to provide
-----------------
for indemnification and advancement of expenses to the fullest extent permitted
by Section 145 of the General Corporation Law of Delaware. To the extent that
such Section or any successor section may be amended or supplemented from time
to time, this Article V shall be amended automatically and construed so as to
permit indemnification and advancement of expenses to the fullest extent from
time to time permitted by law.
-13-
<PAGE>
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
---------------------
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice-chairman of the board of directors,
or the president or a vice-president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue. Certificates may be issued for partly paid
shares and in such case upon the face or back of the certificates issued to
represent any such partly paid shares, the total amount of the consideration to
be paid therefor, and the amount paid thereon shall be specified.
Section 2. Lost Certificates. The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it be required and/or to give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged have been lost, stolen or
destroyed or the issuance of such new certificate.
Section 3. Transfer of Stock. Upon surrender to the corporation or the
-----------------
transfer agent of the corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and proper evidence of compliance with other conditions to rightful
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Record Date. In order that the corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the board of directors, and which shall not be more than sixty days
nor less then ten days before the date of such meeting. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of
-14-
<PAGE>
stockholders shall be at the close of business on the day before the day on
which notice is given, or, if notice is waived, at the close of business on the
day before the day on which the meeting is held. In order that the corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the board of directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the board of directors, and which shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the board of directors. If no record date is fixed, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation as
provided under Section 10 of Article I. If no record date is fixed and prior
action by the board of directors is required, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the board of
directors adopts the resolution taking such prior action. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the board of directors
may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted, and which shall be not more sixty
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating to
such purpose.
Section 5. Registered Stockholders. The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as a provided by the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
------------------------------------
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or office is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if the material
-15-
<PAGE>
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the board of directors or the committee, and:
(a) The board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
or
(b) The contract or transaction is specifically approved in good
faith by vote of the stockholders; or
(c) The contract or transaction is on terms no less fair as to the
corporation than those offered by non-affiliated third parties as of the
time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
Section 2. Quorum. Common or interested directors may be counted in
------
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
---------
corporation, if any, may be declared by the board of directors at any regular or
special meeting or by written consent, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the certificate of incorporation.
Section 2. Reserves. The directors may set apart out of any funds of the
--------
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve.
Section 3. Checks. All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 5. Seal. The board of directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile
-16-
<PAGE>
thereof to be impressed or affixed or reproduced or otherwise. The seal may be
altered from time to time by the board of directors.
ARTICLE IX
AMENDMENTS
These by-laws may be adopted, amended or repealed by vote of a majority of
the directors then in office or by vote of a majority of the voting power of the
stock outstanding and entitled to vote, provided, however, a vote of 66 and
2/3% of the voting power of the stock outstanding and entitled to vote shall be
required for the stockholders to amend Article I, Sections 1, 2, 3, 6, 9, 10 or
11 or Article II, Sections 1, 2, 3, 4 or 10 or this Article IX . Any by-law,
whether adopted, amended or repealed by the stockholders or directors, may be
amended or reinstated by the stockholders or the directors.
-17-
<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>
i
<PAGE>
<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
-1-
<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.
-2-
<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
-3-
<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
-4-
<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.
-5-
<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
-6-
<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
-7-
<PAGE>
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;
-8-
<PAGE>
(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 A
Schedule of Investors
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Number of Shares of
Series J Preferred
Investor Name Total Stock Purchased
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
- ---------------------------------------------------------------------------------
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.
<PAGE>
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ACCESS
RADIOLOGY CORPORATION
Scott S. Sheldon and Christine Chung hereby certify that:
A. They are the duly elected and acting President and Secretary, respectively,
of ACCESS Radiology Corporation, a Delaware corporation.
B. The original name of this corporation is Teleradiology Services
Incorporated and the date of filing the original Certificate of Incorporation of
this corporation with the Secretary of State of the State of Delaware is March
17, 1992.
C. The Certificate of Incorporation of this corporation is hereby amended and
restated to read as follows:
"1. CORPORATE NAME.
The name of the corporation is ACCESS Radiology Corporation (the
"Company").
2. REGISTERED AGENT.
The address of the registered office of the Company in the State of
Delaware is 1013 Center Road, in the City of Wilmington, New Castle County,
Delaware 19805. The name of the Company's registered agent at said address is
The Corporation Service Company.
3. CORPORATE PURPOSE.
The purpose of the Company is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware.
4. CAPITAL STOCK.
4.1 Authorized Stock. This Company is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock". The
total number of shares that the Company is authorized to issue is 50,000,000
shares, 35,000,000 shares of which will be Common Stock (the "Common Stock") and
15,000,000 shares of which will be Preferred Stock. The Preferred Stock will
have a par value of $0.01 per share and the Common Stock will have a par value
of $0.01 per share.
4.2 Undesignated Preferred Stock. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby authorized,
within the limitations and restrictions stated in this Restated Certificate of
Incorporation, to fix or alter the dividend
<PAGE>
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
the liquidation preferences of any wholly unissued series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series will be so decreased, the shares constituting such decrease will
resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
4.3 Preferred Stock. The rights, preferences, privileges, restrictions and
other matters relating to the Preferred Stock are as follows:
(a) Designation. 716 of the authorized shares of Preferred Stock are
hereby designated "Series B Preferred Stock" (the "Series B Preferred"). 450 of
the authorized shares of Preferred Stock are hereby designated "Series C
Preferred Stock" (the "Series C Preferred"). 345 of the authorized shares of
Preferred Stock are hereby designated "Series E Preferred Stock" (the "Series E
Preferred"). 1,000 of the authorized shares of Preferred Stock are hereby
designated "Series F Preferred Stock" (the "Series F Preferred"). 816 of the
authorized shares of Preferred Stock are hereby designated "Series G Preferred
Stock" (the "Series G Preferred"). 400 of the authorized shares of Preferred
Stock are hereby designated "Series H Preferred Stock" (the "Series H
Preferred"). 7,230,000 of the authorized shares of Preferred Stock are hereby
designated "Series J Preferred Stock" (the "Series J Preferred"). References
hereinafter to the "Series Preferred" means the Series B Preferred, the Series C
Preferred, the Series E Preferred, the Series F Preferred, the Series G
Preferred, the Series H Preferred and any future series so designated.
(b) Dividend Rights.
(1) Holders of Series J Preferred, in preference to the holders
of Series Preferred or Common Stock, will be entitled to receive, when and as
declared by the Board of Directors, but only out of funds that are legally
available therefor, cash dividends at the rate of 10% of the Original Issue
Price (as defined below) per annum on each outstanding share of Series J
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The Original Issue
Price of the Series J Preferred will be $1.10. Such dividends will be payable
only when, as and if declared by the Board of Directors and will be non-
cumulative.
(2) So long as any shares of Series J Preferred are outstanding,
no dividend, whether in cash or property, will be paid or declared, nor will any
other distribution be made, on any Series Preferred or Common Stock, nor will
any shares of any Series Preferred or Common Stock be purchased, redeemed or
otherwise acquired for value by the Company until all dividends on the Series J
Preferred set forth in Section 4.3(b)(1) above have been paid or declared and
set apart. In addition, in the event dividends are paid on any share of Series
Preferred or Common Stock, an additional dividend will be paid with respect to
all
-2-
<PAGE>
outstanding shares of Series J Preferred in an amount equal per share (on an as-
if-converted to Common Stock basis) to the amount paid or set aside for each
such share (on an as if-converted to Common Stock basis). The provisions of this
Section 4.3(b)(2) will not apply to (A) a dividend payable in Common Stock or
(B) any repurchase of any outstanding securities of the Company that is
unanimously approved by the Board of Directors.
(3) Whenever the Company declares a dividend on its Common
Stock, the holders of Series Preferred will be entitled to receive dividends in
an amount equal per share (on an as-if converted to Common Stock basis) to the
amount paid or set aside for each share of Common Stock. The provisions of this
Section 4.3(b)(3) will not apply to (A) a dividend payable in Common Stock or
(B) any repurchase of any outstanding securities of the Company that is
unanimously approved by the Board of Directors.
(c) Voting Rights.
(1) Except as otherwise provided herein or as required by law,
the Series Preferred and Series J Preferred will be voted equally with the
shares of the Common Stock of the Company and not as a separate class at any
annual or special meeting of stockholders of the Company, and may act by written
consent in the same manner as the Common Stock. In either case, each holder of
shares of Series Preferred and Series J Preferred will be entitled to such
number of votes as is equal to the whole number of shares of Common Stock into
which such holder's aggregate number of shares of Series Preferred and Series J
Preferred are convertible pursuant to Section 4.3(d) immediately after the close
of business on the record date fixed for such meeting or the effective date of
such written consent.
(2) In addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of 2/3 of the outstanding
series of each respective Series Preferred will be necessary for effecting or
validating the following actions with respect to such series:
(A) Creation or authorization of any additional class or
series of shares of stock unless the same ranks junior to, or pari passu with,
such Series Preferred as to the distribution of assets on the liquidation,
dissolution or winding up of the Company, or an increase in the authorized
amount of any additional class or series of shares of stock unless the same
ranks junior to, or pari passu with, such Series Preferred as to the
distribution of assets on the liquidation, dissolution or winding up of the
Company, or creation or authorization of any obligation or security convertible
into shares of any class or series of stock unless the same ranks junior to, or
pari passu with, such Series Preferred as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, whether any such
creation, authorization or increase will be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
-3-
<PAGE>
(B) Amendment, alteration or repeal of the Certificate of
Incorporation if the effect would be materially detrimental or adverse in any
manner with respect to the rights of the holders of such Series Preferred; or
(C) Redemption or other acquisition of any shares of such
Series Preferred except pursuant to a purchase offer made pro rata to all
holders of the shares of such Series Preferred on the basis of the aggregate
number of outstanding shares of such Series Preferred then held by each such
holder.
(3) In addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of 2/3 of the outstanding
Series J Preferred will be necessary for effecting or validating the following
actions:
(A) Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation or Bylaws of the Company that adversely affects
the voting powers, preferences or other special rights or privileges,
qualifications, limitations or restrictions of the Series J Preferred;
(B) Any increase or decrease (other than by conversion) in
the authorized number of shares of Common Stock or Series J Preferred;
(C) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking senior to
the Series J Preferred in right of redemption, liquidation preference, voting or
dividends or any increase in the authorized or designated number of any such new
class or series;
(4) In addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of a majority of the
outstanding Series Preferred and Series J Preferred, voting together as a single
class on an as-if-converted to Common Stock basis, will be necessary for
effecting or validating the following actions:
(A) Any redemption, repurchase, payment of dividends or
other distribution with respect to Preferred Stock or Common Stock, except for
acquisitions of Preferred Stock or Common Stock by the Company pursuant to and
in compliance with agreements that permit the Company to repurchase such shares
upon termination of services to the Company;
(B) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section
4.3(d)(6);
(C) Any amendment, modification or waiver of the
Certificate of Incorporation or Bylaws of the Company relative to the rights,
preferences, privileges, restrictions or other matters relating to any series of
Preferred Stock;
-4-
<PAGE>
(D) Any voluntary dissolution or liquidation of the
Company; or
(E) Any issuance of equity securities as compensation to
employees, officers, directors or consultants of the Company other than under
the Option Plan (as defined in Section 4.3(f)(9)(D).
(5) For so long as any shares of Series J Preferred remain
outstanding, the authorized number of directors of the Company will be seven and
(A) the holders of Series J Preferred, voting as a separate class, will be
entitled to elect one member of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such director and to fill any vacancy
caused by the resignation, death or removal of such director and (B) the holders
of Common Stock, Series Preferred and Series J Preferred, voting together as a
class on an as-if-converted to Common Stock basis, will be entitled to elect all
remaining members of the Board of Directors at each meeting or pursuant to each
consent of the Company's stockholders for the election of directors, and to
remove from office such directors and to fill any vacancy caused by the
resignation, death or removal of such directors.
(d) Liquidation Preference.
(1) Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, with respect to which the Total
Company Valuation (as defined below) is less than $26,000,000, before any
distribution or payment is made to the holders of Series Preferred or Common
Stock, the holders of Series J Preferred will be entitled to be paid out of the
assets of the Company, for each share of Series J Preferred held by them, an
amount per share of Series J Preferred equal to the Original Issue Price (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to the Series J Preferred) plus all declared but unpaid
dividends on the Series J Preferred.
(2) If, upon any liquidation, distribution or winding up to
which Section 4.3(d)(1) applies, the assets of the Company are insufficient to
make payment in full to all holders of Series J Preferred of the liquidation
preference set forth in Section 4.3(d)(1), then such assets will be distributed
among the holders of Series J Preferred at the time outstanding ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
(3) After the payment of the full liquidation preference of the
Series J Preferred as set forth in Section 4.3(d)(1) (if applicable), the assets
of the Company legally available for distribution, if any, will be distributed
to the holders of Series Preferred (and any other series of Preferred Stock
designated by the Board of Directors as sharing with the Series Preferred on a
pari passu basis in the event of a liquidation) on a pari passu basis as
follows:
-5-
<PAGE>
(A) $1,000 for each of share of Series B Preferred held by
them;
(B) $5,000 for each of share of Series C Preferred held by
them;
(C) $5,000 for each of share of Series E Preferred held by
them;
(D) $1,000 for each of share of Series F Preferred held by
them;
(E) $5,000 for each of share of Series G Preferred held by
them;
(F) $5,000 for each of share of Series H Preferred held by
them; and
(G) Any amount designated by the Board of Directors with
respect to any other series of Preferred Stock designated by the Board of
Directors as sharing with the Series Preferred on a pari passu basis in the
event of a liquidation.
(4) If the assets to be distributed among the holders of the
Series Preferred (and any other series of Preferred Stock designated by the
Board of Directors as sharing with the Series Preferred on a pari passu basis in
the event of a liquidation) are insufficient to permit payment in full to such
holders of the amounts distributable pursuant to Section 4.3(d)(3), then such
assets will be distributed ratably among such holders of outstanding shares of
Series Preferred (and any other series of Preferred Stock designated by the
Board of Directors as sharing with the Series Preferred on pari passu basis in
the event of a liquidation).
(5) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 4.3(d)(3), the remaining assets of the
Company legally available for distribution, if any, will be distributed ratably
to the holders of the Common Stock and Series J Preferred on an as-if-converted
to Common Stock basis.
(6) The following definitions will apply under this Section
4.3(d):
(A) a "liquidation" of the Company will include (without
limitation):
1) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or
-6-
<PAGE>
reorganization own 50% or less of the Company's voting power immediately after
such consolidation, merger or reorganization, or any transaction or series of
related transactions to which the Company is a party in which 50% or more of the
Company's voting power is transferred unless within ten days after receipt of
notice that the event will occur, holders of a majority of the outstanding
Series Preferred, voting together as a single class on an as-if-converted to
Common Stock basis, and holders of a majority of the outstanding Series J
Preferred elect in writing not to treat such event as a liquidation of the
Company (an "Acquisition"); or
2) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(B) "Total Company Valuation" means the aggregate Fair
Market Value of the consideration received or to be received by all holders of
capital stock of the Company in any liquidation, dissolution or winding up of
the Company (including consideration received or to be received through the
operation of this Section 4.3(d)). In the event of an Acquisition involving the
transfer of less than all of the capital stock of the Company, the Total Company
Valuation will be computed by multiplying the Fair Market Value of the
consideration received or to be received by all holders of capital stock of the
Company in such transaction by a fraction, the numerator of which is the total
number of shares of capital stock of the Company then outstanding (on an as-if-
converted to Common Stock basis and assuming the exercise of all outstanding
stock options and warrants) and the denominator of which is the number of shares
of the Company's capital stock (on an as-if-converted to Common Stock basis and
assuming the exercise of all outstanding stock options and warrants) actually
transferred.
(C) "Fair Market Value" means (1) with respect to
consideration consisting of cash, the amount of such cash, (2) with respect to
securities that are publicly traded, the average Current Market Price of such
securities over the 20 consecutive trading days ending with and including the
date prior to the date as of which Fair Market Value is to be determined, and
(3) with respect to any other property, the value determined in good faith by
the Board of Directors of the Company.
(D) "Current Market Price" of a security means, for any
day, the last reported sales price, or if no sale takes place on such day, the
average of the reported closing bid and asked prices, in either case as reported
on the New York Stock Exchange Composite Tape or, if such security is not listed
or admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such security is not quoted on the Nasdaq National
Market, as reported by Nasdaq in the over the counter market or, if not reported
by Nasdaq, the average of the bid and asked prices as furnished by any New York
Stock Exchange member firm regularly making a market in such security selected
for the purpose by the
-7-
<PAGE>
Company's Board of Directors or, if there is no such firm, as determined in good
faith by the Company's Board of Directors.
(e) Conversion Rights Of Series Preferred. The holders of each series
of Series Preferred will have the following conversion rights:
(1) Right To Convert Series B Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series B Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series B Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series B Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
B Preferred to be converted by $1,000 and (B) dividing the result by the
conversion price of $4.16667 per share or, in case an adjustment of such price
has taken place pursuant to the further provisions of this Section 4.3(e), then
by the conversion price as last adjusted and in effect at the date any share or
shares of Series B Preferred are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series B Conversion Price").
(2) Right To Convert Series C Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series C Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series C Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series C Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
C Preferred to be converted by $5,000 and (B) dividing the result by the
conversion price of $5.25 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this Section 4.3(e), then by
the conversion price as last adjusted and in effect at the date any share or
shares of Series C Preferred are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series C Conversion Price").
(3) Right To Convert Series E Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series E Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series E Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series E Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
E Preferred to be converted by $5,000 and (B) dividing the result by the
conversion price of $5.25 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this Section 4.3(e), then by
the conversion price as last adjusted and in effect at
-8-
<PAGE>
the date any share or shares of Series E Preferred are surrendered for
conversion (such price, or such price as last adjusted, being referred to as the
"Series E Conversion Price").
(4) Right To Convert Series F Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series F Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series F Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series F Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
F Preferred to be converted by $1,000 and (B) dividing the result by the
conversion price of $0.50 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this Section 4.3(e), then by
the conversion price as last adjusted and in effect at the date any share or
shares of Series F Preferred are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series F Conversion Price").
(5) Right To Convert Series G Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series G Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series G Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series G Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
G Preferred to be converted by $5,000 and (B) dividing the result by the
conversion price of $1.50 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this Section 4.3(e), then by
the conversion price as last adjusted and in effect at the date any share or
shares of Series G Preferred are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series G Conversion Price").
(6) Right To Convert Series H Preferred. On the terms and
subject to the conditions of this Section 4.3(e), the holder of any share or
shares of Series H Preferred will have the right, at the holder's option at any
time, to convert any such shares of Series H Preferred (except that upon any
liquidation of the Company the right of conversion will terminate at the close
of business on the business day fixed for payment of the amount distributable on
the Series H Preferred) into such number of fully paid and nonassessable shares
of Common Stock as is obtained by (A) multiplying the number of shares of Series
H Preferred to be converted by $5,000 and (B) dividing the result by the
conversion price of $1.50 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this Section 4.3(e), then by
the conversion price as last adjusted and in effect at the date any share or
shares of Series H Preferred are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series H Conversion Price").
Each of the Series B Conversion Price, the Series C Conversion Price, the Series
E Conversion Price, the Series F Conversion Price, the Series G Conversion Price
and the Series H Conversion Price will hereinafter be referred to as the
"Applicable Conversion Price".
-9-
<PAGE>
(7) Issuance Of Certificates; Time Conversion Effected. Such
rights of conversion set forth in Sections 4.3(e)(1) through 4.3(e)(6) will be
exercised by a holder of Series Preferred by giving written notice that such
holder elects to convert a stated number of shares of Series Preferred into
Common Stock and by surrender of a certificate or certificates for the shares so
to be converted to the Company at its principal office (or such other office or
agency of the Company as the Company may designate by notice in writing to the
holders of Series Preferred) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock will be issued. Promptly after the receipt of such written notice and
surrender of the certificate or certificates for the share or shares of Series
Preferred to be converted, the Company will issue and deliver, or cause to be
issued and delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of whole shares
of Common Stock issuable upon the conversion of such share or shares of Series
Preferred. To the extent permitted by law, such conversion will be deemed to
have been effected and the Applicable Conversion Price will be determined as of
the close of business on the date on which such written notice has been received
by the Company and the certificate or certificates for such share or shares have
been surrendered as aforesaid, and at such time the rights of the holder of such
share or shares of Series Preferred will cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
will be issuable upon such conversion will be deemed to have become the holder
or holders of record of the shares represented thereby.
(8) Fractional Shares; Dividends; Partial Conversion. At the
time of each conversion, the Company will pay in cash an amount equal to all
dividends declared but unpaid on the shares of such Series Preferred surrendered
for conversion on the date upon which the conversion is deemed to take place as
provided in Section 4.3(e)(7). In case the number of shares of Series Preferred
represented by the certificate or certificates surrendered pursuant to Sections
4.3(e)(1) through 4.3(e)(6) exceeds the number of shares converted, the Company
will, upon such conversion, execute and deliver to the holder, at the expense of
the Company, a new certificate or certificates for the number of shares of such
Series Preferred represented by the certificate or certificates surrendered that
are not to be converted. If any fractional share of Common Stock would be
delivered upon such conversion, the Company will pay to the holder surrendering
such Series Preferred for conversion 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.
(9) Subdivision Or Combination Of Common Stock. In case the
Company at any time after the date of this certificate subdivides (whether
before or after the issuance of any Series Preferred and whether by any stock
split, stock dividend or otherwise) its outstanding shares of Common Stock into
a greater number of shares, the Applicable Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced and,
conversely, in case the outstanding shares of Common Stock are combined into a
-10-
<PAGE>
smaller number of shares, the Applicable Conversion Price in effect immediately
prior to such combination will be proportionately increased.
(10) Reorganization Or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Company is
effected in such a way that holders of Common Stock will be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, lawful and
adequate provision will be made whereby each holder of a share or shares of
Series Preferred will thereupon have the right to receive, upon the basis and
upon the terms and subject to the conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the conversion of
such share or shares of Series Preferred, 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 conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions will be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustment of the Applicable Conversion Price) will thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
(11) Notice Of Adjustment. Upon any adjustment of the Applicable
Conversion Price, then and in each such case the Company will give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Series Preferred at the address of such holder as shown on the books of the
Company, which notice will state the Applicable Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
(12) Other Notices. In case at any time:
(A) the Company declares any dividend upon its Common Stock
payable in cash or stock or makes any other distribution to the holders of its
Common Stock;
(B) the Company offers for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(C) there is 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
(D) there is a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
-11-
<PAGE>
then, in any one or more of said cases, the Company will give, by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex. addressed to each holder of any shares of Series Preferred at the address
of such 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 will close or a
record will 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 will take place.
Such notice in accordance with the foregoing clause (a) will also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock will be entitled thereto and such notice in
accordance with the foregoing clause (b) will also specify the date on which the
holders of Common Stock will 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.
(13) Stock To Be Reserved. The Company will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Series Preferred as herein provided, such number
of shares of Common Stock as are then issuable upon the conversion of
outstanding shares of Series Preferred. The Company covenants that all shares of
Common Stock that will be so issued will 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 Applicable Conversion Price in effect at the
time. The Company will take all such action as may be necessary to assure that
all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed. The Company will not take
any action that results in any adjustment of the Applicable Conversion Price if
the total number of shares of Common Stock issued -and issuable after such
action upon conversion of the Series Preferred would exceed the total number of
shares of Common Stock then authorized by the Certificate of Incorporation.
(14) No Reissuance Of Series Preferred. Shares of Series
Preferred that are converted into shares of Common Stock as provided herein will
not be reissued.
(15) Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Series Preferred will be made without charge to the
holders thereof for any such issuance tax in respect thereof, provided that the
Company will not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of such Series Preferred that is being converted.
-12-
<PAGE>
(16) Closing Of Books. The Company will at no time close its
transfer books against the transfer of any Series Preferred or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Series
Preferred in any manner that interferes with the timely conversion of such
Series Preferred, except as may otherwise be required to comply with applicable
securities law.
(17) Definition Of Common Stock. As used in this Section 4.3(e),
the term "Common Stock" means the Company's authorized Common Stock, par value
$.01 per share, as constituted on the date of the filing of this Amended and
Restated Certificate of Incorporation, and will also include any capital stock
of any class of the Company thereafter authorized that will 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 receivable upon
conversion of the shares of Series Preferred will include only shares designated
as Common Stock of the Company on the date of the filing of this instrument, or
in case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in Section 4.3(e)(10).
(18) Mandatory Conversion Of Series Preferred. If at any time the
Company effects a firm commitment underwritten public offering of shares of
Common Stock, then effective upon the closing of the sale of such shares by the
Company pursuant to such public offering, all outstanding shares of Series
Preferred, except shares of Series H Preferred, will automatically convert to
shares of Common Stock on the basis so forth in this Section 4.3(e). Holders of
such shares of Series Preferred so converted may deliver to the Company at its
principal office (or such other office or agency of the Company as the Company
may designate by notice in writing to such holders) during its usual business
hours, the certificate or certificates for the shares so converted. As promptly
as practicable thereafter, the Company will issue and deliver to such holder a
certificate or certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder may be entitled pursuant to
Section 4.3(e)(8). Until such time as a holder of shares of Series Preferred
surrenders his, her or its certificates, therefor as provided above, such
certificates will be deemed to represent the shares of Common Stock to which
such holder will be entitled upon the surrender thereof.
(19) Mandatory Conversion Of Series H Preferred. If at any time
the Company effects a firm commitment underwritten public offering of shares of
Common Stock at a price of at least $3.00 per share (subject to adjustment in
the same manner as the Series H Conversion Price is subject to adjustment
pursuant to Section 4.3(e)(9)) for gross proceeds of at least $15,000,000, then
effective upon the closing of the sale of such shares by the Company pursuant to
such public offering, all outstanding shares of Series H Preferred will
automatically convert to shares of Common Stock on the basis set forth in this
Section 4.3(e). If the Company effects a firm commitment underwritten public
offering that does not meet the price and gross proceeds criteria set forth in
the preceding sentence, and thereafter the Company
-13-
<PAGE>
effects, in a transaction approved by the holders of a majority of the voting
power of all shares of capital stock entitled to vote thereon voting together as
a single class, a consolidation or merger of the Company into or with any other
entity or entities that results in the exchange of outstanding shares of the
Company for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or an affiliate thereof (other than a merger
to reincorporate the Company in a different jurisdiction), or the sale, lease or
other disposition by the Company of all or substantially all of its assets, then
upon the closing of such transaction all outstanding shares of Series H
Preferred will automatically convert to shares of Common Stock on the basis set
forth in this Section 4.3(e) and the provisions of Section 4.3(d)(3) will not
apply to the Series H Preferred with respect to such transaction. Holders of
shares of Series H Preferred converted pursuant to this Section 4.3(e)(19) may
deliver to the Company at its principal office (or such other office or agency
of the Company as the Company may designate by notice in writing to such
holders) during its usual business hours, the certificate or certificates for
the shares so converted. As promptly as practicable thereafter, the Company will
issue and deliver to such holder a certificate or certificates of the number of
whole shares of Common Stock to which such holder is entitled, together with any
cash dividends and payment in lieu of fractional shares to which such holder may
be entitled pursuant to Section 4.3(e)(8). Until such time as a holder of shares
of Series H Preferred surrenders his, her or its certificates therefor as
provided above, such certificates will be deemed to represent the shares of
Common Stock to which such holder will be entitled upon the surrender thereof.
(f) Conversion Rights Of Series J Preferred. The holders of the
Series J Preferred will have the following rights with respect to the conversion
of the Series J Preferred into shares of Common Stock:
(1) Conversion Rate. The conversion rate in effect at any time
for conversion of the Series J Preferred will be the quotient obtained by
dividing the Original Issue Price by the Series J Conversion Price (as defined
below). The conversion price for the Series J Preferred (the "Series J
Conversion Price") will initially be the Original Issue Price. The Series J
Conversion Price will be adjusted from time to time in accordance with this
Section 4.3(f). All references to the Series J Conversion Price herein mean the
Series J Conversion Price as so adjusted. The number of shares of Common Stock
to which a holder of Series J Preferred will be entitled upon conversion will be
the product obtained by multiplying the Series J Conversion Rate then in effect
by the number of shares of Series J Preferred being converted.
(2) Optional Conversion.
(A) Subject to and in compliance with the provisions of
this Section 4.3(f), any shares of Series J Preferred may, at the option of the
holder, be converted at any time into fully-paid and nonassessable shares of
Common Stock.
(B) Each holder of Series J Preferred who desires to
convert the same into shares of Common Stock pursuant to this Section 4.3(f)(2)
will surrender the
-14-
<PAGE>
certificate or certificates therefor, duly endorsed, at the office of the
Company or any transfer agent for the Series J Preferred, and will give written
notice to the Company at such office that such holder elects to convert the
same. Such notice will state the number of shares of Series J Preferred being
converted. Thereupon, the Company will promptly issue and deliver at such office
to such holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled and will promptly pay in cash or, to the
extent sufficient funds are not then legally available therefor, in Common Stock
(at the Common Stock's fair market value determined by the Board of Directors as
of the date of such conversion), any declared and unpaid dividends on the shares
of Series J Preferred being converted. Such conversion will be deemed to have
been made at the close of business on the date of such surrender of the
certificates representing the shares of Series J Preferred to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion will be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(3) Automatic Conversion.
(A) Each share of Series J Preferred will automatically be
converted into shares of Common Stock (1) at any time upon the affirmative
election of the holders of a majority of the then-outstanding shares of the
Series J Preferred or (2) immediately upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Company in which (A) the per share price to the public is
at least $3.00 (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like) and (B) the aggregate cash proceeds to the
Company (after deduction of underwriters' commissions and expenses) are at least
$15,000,000 (a "Qualified IPO").
(B) Upon the first occurrence of an event specified in
Section 4.3(f)(3)(A), the outstanding shares of Series I Preferred will be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company will not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series J Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates (and, if reasonably requested by the
Company, obtains a bond therefor). Upon the occurrence of such automatic
conversion of the Series J Preferred, the holders of Series J Preferred will
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series J Preferred. Thereupon, there will be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series J Preferred surrendered were convertible on the date on which such
automatic conversion
-15-
<PAGE>
occurred, and any declared and unpaid dividends will be paid in accordance with
the provisions of Section 4.3(f)(2)(B).
(4) Adjustment For Stock Splits And Combinations. If the Company
at any time or from time to time after the date that the first share of Series J
Preferred is issued (the "Original Issue Date") effects a subdivision of the
outstanding Common Stock without a corresponding subdivision of the Preferred
Stock, the Series J Conversion Price in effect immediately before that
subdivision will be proportionately decreased. Conversely, if the Company at any
time or from time to time after the Original Issue Date combines the outstanding
shares of Common Stock into a smaller number of shares without a corresponding
combination of the Preferred Stock, the Series J Conversion Price in effect
immediately before the combination will be proportionately increased. Any
adjustment under this Section 4.3(f)(4) will become effective at the close of
business on the date the subdivision or combination becomes effective.
(5) Adjustment For Common Stock Dividends And Distributions. If
the Company at any time or from time to time after the Original Issue Date makes
a dividend or other distribution payable in additional shares of Common Stock,
in each such event the Series J Conversion Price that is then in effect will be
decreased as of the time of such issuance by multiplying the Series J Conversion
Price then in effect by a fraction (A) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance, and (B) the denominator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance.
(6) Adjustments For Other Dividends And Distributions. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, in each such event provision will be made so
that the holders of the Series J Preferred will receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Company that they would have received had
their Series J Preferred been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called for
during such period under this Section 4.3(f) with respect to the rights of the
holders of the Series J Preferred or with respect to such other securities by
their terms.
(7) Adjustment For Reclassification, Exchange And Substitution.
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of the Series J Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer or a stock dividend, combination, split,
-16-
<PAGE>
recapitalization or other transaction for which adjustment to the Series J
Conversion Price is provided elsewhere in this Section 4.3(f)), in any such
event each holder of Series J Preferred will have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series J Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(8) Reorganizations. If at any time or from time to time after
the Original Issue Date there is a capital reorganization of the Common Stock
(other than an Acquisition or Asset Transfer or a stock dividend, combination,
split, recapitalization or other transaction for which adjustment to the Series
J Conversion Rate is provided elsewhere in this Section 4.3(f)), as a part of
such capital reorganization, provision will be made so that the holders of the
Series J Preferred will thereafter be entitled to receive upon conversion of the
Series J Preferred the number of shares of stock or other securities or property
of the Company to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment will be made in the
application of the provisions of this Section 4.3(f) with respect to the rights
of the holders of Series J Preferred after the capital reorganization to the end
that the provisions of this Section 4.3(f) (including adjustment of the Series J
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series J Preferred) will be applicable after that event and be
as nearly equivalent as practicable.
(9) Sale Of Shares Below Series J Conversion Price.
(A) If at any time or from time to time after the Original
Issue Date the Company issues or sells, or is deemed by the express provisions
of this Section 4.3(f)(9) to have issued or sold, Additional Shares of Common
Stock (as hereinafter defined), other than as an Acquisition or Asset Transfer
or a stock dividend, combination, split, recapitalization or other transaction
for which adjustment to the Series J Conversion Rate is provided elsewhere in
this Section 4.3(f), for an Effective Price (as hereinafter defined) less than
the then-effective Series J Conversion Price, then and in each such case the
then-existing Series J Conversion Price will be reduced, as of the opening of
business on the date of such issue or sale, to (1) if such issuance occurs on or
prior to the second anniversary of the Original Issue Date, the Effective Price
or (2) if such issuance occurs after the second anniversary of the Original
Issue date, a price determined by multiplying the then-effective Series J
Conversion Price by a fraction (A) the numerator of which will be (i) the number
of shares of Common Stock deemed outstanding (as defined below) immediately
prior to such issue or sale, plus (ii) the number of shares of Common Stock that
the aggregate consideration received (as hereinafter defined) by the Company for
the total number of Additional Shares of Common Stock so issued would purchase
at such Series J Conversion Price, and (B) the denominator of which will be the
number of shares of Common Stock deemed outstanding
-17-
<PAGE>
immediately prior to such issue or sale plus the total number of Additional
Shares of Common Stock so issued. For the purposes of the preceding sentence,
the number of shares of Common Stock deemed to be outstanding as of a given date
will be the sum of (1) the number of shares of Common Stock actually outstanding
and (2) the number of shares of Common Stock into which the then-outstanding
shares of Preferred Stock could be converted if fully converted on the day
immediately preceding the given date.
(B) For the purpose of making any adjustment required under
this Section 4.3(f)(9), the consideration received by the Company for any issue
or sale of securities (1) to the extent it consists of cash, will be computed at
the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, will be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration that covers both, will be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(C) For the purpose of the adjustment required under this
Section 4.3(f)(9), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series J Conversion Price, in each case the
Company will be deemed to have issued at the time of the issuance of such rights
or options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company will be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price will be recalculated using the
figure to which such minimum
-18-
<PAGE>
amount of consideration is reduced; provided further that if the minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price will be again recalculated using the increased minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series J
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, will be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities will expire without having been exercised, the Series J Conversion
Price as adjusted upon the issuance of such rights, options or Convertible
Securities will be readjusted to the Series J Conversion Price that would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold on the exercise of such rights or options or rights
of conversion of such Convertible Securities, and such Additional Shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment will not apply to prior
conversions of Series J Preferred.
