<PAGE>
As filed with the Securities and Exchange Commission on February 25, 2000
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
eMed Technologies Corporation
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 7374 04-3155965
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction Classification Code Number) Identification No.)
of Incorporation or
Organization)
</TABLE>
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)
------------
Caren Mason, 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:
<TABLE>
<S> <C>
Paul Model, esq. David J. Goldschmidt,
Joel F. Freedman, esq. 477 Madison Avenue esq.
Ropes & Gray New York, New York 10022 Skadden, Arps, Slate,
One International Place (212) 751-8438 Meagher & Flom LLP
Boston, Massachusetts Four Times Square
02110-2624
New York, New York 10036
(617) 951-7000 (212) 735-3000
</TABLE>
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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value $.01,
per share.................... $46,000,000 $12,144
</TABLE>
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- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+Although we are permitted by US federal securities laws to offer these +
+securities using this prospectus, we may not sell them or accept your offer +
+to buy them until the documentation filed with the SEC relating to these +
+securities has been declared effective by the SEC. This prospectus is not an +
+offer to sell these securities or our solicitation of your offer to buy these +
+securities in any jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--FEBRUARY 25, 2000
PROSPECTUS
, 2000
eMed Technologies Corporation
Shares of Common Stock
- --------------------------------------------------------------------------------
Market & Proposed Symbol: The Offering:
. NASDAQ/EMDT . We are offering shares.
. The underwriters have an option to purchase up
to an additional shares from us to cover
over-allotments.
. This is our initial public offering, and no
public market currently exists for our shares.
-----------------------------------------------
<TABLE>
<CAPTION>
Per Share Total
-----------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to eMed, before expenses:
-----------------------------------------------------
</TABLE>
This investment involves risk. See "Risk Factors" beginning on page 6.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette
SG Cowen
Wit SoundView
DLJdirect Inc.
<PAGE>
Inside Front Cover
------------------
[eMed Technologies Logo] eMed.net Web Services
[pictures of radiology group [picture of Secure Desktop
website showing radiology report portion of radiology group
to referring physician and website]
associated medical images]
Clinical Imaging and Information Physicians' Secure Desk
[picture of home page for an Customized and Branded Web Site
individualized radiology group
website]
Practice Management and Promotion Clinical Content
[pictures of individualized [picture of radiology group
radiology group website showing website showing patient preparation
physician biography and directions guidelines and exam description]
for visiting patients]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 6
Use of Proceeds..................... 16
Dividend Policy..................... 16
Capitalization...................... 17
Dilution............................ 18
Selected Financial Data............. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................ 27
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 36
Principal Stockholders........... 44
Certain Transactions............. 49
Description of Capital Stock..... 50
Shares Eligible For Future Sale.. 54
Underwriting..................... 57
Legal Matters.................... 60
Experts.......................... 60
Where You Can Find More
Information..................... 60
Index to Financial Statements.... F-1
</TABLE>
<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 provide Internet-based business services to health care professionals and
others who require access to medical image information. Our offerings, in a
cost-effective manner, significantly improve how physicians, health care
professionals, payors and others use and share medical images. We believe our
recently introduced eMed.net web service is the first to integrate and deliver
over the Internet medical images with other clinical information and practice
tools. eMed.net Internet-enables radiology groups and imaging departments by
providing individualized websites for image distribution, physician practice
facilitation, education, commerce and marketing. Customers can obtain the
benefits of our eMed.net web service without replacing their existing
communications infrastructure, imaging devices or film printer networks. We
also offer communications infrastructure components to capture, compress,
transmit, route, display and store medical images, including x-rays, MRIs, CTs
and ultrasounds. In addition, we intend to offer our web services technology to
other vendors to enable them to distribute medical images through their
Internet-based health care applications under the brand name "Images by eMed".
Our Market Opportunity
Medical images and related information are utilized in forming patient
diagnosis, care judgments, reimbursement decisions, consultations, research and
education by a broad cross-section of health care professionals, payors and
others. Based on historical data, we believe 350 million radiology studies,
often consisting of multiple images, are conducted each year. Medical images
are also used in a variety of other specialties, including dentistry. In
addition to the 600,000 physicians and 140,000 dentists in the United States,
there are payors and others who require access to medical images. Frequently,
multiple parties at different locations simultaneously need to access the same
medical images.
The film and paper-based method for capturing, analyzing, distributing and
storing medical images and associated medical reports is inherently
inefficient. Traditional electronic solutions offered by others to address this
inefficiency require significant initial capital outlays, are narrow in scope
and are difficult to implement, resulting in limited adoption of these
technologies.
1
<PAGE>
The Internet represents a significant advance in the technology available to
health care professionals to decrease operating costs and improve the quality
of the services they provide. We believe that physicians are increasingly using
Internet-based medical applications.
We believe these market dynamics, coupled with accelerated Internet use,
will drive adoption of our Internet-based solutions.
eMed Solutions
We have developed Internet-based offerings which we believe are cost-
effective, easy to use and provide our customers with increased efficiencies
and greater revenue opportunities. We offer all of our web services and
communications infrastructure on a subscription and transaction fee basis which
permits customers to obtain the benefits of our offerings without the more
significant initial capital outlays associated with one-time, up front
purchases. Our offerings include:
. eMed.net, introduced in December 1999, allows for secure delivery of
medical images and reports over the Internet on individualized websites,
which are designed, produced and hosted by eMed.
. Images by eMed is the brand name under which we intend to offer our
technology to other vendors to enable them to distribute medical images
through their Internet-based health care applications. For example, we
have entered into a letter of intent with rdental.com to establish an
exclusive relationship under which we will enable rdental.com to
distribute dental images over the Internet for both referrals and
claims.
. FrameWave is our suite of communications infrastructure offerings that
capture, compress, transmit, route, display and store medical images.
These offerings are sold on either a one-time or a subscription fee
basis.
Our Strategy
Our objective is to become the leading provider of Internet-based medical
image distribution and management services. Elements of our strategy to achieve
this objective include:
. Increasing market penetration of our eMed.net web service in radiology
and other image-intensive health care applications
. Pursuing strategic relationships with health care application service
providers who lack Internet-based image distribution functionality
. Expanding our web service offerings to include additional services, such
as integrated transcription services, exam scheduling, secure email,
literature search, and continuing medical education credit with group
and personal links
. Maintaining and expanding our technological expertise in web services
and communications infrastructure
2
<PAGE>
Corporate History and Information
Prior to 1996, our business consisted primarily of providing network
management services that permit health care professionals to access, transmit
and review medical images at remote locations. We began selling FrameWave
communications infrastructure in late 1996 and introduced eMed.net, the first
of our web services, in December 1999.
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 Technologies Corporation has registered or applied to register the
names eMed, Images by eMed, eMed.net, Secure Desktop and FrameWave as
trademarks. All other brand names or trademarks appearing in this prospectus
are the property of their respective owners.
3
<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,
capital expenditures, 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 January 31, 2000, and excludes:
. 2,206,961 shares of our common stock subject to options outstanding as
of January 31, 2000 at a weighted average exercise price of $1.80 per
share;
. warrants to purchase 522,440 shares of common stock at exercise prices
from $0.02 to $1.20 per share and warrants to purchase 409,091 shares of
Series J preferred stock outstanding as of January 31, 2000 at an
exercise price of $1.10 per share. Upon completion of this offering, the
warrants to purchase Series J preferred stock will become warrants to
purchase 170,449 shares of common stock.
4
<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>
Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.......................... $ 466 $ 1,009 $ 8,027 $12,594 $ 23,571
Cost of revenue.................. (313) (1,404) (7,012) (8,976) (12,318)
------- ------- ------- ------- --------
Gross margin..................... 153 (395) 1,015 3,618 11,253
------- ------- ------- ------- --------
Operating expenses:
Research and development........ 239 610 1,300 2,362 3,364
Sales and marketing............. 571 1,319 2,912 3,498 5,313
General and administrative...... 1,476 1,331 1,982 2,722 4,346
Stock-based compensation........ -- -- -- -- 635
------- ------- ------- ------- --------
Total operating expenses....... 2,286 3,260 6,194 8,582 13,658
------- ------- ------- ------- --------
Loss from operations............. (2,133) (3,655) (5,179) (4,964) (2,405)
Interest income (expense), net... (119) (70) (204) (106) (112)
Other income (expense)........... 218 (21) (242) (43) (44)
------- ------- ------- ------- --------
Net loss......................... $(2,034) $(3,746) $(5,625) $(5,113) $ (2,561)
======= ======= ======= ======= ========
Basic and diluted net loss per
share........................... $ (5.08) $ (8.39) $(12.45) $(11.70) $ (5.12)
Shares used in computing basic
and diluted net loss per share.. 400 446 452 437 500
Unaudited pro forma basic and
diluted net loss per share...... $ (0.31)
Shares used in computing
unaudited proforma basic and
diluted net loss per share...... 8,356
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------
Actual As Adjusted
----------- --------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................ $ 4,464 $
Working capital...................................... 3,262
Total assets......................................... 13,277
Total long-term liabilities.......................... 79
Total stockholders' equity........................... 4,424
</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 an
assumed public offering price of $ per share in the offering, after deducting
the underwriters' discount and our estimated offering expenses.
5
<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
Our future growth may suffer if we do not achieve broad acceptance of our web
services by health care professionals and others.
Our success, in part, depends upon our web services gaining acceptance by a
large number of radiologists 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. The adoption of our web services requires radiologists and other
health care professionals to accept a new way of conducting business and
exchanging information. In addition, the rate at which physicians and health
care organizations will adopt more advanced technologies is uncertain. Failure
to achieve broad acceptance of our web services would have a material adverse
effect on our operating results.
We may be unable to sell our Internet-based offerings if our target customers
do not accept our subscription and transaction-based pricing model.
Our new subscription and transaction-based pricing model for Internet-based
offerings is untested and will require our target customers to make recurring
subscription and transaction fee payments. Currently, customers typically buy
medical information systems as a one-time capital investment with a yearly fee
for maintenance and support. Our target customers may not accept our new
pricing model. 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 would 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 our eMed.net web services in December 1999. In
extending our business into web 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.
6
<PAGE>
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 key personnel, upon whom
the success of our business will depend.
Our senior management team consists of only eight 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 our market. Larger competitors may have the resources to offer competitive
products or services 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 and services 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."
7
<PAGE>
We may be unable to sell new products and services to our installed user base.
We will seek 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 or services may be reluctant to adopt new technologies that may
replace or make redundant all or part of their existing systems.
If we fail to achieve early market acceptance, we may be unable to compete
successfully.
We believe that, to be successful, we must gain early market acceptance of
our offerings before our competitors introduce alternative products and
services with features similar to ours. Failure to achieve such early market
accceptance may materially reduce our ability to compete successfully, if at
all, with other market participants and may lead to reduced sales.
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, 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, management and financial resources to do so. Even with this investment of
time, 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 -- Technology."
8
<PAGE>
Technological change may render our products and services obsolete.
We expect that our market 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 could render our 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 and services into their networks may
cause customers to decide not to buy our products or services.
We often must integrate our products and services with the networks that
exist either at a customer site or among customer sites. We do not control
these customer proprietary networks. Customers' uncertainty as to the
compatability of our offerings with their existing 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 and web
services depend on the uninterrupted, efficient operation of our computer
network. The servers used in connection with our web services will be located
at both customer sites and 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,
we may not be able to provide customer support on which our users depend, and
as a result our business could be materially and adversely affected. Our
insurance policies may not adequately cover any losses.
A variety of factors including our plans to expand our business may cause our
quarterly and annual results to vary and our stock price to fluctuate.
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 sales of our new web services. Other factors
which may cause our operating results to fluctuate include the size and timing
of significant orders, the demand for and market acceptance of our products and
services, and the length of our sales cycles. Our revenue is not predictable
and 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 have initiated a new subscription and transaction-
9
<PAGE>
based pricing model for our offerings. 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 and concerns about the
introduction of new products by us or our competitors. Potential downturns in
general economic conditions may cause reductions in demand for our offerings.
Our revenue and other financial and operating results may not meet the
expectations of securities analysts and our stockholders. As a result of such
fluctuation or failure to meet expectations, the price of our common stock
could be materially adversely affected.
If we are unable to enter into and leverage strategic alliances, we may be
unable to grow as planned.
Part of our success will be dependent on our ability to enter into strategic
relationships with other vendors of Internet-based health care applications. We
may be unable to enter into, maintain or leverage these relationships. Also,
these third parties may not fulfill their obligations to us and may fail to
devote sufficient resources to successfully increase our revenue.
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.
Any disruption of our relations with our suppliers could increase our costs and
delay or halt our filling customer orders.
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 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
10
<PAGE>
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.
Our business may suffer if we are not able to successfully protect our
intellectual property rights which are important elements of our products and
services.
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 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. We cannot be sure 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 have in the past and may in the future
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 using our products and services.
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 or the websites we host for our customers. These types of claims have
been brought against providers of Internet-based services in
11
<PAGE>
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 is highly dependent on the proper and continual functioning of our
computer systems and therefore may be adversely affected by Year 2000 problems.
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. A significant Year 2000 related disruption could cause our
customers to be dissatisfied with our products and services or could impose an
unmanageable burden on our technical support staff. Although the effects of any
of these or other Year 2000 problems are not quantifiable at this time, any of
these events could have a material adverse effect on our business and operating
results.
Risks Related to Our Industry
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 other patient information to be made available to health care
professionals through our web services. Any well-publicized compromise of
security on the Internet, or involving any of our web services in particular,
could deter people from using the Internet or from using our web services. Any
reluctance for security reasons on the part of physicians or health care
organizations to use the Internet or our web services could adversely affect
our business.
Our inability to prevent security breaches could expose us to claims for
damages.
A security breach could occur if a third party were able to penetrate our
network security and misappropriate our customers' patient and other
proprietary information. If this happened, we could also be subject to
liability and litigation. We may have to devote significant financial and other
resources to protect against security breaches or to alleviate problems caused
by breaches.
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.
12
<PAGE>
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. Other legislation and
regulations currently being considered at the federal level could also
negatively affect our business. For example, the Health Insurance Portability
and Accountability Act of 1996 mandates the use of standard transactions and
identifiers, prescribed security measures and other provisions within two years
after the adoption of final regulations, which have not yet been adopted by the
Department of Health and Human Services. We cannot predict what impact, if any,
such proposals or health care reforms might have on us.
We may be unable to introduce new products or services if we fail to obtain
regulatory clearances and approvals.
Because most of 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 pre-market clearance or approval from the Food and Drug
Administration or any foreign counterparts. Failure to 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 offerings 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. 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 offerings for the
health care industry.
13
<PAGE>
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.
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 Internet services 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.
14
<PAGE>
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.
15
<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.
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 December 31, 1999, the
interest rate on this facility was 9.50%.
We intend to use the remaining net proceeds from this offering for general
corporate purposes, including capital expenditures, the expansion of our sales,
marketing and development efforts, and for potential acquisitions. We are not
currently participating in any active negotiations and have no commitments or
agreements with respect to any acquisition. 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.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 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 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>
December 31, 1999
----------------------------
Actual As Adjusted
------------- -------------
(dollars in thousands)
<S> <C> <C>
Long-term debt..................................... $ 79 $
------------- ---------
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; 561,042 shares issued and outstanding;
shares issued and outstanding as adjusted..... 6
Additional paid-in capital......................... 29,757
Deferred compensation.............................. (3,037)
Treasury stock .................................... (50)
Accumulated deficit................................ (22,371)
------------- ---------
Total stockholders' equity....................... 4,424
------------- ---------
Total capitalization............................. $ 4,503 $
============= =========
</TABLE>
The share information in the table is based on our shares of common stock
outstanding as of December 31, 1999. This table excludes:
. 1,701,357 shares of our common stock subject to options outstanding as
of December 31, 1999 at a weighted average exercise price of $1.52 per
share; and
. warrants to purchase 522,440 shares of common stock at exercise prices
from $0.02 to $1.20 and warrants to purchase 409,091 shares of Series J
preferred stock outstanding as of December 31, 1999 at an exercise price
of $1.10 per share. Upon completion of this offering, the warrants to
purchase Series J preferred stock will become warrants to purchase
170,449 shares of common stock.
17
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $4.4 million or $0.52 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 7,856,152 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 December 31, 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 December 31,
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 December 31,
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... 8,417,194 % $25,787,000 % $3.06
New investors........... % %
--------- ----- ----------- ----- -----
Total................. 100.0% $ 100.0% $
========= ===== =========== ===== =====
</TABLE>
The above information assumes no exercise of (1) the underwriters' over-
allotment option and (2) stock options or warrants after December 31, 1999. As
of December 31, 1999, we had reserved 1,701,357 shares of our common stock for
issuance upon exercise of outstanding options at a weighted average exercise
price of $1.52 per share and 692,889 shares of common stock for issuance upon
exercise of warrants to purchase 522,440 shares of common stock at exercise
prices from $0.02 to $1.20 per share and warrants to purchase Series J
preferred stock at an exercise price of $1.10 per share. Upon completion of
this offering, the warrants to purchase Series J preferred stock will become
warrants to purchase 170,449 shares of common stock. To the extent any of those
options or warrants are exercised, there will be further dilution to new
investors.
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<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, 1997, 1998 and 1999, and the balance sheet data as of
December 31, 1998 and 1999, 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, 1995 and
1996, and the balance sheet data as of December 31, 1995, 1996 and 1997, have
been derived from audited financial statements of eMed that do not appear in
this prospectus. The historical results are not necessarily indicative of the
operating results to be expected in the future.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenue.......................... $ 466 $ 1,009 $ 8,027 $12,594 $ 23,571
Cost of revenue.................. (313) (1,404) (7,012) (8,976) (12,318)
------- ------- ------- ------- --------
Gross margin..................... 153 (395) 1,015 3,618 11,253
------- ------- ------- ------- --------
Operating expenses:
Research and development........ 239 610 1,300 2,362 3,364
Sales and marketing............. 571 1,319 2,912 3,498 5,313
General and administrative...... 1,476 1,331 1,982 2,722 4,346
Stock-based compensation........ -- -- -- -- 635
------- ------- ------- ------- --------
Total operating expenses....... 2,286 3,260 6,194 8,582 13,658
------- ------- ------- ------- --------
Loss from operations............. (2,133) (3,655) (5,179) (4,964) (2,405)
Interest income (expense), net... (119) (70) (204) (106) (112)
Other income (expense)........... 218 (21) (242) (43) (44)
------- ------- ------- ------- --------
Net loss......................... $(2,034) $(3,746) $(5,625) $(5,113) $ (2,561)
======= ======= ======= ======= ========
Basic and diluted net loss per
share........................... $ (5.08) $ (8.39) $(12.45) $(11.70) $ (5.12)
Shares used in computing basic
and diluted net loss per share.. 400 446 452 437 500
Unaudited pro forma basic and
diluted net loss per share...... $ (0.31)
Shares used in computing
unaudited pro forma basic and
diluted net loss per share...... 8,356
<CAPTION>
As of December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........ $ 42 $ 2,201 $ 4,421 $ 2,259 $ 4,464
Working capital (deficit)........ (124) 1,889 5,541 (1,248) 3,262
Total assets..................... 1,022 3,978 9,890 11,506 13,277
Total long-term liabilities...... 1,278 177 963 342 79
Total stockholders' equity
(deficit)....................... (810) 2,549 5,503 388 4,424
</TABLE>
19
<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
Prior to 1996, our business consisted primarily of providing network
management services that permit health care professionals to access, transmit
and review medical images at remote locations. We began selling FrameWave
communications infrastructure in late 1996 and introduced eMed.net, the first
of our web services, in December 1999.
Communications infrastructure sales currently constitute a substantial
portion of our revenue. We generally recognize revenue from these sales upon
shipment to the customer. Revenue from web services have not been material to
date. We also derive revenue from installation and one time services. Our
standard installation fee is based on a percentage of sales price. We provide a
one year warranty on all communications infrastructure offerings. We generate
recurring revenue from contracts to provide network-based comprehensive support
and post-warranty maintenance to customers. We recognize revenue from these
contracts ratably over their lives. Recurring fees constituted approximately 7%
and 10% of revenue for the year ended December 31, 1998 and 1999, respectively.
As our customer base grows, we expect recurring fees from service contracts to
increase more quickly than our product sales.
Most of our communications infrastructure components are currently 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 also intend to offer our
communications infrastructure components on a subscription fee basis.
Costs of communications infrastructure 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 implement our web services
strategy, we expect our operating expenses to increase significantly.
Our first web service, eMed.net, was commercially introduced in December
1999 and is offered on a subscription and transaction fee basis. We expect our
historical revenue sources will continue to be significant contributors to our
overall revenue. Customers using our web services will continue to need
products like our communications infrastructure offerings. However, we expect
that revenue from our web services will constitute an increasingly greater
portion of our total revenues. Therefore, our past results may not be
indicative of our future performance and may not be comparable to our future
results.
20
<PAGE>
We also expect to generate revenue by offering our technology, under the
brand name Images by eMed, to other vendors to enable them to distribute
medical images through their Internet-based health care applications. We will
make this technology available on a subscription and transaction fee basis. We
also expect to generate revenue in the future from other services offered with
eMed.net, as well as from website advertisements.
The subscription revenue associated with communications infrastructure
products, eMed.net and other web services will be recognized on a monthly basis
over the life of the agreement or as services are rendered.
Due to our expected migration to a subscription fee model for communications
infrastructure and web services, we expect capital expenditures to increase
resulting in depreciation being an increasing portion of our cost of revenue.
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 web services
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.
As of January 31, 2000, we had 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 will result in average annual
non-cash charges of approximately $1.8 million through 2003 as the options
vest.
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. The acquisition was accounted for
using the purchase method of accounting. In February 1999, we sold non-core
assets which we acquired as part of the transaction for $861,000. Since
acquiring E-Systems Medical Electronics, we have integrated its operations into
our existing business and have eliminated redundant functions. In addition, we
have discontinued the practice of selling the acquired communications
infrastructure product lines at margins below levels acceptable to us. We did
not acquire the E-Systems Medical Electronics business with the intent to
continue their method of operations. Rather, the main purpose of the
acquisition was to obtain easier access to the E-Systems Medical Electronics
installed user base for marketing our web services and to acquire certain of
its technology and employees. 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
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenue. Revenue increased by 87% to $23.6 million for the year ended
December 31, 1999 from $12.6 million for the year ended December 31, 1998.
Communications infrastructure product revenue increased by 79% to $20.3 million
for the year ended December 31, 1999 from $11.3 million for the year ended
December 31, 1998. This increase was attributable to the increased sales volume
21
<PAGE>
of our communications infrastructure offerings. Service revenue increased by
156% to $3.3 million for the year ended December 31, 1999 from $1.3 million for
the year ended December 31, 1998. The increase was primarily due to the growth
in our installed user base and related annual service contracts.
Gross Margin. Gross margin increased to $11.3 million or 48% of revenue, for
the year ended December 31, 1999 from $3.6 million or 29% of revenue for the
year ended December 31, 1998. Gross margin from product revenue increased to
$11.3 million, or 56% of product revenue, for the year ended December 31, 1999
from $4.1 million or 36% of product revenue, for the year ended December 31,
1998. The increase in gross margin is attributable primarily to a reduction in
the material costs of products sold and, to a lesser extent, to 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
margins from service revenue improved to a loss of $53,000 for the year ended
December 31, 1999 from a loss of $458,000 for the year ended December 31, 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 42% to $3.4 million for the year ended December 31, 1999 from $2.4 million
for the year ended December 31, 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 expenses decreased to 14% of
total revenues for the year ended December 31, 1999 from 19% of total revenue
for the year ended December 31, 1998.
Sales and Marketing Expense. Sales and marketing expense increased by 52% to
$5.3 million for the year ended December 31, 1999 from $3.5 million for the
year ended December 31, 1998. This increase resulted from expanding our sales
force and related support staff and increasing marketing personnel and
promotional expenses. As a percentage of revenue, sales and marketing decreased
to 23% for the year ended December 31, 1999 from 28% of revenue for the year
ended December 31, 1998.
General and Administrative Expense. General and administrative expenses
increased by 60% to $4.3 million for the year ended December 31, 1999 from $2.7
million for the year ended December 31, 1998. This increase resulted from
increased personnel costs and associated recruiting and facilities expenses. As
a percentage of revenue, general and administrative expense decreased to 18%
for the year ended December 31, 1999 from 22% of revenue for the year ended
December 31, 1998.
Stock-based Compensation. During the year ended December 31, 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 resulted in non-cash compensation charges of $635,000 for the year
ended December 31, 1999.
Interest Expense -- Net. Interest expense, net increased to $112,000 for the
year ended December 31, 1999 from $106,000 for the year ended December 31,
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.
22
<PAGE>
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 communications
infrastructure 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 year ended December 31, 1998 from $1.0 million, or 13% of revenue, for the
year 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 communication infrastructure
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.
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 an increase in personnel and increased expenses related to additional
leased facilities space. 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.
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Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
equity and debt financing. During the period from inception through December
31, 1999, we received net proceeds from the sale of our capital stock and
convertible notes of $25.8 million. None of the convertible notes remain
outstanding. As of December 31, 1999, we had $4.5 million of cash and cash
equivalents and approximately $1.5 million was available under our credit
facility.
Cash used in operating activities for the year ended December 31, 1999 of
$1.3 million consisted primarily of net operating losses of $2.6 million and an
increase in accounts receivable of $1.0 million offset, in part, by a $444,000
decrease in inventories. The increase in accounts receivable is attributable to
the increase in revenue and the decrease in inventory resulting from our
ability to liquidate inventory acquired as part of our acquisition of E-Systems
Medical Electronics. 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 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. The level of operating losses incurred in the first three
quarters of 1997 caused our debt to equity ratios to be non-compliant with the
ratios required under our credit facility as then in effect. We cured this non-
compliance on December 31, 1997 when we completed the Series J preferred stock
offering described below. The completion of our acquisition of the E-Systems
Medical Electronics business caused us to be non-compliant with our credit
facility covenants. This was discussed with our bank prior to the acquisition.
After these discussions, our bank permitted us to borrow under the credit
facility to pay a portion of the cost of acquisition of E-Systems Medical
Electronics. We amended the credit facility in March 1999 pursuant to a term
sheet agreed upon prior to the acquisition. This amendment included waivers of
our previous non-compliance. In the third quarter of 1999, at the end of which
our credit facility was due, we amended the facility to extend its maturity to
March 31, 2000, to modify the financial covenants, and to modify conditions to
availability.
Cash provided by investing activities for the year ended December 31, 1999
of $46,000 consisted primarily of $861,000 of proceeds from sale of non-core
assets that were acquired as part of the acquisition of E-Systems Medical
Electronics, offset by capital expenditures of $808,000 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 $842,000 consisted
primarily of capital expenditures for computer equipment and other fixed
assets.
Cash provided by financing activities for the year ended December 31, 1999
of $3.4 million consisted primarily of $5.8 million received from the issuance
of 4,142,857 shares of Series K
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preferred stock and warrants to purchase 467,186 shares of common stock. This
amount was offset in part by $2.2 million of the remaining price owed to
Raytheon for our purchase of E-Systems Medical Electronics. This Series K
preferred stock will be converted into 1,726,152 shares of common stock upon
the closing of this offering. 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
3,221,179 shares of common stock and the Series J warrants will become warrants
to purchase 170,449 shares of common stock upon the closing of this offering.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. We may require additional capital in the
future. Our capital requirements are expected to include the funding of
operating losses, working capital requirements, capital expenditures and other
general corporate purposes, including expansion of our network, advertising and
content development. We intend to repay our 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 new content, features or services;
. enhance our operating infrastructure;
. respond to competitive pressures; or
. acquire complementary businesses or necessary technologies.
Recent developments. We intend to acquire the assets of Trilex Corporation
in exchange for 100,000 shares of common stock. Assets acquired will include
technology which permits the exchange of information among standard health care
information systems. The operations we intend to acquire are located in
Pleasanton, California. The acquisition will be accounted for under the
purchase method of accounting.
Inflation
We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods reflected above.
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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.
This Year 2000 problem could potentially cause system failures or
miscalculations that could disrupt operations. To date we have not experienced
any significant Year 2000 problems.
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. We have also contacted all of our
significant suppliers and customers and have not received any responses that
indicate our networks and systems are vulnerable to any Year 2000 issues they
may experience. 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 offerings 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 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 evaluated the risks
to us presented by noncompliant fielded products. We have not undertaken 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. Based on the efforts described above, we
currently believe that our systems are Year 2000 compliant.
We intend to take appropriate actions to mitigate the effects of any Year
2000 issues that may arise. Such actions may include having arrangements for
alternate suppliers and using manual intervention where necessary. 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.
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BUSINESS
Overview
We provide Internet-based business services to health care professionals and
others who require access to medical image information. Our offerings
significantly improve how physicians, health care professionals, payors and
others use and share medical images in a cost-effective manner. We believe our
recently introduced eMed.net web service is the first to integrate and deliver
over the Internet medical images with other clinical information and practice
tools. eMed.net Internet-enables radiology groups and imaging departments by
providing individualized websites for image distribution, physician practice
facilitation, education, commerce and marketing. Customers can obtain the
benefits of our eMed.net web service without replacing their existing
communications infrastructure, imaging devices or film printer networks. We
also offer communications infrastructure components to capture, compress,
transmit, route, display and store medical images, including x-rays, MRIs, CTs
and ultrasounds. We also intend to offer our web services technology to other
vendors to enable them to distribute medical images through their Internet-
based health care applications under the brand name "Images by eMed."
Market Opportunity
Large and Fragmented Market for Medical Imaging Services. Medical imaging is
critical to patient diagnosis and care across a broad spectrum of health care
procedures and disease states. Medical images and related information are also
utilized in reimbursement decisions, consultations, research and education.
Medical images and related information are used by a broad cross-section of
industry participants including radiologists, referring physicians, hospitals
and outpatient imaging centers. Medical images and related information are also
used extensively by the dental industry.
Today there are over 29,000 radiologists serving approximately 600,000
physicians, 3,000 imaging centers and 6,000 hospitals. Efficient systems for
the distribution, management and storage of medical images and related
information is critical to all of these constituencies. Based on historical
data, we believe that over 350 million radiology studies, often consisting of
multiple images, are conducted annually. According to the American College of
Radiology, the number of radiology studies is growing due to the increasing
usefulness of radiology as a non-invasive diagnostic technique and the general
aging of the U.S. population. The inability to easily access and the failure to
appropriately manage this information can result in unnecessary expense. The
U.S. Health Care Financing Administration estimates that approximately 10% of
all health care expenditures are the result of a duplication of care due to
missing patient information.
According to the American Dental Association, approximately 140,000 dentists
in the United States. An estimated 10% of the approximately 400 million dental
insurance claims made each year require medical images for claims processing.
Also, an estimated 5% of dental claims are referred to specialists for
preapproval, requiring the delivery of relevant medical images.
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Inefficiencies in Medical Image Information Technology. The film and paper-
based method for capturing, analyzing, distributing and storing medical images
and associated medical reports is inherently inefficient. For example,
the current paradigm for a radiology procedure typically involves the following
steps:
. production of images,
. printing images to film,
. circulation of copies of films for diagnosis,
. report dictation,
. report transcription,
. review and finalization of report, and
. circulation of images and final report by courier to referring and
consulting physicians.
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. 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 radiology
reports is approximately $950 million annually.
The dental industry suffers from similar medical image distribution
inefficiencies. Dentists now deliver the images needed to process insurance
claims by courier. This slow process results in duplicative film costs and
delays in processing. Approvals required for some procedures may also be
delayed.
Competitive Pressure on Health Care Providers. All medical specialties have
been fundamentally affected by change in the structure and economics of the
U.S. health care industry. For example, health care payors and providers are
forcing radiologists and imaging facilities to reduce exam fees, improve the
timeliness and availability of interpretations and related patient images, and
ensure the availability of sub-specialist radiologists. This pressure has
driven radiologists and imaging facilities to look for ways to enhance their
efficiency and to provide better service to referring physicians and other
constituencies.
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.
The power and ability of the Internet to connect various participants in the
health care industry, including physicians, health care facilities and
patients, creates an opportunity to advance the state of information technology
in the health care industry. Internet-based offerings 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 also believe that medical image
access requirements are well 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.
Lack of Effective Solutions. Traditional electronic solutions offered by
others to address the inefficiency inherent in medical imaging require
significant initial capital outlays, are narrow in scope
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and are difficult to implement. We believe this has resulted in limited
adoption of these technologies. We believe these dynamics coupled with
accelerated Internet use, will drive adoption of our Internet-based solutions.
eMed Solutions
We have developed Internet-based offerings which we believe are cost-
effective, easy to use and provide our customers with increased efficiencies
and greater revenue opportunities. Our web services and communications
infrastructure offerings incorporate our advanced proprietary medical image
technology. Customers can obtain the benefits of our eMed.net web service
without replacing their existing communications infrastructure, imaging
devices, or film printer networks. We also offer communications infrastructure
components to capture, compress, transmit, route, display and store medical
images.
Our comprehensive support services increase the cost effectiveness and
reliability of our web services and communications infrastructure offerings.
Because medical imaging is critical to patient diagnosis and care, we believe
that our customers highly value the increased reliability provided by our
comprehensive support services. Our network operations center personnel are
able to remotely monitor and manage customers' systems and identify and resolve
system problems.
We offer all of our web services and communications infrastructure on a
subscription and transaction fee basis which permits customers to obtain the
benefits of our offerings without the more significant initial capital outlays
associated with one-time, up front purchases. Our offerings include:
eMed.net. eMed.net, introduced in December 1999, provides radiology groups
and imaging departments with individualized websites for image distribution,
physician practice facilitation, education, commerce and marketing. This
service permits our customers to completely outsource to us their web
infrastructure and web presence needs. Through these eMed.net websites, our
customers are able to make available medical images and related patient
information securely over the Internet using any commercially available
Internet browser. Health care professionals are able to access these medical
images and related information using authorizing passwords. Also, eMed.net
websites will provide our customers the opportunity to incorporate other
clinically relevant information and marketing information targeted to their
customers. This enhances our customers' ability to market their services and to
serve their customer base of referring physicians and patients. In addition, we
intend the eMed.net Secure Desktop to serve as a platform from which we can
offer additional practice tools to health care professionals at their desktop
computers. We expect these additional tools will include integrated
transcription services, secure email, literature search capability, as well as
group and personal links. The servers required for eMed.net are located at both
customer sites and at our headquarters in Lexington, Massachusetts.
Images by eMed. Images by eMed is the brand name under which we intend to
offer our technology to other vendors to enable them to distribute medical
images through their Internet-based health care applications. Images by eMed is
a repackaging of the underlying eMed.net technology that can be integrated into
any Internet-based application. By virtue of being Internet-based, third party
application service providers can integrate our Images by eMed service through
simple Internet links. This service will be offered on a subscription and
transaction fee basis. For example, we have
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signed a letter of intent with rdental.com to establish an exclusive
relationship under which we will enable rdental.com to transmit dental images
over the Internet for both referrals and claims settlement, on a transaction
fee basis.
FrameWave. FrameWave is our suite of communications infrastructure offerings
that serve to manage the distribution of medical images over the Internet and
private networks. The FrameWave offerings integrate off-the-shelf computing
hardware, network electronics and highly specialized, proprietary software,
developed by eMed and others, to capture images from imaging devices, route
images over networks, and display images on computer workstations. Given the
mission critical nature of medical imaging, our offerings incorporate state-of-
the-art compression and transmission technology to ensure high performance,
reliability and scalability. These offerings are sold on either a one-time fee
or a subscription basis. Our communications infrastructure offerings include
image acquisition devices, image management servers, image review workstations
and electronic image archives. All of these offerings can be purchased from us
individually or in larger system configurations. Our communications
infrastructure offerings:
. convert hard-copy x-rays into digital form;
. directly obtain images from imaging devices that create them in
electronic format such as MRIs, CTs and ultrasound;
. 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; and
. permit users to view medical images on computers at home, in the office,
or within health care facilities.
Strategy
Our objective is to become the leading provider of Internet-based medical
image distribution and management services. Elements of our strategy to achieve
this objective include:
. Increasing market penetration of our eMed.net web service in radiology
and other image-intensive health care applications. We intend to
increase market penetration of our eMed.net web service through expanded
sales and marketing efforts. We intend to aggressively market our
eMed.net web service to the large base of over 1,800 imaging centers and
hospitals and 7,000 radiologists that have installations of our
communications infrastructure products. We believe this base provides us
with a significant advantage in driving adoption of our web services.
. Pursuing strategic relationships with health care application services
providers who lack Internet-based image distribution functionality. We
intend to pursue relationships with other application services providers
who lack image functionality for distributing medical images in their
Internet-based health care applications. We will enable these providers
to supplement their service offerings with the efficient distribution of
medical images over the Internet on a transaction fee or subscription
basis. We believe we can increase our revenue as well as brand awareness
of Images by eMed by leveraging the distribution channels of these
providers with our Internet-based technology.
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. Expanding our web services. We intend to incorporate additional practice
tools with our eMed.net web service into what we call the Secure
Desktop. We plan to provide physicians, at their desktop computers, with
a broad range of practice tools and information. For example, the
reports that accompany medical images are generally prepared through
inefficient dictation and transcription procedures. To address this
inefficiency, we intend to incorporate a speech-to-text transcription
capability into our web service offerings. We also intend to integrate
tools such as exam scheduling, secure email, literature search
capabilities and relevant group and personal links. Integrating these
and other services will achieve efficiencies by eliminating the need for
redundant systems and will provide our customers with more convenient
access to information they need and use.
. Maintaining and expanding our technological expertise in web services
and communications infrastructure offerings. Our advanced proprietary
software including our compression technology permits customers to
access, transmit and store digital medical images quickly and
economically. We plan to continue our efforts to expand our
technological capabilities. 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.
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. In addition, we have begun to train and engage selected
independent sales and service organizations to provide on-site service to
customers under our supervision. These services include installation, training
and on-site repair.
Our marketing activities will include:
. an enhanced website which supports our eMed.net web service with product
demonstrations and new user tutorials
. e-commerce distribution of the full line of offerings
. eMed branding activities including web advertising, print advertising in
trade journals, business and financial press
. trade show representation and company profiles in key clinical journals
. on-site seminars, distance learning and continuing medical education
over the Internet
. direct marketing to our installed base via the Internet and our customer
support center
. increase brand awareness of Images by eMed through relationships with
other health care application service providers
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Technology
We have historically developed products and services through our own
research and development, acquisitions and strategic relationships. As of
January 31, 2000 our engineering group included approximately one-fourth of our
employees. We will continue to pursue technology development internally as well
as through strategic relationships.
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. 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. Using this technology, a medical
image transmission which would otherwise take up to 27 minutes in uncompressed
form can be completed in as little as 30 seconds.
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.
The core technology employed in our web services is what is referred to as
dynamic HTML, which is integrated with our compression technology. This
technology, which we license from AWARE, Inc., differs from typical HTML-based
applications due to the number, size, and grayscale characteristics of medical
images. 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.
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.
Our recent acquisition of Trilix Information Systems includes technology
which adds an important component to our communications infrastructure
offerings. This technology allows the
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exchange of information among different standard health care imaging and
information systems and will enable more efficient integration of medical
images and related information.
All of our products except our archive products operate on computers with
Intel Pentium processors that run the Microsoft Windows NT and Windows SQL
Server platforms. Our archive products are built on the Sun Sparc platform. We
believe that the use of well known and highly developed hardware and operating
system platforms simplifies manufacturing and support, encourages customer
acceptance, and reduces the risks of technological obsolescence.
All of our communications infrastructure components are fully 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.
Our licensing agreement for our image viewing software expires on March 31,
2002. 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 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 or applied to register the names "eMed," "eMed.net,"
"Images by eMed," "Secure Desktop" and "FrameWave" as trademarks with the
United States Patent and Trademark Office and have reserved the Internet
addresses: www.eMed.com and www.eMed.net.
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.
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Competition
Competition in our markets is intense and 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.
Many companies offer products and services that are competitive with all or
a portion of our current offerings. In addition, some of these 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 some 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. 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 most of our products and services are
subject to FDA medical device regulations in the United States and to similar
regulations in other countries by corresponding regulatory authorities. The FDA
regulations govern the testing, manufacture, labeling, record keeping,
approval, advertising and promotion of our products and services. The process
of obtaining and maintaining required regulatory clearances and approvals is
lengthy, expensive and uncertain. Our ability to market new products and
improvements to existing products will depend on obtaining new clearances and
approvals in the future.
The FDA requires that a manufacturer seeking to market a new medical device
or an existing medical device for a new indication obtain either a pre-market
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 and services which require 510(k)
clearance from the FDA have received such clearance.
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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 regulated 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 have
been minimal to date, are subject to foreign regulatory requirements that vary
widely from country to country. In Europe, we have obtained 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, which must be affixed to our products for sales in
member countries.
Employees
As of January 31, 2000, we employed 122 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 is material.
35
<PAGE>
MANAGEMENT
The following table sets forth information concerning our officers and
directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Caren Mason............... 46 Chief Executive Officer
Scott S. Sheldon.......... 38 President and Director
Christine L. Chung........ 32 Vice President -- eMed.net Business Manager,
Corporate Secretary
Jerry Froelich, M.D....... 47 Chief Medical Officer
Gary A. Lortie............ 40 Chief Financial Officer, Vice President --
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
Ralph C. Sabin............ 48 Director
Michael Schmertzler....... 47 Director
Donald E. Strange......... 55 Director
</TABLE>
Caren Mason has served as our CEO since January 17, 2000. From 1996 through
1999, Ms. Mason held various senior management positions at General Electric,
with her most recent position as that of General Manager, Womens Healthcare
Business. Prior to her work with General Electric, Ms. Mason was a Senior Vice
President with Bayer, AG where she managed the AGFA Technical Imaging Business
which included its Medical Imaging business unit. Ms. Mason first joined AGFA
in 1989 and held various management positions prior to her assignment as Senior
Vice President. Ms. Mason's initial work was with the Baxter Healthcare
Corporation where she worked for eleven years and held management positions in
businesses such as Medical Systems and the Pharmaseal Division.
Scott S. Sheldon has served as our President and a Director since he co-
founded eMed in March 1992. He also held the position of Chief Executive
Officer until January 2000. 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, eMed.net
Business Manager 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,
36
<PAGE>
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 Health Care
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.
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 Partners II 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
37
<PAGE>
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.
Ralph C. Sabin has served as one of our directors since November 1999. Mr.
Sabin is a managing director for Pacific Venture Group, a private venture
capital firm investing exclusively in the health care industry, which Mr. Sabin
co-founded in 1995. In 1994 Mr. Sabin was the Chief Financial Officer for Sonus
Pharmaceuticals, Inc., a venture financed bio-pharmaceutical company based in
Bothell, Washington. From 1974 to 1994, Mr. Sabin was employed by Ernst &
Young, since 1984 as a partner, and served in various management roles
including West Region Director of Enterpreneurial Services.
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. Under the
terms of our current certificate of incorporation, the holders of our Series J
preferred stock, voting as a separate class, have the right to elect one
director. Mr. Sabin is the nominee of the Series J preferred holders. The right
of the Series J preferred holders to elect a director will terminate upon the
closing of this offering.
Committees
The board of directors has established a compensation committee and an audit
committee. The compensation committee, consisting of Messrs. Bochnowski, Neff,
Sabin 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
38
<PAGE>
committee, consisting of Messrs. Pyle, Sabin 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 6,250 shares of our common stock at a purchase price of $1.20 per
share. On June 30, 1999, we granted Messrs. Bochnowski, Neff, Pyle, Schmertzler
and Strange options to purchase 6,250 shares of our common stock at a purchase
price of $2.04 per share. On January 14, 2000, we granted Messrs. Bochnowski,
Neff, Pyle, Schmertzler and Strange options to purchase 6,250 shares each of
common stock, and Mr. Sabin an option to purchase 6,875 shares of common stock,
at a purchase price of $2.75 per share.
Executive Compensation
The following table shows the cash compensation paid or accrued for the year
ended December 31, 1999, to our chief executive officer as of December 31, 1999
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, 1999 (the "Named Executive Officers"). No other
executive officer received more than $100,000 in salary and bonus during this
period.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ----------------
Shares of Common
Name and Principal Stock Underlying All Other
Position Salary($) Bonus Options (#) Compensation ($)
- ------------------ ------------ ------- ---------------- ----------------
<S> <C> <C> <C> <C>
Scott S. Sheldon(1)..... $171,290 $35,000 104,167 $ 1,441(2)
Chief Executive Officer
and President
Howard Pinsky........... $146,165 $35,000 104,167 $11,750(3)
Chief Technology Offi-
cer
David J. Mahoney........ $133,422 $20,000 29,167 $31,319(4)
Vice President -- Sales
Gary A. Lortie.......... $119,732 $20,000 29,167 $ 1,169(2)
Vice President -- Fi-
nance, CFO
</TABLE>
- ---------------------
(1) In January 2000, Caren Mason became our Chief Executive Officer and Mr.
Sheldon retained the position of President.
(2) Represents premiums paid on term life insurance policies included in annual
compensation.
(3) Represents an annual car allowance of $10,400 and premiums of $1,350 paid
on a term life insurance policy.
(4) Represents commissions of $30,137 and premiums of $1,182 paid on a term
life insurance policy.
39
<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, 1999. We have not granted
any stock appreciation rights during 1999. 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, 1999.
<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(1) Fiscal Year Share Date 5% 10%
- ---- ---------- ------------- ----------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Scott S. Sheldon........ 104,167 14% $2.04 6/30/09 117,000 266,000
Howard Pinsky........... 104,167 14% $2.04 6/30/09 117,000 266,000
David J. Mahoney........ 29,167 3.9% $2.04 6/30/09 33,000 75,000
Gary A. Lortie.......... 31,250 4.2% $1.20-$2.04 2/4/09-6/30/09 34,000 78,000
</TABLE>
- ---------------------
(1) Options vest 6.25% each fiscal quarter following the date of grant.
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, 1999 and
options held as of December 31, 1999. There was no public trading market for
our common stock as of December 31, 1999. Accordingly, the values in the table
have been calculated on the basis of an assumed 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 -- 152,656 166,020
Howard Pinsky........... 0 -- 129,133 166,020
David J. Mahoney........ 0 -- 23,696 30,471
Gary A. Lortie.......... 0 -- 23,565 59,768
</TABLE>
Compensation Committee Interlocks and Insider Participation
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.
40
<PAGE>
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 0.42 shares of common stock and the Series J warrants will become rights
to purchase 170,449 shares of common stock.
Three Arch Bay, for which our director Thomas Neff has management authority,
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
201,388 shares of our common stock at an exercise price of $0.02 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 40,277 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 $0.02 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 281,916 shares of common stock. Delphi
Ventures and Delphi Bioinvestments purchased 178,571 shares of Series K
preferred stock and warrants to purchase 20,138 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.
41
<PAGE>
Employment Contracts
Caren Mason. We are a party to an employment agreement with Caren Mason. The
term of the agreement is until December 31, 2001, although we may, by mutual
agreement, extend the agreement for successive one-year terms. Pursuant to the
agreement, we are obligated to pay Ms. Mason an annual salary of at least
$225,000 beginning in January 2000. Ms. Mason is eligible to earn incentive
compensation in an amount up to 70% of her annual salary at the discretion of
the Board of Directors. Ms. Mason is also eligible to earn an additional bonus
of $120,000 for the year 2000 if certain milestones are achieved within Ms.
Mason's first six months of employment. In the event that we elect not to renew
Ms. Mason's agreement or she is terminated without cause or other events which
would constitute a constructive termination without cause, she would receive
six monthly installments of her base salary. If Ms. Mason's employment
terminates due to her death, her beneficiaries would receive six monthly
installments of her base salary after her death. On January 14, 2000, Ms. Mason
was granted options for the purchase of 461,760 shares of Common Stock at an
exercise price of $2.75 per share under the 1994 Stock Plan. Pursuant to her
employment agreement, we are obligated to issue to Ms. Mason additional options
under the 1994 Stock Plan to purchase a number of shares equal to 1% of the
fully diluted common stock on January 14, 2001. If Ms. Mason's employment is
terminated for any of the foregoing reasons, or her employment is terminated
due to disability, then she or her 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. On a change of control
of eMed within Ms. Mason's first six months of employment, Ms. Mason's options
would be vested to the extent that the excess of the aggregate value of common
stock subject to vested options over the aggregate exercise price of such
options would equal $2.0 million. On a change of control of eMed after six
months and within eighteen months, half of Ms. Mason's then unvested stock
options will vest and become exercisable. On a change of control of eMed after
eighteen months of employment, all of Ms. Mason's stock options will vest and
become exercisable.
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. On a change of control of eMed,
all of Mr. Sheldon's stock options will vest and become exercisable.
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
42
<PAGE>
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 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. On a change of control of eMed, all of Mr. Pinsky's
stock options will vest and become exercisable.
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 3,062,500. 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 January 31, 2000,
764,671 options are available for grant under the 1994 Stock Plan.
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of January 31, 2000 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 January
31, 2000, there were 8,417,722 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>
Caren Mason(1)................................ 28,861 * *
Scott S. Sheldon(2)........................... 282,994 3.3%
Howard Pinsky(3).............................. 145,931 1.7%
Gary A. Lortie................................ 28,773 *
David J. Mahoney.............................. 27,082 *
James J. Bochnowski........................... 916,597 10.9%
Delphi Ventures III, L.P. and affiliated
entities(4)
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Thomas B. Neff................................ 921,519 10.9%
Three Arch Bay Health Sciences Fund and
affiliated entities(5)
c/o FibroGen, Inc.
225 Gateway Blvd.
South San Francisco, CA 94080
Thomas O. Pyle(6)............................. 34,695 *
Ralph C. Sabin................................ 1,332,847 15.8%
Pacific Venture Group, L.P. and an affiliated
entity(7)
15635 Alton Parkway, Suite 230
Irvine, CA 92618
Michael Schmertzler(8)........................ 322,839 3.8%
Donald E. Strange(9).......................... 36,679 *
Bedrock Capital Partners I, L.P. and affili- 861,490 10.2%
ated entities(10)............................
One Maritime Plaza, Suite 500
San Francisco, CA 94111
Bessemer Venture Partners IV L.P. and related 700,567 8.3%
entities(11).................................
83 Walnut Street
Wellesley Hills, MA 02481
Seaflower BioVenture Fund II, LLC and an af- 606,560 7.2%
filiated entity(12)..........................
1000 Winter Street, Suite 1000
Waltham, MA 02451
All directors and executive officers as a
group (15 persons)(13)....................... 4,153,473 46.0%
</TABLE>
- ---------------------
* Less than one percent
44
<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 January 31, 2000 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) Represents 28,861 shares issuable to Ms. Mason upon the exercise of
options exercisable within 60 days of January 31, 2000.
(2) Represents 169,454 shares issuable to Mr. Sheldon upon the exercise of
options exercisable within 60 days of January 31, 2000, 68,787 shares
held by Scott Sheldon and Kimberly Howard-Sheldon as joint tenants with
right of survivorship and 44,753 shares held by the Sheldon Children's
1999 Irrevocable Trust. Mr. Sheldon may be deemed to share voting and
dispositive power with respect to the shares held by the Sheldon
Children's 1999 Irrevocable Trust, and disclaims beneficial ownership of
such shares.
(3) Represents 145,931 shares issuable to Mr. Pinsky upon the exercise of
options exercisable within 60 days of January 31, 2000.
(4) Represents:
. 4,686 shares issuable to Mr. Bochnowski upon the exercise of options
exercisable within 60 days of January 31, 2000.
. 817,405 shares held by Delphi Ventures III, L.P. and 78,386 shares
issuable to Delphi Ventures III, L.P. upon the exercise of warrants
exercisable within 60 days of January 31, 2000.
. 14,709 shares held by Delphi Bioinvestments III, L.P. and 1,411 shares
issuable to Delphi Bioinvestments III, L.P. upon the exercise of
warrants exercisable within 60 days of January 31, 2000.
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.
(5) Represents:
. 63,274 shares held by Mr. Neff.
. 28,644 shares issuable to Mr. Neff upon the exercise of options
exercisable within 60 days of January 31, 2000.
. 696,914 shares held by Three Arch Bay Health Sciences Fund.
. 99,919 shares held by Thomas B. Neff Family Partnership and 32,768
shares issuable to Thomas B. Neff Family Partnership upon the exercise
of warrants exercisable within 60 days of January 31, 2000.
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<PAGE>
Mr. Neff is a director of eMed and general partner of Three Arch Bay
Health Sciences Fund and Thomas B. Neff Family Partnership.
(6) Represents 34,695 shares issuable to Mr. Pyle upon the exercise of options
exercisable within 60 days of January 31, 2000.
(7) Represents:
. 1,227,619 shares held by Pacific Venture Group, L.P. and 38,473 shares
issuable to Pacific Venture Group, L.P. upon the exercise of warrants
exercisable within 60 days of January 31, 2000.
. 57,552 shares held by PVG Associates, L.P. and 1,804 shares issuable to
PVG Associates, L.P. upon the exercise of warrants exercisable within
60 days of January 31, 2000.
. 5,681 shares held by the Sabin Family Trust.
. 1,718 shares issuable to Mr. Sabin upon the exercise of options
exercisable within 60 days of January 31, 2000.
Mr. Sabin, a director of eMed and managing director of PVG Equity Partners,
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.
(8) Includes 51,163 shares issuable to Mr. Schmertzler upon the exercise of
options and warrants exercisable within 60 days of January 31, 2000.
(9) Includes 34,695 shares issuable to Mr. Strange upon the exercise of
options exercisable within 60 days of January 31, 2000.
(10) Represents:
. 751,219 shares held by Bedrock Capital Partners I, L.P. and 18,784
shares issuable to Bedrock Capital Partners I, L.P. upon the exercise
of warrants exercisable within 60 days of January 31, 2000.
. 40,785 shares held by Credit Suisse First Boston Bedrock Fund, L.P. and
787 shares issuable to Credit Suisse First Boston Bedrock Fund, L.P.
upon the exercise of warrants exercisable within 60 days of January 31,
2000.
. 39,973 shares held by VBW Employee Bedrock Fund, L.P. and 567 shares
issuable to VBW Employee Bedrock Fund, L.P. upon the exercise of
warrants exercisable within 60 days of January 31, 2000.
. 9,375 shares issuable to Jason Rosenbluth upon the exercise of options
exercisable within 60 days of January 31, 2000.
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<PAGE>
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.
(11) Represents:
. 239,128 shares held by Bessemer Venture Partners IV L.P. and 7,314
shares issuable to Bessemer Venture Partners IV L.P. upon the exercise
of warrants exercisable within 60 days of January 31, 2000.
. 238,686 shares held by Bessec Ventures IV L.P. and 7,194 shares
issuable to Bessec Ventures IV L.P. upon the exercise of warrants
exercisable within 60 days of January 31, 2000.
. 68,046 shares held by Bessemer Venture Investors L.P. and 2,013 shares
issuable to Bessemer Venture Investors L.P. upon the exercise of
warrants exercisable within 60 days of January 31, 2000.
. 28,546 shares held by BVP IV Special Situations L.P. and 845 shares
issuable to BVP IV Special Situations L.P. upon the exercise of
warrants exercisable within 60 days of January 31, 2000.
. An aggregate of 106,036 shares held by, and 2,759 shares issuable upon
the exercise of warrants exercisable within 60 days of September 17,
1999 to 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.
(12) Represents:
. 290,178 shares held by Seaflower BioVenture Fund II, LLC and 78,543
shares issuable to Seaflower BioVenture Fund II, LLC upon the exercise
of warrants exercisable within 60 days of January 31, 2000.
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<PAGE>
. 210,656 shares held by Seaflower Health and Technology Fund, LLC and
27,183 shares issuable to Seaflower Health and Technology Fund, LLC
upon the exercise of warrants exercisable within 60 days of January 31,
2000.
James Sherblom is the general manager of both of the limited liability
companies listed above.
(13) Represents:
. Shares described in notes 1, 2, 3, 4, 5, 6, 7, 8, and 9 above.
. 21,959 shares held by, and 52,700 shares issuable to, executive
officers not listed in the notes above upon exercise of options
exercisable within 60 days of January 31, 2000.
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<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 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 20,138 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 40,277
shares of common stock for aggregate consideration of $500,000. Bessemer
Venture Partners IV, L.P., Bessec Ventures IV, L.P., and 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 20,138 shares of
common stock for aggregate consideration of $250,000.
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<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 December 31, 1999, 8,417,194 shares of common stock were
outstanding, held of record by 161 stockholders. As of December 31, 1999,
options were outstanding which are exercisable for 1,701,357 shares of common
stock at a weighted average exercise price of $1.52 per share. Also as of
December 31, 1999, there were warrants to purchase 522,440 shares of common
stock at exercise prices from $0.02 to $1.20 per share and warrants to purchase
409,091 shares of Series J preferred stock at an exercise price of $1.10 per
share. Upon the closing of this offering, the warrants to purchase Series J
preferred stock will become warrants to purchase 170,449 shares of common
stock. Also, as of January 31, 2000, 764,671 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.
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<PAGE>
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.
Anti-Takeover 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 anti-takeover 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.
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<PAGE>
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 Director
Nominations. Our amended and restated by-laws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be received at our principal executive offices not less than (1) 60 days
in advance of the meeting if it is held within 30 days before the anniversary
of the previous year's annual meeting or (2) 90 days in advance of the meeting
if it is held on or after the anniversary of the previous year's annual
meeting. In any other event, in order to be timely, notice from the stockholder
must be received no later than the fifteenth day following the date on which
notice of the annual meeting was mailed to stockholders or made public,
whichever occurred earlier. Our amended and restated by-laws also specify
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.
Removal of Directors. Our by-laws provide that any director, or the entire
board, may be removed, only with cause, by the holders of two-thirds of the
shares then entitled to vote in an election of directors, unless otherwise
specified by law.
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<PAGE>
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 the following provisions of our by-laws
related to our corporate structure:
. provisions regarding the location of stockholder meetings, quorums at
stockholder meetings, voting power, proxies, shareholder actions without
meetings and annual meetings,
. provisions regarding the number of directors, the filling of vacancies,
resignations and removals, and quorums and adjournments of director
meetings, and
. amendments of the provision governing amendments.
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."
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<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 or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
the shares are purchased by "affiliates" as that term is defined in Rule 144
under the Securities Act. Any shares purchased by an affiliate may not be
resold except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.
Upon the expiration of the lock-up agreements described under "Underwriting"
and subject to the provisions of Rule 144 and Rule 701, restricted shares
totaling will be available for sale in the public market 180 days after
the date of this prospectus. Of those shares, will be available pursuant
to Rule 144(k) and will be available pursuant to Section 701. The sale of
restricted securities under those rules, is subject to volume limitations for
one year following a one year holding period, unless the shares are held by
affiliates, in which case the sale continues to be subject to volume limitatons
until the holder is no longer an affiliate.
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.
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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.
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 the holding
period contained in Rule 144. In addition, these shareholders who are not our
affiliates can resell without compliance with the volume limitations and notice
requirements of 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
3,062,500 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 December 31, 1999, there were options to purchase 1,701,357 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 options held by shareholders who are subject to lock-up
agreements, the expiration of those agreements.
Registration Rights
We have entered into two agreements with groups of holders of 7,691,702
shares of our common stock that entitle those holders to require us to register
their shares for resale under the Securities Act of 1933.
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<PAGE>
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.
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<PAGE>
UNDERWRITING
General
Under the terms and conditions contained in an underwriting agreement dated
, 2000, the underwriters named below, who are represented by Donaldson,
Lufkin & Jenrette Securities Corporation, SG Cowen Securities Corporation,
SoundView Technology Group, Inc. and DLJdirect Inc., have severally agreed to
purchase from us the number of shares of common stock set forth opposite their
names below:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................
SG Cowen Securities Corporation....................................
SoundView Technology Group, Inc. ..................................
DLJdirect Inc......................................................
---
Total..........................................................
===
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock in
this offering are conditioned upon approval by their counsel of legal matters
concerning this offering and satisfaction of conditions precedent by us. The
underwriters are obligated to purchase and accept delivery of all the shares of
common stock in this offering, other than those shares covered by the over-
allotment option described below, if any are purchased.
The underwriters initially propose to offer some of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares to dealers at the
initial public offering price less a concession not in excess of $ per share.
The underwriters may allow, and those dealers may re-allow, a concession not in
excess of $ per share on sales to other dealers. After the initial offering
of the common stock to the public, the representatives may change the public
offering price and concessions. The underwriters do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid by us in
connection with this offering. This information is presented assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares of our common stock.
<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per share.................................................. $ $
Total...................................................... $ $
</TABLE>
We will pay the offering expenses, estimated to be approximately $
million. We will pay to the underwriters underwriting discounts and commissions
in an amount equal to the public offering price per share of common stock less
the amount the underwriters pay to us for each share of common stock sold by
us.
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We have granted to the underwriters an option, exercisable for 30 days after
the date of this prospectus to purchase up to additional shares of common
stock at the initial public offering price less the underwriting discounts and
commissions. The underwriters may exercise this option solely to cover over-
allotments, if any, made in connection with this offering. To the extent the
underwriters exercise this option, each underwriter will be obligated, upon
satisfaction of certain conditions to purchase a number of additional shares
approximately proportionate to that underwriter's initial purchase commitments.
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act, or to contribute to payments that the
underwriters may be required to make for these liabilities.
For a period ending 180 days from the date of this prospectus, we and our
executive officers, directors, most of our other stockholders will agree not
to, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation:
. issue, sell, offer or agree to sell, grant any option for the sale of,
pledge, make any short sale or maintain any short position, establish or
maintain a put equivalent position,
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, whether any such transaction described above is to be settled by
delivery of common stock or other securities, in cash, or otherwise.
Prior to this offering, no public market has existed for our common stock.
We will negotiate the initial public offering price for our common stock with
the representatives, but the price may not reflect the market price for our
common stock after this offering. The factors considered in determining the
initial public offering price include:
.the history of and prospects for the industry in which we compete;
.our past and present operations;
.our historical results of operations;
.our prospects for future operational results;
.recent market prices of securities of generally comparable companies; and
.general conditions of the securities market at the time of this offering.
We have applied to list our common stock on the Nasdaq National Market under
the symbol "EMDT" upon official notification of issuance.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisements in connection with the offer and sale of any shares of common
stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules
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<PAGE>
and regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering and the distribution of this prospectus. This prospectus is not
an offer to sell or a solicitation of an offer to buy any shares of common
stock in any jurisdiction where that would not be permitted or legal.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock in the open market to cover such syndicate short positions or to
stabilize the price of our common stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members and selected
dealers if they repurchase previously distributed common stock in syndicate
covering transactions, in stabilizing transactions or otherwise, or if
Donaldson, Lufkin & Jenrette Securities Corporation receives a report which
indicates that the clients of such syndicate members have "flipped" our common
stock. These activities may stabilize or maintain the market price of the
common stock above independent market levels. The underwriters are not required
to engage in these activities and may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to % of the shares of common stock offered by this
prospectus for sale to our officers, directors, employees and their family
members and to business associates, including clients, consultants and other
friends. These persons must commit to purchase after the registration statement
has become effective but before the opening of business on the following
business day. The number of shares available for sale to the general public
will be reduced to the extent these persons purchase the reserved shares.
A prospectus in electronic format is being made available on an Internet
website maintained by Wit SoundView's affiliate, Wit Capital Corporation. In
addition, all dealers purchasing shares from Wit SoundView in this offering
have agreed to make a prospectus in electronic format available on websites
maintained by each of these dealers. Other than the prospectus in electronic
form, the information on Wit Capital Corporation's website and any information
contained on any other website maintained by Wit Capital Corporation is not
part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved or endorsed by us or any underwriter in its
capacity as underwriter and should not be relied upon by investors.
An electronic prospectus is also available on the website maintained by
DLJdirect Inc.
The following SG Cowen Securities Corporation Managing Directors, in the
aggregate, own shares of our common stock: David MacGregor Malcolm, Satish K.
Tyagi, Ian Hardington, Kim Fennebresque, Bradford C. Yates, Eric Cohen, William
B. Buchanan, Jr., David M. Feinman and Namil R. Parekh. These shares are
restricted from sale, transfer, assignment or hypothecation for 180 days after
the closing of this offering.
59
<PAGE>
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, 1998 and 1999 and for the
three years in the period ended December 31, 1999, 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.