(D) "Additional Shares of Common Stock" means all shares of
Common Stock issued by the Company or deemed to be issued pursuant to this
Section 4.3(f)(9), whether or not subsequently reacquired or retired by the
Company other than (1) shares of Common Stock issued upon conversion of the
Preferred Stock; (2) up to 1,582,343 shares of Common Stock and/or options or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options or other rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) issued after the Original Issue Date to
employees, officers or directors of or consultants or advisors to the Company or
any subsidiary pursuant to a stock option plan that is approved unanimously by
the Board of Directors (the "Option Plan"); (3) shares of Common Stock issued
pursuant to the exercise of options, warrants or convertible securities
outstanding as of the Original Issue Date; and (4) shares of Common Stock and/or
warrants, options or other Common Stock purchase rights, and the Common Stock
issued pursuant to such warrants, options or other rights (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like) issued
after the Original Issue Date pursuant to any equipment leasing arrangement or
debt financing approved by the Board of Directors. The "Effective Price" of
Additional Shares of Common Stock means the quotient determined by dividing the
total number of Additional Shares of Common Stock issued or sold, or deemed to
have been issued or sold by the Company under this Section 4.3(f)(9), into the
aggregate consideration received, or deemed to have been received by the
-19-
<PAGE>
Company for such issue under this Section 4.3(f)(9), for such Additional Shares
of Common Stock.
(10) Certificate Of Adjustment. In each case of an adjustment or
readjustment of the Series J Conversion Price for the number of shares of Common
Stock or other securities issuable upon conversion of the Series J Preferred, if
the Series J Preferred is then convertible pursuant to this Section 4.3(f), the
Company, at its expense, will compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and will mail such certificate, by first class mail
postage prepaid, to each registered holder of Series J Preferred at the holder's
address as shown in the Company's books. The certificate will set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (A) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (B) the Series J Conversion Price at the time in effect, (C) the number
of Additional Shares of Common Stock and (D) the type and amount, if any, of
other property that at the time would be received upon conversion of the Series
J Preferred.
(11) Notices Of Record Date. Upon (A) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution or (B) any Acquisition or other capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company, any merger or consolidation of the Company with or into any other
corporation, any Asset Transfer or any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company will mail to each holder
of Series J Preferred at least 20 days prior to the record date specified
therein a notice specifying (X) the date on which any such record is to be taken
for the purpose of such dividend or distribution and a description of such
dividend or distribution, (Y) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset,
Transfer, dissolution, liquidation or winding up is expected to become
effective, and (Z) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) will be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
(12) Fractional Shares. No fractional shares of Common Stock will
be issued upon conversion of Series J Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series J Preferred by a holder thereof will be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company will, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
-20-
<PAGE>
(13) Reservation Of Stock Issuable Upon Conversion. The Company
will at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series J Preferred, such number of its shares of Common Stock
as from time to time will be sufficient to effect the conversion of all
outstanding shares of the Series J Preferred. If at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect the
conversion of all then-outstanding shares of the Series J Preferred, the Company
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as will be sufficient for such purpose.
(14) Notices. Any notice required or permitted by the provisions
of this Section 4.3(f) will be in writing and will be deemed effectively given:
(A) upon personal delivery to the party to be notified, (B) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (C) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (D) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
notices will be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(15) Payment Of Taxes. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series J Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series J Preferred
so converted were registered.
(16) No Dilution Or Impairment. Without the consent of the
holders of then outstanding Series J Preferred as required under Section
43(c)(3), the Company will not amend its Certificate of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or take any other voluntary action for
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but will at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series J Preferred against dilution or other impairment.
(g) No Reissuance Of Preferred Stock. No share or shares of Preferred
Stock acquired by the Company by reason of redemption, purchase, conversion or
otherwise will be reissued.
(h) No Preemptive Rights. Stockholders will have no preemptive rights
except as granted by the Company pursuant to written agreements.
-21-
<PAGE>
5. BYLAWS.
The Board of Directors will have the power to adopt, amend or repeal the
bylaws of the Company, subject to any consent or approval that may be required
by the terms of any Preferred Stock.
6. ELECTIONS.
Election of directors need not be by written ballot unless the bylaws of
the Company so provide.
7. LIMITATION ON LIABILITY; INDEMNITY.
7.1 Liability. A director of the Company will not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by Delaware law.
7.2 Indemnity.
(a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, will be
indemnified and held harmless by the Company to the fullest extent permitted by
Delaware law; provided, however, that the foregoing will not require the Company
to indemnify or advance expenses to any person in connection with any action,
suit, proceeding, claim or counterclaim initiated by or on behalf of such
person. The right to indemnification conferred in this Section 7.2 will include
the right to be paid by the Company the expenses incurred in connection with any
such proceeding in advance of its disposition to the fullest extent permitted by
Delaware law. The right to indemnification conferred in this Section 7.2 will be
a contract right. Any person seeking indemnification under this Section 7.2 will
be deemed to have met the standard of conduct required for indemnification
unless the contrary will be established.
(b) The Company may, by action of its Board of Directors, provide
indemnification to such of the employees and agents of the Company to such
extent and to such effect as the Board of Directors will determine to be
appropriate and permitted by Delaware law.
(c) The Company will have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any expense,
-22-
<PAGE>
liability or loss incurred by such person in any such capacity or arising out of
his or her status as such, whether or not the Company would have the power to
indemnify such person against such liability under Delaware law.
(d) The rights and authority conferred in this Section 7 will not be
exclusive of any other right which any person may otherwise have or hereafter
acquire.
(e) Neither the amendment nor repeal of this Section 7, nor the
adoption of any provision of the Certificate of Incorporation or the bylaws of
the Company, nor, to the fullest extent permitted by Delaware law, any
modification of law, will eliminate or reduce the effect of this Section 7 in
respect of any acts or omissions; occurring prior to such amendment, repeal,
adoption or modification.
8. AMENDMENTS.
The Company reserves the right to amend this Certificate of Incorporation
in any manner permitted by Delaware law.
D. This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Company.
E. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Company. The total number of outstanding shares entitled to
vote or act by written consent was 1,081,834 shares of Common Stock, 716 shares
of Series B Preferred Stock, 450 shares of Series C Preferred Stock, 344.39
shares of Series E Preferred Stock, 1,000 shares of Series F Preferred Stock,
815.87 shares of Series G Preferred Stock and 400 shares of Series H Preferred
Stock. A majority of the outstanding shares of Common Stock and at least 2/3 of
the outstanding shares of each outstanding series of Preferred Stock approved
this Amended and Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware and written notice of such was given by the Company in accordance with
said Section 228.
-23-
<PAGE>
The Company has caused this Amended and Restated Certificate of
Incorporation to be signed by the President and the Secretary in ____________,
Massachusetts, this __ day of September, 1997.
ACCESS RADIOLOGY CORPORATION
By: _______________________________
Scott S. Sheldon
President
Attest:
By: _____________________________
Christine Chung
Secretary
-24-
<PAGE>
Exhibit C
SCHEDULE OF EXCEPTIONS
Capitalized terms used herein and not otherwise defined have the meanings
set forth in the Series J Preferred Stock Purchase Agreement, dated September
30, 1997, to which this Schedule of Exceptions is attached as Exhibit C.
Disclosure of any matter in any item of this Schedule is deemed to be disclosure
of such matter for purposes of all items with respect to which such matter is
required to be disclosed. Disclosure of any matter in this Schedule does not,
by implication or otherwise, indicate that such matter is material. Copies or
forms of all of the documents listed or described below have been provided to
Cooley Godward LLP and any summary below is qualified by reference to such
documents.
2.5(c) A list of the Company's shareholders has been provided to Cooley
Godward LLP.
2.5(d) The Company has issued a certificate for five shares of Series C
Preferred Stock to Joseph Tortorici, a holder who in fact subscribed and paid
for four shares. The Company is in the process of contacting Mr. Tortorici to
correct this error.
2.5(e) The Company has outstanding warrants to purchase 255,482 shares of
Common Stock under various warrants issued in connection with private
placements of the Company's equity securities. The Company also has outstanding
an aggregate principal amount of $1,500,000 of Convertible Subordinated Notes
(the "Notes") that are expected to be converted into Series J Preferred Stock on
a dollar for dollar basis simultaneously with the Closing, and warrants to
purchase an additional 409,091 shares of Series J Preferred Stock at an exercise
price of $1.10 per share (the "Bridge Warrants"). The Bridge Warrants entitle
the holders of the Bridge Warrants, until June 30, 2002, to purchase from the
Company that amount of securities of the type issued in the Equity Financing
having an aggregate purchase price in the Equity Financing of $450,000. 10 for
an aggregate exercise price of $450,000.10.
The Notes bear interest at the rate of 6% per annum, from the date of
issuance. If at any time prior to October 31, 1997, the Company completes an
Equity Financing (which for purposes of the Notes will be the sale of the
Company's Series J Preferred Stock pursuant to the Purchase Agreement), each
Note, effective on the closing of the Equity Financing, automatically converts
into the amount of securities that a purchaser in the Equity Financing would
receive upon payment of a purchase price equal to the outstanding principal and
accrued interest of such Note.
Attached hereto as Exhibit C-1 are Post-Closing Capitalization Tables of
the Company which show the fully diluted Common Stock equivalent holdings of its
stockholders, assuming a $7,500,000 Series J Preferred Stock financing.
2.7 Contracts:
<PAGE>
1. Vendor Program Agreement, dated as of September 5, 1996, between
the Company and DVI Financial Services, Inc.
2. Master Lease Agreement, dated as of January 19, 1996 (renewed as
of August 18, 1997), between the Company and LTI Ventures Leasing Corp.
3. Loan Agreement, dated as of May 16, 1997, between the Company and
Fleet National Bank, and related documentation.
4. OEM Development Software Agreement, dated as of November 9, 1995
and amended May 20, 1997, between the Company and Mitra Imaging Incorporated.
5. Software Development and Licensing Agreement, dated as of May 30,
1997, between the Company and AWARE, Inc.
6. Amended and Restated Reseller Agreement, dated as of May 30,
1997, between the Company and ISG Technologies, Inc.
7. Sublease Agreement, dated as of April 1, 1996, between the
Company and The Future Now, Inc. (principal office and manufacturing facility).
8. Purchase Agreement, dated as of September 1, 1996, between the
Company and Lockheed Martin Medical Imaging Systems, Inc. (Note: The business
of Lockheed Martin Medical Imaging Systems, Inc. was recently acquired by
general Electric. The counterparty is now GE Medical Systems.)
9. Employment Agreement, dated as of August 28, 1997, between the
Company and Scott Sheldon.
10. Employment Agreement, dated as of August 28, 1997, between the
Company and Philip Holberton.
11. Employment Agreement, dated as of August 28, 1997, between the
Company and Howard Pinsky.
12. Employment Agreement, dated as of August 28, 1997, between the
Company and Diagnostic Imaging, Inc.
13. Various confidentiality agreements with industry participants,
the form of which has been provided to Cooley Godward UP.
14. Stock option agreements with directors, employees and members of
the Medical and Technical Advisory Board.
-2-
<PAGE>
2.8 Mr. Gary Sadow, a member of the Company's Medical and Technical
Advisory Board to whom stock options ha ve been granted, is an officer of
Sterling Diagnostic Imaging, Inc. ("Sterling"). The Company and Sterling have
entered into a letter of intent regarding the resale by Sterling of ACCESS
products. Mr. Sadow participated in the negotiation of definitive contractual
documentation.
The Company was not in compliance with certain of the financial covenants
contained in the Fleet Loan documentation as of June 30, 1997. The Company has
obtained a written waiver from Fleet Bank. The Company expects that the
conditions giving rise to this non-compliance will be cured by the closing of
the financial contemplated by the Series J Preferred Stock Purchase Agreement
referenced above.
2.12 The Company received a letter dated June 19, 1996 from counsel to
American Telemedicine International ("ATI"), written on behalf of ATI and
Massachusetts General Hospital ("MGH"). This letter states that ATI is
"associated . . . through merger" with RSTAR, Inc. ("RSTAR"), which is a former
employer of Howard Pinsky, an executive of the Company. The June 19th letter
asserts that U.S. Patent No. 5,469,353, issued to Mr. Pinsky and others and
assigned to the Company, is derived from proprietary information and trade
secrets of NIGH and RSTAR, has been improperly assigned and is currently
unenforceable due to incorrect ownership. The letter demands assignment of the
patent to ATI and the addition of a current ATI employee as an inventor. The
June 19th letter asserts that Mr. Pinsky had misappropriated proprietary
information and trade secrets relevant to the patent that were provided to him
while working for RSTAR. Counsel to ATI also made claims against Mr. Pinsky in a
separate letter addressed to Mr. Pinsky personally. The Company has agreed to
indemnify Mr. Pinsky against claims made against him in connection with this
dispute.
The June 19th letter contained an offer to make documentation supporting
the claims of RSTAR and NIGH available to the Company. In a responsive letter
dated July 3, 1996, patent counsel to the Company (Lahive & Cockfield) stated
that a preliminary investigation indicated that the assertions of the June 19th
letter were incorrect, and requested copies of the offered documentation. In a
subsequent letter dated July 31, counsel to ATI stated that deliver of such
documentation would be conditioned on execution by the Company of an enclosed
"Confidential disclosure Agreement", the terms of which are unacceptable to the
Company. The July 31 letter also requested that ATI receive documentation
relevant to the patent from the Company. In a further response dated August 21,
counsel to the Company stated that the agreement proposed by ATI was not
acceptable, that in any event no confidentiality agreement should be required
for disclosure of material now included in an issued patent, and that the
Company was not prepared to deliver any material to ATI prior to receiving some
substantiation of ATI's claims. The August 21 letter further stated the belief
of ACCESS that the claims of ATI and MGH are without merit.
Subsequent to August 21, 1996, counsel to the Company and counsel to ATI
exchanged further letters and telephone calls regarding the terms on which ATI
would be willing to make
-3-
<PAGE>
material supporting ATI's claims available to the Company. No resolution to this
matter was reached, and ATI and its counsel have not communicated with the
Company or its counsel since December 19, 1996, the date of the last letter that
counsel to the Company sent to counsel to ATI on this matter.
The Company believes that the claims of ATI and NIGH are without merit and
intends to contest them vigorously.
2.15 Fleet National Bank has a security interest in substantially all of
the Company's assets to secure loans outstanding under the Loan Agreement
referred to in Item 2.7.3.
2.16 Reference is made to the matters disclosed in items 2.7 and 2.12.
2.17(a) The Company issued $1,500,000 in principal amount of Convertible
Subordinated Notes, together with warrants to purchase 409,091 shares of Series
J Preferred Stock, in June 1997.
The Company entered into a lease with Hartwell Group LLC for 25,404 square
feet in Lexington, Massachusetts on September 26, 1997.
Reference is made to all other matters disclosed in response to Section
2.17.
2.17(b) The Company is a party to a Vendor Program Agreement with DVI
Financial Services, Inc. ("DVI"), under which DVI had committed to provide
financing to qualified customers for the purchase of ACCESS products. The
Company has recently been informed that the business unit of DVI that provided
this financing has been discontinued, and that DVI is therefore no longer in a
position to continue the arrangements contemplated by the Vendor Program
Agreement. The Company does not plan to take any action with respect to this
matter.
GE Medical Systems is a business unit of General Electric that succeeded
through an asset purchase to the business of Lockheed Martin Medical Imaging
("LMMIS") and the Purchase Agreement between the Company and LMMIS. GE Medical
Systems has informed the Company that, as a matter of policy, GE Medical Systems
will not honor certain provisions of the LMMIS contract calling for rebates of
discounts granted by the Company if volume purchase targets are not met. The
Company and GE Medical Systems are in the process of amending the LMMIS contract
to, among other things, eliminate these rebates.
The Company has forgiven a loan of $10,000 to Dan Trott (Vice President of
Sales and Marketing).
2.17(f) The Company has entered into employment contracts with Scott
Sheldon and Philip Holberton since June 30, 1997 (see item 2.7).
2.18(h) Michael Schmertzler resigned as Chairman of the Board in July 1997.
-4-
<PAGE>
2.19 Reference is made to Item 2.7.
2.20 The Company believes it is late in filing some of its state sales
tax returns. The Company does not believe that these filings will have a
Material Adverse Effect.
-5-
<PAGE>
Exhibit D
See Exhibit 10.3 filed with this Registration Statement.
-6-
<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.
-4-
<PAGE>
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
-5-
<PAGE>
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
-6-
<PAGE>
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;
-7-
<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 License, (b) give any person or entity the right to declare a default
or exercise any
-8-
<PAGE>
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
-9-
<PAGE>
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
-10-
<PAGE>
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:
-11-
<PAGE>
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
-12-
<PAGE>
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.
-13-
<PAGE>
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.
-14-
<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 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 A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF THE SERIES K CONVERTIBLE PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS
OF
ACCESS RADIOLOGY CORPORATION
Under Section 151 of the
Delaware General Corporation Law
I, Scott S. Sheldon, President of ACCESS Radiology Corporation, a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance with
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation, said Board of Directors adopted a resolution dated
July 10, 1998, providing for the authorization, designation and issuance of up
to 1,785,800 shares of Series K Convertible Preferred Stock, which resolution is
as follows:
RESOLVED: That, pursuant to Section 4.2 of the Certificate of
Incorporation of the Corporation, as amended, there be and hereby is authorized
and created a series of Preferred Stock, hereby designated as the Series K
Preferred Stock, to consist of 1,785,800 shares, with a par value of $.01 per
share, and that the designations, preferences and relative, participating,
optional or other special rights of the Series K Preferred Stock and the
qualifications, limitations or restrictions thereof, be as hereby set forth. The
Series K Preferred Stock is hereby designated as "Series Preferred", as that
term is defined in the Certificate of Incorporation. Capitalized terms used in
this Certificate and not otherwise defined have the meanings specified in the
Certificate of Incorporation, as amended from time to time.
Series K Preferred Stock.
- ------------------------
1. Number of Shares. The series of Preferred Stock designated and known as
----------------
"Series K Preferred Stock" shall consist of 1,785,800 shares.
2. Dividend Rights. Whenever the Company declares a dividend on its Common
----------------
Stock, the holders of Series K Preferred Stock will be entitled to receive
dividends in an amount equal per share
<PAGE>
(on an as-if-converted to Common Stock basis) to the amount paid or set aside
for each share of Common Stock. The provisions of this Section 2 will not apply
to a dividend payable as Common Stock.
3. Voting Rights.
--------------
(a) Except as otherwise provided herein or as required by law, the Series K
Preferred Stock will be voted together with the other Series Preferred and the
Series J Preferred equally with the shares of Common Stock of the Company, and
not as a separate class, at any annual or special meeting of stockholders of the
Company, and may act by written consent in the same manner as the Common Stock.
In either case, each holder of shares of Series K Preferred Stock will be
entitled to such number votes as is equal to the whole number of shares of
Common Stock into which such holder's aggregate number of shares of Series K
Preferred Stock are convertible pursuant to Section 5 immediately after the
close of business on the record date fixed for such meeting or the effective
date of such written consent
(b) In addition to any other vote or consent required herein or by law, the
vote or written consent of the holders of 2/3 of the outstanding Series J
Preferred Stock and the outstanding Series K Preferred Stock, voting together as
a single class on an as-if converted to Common Stock basis, will be necessary
for effecting or validating the creation or authorization of any additional
class or series of shares of stock unless the same ranks junior to, or pari
passu with, the Series K Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, or an increase in the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to, or pari passu with, the Series K Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Company, or creation or authorization of any obligation or security convertible
into shares of any class or series of stock unless the same ranks junior to, or
pari passu with, the Series K Preferred Stock as to the distribution of assets
on the liquidation, dissolution or winding up of the Company, whether any such
creation, authorization or increase will be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise. Any
action requiring consent pursuant to this clause 3(b) is referred to herein as a
"3(b) Consent Event."
(c) In addition to any other vote or consent required herein or by law, the
vote or written consent of the holders of 2/3 of the outstanding Series K
Preferred Stock, voting together as a single class on an as-if converted to
Common Stock basis, will be necessary for effecting or validating the following
actions:
(i) Any 3(b) Consent Event, if, and only if, all actions required to
be taken under the terms of the Series J Preferred Stock to implement such 3(b)
Consent Event have not been taken or consented to by the requisite holders of
the outstanding Series J Preferred Stock prior to or concurrently with the
consent obtained with respect to such 3(b) Consent Event pursuant to clause
(3)(b);
-2-
<PAGE>
(ii) Except for any 3(b) Consent Event, any amendment, alteration or
repeal of the Certificate of Incorporation if the effect would be materially
detrimental or adverse in any manner with respect to the rights of the holders
of the Series K Preferred Stock;
(iii) Any redemption or other acquisition of any shares of Series K
Preferred Stock except pursuant to a purchase offer made pro rata to all holders
of the shares of Series K Preferred Stock on the basis of the aggregate number
of outstanding shares of such Series Preferred then held by each such holder; or
(iv) Any increase or decrease (other than by conversion) in the
authorized number of shares of Series K Preferred Stock.
(d) In addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of a majority of the outstanding
Series Preferred (including the Series K Preferred Stock) and Series J
Preferred, voting together as a single class on an as-if converted to Common
stock basis, will be necessary for effecting or validating the following
actions:
(i) Any redemption, repurchase, payment of dividends or other
distribution with respect to Preferred Stock or Common Stock, except for
acquisitions of Preferred Stock or Common Stock by the Company pursuant to and
in compliance with agreements that permit the Company to repurchase such shares
upon termination of services to the company;
(ii) Any agreement by the Company or its stockholders regarding an
Asset Transfer or Acquisition (each as defined in Section 4(d));
(iii) Any amendment, modification or waiver of the Certificate of
Incorporation or Bylaws of the Company relative to the rights, preferences,
privileges, restrictions or other matters relating to any series of Preferred
Stock;
(iv) Any voluntary dissolution or liquidation of the Company; or
(v) Any issuance of equity securities as compensation to employees,
officers, directors or consultants of the Company other than under the Option
Plan (as defined in Section 5(j)(v)).
4. Liquidation Preference.
-----------------------
(a) Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, with respect to which the Total Company
Valuation (as defined below) is less than $26,000,000, before any distribution
or payment is made to the holders of Common Stock, but after the payment of the
full liquidation preference of (i) the Series J Preferred and (ii) any Senior
Preferred (as defined below), in each case, as set forth in the Certificate of
Incorporation, the holders of Series K Preferred Stock will be entitled to be
paid out of the assets of the Company, for each
-3-
<PAGE>
share of Series K Preferred Stock held by them, an amount per share of Series K
Preferred Stock equal to the Series K Original Issue Price (as defined below and
as adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to the Series K Preferred). Such payment shall be made on
a pari passu basis with the holders of the other Series Preferred (and any other
----------
series of Preferred Stock designated by the Board of Directors as sharing with
the Series Preferred an a pari passu basis in the event of a liquidation). Upon
payment in full of the liquidation preference specified in this Section 4(a),
each share of the Series K Preferred Stock shall, automatically and without
further action, be converted into Common Stock at the then effective Conversion
Rate (as defined in Section 5(a)), and the Common Stock issuable upon such
conversion shall participate in the proceeds of the liquidation of the Company
as provided in Section 4(c). Any series of Preferred Stock which is designated
as senior to the Series K Preferred Stock with respect to liquidation
preferences and the creation or authorization of which was consented to in
accordance with clause 3(b) and, if applicable, clause 3(c)(i) is referred to
herein as "Senior Preferred."
(b) If the assets to be distributed among the holders of the Series K
Preferred Stock, the other Series Preferred (and any other series of Preferred
Stock designated by the Board of Directors as sharing with the Series Preferred
on a pari passu basis in the event of a liquidation) are insufficient to permit
payment in full to such holders of the amounts distributable pursuant to the
Certificate of Incorporation, then such assets will be distributed ratably among
such holders of outstanding shares of Series K Preferred Stock, shares of other
Series Preferred, and any other series of Preferred Stock designated by the
Board of Directors as sharing with the Series Preferred on a pari passu basis
in the event of a liquidation.
(c) After the payment of the full liquidation preference of the Series K
Preferred Stock and the other Series Preferred, and any liquidation preference
of the Series J Preferred pursuant to Section 4.3(d)(1) of the Company's
Certificate of Incorporation, the remaining assets of the Company legally
available for distribution, if any, will be distributed ratably to the holders
of the Common Stock and Series J Preferred on an as-if-converted to Common Stock
basis.
(d) The following definitions will apply under this Section 4:
(i) a "liquidation" of the Company will include (without limitation):
(A) any consolidation or merger of the Company with or into any
other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization own 50% or less of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which 50% or more of the Company's voting power is transferred unless
within ten days after receipt of notice that the event will occur, holders of a
majority of the outstanding Series Preferred (including the Series K Preferred
Stock), voting together as a single class on an as-if-converted to Common Stock
basis, and holders of a majority of the outstanding Series J Preferred elect in
writing not to treat such event as a liquidation of the Company (an
"Acquisition"); or
-4-
<PAGE>
(B) a sale, lease or other disposition of all or substantially
all of the assets of the Company (an "Asset Transfer").
(ii) "Total Company Valuation" means the aggregate Fair Market Value
of the consideration received or to be received by all holders of capital stock
of the Company in any liquidation, dissolution or winding up of the Company
(including consideration received or to be received through the operation of
this Section 4). In the event of an Acquisition involving the transfer of less
than all of the capital stock of the Company, the Total Company Valuation will
be computed by multiplying the Fair Market Value of the consideration received
or to be received by all holders of capital stock of the Company in such
transaction by a fraction, the numerator of which is the total number of shares
of capital stock of the Company then outstanding (on an as-if-converted to
Common Stock basis and assuming the exercise of all outstanding stock options
and warrants) and the denominator of which is the number of shares of the
Company's capital stock (on an as-if-converted to Common Stock basis and
assuming the exercise of all outstanding stock options and warrants) actually
transferred.
(iii) "Fair Market Value" means (A) with respect to consideration
consisting of cash, the amount of such cash, (B) with respect to securities
that are publicly traded, the average Current Market Price of such securities
over the 20 consecutive trading days ending with and including the date prior to
the date as of which Fair Market Value is to be determined, and (C) with respect
to any other property, the value determined in good faith by the Board of
Directors of the Company.
(iv) "Current Market Price" of a security means, for any day, the
last reported sale price, or if no sale takes place on such day, the average of
the reported closing bid and asked prices, in either case as reported on the New
York Stock Exchange Composite Tape or, if such security is not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such security is not quoted on the Nasdaq National
Market, as reported by Nasdaq in the over the counter market or, if not reported
by Nasdaq, the average of the bid and asked prices as furnished by any New York
Stock Exchange member firm regularly making a market in such security selected
for the purpose by the Company's Board of Directors or, if there is no such
firm, as determined in good faith by the Company's Board of Directors.
(v) "Series K Original Issue Price" means, with respect to each
share of Series K Preferred, the Series K Purchase Price (as defined in the
Securities Purchase Agreement dated as of July 28, 1998 among the Company and
the Investors named therein).
5. Conversion Rights of Series K Preferred Stock. The holders of the Series K
----------------------------------------------
Preferred Stock will have the following rights with respect to the conversion of
the Series K Preferred Stock into shares of Common Stock:
-5-
<PAGE>
(a) Conversion Rate. The Conversion Rate in effect at any time for
----------------
conversion of the Series K Preferred will be the quotient obtained by dividing
the Series K Original Issue Price by Series K Conversion Price (as defined
below). The conversion price for the Series K Preferred Stock (the "Series K
Conversion Price") will initially be the Series K Original Issue Price. The
Series K Conversion Price will be adjusted from time to time in accordance with
this Section 5. All references to the Series K Conversion Price herein mean the
Series K Conversion Price as so adjusted. The number of shares of Common Stock
to which a holder of Series K Preferred Stock will be entitled upon conversion
will be the product obtained by multiplying the Series K Conversion Rate then
in effect by the number of shares of Series K Preferred Stock being converted.
(b) Optional Conversion.
--------------------
(i) Subject to and in compliance with the provisions of this Section
5(b), any shares of Series K Preferred Stock may, at the option of the holder,
be converted at any time into fully-paid and nonassessable shares of Common
Stock.
(ii) Each holder of Series K Preferred Stock who desires to convert
the same into shares of Common Stock pursuant to this Section 5(b) will
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or any transfer agent for the Series K Preferred Stock, and will
give written notice to the Company at such office that such holder elects to
convert the same. Such notice will state the number of shares of Series K
Preferred Stock being converted. Thereupon, the Company will promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and will
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series K Preferred Stock being
converted. Such conversion will be deemed to have been made at the close of
business on the date of such surrender of the certificates representing the
shares of Series K Preferred Stock to be converted, and the person entitled to
receive the shares of Common Stock issuable upon such conversion will be treated
for all purposes as the record holder of such shares of Common Stock on such
date.
(c) Automatic Conversion.
---------------------
(i) Each share of Series K Preferred Stock will automatically be
converted into shares of Common Stock (A) at any time upon either of (1) the
affirmative election of the holders of a majority of the then-outstanding shares
of the Series K Preferred Stock and the then-outstanding shares of Series J
Preferred Stock, voting together as a single class on an as-if converted to
Common Stock basis; provided, however, that the effectiveness of such election
shall be subject to the prior or concurrent conversion of (or irrevocable
election to convert) the Series J Preferred Stock pursuant to Section
4.3(f)(3)(A) of the Certificate of Incorporation or (2) the affirmative election
of the holders of a majority of the then-outstanding shares of the Series K
Preferred Stock, voting together
-6-
<PAGE>
as a single class on an as-if converted Common Stock basis, or (B) immediately
upon the closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Company in
which (1) the per share price to the public is at least $3.00 and (2) the
aggregate cash proceeds to the Company (after deduction of underwriters'
commissions and expenses) are at least $15,000,000 (a "Qualified IPO").
(ii) Upon the first occurrence of an event specified in Section
5(c)(i), the outstanding shares of Series K Preferred Stock will be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Company or its transfer agent; provided, however, that the Company will not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless the certificates evidencing such shares of Series K
Preferred Stock are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates (and, if reasonably requested by the
Company, obtains a bond therefor). Upon the occurrence of such automatic
conversion of the Series K Preferred Stock, the holders of Series K Preferred
Stock will surrender the certificates representing such shares at the office of
the company or any transfer agent for the Series K Preferred Stock. Thereupon,
there will be issued and delivered to such holder promptly at such office and in
its name as shown on such surrendered certificate or certificates, a certificate
or certificates for the number of shares of Common Stock into which the shares
of Series K Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred, and declared and unpaid dividends will be
paid in accordance with the provisions of Section 5(b)(ii).
(d) Adjustment For Stock Splits and Combinations. If the Company at any
---------------------------------------------
time from time to time after the date on which this Certificate of Designation
is filed (the "Filing Date") effects a subdivision of the outstanding Common
Stock without a corresponding subdivision of the Preferred Stock, the Series K
Conversion Price in effect immediately before that subdivision will be
proportionately decreased. Conversely, if the Company at any time or from time
to time after the Filing Date combines the outstanding shares of Common Stock
into a smaller number of shares without a corresponding combination of the
Preferred Stock, the Series K Conversion Price in effect immediately before the
combination will be in proportionately increased. Any adjustment under this
Section 5(d) will become effective at the close of business on the date the
subdivision or combination becomes effective; provided that if the initial
Series K Conversion Price has not yet been determined as of such date, then such
adjustment shall be made on the first day that the Series K Conversion Price may
be determined.
(e) Adjustment For Common Stock Dividends And Distributions. If the
--------------------------------------------------------
Company at any time or from time to time after the Filing Date makes a dividend
or other distribution payable in additional shares of Common Stock, in each such
event the Series K Conversion Price that is then in effect will decreased as of
the time of such issuance by multiplying the Series K Conversion Price
-7-
<PAGE>
then in effect by a fraction (i) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and (ii) the denominator of which is the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance; provided that if the initial Series K Conversion Price has not yet
been determined as of date of such issuance, then such adjustment shall be made
on the first day that the Series K Conversion Price may be determined.
(f) Adjustments For Other Dividends And Distributions. If the Company at
--------------------------------------------------
any time or from time to time after the Filing Date makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Company other than
shares of Common Stock, in each such event provision will be made so that the
holders of the Series K Preferred Stock will receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Company that they would have received had
their Series K Preferred Stock been converted into Common Stock on the date of
such event (giving effect to the Series K Conversion Price in effect on that
date or on the first date thereafter that the Series K Conversion Price may be
determined) and had they thereafter, during the period from the date of such
event to and including the conversion date, retained such securities receivable
by them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 5 with respect to rights of the
holders of the Series K Preferred Stock or with respect to such other securities
by their terms.
(g) Adjustments For Reclassification, Exchange And Substitution. If at any
------------------------------------------------------------
time or from time to time after the Filing Date the Common Stock issuable upon
the conversion of the Series K Preferred Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer or a stock dividend, combination, split, recapitalization or
other transaction for which adjustment to the Series K Conversion Price is
provided elsewhere in this Section 5), in any such event each holder of Series K
Preferred Stock will have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Common Stock into which such shares of Series K Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change (giving effect to the Series Conversion Price in
effect at that time or at the first time thereafter that the Series K Conversion
Price may be determined), all subject to further adjustment as provided herein
or with respect to such securities or property by the terms thereof.
(h) Reorganizations. If at any time or from time to time after the Filing
----------------
Date there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer or a stock dividend, combination, split,
recapitalization or other transaction for which adjustment to the Series K
Conversion Rate is provided elsewhere in this Section 5), as part of such
capital reorganization, provision will be made so that the holders of the Series
K Preferred Stock will thereafter be entitled to receive upon conversion of the
Series K Preferred Stock the number of shares of stock or other securities or
property of the Company to which a holder of the number of shares of Common
Stock
-8-
<PAGE>
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any case, appropriate adjustment will be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of Series K Preferred Stock after the capital reorganization to the
end that the provisions of this Section 5 (including adjustments of the Series K
Conversion Price and the number of shares issuable upon conversion of the Series
K Preferred Stock) will be applicable after that event and be as nearly
equivalent as practicable.
(j) Sale Of Shares Below Series K Conversion Price.
-----------------------------------------------
(i) If at any time or from time to time after the Filing Date and on
or prior to September 30, 1999 the Company issues or sells, or is deemed by the
express provisions of this Section 5 to have issued or sold, Additional Shares
of Common Stock (as hereinafter defined), other than as an Acquisition or Asset
Transfer or a stock dividend, combination, split, recapitalization or other
transaction for which adjustment to the Series K Conversion Rate is provided
elsewhere in this Section 5, for an Effective Price (as hereinafter defined)
less than the then-effective Series K Conversion Price, then and in each such
case the then-effective Series K Conversion Price will be reduced (if
necessary), as of the opening of business on the date of such issue or sale, to
be equal to the lesser of the then-effective Series K Conversion Price and the
Series K Conversion Price obtained by application of the following expression:
1
-----------
CP = (1/EP - WF)
Where CP is the Series K Conversion Price, EP is the Effective Price (as
defined below), and WF is the Warrant Factor (as defined below).
(ii) If at any time or from time to time after September 30, 1999 the
Company issues or sells, or is deemed by the express provisions of this Section
5 to have issued or sold, Additional Shares of Common Stock, other than as an
Acquisition or Asset Transfer or a stock dividend, combination, split,
recapitalization or other transaction for which adjustment to the Series K
Conversion Rate is provided elsewhere in this Section 5, for an Effective Price
less than the then-effective Series K Conversion Price, then and in each such
case the then-effective Series K Conversion Price will be reduced (if necessary)
so that each holder of Series K Preferred Stock shall be entitled to receive
upon conversion that number of shares of Common Stock equal to the greater of
(X) the number of shares resulting from the application of the then effective
Series K Conversion Price and (Y) the number of shares resulting from (A)
applying a conversion price determined by multiplying the then-effective Series
K Conversion Price by a fraction (q) the numerator of which will be (I) the
number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale, plus (2) the number of shares of Common
Stock that the aggregate consideration received (as hereinafter defined) by the
Company for the total number of Additional Shares of Common Stock so issued
would be purchase at such Series K Conversion Price, and (r) the denominator of
which will be the number of shares of Common Stock deemed
-9-
<PAGE>
outstanding immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued, and (B) subtracting, from the
number of shares obtained by applying the conversion price determined in the
forgoing clause (A), a number of shares obtained by multiplying the Warrant
Factor by the product of the Series K Original Issue Price and the number of
shares of Series K Preferred Stock held by the relevant holder. For the purposes
of preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date will be the sum of (1) the number of shares of
Common Stock actually outstanding and (2) the number of shares of Common Stock
into which the then-outstanding shares of Preferred Stock could be converted if
fully converted on the day immediately preceding the given date.
(iii) For the purpose of making any adjustment required under this
Section 5(j), the consideration received by the Company for any issue or sale of
securities (A) to the extent it consists of cash, will be computed at the net
amount of cash received by the Company after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale but without deduction of any expense
payable by the Company, (B) to the extent it consists of property other than
cash, will be computed at the fair market value of that property as determined
in good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as hereinafter defined) or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets of the
Company for a consideration that covers both, will be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the Board of Directors to be allocable to such Additional Shares of Common
Stock, Convertible Securities or rights or options.
(iv) For the purpose of the adjustment required under this Section
5(j), if the Company issues or sells any rights or options for the purchase of,
or stock or other securities convertible into, Additional Shares of Common Stock
(such convertible stock or securities being herein referred to as "Convertible
Securities") and if the Effective Price of such Additional Shares of Common
Stock is less than the Series K Conversion Price, then in each case the Company
will be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance if
such rights or options or Convertible Securities plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of the
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if
in the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of anti-dilution or similar protective
clauses, the Company will be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence
-10-
<PAGE>
of specified events other than by reason of anti-dilution adjustments, the
Effective Price will be recalculated using the figure to which such minimum
amount of consideration is reduced; provided further that if the minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price will be again recalculated using the increased minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series K
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, will be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities will expire without having been exercised, the Series K Conversion
Price as adjusted upon the issuance of such rights, options or Convertible
Securities will be adjusted to the Series K Conversion Price that would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold on the exercise of such rights of conversion of
such Convertible Securities, and such Additional Shares of Common Stock, if any,
were issued or sold for the consideration actually received by the Company for
the granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment will not apply to prior conversions of Series K
Preferred Stock.
(v) "Additional Shares of Common Stock" means all shares of Common
Stock issued by the Company or deemed to be issued pursuant to this Section
5(j), whether or not subsequently reacquired or retired by the Company, other
than (A) shares of Common Stock issued upon conversion of the Preferred Stock,
(B) up to 2,850,000 shares (the "Cap") of the Company's Common Stock and/or
options or other Common Stock purchase rights, and the Common Stock issued
pursuant to such options or other rights (whether previously or hereafter issued
and as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like) issued to employees, officers, or directors of or consultants to
the Company or any subsidiary pursuant to a stock option plan that is in effect
on the Filing Date or that is approved unanimously by the Board of Directors
after the Filing Date (the "Option Plan"), provided, however, that if any
options or other rights to purchase Common Stock lapse unexercised, such options
or rights will not be counted toward the Cap after such lapse; (C) shares of
Common Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Filing Date; (D) shares of Common Stock and/or
warrants, options or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) issued after the Filing
Date pursuant to any equipment leasing arrangement or debt financing approved by
the Board of Directors; and (E) shares of Common Stock and/or warrants issued or
deemed to be issued pursuant to the Securities Purchase Agreement dated as of
July __, 1998 among the Company and the Investors named therein, as amended from
time to time, and shares of Common Stock issuable upon the exercise of warrants
issued or deemed to be issued, pursuant to such Agreement.
-11-
<PAGE>
(vi) The "Effective Price" of Additional Shares of Common Stock means
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this Section 5(j), into the aggregate consideration received, or
deemed to have been received by the Company for such issue under this Section
5(j), for such Additional Shares of Common Stock.
(vii) "Warrant Factor" means 0.193333, subject to adjustment as
provided herein. In case the Company shall at any time after the Filing Date
subdivide (by any stock split, stock dividend or otherwise) its outstanding
shares of Common Stock into a greater number of shares, the Warrant Factor in
effect immediately prior to such subdivision shall be proportionately increased,
and, conversely, in case at any time after the Filing Date the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Warrant Factor in effect immediately prior to such combination shall be
proportionately decreased. Each calculation of the Warrant Factor will be made
to at least six decimal places.
(k) Certificate of Adjustment. In each case of an adjustment or
-------------------------
readjustment of the Series K Conversion Price for the number of shares of Common
Stock or other securities issuable upon conversion of the Series K Preferred
Stock, if the Series K Preferred Stock is then convertible pursuant to this
Section 5, the Company, at its expense, will compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and will mail such certificate, by
first class mail, postage paid, to each registered holder of Series K Preferred
Stock at the holder's address as shown in the Company's book's. The certificate
will set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based, including a statement of (A) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (B) the Series K Conversion Price at the time in effect, (C) the
number of Additional Shares of Common Stock and (D) the type and amount, if any,
of other property that at the time would be received upon conversion of the
Series K Preferred Stock.
(l) Notices Of Record Date. Upon (A) any taking by the Company of a
----------------------
record of the holders of any class of securities for the purpose of determining
the holders there of who are entitled to receive any dividend or other
distribution or (B) any Acquisition or other capital reorganization of the
Company, any reclassification of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, any Asset
Transfer or voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company will mail to each holder of Series K Preferred Stock at
least 20 days prior to the record date specified therein a notice specifying (X)
the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (Y)
the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up is expected to become effective, and (Z) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
will be entitled
-12-
<PAGE>
to exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(m) Fractional Shares. No Fractional Shares of Common Stock will be issued
-----------------
upon conversion of Series K Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series K Preferred Stock by a holder thereof will be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company will, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(n) Reservation Of Stock Issuable Upon Conversion. The Company will at all
----------------------------------------------
times reserve and keep available out of it's authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series K Preferred Stock, such number of its shares of Common Stock as
from time to time will be sufficient to effect the conversion of all outstanding
shares of the Series K Preferred Stock. If at any time the number of authorized
but unissued shares of Common Stock is not sufficient to effect the conversion
of all then-outstanding shares of the Series K Preferred Stock, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as will be sufficient for such purpose.
(o) Notices. Any notice or required or permitted by the provisions of this
-------
Section 5 will be in writing and will be deemed effectively given: (A) upon
personal delivery to the party to be notified, (B) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (C) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (D) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices will be addressed to
each holder of record at the address of such holder appearing on the book of the
Company.
(p) Payment Of Taxes. The Company will pay all taxes (other than taxes
-----------------
based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series K Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series K Preferred
Stock so converted were registered.
(q) No Dilution or Impairment. Without the consent of the holders of then-
-------------------------
outstanding Series K Preferred as required under Section 3(b), the Company will
not amend its Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or take any other voluntary action for the purpose of
avoiding
-13-
<PAGE>
or seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series K Preferred Stock against dilution or other impairment.
[The remainder of this page is intentionally left blank.]
-14-
<PAGE>
[Certificate Of Designation]
IN WITNESS WHEREOF, ACCESS Radiology Corporation has caused this
Certificate to be signed by Scott S. Sheldon, its President.
ACCESS RADIOLOGY CORPORATION
By:____________________________________
Scott S. Sheldon, President
<PAGE>
EXHIBIT B
See Exhibit 10.18 filed with this Registration Statement.
<PAGE>
Exhibit C
SCHEDULE OF EXCEPTIONS TO
ACCESS RADIOLOGY CORPORATION
SERIES K SECURITIES PURCHASE AGREEMENT
Capitalized terms used herein and not otherwise defined have the meanings
set forth in the Securities Purchase Agreement. Disclosure of any matter in any
item of this Schedule is deemed to be disclosure of such matter for purposes of
all items with respect to which such matter is required to be disclosed.
Disclosure of any matter in this Schedule does not, by implication or otherwise,
indicate that such matter is material.
2.5(d) The Company has issued a certificate for five shares of Series C
Preferred Stock to Joseph Tortorici, a holder who in fact subscribed and paid
for four shares. The Company is in the process of contacting Mr. Tortorici to
correct this error.
2.5(e) Certain nominee holders of capital stock of the Company that is
beneficially owned by persons resident outside of the United States have granted
proxies to an individual representative for purposes of voting on matters
submitted to shareholders.
2.7. Contracts:
1. Master Lease Agreement with LTI Ventures Leasing Corp.
2. Loan Agreement and Related Documentation with Fleet National Bank.
3. OEM Development Software Agreement with Mitra Imaging Incorporated.
4. Software Development and Licensing Agreement with AWARE, Inc.
5. Amended and Restated Reseller Agreement with ISG Technologies, Inc.
6.Lease Agreement with Hartwell Group LLC (principal office and manufacturing
facility).
7. Purchase Agreement originally with Lockheed Martin Medical Imaging Systems,
Inc. (Note: The business of Lockheed Martin Medical Imaging Systems, Inc. has
since been acquired by General Electric. The counterparty is now GE Medical
Systems.)
8. Employment Agreement with Scott Sheldon.
<PAGE>
9. Employment Agreement with Philip Holberton.
10. Employment Agreement with Howard Pinsky.
11. Letter of Intent with Sterling Diagnostic Imaging, Inc.
12. Various confidentiality agreements with industry participants.
13. Stock option agreements with directors, employees and members of the Medical
and Technical Advisory Board.
14. Contract Tariff with ATT.
15. Master Software Agreement with Astea International, Inc.
16. Investors Rights Agreement with holders of Series J Preferred Stock.
17. Series J Preferred Stock Purchase Agreement.
18. Equipment Purchase Contract with Lumisys, Inc.
19. Reseller Agreement with IMNET Systems, Inc.
2.8. Mr. Gary Sadow, a member of the Company's Medical and Technical
Advisory Board to whom stock options have been granted, is an officer of
Sterling Diagnostic Imaging, Inc. ("Sterling"). ACCESS and Sterling have entered
into a letter of intent regarding the resale by Sterling of ACCESS products.
Mr. Sadow participated in the negotiation of this letter of intent and is
expected to participate in the negotiation of definitive contractual
documentation.
2.12. American Telemedicine International/ Massachusetts General Hospital.
--------------------------------------------------------------------
ACCESS received a letter dated June 19, 1996 from counsel to American
Telemedicine International ("ATI"), written on behalf of ATI and Massachusetts
General Hospital ("MGH"). This letter states that ATI is "associated...through
merger" with RSTAR, Inc. ("RSTAR"), which is a former employer of Howard Pinsky,
an executive of ACCESS. The June 19th letter asserts that U.S. Patent No.
5,469,353, issued to Mr. Pinsky and others and assigned to ACCESS, is derived
from proprietary information and trade secrets of MGH and RSTAR, has been
improperly assigned, and is currently unenforceable due to incorrect ownership.
The letter demands assignment of the patent to ATI and the addition of a current
ATI employee as an inventor. The June 19th letter asserts that Mr. Pinsky had
misappropriated proprietary information and trade secrets relevant to the patent
which were provided to him while working for RSTAR. Counsel to ATI also made
claims against Mr. Pinsky in a separate letter addressed to Mr. Pinsky
personally. ACCESS has agreed to indemnify Mr. Pinsky against claims made
against him in connection with this dispute.
-2-
<PAGE>
The June 19th letter contained an offer to make documentation supporting
the claims of RSTAR and MGH available to ACCESS. In a responsive letter dated
July 3, 1996, patent counsel to ACCESS (Lahive & Cockfield) stated that a
preliminary investigation indicated that the assertions of the June 19th letter
were incorrect, and requested copies of the offered documentation. In a
subsequent letter dated July 31, counsel to ATI stated that delivery of such
documentation would be conditioned on execution by ACCESS of an enclosed
"Confidential Disclosure Agreement", the terms of which are unacceptable to
ACCESS. The July 31 letter also requested that ATI receive documentation
relevant to the patent from ACCESS. In a further response dated August 21,
counsel to ACCESS stated that the agreement proposed by ATI was not acceptable,
that in any event no confidentiality agreement should be required for disclosure
of material now included in an issued patent, and that ACCESS was not prepared
to deliver any material to ATI prior to receiving some substantiation of ATI's
claims. The August 21 letter further stated the belief of ACCESS that the claims
of ATI and MGH are without merit.
Subsequent to August 21, 1996, counsel to ACCESS and counsel to ATI
exchanged further letters and telephone calls regarding the terms on which ATI
would be willing to make material supporting ATI's claims available to ACCESS.
No resolution to this matter was reached, and ATI and its counsel have not
communicated with ACCESS or its counsel since December 19, 1996, the date of the
last letter that counsel to ACCESS sent to counsel to ATI on this matter.
ACCESS believes that the claims of ATI and MGH are without merit and
intends to contest them vigorously.
2.16. Reference is made to the matters disclosed in items 2.7 and 2.12.
2.17(a). The Company is currently experiencing losses on a cash basis of
approximately $300,000 per month. Reference is made to all other matters
disclosed in response to Section 2.17.
2.17(c). GE Medical Systems is a business unit of General Electric that
succeeded through an asset purchase to the business of Lockheed Martin Medical
Imaging ("LMMIS") and the Purchase Agreement between ACCESS and LMMIS. GE
Medical Systems has informed ACCESS that, as a matter of policy, GE Medical
Systems will not honor certain provisions of the LMMIS contract calling for
rebates of discounts granted by ACCESS if volume purchase targets are not met.
ACCESS and GE Medical Systems are in the process of amending the LMMIS contract
to, among other things, eliminate these rebates.
2.17(e). The Fleet loan was renewed and amended as of April 10, 1998.
ACCESS has amended its software agreement ISG Technologies since March 31.
ACCESS is in the process of renegotiating its agreement for sales of services
and equipment to TeleQuest, Inc., a customer undergoing financial stress, and
has agreed to modify or cancel some of TeleQuest's purchase obligations
2.17(f). ACCESS finalized a new bonus plan for senior executives in May of
1998.
-3-
<PAGE>
2.17(h). Calvin Head, the Company's Director of Customer Engineering,
resigned in May of 1998.
2.17(j). ACCESS repurchased 100,000 shares of Common Stock from Scott
Sheldon for $50,000 in April of 1998.
2.18. Reference is made to Item 2.7. The Company licenses various generally
commercially available software from vendors (for example, Microsoft) under
standard terms of such vendors.
2.19. Reference is made to Items 2.7 and 2.17(f).
2.20. ACCESS believes that it is late in filing some of its state sales tax
returns. ACCESS does not believe that this will have a Material Adverse Effect.
The Commonwealth of Massachusetts has audited ACCESS's Massachusetts sales tax
returns through 1997 and has assessed additional sales tax as a result of this
audit. ACCESS is contesting the amount of this assessment.
-4-
<PAGE>
EXHIBIT D
See Exhibit 10.9 filed with this Registration Statement.
<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
-2-
<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:
-3-
<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.
-4-
<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.
-5-
<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,
-6-
<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;
-7-
<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
-8-
<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
-9-
<PAGE>
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.
-10-
<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 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.
-11-
<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.
-13-
<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: $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 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. Parakh
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 A
BEDROCK CAPITAL PARTNERS I, L.P. $ 233,189.60
VBW EMPLOYEE BEDROCK FUND, L.P. $ 7,039.20
CREDIT SUISSE FIRST BOSTON BEDROCK FUND, L.P. $ 9,770.60
PACIFIC VENTURE GROUP, L.P. $ 477,600
PVG ASSOCIATES, L.P. $ 22,400
DELPHI VENTURES III, L.P. $ 245,578.20
DELPHI BIOINVESTMENTS III, L.P. $ 4,421.20
CHILD HEALTH CORPORATION OF AMERICA $ 250,000
BESSEC VENTURES IV L.P. $ 89,314.40
BESSEMER VENTURE PARTNERS IV, L.P. $ 90,798.40
WILLIAM T. BURGIN $ 1,719.20
NEILL H. BROWNSTEIN $ 1,719.20
ROBERT H. BUESCHER $ 1,171.80
G. FELDA HARDYMON $ 1,563.80
CHRISTOPHER GABRIELI $ 8,593.20
DAVID J. COWAN $ 6,249.60
BRUCE K. GRAHAM $ 344.40
GAUTAM A. PRAKASH $ 1,873.20
ROBI L. SONI $ 344.40
JOANNA A. STROBER $ 781.20
CRAIGHILL CORPORATION $ 714
RICHARD R. DAVIS $ 1,904
<PAGE>
CONALY PARTNERS $ 714
LINDSAY 1994 FAMILY PARTNERSHIP, L.P. $ 1,586.20
JOHN G. MACDONALD $ 571.20
HOWARD S. MARKOWITZ $ 317.80
EDWARD PARK $ 793.80
ROBERT J.S. RORISTON $ 634.20
STEVEN L. WILLIAMSON $ 729.40
WOODS 1994 FAMILY PARTNERSHIP, L.P. $ 2076.20
BVP IV SPECIAL SITUATIONS L.P. $ 10,487.40
BESSEMER VENTURE INVESTORS L.P. $ 24,999.80
-2-
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF ACCESS RADIOLOGY CORPORATION
ACCESS Radiology Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, acting by unanimous
written consent dated January 15, 1999 in accordance with Sections 141 and 242
of the General Corporation Law of the State of Delaware, duly adopted a
resolution approving the amendments to the Company's Certificate of
Incorporation set forth below.
SECOND: That the amendments to the Company's Certificate of Incorporation
set forth below have been authorized, in accordance with Section 242 of the
General Corporation Law of the State of Delaware, by the vote of the holders of
a majority of all outstanding shares entitled to vote on amendments to the
Company's Certificate of Incorporation.
THIRD: That the amendments to the Company's Certificate of Incorporation
set forth below, insofar as they amend the terms of the Company's Series J
Preferred Stock, have been authorized, in accordance with the Certificate of
Incorporation and Section 242 of the General Corporation Law of the State of
Delaware, by the written consent of the holders of at least two-thirds of the
outstanding shares of Series J Preferred Stock.
FOURTH: That the amendments to the Company's Certificate of Incorporation
set forth below, insofar as they amend the terms of the Company's Series K
Preferred Stock, have been authorized, in accordance with the Certificate of
Incorporation and Section 242 of the General Corporation Law of the State of
Delaware, by the written consent of the holders of at least two-thirds of the
outstanding shares of Series K Preferred Stock.
FIFTH: That the amendments to the Company's Certificate of Incorporation
referred to above are as follows:
1. Section 1 of the Certificate of Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of the Series K Preferred Stock
(the "Series K Designation") is amended to read in its entirety as follows:
"1. Number of Shares. The series of Preferred Stock designated and known
----------------
as "Series K Preferred Stock" shall consist of 3,935,000 shares."
2. Section 4(d)(v) of the Series K Designation is amended to read in its
entirety as follows:
"(v) "Series K Original Issue Price" means, with respect to each share of
Series K Preferred Stock, $1.40."
3. Section 5(j)(v) of the Series K Designation is amended to read in its
entirety as follows:
"(v) "Additional Shares of Common Stock" means all shares of Common Stock
issued by the Company or deemed to be issued pursuant to this Section 5(j),
whether or not subsequently reacquired or retired by the Company, other than (A)
shares of Common Stock issued upon conversion of the Preferred Stock, (B) up to
2,850,000 shares (the "Cap") of the Company's Common Stock and/or options or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options or other rights (whether previously or hereafter issued and as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like)
issued to employees, officers, or
<PAGE>
directors of or consultants to the Company or any subsidiary pursuant to a stock
option plan that is in effect on the Filing Date or that is approved unanimously
by the Board of Directors after the Filing Date (the "Option Plan"), provided,
however, that if any options or other rights to purchase Common Stock lapse
unexercised, such options or rights will not be counted toward the Cap after
such lapse; (C) shares of Common Stock issued pursuant to the exercise of
options, warrants or convertible securities outstanding as of the Filing Date;
(D) shares of Common Stock and/or warrants, options or other rights (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like)
issued after the Filing Date pursuant to any equipment leasing arrangement or
debt financing approved by the Board of Directors; (E) shares of Common Stock
and/or warrants issued or deemed to be issued pursuant to the Securities
Purchase Agreement dated as of July 28, 1998 among the Company and the Investors
named therein, as amended from time to time, and shares of Common Stock issuable
upon the exercise of warrants issued or deemed to be issued pursuant to such
Agreement; and (F) shares of Common Stock and/or warrants issued or deemed to be
issued pursuant to the Securities Purchase Agreement dated as of January 20,
1999 among the Company and the Investors named therein, as amended from time to
time, and shares of Common Stock issuable upon the exercise of warrants issued
or deemed to be issued pursuant to such Agreement.
4. The first sentence of Section 4.3(f)(9)(D) of the Certificate of
Incorporation relating to the Series J Preferred Stock is amended to read in its
entirety as follows:
"(D) "Additional Shares of Common Stock" means all shares of Common Stock issued
by the Company or deemed to be issued pursuant to this Section 4.3(f)(9),
whether or not subsequently reacquired or retired by the Company, other than (1)
shares of Common Stock issued upon conversion of the Preferred Stock, (2) up to
2,850,000 shares (the "Cap") of the Company's Common Stock and/or options or
other Common Stock purchase rights, and the Common Stock issued pursuant to such
options or other rights (whether previously or hereafter issued and as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like)
issued to employees, officers, or directors of or consultants to the Company or
any subsidiary pursuant to a stock option plan that is in effect onthe Original
Issue Date or that is approved unanimously by the Board of Directors after the
Original Issue Date (the "Option Plan"), provided, however, that if any options
or other rights to purchase Common Stock lapse unexercised, such options or
rights will not be counted toward the Cap after such lapse; (3) shares of Common
Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date; (4) shares of Common Stock
and/or warrants, options or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) issued after the Original
Issue Date pursuant to any equipment leasing arrangement or debt financing
approved by the Board of Directors; (5) shares of Common Stock and/or warrants
issued or deemed to be issued pursuant to a Qualified Standby Financing, and
shares of Common Stock issuable upon the exercise of warrants issued or deemed
to be issued, pursuant to a Qualified Standby Financing; and (6) shares of
Common Stock and/or warrants issued or deemed to be issued pursuant to the
Securities Purchase Agreement dated as of January 20, 1999 among the Company
and the Investors named therein, as amended from time to time, and shares of
Common Stock issuable upon the exercise of warrants issued or deemed to be
issued pursuant to such Agreement."
IN WITNESS WHEREOF, ACCESS Radiology Corporation has caused this
Certificate to be executed by Scott S. Sheldon, its President, and attested by
Christine Chung, its Secretary, as of the 27th day of January, 1999.
______________________
Scott S. Sheldon
President
ATTEST:
______________________
Christine Chung
Secretary
-2-
<PAGE>
EXHIBIT C
See Exhibit 10.19 filed with this Registration Statement.
<PAGE>
EXHIBIT D
SCHEDULE OF EXCEPTIONS TO
ACCESS RADIOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Securities Purchase Agreement. Disclosure of any
matter in any item of this Schedule is deemed to be disclosure of such matter
for purposes of all items with respect to which such matter is required to be
disclosed. Disclosure of any matter in this Schedule does not, by implication or
otherwise, indicate that such matter is material.
2.5(d) The Company has issued a certificate for five shares of Series
C Preferred Stock to Joseph Tortorici, a holder who in fact subscribed and paid
for four shares. The Company is in the process of contacting Mr. Tortorici to
correct this error.
2.5(e) Certain nominee holders of capital stock of the Company that is
beneficially owned by persons resident outside of the United States have granted
proxies to an individual representative for purposes of voting on matters
submitted to shareholders.
2.7. Contracts:
1. Master Lease Agreement with LTI Ventures Leasing Corp.
2. Loan Agreement and Related Documentation with Fleet National Bank.
3. OEM Development Software Agreement with Mitra Imaging Incorporated.
4. Software Development and Licensing Agreement with AWARE, Inc.
5. Amended and Restated Reseller Agreement with ISG Technologies, Inc.
6. Lease Agreement with Hartwell Group LLC (principal office and manufacturing
facility).
7. Master Sale and Service Agreement with GE Medical Systems.
8. Employment Agreement with Scott Sheldon.
9. Employment Agreement with Howard Pinsky.
10. Letter of Intent with Sterling Diagnostic Imaging, Inc.
11. Various confidentiality agreements with industry participants.
12. Stock option agreements with directors, employees and members of the Medical
and Technical Advisory Board.
13. Contract Tariff with ATT.
14. Master Software Agreement with Astea International, Inc.
<PAGE>
15. Investors Rights Agreement with holders of Series J Preferred Stock.
16. Series J Preferred Stock Purchase Agreement.
17. Equipment Purchase Contract with Lumisys, Inc.
18. Reseller Agreement with IMNET Systems, Inc.
19. Securities Purchase Agreement dated July 28, 1998 relating to Series K
Preferred Stock and Warrants.
20. Registration Rights Agreement dated July 28, 1998.
21. Acquisition Agreement with Raytheon E-Systems, Inc. (E-Med Acquisition).
22. Lease Agreement with NWA Limited Partnership (principal facility of E-Med in
San Antonio, Texas).
23. Lease Agreement with Commercial Realty Trust of Burlington (E-Med/MegaScan
facility in Billerica, MA).
24. License Agreement between Raytheon E-Systems, Inc. and MITRA Imaging,
Incorporated (acquired in E-Med transaction).
2.8. Mr. Gary Sadow, a member of the Company's Medical and Technical Advisory
Board to whom stock options have been granted, is an officer of Sterling
Diagnostic Imaging, Inc. ("Sterling"). ACCESS and Sterling have entered into a
letter of intent regarding the resale by Sterling of ACCESS products. Mr. Sadow
participated in the negotiation of this letter of intent and is expected to
participate in the negotiation of definitive contractual documentation.
2.11. Compliance with Instruments.
---------------------------
1. ACCESS is not in compliance with the covenants contained in its loan
agreement with Fleet Bank. Fleet Bank has, however, continued to advance funds
to ACCESS under the loan agreement and has orally promised to commence
documentation of an amended facility, to be effective upon the closing of $4.5
million in additional equity financing (inclusive of that contemplated by this
Securities Purchase Agreement and the Securities Purchase Agreement dated as of
July 28, 1998 among the Company and the Investors parties thereto).
2. Most if not all of the customer contracts acquired in the E-Med transaction
provide that they may not be assigned without the consent of the customer.
ACCESS has not obtained any such consents. These contracts may therefore have
been breached.
3. The lease of the principal E-Med facility in San Antonio, Texas, expired on
December 31, 1998, and ACCESS is now holding over in the space. ACCESS is
negotiating a lease for new space for occupancy on February 1, 1999. Based on
conversations with the landlord under the expired lease, ACCESS expects that the
landlord will not take legal action if ACCESS vacates by February 1.
4. The lease of the MegaScan facility in Billerica Mass. (acquired in the E-Med
acquisition) states that it may not be assigned without the landlord's consent.
ACCESS has not obtained this consent and therefore is in breach of this lease.
ACCESS anticipates opening discussions with the landlord promptly.
2.12. Litigation.
----------
-2-
<PAGE>
American Telemedicine International/ Massachusetts General Hospital. ACCESS
- -------------------------------------------------------------------
received a letter dated June 19, 1996 from counsel to American Telemedicine
International ("ATI"), written on behalf of ATI and Massachusetts General
Hospital ("MGH"). This letter states that ATI is "associated...through merger"
with RSTAR, Inc. ("RSTAR"), which is a former employer of Howard Pinsky, an
executive of ACCESS. The June 19th letter asserts that U.S. Patent No.
5,469,353, issued to Mr. Pinsky and others and assigned to ACCESS, is derived
from proprietary information and trade secrets of MGH and RSTAR, has been
improperly assigned, and is currently unenforceable due to incorrect ownership.
The letter demands assignment of the patent to ATI and the addition of a current
ATI employee as an inventor. The June 19th letter asserts that Mr. Pinsky had
misappropriated proprietary information and trade secrets relevant to the patent
which were provided to him while working for RSTAR. Counsel to ATI also made
claims against Mr. Pinsky in a separate letter addressed to Mr. Pinsky
personally. ACCESS has agreed to indemnify Mr. Pinsky against claims made
against him in connection with this dispute.
The June 19th letter contained an offer to make documentation supporting
the claims of RSTAR and MGH available to ACCESS. In a responsive letter dated
July 3, 1996, patent counsel to ACCESS (Lahive & Cockfield) stated that a
preliminary investigation indicated that the assertions of the June 19th letter
were incorrect, and requested copies of the offered documentation. In a
subsequent letter dated July 31, counsel to ATI stated that delivery of such
documentation would be conditioned on execution by ACCESS of an enclosed
"Confidential Disclosure Agreement", the terms of which are unacceptable to
ACCESS. The July 31 letter also requested that ATI receive documentation
relevant to the patent from ACCESS. In a further response dated August 21,
counsel to ACCESS stated that the agreement proposed by ATI was not acceptable,
that in any event no confidentiality agreement should be required for disclosure
of material now included in an issued patent, and that ACCESS was not prepared
to deliver any material to ATI prior to receiving some substantiation of ATI's
claims. The August 21 letter further stated the belief of ACCESS that the claims
of ATI and MGH are without merit.
Subsequent to August 21, 1996, counsel to ACCESS and counsel to ATI
exchanged further letters and telephone calls regarding the terms on which ATI
would be willing to make material supporting ATI's claims available to ACCESS.
No resolution to this matter was reached, and ATI and its counsel have not
communicated with ACCESS or its counsel since December 19, 1996, the date of the
last letter that counsel to ACCESS sent to counsel to ATI on this matter.
ACCESS believes that the claims of ATI and MGH are without merit and
intends to contest them vigorously.
White v ACCESS Radiology Corporation and David Tomczak. This is a
------------------------------------------------------
wrongful termination lawsuit filed by a former support engineer who was
terminated after working at ACCESS for approximately one month. The complaint
seeks damages of $65,000 and alleges breach of what Mr. White claims was an
employment contract, breach of an implied covenant of good faith, and various
related causes of action. ACCESS believes that this action is without merit and
is contesting the matter vigorously through its counsel, Ropes & Gray. ACCESS
has filed an answer to the complaint and discovery has begun. ACCESS expects to
file a motion for summary judgment during the first half of 1999.
Mohen v. E-Systems Medical Electronics, Inc., et a l. Liability for this
----------------------------------------------------
lawsuit was expressly assumed by ACCESS as part of the E-Med acquisition. The
complaint alleges that unpaid commissions of approximately $60,000 are due to
Mr. Mohen for sales of E-Med equipment procured by him. Raytheon E-Systems took
the position that, because the equipment in question was shipped and paid for
after the termination of Mr. Mohen's employment, no commissions were due under
the terms of Mr. Mohen's contract. Discovery is substantially complete and a
pre-trial conference has been scheduled for March of 1999.
ACCESS has reviewed the matter and believes that valid defenses to Mr.
Mohen's claims may exist. However, trial of the matter would involve substantial
risk and expense, particularly because none of the parties or witnesses involved
are now employed by ACCESS. ACCESS is therefore actively seeking to settle this
matter.
-3-
<PAGE>
ACCESS has made an offer of $30,000 to Mr. Mohen, who has countered with a
demand for $45,000. ACCESS believes that the matter will be settled for an
amount within this range.
2.16. Reference is made to the matters disclosed in items 2.7 and 2.12.
2.17 (a). The Company is currently experiencing losses on a cash basis of
approximately $300,000 per month. Reference is made to all other matters
disclosed in item 2.11.
2.17 (c). Three Arch Bay Health Sciences Fund ("Three Arch Bay") has informed
the Company that it is unable at this time to fulfill its commitment to purchase
$500,000 of Series K Preferred Stock of the Company under the Securities
Purchase Agreement dated July 28, 1998. The Company has agreed to amend the
Securities Purchase Agreement to permit the closing of this purchase to be
delayed until March 31, 1999. Three Arch Bay has agreed to make certain payments
to the Company under this amendment. If the Three Arch Bay purchase is not
consummated by March 31, 1999, the amendment provides that Three Arch Bay's
unsatisfied commitment will lapse, and that warrants issued to Three Arch Bay in
respect of the unsatisfied commitment will become void. Should this occur, the
Company would seek alternative purchasers for the Series K Preferred Stock
subject to Three Arch Bay's commitment and not purchased by Three Arch Bay.
2.18. Reference is made to Item 2.7. The Company licenses various generally
commercially available software from vendors (for example, Microsoft) under
standard terms of such vendors.
2.19. Reference is made to Item 2.7.
2.20. ACCESS believes that it is late in filing some of its state sales tax
returns. ACCESS does not believe that this will have a Material Adverse Effect.
The Commonwealth of Massachusetts has audited ACCESS's Massachusetts sales tax
returns through 1997 and has assessed additional sales tax as a result of this
audit. ACCESS is contesting the amount of this assessment.
-4-
<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
-2-
<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
-7-
<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
-9-
<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
-10-
<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
-11-
<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.
-12-
<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)
-13-
<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
-15-
<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.
-16-
<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.
-17-
<PAGE>
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.
-18-
<PAGE>
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
-19-
<PAGE>
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.
-20-
<PAGE>
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
-21-
<PAGE>
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
-22-
<PAGE>
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.
-23-
<PAGE>
(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
-24-
<PAGE>
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.
-25-
<PAGE>
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
-26-
<PAGE>
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:
-27-
<PAGE>
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
-28-
<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.