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
eMed Technologies Corporation
Report of Independent Accountants....................................... F-2
Balance Sheet as of December 31, 1998 and 1999 and Pro Forma Balance
Sheet as of December 31, 1999 (unaudited).............................. F-3
Statement of Operations for the years ended December 31, 1997, 1998 and
1999................................................................... F-4
Statement of Changes in Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999....................................... F-5
Statement of Cash Flows for the years ended December 31, 1997, 1998 and
1999................................................................... F-6
Notes to Financial Statements........................................... F-7
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Report of Independent Accountants....................................... F-19
Balance Sheet as of December 31, 1997 and November 23, 1998............. F-20
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-21
Statement of Cash Flows for the year ended December 31, 1997 and for the
period from January 1, 1998 through November 23, 1998.................. F-22
Notes to Financial Statements........................................... F-23
Unaudited Pro Forma Combined Statement of Operations
Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1998...................................................... F-27
Notes to Unaudited Pro Forma Combined Statement of Operations........... F-28
</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, 1998 and 1999 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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
February 24, 2000
F-2
<PAGE>
eMed Technologies Corporation
Balance Sheet
<TABLE>
<CAPTION>
Pro Forma
December 31, December 31,
------------------------ ------------
1998 1999 1999
----------- ----------- ------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............. $ 2,259,052 $ 4,463,581
Accounts receivable, net of allowance
for doubtful account of $487,073 and
$460,006 at December 31, 1998 and
1999, respectively.................... 4,926,216 5,898,262
Inventories............................ 2,011,410 1,567,869
Prepaid expenses and other current as-
sets.................................. 330,641 106,477
----------- -----------
Total current assets.................. 9,527,319 12,036,189
Fixed assets, net....................... 991,181 1,116,077
Goodwill, net........................... 77,016 68,673
Other assets............................ 49,810 56,207
Assets held for sale.................... 861,000 --
----------- -----------
Total assets.......................... $11,506,326 $13,277,146
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of capital lease obli-
gations............................... $ 45,796 $ 6,358
Short-term debt........................ 2,797,359 2,801,621
Note payable to Raytheon............... 2,200,000 --
Accounts payable....................... 2,372,307 2,646,171
Accrued employee benefits.............. 351,150 550,848
Accrued warranty expenses.............. 478,888 873,148
Other accrued expenses................. 811,470 702,524
Accrued acquisition reserves........... 335,842 --
Deferred revenue....................... 1,382,887 1,193,156
----------- -----------
Total current liabilities............. 10,775,699 8,773,826
Capital lease obligations............... 6,521 --
Long-term debt.......................... 335,893 79,304
----------- -----------
Total liabilities..................... 11,118,113 8,853,130
----------- -----------
Commitments and contingencies (Note 12)
Stockholders' equity:
Convertible preferred stock, $0.01 par
value.................................. 77,346 118,775 $ --
Common stock, $0.01 par value;
Authorized: 35,000,000 shares; Issued:
485,640 and 602,714 shares at December
31, 1998 and 1999, respectively; and
8,458,866 shares issued at December 31,
1999 pro forma (unaudited);
Outstanding: 443,969 and 561,042 shares
at December 31, 1998 and 1999,
respectively; and 8,417,194 shares
outstanding at December 31, 1999 pro
forma (unaudited)...................... 4,856 6,027 84,589
Additional paid-in capital.............. 20,166,076 29,757,664 29,757,662
Deferred compensation................... -- (3,037,317) (3,037,317)
Treasury stock.......................... (50,000) (50,000) (50,000)
Accumulated deficit..................... (19,810,065) (22,371,133) (22,371,135)
----------- ----------- -----------
Total stockholders' equity............ 388,213 4,424,016 4,424,016
Total liabilities and stockholders'
equity............................... $11,506,326 $13,277,146 $13,277,146
=========== =========== ===========
</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 December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Product............................... $ 7,164,242 $11,299,756 $20,250,613
Service............................... 862,762 1,294,411 3,319,999
----------- ----------- -----------
Total revenue........................ 8,027,004 12,594,167 23,570,612
----------- ----------- -----------
Cost of revenue:
Product (excluding $11,612 of stock-
based compensation in 1999).......... 5,553,543 7,223,230 8,944,773
Service (excluding $41,735 of stock-
based compensation in 1999).......... 1,458,579 1,752,909 3,372,627
----------- ----------- -----------
Total cost of revenue................ 7,012,122 8,976,139 12,317,400
----------- ----------- -----------
Gross margin......................... 1,014,882 3,618,028 11,253,212
----------- ----------- -----------
Operating expenses:
Research and development (excluding
$74,901 of stock-based compensation
in 1999)............................. 1,300,360 2,361,430 3,364,170
Sales and marketing (excluding
$201,425 of stock-based
compensation in 1999)................ 2,912,125 3,498,169 5,313,172
General and administrative (excluding
$305,502 of stock-based compensation
in 1999)............................. 1,981,861 2,722,340 4,345,692
Stock-based compensation.............. -- -- 635,175
----------- ----------- -----------
Total operating expenses............. 6,194,346 8,581,939 13,658,209
----------- ----------- -----------
Loss from operations................... (5,179,464) (4,963,911) (2,404,997)
Interest income........................ 66,025 134,732 184,320
Interest expense....................... (269,591) (240,343) (296,496)
Other expense.......................... (242,139) (43,432) (43,895)
----------- ----------- -----------
Net loss............................. $(5,625,169) $(5,112,954) $(2,561,068)
=========== =========== ===========
Basic and diluted net loss per share... $ (12.45) $ (11.70) $ (5.12)
Shares used in computing basic and di-
luted net loss per share.............. 451,676 436,949 500,012
Unaudited pro forma basic and diluted
net loss per share.................... $ (0.31)
Shares used in computing unaudited pro
forma basic and diluted net loss per
share................................. 8,356,164
</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
------------------- -------------- Additional Total
Par Par paid-in Deferred Treasury Accumulated stockholders'
Shares value Shares value capital compensation stock deficit equity
---------- -------- ------- ------ ----------- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................ 3,726 $ 37 450,752 $4,508 $11,616,107 $ -- $ -- $ (9,071,942) $ 2,548,710
Exercise of common
stock options....... 1,562 15 1,860 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 77,346 452,314 4,523 20,126,415 (8,002) -- (14,697111) 5,503,171
Exercise of common
stock options....... 33,326 333 39,661 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 77,346 485,640 4,856 20,166,076 -- (50,000) (19,810,065) 388,213
Exercise of common
stock options....... 65,889 659 84,148 84,807
Issuance of 4,142,857
shares of Series K
convertible
preferred stock..... 4,142,857 41,429 5,756,037 5,797,466
Exercise of common
stock warrants...... 51,185 512 60,911 61,423
Deferred compensation
related to stock
option grants....... 3,690,492 (3,690,492) --
Amortization of
deferred
compensation........ 653,175 653,175
Net loss ............ (2,561,068) (2,561,068)
---------- -------- ------- ------ ----------- ----------- -------- ------------ -----------
Balance, December 31,
1999 ............... 11,877,492 $118,775 602,714 $6,027 $29,757,664 $(3,037,317) $(50,000) $(22,371,133) $ 4,424,016
========== ======== ======= ====== =========== =========== ======== ============ ===========
</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 December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................... $(5,625,169) $(5,112,954) $(2,561,068)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization......... 469,488 521,006 621,122
Amortization of debt discount......... 119,000 -- --
Loss on disposal of fixed assets...... 236,764 50,933 70,652
Compensation expense associated with
issuance of stock options............ 5,578 8,002 653,175
Preferred stock issued in lieu of
cash payment for interest............ 22,906 -- --
Changes in operating assets and
liabilities, net of effects from
acquisition of E-Systems Medical
Electronics:
Accounts receivable.................. (2,489,335) 36,664 (972,046)
Inventories.......................... (399,200) 638,428 443,541
Prepaid expenses and other current
assets.............................. (715,014) 553,719 224,164
Accounts payable..................... 1,302,059 19,673 273,864
Accrued employee benefits............ 209,678 (19,382) 199,698
Accrued warranty expenses............ 100,657 178,231 394,260
Other accrued expenses............... 366,210 (302,859) (108,946)
Accrued acquisition reserves......... -- -- (335,842)
Deferred revenue..................... 284,375 689,532 (189,731)
----------- ----------- -----------
Net cash used in operating
activities......................... (6,112,003) (2,739,007) (1,287,157)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets.............. (853,122) (465,274) (808,327)
Change in other assets................. 11,596 (17,054) (6,397)
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............... (841,526) (1,481,628) 46,276
----------- ----------- -----------
Cash flows from financing activities:
Principal payments of capital lease
obligations........................... (189,842) (179,746) (45,959)
Cash received for fixed assets......... 46,028 -- --
Proceeds from issuance of convertible
notes and warrants.................... 1,500,000 -- --
Borrowings from lines of credit........ 884,527 2,390,039 4,262
Principal payments of debt............. -- (141,314) (256,589)
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....................... 6,930,271 -- 5,797,466
Proceeds from exercise of common stock
options............................... 1,875 39,994 84,807
Proceeds from issuance of common stock
warrants.............................. -- -- 61,423
Purchase of common stock held in
treasury.............................. -- (50,000) --
----------- ----------- -----------
Net cash provided by financing
activities......................... 9,172,859 2,058,973 3,445,410
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents...................... 2,219,330 (2,161,662) 2,204,529
Cash and cash equivalents, beginning of
year.................................. 2,201,384 4,420,714 2,259,052
----------- ----------- -----------
Cash and cash equivalents, end of
year.................................. $ 4,420,714 $ 2,259,052 $ 4,463,581
=========== =========== ===========
Supplemental cash flow disclosures:
Cash paid for interest................ $ 122,458 $ 240,343 $ 296,496
=========== =========== ===========
</TABLE>
Non-cash financing and investing activities:
During 1997, eMed converted $1,480,906 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. In late
1996, eMed began selling FrameWave communications infrastructure products and
related 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.
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, 1998
and 1999.
Revenue Recognition, Significant Customers and Concentration of Credit Risk
Revenue from product sales is recognized upon shipment to the customer
provided that evidence of an arrangement exists, fees are fixed or
determinable, risk of loss has passed to the customer, collection of the
related receivable is probable and no uncertainty exists about customer
acceptance. In the event uncertainty exists about customer acceptance of
product sales, such as performance criteria beyond that of eMed's standard
product specifications, revenue is deferred until acceptance occurs. 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. Revenue under
arrangements where multiple elements are sold together is allocated to each
element based on their relative fair values.
At December 31, 1998 and 1999, the Company had cash balances at certain
financial institutions in excess of federally insured limits. However, the
Company does not believe that it is subject to unusual credit risk beyond the
normal credit risk associated with commercial banking relationships.
Financial instruments which potentially expose eMed to concentration of
credit risk include accounts receivable. eMed performs ongoing evaluations of
customers' financial condition and does
F-7
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
not generally require collateral. At December 31, 1998, accounts receivable
from one customer accounted for approximately 11% of the total amounts due to
eMed. At December 31, 1999, no customers accounted for more than 10% of the
total amounts due to eMed.
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. In 1999, no customers accounted for more
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.
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. Fixed assets held under capital
leases are amortized over the shorter of the lease term or the estimated useful
life of the related asset. 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, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," and capitalized thereafter until
commercial release of the products. Software development costs eligible for
capitalization have not been significant to date.
Internal Use Software
On January 1, 1999, eMed adopted American Institute of Certified Public
Accountants Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). Accordingly,
eMed capitalizes costs associated with the design and implementation of its
internally developed software. To date, internal costs eligible for
capitalization under SOP 98-1 have not been significant.
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).
F-8
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
Advertising Costs
Advertising costs are charged to operations as incurred. Advertising costs
were approximately $114,000, $106,000 and $207,000 in the years ended December
31, 1997, 1998 and 1999, 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 December 31, 1999 (Note 7) will
automatically convert into 7,856,152 shares of common stock. This conversion
has been reflected in the unaudited pro forma balance sheet as of December 31,
1999.
Net Loss per Share 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, excluding shares of common stock subject to
repurchase. Diluted net loss per share does not differ from basic net loss per
share since potential common shares from conversion of preferred stock,
exercise of stock options and warrants and the lapsing of restrictions on
common stock subject to repurchase are antidilutive for all periods presented.
Unaudited pro forma basic and diluted net loss per share has 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. SFAS No. 133, as amended, is
effective for eMed beginning January 1, 2001. eMed does not expect SFAS No. 133
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
F-9
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
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.
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.................................. $ (36.09) $ (26.22)
</TABLE>
In connection with the acquisition of E-Systems Medical Electronics, eMed
undertook 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 consisted 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 paid approximately $76,000 of the planned costs
which related solely to severance payments. In the year ended December 31,
1999, eMed paid an additional $336,000 of the planned costs which were
comprised of $73,000 of other exit costs and $263,000 of severance and other
employee-related costs. As of December 31, 1998 and 1999, the acquisition
reserves balance was $335,842 and $0, respectively.
F-10
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
4. Inventories
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
---------- ----------
<S> <C> <C>
Raw materials and purchased components................ $1,545,650 $1,296,661
Work in process....................................... 107,336 139,709
Finished goods........................................ 358,424 131,499
---------- ----------
$2,011,410 $1,567,869
========== ==========
</TABLE>
5. Fixed Assets
<TABLE>
<CAPTION>
December 31,
Estimated ---------------------
Useful lives 1998 1999
(years) ---------- ----------
<S> <C> <C> <C>
Furniture and fixtures.................. 5 $ 194,503 $ 223,104
Office equipment and computers.......... 3 256,957 267,000
Electronic medical imaging equipment.... 3 1,558,018 2,022,914
Leasehold improvements.................. Lease term 90,940 126,678
---------- ----------
2,100,418 2,639,696
Less--Accumulated depreciation and amor-
tization............................... 1,109,237 1,523,619
---------- ----------
$ 991,181 $1,116,077
========== ==========
</TABLE>
At December 31, 1998 and 1999, furniture and electronic medical imaging
equipment held under capital leases totaled $321,770 and $235,926,
respectively. Accumulated amortization of furniture and electronic medical
imaging equipment held under capital leases was $319,074 and $235,926 at
December 31, 1998 and 1999, respectively. Depreciation and amortization expense
on fixed assets was $469,488, $521,006 and $621,122, of which $187,838, $54,727
and $2,695 related to amortization of assets held under capital leases in 1997,
1998 and 1999, 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.
F-11
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
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, guarantees, mergers and payments of dividends.
In April 1998, the terms of the Working Capital Facility were amended
whereby eMed could borrow up to $3,000,000 subject to certain limitations,
through March 31, 1999, at which time, all outstanding principal and interest
was to become due. The interest rate on outstanding borrowings under this
Working Capital Facility fluctuated monthly between the bank's prime rate plus
0.5% to 1.75% based on certain financial ratios. Additionally, eMed was
required to pay a fee equal to 0.75% of the average unused Working Capital
Facility, payable quarterly (the "Facility Fee").
In January and March 1999, the terms of the Working Capital Facility were
further amended whereby eMed could borrow up to $4,000,000, subject to certain
limitations, through September 30, 1999, at which time all outstanding
principal and interest was to become due. The amended interest rate on
outstanding borrowings fluctuated 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 required
eMed to raise $2.0 million of additional capital by June 30, 1999. This
additional capital was obtained (see Note 7.) In September 1999, terms of the
Working Capital Facility were further amended, extending it through March 31,
2000, at which time all outstanding principal and interest is due.
Borrowings under the Working Capital Facility totaled $2,550,000 at December
31, 1998 and 1999 and the interest rate at December 31, 1999 was 9.5%.
Borrowings under the Equipment Facility bear interest, payable monthly, at
the bank's prime rate plus 1.0% (9.5% at December 31, 1999). In April 1998, the
terms of the Equipment Facility were amended whereby eMed could borrow up to
$750,000, subject to certain limitations. At December 31, 1998, outstanding
borrowings of $583,252 under the Equipment Facility converted to a three-year
term loan payable in 36 monthly installments of principal and interest.
As of December 31, 1999, future minimum principal payments under the
Equipment Facility are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
2000................................................................ $252,491
2001................................................................ 79,304
--------
$331,795
========
</TABLE>
F-12
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
7. Preferred Stock
Shares authorized, issued and outstanding and the carrying values of eMed's
preferred stock are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
--------- ---------
<S> <C> <C>
Series B:
716 shares authorized, issued and outstanding at De-
cember 31, 1998 and 1999............................. $ 700,228 $ 700,228
Series C:
450 shares authorized, issued and outstanding at De-
cember 31, 1998 and 1999............................. 2,245,000 2,245,000
Series E:
345 shares authorized at December 31, 1998 and 1999;
344 shares issued and outstanding at December 31, 1998
and 1999.............................................. 1,566,656 1,566,656
Series F:
1,000 shares authorized, issued and outstanding at De-
cember 31, 1998 and 1999............................. 1,000,000 1,000,000
Series G:
816 shares authorized, issued and outstanding at De-
cember 31, 1998 and 1999............................. 4,070,349 4,070,349
Series H:
400 shares authorized, issued and outstanding at De-
cember 31, 1998 and 1999............................. 2,000,001 2,000,001
Series J:
8,140,000 shares authorized at December 31, 1998 and
1999; 7,730,909 shares issued and outstanding at
December 31, 1998 and 1999............................ 8,411,177 8,411,177
Series K:
1,785,800 and 4,145,000 shares authorized at December
31, 1998 and 1999, respectively; 0 and 4,142,857
shares issued and outstanding at December 31, 1998 and
1999, respectively.................................... -- 5,797,466
Undesignated:
5,070,473 and 2,711,273 shares authorized at December
31, 1998 and 1999, respectively....................... -- --
</TABLE>
The convertible preferred stock has the following characteristics:
Dividends
No dividends have been declared or paid by eMed through December 31, 1999.
The holders of Series B, Series C, Series E, Series F, Series G, Series H and
Series K 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.
F-13
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
Conversion
Each share of Series B, Series C, Series E, Series F, Series G, Series H,
Series J and Series K convertible preferred stock may be converted at any time,
at the option of the stockholder, into 100, 396.83, 396.83, 833.33, 1,388.89,
1,388.89, 0.42 and 0.42 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 $7.20 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, Series H and Series K 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, $5,000 and $1.40 per share, respectively, plus
any declared but unpaid dividends. The aggregate liquidation preference of the
convertible preferred stock is approximately $26,070,000 at December 31, 1999.
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.
Reserved Shares
As of December 31, 1999, eMed has 10,521,206 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.
Stock Split
On October 12, 1999, eMed effected a 2.4-for-one reverse split on its common
stock. As a result, all common stock share and per share data included in the
accompanying consolidated financial statements and notes have been
retroactively restated for the split.
Common Stock Warrants
In connection with the Series K issuance, eMed issued warrants to purchase
467,188 shares of common stock at an exercise price of $0.02. The warrants
expire in 2009.
F-14
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
9. Stock Plans
Prior to adoption of the 1994 Stock Plan described below, eMed granted
25,928 nonqualified stock options to certain employees, directors and
consultants of eMed of which 417 options have been exercised and 3,471 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 nonqualified 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, 1999, the number of shares issuable pursuant to the 1994 Plan is 2,062,500.
In January 2000, the Board of Directors approved an increase in the number of
shares issuable pursuant to the 1994 Stock Plan to 3,062,500. 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).
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,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss
As reported........................ $(5,625,169) $(5,112,954) $(2,561,068)
Pro forma.......................... (5,653,283) (5,180,199) (2,690,643)
Basic and diluted net loss per share
As reported........................ $ (12.45) $ (11.70) $ (5.12)
Pro forma.......................... (12.52) (11.86) (5.38)
</TABLE>
Because options vest over several years and additional option grants are
expected to be made in future 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
with the following weighted-average assumptions used for grants made during the
years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Expected option term (years)................. 5 5 5
Risk-free interest rate...................... 6.4% 5.0% 5.7%
Dividend yield............................... 0.0% 0.0% 0.0%
Volatility (for option grants after August
18, 1999)................................... 0.0% 0.0% 80.0%
</TABLE>
F-15
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
A summary of the status of eMed's stock options as of December 31, 1997,
1998 and 1999, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------
1997 1998 1999
------------------------ ------------------------ -------------------------
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................ 235,812 $1.15 510,197 $1.18 987,300 $1.20
Granted................. 331,536 $1.20 564,697 $1.20 832,622 $1.62
Exercised............... (1,562) $1.20 (33,326) $1.20 (65,888) $1.23
Canceled................ (55,589) $1.20 (54,268) $1.20 (52,677) $1.44
-------- ----- -------- ----- --------- -----
Outstanding at end of
year................... 510,197 $1.18 987,300 $1.20 1,701,357 $1.52
======== ===== ======== ===== ========= =====
Options exercisable at
end of year............ 261,543 471,356 766,347
======== ======== =========
Weighted-average fair
value of
options granted during
the year (all granted
at fair value for 1997
and 1998 and all
granted below fair
value for 1999)........ $ 0.34 $ 0.34 $ 5.10
======== ======== =========
Options available for
grant at end of year... 666,884 175,755 270,807
======== ======== =========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-average
Options remaining Options
Exercise price outstanding contractual life exercisable
-------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.02 6,646 3.4 6,646
$1.01 14,286 3.0 14,286
$1.20 1,047,399 6.5 639,284
$2.04 612,593 9.5 106,131
$2.75 20,433 9.8 --
--------- -------
1,701,357 766,347
========= =======
</TABLE>
Deferred Compensation
During 1999, eMed granted stock options to purchase 179,479 shares of its
common stock with an exercise price of $1.20 per share, 631,668 shares of its
common stock with an exercise price of $2.04 per share, and 21,475 shares of
its common stock with an exercise price of $2.75 per share. eMed recorded
deferred compensation relating to these options totaling $3,690,492,
representing the differences between the estimated fair 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
year ended December 31, 1999, eMed recorded $653,175 of compensation expense
related to these options.
F-16
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
In January 2000, eMed granted stock options to purchase 506,135 shares of
its common stock with an exercise price of $2.75 per share. eMed will record
deferred compensation relating to these options totaling $4,074,387,
representing the differences between the estimated fair value of the common
stock on the date of grant and the exercise price.
10. Income Taxes
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................... $7,532,342 $8,186,451
Other............................................... 624,489 601,435
---------- ----------
Deferred tax assets.................................. 8,156,831 8,787,986
Deferred tax asset valuation allowance............... (8,156,831) (8,787,986)
---------- ----------
.................................................... $ -- $ --
========== ==========
</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, 1999, eMed has net operating loss carryforwards of
approximately $19,967,000 to offset future federal taxable income. If not
utilized, these carryforwards will expire at various dates ranging from 2014 to
2019. 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, 1997, 1998 and 1999.
F-17
<PAGE>
eMed Technologies Corporation
Notes to Financial Statements--(Continued)
12. Commitments and Contingencies
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, 1999 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Lease Leases
---------- -------
<S> <C> <C>
2000...................................................... $ 695,481 $6,966
2001...................................................... 695,481 --
2002...................................................... 564,468 --
---------- ------
Total minimum lease payments.............................. $1,955,430 6,966
==========
Less--amount representing interest........................ 608
------
Present value of minimum lease payments................... $6,358
======
</TABLE>
Total rent expense under noncancelable operating leases was approximately
$287,000, $562,000 and $773,000 in 1997, 1998 and 1999, respectively.
Legal Proceedings
eMed is from time to time subject to legal proceedings and claims which
arise in the normal course of business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not have a
material adverse effect on eMed's financial position or results of operations.
eMed has initiated a lawsuit against B&L Medical, a terminated distributor,
claiming copyright and trademark infringement by B&L Medical. A preliminary
injunction has been entered by consent of the parties. B&L Medical has filed a
counterclaim for $500,000, although the basis for this counterclaim is not
clear from B&L Medical's papers. eMed believes that B&L Medical's counterclaim
is without merit and intends to defend this counterclaim vigorously. Although
eMed cannot give any assurance as to the probable outcome, the Company does not
believe that the outcome of this counterclaim will have a material adverse
effect on its financial statements.
F-18
<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-19
<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-20
<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-21
<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-22
<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-23
<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.
F-24
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements--(Continued)
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>
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>
F-25
<PAGE>
E-Systems Medical Electronics (a division of Raytheon E-Systems, Inc.)
Notes to Financial Statements--(Continued)
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>
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-26
<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.................. $ (11.70) -- -- $ (26.22)
Shares used in computing
pro forma basic
and diluted net loss per
share.................. 436,949 -- -- 436,949
</TABLE>
F-27
<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-28
<PAGE>
[Inside Back Cover]
[eMed
TECHNOLOGIES
LOGO]
Providing Web Services....
[picture of eMed.net desktop display
of radiology study]
... and the Communications
Infrastructure
[picture of image [picture of home
acquisition device] viewing device]
Image Acquisition Home Viewing
[picture of two
people working at a
desk top computer]
Support
[picture of a [picture of
high resolution, electronic image
diagnostic viewer] archive device]
Diagnostic Reading Storage and Archival
for Medical Imaging
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
, 2000
eMed Technologies Corporation
Shares of Common Stock
---------------------
PROSPECTUS
---------------------
Donaldson, Lufkin & Jenrette
SG Cowen
Wit SoundView
DLJdirect Inc.
- -------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as
to matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the
company have not changed since the date hereof.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers that
affect transactions in these securities may be required to deliver a
prospectus. This is an addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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................. $12,144
National Association of Securities Dealers Filing Fee............... *
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 January 31, 1997 to January 31, 2000, the Registrant issued a
total of 152,496 shares of common stock for an aggregate consideration of
$188,759 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
II-1
<PAGE>
Ventures III, L.P., Seaflower Health and Technology Fund, LLC and 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 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
3,221,179 shares of common stock and the Series J warrants will become
warrants to purchase 170,449 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 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 201,388 shares of common stock at an exercise
price of $.02 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 $.02 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 281,916 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 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 185,270 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 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.
II-2
<PAGE>
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.*
2 Acquisition Agreement dated as of November 23, 1998 by and between
Raytheon E-Systems, Inc. and the Registrant.
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.
10.11 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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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.+
10.30 Letter Agreement dated as of October 13, 1999 between ISG
Technologies, Inc. and the Registrant.
10.31 Employment Agreement dated as of January 14, 2000 between Caren Mason
and the Registrant.
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
+ Portions have been omitted pursuant to a request for confidential treatment
dated February 25, 2000
II-4
<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(1) period
- ----------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Reserves and allowances
deducted from
asset accounts..............
Allowance for doubtful
accounts................... $ 25,000 10,000 -- $ 35,000
Year ended December 31, 1998
Reserves and allowances
deducted from
asset accounts .............
Allowances for doubtful
accounts .................. $ 35,000 460,000 (7,927) $487,073
Year ended December 31, 1999
Reserves and allowances
dededucted from
asset accounts .............
Allowances for doubtful
accounts .................. $487,073 289,610 (316,677) $460,006
</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.
Report of Independent Accountants
Financial Statement Schedules
To the Board of Directors and Stockholders of
eMed Technologies Corporation
Our audits of the financial statements referred to in our report dated
February 24, 2000 appearing in the Prospectus constituting part of this
Registration Statement on Form S-1 of eMed Technologies Corporation also
included an audit of the financial statement schedules listed in Item 16(b) of
this Registration Statement. In our opinion, these financial statement
schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2000
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
II-5
<PAGE>
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-6
<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
25th day of February, 2000.
eMed Technologies Corporation
/s/ Caren Mason
By: _________________________________
Caren Mason
Chief Executive Officer
Power of Attorney
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes Caren Mason, Scott S. Sheldon and Gary Lortie, jointly
and severally, with full power to each, to execute in the name and on behalf of
such person any amendment (including any post-effective amendment) to this
Registration Statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act) and to file the same, with exhibits thereto, and other
documents in connection therewith, making such changes in this Registration
Statement as the person(s) so acting deems appropriate, and appoints each of
such persons, each with full power of substitution, attorney-in-fact to sign
any amendment (including any post-effective amendment) to this Registration
Statement (or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act) and
to file the same, with exhibits thereto, and other documents in connection
therein.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Caren Mason Chief Executive Officer February 25, 2000
______________________________________
Caren Mason
/s/ Scott S. Sheldon President and Director February 25, 2000
______________________________________
Scott S. Sheldon
/s/ Gary A. Lortie Chief Financial Officer February 25, 2000
______________________________________
Gary A. Lortie
/s/ James J. Bochnowski Director February 25, 2000
______________________________________
James J. Bochnowski
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Neff Director February 25, 2000
______________________________________
Thomas B. Neff
/s/ Thomas O. Pyle Director February 25, 2000
______________________________________
Thomas O. Pyle
/s/ Ralph C. Sabin Director February 25, 2000
______________________________________
Ralph C. Sabin
/s/ Michael Schmertzler Director February 25, 2000
______________________________________
Michael Schmertzler
/s/ Donald E. Strange Director February 25, 2000
______________________________________
</TABLE> Donald E. Strange
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1 Form of underwriting agreement.*
2 Acquisition Agreement dated as of November 23, 1998 by and between
Raytheon E-Systems, Inc. and the Registrant.
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.
10.11 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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.+
10.30 Letter Agreement dated as of October 13, 1999 between ISG
Technologies, Inc. and the Registrant.
10.31 Employment Agreement dated as of January 14, 2000 between Caren Mason
and the Registrant.
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
+ Portions have been omitted pursuant to a request for confidential treatment
dated February 25, 2000
<PAGE>
EXHIBIT 2
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
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<PAGE>
or obtain which would not, individually or in the aggregate, reasonably be
expected to have an Adverse Effect on the Business.
Section 3.8. Condition of Assets. The Acquired Assets are in the state of
-------------------
repair and operating condition normally kept by Seller in the ordinary course of
its business, reasonable wear and tear excepted.
Section 3.9. Intellectual Property. Schedule 3.9(i) lists, as of the date
---------------------
hereof, all material Intellectual Property of Seller constituting part of the
Acquired Assets. Seller is the owner of all right, title and interest in and to
all Scheduled Intellectual Property (other than the licensed third party
Intellectual Property set forth on Schedule 3.9(ii)), free and clear of all
Liens. Except as set forth on Schedule 3.2(iii), to Seller's knowledge, as of
the date hereof, no claims of infringement of the intellectual property rights
of any third parties exist based upon the use by Seller of the Scheduled
Intellectual Property that would, individually or in the aggregate, reasonably
be expected to have an Adverse Effect on the Acquired Assets.
Section 3.10. Inventory. The inventory included in the Acquired Assets was
---------
produced or acquired by Seller in the ordinary course of business and, except as
disclosed in Schedule 3. 10, is in good and useable condition. The physical
inventory schedule dated included in Schedule I is accurate, and no items of
inventory identified on such list have been disposed of except in the ordinary
course of business.
Section 3.11. Accounts Receivable. The accounts receivable included in the
-------------------
Acquired Assets arose from bona fide transactions.
Section 3.12. Brokers, Finders, Etc. Except for the services of Newbury, Piret
& Company, Inc., the fees of which shall be paid by Seller, Seller has not
employed nor is it subject to any valid claim of, any broker, finder, consultant
or other intermediary in connection with the Asset Purchase who might be
entitled to a fee or commission in connection therewith..
Section 3.13. No Implied Representation. Notwithstanding anything contained in
this Agreement, it is the explicit intent of each party hereto that Seller is
making no representation or. warranty whatsoever, express or implied, beyond
those expressly given in this Agreement, including any implied warranty or
representation as to condition, merchantability, or suitability as to any of the
Acquired Assets and, subject to the representations and warranties given herein,
it is understood that Buyer takes the Acquired Assets as is and where is. It is
understood that any cost estimates, projections or other predictions contained
or referred to in the Schedules or in the offering materials that have been
provided to Buyer are not and shall not be deemed to be representations or
warranties of Seller.
Section 3.14. Schedules. (a) Any matter set forth in any Schedule shall be
deemed to be referred to on all other Schedules to which such matter logically
relates and where such reference would
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<PAGE>
be appropriate and can reasonably be inferred from the matters disclosed on the
first Schedule as if set forth on such other Schedules.
(b) The inclusion of any item on any Schedule to this Agreement shall not
be construed as an indication that such item is material in any respect.
(c) Seller shall not be obligated to revise or update any Schedule
attached hereto.
Section 3.15. Licenses and Permits. Schedule 3.15 sets forth each material
--------------------
license, franchise, permit or other similar authorization by a Governmental
Authority relating to the operation of the E-MED PACS product line (the
"Permits"), together with the name of the agency or authority issuing such
Permit. Except as set forth on Schedule 3.15, all of the Permits are valid and
in full force and effect and, assuming the consents referred to in Section 3.7
have been or will be obtained, are transferable to Buyer. Assuming the receipt
of such consents, Buyer will have all right, title and interest of Seller in the
Permits.
Article IV.
Representations and Warranties of Buyer
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
Section 4.1. Incorporation, Authorization, Etc. Buyer is a corporation
---------------------------------
duly incorporated, validly existing and in good standing under the laws of
Delaware. Buyer has all requisite corporate power to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance of Buyer's obligations hereunder and the consummation of the
transactions contemplated hereby by Buyer have been duly and validly authorized
by Buyer and no further corporate proceedings or actions on the part of Buyer,
its Board of Directors or stockholders are necessary therefor. The execution,
delivery and performance of this Agreement will not (i) violate any provision of
the charter or bylaws or similar organizational instrument of Buyer, (ii)
violate any provision of, or be an event that is (or with the passage of time
will result in) a violation of, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any obligation under, or result in the imposition of any lien upon or the
creation of a security interest in any of Buyer's assets or properties pursuant
to, any Contract or Order to which Buyer is a party or by which Buyer is bound,
or (iii) violate or conflict with any other material restriction of any kind or
character to which Buyer is subject, that, in the case of clauses (ii) and
(iii), would, individually or in the aggregate, reasonably be expected to have
an Adverse Effect on Buyer or Buyer and its subsidiaries, taken as a whole. This
Agreement has been duly executed and delivered by Buyer, and, assuming the due
execution hereof by Seller, this Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Other than investors in Buyer, Buyer has no Affiliates.
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<PAGE>
Section 4.2. Brokers, Finders, Etc. Buyer has not employed, and is not
---------------------
subject to the valid claim of, any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
who might be entitled to a fee or commission from Seller in connection with such
transactions.
Section 4.3. Consents, Approvals, Other Authorizations. No filing with,
-----------------------------------------
notice to or authorization, consent or approval of, any Governmental Authority
is required to be made, filed, given or obtained by Buyer, in connection with
the consummation of the Asset Purchase except for (i) those that become
applicable solely as a result of the specific regulatory status of Seller, or
(ii) the failure to make, file, give or obtain which would not, individually or
in the aggregate, reasonably be expected to have an Adverse Effect on Buyer.
Section 4.4. Acquisition of Acquired Assets and Operation of the Business
------------------------------------------------------------
for Investment. Buyer has such knowledge and experience in financial and
- --------------
business matters that it is capable of evaluating the merits and risks of its
purchase of the Acquired Assets and operation of the business acquired
hereunder. Buyer confirms that Seller has made available to Buyer the
opportunity to ask questions of the officers of Seller and management employees
of Seller and to acquire additional information about the business and financial
condition of Seller.
Section 4.5 Financial Capability. Buyer has immediately available cash in
--------------------
the amount the First Installment.
Article V.
Covenants of Seller and Buyer
-----------------------------
Section 5.1. Investigation of Business, Access to Properties, Records and
------------------------------------------------------------
Employees. (a) Seller shall afford to representatives of Buyer reasonable access
- ---------
to the offices, plants, properties, books and records of Seller during normal
business hours, in order that Buyer may have full opportunity to make such
investigations as it desires of the affairs of Seller to the extent such affairs
relate to the Acquired Assets or to the Assumed Liabilities; provided, however,
that such investigation shall not unreasonably disrupt the personnel and
operations of Seller. If, in the course of any investigation pursuant to this
Section 5. 1, Buyer discovers any breach of any representation or warranty
contained in this Agreement or any circumstance or condition that upon Closing
would constitute such a breach, Buyer covenants and that it will promptly so
inform Seller.
(b) Any information provided to Buyer or its representatives pursuant to
this Agreement shall be held by Buyer and its representatives in accordance
with, and shall be subject to the terms of, the Confidentiality Agreement dated
July 13, 1998 by and between Raytheon and Buyer, which is hereby incorporated in
this Agreement as though fully set forth herein.
(c) Buyer agrees to (i) hold all of the books and records of Seller
acquired hereunder existing on the Closing Date and not to destroy or dispose of
any thereof for a period of four (4)
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<PAGE>
years from the Closing Date or such longer time as may be required by law, and
thereafter, if it desires to destroy or dispose of such books and records, to
offer first in writing at least sixty (60) days prior to such destruction or
disposition to surrender them to Seller and (ii) following the Closing Date to
afford Seller, its accountants and counsel, during normal business hours, upon
reasonable request, full access to such books, records and other data to the
extent that such access may be requested for any legitimate purpose, including
without limitation preparation of filings under federal and state securities
laws, responding to Governmental Authorities, defending or prosecuting
litigation and preparation of Income Tax Returns and other tax filings, at no
cost to Seller (other than for reasonable out-of-pocket expenses); provided,
however, that nothing herein shall limit any of Seller's rights of discovery.
Buyer shall have the same rights, and Seller the same obligations, as are set
forth above in this Section 5. 1 (c), with respect to any material nonprivileged
records of Seller pertaining to the Acquired Assets or to the Assumed
Liabilities that are retained by Seller, with the exception of Returns relating
to Taxes that are not the responsibility of Buyer or alleged by a Governmental
Authority to be the responsibility of Buyer.
Section 5.2. Best Efforts, Obtaining Consents. (a) Subject to the terms
--------------------------------
and conditions herein provided, each of Seller and Buyer agrees to use its best
efforts (whether before or after the Closing Date) to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable, the
transactions contemplated by this Agreement and to cooperate with the other in
connection with the foregoing, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to material
Contracts, (ii) to obtain all consents, approvals and authorizations that are
required to be obtained under any Law, (iii) to lift or rescind any Order
adversely affecting the ability of the parties hereto to consummate the Asset
Purchase, (iv) to effect all necessary registrations and filings and submissions
of information requested by Governmental Authorities, and (v) to fulfill all
conditions to this Agreement (it being understood that such efforts shall not
include any requirement of Buyer or Seller to expend more than commercially
reasonable sums of money or grant any material financial or other accommodation,
or of Buyer to accept any material modification of its rights hereunder).
Seller and Buyer further covenant and agree, with respect to a threatened or
pending Order or Law that would adversely affect the ability of the parties
hereto to consummate the Asset Purchase, to use their respective best efforts to
prevent the entry, enactment or promulgation thereof, as the case may be (it
being understood that such efforts shall not include any requirement of Buyer or
Seller to expend more than commercially reasonable sums of money or grant any
material financial or other accommodation).
(b) In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Section 5.2, the proper officers
and/or directors of Buyer, including, to the extent applicable, any Entity
designated to hold the Acquired Assets, shall take all such necessary action.
(c) Seller covenants to use its commercially reasonable efforts to effect
the assignment of any contract, permit, license, claim, demand or right which is
not now transferred or assigned
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<PAGE>
and which is a part of the Business. In order that full value of every such
unassigned contract, lease, interest in property, permit, license, claim, demand
or right may be realized by and for the benefit of Buyer, Seller covenants and
agrees with Buyer that Seller will use its commercially reasonable efforts to
enforce every such contract, permit, license, claim, demand or right and to
facilitate the collection of the moneys due and payable and to become -due and
payable in and under every such contract and in respect of every such claim,
demand or right; and Seller does hereby covenant to hold in trust for and
promptly pay over to Buyer all moneys or things of value collected and paid to
Seller, its successors or assigns, after the Closing Date in respect of every
such contract, claim, demand or right. No amounts owing to Buyer by Seller under
this Section 5.2(c) shall be subject to the limitation set forth in Section
10.2.
Section 5.3. Conduct of Business. From the date hereof through the Closing,
-------------------
except as disclosed on Schedule 5.3 or otherwise provided for in, or
contemplated by, this Agreement, and, except as consented to or approved by
Buyer in writing, Seller covenants and agrees that:
(a) Seller shall make use of the Acquired Assets in the ordinary and usual
course in all material respects in accordance with past practices;
(b) Except as otherwise provided for in or contemplated by this Agreement,
Seller shall not (i) assume, incur or guarantee, except in the ordinary course
of business consistent with past practice, any obligation for borrowed money
that would constitute, or increase Buyer's obligation respecting, an Assumed
Liability, (ii) cancel or compromise, except in the ordinary course of business
consistent with past practice, any debts owed to it that would constitute, or
decrease the value of Buyer's right respecting, an Acquired Asset or (iii) waive
or release any rights of material value relating to the Acquired Assets; and
(c) Except in the ordinary course of business, Seller shall not (i) sell,
transfer, distribute as a dividend in kind or otherwise dispose of any material
Acquired Asset (other than inventory in the- ordinary course of business
consistent with past practice), (ii) create or permit to exist any new material
security interest, lien or encumbrance on Acquired Assets, or (iii) enter into
any joint venture, partnership or other similar arrangement or form any other
new material arrangement for the conduct of the business relating to the
Acquired Assets.
Section 5.4. Preservation of Business. From the date hereof to the Closing
------------------------
Date, subject to the terms and conditions of this Agreement, Seller shall use
reasonable efforts (i) to preserve the Acquired Assets intact and (ii) to
preserve the good will of customers and others having business relations with
Seller to the extent such business relations relate to the Acquired Assets.
Section 5.5. Further Assurances. Seller and Buyer agree that, from time to
-------------------
time, whether before, at or after the Closing Date, each of them will execute
and deliver such further instruments; of conveyance and transfer and take such
other action as may be reasonably required or desirable to carry out the
purposes and intent of this Agreement, including (i) allocating rights and
obligations under Contracts and other arrangements, if any, relating to
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<PAGE>
business of Seller and its Affiliates, on the one hand, and relating to the
Acquired Assets on the other, (ii) allocating rights and obligations under
Contracts and other arrangements, if any, relating to the Assumed Liabilities,
and (iii) determining whether to enter into any service or other sharing
agreements on a mutually acceptable arm's length basis that may be necessary to
assure a smooth and orderly transition. In case at any time after the Closing
Date, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary or desirable action. In addition to the
foregoing, Buyer shall, at Seller's sole cost and expense, cooperate with Seller
in the defense or prosecution of any of the Retained Liabilities.
Section 5.6. Public Announcements. Seller and Buyer will consult with
--------------------
each other before issuing, or permitting any agent or Affiliate to issue, any
press releases or otherwise making or permitting any agent or Affiliate to make,
any public statements with respect to this Agreement and the transactions
contemplated hereby, and, except as may be required by applicable law or any
listing agreement with any securities exchange, will not issue any such press
release or make any such public statement, unless the text of such statement
shall have been agreed upon by the parties, such agreement not to be
unreasonably withheld.
Section 5.7 Use of Raytheon Name. From and after the Closing, except for
--------------------
purposes of announcing Buyer's acquisition of the Acquired Assets or responding
reasonably to inquiries with respect thereto, Buyer and its Affiliates shall not
use or permit the use of the names or marks "E-Systems", "Raytheon E-Systems",
"ESY", "RESY", "Raytheon", "RTN", or any other trademark or trade name of Seller
or any Affiliate of Seller, for any commercial purpose or any trademarks or
trade names confusingly similar thereto, nor shall Buyer use or permit the use
of such names and marks in connection with the operation or disposition of the
Acquired Assets or the proceeds thereof, provided, however, that (1) for a
period of sixty (60) days, Buyer may make use of promotional and sales
literature, stationery, cartons and other packaging material included in the
Acquired Assets at Closing, provided, that to the extent practical such
literature is stickered or otherwise marked to indicate the change of ownership,
and (ii) nothing in this Section 5.7 shall require the amendment of any
Contracts nor limit, where relevant, any accurate and complete statement of
facts concerning ownership of the Acquired Assets prior to the Closing in any
Action or in any filing with a Governmental Authority. Notwithstanding the
foregoing, the Acquired Assets shall include, and after the Closing Date Buyer
shall have, the right to unrestricted use of the name "E-Med".
Section 5.8. Performance of Certain Obligations. Buyer agrees from and
----------------------------------
after the Closing Date to perform and fulfill (or cause to be performed and
fulfilled) all obligations and commitments incurred by Seller or any of its
Affiliates as such relate to the Business whether existing as of the Closing
Date or arising or incurred thereafter. Seller agrees from and after the
Closing Date to perform and fulfill (or cause to be performed and fulfilled) all
obligations and commitments incurred by Buyer or any of its Affiliates as such
relate to the Excluded Assets or Retained Liabilities whether existing as of the
Closing Date or arising or incurred thereafter.
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<PAGE>
Section 5.9. Buyer's Warranty Obligation. Buyer covenants and agrees that
---------------------------
it will fully honor and diligently perform all of Seller's product warranty,
guaranty and product return obligations express or implied which arise from or
are related to Seller's operation of the Acquired Assets prior to the Closing
Date. If Buyer fails reasonably to perform such obligations, Seller may, at
Buyer's expense, satisfy, or retain others to satisfy, such obligations.
Section 5.10. Sale of MegaScan. Buyer covenants and agrees that, for one
----------------
(1) year following the Closing, it will use its best efforts to sell, assign or
otherwise dispose of that portion of the Acquired Assets which consist of
MegaScan (any such sale, assignment or disposition a "MegaScan Sale") as
promptly following the Closing Date at the highest reasonable price and in a
manner consistent with reasonable commercial practices; provided that Buyer may
nonetheless dispose of and use the MegaScan assets in the ordinary course
beginning on the Closing Date or terminate or liquidate the balance of the
MegaScan business if Buyer deems such action appropriate. In the event of such a
MegaScan Sale, if the proceeds (the "MegaScan Proceeds") thereof (net of (x)
losses sustained by MegaScan during the period between the Closing Date and any
such MegaScan Sale and (y) any fees and expenses incurred by Buyer in connection
with such MegaScan Sale) exceed $900,000, then Buyer and Seller shall share
equally in such excess. Buyer further covenants that it shall, within fifteen
(15) days of any such MegaScan Sale, deliver to Seller by wire transfer such
excess in immediately available funds.
Section 5.11. Non-competition. Seller agrees that for a period of two (2)
---------------
years after the date hereof (the "Restricted Period "), Seller will not compete
with Buyer in the manufacture or marketing of medical products, whether
individually or as a consultant, partner, owner or stockholder owning more than
five percent (5%) of an Entity in the business of manufacturing or marketing of
medical products in competition with Buyer (the "Restricted Business").
Notwithstanding the foregoing, nothing herein shall prohibit Seller or any of
its Affiliates from (a) owning, directly or indirectly, less than five percent
(5%) of any class of securities of any issuer listed on a national securities
exchange or traded publicly in the over-the-counter market, (b) directly or
indirectly acquiring a business which engages in the Restricted Business if such
business is twenty-five percent (25%) or less (measured by net revenues) of a
larger business so acquired by Seller or any of its Affiliates, and (d)
continuing to produce and sell those products now being produced and sold by
Seller and its Affiliates (including within the foregoing all products that were
under development as of the date hereof).
Section 5.12. Confidentiality. From and after the Closing Date, Seller
---------------
will hold confidential proprietary information constituting Acquired Assets or
provided to Seller by Buyer with respect to the Business after the Closing Date,
and, except to the extent Seller develops such information independently,
obtains it lawfully from a third party or is ordered to disclose such
information by a Governmental Authority, will not disclose any such information
to any third party without the prior written consent of Buyer.
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Article VI
Employees, Employee Benefits and Other Transitional Matters
-----------------------------------------------------------
Section 6.1. Hiring Employees, Comparable Benefits.
-------------------------------------
(a) Subject to Section 6.2(b) hereof, Buyer will continue the employment
of those employees of Seller dedicated to the product lines being sold to Buyer
as it deems advisable, (all such employees being "Assumed Employees'). To the
extent employment of Assumed Employees is continued by Buyer during the first
six (6) months following the Closing Date, such employment shall be on
substantially the same terms and conditions in the aggregate under which the
Assumed Employees worked for Seller immediately prior to the Closing Date.
Seller represents and warrants that Schedule 6. 1 (a) is a true and complete
list of all the employees of Seller dedicated to the product lines being sold to
Buyer.
(b) Buyer agrees that, for a period of 60 days after the Closing Date, it
will not cause any of the employees of Seller dedicated to the product lines
being sold to Buyer, including the Assumed Employees, to suffer "employment
loss" for purposes of the Worker Adjustment and Retraining Notification Act, 29
U.S.C. (S)(S) 2101-2109, and related regulations (the "WARN Act") if such
employment loss could create any liability for Seller or its Affiliates, unless
Buyer delivers notices under the WARN Act in such a manner and at such a time
that Seller or its Affiliates bears no liability with respect thereto. For all
employees other than the Assumed Employees, and for all Assumed Employees
terminated within thirty (30) days of the Closing Date, Buyer will make the
severance payments set forth on Schedule 6.1 (b).
Section 6.2. Medical Benefits. Commencing as of the Closing Date, Buyer
----------------
shall provide the Assumed Employees and dependents and beneficiaries thereof
medical and dental benefit coverage on the terms generally provided to the other
employees of Buyer and their dependants and beneficiaries. Medical benefits to
be provided to all other employees dedicated to the product lines being sold to
Buyer are set forth on Schedule 6.2.
Section 6.3. Investment Plans. Buyer shall have no liability and
----------------
responsibility for the disposition of interests under the E-Systems Employee
Savings Plan (the "Savings Plan") with respect to those Assumed Employees (or
their beneficiaries) who, as of the Closing Date, are participants in the
Savings Plan. No such participant will be eligible to make any contributions to
the Savings Plan, and Raytheon will not be obligated to make any contribution
with respect to any such participant in the Savings Plan, with respect to
compensation earned by such employees on or after the Closing Date.
Section 6.4. Retention Plans. Seller has provided Buyer with information
---------------
regarding Seller's retention plans established to encourage certain employees of
Seller to remain with Seller until Closing and to accept employment and remain
with Buyer after the Closing (the "Retention Plans"). Seller agrees to be
responsible for all payments under the Retention Plans which accrue on or prior
to the Closing Date with respect to the Assumed Employees and Buyer agrees be
responsible for all payments under the Retention Plans which accrue after the
Closing Date with respect to the Assumed Employees.
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<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
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or controversies with respect to any applicable Transfer Taxes shall do so, and
the other party shall cooperate with respect thereto as necessary.
(b) All real property taxes, personal property taxes and similar ad
--
valorem obligations levied with respect to the Acquired Assets for a taxable
- -------
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period which fall on or before the Closing
Date (this and any other tax period which includes one or more days falling on
or before the Closing Date, a "Pre-Closing Tax Period") and the number of days
of such taxable period after the Closing Date (a "Post-Closing Tax Period").
Seller shall be liable for the proportionate amount of such taxes that is
attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of, such taxes that is attributable to the Post-Closing Tax
Period. Upon receipt of any bill for real or personal property taxes relating to
the Acquired Assets, each of Seller and Buyer shall present a statement to the
other setting forth the amount of reimbursement to which each is entitled under
this Section together with such supporting evidence as is reasonably necessary
to calculate the proration amount. The proration amount shall be paid by the
party owing it to the other within 30 days after delivery of such statement. In
the event that either Seller or Buyer shall make any payment for which it is
entitled to reimbursement under this Section, the other party shall make such
reimbursement promptly but in no event later than ten (10) days after the
presentation of a statement setting forth the amount or reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
Section 7.3. Cooperation. Buyer and Seller agree to furnish or cause to be
-----------
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Acquired Assets (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. Buyer and Seller
shall retain all books and records with respect to Taxes pertaining to the
Acquired Assets for a period of at least six (6) years following the Closing
Date. At the end of such period, each party shall provide the other with at
least thirty (30) days prior written notice before destroying any such books and
records, during which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records. Seller and Buyer
shall cooperate with each other in the conduct of any audit or other proceeding
relating to Taxes involving the Acquired Assets. If either party becomes aware
of any pending or threatened assessment, official inquiry, examination or
proceeding that could result in an official determination with respect to Taxes
due or payable the responsibility for which rests with the other party hereto,
such party shall promptly so notify the other party in writing.
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Article VIII.
Conditions of Buyer's Obligation to Close
-----------------------------------------
Buyer's obligation to consummate the Asset Purchase shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions:
Section 8.1. Representations, Warranties and Covenants of Seller. (a) The
----------------------------------------------------
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties that speak as of a specific date or time,
which need only be true and correct as of such date or time), except, in the
case of any representations or warranties other than those that contain a
qualification as to "Adverse Effect," for such inaccuracies which have not had
or would not reasonably be expected to have an Adverse Effect on the Acquired
Assets.
(b) Seller shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing (other than Seller's covenants pursuant to Section 2.2 (a) and (b) with
respect to delivery of documents of transfer of the Acquired Assets at the
Closing, which shall be performed in all respects).
(c) Buyer shall receive at or prior to the Closing a certificate as to the
matters set forth in paragraphs (a) and (b), dated the Closing Date, and validly
executed by an authorized officer of Seller.
Section 8.2. Filings, Consents, Waiting Periods. All registrations,
----------------------------------
filings, applications, notices, consents, approvals, orders, qualifications and
waivers required to be obtained or made as of the Closing Date shall have been
filed, made or obtained, except for such registrations, filings, notices,
consents, approvals, orders, qualifications and waivers the lack of which would
not reasonably be expected to have an Adverse Effect on the Acquired Assets.
Section 8.3. No Injunction. At the Closing Date, there shall be no Order
-------------
of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of all or any portion of the
Asset Purchase, and no Law shall have been enacted by any Governmental Authority
which prevents consummation of the Asset Purchase.
Article IX.
Conditions to Seller's Obligation to Close
------------------------------------------
Seller's obligation to consummate the Asset Purchase is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions:
Section 9.1. Representations, Warranties and Covenants of Buyer. (a) The
--------------------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties that speak as of
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a specific date or time, which need only be true and correct as of such date or
time), except, in the case of any representations or warranties other than those
that contain a qualification as to "Adverse Effect," for such inaccuracies which
have not had or would not reasonably be expected to have an Adverse Effect on
Buyer or Buyer and its subsidiaries, taken as a whole.
(b) Buyer shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing.
(c) Seller shall receive at or prior to the Closing a certificate as to
the matters set forth in paragraphs (a) and (b), dated the Closing Date, and
validly executed by an executive officer of Buyer on behalf of Buyer.
Section 9.2. Filings: Consents: Waiting Periods. All registrations,
----------------------------------
filings, applications, notices, consents, approvals, orders, qualifications and
waivers required to be obtained or made as of the Closing Date shall have been
filed, made or obtained, except for such registrations, filings, notices,
consents, approvals, orders, qualifications and waivers the lack of which would
not reasonably be expected to have an Adverse Effect on Buyer or Buyer and its
subsidiaries, taken as a whole.
Section 9.3. No Injunction. At the Closing Date, there shall be no Order
-------------
of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of all or any portion of the
Asset Purchase, and no Law shall have been enacted by any Governmental Authority
which prevents consummation of the Asset Purchase.
Article X.
Survival: Indemnification
-------------------------
Section 10.1. Survival Periods. The representations and warranties in this
----------------
Agreement shall survive for a period of six (6) months following the Closing. A
claim by any party hereunder shall survive if notice thereof is given in
accordance with Section 10.4(a) within such six (6) month period.
Section 10.2. Indemnification by Seller. (a) From and after the Closing
-------------------------
Date, Seller shall indemnify and hold harmless Buyer, its Affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Buyer Indemnified Parties") from and against any and all damages, claims,
losses, expenses, costs, obligations and liabilities, including without
limitation liabilities for all reasonable attorneys', accountants', and experts'
fees and expenses including those incurred to enforce the terms of this
Agreement (collectively, "Covered Liabilities"), suffered, directly or
indirectly, by Buyer by reason of, or arising out of (i) any of the Retained
Assets or the Retained Liabilities, including any liability based on negligence,
gross negligence, strict liability or any other theory of liability, whether in
law (whether common or statutory) or equity or (ii) any
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breach of any representation, warranty, covenant or agreement of Seller
contained herein; provided. however, that, Seller shall not be required to
indemnify the Buyer Indemnified Parties with respect to any claim for
indemnification under clause (ii) of this Section 10.2 unless and until the
aggregate amount of all claims against Seller under clause (ii) of this Section
10.2 exceeds Two Hundred Thousand Dollars ($200,000) and then only to the extent
such aggregate amount exceeds such amount, and provided, further that in no
------- -------
event shall Seller be required to pay or otherwise be liable for an amount in
excess of One Million Dollars ($1,000,000) with respect to claims made under
clause (ii) of this Section 10.2.
(b) Anything in this Section to the contrary notwithstanding, in the event
that (i) based on a preponderance of the evidence, Seller shows that, on or
prior to the Closing Date, Buyer had knowledge of any breach, untruth,
inaccuracy of, or error in, any representation and warranty of Seller or (ii)
Seller notifies Buyer, on or prior to the Closing Date, of any breach, untruth,
inaccuracy of, or error in, any representation and warranty of Seller, and Buyer
proceeds with the Closing, Buyer shall be deemed to have waived any right
thereafter to assert any claim with respect to any such breach, untruth,
inaccuracy or error, including without limitation any right to indemnification
therefor. Except as set forth in the preceding sentence, Buyer's right to
indemnification hereunder shall not be affected by any investigation or inquiry
concerning the Business by Buyer, whether pursuant to Section 5.1 (a) hereof or
otherwise in conducting its diligence.
Section 10.3. Indemnification by Buyer. (a) From and after the Closing
------------------------
Date, Buyer shall indemnify and hold harmless Seller, its Affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Raytheon Indemnified Parties") from and against any and all Covered
Liabilities incurred by or asserted against any of the Raytheon Indemnified
Parties in connection with or arising from any Assumed Liability or arising out
of or in connection with (i) any of the Acquired Assets after the Closing Date,
including any liability based on negligence, gross negligence, strict liability
or any other theory of liability, whether in law (whether common or statutory)
or equity or (ii) any breach of any representation, warranty, covenant or
agreement of Buyer contained herein; provided. however, that Buyer shall not be
required to indemnify the. Raytheon Indemnified Parties with respect to any
claim made for indemnification under clause (ii) of this Section 10.3 unless and
until the aggregate amount of all claims against Buyer under clause (ii) of this
Section 10.3 exceeds Two Hundred Thousand Dollars ($200,000) and then only to
the extent such aggregate amount exceeds such amount, and provided further, that
in no event shall Seller be required to pay or otherwise be liable for an amount
in excess of One Million Dollars ($1,000,000) with respect to claims made under
clause (ii) of this Section 10.2; and provided further, however, that the
deductible contained in the preceding provision shall not apply to (x) the
obligations of Buyer to pay to Seller the Purchase Price pursuant to Section 2.3
or (y) any fees or expenses incurred by Seller in connection with the
enforcement of the obligations of Buyer to pay the Purchase Price to Seller.
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<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
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<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.
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Article XI.
Termination
-----------
Section 11.1. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing by:
(a) the mutual written consent of Seller and Buyer;
(b) either Seller or Buyer if the Closing has not occurred by the close of
business on November 23, 1998, and if the failure to consummate the Asset
Purchase on or before such date did not result from the failure by the party
seeking termination of this Agreement to fulfill any undertaking or commitment
provided for herein that is required to be fulfilled prior to Closing;
(c) Seller, provided it is not then in breach of any of its obligations
hereunder, if Buyer fails to perform in any material respect any covenant in
this Agreement when performance thereof is due or Buyer shall have breached in
any material respect any of the representations or warranties contained in this
Agreement and does not cure the failure or breach within thirty (30) business
days after Seller delivers written notice thereof, or
(d) Buyer, provided it is not then in breach of any of its obligations
hereunder, if Seller fails to perform in any material respect any covenant in
this Agreement when performance thereof is due or Seller shall have breached in
any material respect any of the representations and warranties contained in this
Agreement and does not cure the failure or breach within thirty (30) business
days after Buyer delivers written notice thereof.
Section 11.2. Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement by either or both of Seller and Buyer pursuant to
Section 11.1, written notice thereof shall forthwith be given by the terminating
party to the other party hereto, and this Agreement shall thereupon terminate
and become void and have no effect, and the transactions contemplated hereby
shall be abandoned without further action by the parties hereto, except that the
provisions of Sections 5.1(b) and 12.4 shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement. If this Agreement is
terminated as provided herein, all filings, applications and other submissions
made pursuant to Sections 3.7 and 4.3 shall, to the extent practicable, be
withdrawn from the agency or other persons to which they were made.
Article XII.
Miscellaneous
-------------
Section 12.1. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become
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effective when one or more counterparts have been signed by each of the parties
and delivered to the other party.
Section 12.2. Governing Law, Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts without reference to the choice of law principles thereof. Buyer
and Seller consent to and hereby submit to the jurisdiction of any state or
federal court located in the Commonwealth of Massachusetts in connection with
any action, suit or proceeding arising out of or relating to this Agreement, and
each of the parties hereto irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
Section 12.3. Entire Agreement. This Agreement (including agreements
----------------
incorporated he-rein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein.
Section 12.4. Expenses. Except as set forth in this Agreement, whether the
--------
Asset Purchase is or is not consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses; provided
that Buyer shall pay all fees relating to the transfer of the Acquired Assets
and the Assumed Liabilities; provided further that if such fees exceed Two
Thousand Five Hundred Dollars ($2,500), then Buyer and Seller shall pay such
fees equally.
Section 12.5. Notices. All notices hereunder shall be sufficiently given
-------
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to Seller shall be addressed to:
Raytheon Company
141 Spring Street
Lexington, Massachusetts 02421
Attention: General Counsel
Telecopy No: (781) 860-2924
or at such other address and to the attention of such other Person as Seller may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
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ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, Massachusetts 02421
Attention: Scott Sheldon
Telecopy No: (781) 861-6360
or at such other address and to the attention of such other Person as Buyer may
designate by written notice to Seller.
Section 12.6. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto, except that Seller may assign this Agreement
to any Entity that succeeds to substantially all of Seller's assets and
liabilities, and Buyer may assign this Agreement (i) to any Entity that succeeds
to substantially all of Buyer's assets and liabilities, or (ii) as security to a
bank or other financial institution.
Section 12.7. Headings: Definitions. The section and article headings
---------------------
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 12.8. Amendment. This Agreement may not be amended, modified,
---------
superseded, canceled, renewed or extended except by a written instrument signed
by the party to be charged therewith.
Section 12.9. Waiver, Effect of Waiver. No provision of this Agreement may
------------------------
be waived except by a written instrument signed by the party waiving compliance.
No waiver by any party hereto of any of the requirements hereof or of any of
such party's rights hereunder shall release the other parties from full
performance of their remaining obligations stated herein. No failure to
exercise or delay in exercising on the part of any party hereto any right, power
or privilege of such party shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege by such party.
Section 12.10. Interpretation, Absence of Presumption. (a) For the purposes
--------------------------------------
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof' "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph and
Schedule references are to the Articles, Sections, paragraphs and Schedules to
this Agreement unless otherwise specified, (iii) the word "including" and words
of similar import when used in this Agreement means
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"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, (v) provisions
shall apply, when appropriate, to successive events and transactions, and (vi)
all references to any period of days shall be deemed to be to the relevant
number of calendar days.
(b) This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section 12.11. Specific Performance. The parties hereto each acknowledge
--------------------
that, in view of the uniqueness of the subject matter hereof, the parties hereto
would not have an adequate remedy at law for money damages in the event that
this Agreement were not performed in accordance with its terms, and therefore
agree that the parties hereto shall be entitled to specific enforcement of the
terms hereof in addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 12.12. Remedies Cumulative. Except as otherwise provided in
-------------------
Article X, all rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered, as an instrument under seal, in their names and on their
behalf by their respective officer, thereunto duly authorized, on and as of the
date first set forth above,
RAYTHEON E-SYSTEMS. INC.
By: ___________________________
Name:
Title:
ACCESS RADIOLOGY CORPORATION
By: __________________________
Name:
Title:
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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.
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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:
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<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.
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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>
Attachments A through E to the foregoing Schedules have been omitted pursuant to
Rule 601(b)(2) under the Securities Act of 1933. The Attachments will be
provided supplementally to the Commission upon its request.
-9-
<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
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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
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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
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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.
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<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
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<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
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<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.
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<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
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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
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<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
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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.
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EXHIBIT 10.1
ACCESS RADIOLOGY CORPORATION
1994 STOCK PLAN
---------------
1. Purpose. The purpose of the ACCESS Radiology Corporation 1994 Stock
-------
Plan (the "Plan") is to encourage superior performance by key employees of
ACCESS Radiology Corporation (the "Company") and of any present or future parent
or subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"); (c) awards of stock in the Company ("Awards"); and
(d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. Administration of the Plan.
--------------------------
A. Board or Committee Administration. The Plan shall be administered
---------------------------------
by the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"); provided that the Plan shall be
administered to the extent required by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor
provision ("Rule 16b-3"), by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to the ratification of the grant or
authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and
<PAGE>
Awards and to make Purchases) Non-Qualified Options, Awards and
authorizations to make Purchases may be granted; (ii) determine the time or
times at which Options or Awards shall be granted or Purchases made; (iii)
determine the purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price specified in
paragraph 6; (iv) determine whether each Option granted shall be an ISO or
a Non-Qualified Option; (v) determine (subject to paragraph 7) the time or
times when each Option shall become exercisable, the conditions (if any)
under which such exercisability may be accelerated, and the duration of the
exercise period; (vi) extend the period during which outstanding Options
may be exercised; (vii) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options, Awards and
Purchases and the nature of such restrictions, if any, and (viii) interpret
the Plan and prescribe and rescind rules and regulations relating to it. If
the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not
treated as an ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted under it shall be
final unless otherwise determined by the Board. The Committee may from time
to time adopt such rules and regulations for carrying out the Plan as it
may deem advisable. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Stock Right granted under it.
B. Committee Actions. The Committee may select one of its members as
-----------------
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law); shall
be the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Subject to the provisions
--------------------------------------
of the first sentence of paragraph 2(A) above, if applicable, Stock Rights
may be granted to members of the Board. All grants of Stock
-2-
<PAGE>
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Consistent with the provisions of the first sentence of Paragraph
2(A) above, members of the Board who either (i) are eligible to receive
grants of Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the Plan or
the grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Stock Rights,
but any such member may be counted in determining the existence of a quorum
at any meeting of the Board during which action is taken with respect to
the granting to such member of Stock Rights.
3. Eligible Employees and Others. ISOs may be granted only to employees
-----------------------------
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation, or any member of the Company's Medical and Technical
Advisory Board. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
-----
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 4,950,000, subject to adjustment as provided in paragraph 13. If any Stock
Right granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares of Common
Stock subject to such Stock Right shall again be available for grants of Stock
Rights under the Plan. Shares of Common Stock underlying Stock Rights granted in
assumption of, or in substitution for, outstanding options or other rights
previously granted by a company acquired by the Company or with which the
Company combines shall not, except in the case of shares with respect to which
Stock Rights are granted to employees who are officers or directors of the
Company for purposes of Section 16 of the Exchange Act, be counted against
shares of Common Stock available for the grant of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be
------------------------
-3-
<PAGE>
granted under the Plan at any time on or after August 11, 1994 and prior to
August 10, 2004. The date of grant of a Stock Right under the Plan will be the
date specified by the Committee at the time it grants the Stock Right; provided,
however, that such date shall not be prior to the date on which the Committee
acts to approve the grant.
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. Price for Non-Qualified Options, Awards and Purchases. The
-----------------------------------------------------
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted, and the purchase price per share of stock granted
in any Award or authorized as a Purchase under the Plan shall in no event
be less than the minimum legal consideration required therefor under the
laws of any jurisdiction in which the Company or its successors in interest
may be organized.
B. Price for ISOs. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible employee
-----------------------------------------
may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior
to the date such Option is granted and
-4-
<PAGE>
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of
the Common Stock on the Nasdaq National Market, if the Common Stock is not
then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the
Common Stock is not reported on the Nasdaq National Market. If the Common
Stock is not publicly traded at the time an Option is granted under the
Plan, "fair market value" shall mean the fair value of the Common Stock as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at
arm's length.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
------------------
12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. Each Option shall be exercisable at such times and
-------
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the agreement granting each Option or otherwise. The
Committee may impose such conditions with respect to the exercise of
Options, including without limitation any relating to the application of
federal or state securities laws, as it may deem necessary or advisable.