-29-
<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:
-30-
<PAGE>
Schedule 2.3(b)
---------------
The Final Installment shall be the amount obtained from the following
table:
Date Final Installment
---- -----------------
in or prior to the seventh (7th) month after the Closing Date $ 700,000
in the eighth (8th) month after the Closing Date $ 800,000
in the ninth (9th) month after the Closing Date $ 900,000
in the tenth (10th) month after the Closing Date $1,000,000
in the eleventh (11th) month after the Closing Date $1,100,000
in the twelfth (12th) month after the Closing Date $1,200,000
Upon the first anniversary (the "First Anniversary") of the Closing Date,
the Final Installment shall be One Million Three Hundred Thousand Dollars
($1,300,000). If Buyer fails to pay to Seller the Final Installment by wire
transfer in immediately available funds on or before the First Anniversary, then
interest shall accrue with respect to the Final Installment at the rate of
twenty percent (20%) per annum or at the maximum rate permitted by law,
whichever is less.
<PAGE>
Schedule I
Acquired Assets
---------------
Acquired Assets are those assets of Seller used or held in the ordinary
course of business for the manufacture, marketing and sale of the product lines
produced by Raytheon E-Systems under the name E-MED. These assets include,
without limitation:
1. Inventory listed in Attachment A and MegaScan inventory;
2. Intellectual property identified on Schedule 3.9(i);
3. Prepaid expenses listed on Attachment B;
4. Property, Plant and Equipment listed on Attachment C;
5. Leases at San Antonio, Texas and Billerica, Massachusetts;
6. All agreements entered into by Seller relating to the EMED product line;
7. All proposals outstanding relating to the EMED product line;
8. All books and records relating to the EMED product line; and,
9. All accounts receivable (including receivables from employee loans) and;
10. Work in progress related to the EMED product line.
-2-
<PAGE>
Schedule II
Estimated Balance Sheet
-----------------------
Schedule II
-----------
EMED
ESTIMATED BALANCE SHEET
October 23, 1998
<TABLE>
<CAPTION>
Account
Account # Account Description Balance
--------- ------------------- -------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
101** Total Cash $ -- Excluded
103** Total Accounts Receivable $ 2,330,059
105** Total Inventory (Excluding MegaScan) $ 3,681,494 (a,b)
1091* Total Prepaid-Miscellaneous $ 14,417
1092* Prepaid-ISG Software Service $ 67,501
1093* Prepaid Deposits $ 42,519
1094* Total Prepaid Travel $ 33,175
1095* Prepaid Third Party Warranty $ 146,382
1097* Prepaid Expenses-Advertising $ -- Excluded
1099* Total Prepaid Fringe Benefits $ -- Excluded
Total Current Assets $ 6,315,547
13*** Total Property and Equipment $ 639,670
183** PACS Software Productization $ 4,032,420
Total Assets $ 10,987,637
LIABILITIES
CURRENT LIABILITIES
201* Total Accounts Payable $ 1,207,163
202* Total Accrued Rent $ (6,145)
203** Total Accrued Payroll $ -- Excluded
2040* Provision for Warranty Cost $ 81,700
2041* Total Accrued Commission/Margins $ 163,576
2042* Accrued Megascan Costs $ -- Excluded
2045* Accrued Workmans Comp $ -- Excluded
2046* Accrued Advertising (RSNA) Fee $ 49,501
2049* Accrued Taxes $ -- Excluded
205** Total Deposits and Deferred Revenues $ 241,084
206** Total E-Systems Intercompany Account $ -- Excluded
Total Liabilities $ 1,736,879
ACQUIRED NET BOOK VALUE $ 9,250,758
</TABLE>
Notes:
-3-
<PAGE>
(a) Excludes MegaScan inventory located at all EMED locations including
Billerica and San Antonio, and at at vendor locations.
(b) Inventory on the closing balance sheet will be adjusted to reflect
differences between the 11/20/98 perpetual inventory and the inventory
physically on hand at that date as confirmed by Price Waterhouse Coopers
for the following items: (1) Film digitizers and related film feeders (2)
personal computers >266 MHz (adjusted at 75% of standard cost), (3) SUN
workstations with the following part numbers - 490-0607-7, 490-0587-6, 490-
0606-6, 490-0555-0, 490-0508-8, 490-0560-4, 495-0044-8 and 170-0231-1.
-4-
<PAGE>
Schedule III
Excluded Assets
---------------
1. Seller will retain non-exclusive world-wide, royalty free right and license
to use, modify, reproduce, release, perform, display, disclose, manufacture,
market and sell the PACSPro 11 Graphics Controller (the capacity to reproduce
and assemble the circuit cord EMED Part Number 170-0226-6 Rev A and Raytheon
Part Number 431-90000) for all non-medical applications, including commercial,
governmental, aerial, spatial, and hydrographical applications.
2. All cash of Seller.
3. All Contracts between Seller and ISG Technologies, Inc.
Schedule IV
-----------
Persons with Access Knowledge:
Mr. Scott Sheldon, President of Access
Mr. Gary Lortie, Access CFO
Persons with Raytheon Knowledge:
Mr. Ron Ford, EMED President
Mr. Robert Dryden, Division Counsel
Schedule V
Retained Liabilities
--------------------
1. Liabilities for infringement of intellectual property arising from events
occurring prior to the Closing Date.
2. All amounts payable by the EMED product line to Seller or its Affiliates.
3. Environmental liabilities relating to the leased properties arising prior
to the Closing Date.
4. Liabilities of Seller for Taxes arising in connection with Seller's the
operation of the product lines produced by Raytheon E-Systems under the name E-
MED.
-5-
<PAGE>
5. Liabilities attributable to the employment of the employees of Seller which
arose prior to the Closing date, excluding accrued vacation benefits accrued by
those employees that are Assumed Employees.
6. Liabilities under all Contracts between Seller and ISG Technologies, Inc.
Schedule 3.1(b)
Obligations breached as a result of the closure of this transaction
-------------------------------------------------------------------
Many of the contracts, leases and licenses relating to the business have
provisions precluding assignment without the consent of both parties to the
Agreement.
Schedule 3.2
Financial Statements of the Product Line
----------------------------------------
Identified in Attachment D
Schedule 3.4
Litigation - Actual or Threatened
---------------------------------
1. Christopher L. Mohen v. E-Systems Medical Electronics, Middlesex Superior
Court Civil Action No. 97-2821
2. Potential litigation involving the Company's alleged infringement of TASC's
PictureCom software
3. Issues previously discussed with Mr. Scott Sheldon relating to the claimed
obligation for EMED to upgrade 5 workstations sold to the Boston Veteran's
Hospital remain outstanding
4. Issues previously discussed with Mr. Scott Sheldon relating to return of
equipment and refund of some portion of the purchase price of equipment sold to
New England Baptist remain outstanding
Schedule 3.5
------------
Attachment G presents those contracts delivered to, reviewed by, or
available during due diligence to Access. Seller represents that this listing
includes but is not limited to all contracts that are material to the acquired
business. Buyer acknowledges that it has reviewed or had the opportunity to
review all of the contracts included in Attachment G. This listing is not
intended to represent outstanding backlog of the acquired business.
Schedule 3.6
Instances Where the Company is not in Compliance with Environmental Laws or
---------------------------------------------------------------------------
Licenses
--------
-6-
<PAGE>
None
Schedule 3.9
------------
(i) Intellectual property list
Identified in Attachment E
(ii) Intellectual property owned by third parties and included in the above
list
ISG
Mitra
Aware
Mayo
DOS
Windows for Workgroups 3.11
WIN 95
WIN 98
WIN NT
Solaris Desktop
Solaris Server
Unixware
Sybase SLQ
Motif Unix
AMASS
Carbon Copy for Windows
Dome Calibrator Software
Powerchute
(iii) Infringement claims by third parties
Identified in Schedule IV
Schedule 3.10
Inventory not in Good and Usable Condition
------------------------------------------
The inventory identified to Stockroom 8 is either obsolete or unlocated.
Remainder is good and usable. This is not to be construed as an assurance of
valuation.
-7-
<PAGE>
Schedule 3.15
Licenses and Permits
--------------------
1. Texas Department of Health Medical Device Manufacturer license
2. FDA Annual Registration of Device Establishment
3. FDA 510(k) Registration Numbers K901679, K935498, K941086 , K931060,
K931186, K931292S1, K922267B, K862158/D, K940859/S2 and K896223/A.
4. Registration to do business in those jurisdictions where the company's
business is conducted.
Schedule 5.1
Instances Where Company shall not act in the Ordinary Course of Business
------------------------------------------------------------------------
None
Schedule 6.1 (a)
List of EMED Employees
----------------------
Identified in Attachment F
-8-
<PAGE>
EXHIBIT 10.11
HARTWELL GROUP LLC
COMMERCIAL LEASE ADDENDUM
A. LESSEE OBLIGATIONS
1. LESSEE shall not change the color or appearance of the outside of the
Leased Premises except upon the prior written consent of the LESSOR. However,
LESSEE may install its own emergency power generator to the exterior rear of the
building.
2. LESSEE shall not post signs on or about the Premises without LESSOR's
prior approval, however LESSEE shall be entitled to reasonable signage to be
erected at LESSEE's own cost and expense, and in compliance with any relevant
municipal regulations.
3. The parking areas shall not be used for storage of unused, damaged or
unregistered vehicles, nor shall the LESSEE store merchandise or other materials
in the parking areas.
4. LESSEE shall not otherwise store vehicles, containers, or refuse
outside the Leased Premises, except for routine parking of vehicles and delivery
or pickup of products or materials.
5. LESSEE shall be responsible to dispose of LESSEE trash and refuse.
6. The LESSEE may maintain insurance required by this Lease under a
blanket policy of insurance which insures the LESSEE and any affiliates of the
LESSEE.
7. No animals, reptiles or pets of any kind shall be kept in or about the
building, except for research purposes in accordance with applicable laws and
regulations.
B. LESSOR OBLIGATIONS
1. LESSOR shall, at its own cost and expense, maintain in good condition
and repair all structural components of the building containing the Leased
Premises, including the foundation, floor, loadbearing walls, exterior walls,
HVAC, plumbing and electrical service, roof, common area, if any, of the
Building, landscaping, parking areas and access ways.
2. LESSOR shall remove snow and ice from the access roadway, the parking
areas, and the walkways, which serve the building, provide exterior lighting,
and LESSOR will remove snow or ice from the roof of the building if, as and when
the conditions cause roof leakage or threaten ice falls over access ways.
3. LESSOR shall maintain with insurance companies, licensed in
Massachusetts, all risk fire insurance policies with extended coverage insuring
the property containing the Leased Premises against loss or damage caused by
fire or casualty in an amount equal to the full replacement cost of the
Building.
C. SUBLEASING PROVISION
The following provisions supplements the provisions of Section 13,
"Assignment-Subleasing" above.
(i) The LESSOR shall be deemed to approve any assignment or sublease to a
parent, subsidiary or affiliate of the LESSEE upon written assurance by LESSEE
that the subsequent use will be in conformance with and subject to section 8,
above, "USE OF LEASED PREMISES".
(ii) Provided that LESSEE pays all rent and other charges under this Lease,
LESSEE shall have a right to sub lease or assign with approval of the LESSOR,
and shall be entitled to all rents received up to the value of rent payable
under this Lease, and the parties will share equally in any rental income
realized in such an assignment or sublease which is in
<PAGE>
excess of the rent under this lease. The LESSEE shall bear all costs or expenses
of such sub leasing or assignment.
(iii) In the event the LESSEE seeks approval for sub lease or assignment for
the entire premises, the LESSOR shall have the right to refuse approval for the
purposes of recovering possession of the Leased Premises, in which case, if the
LESSEE elects to vacate, the Lease term shall be deemed to expire at a mutually
agreed date.
D. MARKET RATE RENT FOR EXTENSION OPTIONS
Upon receipt of written notice from the LESSEE of intent to extend, under
Section 25(b) of the Lease, LESSOR shall respond within thirty days with a
quotation for market rate rent. For this purpose "market rate" shall mean the
rate for Class B office space in comparable buildings in the general area, and
not for space with the specialized improvements installed by the LESSEE (the
parties agreeing that LESSEE shall not be charged rent for or with respect to
any laboratory, biotechnological, specialized or trade improvements which LESSEE
make to the Leased Premises at LESSEE's own expense). Fair market rate shall
reflect the provisions of this Lease for escalation of real estate taxes,
operating costs and for utility charges. The LESSEE shall respond within thirty
(30) days agreeing to the quotation, rejecting the extension or requesting third
party determination of market rate. In the later event each party shall then
appoint a realty broker who has at least ten years experience in commercial real
estate brokerage and/or appraisal in the Greater Boston area, and who is
familiar with similar commercial property in the Lexington area, they shall
confer, and each shall recommend a market rate by writing to the parties. In the
event their recommendations are joint or equal, this shall be market rate. If
the recommendations differ by 5% or less, their average shall be deemed market
rate. In the event their rates differ by a greater amount they shall jointly
nominate a third such broker who shall make an independent recommendation of
market rate. The two closest of the three recommendations shall then be
averaged to establish the market rate. Each party hereto shall pay the expense
of its nominee broker, and each shall share equally the expense of a third, if
required. However, in no event shall market rate, determined as aforesaid, be
less than the rate then payable at the time of exercise of the option, by the
LESSEE. The Market Rate shall be binding on both parties and shall be reflected
in a Lease amendment.
-2-
<PAGE>
EXHIBIT B.
BUILDOUT OBLIGATIONS
A. LESSOR's OBLIGATIONS
The LESSOR shall deliver the Leased Premises, on or before December 1, 1997, in
conformance with plans and specifications agreed between the parties with
respect to the layout and location of offices, rooms, corridors, lighting,
bathrooms, plumbing, electrical services, floors, dock area and climate
controls, as referenced in Exhibit A. ("Tenant Improvements"). The LESSOR shall
deliver the premises completed, upon issuance of a Certificate of Occupancy,
free and clear of all tenants or occupants, and in compliance with local laws,
building codes and regulations. In event "Punch List" items remain to be
completed, such as touch up paint, adjustments to doors etc., the LESSOR shall
complete these items within ten days of the Commencement Date.
In the event, through no delay or fault of LESSEE, the LESSOR fails to deliver
the premises by December 1, 1997 LESSOR agreed to share one half of the penalty
in rental premium suffered by the LESSEE, due to hold over beyond November 30,
1997 in the lease of premises at Natick, up to Five Thousand ($5,000.00). If
payable that amount will be credited to LESSEE upon occupancy.
In the event the premises are suitable for occupancy prior to December 1, 1997,
LESSEE may have use and occupancy of the premises upon that Commencement Date.
In that event rent will commence on December 1, 1997.
The Building, rest rooms and common areas, shall be in compliance with the
Americans with Disabilities Act of 1990, as amended. LESSOR shall remedy any
deficiencies in the building systems or in the Tenant Improvements at its sole
cost, promptly following receipt of notice of any deficiency.
LESSOR shall afford LESSEE access to the premises prior to the Commencement Date
for the purpose of installing cabling, telephone lines and equipment, subject to
the prior conditions that such access shall not interfere with or impede the
LESSOR's work on Tenant Improvements, and such LESSEE work shall comply with
schedules and in a manner agreed with the LESSOR's supervisor on site.
In the event that the LESSOR fails to deliver the premises for occupancy by the
LESSEE prior to January 1, 1998, due to no fault or delay by LESSEE, the LESSEE
may upon ten days written notice cancel this Lease Agreement without penalty or
further obligation on either party.
B. LESSEE's OBLIGATIONS
LESSEE shall be responsible to provide architectural plans for the layout,
design and specifications for construction of all tenant improvements and to
obtain LESSOR's prior approval of such layout and design. Specifications for the
kind, type and quality of material and finish shall be consistent with the kind,
type and quality of materials and finish installed in the leased premises of
Spectrum Medical Technologies, Inc. at 45 Hartwell Ave. Lexington.
In the event of changes in layout or specification by the LESSEE, such changes
shall be defined in plans submitted to the LESSOR. In the event such changes
would result in either delay in work completion or increase in costs of buildout
LESSOR shall notify LESSEE, in writing, within five business days, and LESSEE
may accept the delay or charges, or waive the changes, in writing, within three
business days.
C. SPECIAL PROVISION FOR FINANCING
-3-
<PAGE>
LESSEE may from time to time grant security interests in or make equipment
leases with respect to LESSEE's current or future installations, fixtures,
equipment, improvements, additions and property in the Leased Premises in order
to finance the same or LESSEE's business, and LESSOR shall upon LESSEE's request
execute and deliver reasonable instruments confirming the same.
EXHIBIT C
CLEANING SCHEDULE
INTENTIONALLY OMITTED FROM THIS LEASE
-4-
<PAGE>
EXHIBIT D.
RIGHT OF FIRST REFUSAL ON ADDITIONAL SPACE
INTENTIONALLY OMITTED FROM THIS LEASE
-5-
<PAGE>
EXHIBIT E
EXCLUSIONS FROM OPERATING COSTS
-------------------------------
The following items shall be excluded in computing LESSEE'S share of Operating
costs applicable to the Leased Premises:
1. Any ground lease rental;
2. Costs of capital repairs or capital replacements (except as
specifically permitted in this paragraph 2), capital improvements and equipment;
except those: (a) required by laws enacted on or after the date the temporary
certificate of occupancy issued for the LESSEE work shall be validly issued with
the cost of any such improvements and equipment depreciated or amortized over
the usual life of the improvement and/or equipment, or (b) installed at the
Leased Premises to reduce operating costs, with the cost of any such
improvements and equipment depreciated or amortized at an annual rate reasonably
calculated to equal the amount of operating costs to be saved in each calendar
year throughout the term (as determined at the time LESSOR elected to proceed
with the capital improvement or acquisition of the capital equipment to reduce
operating costs); however, as respects (a) and (b) above, only depreciation or
amortization attributable to a given calendar year shall be included in
operating costs for such year. Depreciation or amortization shall be calculated
on straight line basis and at interest rates calculated at market rates and
terms then prevailing for borrowers similar to LESSOR.
3. Rentals for items (except when needed in connection with normal
repairs and maintenance of the building which shall be permitted) which if
purchased, rather than rented, would constitute a capital improvement
specifically excluded in Subsection 2, above;
4. Costs incurred by LESSOR for the repair for replacement of damage to
the building or its contents caused by fire or other casualty;
5. Depreciation, amortization, lender's fees and interest payments except
as permitted pursuant to Subsection 2, above, and, if permitted, then determined
in accordance with generally accepted accounting principles, consistently
applied (as applied to commercial real estate) in accordance with the
anticipated useful life of such item (as reasonably determined by LESSOR);
6. Overhead and profit increments paid to LESSOR or to subsidiaries or
affiliates of LESSOR for goods and/or services in the building to the extent the
same exceeds the cost of such goods and/or services rendered by unaffiliated
third parties on a competitive basis;
7. Advertising and promotional expenditures, and the costs of acquiring
and installing signs in or on the building identifying the owner of the
building;
8. Interest, principal, points and fees on debts or amortization on any
mortgage or mortgages or any other debt instrument encumbering the building or
property;
9. Any costs associated with gift taxes, excise taxes, income taxes,
transfer taxes or capital levies;
10. Costs incurred in connection with upgrading the building to comply
with handicap, hazardous material, fire and safety codes which were in effect
prior to the date of the lease or which become effective after date of the
Lease;
11. Tax penalties incurred as a result of LESSOR's negligence, inability
or unwillingness to make payments when due, not attributable to LESSEE's failure
to make payments to LESSOR for such items in accordance with the lease;
-6-
<PAGE>
12. Any and all costs arising from the presence of hazardous materials or
substances (as defined by applicable Federal, Massachusetts and local laws) now
or hereafter pertaining to the building ("Hazardous Substances") and property in
or about the building including, without limitation, Hazardous Substances in the
ground, water, or soil;
13. LESSOR's general corporate overhead and general and administrative
expenses except as contained and allowed in the 5% Management Fee per provision
in Clause 6.B, above;
14. Costs of any items for which LESSOR is reimbursed by insurance, or
otherwise compensated by parties other than LESSEE's of the building;
15. Any legal fees associated with the sale or refinancing of the
building;
16. Costs for any separate utility meters LESSOR may install in the
building, unless the installation is required by a utility company or
governmental entity;
17. Costs for construction for compliance with, or penalties assessed for
non-compliance with the Americans with Disabilities Act of 1990 (42. U.S.C.
1281-1283);
18. Expenses incurred as a result of the LESSOR's negligence or the
negligence of another lessee;
19. Costs of procuring tenants for the building, including without
limitation advertising, brokerage commissions and inducements paid or credited
to such tenants for buildout costs;
20. Costs for special work or services to particular tenants.
-7-
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.21
WEB SOFTWARE LICENSING AND DEVELOPMENT AGREEMENT
This Web Software Licensing and Development Agreement is entered into as of
September 10, 1999 (the "Effective Date") between AWARE, Inc. ("AWARE") and eMed
Technologies Corporation ("EMED"), formerly known as ACCESS Radiology
Corporation.
Background
----------
1. EMED is in the business of providing integrated hardware and software
systems and services with respect to the transmission and interpretation of
medical images. AWARE develops and licenses proprietary computer software that
is useful for compression and web-based viewing of digital images.
2. AWARE and EMED are parties to a Software Licensing and Development
Agreement dated May 30, 1997 (the "1997 Agreement"). The 1997 Agreement provides
for the licensing of various software by AWARE to EMED on the terms set forth
therein. Among other things, the 1997 Agreement contemplated the development,
licensing and marketing of certain new software, referred to in the 1997
Agreement as the "Joint Product". The 1997 Agreement sets forth procedures under
which the Joint Product would be developed and licensed, royalties would be
negotiated, and ownership of intellectual property would be determined.
3. The development efforts contemplated with respect to the Joint Product
by the 1997 Agreement have now resulted in the initial commercial release of a
software application for the web-based viewing and distribution of medical
images and related information. This release having occurred, AWARE and EMED now
wish to provide for definitive terms upon which this new software will be
licensed and marketed, and upon which further development work relating to the
new software will proceed.
NOW, THEREFORE, the parties agrees as follows:
Confidential Treatment
1
<PAGE>
I. MODIFICATION OF THE 1997 AGREEMENT.
1.01. Termination of Joint Product Provisions. Article III of the 1997
----------------------------------------
Agreement, which provides for various matters relating to the "Joint Product" as
defined therein, shall terminate upon the execution of this Agreement. In
addition, references to the Joint Product in Articles IV, V and VI of the 1997
Agreement shall have no further force or effect upon the execution of this
Agreement. The rights and obligations of AWARE and EMED with respect to the Web
Product and the related Licensed Software (as defined in Section 2.01 of this
Agreement), and with respect to the Joint Product (as defined Article III of
this Agreement)shall be governed exclusively by this Agreement, and not by the
1997 Agreement. The rights and obligations of AWARE and EMED with respect to the
"Compression Software" (as defined in the 1997 Agreement) shall be governed
exclusively by the 1997 Agreement, and not by this Agreement.
1.02 Survival of the 1997 Agreement. The 1997 Agreement shall survive the
-------------------------------
execution of this Agreement and shall continue to govern the rights and
obligations of the parties with respect to the "Compression Software" (as
defined in the 1997 Agreement), except to the extent expressly modified by this
Agreement. The references to "Schedule I" in Sections 1.01, 1.03(b), 1.04(a),
and 2.02(b) of the 1997 Agreement are amended to refer to "the documentation
separately supplied by AWARE".
II. LICENSING OF SOFTWARE; PAYMENTS.
2.01 Grant of License. Subject to the terms of this Agreement, AWARE
-----------------
grants to EMED the following rights, under any patent, copyright, trade secret
or other proprietary right (other than any trademark) of AWARE, whether
presently held or hereafter acquired, with respect to (i) the proprietary web-
based image viewing and distribution software identified on Schedule I and any
upgrades or modifications thereof (the "Web Product") and (ii) any other web-
based image viewing or distribution software developed by AWARE pursuant to this
Agreement (such software and the Web Product being referred to collectively as
the "Licensed Software"):
Confidential Treatment
2
<PAGE>
(a) The right to use the Licensed Software for internal purposes and
in support of users of EMED products for Medical Use, and to use and make
available the Licensed Software as part of EMED's product line and for
integration with other components of EMED products.
(b) The right to grant sublicenses of the Licensed Software for
Medical Use to users of EMED products and to original equipment
manufacturers or other parties which utilize toolkits to create derivative
products for Medical Use which are in turn licensed to end users.
Sublicenses of software will be granted in compliance with the procedures
set forth in Section 6.01.
(c) The right to modify the Licensed Software to create new releases
and new products for Medical Use, and to grant sublicenses of software as
modified for Medical Use to users and to original equipment manufacturers
or other parties which utilize toolkits to create derivative products for
Medical Use which will in turn be licensed to end users. Sublicenses of
software will be granted in compliance with the procedures set forth in
Section 6.01.
For purposes of the Agreement, "Medical Use" means the compression,
transmission, viewing or other processing of medical images. The rights granted
to EMED shall be exclusive to the extent set forth in Article III.
2.02. License Fees. (a) License fees payable to AWARE with respect to the
-------------
Web Product will be determined based upon the terms on which the Web Product is
made available to customers. [*Redacted pursuant to a Confidential Treatment
Request dated September 10, 1999.
Confidential Treatment
3
<PAGE>
]
(b) With respect to each Subscription Sale of the Web Product, EMED will
pay to AWARE [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(c) With respect to sales of the Web Product other than Subscription
Sales, [*Redacted pursuant to a Confidential Treatment Request dated September
10, 1999.]
(d) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(e) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(f) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
] EMED
will not make the Web Product available without charge
Confidential Treatment
4
<PAGE>
except for (i) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999 ] and (ii) copies of client software provided to
radiologists in connection with Subscription Sales, and EMED will not make the
Web Product available without charge to assist in selling other products or in
generating revenues from other sources.
2.03. Payments. (a) Promptly after the end of each calendar quarter, EMED
---------
will deliver to AWARE a statement setting forth, for such quarter, the number of
copies of server software included in Subscription Sales, Net Client License
Revenue, and Net Software License Revenue. Each quarterly statement shall be
accompanied by payment of license fees due. EMED will use its best efforts to
provide such statement and pay license fees due within 30 days of the end of
each calendar quarter. Each quarterly statement and payment of license fees
shall be provided no later than 60 days after the end of the relevant calendar
quarter.
(b) EMED will keep complete books of account containing all particulars
that may be necessary to determine the amounts payable to AWARE hereunder. Such
books and supporting data shall be open for inspection for one year following
the calendar year to which they pertain, at reasonable times and upon reasonable
notice, by an independent auditor for purposes of verifying the statements
delivered pursuant to subsection (a) above. AWARE will not conduct more than one
such inspection for books and supporting data relating to any single calendar
year. The results of any inspection shall be made available to EMED. If the
agreed results of an inspection show an underpayment or overpayment, then EMED
shall pay to AWARE the amount of any underpayment and AWARE shall pay to EMED
the amount of any overpayment. [*Redacted pursuant to a Confidential Treatment
Request dated September 10, 1999.
]
2.04. Other Products. With respect to Licensed Software that may be
---------------
developed in the future, the parties will negotiate in good faith to determine
definitive terms.
Confidential Treatment
5
<PAGE>
[*Redacted pursuant to a Confidential Treatment Request dated September 10,
1999.
]
III. MARKETING FOR NON-MEDICAL USE.
3.01 AWARE shall have the exclusive right to market software and other
components included in the Web Product and any other software developed pursuant
to this Agreement (the "Joint Product"), under any patent, copyright, trade
secret or other proprietary right of EMED (other than any trademark), whether
presently held or hereafter acquired, for all uses other than Medical Use. AWARE
shall have the following rights with respect to the Joint Product, which EMED
hereby grants to AWARE.
(a) The right to use the Joint Product for internal purposes and in
support of users of AWARE products, and to use and make available the Joint
Product as part of AWARE's product line and for integration with other
components of AWARE products, in all cases for uses other than Medical Use.
Medical Use includes grants of licenses to indemnity insurance companies,
and AWARE will not grant any such licenses.
(b) The right to make and have made, use and have used, and sell,
lease or otherwise transfer the Joint Product, and to grant sublicenses of
the software and other intellectual property included in the Joint Product
to users of AWARE products in which such software is included, in all cases
for uses other than Medical Use. Users to whom sublicenses are granted may
include original equipment manufacturers or other parties which utilize
toolkits to create derivative products for any use other than for Medical
Use, which will in turn be licensed to end users. Sublicenses of software
will be granted in compliance with the procedures set forth in Section
7.01.
(c) The right to modify the Joint Product and the software included
in it to create new releases and new products, to make and have made, use
and have used, and sell, lease or otherwise transfer products including
modifications, and to grant sublicenses of
Confidential Treatment
6
<PAGE>
software as modified to users of AWARE products in which such software is
included, in all cases for uses other than Medical Use. Users to whom
sublicenses are granted may include original equipment manufacturers or
other parties which utilize toolkits to create derivative products for any
use other than for Medical Use, which will in turn be licensed to end
users. Sublicenses of software will be granted in compliance with the
procedures set forth in Section 7.01.
[*Redacted pursuant to a Confidential Treatment Request dated September 10,
1999.
]
IV. EXCLUSIVITY
4.01 Exclusivity Commitments. (a) EMED shall have the exclusive right to
------------------------
use and sublicense software developed or owned by AWARE for Medical Use to the
extent set forth herein. From the date of this Agreement until the
Confidential Treatment
7
<PAGE>
termination of exclusivity as provided in Section 6.01, AWARE will not (except
as expressly permitted by this Agreement) supply for Medical Use or permit any
person to use for Medical Use (i) the Web Software or any modification or
improvement of the Web Software or (ii) any other dynamic HTML or plug-in
product that is developed, owned or licensed by AWARE. AWARE will take
reasonable steps to assure compliance with this exclusivity commitment by third
parties to whom AWARE provides software. Notwithstanding anything contained in
this Agreement, AWARE may provide its ADSL, SDSL, HFC and any other general data
communication product to third parties for Medical Use or any other purpose.
(b) From the date of this Agreement until the termination of exclusivity
as provided in Section 6.01, AWARE will be the exclusive supplier to EMED of
web-based image viewing and distribution software for use in EMED products. EMED
will not independently develop any such software and will not include any such
software (other than that developed by or in cooperation with AWARE under this
Agreement) in the Web Product or any product that is competitive with the Web
Product. The parties understand and agree that home, diagnostic and intensive
care unit viewers are complementary to the Web Product and are therefore not
within the scope of the foregoing restrictions.
4.02. Exceptions. (a) Licenses of software for Medical Use which have been
-----------
previously granted and for which all license fees have been invoiced as of the
date of this Agreement shall continue in effect notwithstanding Section 4.01.
However, AWARE will not provide upgrades or new releases for any software
subject to such licenses except as expressly permitted in this Section 4.02.
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(c) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
8
<PAGE>
]
4.03. Transition. Promptly after the date of this Agreement, AWARE will
-----------
publicly announce that it has enlarged its exclusive relationship with EMED and
that EMED and AWARE are making a commitment to the Web Product. This
announcement will be subject to review by EMED before its release. EMED may
disclose the relationship between AWARE and EMED contemplated by this Agreement
in technical and product oriented marketing materials without review by AWARE.
EMED may disclose this Agreement and the relationship contemplated hereby in
filings with securities regulators to the extent set forth in Section 7.06. All
other public announcements by EMED that refer to AWARE will be subject to review
by AWARE prior to their release.
V. DUTIES OF EMED AND AWARE
5.01. Duties of EMED. EMED will use its best efforts to maximize the market
---------------
and sales volume for the Web Product. [*Redacted pursuant to a Confidential
Treatment Request dated September 10, 1999.
]
5.02. Duties of AWARE. AWARE will continue to provide primary engineering
----------------
application development for EMED's web-based image viewing and distribution
software for use in EMED products including the client software and dynamic HTML
generation applications included in the Web Product. AWARE's responsibilities
will specifically include bug fixes, work-arounds and other software support as
needed to cause the Licensed Software to perform in accordance with its
specifications. AWARE will also make available, upon request by EMED, additional
applications, additional features on existing applications, and changes to core
technology as specified by EMED. [*Redacted pursuant to a Confidential Treatment
Request dated September 10, 1999.
Confidential Treatment
9
<PAGE>
]
5.03. Meetings. Management of AWARE and EMED will meet on a monthly basis
---------
to review technical and market progress towards meeting goals and objectives.
VI. TERM
6.01. Term; Effect of Expiration. (a) The initial term of this Agreement
---------------------------
shall extend until December 31, 2005. The term of this Agreement may be renewed
by mutual agreement of the parties.
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(c) AWARE and EMED agree that the royalties and license fees payable under
this Agreement shall be modified effective upon modification of the licenses
granted hereunder pursuant to subsection (b) above. AWARE and EMED further agree
that the appropriate amount of such modified royalties and license fees cannot
be determined as of the date of this Agreement. [*Redacted pursuant to a
Confidential Treatment Request dated September 10, 1999.
] If, at any time after the end of such three month period, either
party shall determine in its judgment that negotiations are unlikely to result
in an acceptable outcome, such party may initiate arbitration to determine
modified fees and royalties pursuant to the procedures specified in Section
8.01.
6.02. Termination for Breach. (a) If EMED shall materially breach its
-----------------------
obligations under this Agreement, and such material breach shall be continuing
for at least 60 days after delivery of a notice by AWARE describing such breach,
then AWARE may by a separate notice terminate this Agreement for breach under
this Section 6.02(a).
Confidential Treatment
10
<PAGE>
(b) If AWARE shall materially breach its obligations under this Agreement,
and such material breach shall be continuing for at least 60 days after delivery
of a notice by EMED describing such breach, then EMED may by a separate notice
terminate this Agreement for breach under this Section 6.02(b).
(c) With respect to the obligations of AWARE and EMED under Sections 5.01
and 5.02, "material breach" means willful failure of a party to allocate the
resources required by the Section 5.01 or 5.02 (as the case may be) to the
performance of such party's responsibilities.
(d) Termination for breach under this Section 6.02 shall not be an
exclusive remedy, but shall be in addition to any other remedies that either
party may have.
6.03. Effect of Termination for Breach. (a) If AWARE shall terminate this
---------------------------------
Agreement for breach pursuant to Section 6.02, then the license granted to EMED
pursuant to Section 2.01 shall immediately terminate and EMED shall cease using
or marketing the Licensed Software and the Web Product; provided that EMED shall
fulfill any maintenance obligations existing as of the effective date of such
termination. Upon the effectiveness of such a termination, the exclusivity
obligations of AWARE pursuant to Article III shall terminate.
(b) If EMED shall terminate this Agreement for breach pursuant to Section
6.02, then the license granted to EMED pursuant to Section 2.01 and the
exclusivity provisions binding upon AWARE pursuant to Article IV shall remain in
effect, and the exclusivity obligations of EMED pursuant to Article IV shall
terminate. In such event, AWARE shall continue to provide bug fixes, work-
arounds and other software support as needed to cause the Licensed Software to
perform in accordance with its specifications. Also in such event, EMED shall
retain source code delivered under Section 7.03, AWARE shall deliver to EMED any
additional source code of the Licensed Software not previously delivered under
Section 7.03, and EMED shall continue to have the right to modify the Licensed
Software. For so long as the license granted under Section 2.01 continues in
effect pursuant to this subsection (b), EMED shall pay license fees as provided
in Section 2.02. Upon the effectiveness of any termination by EMED for breach
under
Confidential Treatment
11
<PAGE>
Section 6.02(b), the license granted to AWARE under Article III shall
terminate.
6.04. Additional Surviving Terms. All payment obligations accrued prior to
---------------------------
any termination or expiration of this Agreement shall survive such termination
or expiration. All sublicenses granted to any end user in accordance with this
Agreement prior to any termination or expiration of this Agreement shall survive
such termination or expiration. If EMED holds a continuing license under this
Agreement, EMED shall also continue to have the rights set forth in Section 7.03
with respect to such license. The provisions of Sections 6.05, 7.02, 7.05, 7.06,
8.01, 8.02, 8.03 and 8.12 shall survive any termination or expiration of this
Agreement.
6.05. Intellectual Property. AWARE and EMED shall negotiate in good faith
----------------------
for at least three months after effectiveness of expiration or termination of
this Agreement to reach agreement on specific definition of the intellectual
property owned by each party in accordance with the principles set forth in
Section 7.02. If, at any time after the end of such three month period, either
party shall determine in its judgment that negotiations are unlikely to result
in an acceptable outcome, such party may initiate arbitration to determine
ownership of intellectual property pursuant to the procedures specified in
Section 8.01.
VII. INTELLECTUAL PROPERTY
7.01. Software Licensing Procedures. (a) The procedures set forth in this
------------------------------
Section 67.01 shall govern the granting of sublicenses of software under this
Agreement.
(b) Each of AWARE and EMED shall assign a unique number to each copy made
by it of Licensed Software or any other software provided to it by the other
party, whether for internal use or for sublicense to a user. Each of AWARE and
EMED shall keep full, clear and accurate records of all copies that it makes of
any such software and the identity and location of each third party to whom any
such software is provided. Each of EMED and AWARE may examine records of the
other party not more than once in any calendar quarter, during normal business
hours and upon reasonable notice.
Confidential Treatment
12
<PAGE>
(c) Sublicenses of software granted under this Agreement shall include the
following provisions. Such terms may be set forth in a reasonably prominent
printed or electronic document that accompanies the software being sublicensed
and states that by use of such software, the user agrees to the terms set forth
in the document. Sublicenses may be granted directly, or by a reseller or other
intermediary. The provisions required by this subsection (c) are:
(i) a provision restricting the sublicensee's use of the licensed
software to its own business and professional purposes, provided that any
sublicensee of a toolkit may use it to create new applications to be
licensed to end users as part of the sublicensee's product;
(ii) a provision requiring the sublicensee to take all reasonable
precautions to keep the licensed software and any related documentation
confidential;
(iii) a provision prohibiting the sublicensee from reproducing
(except for backup copies), reverse engineering, translating or creating
other versions of the licensed software, provided that any sublicensee of a
toolkit may use it to create new applications to be licensed to end users
as part of the sublicensee's product;
(iv) a provision acknowledging that ownership of the licensed
software remains exclusively with the grantor of the license or its
suppliers;
(v) a provision limiting the other party's liability to the
sublicensee to at least the same extent that the liability of the grantor
to the sublicensee is limited, and disclaiming warranties on behalf of the
other party at least to the extent disclaimed on behalf of the grantor; and
Confidential Treatment
13
<PAGE>
(vi) a provision stating that AWARE or EMED (as the case may be) is
an intended third party beneficiary of the foregoing to the extent any
materials or information delivered to the sublicensee originated with or
are derived from materials or information supplied by AWARE or EMED (as the
case may be), and shall have the right to enforce and shall be entitled to
the benefit of any of the foregoing provisions as they relate to such
materials or information.
Each party will use reasonable efforts to enforce license agreements executed by
its customers. In no event shall source code be released to any sublicensee.
(d) Notwithstanding this Section 7.01 or any other provision of this
Agreement, software may be licensed to the Government of the United States of
America, or an agency or instrumentality thereof, under an agreement containing
software licensing terms generally used by the United States Government (or the
agency or instrumentality to which the software is licensed) for procurement of
commercial software.
7.02. Ownership. (a) As between EMED and AWARE, AWARE owns any software
----------
developed solely by AWARE or by any employee, consultant or other person acting
on AWARE's behalf (other than EMED) under this Agreement, including any
inventions, concepts, specifications, know-how and ideas embodied in such
software, together with all proprietary rights therein ("AWARE Intellectual
Property"). As between EMED and AWARE, EMED owns and shall continue to own those
concepts, specifications, know-how, and ideas embodied in the design and
functionality of the Web Product and conceived solely by EMED, and as applied in
the Web Product for Medical Use, and any software developed solely by EMED or by
any employee, consultant or other person acting on EMED's behalf (other than
AWARE) under this Agreement, including any inventions, concepts, specifications,
know-how and ideas embodied in any of the foregoing, together with all
proprietary rights therein ("EMED Intellectual Property"). As between EMED and
AWARE, the parties shall jointly own any software or other intellectual property
jointly developed by the parties under this Agreement and not allocated between
them above, including any inventions, concepts, specifications, know-how and
ideas embodied therein, together with all
Confidential Treatment
14
<PAGE>
proprietary rights therein ("Joint Intellectual Property"). Whether or not any
intellectual property is jointly developed shall be determined in accordance
with United States patent or copyright law as applicable; provided that in no
event shall either party have an obligation to account to the other except as
specifically provided in this Agreement.
(b) AWARE shall have the right to file and prosecute patent or copyright
applications on AWARE Intellectual Property and EMED shall have the right to
file and prosecute patent or copyright applications on EMED Intellectual
Property. The parties will cooperate in the filing and prosecution of patent or
copyright applications on Joint Intellectual Property, provided that neither
party shall file any such patent or copyright application without the prior
written consent of the other. Each party will cooperate with the other party in
the filing and prosecution by the other party of any patent or copyright
application that complies with this subsection (b), including by executing and
delivering or causing its officers and employees to execute and deliver (all at
the expense of the filing party) any documentation reasonably necessary or
appropriate for the filing and prosecution of such an application and the
vesting of rights as provided in this Agreement.
(c) The exclusivity obligations of the parties under Article IV shall not
in any way be affected by the ownership of AWARE Intellectual Property, EMED
Intellectual Property, or Joint Intellectual Property as provided in this
Section 7.02, or by the filing of any patent or copyright application or the
grant or issuance of any patent or copyright. Neither party shall market, sell,
license or distribute any Joint Intellectual Property except to the extent that
such Joint Intellectual Property is covered by a license granted to such party
hereunder.
7.03 Source Code. Copies of source code of all Licensed Software will be
------------
made available to EMED by AWARE upon completion of each release or patch in
which such source code is included. The fact that AWARE has provided access to
source code shall in no way affect proprietary rights to source code or
software, and all source code shall continue to be owned by the party that owned
it prior to disclosure. All source code is "Confidential Information" as that
term is used in Section 7.06 and shall
Confidential Treatment
15
<PAGE>
be subject to the restrictions set forth in Section 7.06. EMED will maintain
source code revision control procedures with which both AWARE and EMED will
comply. These procedures will be designed to achieve, among other things,
compliance with "Good Manufacturing Practices" as defined by the U.S. Food and
Drug Administration and documentation of the ownership of source code disclosed
by either party. Provision of source code to EMED shall not affect AWARE's
obligations to provide engineering resources and support under Section 5.01.
Should AWARE wish to utilize its license rights pursuant to Section 3.01, AWARE
will notify EMED of such intentions and copies of source code of Joint Products
will be made available to AWARE by EMED upon completion of each release or patch
in which such source code is included. The fact that EMED has provided access to
source code shall in no way affect proprietary rights to source code or
software, and all source code shall continue to be owned by the party that owned
it prior to disclosure. All source code is "Confidential Information" as that
term is used in Section 7.06 and shall be subject to the restrictions set forth
in Section 7.06.
7.04. Representations. (a) AWARE represents to EMED that AWARE has full
----------------
authority to enter into this Agreement and grant the licenses and rights set
forth herein.
(b) EMED represents to AWARE that EMED has full authority to enter into
this Agreement and grant the licenses and rights set forth herein.
7.05. Indemnities. (a) AWARE will, at its expense, defend against, hold
------------
EMED harmless from, and pay any final judgment against EMED or any customer of
EMED arising out of (x) any claim that the Licensed Software infringed a
copyright, a patent or a trade secret of a third party, unless in the case of
third party patent claims, (i) AWARE can show that the patent claimed to have
been infringed was not known to Aware at the time of delivery to EMED of the
infringing portion of Licensed Software or (ii) such patent was infringed in
order to comply with an EMED design or specification or (iii)such patent would
not be infringed by the use of Licensed Software alone and not in combination
with any EMED software; or (y) out of marketing by AWARE of AWARE products
(including any product liability claim unless such product liability claim is
caused by designs, specifications or software provided by EMED); provided that
(i) EMED notifies AWARE in writing of such claim or action,
Confidential Treatment
16
<PAGE>
and (ii) AWARE has sole control of the defense and settlement of such claim or
action. In defending against such claim or action to the extent it relates to
software provided by AWARE, AWARE may, at its option, agree to any settlement in
which AWARE shall either (1) procure for EMED and all customers of EMED the
right to continue using the software at issue; or (2) modify or replace such
software so that it no longer infringes, to the extent that the exercise of such
option does not result in a material adverse change in the operational
characteristics of such software, and equivalent functions and performance
provided by AWARE remain following implementation of such option. If AWARE
concludes in its judgment that none of the foregoing options is reasonable,
AWARE may remove the software at issue and any other component supplied by AWARE
rendered unusable as a result of such removal and pay to EMED damages arising
therefrom, including damages incurred by reason of EMED's inability to perform
its obligations under sublicenses; [*Redacted pursuant to a Confidential
Treatment Request dated September 10, 1999.]
(b) EMED will, at its expense, defend against, hold AWARE harmless from,
and pay any final judgment against AWARE or any customer of AWARE arising out of
(x) any claim that any software licensed to AWARE by EMED hereunder infringed a
copyright, a patent or a trade secret of a third party, unless in the case of
third party patent claims, (i) EMED can show that the patent claimed to have
been infringed was not known to EMED at the time of delivery to AWARE of the
infringing software or (ii) such patent was infringed in order to comply with an
AWARE design or specification or (iii) such patent would not be infringed by the
use of the software licensed by EMED alone and not in combination with any AWARE
software; or (y) out of marketing by EMED of EMED products (including any
product liability claim unless such product liability claim is caused by
designs, specifications or software provided by AWARE) provided that (i) AWARE
notifies EMED in writing of such claim or action, and (ii) EMED has sole control
of the defense and settlement of such claim or action. In defending against such
claim or action to the extent it relates to software provided by EMED, EMED may,
at its option, agree to any settlement in which EMED shall either (1) procure
for AWARE and all customers of AWARE the right to continue using the software at
issue; or (2) modify or
Confidential Treatment
17
<PAGE>
replace such software so that it no longer infringes, to the extent that the
exercise of such option does not result in a material adverse change in the
operational characteristics of such software, and equivalent functions and
performance provided by EMED remain following implementation of such option. If
EMED concludes in its judgment that none of the foregoing options is reasonable,
EMED may remove the software at issue and any other component supplied by EMED
rendered unusable as a result of such removal and pay to AWARE damages arising
therefrom, including damages incurred by reason of AWARE's inability to perform
its obligations under sublicenses; [*Redacted pursuant to a Confidential
Treatment Request dated September 10, 1999.]
(c) If EMED shall determine in its judgment that the concepts,
specifications, know-how, and ideas embodied in the design and functionality of
the Licensed Software infringe or conflict with a patent or copyright not known
to EMED on the date of this Agreement, then EMED shall notify AWARE and the
parties will discuss in good faith whether the Licensed Software can be modified
or other steps may be taken to avoid such infringement. If EMED determines in
its judgment that no such modification or other steps can be reasonably
implemented, EMED may by notice terminate the obligations of AWARE and EMED
under this Agreement with respect to the affected portion of the Licensed
Software, and the indemnity of EMED in subsection (b) above shall apply only to
those claims relating to the affected portion of the Licensed Software of which
AWARE or EMED had notice prior to the date of the first notice regarding
infringement delivered by EMED.
7.06. Confidentiality. As used in this Agreement, "Confidential
----------------
Information" means (i) all confidential information, proprietary software, trade
secrets, know-how, and all other intellectual property that is subject to the
licenses granted in this Agreement and in which proprietary rights would be
adversely affected by disclosure and (ii) all other confidential or proprietary
information (including without limitation financial information and business
information such as customer lists) that is or has been disclosed by AWARE to
EMED or by EMED to AWARE. AWARE and EMED agree that they will not, and will not
permit
Confidential Treatment
18
<PAGE>
their respective officers, employees, agents and representatives to, without
first obtaining the written consent of the other party, use, sell or disclose
any Confidential Information, except as expressly contemplated hereby and except
that Confidential Information may be disclosed by the party that owns it unless
such disclosure would adversely affect the proprietary nature of Confidential
Information subject to any of the licenses granted hereunder. Either party may
disclose Confidential Information to potential customers, and to other third
parties to the extent necessary to permit any such third party to assist in
manufacture or integration of the Web Product, provided that any such potential
customer or third party to whom Confidential Information is disclosed shall
execute a confidentiality agreement no less restrictive than this Section 7.06.
"Confidential Information" does not include (i) information that is or becomes
(other than by disclosure in violation of this Agreement) generally available to
the public, (ii) information that the receiving party can show was known to the
receiving party prior to its disclosure by the other party, or (iii) information
required to be disclosed by law or regulation or by judicial process or
administrative order, provided that prompt notice and an opportunity to seek a
protective order is given to the other party prior to disclosure. AWARE and EMED
agree that this Agreement and the Schedules hereto are Confidential Information
subject to this Section 7.06. AWARE consents to the disclosure of the
relationship contemplated by this Agreement in filings by EMED with the U.S.
Securities and Exchange Commission and state securities authorities, and the
filing of this Agreement and the 1997 Agreement as related exhibits; provided
that EMED shall diligently seek confidential treatment of all pricing
information and shall promptly deliver a copy of all such filings to AWARE.
VIII. GENERAL.
8.01. Arbitration. Any controversy or claim arising out of or relating to
------------
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in Boston, Massachusetts
under its Commercial Arbitration Rules, and judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
Arbitration as specified in this Section 8.01 shall be the sole and exclusive
procedure for the resolution of disputes
Confidential Treatment
19
<PAGE>
between the parties arising out of or relating to this Agreement or the breach
thereof; provided, however, that a party, without prejudice to such procedure,
may file a complaint to seek a preliminary injunction or other provisional
judicial relief, if in its judgment such action is necessary to avoid
irreparable damage or preserve the status quo. Despite such action the parties
will continue to participate in good faith in the procedures specified in this
Section 8.01. AWARE and EMED agree that any breach of Sections 4.01, 4.02, 7.01
or 7.06 would cause irreparable harm and that the aggrieved party shall be
entitled to equitable relief in the nature of an injunction for any such breach,
without posting of a bond or other surety.
8.02. Limitation of Warranties. THE OBLIGATIONS OF AWARE AND EMED EXPRESSLY
-------------------------
STATED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES OR CONDITIONS
EXPRESS OR IMPLIED. TO THE EXTENT ALLOWABLE TO BY LAW, THIS EXCLUSION OF ALL
OTHER WARRANTIES AND CONDITIONS EXTENDS TO IMPLIED WARRANTIES OR CONDITIONS OF
MERCHANTABLE QUALITY AND FITNESS FOR A PARTICULAR PURPOSE, OR AGAINST
INFRINGEMENT AND THOSE ARISING BY STATUTE OR OTHERWISE IN LAW, OR FROM A COURSE
OF DEALING OR USAGE OF TRADE.
8.03. Limitation of Liability. EMED AND AWARE AGREE THAT, EXCEPT AS
------------------------
EXPRESSLY STATED OTHERWISE IN SECTION 7.05, THE LIABILITY OF EITHER OF THEM TO
THE OTHER, IF ANY, UNDER ANY THEORY OF LAW OR EQUITY, ARISING OUT OF, OR IN ANY
WAY RELATED TO THIS AGREEMENT OR THE FULFILLMENT OF ANY OF THE OBLIGATIONS OF
EITHER OF THEM UNDER THIS AGREEMENT, IS LIMITED TO MONEY DAMAGES NOT TO EXCEED
THE TOTAL AMOUNT PAID OR PAYABLE BY EMED TO AWARE UNDER THIS AGREEMENT.
8.04. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Massachusetts.
8.05. Assignment. (a) Subject to EMED's right to grant sublicenses
-----------
hereunder, EMED may not assign this Agreement or any rights hereunder without
the prior written consent of AWARE, except that, without such consent and upon
notice to AWARE, (i) EMED may assign all of its rights hereunder to a
corporation or other legal entity that acquires substantially all of EMED's
assets or where EMED is consolidated or merged, but then only upon the express
assumption by such transferee or its successor of the
Confidential Treatment
20
<PAGE>
obligations set forth in this Agreement and (ii) EMED may grant security
interests in the rights of EMED under this Agreement to secure the obligations
of EMED to a bank or other financial institution which has extended credit to
EMED.
(b) AWARE may not assign this Agreement or any rights hereunder without
the prior written consent of EMED, except that, without such consent and upon
notice to EMED, (i) AWARE may assign all of its rights hereunder to a
corporation or other legal entity that acquires substantially all of AWARE's
assets or where AWARE is consolidated or merged, but then only upon the express
assumption by such transferee or its successor of the obligations set forth in
this Agreement and (ii) AWARE may grant security interests in the rights of
AWARE under this Agreement to secure the obligations of AWARE to a bank or other
financial institution which has extended credit to AWARE.
(c) This Agreement is binding upon, and inures to the benefit of, the
successors and permitted assigns of the parties.
8.06. Effect of Waiver. The waiver or failure of either party to exercise
-----------------
in any respect any right provided for in this Agreement shall not be deemed a
waiver of any further or future right hereunder.
8.07. Headings. The headings used in this Agreement are for convenience of
---------
reference only and are not to be used in interpreting the provisions of this
Agreement.
8.08. Complete Agreement. This Agreement is the exclusive statement of the
-------------------
understanding between the parties with respect to its subject matter. It
supersedes all prior agreements, negotiations, representations and proposals,
written or oral, relating to the subject matter hereof. No provisions of this
Agreement may be changed or modified except by an agreement in writing signed by
the party to be bound. No provision of any purchase order or other instrument
issued by EMED or any invoice or other form issued by AWARE that is inconsistent
with the provisions of this Agreement shall be binding or affect this Agreement
unless signed by both parties.
Confidential Treatment
21
<PAGE>
8.09. Severability. If any provision of this Agreement is invalid or
-------------
unenforceable in any particular case, such case shall not invalidate or render
unenforceable any other part of this Agreement. This Agreement shall be
construed as not containing the particular provision or provisions held to be
invalid or unenforceable to the extent of the particular case, and the rights
and obligations of the parties hereto shall be construed and enforced
accordingly.
8.10. Effectiveness of Agreement; Counterparts. This Agreement is effective
-----------------------------------------
when executed by both parties. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
8.11. Notices. All notices provided for in this Agreement shall be in
--------
writing or facsimile, addressed to the appropriate party at the respective
address set forth below or to such other then-current address as is specified by
notice, as follows:
to AWARE:
AWARE, Inc.
40 Middlesex Turnpike
Bedford, MA 01730
Facsimile: (617) 276-4001
Attention: Edmund Reiter
to EMED:
EMED Technologies Corporation
25 Hartwell Avenue
Lexington, MA 02421
Facsimile: (781) 861-6360
Attention: Howard Pinsky
Notices sent by certified mail, return receipt requested to the address
specified pursuant to this Section 7.11 shall be effective three business days
after deposit in the U.S. Mail with postage prepaid. Notice delivered by any
other means shall be effective upon receipt.
7.12. No Agency. AWARE and EMED are independent contractors and separate
----------
legal entities and shall in no way be interpreted as partners, joint venturers,
agents, employees or legal representatives of each other for any purposes.
Neither party shall be responsible for or bound
Confidential Treatment
22
<PAGE>
by any act of the other party or the other party's agents, employees or any
persons in any capacity in its service.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date set forth above.
EMED TECHNOLOGIES
CORPORATION AWARE, INC.
By: /s/ By: /s/
------------------- -------------------
Name: Name:
Title: Title:
Confidential Treatment
23
<PAGE>
Schedule I
Description of Technology
The Web Product accepts medical images, reports, and other information from
various sources, and makes them available for distribution over the web to thin
web clients. Reports are collected and linked with the original studies
(images). The Web Product includes the application defined by EMED, and user
interfaces, features, and web server technology developed by EMED which handles
the image, text, voice and administrative input required for systems operation.
The Web Product further includes HTML generation, web plug-in, compression, and
end-user application software, using core components developed and owned by
AWARE, Inc. In addition, the product consists of user and technical
documentation which have been provided by both parties.
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.22
SOFTWARE LICENSING AND DEVELOPMENT AGREEMENT
This Software Licensing and Development Agreement is entered into as of May
30, 1997 (the "Effective Date") between AWARE, Inc. ("AWARE") and ACCESS
Radiology Corporation ("ACCESS").
Background
----------
1. ACCESS is in the business of providing integrated hardware and software
systems and services with respect to the transmission and interpretation of
medical images. AWARE develops and licenses proprietary computer software that
is useful for compression and web based viewing of digital images.
2. ACCESS and AWARE are currently parties to a Software Supply Agreement dated
as of November 8, 1995 (the "Old Agreement") under which ACCESS has licensed
certain software from AWARE.
3. ACCESS and AWARE wish to modify the terms of the Old Agreement with respect
to the software currently licensed to ACCESS, and to provide for the development
of new products as described below.
NOW, THEREFORE, the parties agree as follows:
I. LICENSING OF COMPRESSION SOFTWARE; PAYMENTS.
1.01. Grant of Compression License. Subject to the terms of this Agreement,
-----------------------------
AWARE grants to ACCESS the following rights, under any patent, copyright, trade
secret or other proprietary right of AWARE, whether presently held or hereafter
acquired, with respect to the proprietary image compression software identified
on Schedule I (the "Compression Software"). The rights granted to ACCESS shall
be exclusive to the extent set forth in Article II.
Confidential Treatment
1
<PAGE>
(a) The right to use the Compression Software for ACCESS's internal
business purposes and for the support of ACCESS customers, and to use and
make available Compression Software, for integration solely with other
components of ACCESS products provided to ACCESS customers and solely for
Medical Use. ACCESS shall not resell toolkits or other applications
included in the Compression Software except to the extent integrated in
other ACCESS products with substantial ACCESS content.
(b) The right to grant sublicenses of the Compression Software for
Medical Use, solely as integrated with ACCESS products, to users of ACCESS
products. Sublicenses will be granted in compliance with the procedures set
forth in Section 5.01.
For purposes of the Agreement, "Medical Use" means the compression,
transmission, viewing or other processing of medical images.
1.02. Material Supplied for Compression Software. AWARE will make the
-------------------------------------------
following materials available to ACCESS.
(a) One copy of the latest object code or executable code for the
Compression Software, with all upgrades as they are released. If the copy
of the Compression Software initially provided is lost, damaged or
destroyed, AWARE will provide at cost a replacement copy of the Compression
Software, which may be a more recent release or version.
(a) One copy of documentation in English and documentation updates as
they are prepared and released which, when taken together, constitute
complete documentation of the Compression Software. Additional copies of
documentation may be purchased at AWARE's then-current purchase price.
1.03. License Fees; Payments. (a) ACCESS [*Redacted pursuant to a
Confidential Treatment Request dated September 10, 1999.]
Confidential Treatment
2
<PAGE>
(b) [*Redacted pursuant to a Confidential Treatment Request dated September
10, 1999.
]
(c) Promptly after the end of each calendar quarter, ACCESS will deliver to
AWARE a statement setting forth, for such quarter, (i) the number of sublicenses
of Compression Software granted for compression of images, (ii) the utilization
of Old Agreement Licenses, (iii) the amount of the Prepayment applied against
license fees due and (iv) any balance of license fees due. [*Redacted pursuant
to a Confidential Treatment Request dated September 10, 1999.
] ACCESS will use its best efforts to provide such
statement and pay license fees due within 10 days of the end of each calendar
quarter. Each quarterly statement and payment of license fees shall be provided
no later than 30 days after the end of the relevant calendar quarter.
(d) ACCESS will keep complete books of account containing all particulars
that may be necessary to determine the amounts payable to AWARE hereunder. Such
books and supporting data shall be open for inspection for one year following
the calendar year to which they pertain, at reasonable times and upon reasonable
notice, by an independent auditor for purposes of verifying the statements
delivered pursuant to subsection (c) above. AWARE will not
Confidential Treatment
3
<PAGE>
conduct more than one such inspection for books and supporting data relating to
any single calendar year. The results of any inspection shall be made available
to ACCESS. If the agreed results of an inspection show an underpayment or
overpayment, then ACCESS shall pay to AWARE the amount of any underpayment and
AWARE shall pay to ACCESS the amount of any overpayment. [*Redacted pursuant to
a Confidential Treatment Request dated September 10, 1999.
] AWARE shall otherwise bear the costs it incurs in performing any
inspection.
1.04. Support of Compression Software. (a) AWARE warrants to ACCESS that
--------------------------------
the Compression Software will perform substantially in accordance with the
specifications included in Schedule I. AWARE will use its best efforts to ensure
such performance and, if necessary, to supply ACCESS with a corrected version of
the Compression Software as soon as practical after AWARE is notified of any
non-conformity. AWARE will provide maintenance releases, scheduled and
reasonable improvements in functionality, bug fixes and work-arounds at no
charge. This warranty will not apply to copies of Compression Software lost or
damaged through no fault of AWARE. AWARE will provide technical training to a
limited number of technically qualified ACCESS personnel without charge. ACCESS
and AWARE shall mutually agree upon a reasonable schedule for training of ACCESS
personnel.
(b) As between ACCESS and AWARE, ACCESS shall be solely responsible for
installation of Compression Software at end user sites, integration of
Compression Software into devices sold or otherwise provided by ACCESS, and
support of ACCESS customers. The warranty and support obligations of AWARE under
subsection (a) above shall be limited to support and service provided directly
to ACCESS as contemplated by subsection (a).
II. EXCLUSIVITY
2.01 Exclusivity Commitments. (a) The rights of ACCESS to use and
------------------------
sublicense software developed, owned or licensed by AWARE for Medical Use shall
be exclusive to the extent
Confidential Treatment
4
<PAGE>
set forth herein. From the Effective Date until the termination of exclusivity
as provided herein, AWARE will not (except as expressly permitted by this
Agreement) supply for Medical Use or permit any person to use for Medical Use
(i) the Compression Software or any modification or improvement of the
Compression Software, (ii) any other software developed, owned or licensed by
AWARE that implements lossy compression of images, or (iii) any other software
developed, owned or licensed by AWARE that provides functionality similar to the
Joint Product contemplated by Article III. AWARE will take reasonable steps to
assure compliance with this exclusivity commitment by third parties to whom
AWARE provides software. Notwithstanding anything contained in this Agreement,
AWARE may provide its ADSL, SDSL, HFC and any other general data communication
product (not including lossy compression) to third parties for Medical Use or
any other purpose.
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
2.02. Exceptions. (a) Licenses of Compression Software for Medical Use
----------
which have been previously granted and for which all license fees have been
invoiced as of the date of this Agreement shall continue in effect
notwithstanding Section 2.01.
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
AWARE shall not permit any customer to modify the Excepted Release (or any other
version of the Compression Software) for Medical Use and shall not make the
source code of the
Confidential Treatment
5
<PAGE>
Excepted Release (or any other version of the Compression Software) available to
any third party.
(c) AWARE may provide support for Compression Software that is permitted
to be licensed for Medical Use to the limited extent set forth in this
subsection (c). This support may be provided only to customers to whom licensing
of Compression Software for Medical Use is permitted by this Section 2.02. AWARE
may provide corrections of reported defects in the operation of the Excepted
Release with any versions of Netscape Navigator, Microsoft Internet Explorer,
MAC OS System 7, Windows 95 and Windows NT that are current as of the date of
this Agreement or are released within 18 months after the date of this
Agreement. AWARE will not modify the Excepted Release for the purpose of
enabling it to operate with any version of such browsers or operating systems
released later than 18 months after the date of this Agreement. As used in this
subsection (c), "defect" means a condition that causes run time errors or
incorrect results. ACCESS and AWARE may mutually agree to permit a greater level
of support for certain customers on a case by case basis, taking into account
the willingness of the customer involved to purchase products of the development
efforts contemplated by the Agreement, the level of resources required, and the
nature and business activities of the customer requesting support. Except as
expressly agreed in advance by ACCESS, AWARE will not make upgrades of the
Excepted Release available for Medical Use to anyone other than ACCESS and its
sublicensees.
2.03. Transition. Promptly after the date of this Agreement, AWARE will
-----------
publicly announce that it has entered into an exclusive relationship with ACCESS
and that ACCESS and AWARE are making a transition to the products contemplated
by the development provisions of this Agreement. This announcement will be
subject to review by ACCESS before its release.
III. DEVELOPMENT AND MARKETING OF NEW PRODUCTS
3.01. Development Project. (a) Promptly upon execution of this Agreement,
--------------------
AWARE and ACCESS will commence the joint development of a client/server product
that provides for wide-spread distribution and web based viewing of compressed
medical images, having substantially the functionality
Confidential Treatment
6
<PAGE>
described in Schedule II. Each of AWARE and ACCESS will use their best efforts
to fulfill their respective development responsibilities set forth in Schedule
II on the timetable set forth in Schedule II. Best efforts will include (without
limitation) maintaining staffing available for the development project
consistent with the responsibilities and timetable set forth in Schedule II. It
is understood that Schedule II is a planning document that is subject to change
as development work proceeds. AWARE and ACCESS will cooperate and consult in the
development effort and share information as necessary and appropriate for timely
completion of the development project. ACCESS will have final authority and
responsibility for decisions concerning design, specifications and development
of the Joint Product. The products, toolkits, concepts, inventions and
applications arising out of the development work conducted by ACCESS and AWARE
under this Agreement, including all software developed or contributed by either
party, are collectively referred to as the "Joint Product". Each party will bear
expenses it incurs in development of the Joint Product.
(b) AWARE and ACCESS shall each have access to the source code of
software under development or included in the Joint Product. The fact that
either AWARE or ACCESS has provided access to source code shall in no way affect
proprietary rights to source code or software, and all source code shall
continue to be owned by the party that owned it prior to disclosure. All source
code is "Confidential Information" as that term is used in Section 5.06 and
shall be subject to the restrictions set forth in Section 5.06. ACCESS will
maintain source code revision control procedures with which both AWARE and
ACCESS will comply. These procedures will be designed to achieve, among other
things, compliance with "Good Manufacturing Practices" as defined by the U.S.
Food and Drug Administration and documentation of the ownership of source code
disclosed by either party.
3.02. Marketing; Licenses. ACCESS shall have following rights with respect
--------------------
to the Joint Product under any patent, copyright, trade secret or other
proprietary right of AWARE, whether presently held or hereafter acquired, which
AWARE hereby grants to ACCESS. The rights granted to ACCESS shall be exclusive
to the extent set forth in Article II.
Confidential Treatment
7
<PAGE>
(a) The right to use the Joint Product for internal purposes and
in support of users of ACCESS products for Medical Use, and to use and make
available the Joint Product as part of ACCESS's product line and for
integration with other components of ACCESS products.
(b) The right to make and have made, use and have used, and
sell, lease or otherwise transfer the Joint Product, and to grant
sublicenses of the software and other intellectual property included in the
Joint Product, to users of ACCESS products for Medical Use in which such
software is included. Users to whom sublicenses are granted may include
original equipment manufacturers or other parties which utilize toolkits to
create derivative products for Medical Use which will in turn be licensed
to end users. Sublicenses of software will be granted in compliance with
the procedures set forth in Section 5.01.
(c) The right to modify the Joint Product and the software
included in it to create new releases and new products for Medical Use, to
make and have made, use and have used, and sell, lease or otherwise
transfer products including modifications for Medical Use, and to grant
sublicenses of software as modified to users of ACCESS products in which
such software is included, in all cases for Medical Use. Users to whom
sublicenses are granted may include original equipment manufacturers or
other parties which utilize toolkits to create derivative products for
Medical Use which will in turn be licensed to end users. Sublicenses of
software will be granted in compliance with the procedures set forth in
Section 5.01.
3.03. Royalties. (a) In consideration of AWARE's contributions to the Joint
----------
Product, ACCESS will pay royalties to AWARE as determined pursuant to this
Section 3.03. [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
8
<PAGE>
]
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
] Promptly upon
completion of the functional product descriptions and design specifications for
the Joint Product, AWARE and ACCESS will negotiate in good faith to reach
agreement on the [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.]
(c) Promptly after the end of each calendar quarter after commencement of
marketing of the Joint Product, ACCESS will deliver to AWARE a statement setting
forth in reasonable detail the calculation of [*Redacted pursuant to a
Confidential Treatment Request dated September 10, 1999.] and royalties due.
Each quarterly statement shall be accompanied by payment of license fees due.
ACCESS will use its best efforts to provide such statement within 10 days of the
end of each calendar quarter. Each quarterly statement and payment of license
fees shall be provided no later than 30 days after the end of the relevant
calendar quarter.
(d) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
] ACCESS will cooperate with AWARE in marketing efforts and keep
AWARE informed of market developments in general and ACCESS marketing programs
in particular.
(e) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
9
<PAGE>
] ACCESS
will not make the Joint Product available without charge except for the purposes
described in the preceding sentence and will not make the Joint Product
available without charge to assist in selling other products or in generating
revenues from other sources. ACCESS and AWARE will negotiate a reduced royalty
rate for users who migrate to the Joint Product after having previously
purchased ACCESS products including the Compression Software.
3.04. Support. AWARE will have responsibilities for support of software
--------
developed by AWARE and included in the Joint Product that are substantially
similar to AWARE's responsibilities for support of Compression Software pursuant
to Section 1.04. [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
] AWARE and ACCESS will negotiate in good faith to reach agreement on
calculation of support fees payable to AWARE at the same time that they
negotiate [ *Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.]
3.05. Marketing for Non-Medical Use. AWARE shall have the right to market
------------------------------
software and other components included in the Joint Product under any patent,
copyright, trade secret or other proprietary right of ACCESS, whether presently
held or hereafter acquired, for all uses other than medical uses. AWARE shall
have the following rights with respect to the Joint Product, which ACCESS hereby
grants to AWARE.