B. Acceleration of Vesting. The Committee shall have the right to
-----------------------
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment
-5-
<PAGE>
of any Option granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph 16) if such
acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in paragraph 6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
-------------------------
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the
earlier of (a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into Non-
Qualified Options pursuant to paragraph 16. For purposes of this paragraph 9,
employment shall be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. Death; Disability.
-----------------
A. Death. If an ISO optionee ceases to be employed by the Company
-----
and all Related Corporations by reason of his or her death, any ISO owned
by such optionee may be exercised, to the extent otherwise exercisable on
the date of death, by the estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified expiration date of the
ISO or (ii) 180 days from the date of the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the
----------
Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her
on the
-6-
<PAGE>
date of termination of employment, for the number of shares for which he or
she could have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. Assignability. No Stock Right shall be assignable or transferable by
-------------
the grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The designation of a beneficiary by a
grantee does not constitute a transfer. Except as set forth in the previous
sentence, during the lifetime of a grantee each Stock Right shall be exercisable
only by such grantee.
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. In the event that the Committee determines that any
-----------
dividend or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust
-7-
<PAGE>
any or all of (i) the number of shares of Common Stock or other securities of
the Company (or number and kind of other securities or property) with respect to
which Stock Rights may be granted, (ii) the number of shares of Common Stock or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Stock Rights, and (iii) the grant or exercise
price with respect to any Stock Rights or, if deemed appropriate, make provision
for a cash payment to the holder of an outstanding Stock Right; provided, in
each case, that with respect to ISOs no such adjustment shall be authorized to
the extent that such authority would cause the Plan to violate Section 422(b)(1)
of the Code, as from time to time amended.
14. Means of Exercising Options. An Option (or any part or installment
---------------------------
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option (provided that any such shares
of stock acquired through exercise of options or otherwise as compensation from
the Company shall have been held for at least six months), (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of the exercise,
or (e) at the discretion of the Committee, by any combination of (a), (b), (c)
above. If the Committee exercises its discretion to permit payment of the
exercise price of an ISO by means of the methods set forth in clauses (b), (c),
(d) or (e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of an Option
shall not have the rights of a shareholder with respect to the shares covered by
such Option until the date of issuance of a stock certificate to such holder for
such shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
-8-
<PAGE>
15. Term and Amendment of Plan. This Plan was adopted by the Board on
--------------------------
August 11, 1994, subject, with respect to the validation of ISOs granted under
the Plan, to the approval of the Plan by the stockholders of the Company at the
next Meeting of Stockholders or, in lieu thereof, by written consent. If the
approval of stockholders is not obtained prior to August 11, 1995, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on August 10, 2004 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be materially increased (except by adjustment pursuant to paragraph
13); (b) the benefits accruing to participants under the Plan may not be
materially increased; (c) the requirements as to eligibility for participation
in the Plan may not be materially modified; (d) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (e) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. Conversion of ISOs into Non-Qualified Options. The Committee, at
---------------------------------------------
the written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of any portion of such ISOs. At the time
of such conversion, the Committee (with the consent of the optionee) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into
-9-
<PAGE>
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action.
17. Application of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
----------------------------------------------
granted under the Plan, each optionee agrees to notify the Company in writing,
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a
--------------------------------------
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of any Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such arrangement may include payment by the grantee in cash or
by check of the amount of the withholding taxes or, to the extent (if any) of
minimum legal withholding requirements and at the discretion of the Committee,
by the grantee's delivery of previously held shares of Common Stock (provided
that any such shares of stock acquired through exercise of options or otherwise
as compensation from the Company shall have been held for at least six months)
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of an Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
-10-
<PAGE>
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing Options shall be governed by the laws of Delaware, or the
laws of any other jurisdiction in which the Company or its successors in
interest may be organized.
22. Cancellation. Any provisions of this Plan or any Stock Right to the
------------
contrary notwithstanding, the Committee may cause any Stock Right granted
hereunder to be cancelled in consideration of a cash payment or alternative
Stock Right granted to the holder of such cancelled Stock Right equal in value
to the fair market value of such cancelled Stock Right.
23. No Rights to Awards. No employee or other person eligible to receive
-------------------
Stock Rights shall have any claim to be granted any Stock Rights, and there is
no obligation for uniformity of treatment of persons eligible to receive Stock
Rights or holders or beneficiaries of Stock Rights. The terms and conditions of
Stock Rights need not be the same with respect to each recipient.
-11-
<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.
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2.2 Authorization. All corporate action on the part of the Company and its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Investors Rights Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Series J Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the Initial Closing.
This Agreement and the Investors Rights Agreement, when executed and delivered,
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
2.3 Valid Issuance Of Preferred And Common Stock. The Series J Preferred
Stock that is being purchased by the investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Investors Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion of
the Series J Preferred Stock being purchased under this Agreement at each
Closing will have been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of the Restated Certificate, will be duly and
validly issued, fully paid and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investors Rights Agreement and under applicable state and federal securities
laws.
2.4 Governmental Consents. No consent, approval, qualification, order or
authorization of or filing with any local, state or federal governmental
authority is required on the part of the Company or any of its Subsidiaries in
connection with the Company's execution, delivery or performance of this
Agreement or the Investors Rights Agreement, the offer, sale or issuance of the
Series J Preferred Stock by the Company or the issuance of Common Stock upon
conversion of the Series J Preferred Stock, except (a) the filing of the
Restated Certificate with the Secretary of State of the State of Delaware and
(b) such filings as have been made prior to the Initial Closing, except any
notices of sale required to be filed with the Securities and Exchange Commission
under Regulation D of the Securities Act of 1933, as amended (the "Securities
Act"), and such post-closing filings as may be required under applicable state
securities laws, all of which will be timely filed within the applicable periods
therefor.
2.5 Capitalization And Voting Rights. The authorized capital of the
Company will consist immediately prior to the Initial Closing of:
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,081,834 shares are issued and outstanding.
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of
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which are issued and outstanding); (2) 450 of which have been designated as
Series C Preferred Stock (all of which are issued and outstanding); (3) 345 of
which have been designated as Series E Preferred Stock (344.39 of which are
issued and outstanding); (4) 1,000 of which have been designated as Series F
Preferred Stock (all of which are issued and outstanding); (5) 816 of which have
been designated as Series G Preferred Stock (815.87 of which are issued and
outstanding); (6) 400 of which have been designated as Series H Preferred Stock
(all of which are issued and outstanding); and (7) 7,230,000 of which have been
designated as Series J Preferred Stock (none of which will be issued or
outstanding immediately prior to the Initial Closing and up to 6,820,909 of
which will be sold pursuant to this Agreement).
(c) The outstanding shares of Common Stock and Preferred Stock are owned
by the stockholders and in the numbers specified in Section 2.5 of the Schedule
of Exceptions.
(d) The outstanding shares of Common Stock and Preferred Stock have been
duly authorized and validly issued, are fully paid and nonassessable and were
issued in accordance with the registration or qualification provisions of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(e) Except for (1) the conversion privileges of the Preferred Stock, (2)
the rights provided in the Investors Rights Agreement and (3) currently
outstanding options to purchase 1,267,657 shares of Common Stock granted to
employees pursuant to the Company's 1994 Stock Plan (the "Option Plan") and
currently outstanding options to purchase 59,228 shares of Common Stock granted
to employees outside of the Option Plan, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. In addition
to the aforementioned options, the Company has reserved an additional 1,582,343
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan. The Company is not a party or subject to
any agreement or understanding, and to the Company's knowledge there is no
agreement or understanding between any other persons, that affects or relates to
the voting or giving of written consents with respect to any security of the
Company or the voting by a director of the Company.
2.6 Subsidiaries. Set forth in Section 2.6 of the Schedule of Exceptions
is a description of each corporation owned by the Company (collectively, the
"Subsidiaries") and the security ownership thereof. The Company does not own or
control, directly or indirectly, any interest in any other corporation,
partnership, limited liability company, association or other business entity.
The Company is not a participant in any joint venture, partnership or similar
arrangement. All of the outstanding equity securities (including securities or
instruments exercisable for or convertible into equity securities) of each of
the Subsidiaries are owned by the Company beneficially and of record and are not
subject to any mortgages, liens, claims or encumbrances. There are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of
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any kind for the purchase or acquisition from the Company or any of the
Subsidiaries of any securities of any of the Subsidiaries.
2.7 Contracts And Other Commitments. Neither the Company nor any of its
Subsidiaries has or is bound by any contract, agreement, lease or commitment,
written or oral, absolute or contingent, other than (a) contracts for the
purchase of supplies and services that were entered into in the ordinary course
of business, do not involve more than $50,000 and do not extend for more than
one year beyond the date hereof, (b) sales contracts entered into in the
ordinary course of business and (c) contracts terminable at will by the Company
on no more than 30 days' notice without cost or liability to the Company or one
of its Subsidiaries that are not material to the conduct of the business of the
Company and its Subsidiaries. For the purpose of this Section 2.7, employment
and consulting contracts, contracts with labor unions, license agreements and
any other agreements relating to the acquisition or disposition of Intangibles
(as defined in Section 2.18) other than standard end-user license agreements
will not be considered to be contracts entered into in the ordinary course of
business.
2.8 Related Party Transactions. No employee, officer, consultant,
stockholder or director of the Company or any of its Subsidiaries or member of
his or her immediate family is indebted to the Company, nor is the Company or
any of its Subsidiaries indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than for (a) payment of salary for
services rendered, (b) reimbursement for reasonable expenses incurred on behalf
of the Company or any of its Subsidiaries and (c) other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under the Option Plan). To the Company's knowledge
(without making an investigation as to persons who are not officers or
directors), none of such persons has any direct or indirect ownership interest
in any firm or corporation with which the Company or any of its Subsidiaries is
affiliated or with which the Company or any of its Subsidiaries has a business
relationship, or any firm or corporation that competes with the Company or any
of its Subsidiaries, except that employees, stockholders, consultants, officers
or directors of the Company or any of its Subsidiaries and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company or any of its Subsidiaries. To the Company's knowledge, no
officer, director, consultant, employee or stockholder of the Company or any of
its Subsidiaries or any member of his or her immediate family is, directly or
indirectly, interested in any material contract with the Company or any of its
Subsidiaries (other than such contracts as relate to any such person's
employment with the Company or one of its Subsidiaries or ownership of capital
stock or other securities of the Company).
2.9 Registration Rights. Except as provided in the Investors Rights
Agreement, the Company is presently not under any obligation and has not granted
any rights to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
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2.10 Clearances, Approvals, Etc. The Company and its Subsidiaries have all
clearances, approvals, franchises, permits, licenses and any similar authority
including, without limitation, all approvals and clearances from the U.S. Food
and Drug Administration necessary for the conduct of their business as now being
conducted, and the Company believes they can obtain, without undue burden or
expense, any similar authority for the conduct of the business of the Company
and its Subsidiaries as presently proposed to be conducted. Neither the Company
nor any of its Subsidiaries is in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
2.11 Compliance With Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (a) any provision of its certificate
of incorporation or bylaws, (b) any provision of any mortgage, indenture,
agreement, instrument or contract to which it is a party or by which it is bound
or (c) to the best of the Company's knowledge, any judgment, order, writ,
decree, statute, rule, regulation or restriction applicable to it including,
without limitation, the U.S. Federal Food, Drug and Cosmetic Act, as amended,
and regulations promulgated thereunder, which default or violation has had or
could reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance by the Company of this Agreement and the Investors
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby will not result in any such violation or be in material conflict
with or constitute, with or without the passage of time or giving of notice,
either a material default under any such provision or an event that results in
the creation of any material lien, charge or encumbrance upon any assets of the
Company or any of its Subsidiaries or the suspension, revocation, impairment,
forfeiture or nonrenewal of any material franchise, permit, license or similar
authority applicable to the Company or any of its Subsidiaries, any of their
business or operations or any of their assets or properties.
2.12 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
or any of its Subsidiaries that questions the validity of this Agreement or the
Investors Rights Agreement or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in a Material
Adverse Effect or in any change in the current equity ownership of the Company.
Neither the Company nor any of its Subsidiaries is a party to or, to the best of
its knowledge, named in or subject to any order, writ, injunction, judgment or
decree of any court, government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company currently intends to initiate.
2.13 Disclosure. The Company has provided each Investor with all
information reasonably available to it without undue expense that such Investor
has requested in writing for deciding whether to purchase the Series J Preferred
Stock. To the best of the Company's knowledge after reasonable investigation,
neither this Agreement nor the Investors Rights Agreement nor the other written
materials made or delivered in connection with the transactions contemplated
hereby, taken as a whole, contain any untrue statement of a material fact or
omit to
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state a material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made or otherwise, not
misleading.
2.14 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series J Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.15 Title To Property And Assets; Leases. Except for (a) liens reflected
in the Financial Statements (as defined in Section 2.16), (b) liens for current
taxes not yet due or payable, (c) liens imposed by law and incurred in the
ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) liens in respect of
pledges or deposits under workers' compensation laws or similar legislation or
(e) minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use of such property, the Company and its
Subsidiaries have good and marketable title to their property and assets free
and clear of all mortgages, liens, claims and encumbrances. With respect to the
property and assets they lease, the Company and its Subsidiaries are in
compliance with such leases and, to the best of the Company's knowledge, hold a
valid leasehold interest free of any mortgages, liens, claims or encumbrances,
subject to clauses (a)-(d) above.
2.16 Financial Statements. The Company has delivered to each Investor its
audited consolidated financial statements (balance sheet and profit and loss
statement, statement of stockholders' equity and statement of cash flows
including notes thereto) at December 31, 1996 and for the fiscal years then
ended and its unaudited financial statements (balance sheet and profit and loss
statement and statement of cash flows) at June 30, 1997 and for the six months
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except that the unaudited
Financial Statements omit notes thereto required by generally accepted
accounting principles. The Financial Statements fairly present the financial
condition and operating results of the Company and each of the Subsidiaries on a
consolidated basis as of the dates and for the periods indicated therein
(subject in the case of unaudited financial statements to normal year end
adjustments). Except as set forth in the Financial Statements, neither the
Company nor any of its Subsidiaries has any material liabilities, contingent or
otherwise, other than (a) liabilities incurred in the ordinary course of
business subsequent to June 30, 1997 and (b) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements that in both cases, individually or in the aggregate, are not
material to the business, properties or financial condition of the Company and
its Subsidiaries, taken as a whole. Except as disclosed in the Financial
Statements, neither the Company nor any of its Subsidiaries is a guarantor or
indemnitor of any indebtedness of any other person or entity. Each of the
Company and its Subsidiaries maintains and will continue to
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maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.17 Changes. Since June 30, 1997 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries from that reflected
in the Financial Statements, except changes in the ordinary course of business
that have not had a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c) any waiver or compromise by the Company or any of its
Subsidiaries of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or any of its Subsidiaries, except
to the extent such satisfaction or discharge will not have a Material Adverse
Effect;
(e) any material change to a material contract or arrangement by
which the Company or any of its Subsidiaries or any of their assets is bound or
subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, consultant, director or stockholder of the Company
or any of its Subsidiaries;
(g) any sale, assignment or transfer of any material Intangibles of
the Company or any of its Subsidiaries;
(h) any resignation or termination of employment of any key employee
or key consultant of the Company or any of its Subsidiaries;
(i) any receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or any of its
Subsidiaries;
(j) any mortgage, lien, claim, encumbrance, pledge or security
interest created by the Company or any of its Subsidiaries with respect to any
of its material properties or assets, except liens for taxes not yet due or
payable;
(k) any declaration, setting aside or payment of any dividend or
other distribution of the Company's assets in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock by the Company;
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(l) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to have a Material Adverse Effect;
or
(m) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.17.
2.18 Intangibles. To the best of its knowledge, the Company and its
Subsidiaries own or possess sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes (collectively, "Intangibles") necessary for
their business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. Except for standard end-
user license agreements and licenses set forth in Section 2.18 of the Schedule
of Exceptions (the "Material Licenses"), there are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
or any of its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the Intangibles of any other person or
entity. To the Company's knowledge, each Material License is valid and in full
force and effect, and is enforceable by the Company or one of its Subsidiaries
in accordance with its terms. To the Company's knowledge, no person or entity
has violated or breached, or declared or committed any default under, any
Material License. To the Company's knowledge, no event has occurred, and no
circumstance or condition exists, that might (with or without notice or lapse of
time) (a) result in a violation or breach of any of the provisions of any
Material License, (b) give any person or entity the right to declare a default
or exercise any remedy under any Material License, (c) give any person or entity
the right to accelerate the maturity or performance of any Material License or
(d) give any person or entity the right to cancel, terminate or modify any
Material License. Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated or breached any provision of a Material License or misappropriated or
by conducting its business as proposed would misappropriate any of the
Intangibles of any other person or entity.
2.19 Employees; Employee Compensation. To the best of the Company's
knowledge, there is no strike, labor dispute or union organization activities
pending or threatened between the Company or any of its Subsidiaries and any of
their employees. None of the employees of the Company or any of its Subsidiaries
belongs to any union or collective bargaining unit. To the best of the Company's
knowledge, the Company and its Subsidiaries have complied in all material
respects with all applicable state and federal equal opportunity and other laws
related to employment. To the best of the Company's knowledge, no employee of
the Company or any of its Subsidiaries is or will be in violation of any
judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any of its Subsidiaries, or any other
party because of the nature of the business conducted or presently proposed to
be conducted by the Company or any of its Subsidiaries or to the use by the
employee of his or her best efforts with respect to such business. Neither the
execution nor delivery of this Agreement or the Investor Rights Agreement nor
the carrying on of the business of the Company and its
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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.
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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.
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3.4 Receipt Of Information. Such Investor believes it has received all
the information such Investor considers necessary or appropriate for deciding
whether to purchase the Series 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.
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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 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 10.3
INVESTORS RIGHTS AGREEMENT
--------------------------
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") is made as of September
30, 1997 by and among ACCESS RADIOLOGY CORPORATION, a Delaware corporation (the
"Company"), and the undersigned holders of the Company's Series J Preferred
Stock (individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. GENERAL.
1.1 Definitions. As used in this Agreement, the following terms will have
the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of this
Agreement.
(c) "Equity Securities" means (1) any Common Stock, Preferred Stock or
other equity security of the Company, (2) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock or other equity
security of the Company (including any option to purchase such a convertible
security), (3) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, Preferred Stock or other equity security of the
Company or (4) any such warrant or right.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Holder" means any person owning of record Registrable Securities
or any assignee of record of such Registrable Securities in accordance with
Section 2.10 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(g) "Initiating Holders" means the Holders of at least 30% of the
Registrable Securities then outstanding.
(h) "Investor" has the meaning set forth in the first paragraph of
this Agreement.
1
<PAGE>
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company in which the offering price per share is at least
$3.00 and the aggregate offering price to the public is in excess of
$15,000,000.
(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
(k) "Registrable Securities" means (1) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (2) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities will not include any securities sold by a person to the public either
pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferror's rights under Section 2 of this Agreement
are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed $15,000
of a single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which will
be paid in any event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale.
(p) "Shares" means the Company's Series J Preferred Stock issued
pursuant to that certain Series J Preferred Stock Purchase Agreement, dated as
of the date hereof, between the Company and the Investors (the "Purchase
Agreement").
(q) "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
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(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.9(a) of this
Agreement.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions On Transfer.
(a) No Holder will make any disposition of all or any portion of the
Shares or Registrable Securities unless and until:
(1) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(2) (A) The transferee has agreed in writing to be bound by this
Section 2.1, (B) such Holder has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder has furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Securities Act. The Company
will not require opinions of counsel for transactions made pursuant to Rule
144(k) except in unusual circumstances.
(3) Notwithstanding the provisions of Sections 2.1(a)(1) and
2.1(a)(2), no such registration statement or opinion of counsel will be
necessary for a transfer by a Holder that is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interests in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interests in the limited liability company, or (D) to a Holder's family
member or trust for the benefit of an individual Holder or a Holder's family
member or members, provided that the transferee will be subject to the terms of
this Section 2.1 to the same extent as if he, she or it were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable Securities
will (unless otherwise permitted by the provisions of this Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED,
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ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
(c) The Company will reissue promptly unlegended certificates at the
request of any holder thereof if the holder has obtained an opinion of counsel
(which counsel may be counsel to the Company) reasonably acceptable to the
Company to the effect that the securities represented by such certificate, may
lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement under the Securities Act
covering the sale of Registrable Securities that, if completed, would result in
a public offering of equity securities of the Company having an aggregate
offering price to the public in excess of $15,000,000, then the Company will,
within 30 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it will, within 15 days
after the above-described notice from the Company, so notify the Company in
writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company will include such information in the written notice referred to
in Section 2.2(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company (which underwriter or underwriters will be reasonably acceptable to a
majority in interest of the Initiating Holders). Notwithstanding any other
provision of this Section 2.2, if the underwriter advises the Company that
marketing factors require a limitation of the number
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of securities to be underwritten (including Registrable Securities) then the
Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting will be
withdrawn from the registration.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.2:
(1) during the period starting with the date of filing of, and
ending on the date 180 days following the effective date of the registration
statement pertaining to the Initial Offering, provided that the Company is
making reasonable and good faith efforts to cause such registration statement to
become effective;
(2) if, within 30 days of receipt of a written request from the
Initiating Holders pursuant to Section 2.2(a), the Company notifies the Holders
of its intention to file a registration statement with respect to a public
offering of its Common Stock (excluding a registration relating to an employee
benefit plan or with respect to a corporate reorganization or other transaction
under Rule 145 of the Securities Act) within 90 days, during the period
beginning on the date of such notice from the Company and ending 90 days
thereafter;
(3) after the Company has effected two registrations pursuant to
this Section 2.2 and such registrations have been declared or ordered effective;
or
(4) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 90 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company no
more than twice in any one-year period.
2.3 Piggyback Registrations.
(a) The Company will notify all Holders of Registrable Securities in
writing at least 30 days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and
will afford each such Holder an opportunity to include in such registration
statement all or part of
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such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it will, within 15 days after the above-described notice from the
Company, so notify the Company in writing. Such notice will state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder will nevertheless
continue to have the right to include any Registrable Securities in any
subsequent such registration statement or registration statements as may be
filed by the Company with respect to offerings of its securities, all upon the
terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives notice
under this Section 2.3 is for an underwritten offering, the Company will so
advise the Holders of Registrable Securities as a part of such notice. In such
event, the right of any Holder to be included in a registration pursuant to this
Section 2.3 will be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting will enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated: first, to the Company; second, to the Holders on a pro rata basis
based on the total number of Registrable Securities proposed to be sold by the
Holders (assuming conversion of all Shares); and third, to any other shareholder
of the Company on a pro rata basis (assuming conversion of all Preferred Stock).
(c) The Company will have the right to terminate or withdraw any
registration initiated or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration will be borne by the Company in
accordance with Section 2.5.
2.4 Form S-3 Registration.
(a) If the Company receives a written request from a Holder or Holders
that the Company file a registration statement on Form S-3 under the Securities
Act covering the registration of Registrable Securities having an aggregate
offering price to the public in excess of $500,000, then the Company will,
within 10 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration on Form
S-3 under the Securities Act of all Registrable Securities that the Holders
request to be registered. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
will, within 15 days after the above-described notice from the Company, so
notify the Company in writing.
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(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.4
and the Company will include such information in the written notice referred to
in Section 2.4(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters will be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 2.4, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company will so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting will be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting will be withdrawn from the registration.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.4:
(1) if Form S-3 (or any similar form) is not available for such
offering by the Holders;
(2) if the Company has effected two or more registrations
pursuant to this Section 2.4 within the 12 months preceding receipt of the
request described in Section 2.4(a); or
(3) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 90 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company nor
more than twice in any one-year period.
2.5 Expenses Of Registration. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4
will be borne by the Company. All Selling Expenses incurred in connection with
any registrations hereunder will be borne by the holders
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of the securities so registered pro rata on the basis of the number of shares so
registered. The Company will not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
in the case of a registration pursuant to Section 2.2, the Holders of a majority
of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right will be
forfeited by all Holders. If the Holders are required to pay the Registration
Expenses, such expenses will be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
2.6 Obligations Of The Company. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to 120 days or, if earlier, until the participating
Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders,
provided that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriting of such offering. Each
Holder participating in such underwriting will also enter into and perform its
obligations under such an agreement.
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(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2) a letter,
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 Termination Of Registration Rights. All registration rights granted
under this Section 2 will terminate and be of no further force and effect as to
any Holder if (a) the Company has completed its Initial Offering and is subject
to the provisions of the Exchange Act and (b) all Registrable Securities held by
such Holder (together with its affiliates, partners and former partners) may be
sold under Rule 144 during any 90-day period.
2.8 Delay Of Registration; Furnishing Information.
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the Company
to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders
will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Section 2.2, 2.3 or 2.4:
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(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, shareholders, officers, stockholders,
directors and legal counsel of such Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, or liabilities (joint or several) to
which any of such persons may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (individually a
"Violation") by the Company: (1) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto; (2) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, not misleading; or (3) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law in connection with the offering covered by such
registration statement; and the Company will reimburse each such Holder,
partner, shareholder, officer, director, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.9(a)
will not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent will not be unreasonably withheld, nor will the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that (i) it arises out of or is based upon a Violation that occurs
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder or (ii) in the case
of a sale directly by a Holder of Registrable Securities (including a sale of
such Registrable Securities through any underwriter retained by such Holder to
engage in a distribution solely on behalf of such Holder), such untrue statement
or alleged untrue statement or omission or alleged omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus (a copy of
which was delivered to such Holder by the Company at or prior to confirmation of
such sale), and such Holder failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of such sale of the Registrable
Securities to the person asserting any such loss, claim, damage or liability in
any case where such delivery is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors, stockholders, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such other Holder's partners, shareholders, directors, officers or legal
counsel, any
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underwriter (as defined in the Securities Act) for such Holder or any person who
controls such Holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of such persons may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation by the Company, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 2.9(b) will not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent will not be unreasonably
withheld; provided further, that in no event will any indemnity under this
Section 2.9(b) exceed the proceeds from the offering received by the
indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, will to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation or Violations that resulted
in such loss, claim, damage or liability, as well as
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any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party will be determined by a court of
law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
will any contribution by a Holder hereunder exceed the proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
will survive completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation with respect to which indemnification has been sought hereunder,
will, except with the consent of each indemnified party seeking indemnification
hereunder, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
2.10 Assignment Of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may only be assigned
by a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member or members, or (c) acquires at
least 25,000 shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee will agree to be
subject to all restrictions set forth in this Agreement.
2.11 Amendment Of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2.11 will be binding upon each Holder and the Company.
2.12 Limitation On Subsequent Registration Rights. After the date of this
Agreement, the Company will not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any equity securities of the Company
that would grant such holder registration fights that (a) would permit such
holder to cause the registration of equity securities held by such holder at a
time when the Holders would not be permitted hereunder to cause a registration
of Registrable Securities or (b) calls for any Registrable Securities to be
excluded from a registration statement pursuant to Section 2.3.
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2.13 "Market Stand-Off" Agreements. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed 180 days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that the obligations described in this Section 2.13
will not apply to a registration relating solely to employee benefit plans or a
registration relating solely to a SEC Rule 145 transaction. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of said
period. The Company will use all commercially reasonable efforts to require
each other person who has acquired or in the future acquires Common Stock or
Preferred Stock from the Company to be subject to the same or a substantially
equivalent market stand-off agreement.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company will use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder promptly upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information And Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and
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reserves as will be required under generally accepted accounting principles
consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, the Company will furnish
each Investor an audited consolidated balance sheet of the Company as at the end
of such fiscal year, and audited consolidated statements of income, cash flows
and shareholders' equity of the Company for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements will be
accompanied by a report thereon by independent public accountants of national
standing selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within 45 days thereafter, a
consolidated balance sheet of the Company as of the end of each such quarterly
period, and a consolidated statement of income and a consolidated statement of
cash flows of the Company for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments need not have been made.
(d) So long as an Investor (with its affiliates) owns not less than
250,000 shares of Registrable Securities (as adjusted for stock splits,
combinations and the like), the Company will furnish such Holder (1) within 60
days after the beginning of each fiscal year an annual budget and operating
plans for such fiscal year (and as soon as available, any subsequent revisions
thereto); and (2) as soon as practicable after the end of each month, and in any
event within 30 days thereafter, a consolidated balance sheet of the Company as
of the end of each such month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month and for the
current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Holder will have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company will not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information that is confidential and should not, therefore, be disclosed.
14
<PAGE>
3.3 Reservation Of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Series J Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.4 Termination Of Covenants. All covenants of the Company contained in
Section 3 will expire and terminate on the effective date of the registration
statement pertaining to a Qualified Public Offering.
4. BOARD OF DIRECTORS.
4.1 Election. At any annual or special meeting called, or any other
action taken, for the purpose of electing persons to or removing persons from
the Company's Board of Directors, the Holders will vote all of their Shares and
Registrable Securities during the term of this Agreement so as to cause the
representative of the Series J Preferred Stock required by Section 4.3(c)(5) of
the Certificate of Incorporation to be elected to the Board of Directors to be a
nominee of Bedrock Capital Partners I, L.P. (the "Bedrock Nominee").
4.2 Removal. In the event of any removal or resignation of the Bedrock
Nominee from the Board of Directors, the Holders will take all actions necessary
and appropriate to cause such vacancy to be filled in accordance with the
provisions of Section 4.1.
4.3 Best Efforts. The Company will use its best efforts to ensure that
the rights granted to the parties under this Section 4 are effective and that
the parties enjoy the benefits thereof. Such actions include, without
limitation, the use of the Company's best efforts to cause the nomination and
election of the Bedrock Nominee. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all of the provisions of this Section 4 and in the taking
of all such actions as may be necessary, appropriate or reasonably requested by
Bedrock Capital Partners I, L.P.
4.4 Grant of Proxy; Voting Trust. In the event the Holders do not vote
their Shares and Registrable Securities in accordance with this Section 4, each
Holder, to the extent necessary to carry out the terms of this Section 4, hereby
grants to Thomas Volpe an irrevocable proxy pursuant to the Delaware General
Corporation Law to vote such Holder's Shares and Registrable Securities in
accordance with the terms of this Section 4. To the extent this Section 4 or
any provision hereof is deemed illegal, invalid or unenforceable, the parties
hereto agree to enter into a voting trust agreement and to take all action
necessary to cause such voting trust agreement to become legal, valid, binding
and enforceable and to effectuate the terms and provisions thereof.
4.5 Amendment. This Section 4 may be amended only with the written
consent of the Company, Bedrock Capital Partners I, L.P. and the holders of 66
2/3% of the Registrable Securities.
15
<PAGE>
4.6 Termination. This Section 4 will terminate and be of no further force
and effect upon the later of (a) the second anniversary of the date hereof and
(b) the date on which the covenants contained in this Section 4 are not, in the
reasonable judgment of Bedrock Capital Partners I, L.P., necessary to maintain
the status of Bedrock Capital Partners I, L.P. as a "venture capital operating
company" for ERISA purposes. Bedrock Capital Partners I, L.P. will notify the
Company of the occurrence of the date described in clause (b) above.
Notwithstanding the foregoing, this Section 4 will terminate and be of no
further force and effect on such date as Bedrock Capital Partners I, L.P. ceases
to own any shares of capital stock of the Company.
5. RIGHT OF FIRST REFUSAL.
5.1 Subsequent Offerings By The Company. Each Investor will have a right
of first refusal to purchase its pro rata share of all Equity Securities that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 5.4. Each
Investor's pro rata share is equal to the ratio of (a) the number of shares of
the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) that such Investor is deemed to be a
holder of immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares)
immediately prior to the issuance of the Equity Securities.
5.2 Notice. If the Company proposes to issue any Equity Securities, it
will give each Investor written notice of its intention, describing the Equity
Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Each Investor will have 15 days from the giving of
such notice to agree to purchase its pro rata share of the Equity Securities for
the price and upon the terms and subject to the conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased. Notwithstanding the foregoing, the
Company will not be required to offer or sell such Equity Securities to any
Investor who would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale.
5.3 Unsubscribed Equity Securities. If not all of the Investors elect to
purchase their pro rata share of the Equity Securities, then the Company will
promptly notify in writing the Investors who do so elect and will offer such
Investors the right to acquire such unsubscribed shares. The Investors will
have five days after receipt of such notice to notify the Company of its
election to purchase all or a portion thereof of the unsubscribed shares. If
the Investors fail to exercise in full the foregoing right of first refusal, the
Company will have 60 days thereafter to sell the Equity Securities in respect of
which the Investors' rights were not exercised, at a price and upon general
terms and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Investors pursuant to Section 4.1. If
the Company has not sold such Equity Securities within said 60-day period, the
16
<PAGE>
Company will not thereafter issue or sell any Equity Securities without first
offering such securities to the Investors in the manner provided above.