(a) The right to use the Joint Product for internal purposes and
in support of users of AWARE products, and to use and make available the
Joint Product as part of AWARE's product line and for integration with
other components of AWARE products, in all cases for uses other than
Medical Uses. ACCESS agrees that "Medical Uses" for purposes of this
Section
Confidential Treatment
10
<PAGE>
3.05 [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(b) The right to make and have made, use and have used, and
sell, lease or otherwise transfer the Joint Product, and to grant
sublicenses of the software and other intellectual property included in the
Joint Product to users of AWARE products in which such software is
included, in all cases for uses other than Medical Uses. Users to whom
sublicenses are granted may include original equipment manufacturers or
other parties which utilize toolkits to create derivative products for any
use other than Medical Uses which will in turn be licensed to end users.
Sublicenses of software will be granted in compliance with the procedures
set forth in Section 5.01.
(c) The right to modify the Joint Product and the software
included in it to create new releases and new products, to make and have
made, use and have used, and sell, lease or otherwise transfer products
including modifications, and to grant sublicenses of software as modified
to users of AWARE products in which such software is included, in all cases
for uses other than Medical Uses. Users to whom sublicenses are granted may
include original equipment manufacturers or other parties which utilize
toolkits to create derivative products for any use other than Medical Uses
which will in turn be licensed to end users. Sublicenses of software will
be granted in compliance with the procedures set forth in Section 5.01.
[*Redacted pursuant to a Confidential Treatment Request dated September 10,
1999.
] Except as agreed in writing with ACCESS, AWARE will not make the
Joint Product available without charge.
IV. TERM OF RIGHTS AND OBLIGATIONS
4.01. Term of Exclusivity. (a) The exclusivity provisions of Article II and
--------------------
the other obligations of the
Confidential Treatment
11
<PAGE>
parties under this Agreement shall remain in effect unless and until terminated
in accordance with this Article IV.
(b) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(c) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
(d) [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
]
4.02. Effect of Termination of Exclusivity or Expiration of Initial Term.
-------------------------------------------------------------------
(a) If the exclusivity obligations of AWARE and ACCESS shall terminate pursuant
to Section 4.01, AWARE and ACCESS will discuss in good faith whether an
extension of exclusivity or other modifications to this Agreement may be
appropriate. [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
12
<PAGE>
] If development of the Joint Product has not been completed at
the time of termination of exclusivity pursuant to Section 4.01, then rights
under such licenses shall apply to such portions of the Joint Product as shall
be in existence on the date of termination (including any applications that are
incomplete).
(b) AWARE and ACCESS agree that the royalties and license fees payable
under this Agreement shall be modified effective upon modification of the
licenses granted hereunder pursuant to subsection (a) above. AWARE and ACCESS
further agree that the appropriate amount of such modified royalties and license
fees cannot be determined as of the date of this Agreement. [*Redacted pursuant
to a Confidential Treatment Request dated September 10, 1999.
] If, at
any time after the end of such three month period, either party shall determine
in its judgment that negotiations are unlikely to result in an acceptable
outcome, such party may initiate arbitration to determine modified fees and
royalties pursuant to the procedures specified in Section 6.02.
4.03. Termination for Breach. (a) If ACCESS shall materially breach its
-----------------------
obligations under this Agreement, and such material breach shall be continuing
for at least 60 days after delivery of a notice by AWARE describing such breach,
then AWARE may by a separate notice terminate this Agreement for breach under
this Section 4.03(a).
(b) If AWARE shall materially breach its obligations under this Agreement,
and such material breach shall be continuing for at least 60 days after delivery
of a notice by ACCESS describing such breach, then ACCESS may by a separate
notice terminate this Agreement for breach under this Section 4.03(b).
(c) With respect to the obligations of AWARE and ACCESS to participate in
development of the Joint Product pursuant to Section 3.01(a), "material breach"
means willful failure of a party to devote best efforts to the development
project or to allocate sufficient resources to perform such party's
responsibilities.
Confidential Treatment
13
<PAGE>
(d) Termination for breach under this Section 4.03 shall not be an
exclusive remedy, but shall be in addition to any other remedies that either
party may have.
4.04. Effect of Termination for Breach. (a) If AWARE shall terminate this
---------------------------------
agreement for breach pursuant to Section 4.03, then (i) the licenses granted to
ACCESS pursuant to Sections 1.01 and 3.02 shall immediately terminate and ACCESS
shall cease using or marketing the Compression Software and the Joint Product
and (ii) the license granted to AWARE pursuant to Section 3.05 shall remain in
effect.
(b) If ACCESS shall terminate this agreement for breach pursuant to
Section 4.04, then (i) the license granted to AWARE pursuant to Section 3.05
shall immediately terminate, and AWARE shall cease using or marketing the Joint
Product (ii) the licenses granted to ACCESS pursuant to Sections 1.01 and 3.02
shall remain in effect and (iii) the exclusivity obligations of ACCESS under
Article II shall immediately terminate.
(c) If development of the Joint Product has not been completed at the time
of termination for breach pursuant to Section 4.03, then rights under continuing
licenses shall apply to such portions of the Joint Product as shall be in
existence on the date of termination (including any applications that are
incomplete).
(d) For so long as the license granted under Section 1.01 continues in
effect, ACCESS shall pay royalties as provided in Section 1.03. To the extent
that licenses of the Joint Product under Sections 3.02 and 3.05 remain in
effect, royalties payable with respect to the Joint Product will be determined
by agreement between the parties or, failing such agreement, by arbitration
under Section 6.02.
4.06. Additional Surviving Terms. All payment obligations accrued prior to
--------------------------
any termination shall survive such termination. All sublicenses granted to any
end user by either party in accordance with this Agreement prior to any
termination of this Agreement shall survive such termination. Either party which
holds a continuing license under this Agreement shall also continue to have the
rights set forth in Sections 1.02, 1.04. 3.01(b) and 3.04 with respect to such
license. The provisions of Sections 5.02,
Confidential Treatment
14
<PAGE>
5.03, 5.06, 6.02, 6.04, 6.05 and 6.14 shall survive any termination of this
Agreement.
V. INTELLECTUAL PROPERTY
5.01. Software Licensing Procedures. (a) The procedures set forth in this
------------------------------
Section 5.01 shall govern the granting of sublicenses of software to users under
this Agreement. In this Section 5.01, the party granting a sublicense to a user
is referred to as the "Licensor".
(b) Each of AWARE and ACCESS shall assign a unique number to each copy
made by it of software comprising the Joint Product or any other software
developed or provided by the other party, whether for internal use or for
sublicense to a user. Each of AWARE and ACCESS shall keep full, clear and
accurate records of all copies that it makes of any such software and the
identity and location of each third party user to whom any such software is
provided. Each of ACCESS and AWARE may examine records of the other party not
more than once in any calendar quarter, during normal business hours and upon
reasonable notice.
(c) Upon granting a sublicense of software comprising the Joint Product or
any other software developed or provided by the other party, the Licensor shall
require that the user execute an agreement including the software licensing
terms set forth below. Such agreement may be between the user and the Licensor,
or between the user and a reseller or other intermediary authorized by the
Licensor.
(i) a provision restricting the sublicensee's use of the licensed
software to its own business and professional purposes, provided that any
sublicensee of a toolkit may use it to create new applications to be
licensed to end users as part of the sublicensee's product;
(ii) a provision requiring the sublicensee to take all reasonable
precautions to keep the licensed software and any related documentation
confidential;
(iii) a provision prohibiting the sublicensee from reproducing
(except for backup copies), reverse engineering, translating or creating
other versions of
Confidential Treatment
15
<PAGE>
the licensed software, provided that any sublicensee of a toolkit may use
it to create new applications to be licensed to end users as part of the
sublicensee's product;
(iv) a provision acknowledging that ownership of the licensed
software remains exclusively with the Licensor or its suppliers; and
(v) a provision limiting the other party's liability to the
sublicensee to at least the same extent that the liability of the Licensor
to the sublicensee is limited, and disclaiming warranties on behalf of the
other party at least to the extent disclaimed on behalf of the Licensor.
Each party will use reasonable efforts to enforce license agreements executed by
its customers. AWARE agrees that any license of Compression Software granted by
ACCESS prior to the Effective Date need not be altered if it complied with the
requirements of the Old Agreement.
(d) Notwithstanding this Section 5.01 or any other provision of this
Agreement, software may be licensed to the Government of the United States of
America, or an agency or instrumentality thereof, under an agreement containing
software licensing terms generally used by the United States Government (or the
agency or instrumentality to which the software is licensed) for procurement of
commercial software.
5.02. Ownership. (a) As between ACCESS and AWARE, AWARE owns and shall
----------
continue to own the Compression Software (including without limitation AWARE's
AccuRad product) and any other software developed solely by AWARE or by any
employee, consultant or other person acting on AWARE's behalf under this
Agreement, including any inventions, concepts, specifications, know-how and
ideas embodied in such software, together with all proprietary rights therein
("AWARE Intellectual Property"). As between ACCESS and AWARE, ACCESS owns and
shall continue to own the concepts, specifications, know-how, and ideas embodied
in the design and functionality of the Joint Product, and as applied in the
Joint Product for Medical Use, and any software developed solely by ACCESS or
by any employee, consultant or other person acting on ACCESS's behalf under this
Agreement, including any inventions, concepts,
Confidential Treatment
16
<PAGE>
specifications, know-how and ideas embodied in any of the foregoing, together
with all proprietary rights therein ("ACCESS Intellectual Property"). As between
ACCESS and AWARE, the parties shall jointly own any software or other
intellectual property jointly developed by the parties under this Agreement and
not allocated between them above, including any inventions, concepts,
specifications, know-how and ideas embodied therein, together with all
proprietary rights therein ("Joint Intellectual Property"). Whether or not any
intellectual property is jointly developed shall be determined in accordance
with the United States patent laws.
(b) AWARE shall have the right to file and prosecute patent or copyright
applications on AWARE Intellectual Property and ACCESS shall have the right to
file and prosecute patent or copyright applications on ACCESS Intellectual
Property. The parties will cooperate in the filing and prosecution of patent or
copyright applications on Joint Intellectual Property, provided that neither
party shall file any such patent or copyright application without the prior
written consent of the other. Each party will cooperate with the other party in
the filing and prosecution by the other party of any patent or copyright
application that complies with this subsection (b), including by executing and
delivering or causing its officers and employees to execute and deliver (all at
the expense of the filing party) any documentation reasonably necessary or
appropriate for the filing and prosecution of such an application and the
vesting of rights as provided in this Agreement.
(c) The exclusivity obligations of the parties under Article II shall not
in any way be affected by the ownership of AWARE Intellectual Property, ACCESS
Intellectual Property, or Joint Intellectual Property as provided in this
Section 5.02, or by the filing of any patent or copyright application or the
grant or issuance of any patent or copyright. Neither party shall market, sell,
license or distribute any Joint Intellectual Property except to the extent that
such Joint Intellectual Property is covered by a license granted to such party
hereunder.
5.03. Trademarks. (a) The terms specified in Schedule 5.03 to this
Agreement are trademarks or tradenames owned by AWARE and may not be used
without specific written permission. Nothing herein shall confer upon ACCESS any
proprietary interest in the trademarks or tradenames, except
Confidential Treatment
17
<PAGE>
the right to use the same in accordance with the terms hereof. All use of such
marks or names, and the goodwill associated therewith, shall inure to the
benefit of AWARE. ACCESS agrees not to, at any time during the term of this
Agreement or thereafter, directly or indirectly (i) dispute or contest the
validity or enforceability of AWARE's trademarks or tradenames, or (ii) take any
action that would dilute the value of the goodwill attaching to the trademarks
or tradenames.
(b) ACCESS shall exclusively own the trademarks or trade names under which
the Joint Product is sold for Medical Use or otherwise provided by ACCESS, and
may file and prosecute trademark applications on such trademarks and tradenames.
AWARE agrees not to, at any time during the term of this Agreement or
thereafter, directly or indirectly dispute or contest the validity or
enforceability of such trademarks or tradenames.
5.04. Representations. (a) AWARE represents to ACCESS that:
----------------
(i) AWARE has full authority to enter into this Agreement and
grant the licenses and rights set forth herein.
(ii) To the best of AWARE's knowledge, the documentation and
code of the Compression Software have not been published under
circumstances which have caused loss of proprietary rights therein, and to
the best of AWARE's knowledge, the documentation and code of the
Compression Software do not infringe upon any patent, copyright or other
proprietary right of any third party.
(iii) AWARE is not aware of any claim of infringement of any
patent, copyright or other proprietary right having been made or pending
against AWARE relative to the documentation or code of the Compression
Software.
(b) ACCESS represents to AWARE that:
(i) ACCESS has full authority to enter into this Agreement and
grant the licenses and rights set forth herein.
Confidential Treatment
18
<PAGE>
(ii) To the best of ACCESS's knowledge, the specifications and
functionality of the Joint Product, as set forth in Schedule II, do not
infringe upon any patent, copyright or other proprietary right of any third
party.
5.05. Indemnities. (a) AWARE will, at its expense, defend against, hold
-----------
ACCESS harmless from, and pay any final judgment against ACCESS or any customer
of ACCESS arising (x) out of any claim that AWARE Intellectual Property
infringed a copyright, a patent or a trade secret or (y) out of marketing by
AWARE of AWARE products (including any product liability claim unless such
product liability claim is caused by designs, specifications or software
provided by ACCESS); provided that (i) ACCESS notifies AWARE in writing of such
claim or action, and (ii) AWARE has sole control of the defense and settlement
of such claim or action. In defending against such claim or action to the extent
it relates to software provided by AWARE, AWARE may, at its option, agree to any
settlement in which AWARE shall either (1) procure for ACCESS and all customers
of ACCESS the right to continue using the software at issue; or (2) modify or
replace such software so that it no longer infringes, to the extent that the
exercise of such option does not result in a material adverse change in the
operational characteristics of such software, and equivalent functions and
performance provided by AWARE remain following implementation of such option. If
AWARE concludes in its judgment that none of the foregoing options is
reasonable, AWARE may remove the software at issue and any other component
supplied by AWARE rendered unusable as a result of such removal and pay to
ACCESS damages arising therefrom, including damages incurred by reason of
ACCESS's inability to perform its obligations under sublicenses; [*Redacted
pursuant to a Confidential Treatment Request dated September 10, 1999.
]
(b) ACCESS will, at its expense, defend against, hold ACCESS harmless
from, and pay any final judgment against AWARE or any customer of AWARE arising
out of (x) any claim that ACCESS Intellectual Property infringed a copyright, a
patent or a trade secret or (y) out of marketing by ACCESS of ACCESS products
(including any product liability claim unless such product liability claim is
caused by designs, specifications or software provided by AWARE) provided that
(i) AWARE notifies ACCESS in writing of such claim or
Confidential Treatment
19
<PAGE>
action, and (ii) ACCESS has sole control of the defense and settlement of such
claim or action. In defending against such claim or action to the extent it
relates to software provided by ACCESS, ACCESS may, at its option, agree to any
settlement in which ACCESS shall either (1) procure for AWARE and all customers
of AWARE the right to continue using the software at issue; or (2) modify or
replace such software so that it no longer infringes, to the extent that the
exercise of such option does not result in a material adverse change in the
operational characteristics of such software, and equivalent functions and
performance provided by ACCESS remain following implementation of such option.
If ACCESS concludes in its judgment that none of the foregoing options is
reasonable, ACCESS may remove the software at issue and any other component
supplied by ACCESS rendered unusable as a result of such removal and pay to
AWARE damages arising therefrom, including damages incurred by reason of AWARE's
inability to perform its obligations under sublicenses; [*Redacted pursuant to a
Confidential Treatment Request dated September 10, 1999.
]
(c) If ACCESS shall determine in its judgment that the concepts,
specifications, know-how, and ideas embodied in the design and functionality of
the Joint Product infringe or conflict with a patent, copyright, trade secret or
other proprietary right not known to ACCESS on the date of this Agreement, then
ACCESS shall notify AWARE and the parties will discuss in good faith whether the
Joint Product can be modified or other steps may be taken to avoid such
infringement. If ACCESS determines in its judgment that no such modification or
other steps can be reasonably implemented, ACCESS may by notice terminate the
obligations of AWARE and ACCESS under this Agreement with respect to the Joint
Product, and the indemnity of ACCESS in subsection (b) above shall apply only to
those claims relating to the Joint Product of which AWARE or ACCESS had notice
prior to the date of the first notice regarding infringement delivered by
ACCESS.
5.06. Confidentiality. As used in this Agreement, "Confidential
----------------
Information" means (i) all confidential information, proprietary software, trade
secrets, know-how, and all other intellectual property that is subject to the
licenses granted in this Agreement and in which proprietary rights would be
adversely affected by disclosure and (ii)
Confidential Treatment
20
<PAGE>
all other confidential or proprietary information (including without limitation
financial information and business information such as customer lists) that is
or has been disclosed by AWARE to ACCESS or by ACCESS to AWARE. AWARE and ACCESS
agree that they will not, and will not permit their respective officers,
employees, agents and representatives to, without first obtaining the written
consent of the other party, use, sell or disclose any Confidential Information,
except as expressly contemplated hereby and except that Confidential Information
may be disclosed by the party that owns it unless such disclosure would
adversely affect the proprietary nature of Confidential Information subject to
any of the licenses granted hereunder. Either party may disclose Confidential
Information to potential customers, and to other third parties to the extent
necessary to permit any such third party to assist in manufacture or integration
of the Joint Product, provided that any such potential customer or third party
to whom Confidential Information is disclosed shall execute a confidentiality
agreement no less restrictive than this Section 5.06. "Confidential Information"
does not include (i) information that is or becomes (other than by disclosure in
violation of this Agreement) generally available to the public, (ii) information
that the receiving party can show was known to the receiving party prior to its
disclosure by the other party, or (iii) information required to be disclosed by
law or regulation or by judicial process or administrative order, provided that
prompt notice and an opportunity to seek a protective order is given to the
other party prior to disclosure. AWARE and ACCESS agree that this Agreement and
the Schedules thereto are Confidential Information subject to this Section 5.06.
VI. GENERAL.
6.01. Regulatory Matters. ACCESS shall make and prosecute all filings and
-------------------
take such other actions as ACCESS shall consider appropriate to obtain clearance
for commercial marketing of the Joint Products from the FDA and such other
authorities as may be appropriate for marketing of the Joint Product. AWARE will
cooperate with ACCESS in providing information and assistance with respect to
such filings and other actions and may review and comment on filings made by
ACCESS. AWARE shall take such actions to comply with regulatory requirements
(including without
Confidential Treatment
21
<PAGE>
limitation "good manufacturing practices" as defined by the FDA, and standards
and procedures specified in filings made with the FDA) as ACCESS shall
reasonably request, including without limitation use of identified development,
design and specification methodologies.
6.02. Arbitration. Any controversy or claim arising out of or relating to
------------
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in Boston, Massachusetts
under its Commercial Arbitration Rules, and judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
Arbitration as specified in this Section 6.02 shall be the sole and exclusive
procedure for the resolution of disputes between the parties arising out of or
relating to this Agreement or the breach thereof; provided, however, that a
party, without prejudice to such procedure, may file a complaint to seek a
preliminary injunction or other provisional judicial relief, if in its judgment
such action is necessary to avoid irreparable damage or preserve the status quo.
Despite such action the parties will continue to participate in good faith in
the procedures specified in this Section 6.02. AWARE and ACCESS agree that any
breach of Sections 2.01, 2.02, 4.04, 5.01, 5.03 or 5.06 would cause irreparable
harm and that the aggrieved party shall be entitled to equitable relief in the
nature of an injunction for any such breach, without posting of a bond or other
surety.
6.03. Public Announcements. AWARE and ACCESS will cooperate in all public
---------------------
disclosure concerning this agreement, and neither party shall make any such
disclosure without the approval of the other. Approval of disclosure required by
law or regulation shall not be unreasonably withheld; provided that it may be a
condition of such approval that the party making such disclosure seek
confidential treatment.
6.04. Limitation of Warranties. THE OBLIGATIONS OF AWARE AND ACCESS
-------------------------
EXPRESSLY STATED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES OR
CONDITIONS EXPRESS OR IMPLIED. TO THE EXTENT ALLOWABLE TO BY LAW, THIS EXCLUSION
OF ALL OTHER WARRANTIES AND CONDITIONS EXTENDS TO IMPLIED WARRANTIES OR
CONDITIONS OF MERCHANTABLE QUALITY AND FITNESS FOR A PARTICULAR PURPOSE, AND
THOSE ARISING BY STATUTE OR OTHERWISE IN LAW, OR FROM A COURSE OF DEALING OR
USAGE OF TRADE.
Confidential Treatment
22
<PAGE>
6.05. Limitation of Liability. ACCESS AND AWARE AGREE THAT, EXCEPT AS
------------------------
EXPRESSLY STATED OTHERWISE IN THIS AGREEMENT, THE LIABILITY OF EITHER OF THEM TO
THE OTHER, IF ANY, UNDER ANY THEORY OF LAW OR EQUITY, ARISING OUT OF, OR IN ANY
WAY RELATED TO THIS AGREEMENT OR THE FULFILLMENT OF ANY OF THE OBLIGATIONS OF
EITHER OF THEM UNDER THIS AGREEMENT, IS LIMITED TO MONEY DAMAGES NOT TO EXCEED
THE TOTAL AMOUNT PAID OR PAYABLE BY ACCESS TO AWARE OR BY AWARE TO ACCESS (AS
THE CASE MAY BE) UNDER THIS AGREEMENT.
6.06. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Massachusetts.
6.07. Assignment. (a) Subject to ACCESS's right to grant sublicenses
-----------
hereunder, ACCESS may not assign this Agreement or any rights hereunder without
the prior written consent of AWARE, except that, without such consent and upon
notice to AWARE, (i) ACCESS may assign all of its rights hereunder to a
corporation or other legal entity that acquires substantially all of ACCESS's
assets or where ACCESS is consolidated or merged, but then only upon the express
assumption by such transferee or its successor of the obligations set forth in
this Agreement and (ii) ACCESS may grant security interests in the rights of
ACCESS under this Agreement to secure the obligations of ACCESS to a bank or
other financial institution which has extended credit to ACCESS.
(b) Subject to AWARE's right to grant sublicenses hereunder, AWARE may not
assign this Agreement or any rights hereunder without the prior written consent
of ACCESS, except that, without such consent and upon notice to ACCESS, (i)
AWARE may assign all of its rights hereunder to a corporation or other legal
entity that acquires substantially all of AWARE's assets or where AWARE is
consolidated or merged, but then only upon the express assumption by such
transferee or its successor of the obligations set forth in this Agreement and
(ii) AWARE may grant security interests in the rights of AWARE under this
Agreement to secure the obligations of AWARE to a bank or other financial
institution which has extended credit to AWARE.
Confidential Treatment
23
<PAGE>
(c) This Agreement is binding upon, and inures to the benefit of, the
successors and permitted assigns of the parties.
6.08. Effect of Waiver. The waiver or failure of either party to exercise
----------------
in any respect any right provided for in this Agreement shall not be deemed a
waiver of any further or future right hereunder.
6.09. Headings. The headings used in this Agreement are for convenience of
---------
reference only and are not to be used in interpreting the provisions of this
Agreement.
6.10. Complete Agreement. This Agreement is the exclusive statement of the
-------------------
understanding between the parties with respect to its subject matter. It
supersedes all prior agreements, negotiations, representations and proposals,
written or oral, relating to the subject matter hereof, including without
limitation the Old Agreement. No provisions of this Agreement may be changed or
modified except by an agreement in writing signed by the party to be bound. No
provision of any purchase order or other instrument issued by ACCESS or any
invoice or other form issued by AWARE that is inconsistent with the provisions
of this Agreement shall be binding or affect this Agreement unless signed by
both parties.
6.11. Severability. If any provision of this Agreement is invalid or
-------------
unenforceable in any particular case, such case shall not invalidate or render
unenforceable any other part of this Agreement. This Agreement shall be
construed as not containing the particular provision or provisions held to be
invalid or unenforceable to the extent of the particular case, and the rights
and obligations of the parties hereto shall be construed and enforced
accordingly.
6.12. Effectiveness of Agreement; Counterparts. This Agreement is
-----------------------------------------
effective when executed by both parties. This Agreement may be executed in
counterparts, each of which shall constitute one and the same instrument.
6.13. Notices. All notices provided for in this Agreement shall be in
--------
writing or facsimile, addressed to the appropriate party at the respective
address set forth below or to such other then-current address as is specified by
notice, as follows:
Confidential Treatment
24
<PAGE>
(b) to AWARE:
Aware, Inc.
One Oak Park
Bedford, MA 01730
Facsimile: (617) 276-4001
Attention: Edmund Reiter
(c) to ACCESS:
ACCESS Radiology Corporation
313 Speen Street
Natick, MA 01760
Facsimile: (508) 647-9350
Attention: Howard Pinsky
Notices sent by certified mail, return receipt requested to the address
specified pursuant to this Section 6.13 shall be effective three business days
after deposit in the U.S. Mail with postage prepaid. Notice delivered by any
other means shall be effective upon receipt.
6.14. No Agency. AWARE and ACCESS are independent contractors and separate
----------
legal entities and shall in no way be interpreted as partners, joint venturers,
agents, employees or legal representatives of each other for any purposes.
Neither party shall be responsible for or bound by any act of the other party or
the other party's agents, employees or any persons in any capacity in its
service.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date set forth above.
ACCESS RADIOLOGY
CORPORATION AWARE, INC.
By: /s/ Edmund C. Reiter By: /s/ Howard Pinsky
-------------------- -----------------
Name: Edmund C. Reiter Name: Howard Pinsky
Title: Title: Vice President of
Technology
Confidential Treatment
25
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.23
AMENDED AND RESTATED RESELLER AGREEMENT
This Amended and Restated Reseller Agreement is made as of May 30,
1997, between ISG TECHNOLOGIES, INC., a corporation incorporated under the laws
of the Province of Ontario, Canada (hereinafter called "ISG"), and ACCESS
RADIOLOGY CORPORATION, a corporation incorporated in the State of Delaware
(hereinafter called "ACCESS").
B A C K G R O U N D :
1. ACCESS and ISG are parties to a Reseller Agreement dated May 17,
1996, as amended by a Supplemental Agreement dated as of September 30, 1996, (as
so amended, the "Old Reseller Agreement"), under which ACCESS and ISG have
agreed that ACCESS will resell certain medical devices (including software)
developed by ISG.
2. ACCESS and ISG wish to amend the Old Reseller Agreement in
certain respects.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth the parties agree that the Old Reseller Agreement shall be amended and
restated to read in its entirety as follows:
1. Definitions.
1.1 In this Agreement, each of the following terms has the meaning
set out below:
1.1.1 "Carryover Amount" has the meaning set forth in Section
4.2.
1.1.2 "Committed Amount" has the meaning set forth in Section
4.2.
1.1.3 "FDA" means the United States Food and Drug
Administration.
Confidential Treatment
-1-
<PAGE>
1.1.4 "Food and Drug Act" means the United States Federal
Food, Drug and Cosmetic Act, 21 U.S.C. et seq., as amended from time to time.
-- ---
1.1.5 "GMA Release" means, with respect to any VRS
Application or VRS Option, compliance with all of the conditions set forth
below. The date of GMA Release for any release of any VRS Application or VRS
Option shall be the first date on which the conditions set forth below are
satisfied for such release.
(i) The VRS Application or VRS Option, when
installed on ISG Devices, shall perform all of the functions described for
such software on Schedule I and shall perform reasonably free from bugs
material to such software's intended use.
(ii) ISG shall have certified such VRS Application or
VRS Option for installation on ISG Devices consisting of at least the types
of systems and related equipment required by Section 5.3 as of the date of
GMA Release.
(iii) ISG Devices on which the VRS Application or VRS
Option is installed shall all have been cleared for commercial marketing by
the FDA.
(iv) All ISG Devices including such VRS Application
or VRS Option that are to be resold as contemplated by this Agreement shall
be in compliance with all relevant filings made by ISG with the FDA and
with "good manufacturing practices" as defined in the Food and Drug Act and
the regulations or other measures promulgated by the FDA thereunder.
(v) ISG shall have notified ACCESS that GMA Release
of the VRS Application or VRS Option has occurred.
1.1.6 "ISG Devices" means medical imaging workstations
consisting of Licensed Works provided by ISG, installed by ACCESS in accordance
with instructions provided by ISG on computer hardware and video monitors in
configurations certified by ISG as contemplated by Section 5.3.
1.1.7 "Licensed Works" means all or any part of the VRS
Applications and the VRS Options.
Confidential Treatment
-2-
<PAGE>
1.1.8 [*Redacted pursuant to a Confidential Treatment Request
dated September 10, 1999.
]
1.1.9 "Support Period" means, with respect to any ISG Device,
a period of five years from the date of installation of such ISG Device.
1.1.11 "UNIX Termination Date" has the meaning set forth in
Section 5.3(ii).
1.1.10 "Utilization Amount" has the meaning set forth in
Section 4.2.
1.1.11 "VRS Applications" means each of the medical imaging
software applications developed by ISG having the capabilities and service
features described in Schedule I. The features of each VRS Application included
at the base unit price and the VRS Options available for each VRS Application at
additional cost are shown on Schedule I.
1.1.12 "VRS Options" means the options for the VRS
Applications having the capabilities and service features described in Schedule
I.
1.1.13 "VRS NT Software" means the VRS Applications and the
VRS Options for use with the Windows NT operating system, as indicated on
Schedule I.
1.1.14 "VRS UNIX Software" means the VRS Applications and the
VRS Options for use with the Sun Solaris operating system, as indicated on
Schedule I.
2. Grant of Rights.
2.1 Effective upon execution of this Agreement and subject to the
conditions set forth below, ISG hereby appoints ACCESS a non-exclusive reseller
of ISG Devices and grants to ACCESS the following non-exclusive rights:
Confidential Treatment
-3-
<PAGE>
2.1.1 The right to make ISG Devices available to customers, whether
on a monthly fee basis or through outright sales. Such sales may be made
through a prime contractor or systems integrator so long as (i) the end user
shall enter into an agreement containing licensing provisions complying with
Section 3, and (ii) such sales shall be Qualifying Contractor Sales.
2.1.2 The right to include copies of the Licensed Works in ISG
Devices made available by ACCESS to customers and to sublicense Licensed Works
included in such devices in the regular course of business.
2.1.3 The right to use copies of the Licensed Works without charge
for internal purposes of ACCESS, which shall be limited to demonstration and
technical support of customers only.
2.2 ACCESS shall not have any right to distribute the source code
of any of the Licensed Works.
3. Customer License Agreements.
3.1 No customer shall receive any Licensed Works unless such customer
shall have signed an agreement (with ACCESS or with a prime contractor or
systems integrator) containing software licensing provisions complying with
Section 3.2 below.
3.2 Each customer agreement shall set out the name of the customer
and the identity and location of the ISG Devices on which the customer is
licensed to use a copy of the Licensed Works. Such a customer agreement shall
comply with this Section 3.2 if it contains:
(i) in the case of any user, substantially the provisions set
forth in Schedule II (it being understood that ISG need not be
identified by name), or
(ii) in a case where the end user is the Government of the United
States of America or an agency or instrumentality thereof,
substantially the provisions set forth in Schedule IIA, or such
other licensing terms as such Government, agency or
instrumentality shall then generally prescribe for the
procurement of commercial software.
Confidential Treatment
-4-
<PAGE>
3.3 ACCESS shall use reasonable efforts to enforce all the licensing
provisions of customer agreements.
4. Payments.
4.1 ACCESS agrees to pay to ISG the following license fees:
4.1.1 A license fee as set forth in Table 1 of Schedule I
for each copy of the GMA Release version of any VRS Application installed on an
ISG Device made available by ACCESS to a customer in accordance with this
Agreement, except as provided in Section 4.1.2 below.
4.1.2 [*Redacted pursuant to a Confidential Treatment
Request dated September 10, 1999.
]
4.1.3 A license fee as set forth in Table 1 of Schedule I
for each copy of the GMA Release version of each VRS Option installed on an ISG
Device made available by ACCESS to a customer in accordance with this Agreement.
4.1.4 All prices specified in this Section 4.1 are subject
to adjustment as provided in Section 4.2 below.
4.2 ACCESS and ISG agree to the following purchase commitments and
pricing options:
4.2.1. ACCESS agrees, subject to the termination options set
forth below, to pay the Committed Amounts of license fees for each quarter shown
in Schedule I. ACCESS will issue a purchase order at the beginning of each
quarter for the Committed Amount for that quarter. The Committed Amounts shall
be invoiced and paid on the dates set forth in Schedule I. During each quarter,
ACCESS and ISG will record the installation of each copy of the Licensed Works
for which license fees are payable, using the procedures described in Section
4.4. After the end of each quarter, ISG will deliver to ACCESS a statement
setting forth the calculation of the Utilization Amount, the Committed Amount
and the Carryover Amount for the quarter. ACCESS will pay to ISG within 45 days
of receipt of such statement the amount, if any,
Confidential Treatment
-5-
<PAGE>
by which (i) the Utilization Amount for the quarter minus the Carryover Amount
-----
for the quarter exceeds (ii) the Committed Amount for the quarter.
4.2.2. The following terms used in Section 4.2.1 have the
following meanings:
"Committed Amount" means, for any quarter, the amount so
designated for such quarter in Schedule I.
"Utilization Amount" means, for any quarter, the amount of
license fees that would be payable for all copies of Licensed Works installed
during the quarter, calculated in accordance with Section 4.1 and reflecting any
increase or decrease pursuant to Section 4.2.3.
"Carryover Amount" means, for any quarter, the amount (if any) by
which (i) the sum of the Committed Amounts for all preceding quarters exceeds
(ii) the sum of the Utilization Amounts for all preceding quarters. The
Carryover Amount shall be retroactively adjusted to reflect any retroactive
price adjustments required by Section 4.2.3.
4.2.3. The obligation of ACCESS to pay Committed Amounts shall
be subject to compliance by ISG with its obligations hereunder and shall
terminate upon any termination of this Agreement. ACCESS shall have the
following options to change its obligations to pay the Committed Amounts and the
pricing of Licensed Works.
Option 1. ACCESS may cancel its obligations to pay the Committed
---------
Amounts for the quarter ended June 30, 1998 and all subsequent quarters upon
notice to ISG delivered on or before June 29, 1997. The obligations of ACCESS to
pay the Committed Amounts for the quarter ending on March 31, 1998 and all prior
quarters will be unaffected by exercise of this option. Upon exercise of this
option, the license fees for Licensed Works will be changed from those shown in
Table 1 of Schedule I to those shown in Table 2 of Schedule I, and Utilization
Amounts and the Carryover Amount shall be calculated on this basis. This change
will apply retroactively to all copies of Licensed Works installed after the
effective date of this Amended and Restated Reseller Agreement and ACCESS will
pay, upon invoice by ISG following exercise of this Option 1, the amount (if
any) by which (i) the payments that would have been made under Section 4.2.1 for
prior quarters based upon Table 2 of Schedule I exceed (ii) the amounts actually
paid by ACCESS during such prior quarters.
Confidential Treatment
-6-
<PAGE>
Option 2. ACCESS may cancel its obligations to pay the Committed
---------
Amounts for the quarter ended June 30, 1999 and all subsequent quarters upon
notice to ISG delivered on or before September 15, 1998. The obligations of
ACCESS to pay the Committed Amounts for the quarter ending on March 31, 1999 and
all prior quarters will be unaffected by exercise of this option. Upon exercise
of this option, the license fees for copies of Licensed Works installed after
March 31, 1998 will be changed from those shown in Table 1 of Schedule I to
those shown in Table 2 of Schedule I, and Utilization Amounts and the Carryover
Amount shall be calculated on this basis. This change will not be retroactive.
If neither Option 1 nor Option 2 is exercised, the license fee for the
VRS NT 200 (v1.1) application will be reduced to zero for all copies installed
after September 15, 1998. If ACCESS shall deliver to ISG an irrevocable waiver
of ACCESS's rights to exercise Option 1 and Option 2 (which may be delivered
after Option 1 has expired), the license fee for the VRS NT 200 (v1.1)
application will be reduced to zero for all copies installed after the date of
the waiver. ACCESS may at any time elect to reduce the license fee for the VRS
NT 200 (v1.1) application to zero by notice to ISG accompanied by payment of a
reduction fee of [*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.] Such a reduction will be effective for all copies of the
VRS NT 200 (v1.1) application installed after the date of notice and payment.
4.3 After termination of the obligations of ACCESS to pay Committed
Amounts ACCESS shall nonetheless have the rights to resell ISG Devices and
license the Licensed Works as set forth herein for the remaining term of this
Agreement. After any termination of the Committed Amount obligations, license
fees for the Licensed Works shall be calculated in accordance with Sections 4.1
and 4.2.3 and shall be paid monthly upon invoice by ISG for Licensed Works
installed during each month. Any Carryover Amount remaining after termination of
the Committed Amount obligations shall be applied on a first dollar basis to
reduce license fees otherwise payable.
4.4 Within 15 business days of the end of each month, ACCESS will
deliver to ISG a written statement setting forth a list of all ISG Devices
shipped or installed during the month, the Licensed Works included in such ISG
Devices, the name and address of the end user site for each device, a contact
name and telephone number for each end user, and the host ID of each system on
which Licensed Works are installed. These statements
Confidential Treatment
-7-
<PAGE>
will be the basis for quarterly statements of utilization required by Section
4.2.1 and the monthly invoices required by Section 4.3. Terms and conditions for
all ISG Devices ordered hereunder shall be in accordance with this Agreement and
shall not be modified by any terms of ACCESS's purchase order or other forms or
ISG's invoice, bill of lading, installation certificate or other forms. Payment
of all invoices shall be due 45 days from receipt of invoice. Amounts overdue
beyond this limit will bear interest at the rate of 1% per month.
4.5 ACCESS shall maintain complete and accurate records of each ISG
Device sold and each copy of Licensed Works installed hereunder, including
without limitation all records required for compliance with FDA regulations. ISG
may, not more often than twice in any period of twelve consecutive months,
conduct a review of the records of ACCESS relating to ISG Devices and Licensed
Works, at reasonable times and upon reasonable notice. ISG shall bear its own
costs incurred for any such audit unless the audit results in a determination of
a discrepancy of more than 10% between license fees payable as originally
reported by ACCESS and license fees actually payable for Licensed Works
installed by ACCESS for the period covered by the audit, in which case ACCESS
shall pay the reasonable out of pocket costs of the audit. All information made
available by ACCESS under Section 4.4 or this section 4.5 shall be treated as
confidential in accordance with Section 6.2 and shall not be used for any
purpose other than determination of the amounts payable under this Agreement.
4.6 Prices do not include sales tax or similar taxes. ACCESS shall
pay such taxes either directly or when invoiced by ISG, or shall supply
appropriate tax exemption certificates in a form satisfactory to ISG.
4.7 Payments to ISG shall not be deemed to have been made until the
funds are available to ISG in Mississauga, Ontario, Canada. Alternatively, if
ACCESS is prevented by government regulations from transferring funds to Canada,
ISG shall have the right to require ACCESS to deposit the blocked funds or an
equivalent amount denominated in another currency due to ISG in a bank and
country designated by ISG and for ISG's account.
4.8 ACCESS shall be responsible, at its own expense, for obtaining
all necessary import permits and for the payment of any and all taxes and duties
imposed on the delivery, importation, sale or license of the ISG Devices and
Licensed Works in locations designated by ACCESS; except that ISG shall be
Confidential Treatment
-8-
<PAGE>
responsible for complying with all regulations or other measures promulgated by
the FDA under the Food and Drug Act which are required to be complied with for
the importation of ISG Devices into the United States.
4.9 If any copy of Licensed Works installed on an ISG Device is lost
or is so damaged as to be unusable prior to delivery of such ISG Device to the
customer, ISG will permit installation of a replacement copy of such lost or
damaged Licensed Works without payment of an additional license fee.
5. Support.
5.1 ISG will supply the following materials to ACCESS:
5.1.1 Five copies of the latest object code or executable
code for the GMA Release version of each item included in the Licensed Works,
with updates as provided in Section 5.2.3. Each copy of Licensed Works will
enable ACCESS to install and integrate such Licensed Works on ISG Devices, and
will enable users to use such ISG Devices for an unlimited time, without
requiring any activation or other action by ISG. If a copy of the Licensed Works
initially provided is lost, damaged or destroyed, ISG will provide at cost a
replacement copy, which may be a more recent release or version.
5.1.2 Either (i) for each ISG Device for which a license fee
is recorded, one copy of documentation in English and documentation updates as
they are prepared and released which, when taken together, constitute complete
documentation for the ISG Devices complying with the requirements of the Food
and Drug Act and the regulations and other measures promulgated by the FDA
thereunder or (ii) all materials necessary to permit ACCESS to produce
documentation as set forth in clause (i), which will include soft copy of text
and updates as well as art work for covers, backs and spines of user manuals.
5.1.3 Five copies of all installation scripts and procedures
necessary or appropriate for installation of the GMA Release version of each
item of Licensed Software on ISG Devices.
5.1.4 Five copies of any modifications to the Licensed Works
(with revisions to the documentation to reflect such modifications) which are
provided to other customers of ISG without charge and are not proprietary to
such customers.
Confidential Treatment
-9-
<PAGE>
5.2 ISG will provide the following support:
5.2.1 ISG will make support as provided in this Section 5.2
available for each ISG Device for the duration of the Support Period for such
device, subject to payment of support fees as provided herein. ISG will at all
times support the current release of each of the Licensed Works and the
immediately preceding Major Release of each of the Licensed Works. ISG will
support each Major Release of VRS UNIX Software for at least 12 months from the
date of GMA Release, regardless of the number of additional releases during such
period. After June 30, 1998, ISG will support each Major Release of VRS NT
Software for at least 12 months from the date of GMA Release, regardless of the
number of additional releases during such period. A "Major Release" is a release
of a Licensed Work which has undergone full GMA Release procedures and is
identified by the first two numerals in a version number (that is, "x.y").
5.2.2 ACCESS will provide first line support to its
customers. In the event of a problem, ACCESS's end customer will contact ACCESS
with problems, queries and/or help line requests. Trained ACCESS customer
service personnel will respond to calls and attempt to diagnose and repair
problems according to procedures defined in ISG's training courses and
documentation. ACCESS will contact ISG only after having done so without
resolving the problem, with such contact being made as defined for the relevant
geographical territory and the problem being logged in accordance with an agreed
procedure. ISG will then provide second line support. ISG will issue a Customer
Service Order Number and one or more of the following courses of action will be
taken as deemed appropriate by ISG technical support staff:
i) Technical or applications support via telephone to trained
ACCESS service personnel.
ii) In depth problem investigation and analysis via modem to
end customer system. This support is provided only where direct high speed
modem access is available via a dedicated telephone line.
iii) A monthly problem report will be provided to ACCESS
detailing the Customer Service Order Number, date and type of call and
resolution of each support call.
iv) On site consultation is available upon request at then
applicable ISG standard time and materials
Confidential Treatment
-10-
<PAGE>
rates and is subject to availability of technical or applications support
personnel.
v) Five master copies of software updates will be provided from
time to time to ACCESS, as provided in Section 5.2.3 below.
5.2.3 In providing maintenance support, ISG shall:
i) Respond to and verify any alleged errors in the
documentation or code upon notification by ACCESS; and
ii) Provide resolution of defects as detailed below:
1. Safety - Deficiency affects patient safety or FDA
reportable defects.
2. Critical - Deficiency causes the VRS application to
fail catastrophically.
3. Urgent - Deficiency causes the VRS application to give
erroneous, distorted or severely deficient function from which users
must be isolated.
4. Serious to Minor - Deficiency similar to level 3 above,
but for which a work-around can be implemented allowing the user to
achieve the desired accuracy or function, with minor inconvenience, or
deficiency causes minor inconvenience, but is a definite deficiency
against specification.
5. Improvements - ACCESS requests new functionality not
covered by specification.
For priority levels 1, 2 and 3, ISG will immediately take corrective action
and provide a validated bug fix, in the form of an update, within a
reasonably expeditious time frame.
For priority level 4, ISG will take corrective action and provide a
validated bug fix, in the form of an update, without charge, within a
reasonable time frame.
For priority level 5, ISG will determine in its good faith judgment whether
the requested functionality is appropriate for inclusion in the next
general release to customers. If
Confidential Treatment
-11-
<PAGE>
ISG so determines, ISG will provide an update to ACCESS without charge. If
ISG does not so determine, ISG will provide the requested modification at
ISG's standard charges.
5.2.4 ACCESS will pay support fees [*Redacted pursuant to a
Confidential Treatment Request dated September 10, 1999.
] ISG will in
any event make support available after that date to the extent provided in this
Agreement at ISG's then applicable time and materials charges.
5.3 ISG hereby certifies the compatibility only of the hardware and
systems configurations listed in Schedule I for inclusion in ISG Devices on
which Licensed Works are installed. ISG will cause the Licensed Works to be
compatible with, and will certify to ACCESS that ISG Devices may include:
(i) At all times during the term of this Agreement prior to the
UNIX Termination Date, the release of the Sun Solaris operating system
immediately prior to the then most current release.
(ii) At all times during the term of this Agreement on or after
the UNIX Termination Date, the most current release of the Sun Solaris
operating system as of the UNIX Termination Date; provided that if support
of a newer release of the Sun Solaris operating system is necessary to
correct a defect of Level 3 or higher (as defined in Section 5.2.3(ii)),
ISG will provide the necessary support. The "UNIX Termination Date" means a
date of which ACCESS is notified at least twelve months in advance, on
which ISG shall cease to make VRS UNIX Software available to customers.
(iii) At all times during the term of this Agreement, the release
of the Windows NT operating system immediately prior to the then most
current release.
Confidential Treatment
-12-
<PAGE>
ISG Devices including any of the systems and components set forth
above, and Licensed Works installed thereon, shall be covered by all support
obligations, representations, warranties and agreements of ISG contained herein.
5.4 While it is acknowledged that the ISG Devices may be used in
certain surgical, medical life support or other applications of a similar degree
of potential hazard, ACCESS acknowledges that ISG Devices are not designed or
intended to substitute for or override the training, experience and knowledge of
end users.
1. Additional Covenants.
6.1 ACCESS shall include in all copies of Licensed Works made by
ACCESS any copyright or similar notice as furnished by ISG to ACCESS.
6.2 Each party hereto covenants that it shall keep confidential any
confidential information relating to the other party's business, finances,
marketing and technology to which it obtains access (including without
limitation the Licensed Works and the pricing and other terms of this Agreement)
and that it shall take all reasonable precautions to protect such confidential
information of the other party or any part thereof from any use, disclosure or
copying except as expressly authorized by this Agreement. The obligations of
the parties under this Section 6.2 are in addition to, and not in substitution
of, their respective obligations under the Confidentiality Agreement dated as of
March 31, 1995 between ACCESS and ISG.
6.3 The parties agree as follows with respect to proprietary rights:
6.3.1 ACCESS acknowledges that, except as set forth in Section
6.3.2 below, the Licensed Works and all related information and documentation
are the property of ISG and/or third parties from whom ISG has acquired certain
rights under license.
6.3.2 ISG acknowledges that ACCESS has provided and will provide
to ISG certain software applications, know-how and trade secrets relating to
wavelet compression and decompression of images, which are included in Licensed
Works made available to ACCESS under this Agreement. ISG agrees that it will
treat the particular specifications ACCESS has provided
Confidential Treatment
-13-
<PAGE>
regarding compression and decompression as proprietary information of ACCESS.
This applies to the specifications and concepts including the following:
1. Non-standard DICOM transport mechanisms for image transmission
2. Controls over the number of images in a study
3. The use of progressive decompression
4. Modifications to the DICOM header elements reflecting changes in
certain data such as image matrix size and compression status
5. Error and exception handling
6. PPP server transmission methodologies
ISG agrees that it will not provide other customers for its workstation products
with the above information and know-how (or devices or applications including
them). Nothing in this paragraph will be construed so as to restrict ISG from
developing and/or marketing a solution similar to any or all of the ACCESS
solutions specified in items 1 to 6 above, provided that ISG has received the
specifications and/or know-how for such similar solutions from a third party
without solicitation or assistance from ISG and without any knowledge on ISG's
part that such third party is in violation of any confidentiality obligation or
proprietary right.
6.4 ACCESS at all times will comply with all provisions of the Food
and Drug Act and the regulations and other measures promulgated by the FDA
thereunder which are applicable to ACCESS as a distributor of ISG Devices as
contemplated by this Agreement.
6.5 ISG represents that the ISG Devices, when configured and marketed
as contemplated by this Agreement and assuming compliance by ACCESS with its
covenant set forth in Section 6.4, will at all times comply with all applicable
provisions of the Food and Drug Act, the regulations and other measures
promulgated by the FDA thereunder, and all filings made by ISG thereunder, and
will have all necessary FDA clearances or approvals for commercial marketing in
the United States of America. ISG will at all times comply with all provisions
of the
Confidential Treatment
-14-
<PAGE>
Food and Drug Act, the regulations and other measures promulgated by the FDA
thereunder, and all filings made by ISG thereunder, which are applicable to ISG
as the manufacturer of ISG Devices distributed as contemplated by this
Agreement.
6.6 The parties agree to the following indemnity provisions:
6.6.1 ACCESS shall indemnify and save harmless ISG from and
against any and all liabilities, damages, costs or expenses (including
attorney's fees as incurred) resulting from any negligence or misconduct of
ACCESS in marketing or installing ISG Devices or failure to comply with ACCESS's
obligations set forth in Section 6.4.
6.6.2 ISG shall indemnify and save harmless ACCESS from and
against any and all liabilities, damages, costs or expenses (including
attorney's fees as incurred) resulting from any negligence or misconduct of ISG
in manufacturing ISG Devices, any defect in ISG Devices installed and configured
as instructed by ISG, or any inaccuracy or failure of compliance with ISG's
representations and obligations set forth in Section 6.5.
6.6.3 Any party seeking indemnification hereunder shall promptly
inform the indemnifying party in writing upon becoming aware of any claim for
which indemnity may be sought. Such notice shall include a statement of the
facts and circumstances relevant to such claim. Following such notice, the
indemnifying party may participate in the defense. Neither party shall settle
or compromise any claim for which indemnity is sought hereunder without the
prior written consent of the indemnifying party.
6.7 At least two qualified ACCESS employees will attend two days of
service training at ISG's facility annually. ACCESS will pay a charge of $3,000
per person per year for such training. Attendance by ACCESS personnel for whom
the training charge has been paid in any year at additional new training courses
during that year will be free of charge.
6.8 ISG agrees to the following development obligations.
6.8.1 ISG will release for resale by ACCESS hereunder either a
software patch for VRS UNIX 2.1 or a release of VRS UNIX 2.2 , which will in
either case include additional functionality as set forth in Schedule I. This
patch or release
Confidential Treatment
-15-
<PAGE>
will be released in a beta test version by June 30, 1997 and a GMA Release
version by October 31, 1997.
6.8.2 ISG will release for resale by ACCESS hereunder a GMA
Release version of the VRS NT-200 Release 1.1 application, having the
functionality specified in Schedule I, by May 30, 1997.
6.8.3 ISG will release for resale by ACCESS hereunder a GMA
Release version of the VRS NT Software having the decompression functionality
specified in Schedule I by June 30, 1997.
6.8.4 If ISG does not release any of the applications set forth
above by the date specified, payment of all Committed Amounts falling due after
the specified release date will be deferred until release occurs. During any
period of deferral, ACCESS will pay license fees as provided in Section 4.3.
Upon resumption of payment of Committed Amounts, payments made during the
deferral period will be credited on a first dollar basis against Committed
Amounts payable.
7. Warranties.
7.1 ISG warrants and agrees that:
7.1.1 ISG has the full authority to grant the license and rights
set forth in this Agreement.
7.1.2 To the best of ISG's knowledge, the documentation and code
of the Licensed Works have not been published under circumstances which have
caused loss of copyright therein, and to the best of the ISG's knowledge the
documentation and code of the Licensed Works do not infringe upon any copyright
or other proprietary right of any third party.
7.1.3 ISG is not aware of any claim of infringement of any
copyright or other proprietary right having been made or pending against ISG
relative to the documentation or code of the Licensed Works.
7.1.4 ISG will, at its expense, defend against, hold ACCESS
harmless from, and pay any final judgment against ACCESS or any ACCESS customer
arising out of any claim that the use of any Licensed Work as contemplated by
this Agreement infringed a copyright, a patent or a trade secret provided that
(i) ACCESS notifies ISG in writing of such claim or action, and (ii) ISG has
sole control of the defense and settlement of such
Confidential Treatment
-16-
<PAGE>
claim or action. In defending against such claim or action, ISG may, at its
option, agree to any settlement in which ISG shall either (1) procure for ACCESS
and all ACCESS customers the right to continue using the Licensed Works; or (2)
modify or replace the Licensed Works so that they no longer infringe, to the
extent that the exercise of such option does not result in a material adverse
change in the operational characteristics of the Licensed Works, and equivalent
functions and performance provided by ISG remain following implementation of
such option. If ISG concludes in its judgment that none of the foregoing options
is reasonable, ISG may remove the Licensed Works and any other components
supplied by ISG rendered unusable as a result of such removal and repay to
ACCESS all amounts paid with respect to the infringing products by ACCESS to ISG
under this Agreement. Any such payment shall be in addition to, and shall not
diminish, ISG's obligation to defend and indemnify against claims for
infringement. Each party shall promptly notify the other in the event that it
becomes aware of a claim covered by this Section 7.1.
7.2 The ISG Devices, when properly installed and configured, will meet
all applicable standards of the American College of Radiology for diagnostic
images and are appropriate for diagnostic radiological examinations, and ISG has
no knowledge of existing problems which would cause the ISG Devices to fail to
comply with the foregoing warranty.
8. Term and Termination.
8.1 This agreement shall have an initial term ending on March 31,
2000, subject to earlier termination as provided below.
8.2 If there shall be any material breach of this Agreement by ACCESS
which shall not be cured within 30 days of ISG giving written notice thereof to
ACCESS, then at any time thereafter that such breach shall be continuing ISG may
terminate this Agreement by delivery of a separate written termination notice to
ACCESS.
8.3 If there shall be any material breach of this Agreement by ISG
which shall not be cured within 30 days of ACCESS giving notice thereof to ISG,
then at any time thereafter that such breach shall be continuing ACCESS may
terminate this Agreement by delivery of a separate written termination notice to
ISG.
8.4 If either party to this Agreement shall wind up or discontinue its
business, shall make an assignment for the
Confidential Treatment
-17-
<PAGE>
benefit of creditors, shall have a receiver appointed for its assets, shall
commence bankruptcy or insolvency proceedings, or shall have bankruptcy or
insolvency proceedings commenced against it which shall not be dismissed or
stayed within 60 days, the other party may terminate this Agreement upon notice
to the affected party.
8.5 If this Agreement shall be terminated under Section 8.2, Section
8.3 or Section 8.4, then:
8.5.1 ACCESS's right to resell ISG Devices and to furnish
Licensed Works to customers and to use and make copies of the Licensed Works
shall immediately terminate ;
8.5.2 ISG's support obligations hereunder shall immediately
terminate;
8.5.3 ACCESS shall pay, within ten (10) days, all amounts which
have accrued to ISG;
8.5.4 ACCESS shall immediately deliver the master copy of the
Licensed Works and all other copies in the possession of ACCESS to ISG at
ACCESS's expense; and
8.5.5 ACCESS shall provide a list of names and addresses of
customers who have entered into sublicenses with ACCESS since the date of this
Agreement.
8.6 Notwithstanding any termination or expiration of this Agreement,
any sublicense granted to an ACCESS customer prior to such termination or
expiration shall survive such termination or expiration, and Sections 6.2, 6.3,
6.6 and 7.1 shall survive any such termination or expiration. The rights of
ACCESS under Section 9.10 and the Escrow Agreement referred to therein shall
survive any termination of this Agreement by ACCESS. The obligations of ISG to
provide support set forth in Section 5.2 and the obligations of ISG under
Section 9.10 shall survive expiration of the term of this Agreement for the
remainder of the Support Period for any ISG Device, subject to continued payment
of support fees by ACCESS.
8.7 The remedies set forth in Sections 8.1 through 8.5 shall not be
exclusive, but shall be in addition to any other remedies available to either
party at law or in equity.
9. General.
Confidential Treatment
-18-
<PAGE>
9.1.1 ACCESS and ISG are independent contractors and separate legal
entities and shall in no way be interpreted as partners, joint-venturers,
agents, employees or legal representatives of each other for any purpose.
ACCESS shall solicit orders for ISG Devices only as an independent contractor.
The parties shall not be responsible for or bound by any act of the other party
or such other party's agents, employees or any person in any capacity in its
service.
9.2 Assignment:
9.2.1 Subject to ACCESS's right to grant sublicenses hereunder,
ACCESS may not assign this Agreement or any rights hereunder without the prior
written consent of ISG except that, without such consent and upon notice to ISG,
ACCESS may assign all of its rights hereunder to a corporation or other legal
entity that acquires substantially all of ACCESS's assets or where ACCESS is
consolidated or merged but then only upon the express assumption by such
transferee or its successor of the obligations set forth in this Agreement.
9.2.2 ISG may not assign this Agreement or any rights hereunder
without the prior written consent of ACCESS, except that, without such consent
and upon notice to ACCESS, ISG may assign all of its rights hereunder to a
corporation or other legal entity that acquires substantially all of ISG's
assets or where ISG is consolidated or merged, but then only upon the express
assumption by such transferee or its successor of the obligations set forth in
this Agreement.
9.2.3 This Agreement is binding upon, and inures to the benefit
of, the successors and permitted assigns of the parties.
9.3 The waiver or failure of either party to exercise in any respect
any right provided for in this Agreement shall not be deemed a waiver of any
further or future right hereunder.
9.4 The headings used in this Agreement are for convenience of
reference only and are not to be used in interpreting the provisions of this
Agreement.
9.5 If any provision of this Agreement is invalid or unenforceable
in any particular case, such case shall not invalidate or render unenforceable
any other part of this Agreement. The Agreement shall simply be construed as not
Confidential Treatment
-19-
<PAGE>
containing the particular provision or provisions held to be invalid or
unenforceable to the extent of the particular case, and the rights and
obligations of the parties hereto shall be construed accordingly.
9.6 This Agreement is effective when executed by both parties. This
Agreement may be executed in counterparts, each of which shall constitute one
and the same instrument.
9.7 This Agreement and the Confidentiality Agreement dated March 31,
1995 constitute the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties pertaining
to such subject matter.
9.8 Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in U.S. funds.
9.9 This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
9.10 ISG shall place a copy of the source code for the Licensed Works
(the "Escrow Materials") it has the authority to so deliver, in escrow with Fort
Knox Escrow Services, Inc. (the "Escrow Agent") under an Escrow Agreement in the
form of Schedule IV. The Escrow Agent shall be authorized to release the Escrow
Materials to ACCESS if and when ACCESS is deemed to have the right thereto as
determined below.
9.10.1 Provided that ACCESS is not then in material default under
the terms of this Agreement, the Escrow Agent shall provide to ACCESS the Escrow
Materials upon notification by ACCESS to the Escrow Agent, with a copy to ISG,
of the occurrence of any of the following events (each a "Release Condition"):
(a) The undisputed failure by ISG, following not less than 90
days written notice from ACCESS, clearly indicating the
nature of the default, to maintain the Licensed Works and
such failure results in the occurrence or continuance of a
defect classified as Level 1 Safety, Level 2 Critical or
Level 3 Urgent under Section 5.2.3 above, or if such failure
is disputed, the notice must be supplemented by a court
order resolving the dispute; or
Confidential Treatment
-20-
<PAGE>
(b) Proceedings shall be commenced by or against ISG under the
United States Bankruptcy Code or the Canadian Bankruptcy and
Insolvency Act and (in the case of a proceeding commenced
against ISG) shall not be dismissed or discharged within 90
days of commencement.
9.10.2 Upon taking possession of the Escrow Materials due to the
occurrence of a Release Condition, ACCESS agrees that such source code shall be
subject to restrictions on use, transfer, sales and reproduction placed on the
Licensed Works themselves by this Agreement.
9.10.3 The Escrow Agreement will continue in full force and effect,
except that this Agreement shall govern any inconsistencies between this
Agreement and the Software Escrow Agreement.
9.10.4 ACCESS shall use the Escrow Materials only for what would
otherwise be obligations of ISG to provide support of the Licensed Works. It is
expressly understood that the Software Escrow Agreement pertains to the right to
use the Escrow Materials and that no rights to ownership of the Escrow Materials
pass from ISG to ACCESS. It is also expressly understood that the Escrow
Materials are confidential and secret assets of ISG and the Escrow Materials
will be held by ACCESS and not reproduced or copied, or made available to any
third party, except in accordance with this Agreement. It is expressly
understood that the Escrow Materials will be either returned to ISG or destroyed
once the default giving rise to a Release Condition is cured and adequate
assurances of ISG's future performance are given to ACCESS. UNDER NO
CIRCUMSTANCES IS THE SOURCE CODE TO BE SOLD, TRANSFERRED OR COPIED BY ACCESS OR
ITS DISTRIBUTORS. This Agreement shall be deemed to be a "License Agreement"
referred to in the Escrow Agreement and Section 365(n) of the United States
Bankruptcy Code.
9.11 EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT (INCLUDING WITHOUT
LIMITATION ARTICLE 5), ISG MAKES NO WARRANTIES OF ANY KIND WITH RESPECT TO THE
ISG DEVICES, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. Except as otherwise set forth in this
Agreement, in no event shall ISG be liable to ACCESS for any indirect, special,
incidental or consequential damages of any nature or kind whatsoever or for any
damages (whether caused directly or indirectly) related to loss of profits, loss
of
Confidential Treatment
-21-
<PAGE>
revenue, loss of data or other economic loss in connection with, or arising out
of, the use or supply or non-supply of the ISG Devices. Except as otherwise set
forth in this Agreement (including without limitation Articles 6 and 7), the
liability of ISG to ACCESS under this Agreement or resulting from this Agreement
under any theory of law or equity is limited to money damages not to exceed the
total amount paid by ACCESS to ISG hereunder.
9.12 Notices:
All notices provided for in this Agreement shall be in writing or facsimile,
addressed to the appropriate party at its respective address set forth below or
to such other then-current address as is specified by notice, as follows:
(a) to ISG: ISG Technologies, Inc.
6509 Airport Road
Mississauga, Ontario
CANADA L4V 1S7
Facsimile: (905) 672-0360
Attention: VP Finance
(b) to ACCESS: ACCESS Radiology Corporation
313 Speen Street
Natick, MA 01760
Facsimile: (508) 647-9350
Attention: Howard Pinsky
Notices shall be deemed to be received upon actual delivery, upon confirmation
of receipt of a facsimile, or five days after mailing with first class postage
prepaid.
9.13. This Amended and Restated Reseller Agreement shall become
effective when executed by ISG and ACCESS. All references to "this Agreement",
"herein", "hereby" and similar references shall refer to this Amended and
Restated Reseller Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date set forth above.
ACCESS RADIOLOGY CORPORATION ISG TECHNOLOGIES, INC.
By: /s/ David Lang /s/ Peter Bak
---------------------- ---------------------
By: ______________________
Confidential Treatment
-22-
<PAGE>
Name: David Lang Name: Peter Bak
- ---------------------------
- ---------------------------
Title: Vice President of Title: Vice
Business Operations President of Product
Development
Confidential Treatment
-23-
<PAGE>
SCHEDULE I
----------
Licensed Works Description and Pricing
--------------------------------------
Pricing Table 1
<TABLE>
<CAPTION>
==============================================================================================================
Product VRS-NT- VRS-NT- VRS-NT-ICU VRS-NT-DX VRS-NT-XS VRS-UNIX VRS-UNIX
Feature 200 600 DX XS
(v1.1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Base Pricing
==============================================================================================================
[*] [*] [*] [*] [*] [*] [*] [*]
==============================================================================================================
Options Pricing
==============================================================================================================
[*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
==============================================================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated September 10, 1999.
Confidential Treatment
-24-
<PAGE>
Pricing Table 2
<TABLE>
<CAPTION>
============================================================================================================
Product VRS-NT- VRS-NT- VRS-NT-ICU VRS-NT-DX VRS-NT-XS VRS-UNIX- VRS-UNIX
Feature 200 600 DX XS
(v1.1)
============================================================================================================
Base Pricing
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*] [*] [*] [*] [*]
============================================================================================================
Options Pricing
============================================================================================================
[*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
============================================================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated September 10, 1999.
Base Unit Feature Content:
- --------------------------
[*Redacted pursuant to a Confidential Treatment Request dated September 10,
1999.
Confidential Treatment
-25-
<PAGE>
]
Options Pricing Legend:
- -----------------------
[*Redacted pursuant to a Confidential Treatment Request dated September
10, 1999.
]
Confidential Treatment
-26-
<PAGE>
Commitment Table
<TABLE>
<CAPTION>
=========================================================================
Quarter Amount Invoice Date Paid Date
(On or Before) (On or Before)
=========================================================================
<S> <C> <C> <C>
Q1 [*] - -
- -------------------------------------------------------------------------
Q2 [*] June 30/th/ 1997 August 14/th/ 1997
- -------------------------------------------------------------------------
Q3 [*] September 30/th/ 1997 November 14/th/ 1997
- -------------------------------------------------------------------------
Q4 [*] December 31/st/ 1997 February 14/th/ 1998
- -------------------------------------------------------------------------
Q5 [*] March 31/st/ 1998 May 15/th/ 1998
- -------------------------------------------------------------------------
Q6 [*] June 30/th/ 1998 August 14/th/ 1998
- -------------------------------------------------------------------------
Q7 [*] September 30/th/ 1998 November 14/th/ 1998
- -------------------------------------------------------------------------
Q8 [*] December 31/st/ 1998 February 14/th/ 1999
- -------------------------------------------------------------------------
Q9 [*] March 31/st/ 1999 May 15/th/ 1999
- -------------------------------------------------------------------------
Q10 [*] June 30/th/ 1999 August 14/th/ 1999
- -------------------------------------------------------------------------
Q11 [*] September 30/th/ 1999 November 14/th/ 1999
- -------------------------------------------------------------------------
Q12 [*] December 31/st/ 1999 February 14/th/ 2000
- -------------------------------------------------------------------------
Q13 [*] March 31/st/ 2000 May 15/th/ 2000
=========================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated September
10, 1999.
Confidential Treatment
-27-
<PAGE>
VRS UNIX Release 2.1 Patch / Release 2.2
ACCESS Radiology Corporation Additional Features to VRS
UNIX Release 2.1
The following additional features to VRS UNIX Release 2.1 will be
provided to ACCESS Radiology Corporation in the form of either a patch to VRS
UNIX Release 2.1 or a new version VRS UNIX Release 2.2.
<TABLE>
<CAPTION>
===================================================================
Feature Description
- -------------------------------------------------------------------
<S> <C>
[*] [*
]
- -------------------------------------------------------------------
[*] [*
]
- -------------------------------------------------------------------
</TABLE>
Confidential Treatment
-28-
<PAGE>
<TABLE>
- -------------------------------------------------------------------
<S> <C>
[*] [*
]
- -------------------------------------------------------------------
[*] [*
]
===================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
-29-
<PAGE>
VRS-NT 200 Release 1.1
ACCESS Radiology Corporation Additional Features to VRS-NT 200
Release 1.0
The following features, in addition to those already provided in VRS-NT 200
Release 1.0, will be provided to ACCESS Radiology Corporation in VRS-NT 200
Release 1.1.
<TABLE>
<CAPTION>
=================================================================
Feature Description
- -----------------------------------------------------------------
<S> <C>
[*] [*
]
- -----------------------------------------------------------------
[*] [*
]
- -----------------------------------------------------------------
[*] [*
]
- -----------------------------------------------------------------
[*] [*
]
- -----------------------------------------------------------------
[*] [*
]
=================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
-30-
<PAGE>
VRS-NT Software
ACCESS Radiology Corporation Additional Features to VRS-NT
Software
The following features, in addition to those stated in VRS NT marketing
Specifications Document Revision 12, #1997-00295, will be provided to ACCESS
Radiology Corporation.
<TABLE>
<CAPTION>
==================================================================
Feature Description
- ------------------------------------------------------------------
<S> <C>
[*] [*
]
- ------------------------------------------------------------------
[*] [*
]
- ------------------------------------------------------------------
[*] [*
]
==================================================================
</TABLE>
*Redacted pursuant to a Confidential Treatment Request dated
September 10, 1999.
Confidential Treatment
-31-
<PAGE>
SCHEDULE II
-----------
Standard Form Sublicensing Provisions
-------------------------------------
Each customer agreement shall provide:
1. That the customer is granted a non-exclusive, nontransferable
license to operate, at the location specified in the customer agreement and for
its own business and professional purposes only, a copy or copies of the object
code form of the software.
2. That title, ownership rights, intellectual property rights and all
other rights associated with the software and applicable under law shall remain
vested in ISG.
3. That the obligations (if any) of ISG are limited to those
expressly stated in the sublicense, are in lieu of all other warranties or
conditions expressed or implied, including without limitation warranties of
merchantability or fitness for a particular use, or those arising by statute or
otherwise in law, or from a course of dealing or usage of trade.
4. That the liability of ISG under any theory of law or equity is
limited to money damages not to exceed the total amount paid by the customer for
ISG Devices.
5. That ISG shall have no liability to the customer with respect to
any claim of patent or copyright infringement to the extent that such claim is
based upon (i) the combination of licensed software with machines, systems or
devices other than those included in the ISG Devices sold to the customer, (ii)
modification of the licensed software by the customer, or (iii) use of the
licensed software not in accordance with its specifications.