5.4 Excluded Equity Securities. The right of first refusal established by
this Section 5.1 will have no application to any of the following Equity
Securities:
(a) 2,850,000 shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants or
other rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to the
Company's 1994 Stock Plan;
(b) 255,482 shares of Common Stock and 409,091 shares of Series J
Preferred Stock issuable upon exercise of warrants outstanding on the date
hereof;
(c) 59,228 shares of Common Stock issuable upon exercise of stock
options granted to employees, outstanding on the date hereof and not otherwise
described in Section 5.4(a);
(d) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(e) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued upon conversion of the Shares or any
other shares of Preferred Stock outstanding as of the date hereof; and
(g) any Equity Securities issued pursuant to any equipment leasing
arrangement or debt financing approved by the Board of Directors.
5.5 Termination. The right of first refusal set forth in this Section 5
will not apply to, and will expire upon the closing of, a Qualified Public
Offering.
6. RESTRICTION ON SECURITIES ISSUANCES.
Until January 1, 1999, the Company will not issue or grant any of its
securities as compensation (pursuant to its stock option plans or otherwise) to
any person that is not then an employee of the Company and then owns 1% of more
of the outstanding Common Stock of the Company (assuming exercise of all stock
options and other rights to acquire equity securities and conversion of all
Preferred Stock to Common Stock).
17
<PAGE>
7. MISCELLANEOUS.
7.1 Governing Law. This Agreement will be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
7.2 Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Holder and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby will be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
7.3 Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the parties
hereto and will inure to the benefit of and be enforceable by each person who is
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes.
7.4 Severabi1ity. In case any provision of the Agreement is invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
7.5 Amendment And Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least 66 2/3% of the Registrable Securities.
(b) Except as otherwise expressly provided, (1) the obligations of the
Company and the rights of the Holders under this Agreement may be waived by any
Holder only in writing and for all Holders only with the written consent of the
holders of at least 66 2/3% of the Registrable Securities and (2) the
obligations of the Holders and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include Additional Investors (as
defined in Section 1.3 of that certain Series J Stock Purchase Agreement of even
date herewith) as "Investors," "Holders" and parties hereto.
18
<PAGE>
7.6 Delays Or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach, default or
noncompliance of any other party under this Agreement will impair any such
right, power or remedy, nor will it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of any similar
breach, default or noncompliance thereafter occurring. Any waiver, permit,
consent, or approval of any kind or character on the part of any party hereto of
any breach, default or noncompliance under the Agreement or any waiver on such
Holder's part of any provisions or conditions of this Agreement must be in
writing and will be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law or otherwise
afforded to the parties hereto, will be cumulative and not alternative.
7.7 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by 10 days' advance written
notice to the other parties hereto.
7.8 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
7.9 Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
7.11 Antidilution Provisions. The Holders agree that for purposes of
Section 4.3(f) of the Restated Charter (as defined in the Purchase Agreement),
"Additional Shares of Common Stock" will not include up to 2,850,000 (the "Cap")
shares of the Company's Common Stock and/or options or other rights to purchase
the Company's Common Stock and the Company's Common Stock issued pursuant to
such options or other rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) issued pursuant to the existing Company
1994 Stock Option Plan, whether previously or hereafter issued, provided,
however, that if any options or other rights to purchase the Company's Common
Stock lapse
19
<PAGE>
unexercised, such options or rights will not be counted toward such Cap. Each
Holder agrees to vote in favor of, and to consent to, any amendment proposed by
the Company to the Restated Charter, the sole purpose of which is to amend the
Restated Charter to provide for the foregoing.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE>
The parties have executed this Agreement as of the date first above written.
The Company:
Access Radiology Corporation
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
The Investors:
Bedrock Capital Partners I, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
Bedrock Capital Partners Side-By-Side, L.P.
By: Volpe Brown Whelan & Company, LLC,
Its General Partner
Signature:
_________________________
Printed Name:
_____________________
Title:
____________________________
Address:
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Pacific Venture Group, L.P.
By: PVG Equity Partners, L.L.C
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
PVG Associates, L.P.
By: PVG Equity Partners, L.L.C.
Its General Partner
Signature: _______________________
Printed Name:
Title: Member
Address: __________________________
__________________________
__________________________
Delphi Ventures III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Delphi BioInvestments III, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
<PAGE>
VBW Partners, L.P.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Seaflower Health and Technology
Fund, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
J&L Sherblom Family, LLC
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredit Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Pictet Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
ICD, Ltd.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Guadamur LTD.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp.
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Rigel Investment Corp. #2
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Privat Kredir Bank
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
Gole Inc. A
Signature: _______________________
Printed Name: ____________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE>
EXHIBIT 10.4
AMENDMENT NO.1 TO
ACCESS RADIOLOGY CORPORATION
INVESTORS RIGHTS AGREEMENT.
This is Amendment No. 1 (the "Amendment"), dated as of November 13, 1997,
to the Investors Rights Agreement dated as of September 30, 1997 among ACCESS
Radiology Corporation ("the Company") and each of the holders of the Company's
Series J Preferred stock parties thereto (the "Investors").
The parties agree as follows:
1. Amendment of Section 5.4 of the Investors Rights Agreement. Section
-------------------------------------------------------------
5.4 of the Investors Rights Agreement, "Excluded Equity Securities", is amended
by adding a new clause (h) as follows:
(h) Shares of Series J Preferred Stock sold pursuant to the Series J
Preferred Stock Purchase Agreement dated as of September 30, 1997
among the Company and the Investors parties thereto, as amended from
time to time.
2. General. This Amendment may be executed in any number of counterparts,
--------
each of which will be an original, but all of which together will constitute the
same instrument. This Amendment shall become effective as of the date set forth
above when executed as required by Section 7.5 of the Investors Rights
Agreement. Except as expressly amended hereby, all of the terms of the Purchase
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1.
ACCESS Radiology Corporation
by_________________________
Scott Sheldon
President
Name of Investor:
by________________________
Name:
Title (if any):
<PAGE>
EXHIBIT 10.5
ACCESS RADIOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
THIS Securities PURCHASE AGREEMENT (this "Agreement") is made as of July
28, 1998 by and between ACCESS RADIOLOGY CORPORATION, a Delaware corporation
(the "Company"), and each of the persons and entities listed on the signature
pages hereof (individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. PURCHASE AND SALE OF Securities.
Sale and Issuance of Securities.
(a) The Company has filed with the Secretary of State of the State of
Delaware a Certificate of Designations, Preferences and Relative, Participating,
Optional or Other Special Rights of the Series K Preferred Stock in the form
attached hereto as Exhibit A (the "Certificate of Designation").
(b) On the terms of this Agreement, each Investor agrees to purchase,
if the Company delivers a Drawdown Notice as provided in Section 1.2(a), shares
of the Company's Series K Preferred Stock at a purchase price determined
pursuant to subsection (c) below. Each Investor agrees to purchase a number of
shares of the Company's Series K Preferred Stock equal to the amount of the
commitment (the "Commitment") set forth opposite each Investor's name on the
signature pages hereof divided by the Series K Purchase Price as defined in
subsection (c) below (rounded downward to the nearest whole share). The Series K
Preferred Stock will have the rights, privileges, and restrictions set forth in
the Certificate of Designation and the Company's Certificate of Incorporation.
The obligations of the Investors under this Agreement are several and not joint.
(c) If a Drawdown Notice is delivered on or before December 31, 1998,
the Series K Purchase Price will be $1.40 per share. If a Drawdown Notice is
delivered after December 31, 1998, the Series K Purchase Price will be $1.50 per
share.
(d) Upon the execution of this Agreement, the Company is delivering
to each Investor a warrant in the form of Exhibit B (each a "Warrant" and
collectively the "Warrants") to purchase a number of shares of Common Stock of
the Company equal to such Investor's Commitment multiplied by 290/1500 (rounded
downward to the nearest whole share).
Closing.
<PAGE>
(a) At any time on or after the date hereof and on or before March
31, 1999, the Company may deliver to each Investor a notice (the "Drawdown
Notice") stating that the Company has irrevocably elected to sell all of the
shares of Series K Preferred Stock subject to this Agreement to the Investors.
The closing of the purchase and sale of the Series K Preferred Stock (the
"Closing") will take place at the principal offices of the Company at 10:00 a.m.
(or at such other location and time of day as shall be agreed to by all of the
parties hereto) on the date that is 45 calendar days after the date of the
Drawdown Notice (or, if such 45th day is not a business day, on the next
succeeding business day, or any other date agreed to by all of the parties
hereto). If any Investor or Investors shall default on their obligations to
purchase Series K Preferred Stock at the Closing, all other Investors shall
nonetheless remain obligated to proceed with the Closing and to purchase Series
K Preferred Stock as set forth herein. If any Investor or Investors shall
default on their obligations to purchase Series K Preferred Stock at the
Closing, the Company shall promptly notify the non-defaulting Investors, each of
whom shall then have the option to take up and pay for (on the terms set forth
in this Agreement) all or part of such non-defaulting Investor's pro-rata share
(based upon the Commitments of all of the non-defaulting Investors) of the
shares of Series K Preferred Stock that the defaulting Investor or Investors
have failed to purchase.
(b) At the Closing, the Company will deliver to each Investor a
certificate representing the shares of Series K Preferred Stock that such
Investor is purchasing at Closing against payment of the purchase price
therefore by check or wire transfer to be made at the Closing by each Investor.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor as of the date
of this Agreement that, except as set forth on the schedule of exceptions
attached as Exhibit C (the "Schedule of Exceptions"):
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
business, properties or financial condition of the Company (a "Material Adverse
Effect"). The Company has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as now proposed to be conducted. The Company has all requisite corporate
power and authority to execute and deliver the Registration Rights Agreement in
substantially the form attached hereto as Exhibit D (the "Registration Rights
Agreement"), to issue and sell the Series K Preferred Stock and the Warrants
pursuant to this Agreement and the Common Stock (as defined in Section 2.5)
issuable upon conversion or exercise thereof (as the case may be) and to carry
out the provisions of this Agreement, the Warrants, the Registration Rights
Agreement and the Certificate of Designation.
-2-
<PAGE>
2.2 Authorization. All corporate action on the part of the Company and
its officers, directors and stockholders for the authorization, execution and
delivery of this Agreement, the Warrants and the Registration Rights Agreement,
the performance of all of the obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance), sale
and delivery of the Series K Preferred Stock and the Warrants issued or issuable
hereunder and the Common Stock issuable upon conversion or exercise thereof (as
the case may be) has been taken or will be taken prior to the Closing. This
Agreement, the Warrants and the Registration Rights Agreement, when executed and
delivered, will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
2.3 Valid Issuance Of Preferred And Common Stock. The Series K Preferred
Stock to be purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion or
exercise (as the case may be) of the Series K Preferred Stock and the Warrants
issued or issuable under this Agreement will have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Company's
Certificate of Incorporation, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration Rights
Agreement and under applicable state and federal securities laws.
2.4 Governmental Consents. No consent, approval, qualification, order or
authorization of or filing with any local, state or federal governmental
authority is required on the part of the Company for the execution, delivery or
performance of this Agreement, the Warrants or the Registration Rights
Agreement, and the offer, sale or issuance of the Series K Preferred Stock and
the Warrants, except (a) the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware and (b) such filings as have been
made prior to the date of this Agreement, except any notices of sale required to
be filed with the Securities and Exchange Commission under Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"), and such post-closing
filings as may be required under applicable state securities laws, all of which
will be timely filed within the applicable periods therefor.
2.5 Capitalization And Voting Rights. The authorized capital of the
Company consists on the date of this Agreement of:
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,056,698 shares are issued and outstanding.
-3-
<PAGE>
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of which are issued and outstanding); (2) 450 of which have been
designated as Series C Preferred Stock (all of which are issued and
outstanding); (3) 345 of which have been designated as Series E Preferred Stock
(344.39 of which are issued and outstanding); (4) 1,000 of which have been
designated as Series F Preferred Stock (all of which are issued and
outstanding); (5) 816 of which have been designated as Series G Preferred Stock
(815.87 of which are issued and outstanding); (6) 400 of which have been
designated as Series H Preferred Stock (all of which are issued and
outstanding); (7) 8,140,000 of which have been designated as Series J Preferred
Stock (7,730,909 of which are issued and outstanding); and (8) 1,785,800 have
been designated as Series K Preferred Stock (none of which are issued and
outstanding).
(c) The capitalization table attached to the Schedule of Exceptions
is accurate.
(d) The outstanding shares of Common Stock and Preferred Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
were issued in accordance with the registration or qualification provisions of
the Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(e) Except for (1) this Agreement, (2) the conversion privileges of
the Preferred Stock, (3) the Investors Rights Agreement dated as of September
30, 1997 among the Company and certain holders of the Company's Series J
Preferred Stock, (4) currently outstanding options to purchase 2,334,706 shares
of Common Stock granted to employees pursuant to the Company's 1994 Stock Plan
(the "Option Plan") and currently outstanding options to purchase 52,898 shares
of Common Stock granted to employees outside of the Option Plan, (5) warrants to
purchase 255,482 shares of Common Stock (not including the Warrants) granted in
connection with private placements of the Company's securities, and (6) warrants
to purchase 409,091 shares of Series J Preferred Stock, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. In addition to the aforementioned options, the company has
reserved an additional 412,596 shares of Common Stock for purchase upon exercise
of options to be granted in the future under the Option Plan. The Company is not
a party or subject to any agreement or understanding, and to the Company's
knowledge there is no agreement or understanding between any other persons, that
affects or relates to the voting or giving of written consents with respect to
any security of the Company or the voting by a director of the Company.
2.6 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest in any other business entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
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2.7 Contracts And Other Commitments. The Company is not bound by any
contract, agreement, lease or commitment, written or oral, absolute or
contingent, other than (a) contracts for the purchase or license of supplies,
software and services that were entered into in the ordinary course of business
that do not extend for more than one year from the date hereof, (b) sales
contracts entered into the ordinary course of business and (c) contracts
terminable at will by the Company on no more than 30 days' notice without cost
or liability to the Company. For the purpose of this Section 2.7, employment and
consulting contracts, contracts with labor unions, license agreements and any
other agreements relating to the acquisition or disposition of Intangibles (as
defined in Section 2.18) other than standard end-user license agreements will
not be considered to be contracts entered into the ordinary course of business.
2.8 Related Party Transactions. No employee, officer, consultant,
stockholder or director of the Company or member of his or her immediate family
is indebted to the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than for (a) payment
of salary for services rendered, (b) reimbursement for reasonable expenses
incurred on behalf of the Company and (c) other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under the Option Plan). To the Company's knowledge, no officer,
director, or employee of the Company or any member of his or her immediate
family is, directly or indirectly, interested in any material contract with the
Company (other than such contracts as relate to any such person's employment
with the Company or ownership of capital stock or other securities of the
Company).
2.9 Registration Rights. Except as provided in (1) the Investors Rights
Agreement dated as of September 30, 1997 among the Company and certain holders
of the Company's Series J Preferred Stock, and (2) Registration Rights
Agreements in substantially the form of the Registration Rights Agreement
attached hereto as Exhibit D, the Company is not under any obligation and has
not granted any rights to register under the Securities Act any of its
outstanding securities or any of its securities that may subsequently be issued.
2.10 Clearances, Approvals, Etc. The Company has all the clearances,
approvals, franchises, permits, licenses and any similar authority including,
without limitation, all approvals and clearances from the U.S. Food and Drug
Administration, the absence of which would have a Material Adverse Effect, and
the Company believes it can obtain, without undue burden or expense, any similar
authority the absence of which would have a Material Adverse Effect with respect
to the business of the Company as now proposed to be conducted. The Company is
not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.11 Compliance With Other Instruments. The Company is not in violation
or default of (a) any provision of its certificate of incorporation or bylaws,
(b) any provision of any mortgage, indenture, agreement, instrument or contract
to which it is a party or by which
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it is bound or (c) to the best of the Company's knowledge, any judgment, order,
writ, decree, statute, rule, regulation or restriction applicable to it
including, without limitation, the U.S. Federal Food, Drug and Cosmetic Act, as
amended, and regulations promulgated thereunder, which default or violation has
had or could reasonably be expected to have a Material Adverse Effect. The
execution, delivery and performance by the Company of this Agreement, the
Warrants and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in material conflict with or constitute, with or without the
passage of time or giving of notice, either a material default under any such
provision or an event that results in the creation of any material lien, charge
or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material franchise, permit, license
or similar authority applicable to the Company, its business, operations or any
of its material assets or properties.
2.12 Litigation. There is no action, suit proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Warrants or the Registration
Rights Agreement or the right of the Company to enter into such agreements, or
to consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in a Material Adverse Effect or
in any change in the current equity ownership of the Company. The Company is not
a party to or, to its knowledge, named in or subject to any material order,
writ, injunction, judgment or decree of any court, government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company currently intends to initiate.
2.13 Disclosure. The Company has provided each Investor with all
information reasonably available to it without undue expense that such Investor
has requested in writing for deciding whether to purchase the Series K Preferred
Stock.
2.14 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series K Preferred Stock and the Warrants as contemplated by
this Agreement are exempt from the registration requirements of the Securities
Act, and neither the Company nor any authorized agent acting on its behalf will
take action hereafter that would cause the loss of such exemption.
2.15 Title To Property And Assets; Leases. Except for (a) liens
reflected in the Financial Statements (as defined in Section 2.16), (b) liens
for current taxes not yet due or payable, (c) liens imposed by law and incurred
in the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) liens in respect of
pledges or deposits under workers' compensation laws or similar legislation, (e)
liens securing money borrowed from a bank or other financial institution, or (f)
minor defects in title, the Company has good and marketable title to its
property and assets free and
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clear of all material mortgages, liens, claims and encumbrances. With respect to
the property and assets it leases, the Company is in compliance with such leases
in all material respects and, to the Company's knowledge, hold a valid leasehold
interest free of any mortgages, liens, claims or encumbrances, subject to
clauses (a)-(f) above.
2.16 Financial Statements. The Company has delivered to each Investor
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholder's equity and statement of cash flows including notes
thereto) at December 31, 1997 and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement and
statement of cash flows) at March 31, 1998 and for the three months then ended (
the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except that the unaudited Financial
Statements omit notes thereto required by generally accepted accounting
principles. The Financial Statements fairly represent the financial condition
and operating results of the Company as of the dates and for the periods
indicated therein (subject in the case of unaudited financial statements to
normal year end adjustments). Except as set forth in the Financial Statements,
the Company has no material liabilities, contingent or otherwise, other than (a)
liabilities incurred in the ordinary course of business subsequent to March 31,
1998 and (b) obligations under contracts and commitments not required under
generally accepted accounting principles to be reflected in the Financial
Statements that in both cases, individually or in the aggregate, are not
material to the business, properties or financial condition of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person or entity. The Company
maintains a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.17 Changes. Since March 31, 1998 there has not been:
(a)any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not had
a Material Adverse Effect;
(b)any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c)any waiver of compromise by the Company of a valuable right or a
material debt owed to it, other than in the ordinary course of business;
(d)any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except to the extent such satisfaction
or discharge will not have a Material Adverse Effect;
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<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
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<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
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<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
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determinable period in the future, or for a market rise, or for sale if the
market does not rise. Such Investor has no such intention.
3.4 Receipt Of Information. Such Investor believes it has received all
the information such Investor considers necessary or appropriate for deciding
whether to purchase the Series K Preferred Stock and Warrants. Such Investor has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series K Preferred
Stock and Warrants and the business, properties, prospects and financial
condition of the Company and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to such Investor or to which such Investor had access. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement.
3.5 Investment Experience. Such Investor is experienced in evaluating and
investing in private placement transactions of securities of companies in a
similar stage of development to the Company and acknowledges that such Investor
is able to fend for itself, can bear the economic risk of such Investor's
investment and has such knowledge and experience in financial and business
matters that such Investor is capable of evaluating the merits and risks of the
investment in the Series K Preferred Stock. If other than an individual, such
Investor has not been organized for the purpose of acquiring the Series K
Preferred Stock.
3.6 Accredited Investor. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act.
3.7 Restricted Securities. Such Investor understands that the Series K
Preferred Stock, the Warrants, and the Common Stock issuable upon conversion or
exercise thereof (as the case may be) may not be sold, transferred or otherwise
disposed of without registration under the Securities Act or exemption
therefrom, and that in the absence of an effective registration statement
covering such securities or an available exemption from registration under the
Securities Act, such securities must be held indefinitely. In particular, such
Investor is aware that such securities may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that rule
are met. Among the conditions for use of Rule 144 may be the availability of
current information to the public about the Company. Such information is not now
available and the Company has no present plans to make such information
available.
4. DELIVERIES AT SIGNING.
The Company and the Investors have made the following deliveries to each
other upon the execution of this Agreement:
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4.1 Registration Rights Agreement. The Company and each Investor have
executed and delivered the Registration Rights Agreement.
4.2 Officer's Certificate. The President of the Company has delivered to
the Investors a certificate, dated as of the date of this Agreement, to the
effect that the representations and warranties of the Company contained in this
Agreement are true as of the date of this Agreement.
4.3 Secretary's Certificate. The Company has delivered to the Investors a
certificate of the Secretary of the Company, dated the date of this Agreement,
in form and substance satisfactory to the Investors.
4.4 Good Standing Certificate. The Company has delivered to the Investors
a long form good standing certificate with respect to the Company from the State
of Delaware dated as of a date not more than seven days prior to the date of
this Agreement.
4.5 Opinion of Counsel. Ropes & Gray, counsel to the Company, has
delivered to the Investors an opinion of counsel in form and substance
satisfactory to Palmer & Dodge LLP.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement will be governed by and under the laws
of the State of Delaware.
5.2 Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of and be binding upon,
the successors, assigns, heirs executors and administrators of the parties
hereto.
5.3 Severability. In case any provision of this Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
5.4 Amendment And Waiver.
(a)Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and Investors
representing at least 66 2/3% of the Commitments hereunder.
(a)Except as otherwise expressly provided, (1) the obligations of the
Company and the rights of the Investors under this Agreement may be waived by
any Investor only in writing and for all Investors only with the written consent
of Investors representing at least 66 2/3% of the Commitments hereunder, and (2)
the obligations of the Investors and the rights
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of the Company under this Agreement may be waived only with written consent of
the Company.
5.5 Delays Or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party hereto upon any breach, default or noncompliance
of any other party under this Agreement will impair any such right, power or
remedy, nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach, default or
noncompliance under the Agreement must be in writing and will be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law or otherwise afforded to the parties hereto, will be
cumulative and not alternative.
5.6 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of delivery. All communications will be sent to the party
to be notified at the address as set forth on the signature pages hereof or at
such other address as such party may designate by 10 days' advance written
notice to the other parties hereto.
5.7 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants, which will include, without limitation, all fees,
costs and expenses of appeals.
5.8 Titles And Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
5.10 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party will be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein.
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5.11 Finder's fees. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each Investor will indemnify and hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible. The Company will indemnify and hold harmless
each Investor from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against
liability or asserted liability) for which the Company or any of its officers,
employees, or representatives is responsible.
5.12 Expenses. The Company will pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement, and will pay the reasonable fees and expenses of Palmer & Dodge LLP
in connection with this Agreement upon presentation of a written statement
therefor and up to $2500 of the reasonable fees and expenses of Cooley Godward
in connection with this Agreement.
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<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
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<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
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<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.]
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<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 10.6
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This is an amendment (this "Amendment"), dated as of January 14, 1999, to
the Securities Purchase Agreement (the "Purchase Agreement") dated as of July
28, 1998 among ACCESS Radiology Corporation (the "Company") and the Investors
listed on the signature pages of the Purchase Agreement.
The parties agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
have the meanings set forth in the Purchase Agreement.
2. A new subsection (c) is added to Section 1 of the Purchase Agreement
under the heading "Closing", to read as follows:
(c) Notwithstanding anything else contained in this Agreement, the
obligation of Three Arch Bay Health Sciences Fund ("Three Arch Bay") to
purchase Series K Preferred Stock under its Commitment of $500,000 shall be
subject to the following special terms. Irrespective of the date of
delivery of the Drawdown Notice, Three Arch Bay may delay its purchase of
Series K Preferred Stock hereunder until March 31, 1999. Three Arch Bay
agrees to pay to the Company an amount in cash equal to interest on a
principal sum of $1,000,000 at the rate of 1% per month, accruing from the
date of closing of the sale by the Company of additional Series K Preferred
Stock and warrants expected to occur in January of 1999 (under a separate
Securities Purchase Agreement), until the earlier of (i) the date on which
Three Arch Bay and/or its related investors shall have purchased Series K
Preferred Stock (including pursuant to Three Arch Bay's Commitment
hereunder) from the Company for an aggregate price of at least $1,000,000
and (ii) March 31, 1999. Such amount shall be payable on the date that it
ceases to accrue pursuant to the preceding sentence. If Three Arch Bay
purchases Series K Preferred Stock for an aggregate price of less than
$1,000,000, the amount payable by Three Arch Bay under this subsection (c)
shall continue to accrue on the shortfall until payable as provided above.
Any portion of the Commitment of Three Arch Bay that is not satisfied by
March 31, 1999 shall lapse and be of no further effect, without any
requirement that the Company offer the shares subject thereto to the other
Investors pursuant to subsection (a) above. In such event, the Warrants
issued to Three Arch Bay shall void and not exercisable to the extent of a
number of the common shares subject thereto equal to the product of (i) the
portion of the Commitment of Three Arch Bay that remains unsatisfied
multiplied by (ii) 290/1500 (rounded upward to the nearest whole share).
3. This amendment shall become effective as of the date first above
written upon the satisfaction of the requirements of Section 5.4(a) of the
Purchase Agreement. This Amendment may be executed in counterparts, each of
which shall constitute an original, but all of which shall constitute a single
instrument. Except as expressly amended hereby, all provisions of the Purchase
Agreement shall remain in full force and effect. To the extent that any
provision of this Amendment conflicts with the Warrants held by Three Arch Bay,
this Amendment shall be deemed to be an amendment to such Warrants to conform
such Warrants to the provisions hereof.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as set
forth below.
ACCESS Radiology Corporation
by:
------------------------------
Name:
Title:
Three Arch Bay Health Sciences Fund
by:
------------------------------
Name:
Title:
Seaflower BioVenture Fund II, LLC
by:
------------------------------
J and L Sherblom Family, LLC
by:
------------------------------
Seaflower Health and Technology Fund,
LLC
by:
------------------------------
<PAGE>
EXHIBIT 10.7
ACCESS RADIOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of January
20, 1999 by and between ACCESS RADIOLOGY CORPORATION, a Delaware corporation
(the "Company"), and each of the persons and entities listed on Exhibit A
(individually, an "Investor" and collectively, the "Investors").
The parties agree as follows:
1. Purchase And Sale Of Stock
1.1. Sale and Issuance of Securities.
(a) The Company will adopt and file with the Secretary of State of the
State of Delaware on or before the Initial Closing (as defined in Section
1.2(a)) an Amendment to its Certificate of Incorporation in the form attached
hereto as Exhibit B (the "Charter Amendment").
(b) On the terms and subject to the conditions of this Agreement, each
Investor will purchase and the Company will sell and issue to each Investor a
number of shares of the Company's Series K Preferred Stock, and a warrant (a
"Warrant") to purchase a number of shares of Common Stock, in each case
determined in accordance with this subsection (b). The aggregate amount of the
purchase price to be paid by each Investor is set forth opposite the Investor's
name on Exhibit A. The number of shares of Series K Preferred Stock purchased
by each Investor shall be determined by dividing such Investor's aggregate
purchase price by $1.40. The number of shares of Common Stock issuable upon
exercise of the Warrant issued to each Investor shall be determined by
multiplying such Investor's aggregate purchase price by a fraction equal to
290/1500 (rounded down to the nearest whole share). The Series K Preferred
Stock will have the rights, privileges, and restrictions set forth in the
Charter Amendment and the existing Certificate of Designations, Preferences and
Relative, Participating, Optional or Other Special Rights of the Series K
Preferred Stock (the "Series K Designation"). The Warrants will be in the form
attached hereto as Exhibit C. The obligations of the Investors under this
Agreement are several and not joint.
1.2. Closing.
(a) The purchase and sale of the Series K Preferred Stock and
Warrants, by the Investors listed on Exhibit A as of the date hereof, will take
place at the offices of the Company at 10:00 a.m. on the date hereof or at such
other time and place as the Company and the Investors mutually agree, either
orally or in writing (which time and place are designated as the "Initial
Closing"). In addition, the purchase and sale of Series K Preferred Stock and
Warrants by and to the Additional Investors (as defined in Section 1.3) in
accordance with
<PAGE>
Section 1.3 will take place at the offices of the Company or at such other place
and at such times as the Company and the Additional Investors mutually agree,
either orally or in writing (together with the Initial closing, each such time
and place is designated as a "Closing").
(b) At each Closing, the Company will deliver to each Investor a
certificate representing the shares of Series K Preferred Stock that such
Investor is purchasing at Closing, and a Warrant to purchase the number of
shares of Common Stock determined in accordance with Section 1.1(b), against
payment of the purchase price therefor by check, wire transfer or as otherwise
set forth on Exhibit A.
1.3. Subsequent Sale of Securities.
If less than all of the authorized and unissued shares of Series K
Preferred Stock are sold at the Initial Closing, then, subject to the terms and
conditions of this Agreement, the Company may sell up to the balance of the
authorized and unissued Series K Preferred Stock to such persons as the Board of
Directors of the Company may determine at the same price per share as the Series
K Preferred purchased and sold at the Initial Closing, together with warrants to
purchase an amount of Common Stock determined in accordance with Section 1.1(b).
Shares of Series K Preferred Stock and warrants so issued may include shares and
warrants previously subject to the Securities Purchase Agreement dated as of
July 28, 1998 that have not been purchased and paid for pursuant thereto. Any
such sale shall be made pursuant to this Agreement upon the same terms and
conditions as those contained herein, and the purchasing persons or entities
("Additional Investors") shall become parties to this Agreement, and will be
Investors for all purposes hereunder and thereunder.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Investor as of the date
of this Agreement that, except as set forth on the schedule of exceptions
attached as Exhibit D (the "Schedule of Exceptions"):
2.1. Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified and authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
business, properties or financial condition of the Company (a "Material Adverse
Effect"). The Company has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted
and as now proposed to be conducted. The Company has all requisite corporate
power and authority to execute and deliver the Registration Rights Agreement
dated as of July 28, 1998 among the Company and certain holders of its equity
Securities (the "Registration Rights Agreement"), to issue and sell the Series K
Preferred Stock and the Warrants pursuant to this Agreement and the Common Stock
(as defined in Section 2.5) issuable upon conversion or exercise thereof (as the
case may be) and
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<PAGE>
to carry out the provisions of this Agreement, the Warrants, the Registration
Rights Agreement, the Charter Amendment and the Series K Designation.
2.2. Authorization. All corporate action on the part of the Company and
its officers, directors and stockholders for the authorization, execution and
delivery of this Agreement, the Warrants and the Registration Rights Agreement,
the performance of all of the obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance), sale
and delivery of the Series K Preferred Stock and the Warrants issued or issuable
hereunder and the Common Stock issuable upon conversion or exercise thereof (as
the case may be) has been taken or will be taken prior to the Initial Closing.
This Agreement, the Warrants and the Registration Rights Agreement, when
executed and delivered, will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity.
2.3. Valid Issuance Of Preferred And Common Stock. The Series K Preferred
Stock to be purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Registration Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion or
exercise (as the case may be) of the Series K Preferred Stock and the Warrants
issued or issuable under this Agreement will have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Company's
Certificate of Incorporation, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Registration Rights
Agreement and under applicable state and federal securities laws.
2.4. Governmental Consents. No consent, approval, qualification, order or
authorization of or filing with any local, state or federal governmental
authority is required on the part of the Company for the execution, delivery or
performance of this Agreement, the Warrants or the Registration Rights
Agreement, and the offer, sale or issuance of the Series K Preferred Stock and
the Warrants, except (a) the filing of the Charter Amendment with the Secretary
of State of the State of Delaware and (b) such filings as have been made prior
to the date of this Agreement, except any notices of sale required to be filed
with the Securities and Exchange Commission under Regulation D of the Securities
Act of 1933, as amended (the "Securities Act"), and such post-closing filings as
may be required under applicable state securities laws, all of which will be
timely filed within the applicable periods therefor.
2.5. Capitalization And Voting Rights. The authorized capital of the
Company consists on the date of this Agreement of:
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<PAGE>
(a) 35,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), of which 1,059,322 shares are issued and outstanding.
(b) 15,000,000 shares of Preferred Stock, par value $0.01 per share
("Preferred Stock"): (1) 716 of which have been designated as Series B Preferred
Stock (all of which are issued and outstanding); (2) 450 of which have been
designated as Series C Preferred Stock (all of which are issued and
outstanding); (3) 345 of which have been designated as Series E Preferred Stock
(344.39 of which are issued and outstanding); (4) 1,000 of which have been
designated as Series F Preferred Stock (all of which are issued and
outstanding); (5) 816 of which have been designated as Series G Preferred Stock
(815.87 of which are issued and outstanding); (6) 400 of which have been
designated as Series H Preferred Stock (all of which are issued and
outstanding); (7) 8,140,000 of which have been designated as Series J Preferred
Stock (7,730,909 of which are issued and outstanding); and (8) 3,935,000 will
have been designated as Series K Preferred Stock upon filing of the Charter
Amendment (1,428,571 of which are issued and outstanding giving effect to the
closing under the Securities Purchase Agreement dated July 28, 1998 ).