6. That the customer shall:
(a) maintain the software in confidence, utilizing at least the same
degree of care used by the customer to protect its own
confidential information;
(b) not transfer the software to any other party, except in
connection with a sale of the ISG Device in which it is
installed;
Confidential Treatment
-32-
<PAGE>
(c) not attempt to produce any work derived from the software or
modify the software in any manner whatsoever;
(d) not attempt to decode, decipher, decompile, decompose,
disassemble, reverse engineer or otherwise render the software to
a human-perceivable form; and
(e) not attempt to defeat the mechanisms which control the number of
copies of the software which are allowed to operate
simultaneously during any particular time period.
7. That the customer acknowledges that, although the software may be
used in certain surgical, medical life support or other applications of a
similar degree of potential hazard, the software is not designed or intended to
substitute for or override the training, experience and knowledge of end users.
8. That the customer acknowledges that ISG Devices are resold to the
customer by agreement of ISG, and that the customer is agreeing to the foregoing
provisions in consideration of ISG making the ISG Devices available under such
agreement.
-33-
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.24
AMENDMENT NO. 1
TO
AMENDED AND RESTATED RESELLER AGREEMENT
This is Amendment No. 1, dated as of April 30, 1998, to the Amended and
Restated Reseller Agreement (the "Reseller Agreement") dated as of May 30, 1997
between ACCESS Radiology Corporation ("ACCESS")and ISG Technologies, Inc.
("ISG").
WHEREAS, ACCES and ISG wish to amend the Reseller Agreement to reflect the
replacement of the VRS NT 200 Product with the VRS 300 Product, and to address
certain related matters,
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
------------
have the meanings set forth in the Reseller Agreement. Upon the effectiveness of
this Amendment No. 1, references in the Reseller Agreement to "this Agreement",
"hereof", "hereunder", and the like shall refer to the Reseller Agreement as
amended by this Amendment No. 1. The reference to "the VRS NT 200 application"
in section 1.1.8 of the definitions is changed to "the VRS 300 Product". The
following new definition is added to Section 1.1 of the Reseller Agreement:
1.1.2A "Execution Date" means the later of (i) April 30, 1998
and (ii) the thirtieth day after GMA Release of the VRS 300 Product.
2. Schedules. The pricing for VRS-NT-200 (v1.1) appearing in Pricing
----------
Table 1 and Pricing Table 2 of Schedule I shall cease to apply as of the
effectiveness of this Amendment No.1.[ *Redacted pursuant to Confidentiality
Treatment Request dated September 10, 1999.
] The portion of Schedule I titled "VRS-NT 200 Release 1.1" and
the Marketing Specifications Document for the VRS NT 200 Product included in
Schedule I are replaced in their entirety by the pages attached to this
Amendment No. 1. Schedule IIA attached to this Amendment No. 1 is hereby made a
Schedule to the Reseller Agreement.
Confidential Treatment
-1-
<PAGE>
3. Amendment of Section 4.1.2. Section 4.1.2 of the Reseller Agreement is
---------------------------
amended to read in its entirety as follows:
4.1.2 [*Redacted pursuant to Confidentiality Treatment Request
dated September 10, 1999.
]
4. Addition of Section 4.1.5. A new Section 4.1.5 is added to the
---------------------------
Reseller Agreement to read as follows:
4.1.5 Prior to the Execution Date, ACCESS has paid an aggregate
of [ *Redacted pursuant to Confidentiality Treatment Request dated
September 10, 1999.] in prepaid license fees for the VRS NT 200 Product.
Following the Execution Date, any balance of this prepayment not applied to
license fees for installed copies of the VRS NT 200 Product will be applied
on a first dollar basis to license fees payable hereunder for the VRS 300
Product. This prepayment and its application will be accounted for
separately from the accounting for the application of Committed Payments
under Section 4.2. The balance of this prepayment remaining as of April 30,
1998 is [ *Redacted pursuant to Confidentiality Treatment Request dated
September 10, 1999.] A detailed calculation of this remaining balance is
set forth in Schedule IIA.
5. Amendment of Section 4.2.3. The last paragraph of Section 4.2.3 is
---------------------------
deleted.
6. Amendment of Section 5.1.1. A new sentence is added to Section 5.1.1,
---------------------------
to read as follows:
Materials provided under this Section will include materials for the
upgrade of VRS NT 200 Products installed for existing users to the VRS 300
Product. ISG will provide a CD-ROM for each copy of the VRS 300 Product to
be installed (including upgrades from the VRS 200), or in the alternative
will enable ACCESS to produce such CD-ROMS from an original
Confidential Treatment
-2-
<PAGE>
supplied by ISG.
7. Addition of Section 5.5. A New Section 5.5 is added to the Reseller
------------------------
Agreement, to read as follows:
5.5 Notwithstanding anything else contained in this agreement, ISG
shall have no responsibility for support of the VRS NT 200 Product after
the Execution Date.
8. General. This Amendment No. 1 will become effective as of April 30,
--------
1998 when executed and delivered by both parties. This Amendment No. 1 may be
executed in counterparts, all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
first date set forth above.
ACCESS RADIOLOGY CORPORATION ISG TECHNOLOGIES, INC.
By:/s/ David Lang By: /s/ Peter Bak
--------------------------- ------------------------
Name: David Lang Name: Peter Bak
Title: Vice President of Title: Vice President of
Business Operations Product Development
Confidential Treatment
-3-
<PAGE>
Revision III
CONFIDENTIAL TREATMENT EXHIBIT 10.25
[ISG LOGO]
December 29, 1998
Mr. Howard Pinsky
Vice President of Technology
Access Radiology Corporation
25 Hartwell Avenue
Lexington, MA 02173
Dear Howard:
This letter outlines the general terms and conditions around which ISG will
agree to provide the VRS 300 Workstation software to Access Radiology at a
reduced cost. This letter, upon your signature, will constitute an amendment to
the Reseller Agreement dated May 30, 1997. All other terms and conditions of
the Reseller Agreement shall continue to apply.
1) [*Redacted pursuant to Confidentiality Treatment Request dated September
10, 1999.
]
2) 2) Access agrees to assist ISG with obtaining and implementing Aware's
wavelet compression, and ISG plans to make it available for use on all
products and components developed and owned by ISG, including but not
limited to the IAP Tool Kit. Specifically, ACCESS will release AWARE, Inc.
of competitive restrictions on AWARE products (that are the sole property
of AWARE, Inc.) to ISG, so that ISG can use the AWARE.DLL and AWARE plug-
ins in their products as defined above. Furthermore:
i) ISG may ask Access to provide advice to ISG in matters relating to
ISG's obtaining FDA market clearance; although ACCESS in no way
warrants any specific legal expertise in FDA regulatory matters. If
appropriate, ACCESS will allow ISG to take advantage of the Access's
FDA clearance of the Aware Compression/Decompression solution through
either
Confidential Treatment
<PAGE>
Revision III
reference of substantial equivalence, or through re-packaging and re-
licensing of ACCESS software components.
ii) Access and ISG will work cooperatively in developing decompression
mechanisms that provide for optimal performance in receiving and
displaying compressed images.
3) iii) [*Redacted pursuant to Confidentiality Treatment Request dated
September 10, 1999.
]
3) Access also agrees to have the ISG name and logo included in conjunction
with the Access "Splash Screen," when the software is started. The
software copyrights will also make appropriate reference to ISG and contain
the ISG logo in the "About VR" window under the Help Menu. ISG requests
that a copy of the software be sent to ISG, so that ISG, can verify that
the correct information and logo are incorporated into the software before
it is shipped.
4) Access agrees to continue to promote the ISG workstation products in sales
to customers that have installed the VRS 300 and Access Servers.
5) ISG will provide Access with a method of accessing the ISG "Install Wizard"
to allow Access to modify the program to suit its specific installation
requirements. ISG acknowledges that ACCESS plans to provide VRS 300 (as a
part of an ACCESS solutions package) as software only, and plans to use the
Install Wizard to accomplish this. Further, ACCESS plans to run software on
operating systems certified by ISG, including Windows 95 and Windows NT.ISG
will work toward releasing the VRS 300 as quickly as possible under Windows
98.
6) The current implementation of the VR WIN suite of products does not support
different configuration for GDI and Diagnostic Quality (DICOM) printing. If
the print feature is enabled, both GDI (postscript) and DICOM printing are
available. For the purpose of this agreement:
a) Access Radiology may purchase as an option, on any VRS 300 license
covered by this agreement, the full print feature. Access must accept
legal responsibility for enforcing with their end users that the
software's additional print features, beyond postscript, are not
activated. If future ISG VR WIN releases separate the DICOM and the
postscript print features, the new version may be substituted for the
full version. The cost of this option is [ *Redacted pursuant to
Confidentiality Treatment Request dated September 10, 1999.] per
license.
b) [*Redacted pursuant to Confidentiality Treatment Request dated
September 10, 1999.]
Confidential Treatment
<PAGE>
Revision III
]
7) [*Redacted pursuant to Confidentiality Treatment Request dated September
10, 1999.
]
8) In addition, ACCESS plans to include additional applications (report
viewing and network diagnostics) available through the VRS 300 product.
Currently using the default configuration with the small toolbar there is
no way to access reports. This can be modified by changing the registry to
turn on the next size toolbar to get access to reports (this is because
changing to the next size toolbar brings up the study bar which is where
the report button is). This is not optimum. ISG will therefore add either a
report button to the toolbar and/or have report accessible from the menu
bars.
Please indicate your agreement to these general terms and conditions with your
signature below.
________________________________________________________________________________
Agreed to this 31st day of December 1998.
ISG TECHNOLOGIES INC. ACCESS RADIOLOGY CORPORATION
By: /s/ Maxwell Rutherford By: /s/ Howard Pinsky
------------------------------- ---------------------------------
Name: Maxwell Rutherford Name: Howard Pinsky
--------------------------- -----------------------------
Title: President & Chief Operating Title: Vice President of Technology
---------------------------- ------------------------------
Officer
Confidential Treatment
<PAGE>
EXHIBIT 10.26
ACCESS RADIOLOGY CORPORATION
CONFIDENTIALITY AGREEMENT
This is a Confidentiality Agreement dated as of March 31, 1995 between
--------------
ACCESS Radiology Corporation ("ACCESS") and ISG Technologies, Inc. (the
---------------------
"Counterparty").
WHEREAS, each of ACCESS and the Counterparty possesses and will possess
confidential and proprietary information relating its business;
WHEREAS, such information of ACCESS is valuable in the business of ACCESS
and has been developed at ACCESS's expense and such information of the
Counterparty is valuable in the business of the Counterparty and has been
developed at the Counterparty's expense;
WHEREAS, information has been or will be exchanged by ACCESS and the
Counterparty in connection with DECOM and non-DECOM based workstation strategies
------------------------------------------------
and business;
- ------------
NOW, THEREFORE, the parties agree as follows:
1. As used in this Agreement, "Confidential Information" means all trade
secrets, know-how, business and financial information and other proprietary
information or data disclosed to one party by the other or incorporated in
materials or products provided to one party by the other and marked or indicated
to be confidential.
2. Each party acknowledges and agrees that Confidential Information received
from the other party is the sole and exclusive property of the disclosing party.
Each party will not use any Confidential Information received from the other
party except in connection with the business relationship described above or
otherwise with the prior written agreement of the disclosing party.
3. Each party will hold all Confidential Information received from the other
party in strict confidence and will not disclose any such Confidential
Information other than to its employees and agents who need to know such
Confidential Information for the purposes permitted by Paragraph 2 and are bound
to maintain its confidentiality. Each party will be responsible for any use,
disclosure, copying or analysis of Confidential Information inconsistent with
this Agreement by any of such party's employees or agents or any of such party's
affiliates or their employees or agents.
<PAGE>
4. Each party will not make copies or perform analyses of Confidential
Information received from the other party except for the purposes permitted by
Paragraph 2. Each party will, upon the request of the other party, return all
tangible Confidential Information (including copies thereof) provided by the
requesting party and will either return or destroy all notes, summaries and
other material containing or derived from Confidential Information disclosed by
the requesting party, any such destruction to be confirmed by the requesting
party in writing.
5. Each party acknowledges and agrees that no license, implied or otherwise,
is granted hereby under any patent, copyright, trademark, any application for
any of the foregoing or any other intellectual property right. If Confidential
Information is or becomes the subject of a patent, copyright, trademark or any
application for any of the foregoing, the party originating such Confidential
Information will have all the rights and remedies available under such patent,
copyright, trademark or application.
6. The limitations on disclosure and use of Confidential Information contained
in this Agreement shall not apply to any information that:
a. is in the public domain at the time of disclosure to the receiving
party hereunder or thereafter becomes in the public domain through no
fault of the receiving party;
b. can be shown by the receiving party has been in its possession prior
to disclosure by the disclosing party; or
c. is furnished to the receiving party by a third party that has a bona
fide right to do so.
7. Each party shall be held to the same standard of care with respect to
Confidential Information under this Agreement as such party normally applies to
its own confidential information of similar kind.
8. Each party and its affiliates will not, directly or indirectly, solicit,
interfere with, or endeavor to entice away from the other party any of its
suppliers, dealers, employees, board members or members of any advisory board.
9. Each party acknowledges and agrees that damages would not be an adequate
remedy for any breach of this Agreement with respect to Confidential Information
received hereunder, that any such breach of this Agreement would cause
irreparable harm to the party that originated such information, and that in
addition to any other available remedies the aggrieved party shall be entitled
to one or more injunctions against any such breach without requirement of a
board or other surety.
-2-
<PAGE>
10. The restrictions on use and disclosure of Confidential Information
contained in the Agreement shall extend for five years from the date hereof
unless sooner terminated by written agreement of the parties. This Agreement
shall be binding upon an inure to the benefit of the parties and their
successors and assigns and may not be amended except by written agreement of the
parties.
11. The invalidity or unenforceability of any provision of this Agreement
shall not affect any other provisions hereof.
12. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
date first written above.
Access Radiology Corporation
By /s/
----------------------------------
Title _______________________________
ISG Technologies, Inc.
By /s/
----------------------------------
Title _______________________________
-3-
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.27
OEM DEVELOPMENT SOFTWARE AGREEMENT
This agreement is made as of the 9th day of November, 1995, between MITRA
IMAGING INCORPORATED, a corporation incorporated under the laws of the Province
of Ontario, Canada (hereinafter called "Mitra), and ACCESS RADIOLOGY
CORPORATION, a corporation incorporated in the State of Delaware (hereinafter
called "ACCESS").
B A C K G R O U N D
1. ACCESS desires to develop application-specific software using software
products marketed by Mitra and to distribute Mitra Software to third party end
users (hereinafter called "Customers") ; and
2. Mitra has agreed to license ACCESS to do so,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth the parties hereto agree as follows:
1. Interpretation.
1.1 In this Agreement, each of the following terms has the meaning
set out below:
1.1.1 "DAP for Windows" means all or any portion of the
computer programs in object code format, described as
such in the user's manual entitled "Mitra Imaging
Incorporated DICOM Application Platform Revision 1.0 "
dated A---)--il 29, 1995, and conforming to the
specifications set forth therein.
1.1.2 "DAP for UNIX" means all or any portion of the computer
programs in object code format, described as such in
the user's manual entitled "Mitra Imaging Incorporated
DICOM Application Platform Revision 1.011 dated April
29, 1995, and conforming to the specifications set
forth therein.
1.1.3 "FDA" means the United States Food and Drug
Administration.
1.1.4 "Food and Drug Art" means the United States Pure Food
and Drug Act, as amended from time to time.
Confidential Treatment
-1-
<PAGE>
1.1.5 "Lumiscan" means all or any portion of the computer
programs in object code format, described in the User's
Manual for Lumisys DICOM 3.0 Tookit Version 0-4.2 dated
August 3, 1995, and conforming to the specifications
set forth therein.
1.1.6 "Mitra Software" means all or any portion of DAP for
Windows, DAP for UNIX, Lumiscan and the server
software.
1.1.7 "Server Software" means all or any portion of the
computer programs in object code for-mat, listed on
Schedule A and conforming to the specifications set
forth therein.
1.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral Or written, of the parties pertaining
to such subject matter.
1.3 Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in U.S. funds.
1.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
2. Grant of Rights.
2.1 Effective upon execution of this Agreement, Mitra hereby appoints
ACCESS a non-exclusive reseller of Mitra Software products and
grants to ACCESS the following nonexclusive rights:
2.1.1 The right to use DAP for Windows and DAP for UNIX to
develop application-specific software and to sublicense
such software incorporated in such ACCESS-developed
software to ACCESS customers in the regular course of
business;
2.1.2 The right to include copies of the Lumiscan and Server
Software in software or devices made available by
ACCESS to its customers and to sublicense Lumiscan and
Server Software included in such software or devices to
ACCESS customers in the regular course of business; and
2.1.3 The right to use copies of the Mitra Software for
internal purposes of ACCESS, including software
development, demonstration,
Confidential Treatment
-2-
<PAGE>
support of ACCESS customers and processing of data in
the regular course of 1~ACCESS's business.
3. Customer License Agreements.
3.1 ACCESS shall develop standard form customer sublicensing
provisions acceptable to Mitra for use with Mitra Software. No
customer shall receive any Mitra Software unless such customer
shall have signed an agreement containing the standard form
customer sublicensing provisions.
3.2 Each customer agreement shall set out the name and address of the
customer and the identity and location of the devices on which
the customer is licensed to use a copy of Mitra Software, and
shall include standard form customer sublicensing provisions
which provide:
3.2.1 that only a personal, non-transferable and non-
exclusive right to use each copy of Mitra Software
solely for the customer's business or professional
purposes is granted to the customer;
3.2.2 that no title to the Mitra Software is transferred to
the customer; and
3.2.3 that the customer shall not transfer, provide or
disclose Mitra Software to any other third par-y.
3.3 ACCESS shall assign a unique internal number to each sublicense
granted to a customer and shall place this number clearly in the
customer agreement.
3.4 ACCESS shall use reasonable efforts to all the licensing
provisions of customer agreements.
3.5 ACCESS shall demonstrate to Mitra that its software applications
that include Mitra Software have. sufficient mechanisms for
tracking usage and preventing unauthorized copying. Without this
ACCESS is required to distribute a copy-protected version of the
Mitra Software administrated by Mitra at installation.
4. License Fees.
4.1 ACCESS agrees to pay to Mitra the following license fees:
Confidential Treatment
-3-
<PAGE>
4.1.1 [*Redacted pursuant to Confidentiality Treatment
Request dated September 10, 1999.]
4.1.2 [*Redacted pursuant to Confidentiality Treatment
Request dated September 10, 1999.]
4.1.3 [*Redacted pursuant to Confidentiality Treatment
Request dated September 10, 1999.]
4.1.4 [*Redacted pursuant to Confidentiality Treatment
Request dated September 10, 1999.]
4.2 License and upgrade fees under Sections 4.1.2 through 4.1.4 shall
be payable quarterly within 30 days of the end of each calendar
quarter for sublicenses granted to ACCESS Customers during such
quarter. Each payment of such license fees shall be accompanied
by a statement setting forth in reasonable detail the calculation
of the license fees payable. License fees do not include any
customs or import duties, or sales, use or similar taxes, which
shall be the responsibility of ACCESS.
4.3 ACCESS shall keep full, clear and accurate records of the number
of copies of Mitra Software furnished by it to customers or used
by it internally, and the identity and location of each customer
to whom Mitra Software is furnished by ACCESS.
4.4 Mitra shall have the right to make an examination and audit not
more than twice per calendar year, of all records kept pursuant
to Section 4.3.
5. Support.
Confidential Treatment
-4-
<PAGE>
5.1 Mitra will supply the following materials to ACCESS:
5.1.1 One copy of the latest object code or executable code
for each item of Mitra Software, with upgrades as
provided in Section 5.2. If a copy of the Mitra
Software initially provided is lost, damaged or
destroyed, Mitra will provide at cost a replacement
copy, which may be a more recent release or version;
and
5.1.2 One copy of documentation in English and documentation
updates as they are prepared and released which, when
taken together, constitute complete documentation of
the Mitra Software complying with Good Manufacturing
Practices as defined in the Food and Drug Act and the
rules, regulations and orders of the FDA thereunder.
5.2 For so long as ACCESS is current in the payment of support costs
as provided in Section 5.3, Mitra warrants to ACCESS that the
Mitra Software will perform in accordance with its
specifications. Mitra will use its best efforts to ensure if with
a such performance and, corrected version of the Mitra Software
as soon as practical after Mitra is notified of any non-
conformity. Mitra will provide generally available upgrades,
maintenance releases, bug fixes and work-arounds at no charge
(except as provided in Section 5.2). Mitra will support the
version of DAP for Windows used by ACCESS as of the date of this
Agreement only until ACCESS upgrades to the next available
version, which ACCESS will do as soon as practicable.
5.3 ACCESS will pay to Mitra aggregate annual support costs of
[*Redacted pursuant to Confidentiality Treatment Request dated
September 10, 1999.] per year with respect to Mitra Software.
Support costs will be payable in advance on the execution of this
Agreement and each anniversary thereof during the term of this
Agreement.
5.4 Notwithstanding Section 5.2, if an upgrade of DAP for Windows
compatible with Windows 95 or Windows NT shall become available
and ACCESS shall request such an upgrade from Mitra, then upon
delivery of such an upgraded version, ACCESS shall pay to Mitra a
one time upgrade fee. [ *Redacted pursuant to Confidentiality
Treatment Request dated September 10, 1999.]
Confidential Treatment
-5-
<PAGE>
Following delivery of any such upgraded versions, the term "DAP
for Windows" as used in this Agreement shall be deemed to include
such upgraded version for all purposes, it being understood that
the obligations of ACCESS and Mitra with respect to the
previously existing version of DAP for Windows shall also remain
in full force and effect.
6. Additional Covenants.
6.1 ACCESS shall include in all copies of Mitra Software made by
ACCESS any copyright notice as furnished by Mitra to ACCESS.
6.2 Each party hereto covenants that it shall keep confidential any
confidential information relating to the other party's business,
finances, marketing and technology, to which it obtains access
(including without limitation DAP for windows, DAP for UNIX and
the pricing and other terms of this Agreement) and that it shall
take all reasonable precautions to Protect such confidential
information of the other party or any part thereof from any use,
disclosure or copying except as expressly authorized by this
Agreement.
6.3 ACCESS acknowledges that Mitra Software and all related
information and documentation are the property of Mitra and/or
third parties from whom Mitra has acquired certain rights under
license.
6.4 ACCESS shall indemnify and save harmless Mitra from and against
any and all liabilities, damages, costs or expenses awarded
against or incurred or suffered by Mitra arising out of any
action or proceeding commenced or maintained by any third party
in respect of any acts or omissions of ACCESS in marketing or
distributing the Mitra Software.
7. Warranties.
7.1 Mitra warrants and agrees that:
7.1.1 Mitra has the full authority to grant the license and
rights set forth in this Agreement.
7.1.2 To the best of Mitra's knowledge, the documentation and
code of the Mitra Software have not been published
under circumstances which have caused loss of copyright
therein, and to the best of Mitra's's knowledge, the
documentation and code of the Mitra
Confidential Treatment
-6-
<PAGE>
Software do not infringe upon any copyright or other
proprietary right of any third party.
7.1.3 Mitra is not aware of any claim of infringement of any
copyright or other proprietary right having been made
or pending against Mitra relative to the documentation
or code of the Mitra Software.
7.1.4 Mitra will, at its expense, defend against, hold ACCESS
harmless from, and pay any final judgment against
ACCESS or any ACCESS customer arising out of any claim
that any Mitra Software infringed a copyright, a patent
or a trade secret provided that (i) ACCESS notifies
Mitra in writing of such claim or action, and (ii)
Mitra has sole control of the defense and settlement of
such claim or action. In defending against such claim
or action, Mitra may, at its option, agree to any
settlement in which Mitra shall either (1) procure for
ACCESS and all ACCESS customers the right to continue
using the Mitra Software; and (2) modify or replace the
Mitra Software so that it no longer infringes, to the
extent that the exercise of such option does not result
in a material, adverse change in the operational
characteristics of the Mitra Software, and equivalent
functions and performance provided by Mitra remain
following implementation of such option. If Mitra
concludes in its judgment that none of the foregoing
options is reasonable, Mitra may remove the Mitra
Software and any other components supplied by Mitra
rendered unusable as a result of such removal and pay
to ACCESS all damages arising therefrom, including
damages incurred by reason of ACCESS's inability to
perform its obligations to ACCESS customers, but
without diminishing Mitra's obligations under this
Section 7.1.4. Each party shall promptly notify the
other in the event that it becomes aware of a claim
covered by this Section 7.1.
7.2 Mitra warrants and agrees that the Mitra Software, when properly
installed and configured, will meet all applicable standards of
the American College of Radiology for diagnostic images and is
appropriate for diagnostic radiological examinations, and Mitra
has no knowledge of existing problems which would cause the Mitra
Software to fail to comply with the foregoing warranty.
7.3 The express warranties set forth in Sections 5.21, 7.1 and 7.2
are the only warranties made by Mitra with respect to the Mitra
software and other services provided by Mitra. Mitra makes no
other warranties expressed or
Confidential Treatment
-7-
<PAGE>
implied or arising by custom or trade usage and specifically
makes no warranty of merchantability.
8. Term and Termination.
8.1 This agreement shall have an initial term of three years, subject
to earlier termination as provided below.
8.2 If there shall be any material breach of this Agreement by ACCESS
which shall not be cured within 30 days of Mitra giving written
notice thereof to ACCESS, then at any time that such breach shall
be continuing Mitra may terminate this Agreement by delivery of a
separate written termination notice to ACCESS.
8.3 If there shall be any material breach of this Agreement by Mitra
which shall not be cured within 30 days of ACCESS giving notice
thereof to Mitra, then at any time that such breach shall be
continuing ACCESS may terminate this Agreement by delivery of a
separate written termination notice to Mitra.
8.4 If this Agreement shall be terminated under Section 8.2 or
Section 8.3, then:
8.4.1 ACCESS's right to develop application specific software
using Mitra Software and to furnish Mitra Software to
customers and to make copies of the Mitra Software
shall immediately terminate;
8.4.2 Mitra's maintenance and support obligations hereunder
shall immediately terminate;
8.4.3 ACCESS shall pay, within ten (10) days, all amounts
which have accrued to Mitra;
8.4.4 ACCESS shall immediately deliver the master copy of
Mitra Software and all other copies to Mitra at
ACCESS's expense; and
8.4.5 ACCESS shall provide a list of names and addresses of
customers who have entered into sublicenses with ACCESS
since the date of this Agreement.
8.5 Notwithstanding any termination or expiration of this Agreement,
any sublicense granted to an ACCESS customer prior to such
termination or
Confidential Treatment
-8-
<PAGE>
expiration shall survive such termination or expiration, and
Sections 6.2, 6.3 and 7.1 shall survive any such termination
or expiration.
8.6 The remedies set forth in Sections 8.1 through 8.5 shall not be
exclusive, but shall be in addition to any other remedies
available to either party at law or in equity.
9. General.
9.1 Mitra agrees for one year from the date of this Agreement not to
itself incorporate wavelet-based compression in its acquisition
software.
9.2 Assignment:
9.2.1 Subject to ACCESS's right to grant sublicenses
hereunder, ACCESS may not assign this Agreement or any
rights hereunder without the prior written consent of
Mitra, except that, without such consent and upon
notice to Mitra, Mitra may assign all of its rights
hereunder to a corporation or other legal entity that
acquires substantially all of ACCESS's assets or where
ACCESS is consolidated or merged but then only upon the
express assumption by such transferee or its successor
of the obligations set forth in this Agreement.
9.2.2 Mitra may not assign this Agreement or any rights
hereunder without the prior written consent of ACCESS,
except that, without such consent and upon notice to
ACCESS, Mitra may assign all of its rights hereunder to
a corporation or other legal entity that acquires
substantially all of Mitra's assets or where Mitra is
consolidated or merged, but then only upon the express
assumption by such transferee of its successor of the
obligations set forth in this Agreement.
9.2.3 This Agreement is binding upon, and inures to the
benefit of, the successors and permitted assigns of the
parties.
9.3 The waiver or failure of either party to exercise in any respect
any right provided for in this Agreement shall not be deemed a
waiver of any further or future right hereunder.
9.4 The headings used in this Agreement are for convenience of
reference only and are not to be used in interpreting the
provisions of this Agreement.
Confidential Treatment
-9-
<PAGE>
9.5 If any provision of this Agreement is invalid or unenforceable in
any particular case, such case shall not invalidate or render
unenforceable any other part of this Agreement. The Agreement
shall simply be construed as not containing the particular
provision or provisions held to be invalid or unenforceable to
the extent of the particular case, and the rights and obligations
of the parties hereto shall be construed accordingly.
9.6 This Agreement is effective when executed by both parties. This
Agreement may be executed in counterparts, each of which shall
constitute one and the same instrument.
9.7 Notices:
All notices provided for in this Agreement shall be in writing or
facsimile, addressed to the appropriate party at the respective
address set forth below or to such other then-current address as
is specified by notice, as follows:
(a) to Mitra: Mitra Imaging Inc.
115 Randall Drive
Waterloo, Ontario N2V 1C5 CANADA
Facsimile: (519) 746-3745
Attention: Eric Peterson
(b) to ACCESS: ACCESS Radiology Corporation
Bay Colony Corporate Center
950 Winter Street Waltham, MA 02154
Facsimile: (617) 890-0110
Attention: Howard Pinsky
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date set forth above.
ACCESS RADIOLOGY CORPORATION MITRA IMAGING INCORPORATED
By: /s/ Eric Petersen By: /s/ Howard Pinsky
----------------------- ----------------------------
Name: Eric Petersen Name: Howard Pinsky
President Vice President of Technology
----------------------- ----------------------------
Title Title
Confidential Treatment
-10-
<PAGE>
SCHEDULE A
----------
The MITRA TTY interface is intended to provide end-user functionality to a set
of functions employing a VT style interface. The functionality includes:
. the capability to manually delete a stud
. the capability to set the autopurge functions, including the software
which executes the autopurge of patient studies
. the capability to protect a study from autopurge and delete
. the ability to set up DICOM Query/Retrieval Class nodes
. the ability to manually route a study to a DICOM node demographics
. the ability of the above sorted by date and name.
. any additional functionality provided in the interface not listed
above
The interface is relevant to the UNIX implementation of the DAP database.
Confidential Treatment
-11-
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.28
AMENDMENT
TO
OEM DEVELOPMENT SOFTWARE AGREEMENT
This Amendment to OEM Development Software Agreement is made as of May 20,
--------
1997, between MITRA Imaging Incorporated ("MITRA"), and ACCESS Radiology
- ----
Corporation ("ACCESS").
ACCESS and MITRA are parties to an OEM Development Software Agreement (the
"OEM Agreement") dated as of November 9, 1995. ACCESS and Mitra wish to amend
the OEM Agreement as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise delined
have the meanings set forth in the OEM Agreement. The term "DTK", for
purposes of this Agreement and the OEM Agreement, shall mean all or any
portion of the computer programs in object code format, described in
Schedule B attached hereto and conforming to the specifications set forth
in Schedule B. The term "Mitra Software" is amended to include DTK.
2. Amendment of Section 2.1.1. Section 2.2.1 is amended to read as
follows:
2.2.1. The right to use DAP for Windows, DAP for UNIX and
DTK to develop application-specific software and to sublicense such
software incorporated in such ACCESS-developed software to ACCESS
customers in the regular course of business.
3. Amendment of Section 3.1. Section 3.1. is amended to read as follows:
3.1 ACCESS shall develop standard form customer licensing
provisions acceptable to Mitra for use with Mitra Software. No customer
shall receive any Mitra Software unless such customer shall have signed an
Agreement (with ACCESS or with a reseller of ACCESS Systems authorized by
ACCESS) containing the standard form customer sublicensing provisions.
Confidential Treatment
-1-
<PAGE>
4. Addition of Section 3.6. Section 3 is amended by adding the following
Section 3.6:
3.6 Notwithstanding Section 3.2 or any other provision of this
Agreement, Mitra Software may be licensed to the Government of the United States
of America, or an agency or instrumentality thereof, under an Agreement
containing software licensing terms generally used by the United States
Government (or the agency or instrumentality to which the Mitra Software is
licensed) for procurement of commercial software.
5. Addition of Section 4.1.5. Section 4.1 is amended by adding the
following Section 4.1.5:
4.1.5. [*Redacted pursuant to Confidentiality Treatment Request
dated September 10, 1999.
]
6. Amendment of Section 8.1. Section 8.1 is amended to read as follows:
8.1. This Agreement shall have an initial term ending on December 31,
2001, subject to earlier termination as provided below.
7. Counterparts; Effectiveness. This Amendment shall become effective
when executed by MITRA and ACCESS. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Upon the effectiveness
of this Agreement, all references in the OEM Agreement to the "Agreement",
"hereof", "hereunder" and similar references shall be deemed to refer to the OEM
Agreement as amended hereby. Except as expressly amended hereby, all terms of
the OEM Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
ACCESS RADIOLOGY CORPORATION MITRA IMAGING INCORPORATED
By: /s/ Eric Petersen By: /s/ Howard Pinsky
-------------------------- -------------------------
Name: Eric Petersen Name: Howard Pinsky
President Vice President of Technology
-------------------------- ----------------------------
Title: Title:
Confidential Treatment
-2-
<PAGE>
CONFIDENTIAL TREATMENT EXHIBIT 10.29
AMENDMENT TO OEM DEVELOPMENT SOFTWARE AGREEMENT
This Amendment to OEM Development Software Agreement is made as of 4/28/99
-------
between Mitra Imaging Inc. ("MITRA") and ACCESS Radiology Corporation
("ACCESS").
ACCESS and MITRA are parties to an OEM Development Software Agreement dated as
of November 9, 1995 and a subsequent Amendment dated May 20, 1997 ("the OEM
Agreement"). ACCESS and MITRA wish to amend the OEM Agreement as set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth
the parties hereto agree as follows:
1. Addition of Section 4.1.5 Section 4 is amended by adding the following
item:
[*Redacted pursuant to Confidentiality Treatment Request dated September 10,
1999.
]
The license fee paid under this section is for any combination of DTK for
Windows and DTK for UNIX licenses that are incorporated into each copy of
application software by ACCESS, for which the total number of licenses used is
three hundred(300).
[*Redacted pursuant to Confidentiality Treatment Request dated September 10,
1999.]
ACCESS agrees to continue reporting license usage on a monthly basis for the
period beginning December 1, 1998.
If MITRA terminates this agreement in accordance with Section 8.2 of the
Agreement, MITRA will reimburse ACCESS an amount equal to the value of the
prepaid licenses that are unreported as of the termination date.
Confidential Treatment
-1-
<PAGE>
2. Amendment of Section 8.1 Section 8.1 is amended to read as follows:
8.1 This Agreement shall have an initial term ending on December 31, 2004,
subject to earlier termination as provided below.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
ACCESS RADIOLOGY CORPORATION MITRA IMAGING INC.
BY: /s/ By: /s/
----------------------- ------------------------------
Name Name
Title Title
Confidential Treatment
-2-
<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
September 10, 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
September 10, 1999