(c) The capitalization table attached to the Schedule of Exceptions is
accurate.
(d) The outstanding shares of Common Stock and Preferred Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
were issued in accordance with the registration or qualification provisions of
the Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(e) Except for (1) this Agreement, (2) the conversion privileges of
the Preferred Stock, (3) the Investors Rights Agreement dated as of September
30, 1997 among the Company and certain holders of the Company's Series J
Preferred Stock, (4) currently outstanding options to purchase 2,316,623 shares
of Common Stock granted to employees pursuant to the Company's 1994 Stock Plan
(the "Option Plan") and currently outstanding options to purchase 52,898 shares
of Common Stock granted to employees outside of the Option Plan, (5) warrants to
purchase 1, 147,903 shares of Common Stock (not including the Warrants) granted
in connection with private placements of the Company's securities, and (6)
warrants to purchase 409,091 shares of Series J Preferred Stock, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. In addition to the aforementioned options, the company has
reserved an additional 420,805 shares of Common Stock for purchase upon exercise
of options to be granted in the future under the Option Plan. The Company is
not a party or subject to any agreement or understanding, and to the Company's
knowledge there is no agreement or understanding between any other persons, that
affects or relates to the voting or giving of written consents with respect to
any security of the Company or the voting by a director of the Company.
-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,
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the Company has good and marketable title to its property and assets free and
clear of all material mortgages, liens, claims and encumbrances. With respect to
the property and assets it leases, the Company is in compliance with such leases
in all material respects and, to the Company's knowledge, hold a valid leasehold
interest free of any mortgages, liens, claims or encumbrances, subject to
clauses (a)-(f) above.
2.16. Financial Statements. The Company has delivered to each Investor
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholder's equity and statement of cash flows including notes
thereto) at December 31, 1997 and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement and
statement of cash flows) at November 30, 1998 and for the eleven months then
ended ( the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except that the unaudited
Financial Statements omit notes thereto required by generally accepted
accounting principles and the unaudited statement of cash flows is not in a
format consistent with generally accepted accounting principles. The Financial
Statements fairly represent the financial condition and operating results of the
Company as of the dates and for the periods indicated therein (subject in the
case of unaudited financial statements to normal year end adjustments). Except
as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (a) liabilities incurred in the
ordinary course of business subsequent to November 30, 1998 and (b) obligations
under contracts and commitments not required under generally accepted accounting
principles to be reflected in the Financial Statements that in both cases,
individually or in the aggregate, are not material to the business, properties
or financial condition of the Company. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person or entity. The Company maintains a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
2.17. Changes. Since November 30, 1998 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not had
a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that could reasonably be expected to have a Material Adverse Effect;
(c) any waiver Of Compromise by the Company of a valuable right or a
material debt owed to it, other than in the ordinary course of business;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except to the extent such
satisfaction or discharge will not have a Material Adverse Effect;
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(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any officer, consultant, director or stockholder of the Company or any of
its Subsidiaries;
(g) any sale, assignment or transfer of any material Intangibles of
the Company or any of its Subsidiaries, other than in the ordinary course of
business;
(h) any resignation or termination of employment of any key employee
or key consultant of the Company or any of its Subsidiaries;
(i) any mortgage, lien, claim encumbrance, pledge or security
interest created by the Company with respect to any of its material properties
or assets, except liens for taxes not yet due or payable and liens securing debt
for money borrowed to a bank or other financial institution;
(j) any declaration, setting aside or payment of any dividend or
other distribution of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(k) to the Company's knowledge, any other event or condition of any
character that could reasonably be expected to have a Material Adverse Effect;
or
(l) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.17.
2.18. Intangibles. To the best of its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and proprietary
rights and processes (collectively, "Intangibles") necessary for its business as
now conducted and as now proposed to be conducted without any conflict with or
infringement of the rights of others. Except for end-user license agreements,
confidentiality agreements, and licenses set forth in Section 2.18 of the
Schedule of Exceptions (the "Material Licenses"), there are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or party to any options, licenses or agreements of any kind
with respect to the Intangibles of any other person or entity. To the Company's
knowledge, each Material License is valid and in full force and effect, and is
enforceable by the Company in accordance with its terms. To the Company's
knowledge, no person or entity has materially violated or breached, or declared
or committed any default under, any Material License. To the Company's
knowledge, no event has occurred, and no circumstance or condition exists, that
could reasonably be expected to (with or without notice or lapse of time) (a)
result in a material violation or breach of any of the provisions of any
Material
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<PAGE>
License, (b) give any person or entity the right to declare a default or
exercise any remedy under any Material License, (c) give any person or entity
the right to accelerate the maturity or performance of any Material License or
(d) give any person or entity the right to cancel, terminate or modify any
Material License. Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated or breached any provision of a Material License or misappropriated or
by conducting its business as proposed would misappropriate any of the
Intangibles of any other person or entity.
2.19. Employees; Employee Compensation. To the Company's knowledge, there
is no strike, labor dispute or union or union organization activities pending or
threatened between the Company and any of its employees. None of the employees
of the Company belongs to any union or collective bargaining unit. To the
Company's knowledge, the Company has complied in all material respects with all
applicable state and federal equal opportunity and other laws related to
employment. To the Company's knowledge, no employee of the Company is or will
be in violation of any judgment, decree or order, or any term of any employment
contract, patent disclosure agreement or other contract or agreement relating to
the relationship of any such employee with the Company, or any other party
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Neither the execution nor delivery of
this Agreement or the Registration Rights Agreement nor the carrying on of
business of the Company nor the conduct of such business as proposed will, to
the Company's knowledge, conflict with or result in a breach of terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan (other
than the Option Plan), profit sharing plan, retirement agreement or other
employee compensation agreement. The Company is not aware that any officer or
key employee or consultant, or that any group of key employees or consultants,
of the Company intends to terminate their employment or service with the
Company, nor does the Company have a present intention to terminate the
employment or service of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each employee of
the Company or any of its Subsidiaries is terminable at the will of the
employer.
2.20. Tax Returns, Payments, And Elections. The Company has timely filed
all material tax returns and reports (federal, foreign, state and local) as
required by law. These returns and reports are true and correct in all material
respects. The Company has paid all material taxes and other assessments due,
except those contested in good faith. The provision for taxes as shown in the
Financial Statements is adequate for taxes due or accrued as of the dates
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "code"), to be treated as an S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to Code (other than elections
that relate solely to methods of accounting, depreciation, or amortization) that
would have a Material Adverse Effect. The Company has not had any tax
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<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.
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<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.
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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.
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<PAGE>
5.2. Performance. The Investors will have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before such Closing.
5.3. Qualifications. All authorizations, approvals or permits, if any, of
governmental authority or regulatory body of the United States or any state that
are required in connection with the lawful issuance and sale of the Series K
Preferred Stock and Warrants pursuant to this Agreement will be duly obtained
and effective as of such Closing.
5.4. Proceeding And Documents. All corporate and other proceedings in
connection with the transactions completed at such Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to the
Company, which will have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.
5.5. Registration Rights Agreement. Each Investor that is not a party to
the Registration Rights Agreement prior to such Closing will have executed
counterpart signature pages to the Registration Rights Agreement.
6. Miscellaneous.
6.1. Governing Law. This Agreement will be governed by and under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.2. Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Investor and for two
years after the closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate delivered by or on behalf of
the Company pursuant hereto at the Initial Closing in connection with the
transactions contemplated hereby will be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.
6.3. Successors And Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of and be binding upon,
the successors, assigns, heirs executors and administrators of the parties
hereto.
6.4. Severability. In case any provision of this Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
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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.
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<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]
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<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:
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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 10.8
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This is an amendment (this "Amendment"), dated as of May 7, 1999, to the
Securities Purchase Agreement (the "Purchase Agreement") dated as of January 20,
1999 among ACCESS Radiology Corporation (the "Company") and the Investors listed
on the signature pages of the Purchase Agreement.
The parties agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined have
the meanings set forth in the Purchase Agreement.
2. The first sentence of Section 1.3 of the Purchase Agreement is amended
to read in its entirety as follows:
Subject to the terms and conditions of this Agreement, the Company may sell
such additional shares of Series K Preferred Stock as may be authorized and
unissued from time to time to such persons as the Company may determine at
the same price per share as the Series K Preferred Stock purchased and sold
at the Initial Closing, together with warrants to purchase an amount of
Common Stock determined in accordance with Section 1.1(b).
3. This amendment shall become effective as of the date first above written
upon the satisfaction of the requirements of Section 6.5(a) of the Purchase
Agreement. This Amendment may be executed in counterparts, each of which shall
constitute an original, but all of which shall constitute a single instrument.
Except as expressly amended hereby, all provisions of the Purchase Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as set forth
below.
ACCESS Radiology Corporation
By: ________________________
Name:
Title:
BEDROCK CAPITAL PARTNERS I, L.P.
By: _______________________________
Title: Managing Member
<PAGE>
VBW EMPLOYEE BEDROCK FUND, L.P.
By: ________________________________
Title: Managing Member
CREDIT SUISSE FIRST BOSTON BEDROCK
FUND, L.P.
By: Bedrock General Partner I, LLC,
Attorney in Fact
By: __________________________________
Title: Managing Member
PACIFIC VENTURE GROUP, L.P.
By: PVG Equity Partners, L.L.C., General Partner
By: __________________________________
Name:
Title:
PVG ASSOCIATES, L.P.
By: PVG Equity Partners, L.L.C., General Partner
by: _____________________________________
Name:
Title:
DELPHI VENTURES III, L.P.
By: Delphi Management Partners III, L.L.C.,
General Partner
by: ________________________________
Name:
Managing Member:
-2-
<PAGE>
DELPHI BIOINVESTMENTS III, L.P.
by: Delphi Management Partners III, L.L.C.,
General Partner
by: __________________________
Name
Managing Member
CHILD HEALTH CORPORATION OF AMERICA
By: __________________________
Name:
Title:
BESSEC VENTURES IV L.P.
By: __________________________
Name:
Title:
BESSEMER VENTURE PARTNERS IV, L.P.
By: ___________________________
Name:
Title:
-3-
<PAGE>
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT is made as of July 28, 1998 by and
among ACCESS RADIOLOGY CORPORATION, a Delaware corporation (the "Company"), and
such holders of the Company's equity securities as shall execute a counterpart
signature page to this Agreement from time to time.
The parties agree as follows:
1. GENERAL
1.1 Definitions. As used in this Agreement, the following terms will have
the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of
this Agreement.
(c) "Equity Security" means (1) any Common Stock, Preferred Stock or
other equity security of the Company, (2) any security convertible, with or
without consideration, into any Common Stock, Preferred Stock or other equity
security of the Company (including any option to purchase such a convertible
security), (3) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, Preferred Stock or other equity security of the
Company, or (4) any such warrant or right; provided that "Equity Security" shall
not include (i) the Series J Preferred stock of the Company or any Common Stock
issued or issuable upon conversion thereof, or (ii) any security issued or
issuable after May 31, 1998 (other than upon conversion or exercise of an Equity
Security issued or issuable on such date) that is excluded from the definition
of Equity Security by action of the Company's Board of Directors (provided that
no Series K Security may be so excluded).
(d) "Exchange Act" means the Securities Exchange of 1934, as amended.
(e) "Holder" means any Investor owning of record Registrable
Securities or any assignee of record of such Registrable Securities in
accordance with Section 2.10 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
-1-
<PAGE>
(g) "Initiating Holders" means the Holders of at least 50% of the
Registrable Securities then outstanding.
(h) "Investor" means a holder of Equity Securities that is a party to
this Agreement.
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company in which the offering price per share is at least
$3.00 and the aggregate offering price to the public is in excess of
$15,000,000.
(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or documents.
(k) "Registrable Securities" means (1) Common Stock of the Company
issued from time to time to any Investor or issuable upon conversion or exercise
of any Equity Securities held by an Investor; and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities will not
include (1) Common Stock issued or issuable upon exercise of stock options
granted by the Company as compensation, (2) any Common Stock issued or issuable
after May 31, 1998 (other than upon conversion or exercise of an Equity Security
issued or issuable on such date) that is excluded from the definition of
Registrable Securities by action of the Company's Board of Directors (provided
that no Series K Security may be so excluded), (3) any Common Stock issued or
issuable upon conversion of the Series J Preferred stock of the Company, or (4)
any securities sold by a Person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed $15,000 of a single special counsel for the Holders, blue sky fees and
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expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which will be paid in any event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale.
(p) "Series K Securities" means the Series K Preferred Stock of the
Company, the Common Stock issued or issuable upon conversion thereof, the Common
Stock Purchase Warrants issued under agreements to purchase the Series K
Preferred Stock, and the Common Stock issued or issuable upon exercise of such
warrants.
(q) "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.9(a) of this
Agreement.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions On Transfer.
(a) No Investor will make any disposition of Equity Securities unless
and until:
(1) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement;
(2) (A) The transferee has agreed in writing to be bound by this
Section 2.1, (B) such Investor has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Investor has furnished the Company with an
opinion of counsel, reasonably satisfactory
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to the Company, that such disposition will not require registration of such
shares under the Securities Act; or
(3) The disposition is a disposition of Common Stock made in
compliance with Rule 144 under the Securities Act and the transferor has
provided to the Company reasonably detailed confirmation of such
compliance. Such confirmation will include an opinion of counsel if
reasonably requested by the Company, except that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144(k)
except in unusual circumstances.
(4) Notwithstanding the provisions of Sections 2.1(a)(1),
2.1(a)(2), and 2.1(a)(3), no registration statement or opinion of counsel
will be necessary for a transfer by an Investor that is (A) a partnership
to its partners or former partners in accordance with the partnership
interests, (B) a corporation to its shareholders in accordance with their
interests in the corporation, (C) a limited liability company to its
members or former members in accordance with their interests in the limited
liability company, (D) to a Investor's family member or trust for the
benefit of an individual Investor or a Investor's family member or members,
or (E) made without consideration to an entity that is controlled by,
controls, or is under common control with the transferring Investor,
provided that the transferee will be subject to the terms of this Section
2.1 to the same extent as if he, she or it were an original Investor
hereunder.
(b) Each certificate representing Equity Securities subject to this
Agreement issued after May 31, 1998 will (unless otherwise permitted by the
provisions of this Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL
FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
(c) The Company will reissue promptly unlegended certificates at the
request of any holder thereof if the holder has obtained an opinion of counsel
(which counsel may be counsel to the Company) reasonably acceptable to the
Company to the effect that the securities represented by such certificate, may
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lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement under the Securities Act
covering the sale of Registrable Securities that, if completed, would result in
a public offering of equity securities of the Company having an aggregate
offering price to the public in excess of $15,000,000, then the Company will,
within 30 days of the receipt thereof, give written notice of such request to
all other Holders and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it will, within 15 days
after the above-described notice from the Company, so notify the Company in
writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they will so
advise the Company as a part of their request made pursuant to this Section 2.2
and the Company will include such information in the written notice referred to
in Section 2.2(a). In such event, the right of any Holder to include its
Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 2.2, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated first, to the holders of Common
Stock issued or issuable upon conversion of Series J Preferred Stock who have
exercised Registration rights pursuant to Section 2.3 of the Investors Rights
Agreement dated as of September 30, 1997; and, second, to the Holders of
Registrable
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Securities that would otherwise be underwritten pursuant hereto on a pro rata
basis based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting will be withdrawn from the registration.
Notwithstanding the foregoing, the Company may, if approved by its Board of
Directors, unilaterally amend this Section from time to time to provide
purchasers of Equity Securities issued after May 31, 1998 with allocation rights
prior to those of Holders; provided that such rights may not have priority over
the rights of Holders to register Series K Securities hereunder.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.2:
(1) during the period starting with the date of filing of, and
ending on the date 180 days following the effective date of the
registration statement pertaining to the Initial Offering, provided that
the Company is making reasonable and good faith efforts to cause such
registration statement to become effective;
(2) if, within 30 days of receipt of a written request from the
Initiating Holders pursuant to Section 2.2(a), the Company notifies the
Holders of its intention to file a registration statement with respect to a
public offering of its Common Stock (excluding a registration relating to
an employee benefit plan or with respect to a corporate reorganization or
other transaction under Rule 145 of the Securities Act) within 90 days,
during the period beginning on the date of such notice from the Company and
ending 90 days thereafter;
(3) after the Company has effected two registrations pursuant to
this Section 2.2 and such registrations have been declared or ordered
effective (provided that there shall not be counted for purposes of this
clause (3) any registration in which there are included, as a result of the
operation of Section 2.2(b), less than 75% of the securities for which
Holders requested inclusion under Section 2.2(a)); or
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(4) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration to be effected at such
time, in which event the Company will have the right to defer such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided that such right to delay a request will be
exercised by the Company no more than twice in any one-year period.
(d) Notwithstanding anything else contained in this Agreement, no
Holder shall be permitted to cause the registration of any Registrable
Securities at any time when holders of Series J Preferred Stock of the Company
would not be permitted to cause registration of Common Stock issued or issuable
upon conversion thereof pursuant to the Investors Rights Agreement dated as of
September 30, 1997 among such holders and the Company.
2.3 Piggyback Registrations.
(a) The Company will notify all Holders of Registrable Securities in
writing at least 30 days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and
will afford each such Holder an opportunity to include in such registration
statement all or part of such Registrable Securities held by such Holder. Each
Holder desiring to include in any such registration statement all or any part of
the Registrable Securities held by it will, within 15 days after the above-
described notice from the Company, so notify the Company in writing. Such notice
will state the intended method of disposition of the Registrable Securities by
such Holder. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder will nevertheless continue to have the right to include any Registrable
Securities in any subsequent such registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives
notice under this Section 2.3 is for an underwritten offering, the Company will
so advise the Holders of Registrable Securities as a part of such notice. In
such event, the right of any Holder to be included in a registration pursuant to
this Section 2.3 will be conditioned upon such Holder's participation
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in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting will enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
such provision of this Agreement, if the underwriter determines in good faith
that marketing factors require a limitation of the numbers of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated: first, to the Company; second, to the holders of Common Stock
issued or issuable upon conversion of Series J Preferred Stock of the Company
who have exercised registration rights pursuant to the Investors Rights
Agreement dated as of September 30, 1997; third, to the Holders on a pro rata
basis based on the total number of Registrable Securities proposed to be sold by
the Holders (assuming conversion of all Shares); and fourth, to any other
shareholder of the Company on a pro rata basis (assuming conversion of all
Preferred Stock). Notwithstanding the foregoing, the Company may, if approved by
its Board of Directors, unilaterally amend this Section from time to time to
provide purchasers of Equity Securities issued after May 31, 1998 with
allocation rights prior to those of Holders; provided that such rights may not
have priority over the rights of Holders to register Series K Securities
hereunder.
(c) The Company will have the right to terminate or withdraw any
registration initiated or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration will be borne by the Company in
accordance with Section 2.5.
2.4 Form S-3 Registration.
(a) If the Company receives a written request from a Holder or
Holders that the Company file a registration statement on Form S-3 under the
Securities Act covering the registration of Registrable Securities having an
aggregate offering price to the public in excess of $500,000, then the Company
will, within 10 days of the receipt thereof, given written notice of such
request to all other Holders and effect, as soon as practicable, the
registration on Form S-3 under the Securities Act of all Registrable Securities
that the Holders request to be registered. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it will, within 15 days after the above-described notice from the
Company, so notify the Company in writing.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an
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underwriting, they will so advise the Company as part of their request made
pursuant to this Section 2.4 and the Company will include such information in
the written notice referred to in Section 2.4(a). In such event, the right of
any Holder to include its Registrable Securities in such registration will be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting will enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters will be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.4, if the underwriter
advises the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company will so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting will be allocated first, to the holders of Common
Stock issued or issuable upon conversion of Series J Preferred Stock who have
exercised registration rights pursuant to Section 2.3 of the Investors Rights
Agreement dated as of September 30, 1997; and, second, to the Holders of
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting will be
withdrawn from the registration. Notwithstanding the foregoing, the Company may,
if approved by its Board of Directors, unilaterally amend this Section from time
to time to provide purchasers of Equity Securities issued after May 31, 1998
with allocation rights prior to those of Holders; provided that such rights may
not have priority over the rights of Holders to register Series K Securities
hereunder.
(c) The Company will not be required to effect a registration
pursuant to this Section 2.4:
(1) if Form S-3 (or any similar form) is not available for such
offering by the Holders;
(2) if the Company has effected two or more registrations
pursuant to this Section 2.4 within the 12 months preceding receipt of the
request described in Section 2.4(a); or
(3) if the Company furnishes to the Holders a certificate signed
by the Board of Directors stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company
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and its shareholders for such registration to be effected at such time, in
which event the Company will have the right to defer such filing for a
period of not more than 90 days after receipt of the request of the
Initiating Holders; provided that such right to delay a request will be
exercised by the Company no more than twice in any one-year period.
(d) Notwithstanding anything else contained in this Agreement, no
Holder shall be permitted to cause the registration of any Registrable
Securities at any time when holders of Series J Preferred Stock of the Company
would not be permitted to cause registration of Common Stock issued or issuable
upon conversion thereof pursuant to the Investors Rights Agreement dated as of
September 30, 1997 among such holders and the Company.
(e) the Company covenants that it will, at any time when the Company
is otherwise eligible to register securities on Form S-3, use its best efforts
to timely file all reports required to be filed with the SEC under the
Securities Exchange Act of 1934.
2.5 Expenses of Registration. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4
will be borne by the Company. All Selling Expenses incurred in connection with
any registrations hereunder will be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company will not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request, or (b) in the
case of a registration pursuant to Section 2.2, the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right will be
forfeited by all Holders. If the Holders are required to pay the Registration
Expenses, such expenses will be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
2.6 Obligations Of The Company. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all
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reasonable efforts to cause such registration statement to become effective and
keep such registration statement effective for up to 120 days or, if earlier,
until the participating Holder or Holders have completed the distribution
related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statements and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders,
provided that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such state or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriter or underwriters of such
offering. Each Holder participating in such underwriting will also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly provide to each Holder a
corrected prospectus.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a
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majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities, and (2) a letter, dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 will terminate and be of no further force and effect as to
any Holder if (a) the Company has completed its Initial Offering and is subject
to the provisions of the Exchange Act, and (b) all Registrable Securities held
by such Holder (together with its affiliates, partners and former partners) may
be sold under Rule 144 during any 90-day period.
2.8 Delay Of Registration; Furnishing Information.
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the
Company to take an action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Section 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, shareholders, officers, stockholders,
directors and legal counsel of such Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages or liabilities (joint or several) to
which any of such persons may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (indi-
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vidually a "Violation") by the Company; (1) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (2) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading; or (3) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, shareholder, officer, director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 2.9(a) will not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent will not be unreasonably withheld, nor
will the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that (i) it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder, or (ii) in the case of a sale directly by a Holder of Registrable
Securities (including a sale of such Registrable Securities through any
underwriter retained by such Holder to engage in a distribution solely on behalf
of such Holder), such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus (a copy of which was delivered to such Holder by the
Company at or prior to confirmation of such sale), and such Holder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of such sale of the Registrable Securities to the person asserting
any such loss, claim, damage or liability in any case where such delivery is
required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors, stockholders, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such Holder's partners, shareholders, directors, officers or legal counsel,
any underwriter (as defined in the Securities Act) for such
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Holder or any person who controls such Holder or underwriter, against any
losses, claims, damages or liabilities (joint or several) to which any of such
persons may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation by the
Company, in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information furnished by
such Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 2.9(b) will not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent will not be unreasonably
withheld; provided, further, that in no event will any indemnity under this
Section 2.9(b) exceed the proceeds from the offering received by the
indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be
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<PAGE>
unavailable to an indemnified party with respect to any losses, claims, damage
or liabilities referred to herein, the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, will to the extent permitted by
applicable law contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation or Violations that resulted in such loss, claim, damage or liability,
as well as any other relevant equitable considerations. The relative fault of
the indemnifying party and the indemnifying party will be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
will any contribution by a Holder hereunder exceeds the proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
will survive completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation with respect to which indemnification has been sought hereunder,
will, except with the consent of each indemnified party seeking indemnification
hereunder, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
2.10 Assignment Of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may only be assigned
by a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member or members, (c) is controlled by,
controls, or is under common control with the transferring Holder and acquires
Registrable Securities for no consideration, or (d) acquires at least 25,000
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee with agree to be
subject to all restrictions set forth in this Agreement.
-15-
<PAGE>
2.11 "Market Stand-Off" Agreements. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Investor will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Investors (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed 180 days following the
effective date of the registration statement of the Company filed under the
Securities Act; provided that each officer and director of the Company that
holds more than 5000 shares of Common Stock (on an as-converted basis) shall
have entered into a similar agreement and provided, further, that the
obligations described in this Section 2.13 will not apply to a registration
relating solely to employee benefit plans or a registration relating solely to a
SEC Rule 145 transaction. The Company may impose stop-transfer instructions with
respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said period. The Company will use all
commercially reasonable efforts to require each other person who has acquired or
in the future acquires Common Stock or Preferred Stock from the Company to be
subject to the same or a substantially equivalent market stand-off agreement.
3. MISCELLANEOUS
3.1 Governing Law. This Agreement will be governed by and construed under
the laws of the State of Delaware.
3.2 Survival. The representations, warranties, covenants and agreements
made herein will survive any investigation made by any Holder and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby will be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
3.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof will inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and will inure to the benefit of and be enforceable by each person who is a
holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem
-16-
<PAGE>
and treat the person listed as the holder of such shares in its records as the
absolute owner and holder of such shares for all purposes.
3.4 Severability. In case any provision of the Agreement is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
3.5 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, (1) the obligations of
the Company and the rights of the Holders under this Agreement may be waived by
any Holder only in writing and for all Holders only with the written consent of
the holders of at least a majority of the Registrable Securities, and (2) the
obligations of the Holders and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
(c) Any amendment or waiver effected with the written consent of
holders of a majority of the Registrable Securities shall be binding upon all
holders of Registrable Securities.
3.6 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party hereto upon any breach, default or noncompliance
of any other party under this Agreement will impair any such right, power or
remedy, nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on the part of any party hereto of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of any
provisions or conditions of this Agreement must be in writing and will be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law or otherwise afforded to the
parties hereto, will be cumulative and not alternative.
3.7 Notices. All notices required or permitted hereunder will be in
writing and will be deemed effectively given: (1) upon personal delivery to the
party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified
-17-
<PAGE>
mail, return receipt requested, postage prepaid, or (4) one day after deposit
with a nationally recognized overnight courier, specifying next day deliver,
with written verification of receipt. All communications will be sent to the
Company at its principal office and to any Investor at such Investor's address
appearing in the records of the Company.
3.8 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
will be entitled to recover form the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement including, without limitation, reasonable fees and expenses of
attorneys and accountants which will include, without limitation, all fees,
costs and expenses of appeals.
3.9 Titles and Subtitles. The titles of the sections and subsections of
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
3.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessemer Venture Investors L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: VBW Employee Bedrock Fund, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Credit Suisse First Boston Bedrock Fund, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bedrock Capital Partners I, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Pacific Venture Group, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: PVG Associates, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Delphi BioInvestments III, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Delphi Ventures III, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessec Ventures IV, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bessemer Venture Partners IV, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: William T. Burgin
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Neill H. Brownstein
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robert H. Buescher
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: G. Felda Hardymon
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Christopher Gabrielli
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: David J. Cowan
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Bruce K. Graham
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Gautam A. Prakash
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robi L. Soni
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Joanna A. Strober
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Craighill Corporation
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Richard R. Davis
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Conaly Partners
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Lindsay 1994 Family Partnership, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: John G. McDonald
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Howard S. Markowitz
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Edward Park
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Robert J.S. Roriston
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Steven L. Williamson
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Woods 1994 Family Partnership, L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: BVP IV Special Situations L.P.
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Name of Investor: Child Health Investment Corporation
______________________________
Signature
Name:
Title (if any):
ACCESS RADIOLOGY CORPORATION
By_____________________________
Name:
Title:
<PAGE>
EXHIBIT 10.11
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.
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<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
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<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
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<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;
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<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>
EXHIBIT 10.12
HARTWELL GROUP LLC
COMMERCIAL LEASE
Amendment 1
WHEREAS Hartwell Group LLC, a Massachusetts limited liability company
located at 411 Waverley Oaks Rd. Waltham MA., is LESSOR, and ACCESS Radiology
Corporation, a Delaware corporation located at 313 Speen St. Natick MA 01760, is
LESSEE of certain Premises located at 25 Hartwell Ave. Lexington MA under a
Commercial Lease dated September 26, 1997, and
WHEREAS the Lessor has provided, at this date, certain tenant improvements
in excess the improvements contemplated in the Commercial Lease, to a total of
$69,242.02, for which LESSEE is responsible, and
WHEREAS the parties have agreed that the aforesaid costs will be amortized
over the five year term of the Lease at 12% carrying cost;
NOW, THEREFORE the Parties agree to amend the Commercial Lease as follows:
Add to Clause 3 TERM the following third paragraph:
----
"The Commencement Date for the Lease is deemed 10 be December 1, 1997,
substantial completion of all Build Out having occurred."
Delete the words after the heading of Clause 4. RENT:
"The LESSEE shall pay to LESSOR rent at the rates per year, shown below,
which rent shall be payable in advance in the monthly installments shown
below on the first day of each month.
<TABLE>
<CAPTION>
Years Annual Rent Mo. Rent $/SF Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
1-5 $549,234.00 $45,770.00 $21.62
- --------------------------------------------------------------------
</TABLE>
Insert the following words:
"The LESSEE shall pay to LESSOR rent at the rates per year. shown below, which
rent shall be payable in advance in tho monthly installments shown below on the
first day of each month.
<TABLE>
<CAPTION>
Years Annual Rent Mo. Rent $/SF Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
1-5 $567,779.00 $47,315.00 $22.35
- --------------------------------------------------------------------
</TABLE>
All other terms and cond--itions of this Commercial Lease remain in effect.
AGREED this 28th day of November 1997.
Hartwell Group LLC ACCESS Radiology Corporation
LESSOR LESSEE
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of
the 31st day of March, 1999 between ACCESS Radiology Corporation (the
"Employer"), a Delaware corporation, and Scott S. Sheldon (the "Executive"),
residing at 10 Emerson Place, Charles River Park, Boston, Massachusetts 02114.
Where not otherwise defined herein, capitalized terms used herein have the
meanings set forth in Section 7.1 of this Agreement.
WHEREAS, the Employer wishes to employ the Executive in an executive
capacity, as its President and Chief Executive Officer, and Executive wishes to
accept such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, the Employer and the Executive hereby agree as
follows:
1. Term.
----
1.1 The Employer employs the Executive and the Executive accepts such
employment, for a period ending on December 31, 2000 (the "Initial Term").
1.2 This Agreement shall be automatically renewed for additional one-year
terms (a "Renewal Term") upon the expiration of the Initial Term or any Renewal
Term unless either party delivers to the other written notice of expiration
within 60 days prior to the end of the then current term.
1.3 This Agreement may be terminated prior to the expiration of the
Initial Term or any Renewal Term as provided in Section 4 of this Agreement.
2. Positions and Duties.
--------------------
2.1 During the term of this Agreement, the Employer shall employ the
Executive to serve as President and Chief Executive Officer of the Employer
subject to the terms of this Agreement and except as Executive and Employer
otherwise agree in writing. The Executive shall perform such executive,
administrative, and operational duties customary for executives in such capacity
or as may be assigned to the Executive from time to time by the Board of
Directors of the Employer.
2.2 Executive agrees to serve the Employer faithfully and to the best of
the Executive's ability and to devote substantially all of the Executive's
business time, attention and efforts to the interests and business of the
Employer and its Subsidiaries. Nothing contained herein shall preclude
Executive from serving on the board of one business corporation (other than
Employer and its subsidiaries) and on boards of not-for-profit organizations and
trade groups, nor from participating in community affairs, provided that such
activities do not materially interfere with the Executive's performance of his
duties and responsibilities to the Employer. The Executive warrants to the
Employer that the Executive is not under any contractual commitment prohibiting
or limiting Executive's employment by the Employer.
2.3 The Executive agrees at all times to perform his duties in accordance
with applicable laws, rules, and regulations and the policies and procedures of
the Employer applicable to senior executives from time to time.
1
<PAGE>
3. Compensation, Benefits, and Expenses.
------------------------------------
3.1 Salary. During the period from the Effective Date through the
------
Initial Term and any Renewal Term of the Agreement, and except as otherwise
provided in Initial the Agreement, the Employer shall pay to Executive an annual
base salary of $175,000, or such greater amount as may be determined from time
to time by the Board of Directors (the "Base Salary Amount"), in installments
pursuant to the Employer's standard payroll policies and subject to such
withholding or deductions as may be mutually agreed between Employer and the
Executive or required by law. The Board of Directors shall review Executive's
salary not less frequently than annually, prior to February 1 of each year.
3.2 Incentive Compensation. In addition to the salary set forth in
----------------------
Section 3.1, Executive shall be entitled to earn incentive compensation in an
amount and on terms agreed to by the Employer and the Executive (the "Incentive
Compensation").
3.3 Benefits. During the period of his employment, Executive shall be
--------
entitled to participate in Employer's plans for the welfare and benefit of its
employees available to senior executive officers (including health, disability,
and life insurance programs, and vacation periods) as shall be established and
modified from time to time.
3.4 Expenses. During the term of this Agreement, the Employer authorizes
--------
Executive to incur reasonable and necessary out-of-pocket expenses in the course
of performing his duties and rendering services hereunder in accordance with
Employer's policies with respect thereto, and the Employer shall reimburse
Executive for all such expenses, provided (i) such expenses and the purpose for
which they were incurred are in accordance with Employer's policies, and (ii)
the Executive timely submits to the Employer expense reports and substantiation
of the expenses in accordance with Employer's policies.
3.5 Relocation. It is contemplated by the parties that Executive's
----------
permanent residence will remain in the greater Boston metropolitan area.
Executive will not be required to relocate his residence as a condition or term
of employment.
4. Termination.
-----------
4.1 Termination. The Executive's employment by Employer shall terminate
-----------
on the earliest Date of Termination upon the occurrence of any of the following
events:
4.1.1 the Executive's death;
4.1.2 the Executive is determined to be "permanently disabled" as defined
under the disability insurance policy covering the Executive;
4.1.3 termination of Executive by Employer for Cause, provided, however,
that the Board of Directors has given Executive written notice of its intention
to terminate Executive for Cause, specifying with particularity the grounds on
which the proposed termination for Cause is contemplated, which shall be acts or
failures to act on the part of Executive of which the Board first had knowledge
no more than six months prior to the giving of such notice;
4.1.4 termination of employment by Executive upon written notice to
Employer because of Constructive Termination Without Cause;
4.1.5 Resignation by Executive, which shall be upon 30 days' written
notice to Employer; or
4.1.6 termination of Executive by Employer without Cause.
2
<PAGE>
4.2 Time of Termination. Executive's employment with Employer (including
-------------------
all positions held with Employer or its Subsidiaries or affiliates) shall
terminate immediately upon the Date of Termination without further action by
Employer.
4.3 Effect of Termination of Employment.
-----------------------------------
(a) Termination Due to Death. In the event the Executive's employment is
------------------------
terminated due to his death, his estate or designated beneficiaries shall be
entitled to the following:
(i) continuation of installments of the Base Salary Amount in
effect as of the date of death for a period of six months following the date of
death, payable on Employer's standard payroll cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) the right to exercise any stock option held by Executive which
is then exercisable (other than any option qualified as an incentive stock
option under the Internal Revenue Code (an "ISO")) on the date of death for the
remainder of its term;
(v) any other amounts payable on death pursuant to any written
plans or policies of Employer; and
(vi) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(b) Termination Due to Disability. In the event the Executive's employment
-----------------------------
is terminated due to his permanent or total disability, Executive or his legal
representative shall be entitled to the following:
(i) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(ii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iii) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(iv) continuation of medical benefits and life insurance as provided
in Section 3.3 of this Agreement for so long as such continuation may be
provided at reasonable cost to the Employer under its insurance arrangements in
effect from time to time (provided that if the Executive accepts employment with
another employer that offers medical and/or life insurance benefits, then the
Employer's obligation to provide such benefits under this clause shall
terminate);
3
<PAGE>
(v) any other amounts payable according to the Employer's
disability policies; provided that disability payments that would be funded by
insurance on the date hereof shall be made to the extent that funds are
available under insurance policies maintained by the Employer which are then in
effect;
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive
(c) Termination without Cause or Constructive Termination Without Cause.
-------------------------------------------------------------------
In the event of the Executive's employment is terminated by Employer without
Cause (other than by death or disability) or there is a Constructive Termination
Without Cause, Executive shall be entitled to the following:
(i) a lump sum payment of $95,000, except that if such a
termination occurs within twelve months after a Change in Control , then the
Executive shall instead be entitled to continuation of installments of the Base
Salary Amount in effect as of the Date of Termination for a period of twelve
months following the Date of Termination, payable on Employer's standard payroll
cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned
but not yet paid, payable on their standard payment date;
(iv) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(v) continuation, for (x) twelve months if termination occurs
within twelve months of a Change in Control or (y) six months, if termination
occurs more than twelve months after a Change in Control, of medical benefits
and life insurance as provided in Section 3.3 of this Agreement and
participation in other welfare benefit plans (provided that if within such
period the Executive accepts employment with another employer that offers
medical and/or life insurance benefits, then the Employer's obligation to
provide such benefits under this clause shall terminate); and
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive
(d) Termination for Cause or Resignation. In the event Executive's
------------------------------------
employment is terminated by Employer for Cause or by Executive by Resignation,
Executive shall receive:
(i) Base Salary Amount in effect on, and payable through, the Date
of Termination in accordance with Employer's standard payroll policies; and
(ii) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to Executive.
(e) Termination due to Expiration of Term. In the event Employer elects
-------------------------------------
to not renew Executive's employment at the expiration of the Initial Term or any
Renewal Term, Executive shall receive:
4
<PAGE>
(i) a lump sum payment of $95,000, except that if such a
termination occurs within twelve months after a Change in Control , then the
Executive shall instead be entitled to continuation of installments of the Base
Salary Amount in effect as of the Date of Termination for a period of twelve
months following the Date of Termination, payable on Employer's standard payroll
cycle;
(ii) the balance of any incentive awards earned but not yet paid,
payable on their standard payment date;
(iii) the right to exercise any stock option held by Executive which
is then exercisable (other than any ISO) on the Date of Termination for the
remainder of its term;
(iv) continuation, for (x) twelve months if termination occurs
within twelve months of a Change in Control or (y) six months, if termination
occurs more than twelve months after a Change in Control, of medical benefits
and life insurance as provided in Section 3.3 of this Agreement and
participation in other welfare benefit plans (provided that if within such
period the Executive accepts employment with another employer that offers
medical and/or life insurance benefits, then the Employer's obligation to
provide such benefits under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
5. Return of Employer's Property.
-----------------------------
Immediately upon termination of the Executive's employment with the
Employer, the Executive shall deliver to the Employer all confidential
information of the Employer, including, but not limited to, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer discs and other electronic media) relating in any way to the
business of the employer in any way obtained by the Executive during the period
of his employment with Employer. Immediately upon termination of the
Executive's employment with the Employer, the Executive shall deliver to the
Employer all tangible property of Employer in the possession of Executive. The
obligations of Executive under this Section 5 shall survive the termination of
Executive's employment and the expiration or termination of this Agreement.
6. Remedies.
--------
In the event of any breach or threatened breach, the parties to this
Agreement may pursue any and all remedies available at law or in equity for any
such breach or threatened breach, including the recovery of damages. The
Executive shall be under no obligation to mitigate any damages suffered by
Executive and arising in connection with this Agreement, nor (except as provided
in Sections 4.3 (c)(v) and 4.3 (e)(iv)) shall any income or amounts payable to
Executive other than pursuant to this Agreement offset damages hereunder. No
payment due Executive under this Agreement shall be subject to any discount
based on accelerated payment or otherwise. Costs of litigation, including,
without limitation, costs of investigations, fees and expenses of attorneys,
shall be borne by the Executive (i) if the Executive or his estate or
beneficiaries shall actually receive lump sum payments or payments of Base
Salary (as the case may be) and medical, life insurance and welfare benefits
pursuant to Section 4.3 in the amounts and on the dates set forth therein (ii)
if the Executive shall have resigned or (iii) if the Executive shall have been
terminated for Cause (provided that if a court of competent jurisdiction shall
determine that Cause did not exist, then such costs of litigation shall be
repaid to the Executive). In other cases such costs of litigation shall be
borne by the Employer. Each party to this Agreement acknowledges that the
Employer would be irreparably harmed by any breach of
5
<PAGE>
Section 5 and that damages alone would be an inadequate remedy for any breach of
such Section. Accordingly, the Employer shall be entitled to equitable relief,
including without limitation a preliminary and/or permanent injunction for
specific performance, with respect to any such breach, without requirement of
the posting of a bond or other surety.
7. Miscellaneous.
-------------
7.1 Certain Definitions.
-------------------
(a) "Cause" shall mean (i) breach of this Agreement or any other
agreement between the Executive and the Employer, (ii) willful refusal to
perform assigned duties, (iii) dishonesty, (iv) willful injury or attempt to do
injury to the Employer, its assets or its business, (v) substance abuse or (vi)
any act that is a felony or any violation of laws or policies relating to
harassment or discrimination.
(b) "Constructive Termination Without Cause" shall mean:
(i) the Executive shall have ceased to be the President of the
Employer, the Executive shall have been assigned to duties which are
inconsistent with his position as President or limitations shall have been
imposed on the Executive's authority that are inconsistent with his position as
President, in each case without the Executive's prior written consent, whether
as a result of a transaction after the date hereof (including without limitation
a merger, reorganization, consolidation or similar transaction) or otherwise;
(ii) a change in management structure (including the Executive
having ceased to be the Chief Executive Officer of the Employer) shall have
occurred without the prior written consent of the Executive, with the result
that the Executive does not report directly to the Board of Directors of the
Employer and, not less than three months nor more than six months after the
effectiveness of such change, the Executive shall have delivered to all members
of the Board of Directors a written statement setting forth in detail the
reasons why the Executive is not willing to work with the individual to whom he
then reports;
(iii) without the Executive's prior written consent, there shall
have been a reduction in the Executive's then current Base Salary Amount or a
reduction in the Executive's target award opportunity (if any) or other long-
term performance incentive which is proportionately greater than corresponding
reductions in base salary, target award opportunities or long term performance
incentives (as the case may be) for senior management generally, or the Employer
shall have terminated or failed to continue to provide to the Executive any
employee benefit then otherwise provided to the Employer's senior management
generally, or the Employer shall have failed to include the Executive in any
incentive compensation plan of the Employer unless a plan providing
substantially the same opportunity is substituted;
(iv) the Employer shall engage in fraudulent conduct in which
Executive is not a participant;
(v) the Employer shall materially breach this Agreement and shall
not cure such breach within thirty days after written notice of such breach is
given by Executive to the Board of Directors of Employer, including, without
limitation, by failing to obtain the confirmation or assumption of the
Employer's obligations under this Agreement as required by Section 7.5 with
respect to any transaction referred to in that Section; or
(vi) the Employer shall require that Executive relocate to a
principal place of business outside of the Boston, Massachusetts metropolitan
area.
6
<PAGE>
(c) "Date of Termination" shall mean:
(i) if employment terminates because of Executive's death, the
date of death;
(ii) if employment terminates for "Cause", the date of notice
under Section 4.1.3;
(iii) if employment terminates due to "Resignation", then the
earlier of the Executive's last day of employment or 30 days from the receipt by
the Employer of notice of such Resignation;
(iv) if employment terminates because of permanent or total
disability, the date of determination that Executive is disabled as described in
Section 4.1.2 of this Agreement;
(v) if employment terminates for Constructive Termination Without
Cause, on the date set forth in Executive's notice as described in Section 4.1.4
of this Agreement; or
(vi) if employment terminates due to expiration of term, the date
of expiration.
d) "Change in Control" shall mean any transaction or series of related
transactions (including a merger, consolidation or sale of all or substantially
all assets) that results in the acquisition by any person or group of beneficial
ownership of securities of the Employer (or the entity resulting from a merger,
consolidation or sale of all or substantially all assets) representing a
majority of the aggregate voting power of the capital stock of the Employer (or
a resulting entity, calculated in all cases on a fully diluted basis); provided
that the acquisition of additional securities by any person or group that had
beneficial ownership, on January 21, 1999, of securities representing 10% or
more of the aggregate voting power of the capital stock of the Employer, shall
not be a Change in Control. The terms "group" and "beneficial ownership" shall
have the same meanings as under the Rules and Regulations of the United States
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934.
7.2 Notices. Any notices under this Agreement shall be in writing and
-------
shall be given by personal delivery, by local courier service, by certified or
registered letter, return receipt requested, or by a nationally recognized
overnight delivery service; and shall be deemed given when delivered in person
or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a
nationally recognized overnight delivery service at the addresses set forth
below or to such other address or addresses as either party shall have specified
in writing to the other party hereto.
If to the Employer:
ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, MA 02421
Attn.: Secretary
If to the Executive:
Scott S. Sheldon
10 Emerson Place
Charles River Park
Boston, MA 02114
7
<PAGE>
7.3 Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed in
accordance with, and be governed by, the laws of the state of Massachusetts
without reference to its principles of conflicts of law.
7.4 Entire Agreement; Amendment or Modification. This Agreement, the
-------------------------------------------
Restricted Stock Purchase Agreement between Employer and Executive, the
Shareholders Agreement between Employer, Executive and certain other
shareholders of Employer, the Confidentiality and Work Product Agreement between
Employer and Executive, the Non-Competition Agreement between Employer and
Executive and the Employer's written employment manuals and policies are all of
the agreements of the parties hereto relevant to the matters contained herein.
This Agreement supersedes the Employment agreement dated as of August 28, 1997
between the Executive and the Employer. No modification or amendment of any of
the provisions of this Agreement shall be effective unless in writing and signed
by the Executive and Employer. No failure to exercise any right or remedy
hereunder shall operate as a waiver thereof. No term or condition of this
Agreement shall be deemed to have been waived, nor shall a party be estopped
from enforcing any provision of this Agreement, except by a statement in writing
signed by the Executive or Employer, whichever party against whom such waiver or
estoppel is sought. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, such provision shall
be reformed to the extent necessary to make it valid or enforceable and to carry
out the intent of the parties, or if such reformation is not possible, the
remaining provisions of this Agreement shall continue in full force and effect.
7.5 Assignability; Binding Nature. This Agreement has been duly
-----------------------------
authorized by the Board of Directors of Employer and shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs (in
the case of the Executive) and permitted assigns. No rights or obligations of
the Employer under this Agreement may be assigned or transferred by the
Employer, except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Employer is not the
continuing entity, or the sale of all or substantially all of the assets of the
Employer, provided that the assignee or transferee shall expressly assume the
liabilities, obligations and duties of the Employer, as contained in this
Agreement. If requested by Executive, Employer will, prior to the effectiveness
of any merger or consolidation of Employer with or into any other entity or any
sale of all or substantially all of the assets of Employer, provide to Executive
the express written assumption of all of Employer's obligations hereunder by the
surviving or successor entity (or express written confirmation of such
obligations if Employer is the surviving entity). Executive may not assign any
of his rights hereunder without the prior written consent of Employer.
7.6 Survival. The Executive's obligations under Sections 5 and 6 will
--------
survive the termination of Executive's employment and the termination of
expiration of this Agreement. The Employer's obligations under this Agreement
will survive the termination of Executive's employment and the termination or
expiration of this Agreement until paid in full.
7.7 Headings. The paragraph and subparagraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
8
<PAGE>
7.8 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
several counterparts, and all counterparts so executed shall constitute one
agreement, binding on the parties hereto, notwithstanding that both parties are
not signatory to the original or the same counterpart. This Agreement shall
become effective as of the date first set forth above when executed by the
Executive and the Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written, and will be effective for all purposes as of
the Effective Date.
ACCESS Radiology Corporation
By: ______________________
EXECUTIVE
__________________________
Scott S. Sheldon
9
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of the
30th day of April, 1999 between ACCESS Radiology Corporation (the "Employer"), a
Delaware corporation, and Howard Pinsky (the "Executive"), residing at 18 York
Road, Mansfield, MA 02048. Where not otherwise defined herein, capitalized terms
used herein have the meanings set forth in Section 7.1 of this Agreement.
WHEREAS, the Employer wishes to employ the Executive in an executive
capacity, and Executive wishes to accept such employment, on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, the Employer and the Executive hereby agree as
follows:
1. Term.
----
1.1 The Employer employs the Executive and the Executive accepts such
employment, for a period ending on December 31, 2000 (the "Initial Term").
1.2 This Agreement shall be automatically renewed for additional one-year
terms (a "Renewal Term") upon the expiration of the Initial Term or any Renewal
Term unless either party delivers to the other written notice of expiration
within 60 days prior to the end of the then current term.
1.3 This Agreement may be terminated prior to the expiration of the
Initial Term or any Renewal Term as provided in Section 4 of this Agreement.
2. Positions and Duties.
--------------------
2.1 During the term of this Agreement, the Executive shall perform such
executive, administrative, and operational as may be assigned to the Executive
from time to time by the Chief Executive Officer, President, or the Board of
Directors of the Employer.
2.2 Executive agrees to serve the Employer faithfully and to the best of
the Executive's ability and to devote substantially all of the Executive's
business time, attention and efforts to the interests and business of the
Employer and its Subsidiaries. The Executive warrants to the Employer that the
Executive is not under any contractual commitment prohibiting or limiting
Executive's employment by the Employer.
2.3 The Executive agrees at all times to perform his duties in accordance
with applicable laws, rules, and regulations and the policies and procedures of
the Employer applicable to senior executives from time to time.
3. Compensation, Benefits, and Expenses.
------------------------------------
3.1 Salary. During the period from the Effective Date through the Initial
------
Term and any Renewal Term of the Agreement, and except as otherwise provided in
the Agreement, the Employer shall pay to Executive an annual base salary of
$160,000, or such greater amount as may be determined from time to time by the
Board of Directors (the "Base Salary Amount"), in installments pursuant to the
Employer's standard payroll policies and subject to such withholding or
deductions as may be mutually agreed between Employer and the Executive or
required by
1
<PAGE>
law. The Board of Directors shall review Executive's salary not less frequently
than annually, prior to February 1st of each year.
3.2 Incentive Compensation. In addition to the salary set forth in
----------------------
Section 3.1, Executive shall be entitled to earn incentive compensation in an
amount and on terms agreed to by the Employer and the Executive (the "Incentive
Compensation").
3.3 Benefits. During the period of his employment, Executive shall be
--------
entitled to participate in Employer's plans for the welfare and benefit of its
employees available to senior executive officers (including health, disability,
and life insurance programs, and vacation periods) as shall be established and
modified from time to time.
3.4 Expenses. During the term of this Agreement, the Employer
--------
authorizes Executive to incur reasonable and necessary out-of-pocket expenses in
the course of performing his duties and rendering services hereunder in
accordance with Employer's policies with respect thereto, and the Employer shall
reimburse Executive for all such expenses, provided (i) such expenses and the
purpose for which they were incurred are in accordance with Employer's policies,
and (ii) the Executive timely submits to the Employer expense reports and
substantiation of the expenses in accordance with Employer's policies.
3.5 Relocation. It is contemplated by the parties that Executive's
----------
permanent residence will remain in the greater Boston metropolitan area.
Executive will not be required to relocate his residence as a condition or term
of employment.
4. Termination.
-----------
4.1 Termination. The Executive's employment by Employer shall terminate
-----------
on the earliest Date of Termination upon the occurrence of any of the following
events:
4.1.1 the Executive's death;
4.1.2 the Executive is determined to be "permanently disabled" as defined
under the disability insurance policy covering the Executive;
4.1.3 termination of Executive by Employer for Cause, provided, however,
that the Board of Directors has given Executive written notice of termination
for Cause, specifying with particularity the grounds on which the termination
for Cause is based;
4.1.4 resignation by Executive, which shall be upon 30 days' written
notice to Employer; or
4.1.5 termination of Executive by Employer without Cause.
4.2 Time of Termination. Executive's employment with Employer
-------------------
(including all positions held with Employer or its Subsidiaries or affiliates)
shall terminate immediately upon the Date of Termination without further action
by Employer.
4.3 Effect of Termination of Employment.
-----------------------------------
(a) Termination Due to Death. In the event the Executive's employment
------------------------
is terminated due to his death, his estate or designated beneficiaries shall be
entitled to the following:
2
<PAGE>
(i) continuation of installments of the Base Salary Amount in effect
as of the date of death for a period of six months following the date of death,
payable on Employer's standard payroll cycle;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) any other amounts payable on death pursuant to any written plans
or policies of Employer; and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(b) Termination Due to Disability. In the event the Executive's
-----------------------------
employment is terminated due to his permanent or total disability, Executive or
his legal representative shall be entitled to the following:
(i) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable on the date
it would otherwise have been payable;
(ii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iii) continuation of medical benefits and life insurance as provided
in Section 3.3 of this Agreement for so long as such continuation may be
provided at reasonable cost to the Employer under its insurance arrangements in
effect from time to time (provided that if the Executive accepts employment with
another employer that offers medical and/or life insurance benefits, then the
Employer's obligation to provide such benefits under this clause shall
terminate);
(v) any other amounts payable according to the Employer's disability
policies; provided that disability payments that would be funded by insurance on
the date hereof shall be made to the extent that funds are available under
insurance policies maintained by the Employer which are then in effect;
(vi) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive
(c) Termination without Cause. In the event of the Executive's employment
-------------------------
is terminated by Employer without Cause (other than by death or disability),
Executive shall be entitled to the following:
(i) a lump sum payment of $86,000;
(ii) on account of any incentive compensation program for which
awards are computed on a formula basis, an amount equal to the amount earned by
the Executive as of the
3
<PAGE>
Date of Termination, pro rated for the portion of the calendar year elapsed
prior to the Date of Termination, and payable on the date it would otherwise
have been payable;
(iii) the balance on any other incentive awards previously earned but
not yet paid, payable on their standard payment date;
(iv) continuation, for six months, of medical benefits and life
insurance as provided in Section 3.3 of this Agreement and participation in
other welfare benefit plans (provided that if within such period the Executive
accepts employment with another employer that offers medical and/or life
insurance benefits, then the Employer's obligation to provide such benefits
under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive
(d) Termination for Cause or Resignation. In the event Executive's
------------------------------------
employment is terminated by Employer for Cause or by Executive by Resignation,
Executive shall receive:
(i) Base Salary Amount in effect on, and payable through, the Date
of Termination in accordance with Employer's standard payroll policies; and
(ii) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
(e) Termination due to Expiration of Term. In the event Employer elects
-------------------------------------
to not renew Executive's employment at the expiration of the Initial Term or any
Renewal Term, Executive shall receive:
(i) a lump sum payment of $86,000;
(ii) the balance of any incentive awards earned but not yet paid,
payable on their standard payment date;
(iii) continuation, for six months, of medical benefits and life
insurance as provided in Section 3.3 of this Agreement and participation in
other welfare benefit plans (provided that if within such period the Executive
accepts employment with another employer that offers medical and/or life
insurance benefits, then the Employer's obligation to provide such benefits
under this clause shall terminate); and
(v) any other amounts that accrued and became due and payable prior
to termination but have not yet been paid from Employer to Executive.
5. Return of Employer's Property.
-----------------------------
Immediately upon termination of the Executive's employment with the
Employer, the Executive shall deliver to the Employer all confidential
information of the Employer, including, but not limited to, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer discs and other electronic media) relating in any way to the
business of the employer in any way obtained by the Executive during the period
of his employment with Employer. Immediately upon termination of the
Executive's employment with the Employer, the Executive shall deliver to the
Employer all tangible property of Employer in the possession of Executive. The
obligations of Executive under this Section 5 shall survive the termination of
Executive's employment and the expiration or termination of this Agreement.
4
<PAGE>
6. Remedies.
--------
In the event of any breach or threatened breach, the parties to this
Agreement may pursue any and all remedies available at law or in equity for any
such breach or threatened breach, including the recovery of damages. The
Executive shall be under no obligation to mitigate any damages suffered by
Executive and arising in connection with this Agreement, nor (except as provided
in Sections 4.3 (c)(iv) and 4.3 (e)(iii)) shall any income or amounts payable to
Executive other than pursuant to this Agreement offset damages hereunder. No
payment due Executive under this Agreement shall be subject to any discount
based on accelerated payment or otherwise. Costs of litigation, including,
without limitation, costs of investigations, fees and expenses of attorneys,
shall be borne by the Executive (i) if the Executive or his estate or
beneficiaries shall actually receive lump sum payments or payments of Base
Salary (as the case may be) and medical, life insurance and welfare benefits
pursuant to Section 4.3 in the amounts and on the dates set forth therein (ii)
if the Executive shall have resigned or (iii) if the Executive shall have been
terminated for Cause (provided that if a court of competent jurisdiction shall
determine that Cause did not exist, then such costs of litigation shall be
repaid to the Executive). In other cases such costs of litigation shall be borne
by the Employer. Each party to this Agreement acknowledges that the Employer
would be irreparably harmed by any breach of Section 5 and that damages alone
would be an inadequate remedy for any breach of such Section. Accordingly, the
Employer shall be entitled to equitable relief, including without limitation a
preliminary and/or permanent injunction for specific performance, with respect
to any such breach, without requirement of the posting of a bond or other
surety.
7. Miscellaneous.
-------------
7.1 Certain Definitions.
-------------------
(a) "Cause" shall mean (i) breach of this Agreement or any other agreement
between the Executive and the Employer, (ii) willful refusal to perform assigned
duties, (iii) dishonesty, (iv) willful injury or attempt to do injury to the
Employer, its assets or its business, (v) substance abuse or (vi) any act that
is a felony or any violation of laws or policies relating to harassment or
discrimination.
(c) "Date of Termination" shall mean:
(i) if employment terminates because of Executive's death, the
date of death;
(ii) if employment terminates for "Cause", the date of notice
under Section 4.1.3;
(iii) if employment terminates due to "Resignation", then the
earlier of the Executive's last day of employment or 30 days from the receipt by
the Employer of notice of such Resignation;
(iv) if employment terminates because of disability, the date of
determination that Executive is disabled as described in Section 4.1.2 of this
Agreement;
(v) if employment terminates due to expiration of term, the
date of expiration.
7.2 Notices. Any notices under this Agreement shall be in writing and
-------
shall be given by personal delivery, by local courier service, by certified or
registered letter, return receipt requested, or by a nationally recognized
overnight delivery service; and shall be deemed given when delivered in person
or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a
nationally recognized
5
<PAGE>
overnight delivery service at the addresses set forth below or to such other
address or addresses as either party shall have specified in writing to the
other party hereto.
If to the Employer:
ACCESS Radiology Corporation
25 Hartwell Avenue
Lexington, MA 02421
Attn.: Secretary
If to the Executive:
Howard Pinsky
18 York Road
------------
Mansfield, MA 02048
-------------------
7.3 Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed in
accordance with, and be governed by, the laws of the state of Massachusetts
without reference to its principles of conflicts of law.
7.4 Entire Agreement; Amendment or Modification. This Agreement, the
-------------------------------------------
Restricted Stock Purchase Agreement between Employer and Executive, the
Shareholders Agreement between Employer, Executive and certain other
shareholders of Employer, the Confidentiality and Work Product Agreement between
Employer and Executive, the Non-Competition Agreement between Employer and
Executive and the Employer's written employment manuals and policies are all of
the agreements of the parties hereto relevant to the matters contained herein.
This Agreement supersedes the Employment agreement dated as of January 31, 1996
between the Executive and the Employer. No modification or amendment of any of
the provisions of this Agreement shall be effective unless in writing and signed
by the Executive and Employer. No failure to exercise any right or remedy
hereunder shall operate as a waiver thereof. No term or condition of this
Agreement shall be deemed to have been waived, nor shall a party be estopped
from enforcing any provision of this Agreement, except by a statement in writing
signed by the Executive or Employer, whichever party against whom such waiver or
estoppel is sought. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, such provision shall
be reformed to the extent necessary to make it valid or enforceable and to carry
out the intent of the parties, or if such reformation is not possible, the
remaining provisions of this Agreement shall continue in full force and effect.
7.5 Assignability; Binding Nature. This Agreement has been duly
-----------------------------
authorized by the Board of Directors of Employer and shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs (in
the case of the Executive) and permitted assigns. No rights or obligations of
the Employer under this Agreement may be assigned or transferred by the
Employer, except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Employer is not the
continuing entity, or the sale of all or substantially all of the assets of the
Employer, provided that the assignee or transferee shall expressly assume the
liabilities, obligations and duties of the Employer, as contained in this
Agreement. If requested by Executive, Employer will, prior to the effectiveness
of any merger or consolidation of Employer with or into any other entity or any
sale of all or substantially all of the assets of Employer, provide to Executive
the express written assumption of all of Employer's obligations hereunder by the
surviving or successor entity (or express written confirmation of such
obligations if Employer is the surviving entity). Executive may not assign any
of his rights hereunder without the prior written consent of Employer.
6
<PAGE>
7.6 Survival. The Executive's obligations under Sections 5 and 6 will
--------
survive the termination of Executive's employment and the termination of
expiration of this Agreement. The Employer's obligations under this Agreement
will survive the termination of Executive's employment and the termination or
expiration of this Agreement until paid in full.
7.7 Headings. The paragraph and subparagraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
7.8 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
several counterparts, and all counterparts so executed shall constitute one
agreement, binding on the parties hereto, notwithstanding that both parties are
not signatory to the original or the same counterpart. This Agreement shall
become effective as of the date first set forth above when executed by the
Executive and the Employer.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written, and will be effective for all
purposes as of the Effective Date.
ACCESS Radiology Corporation
By: _______________________________
Scott S. Sheldon--President
EXECUTIVE
___________________________________
Howard Pinsky
7
<PAGE>
EXHIBIT 10.15
DIRECTOR INDEMNITY AGREEMENT
AGREEMENT, dated as of _________________________, by and between
ACCESS Radiology Corporation (collectively with any affiliated entity to which
Indemnitee is named, appointed or elected a director, "ACCESS" or the "Company")
and the undersigned (collectively with his estate, heirs,
--------------------
executors, administrators and other personal representatives, the "Indemnitee").
In view of the substantial increase in directors' litigation costs and
risks and the limitations of the availability and coverage of liability
insurance, and in view of the mutual desire of the parties that the Indemnitee
render valuable services to the Company as a director, this Agreement is entered
into in order to provide assurance to the Indemnitee that the Company will
indemnify the Indemnitee against such costs and risks to the fullest extent
permitted by the laws of the State of Delaware.
1. Indemnification.
---------------
(a) To the fullest extent permitted by the laws of the State
of Delaware as from time to time in effect, the Company, which for purposes of
this Agreement shall mean ACCESS and any affiliated entity to which Indemnitee
is named, appointed or elected a director, whether or not such entity executes
this Agreement or an agreement equivalent to this Agreement, the naming,
appointing or electing of Indemnitee as director being deemed equivalent to
execution of this Agreement by such entity, jointly and severally shall
indemnify the Indemnitee against any judgments, penalties, fines, amounts paid
in settlement, and Expenses (as hereinafter defined) incurred in connection with
any actual or threatened Proceeding (as hereinafter defined) in regard to which
Indemnitee is or was a director of the Company, or serves or has served any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity at the request of the Company, to the fullest
extent permitted by the Company's certificate of incorporation, by-laws and
applicable law in effect on the date hereof and to such greater extent as
applicable law may hereafter from time to time permit, and to advance to
Indemnitee, as hereinafter provided, Expenses incurred in connection therewith.
(b) "Expenses" means all reasonable attorneys' fees and
expenses, retainers, court costs, transcription costs, duplicating costs, fees
of experts, fees of witnesses, travel expenses, printing and binding costs,
telephone charges, postage incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating or being or preparing to be a
witness in a Proceeding.
(c) "Proceeding" includes, without limitation, any action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or completed proceeding,
whether civil, criminal, administrative or investigative, whether by a third
party, by or in the right of the Company or by Indemnitee to enforce any rights
under this Agreement or otherwise against the Company or its affiliates.
2. Procedure for Indemnification. To obtain indemnification under
-----------------------------
this Agreement, Indemnitee shall send to the Company a written request for any
indemnification sought under this Agreement together with such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent the Indemnitee is entitled to
indemnification. The Secretary of the Company shall as soon as practicable
advise the Board of Directors in writing that the Indemnitee has requested
indemnification. The Company shall promptly make a finding whether the
indemnification requested is permitted by the laws of the State of Delaware, the
Company's certificate of incorporation, and its by-laws and, no later than 60
days following receipt by the Company of
________________________________________________________________________________
Director Indemnity Agreement Page 1 of 4 ACCESS Radiology Corporation
<PAGE>
such request, the Company shall cause the indemnification provided hereunder to
be authorized and paid unless the finding is that the indemnification requested
is not permitted.
(a) The burden of providing that such standard has not been met
shall be on the Company. During such 60-day period, the Indemnitee shall be
given an opportunity to be heard and to present evidence in connection with
consideration by the Board of Directors, independent legal counsel or the
stockholders, as the case may be, of any findings required by applicable law.
(b) If the Company does not pay the indemnification requested by
the Indemnitee within 60 days after the receipt of such request, the
Indemnitee's right to indemnification shall be enforceable in any court of
competent jurisdiction as set forth below. In any such action, neither the
making of, nor failure to make, any finding by the Company (including its board
of Directors, its independent counsel and its stockholders) that indemnification
of the Indemnitee is proper or not proper in the circumstances, shall be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct. The Indemnitee's reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
successfully establishing the right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Company.
(c) Any action instituted by the Company or by the Indemnitee
under this Agreement may be maintained as to the Company and the Indemnitee in
any court of competent jurisdiction, including but not limited to the Chancery
Court of the State of Delaware. The Company and the Indemnitee each consents to
the exercise of jurisdiction and venue over the Company or the Indemnitee, as
the case may be, by the Chancery Court of the State of Delaware in and for the
County of Delaware.
3. Procedure for Advancement of Expenses. Promptly upon receipt by
-------------------------------------
the Company of a written request for payment of expenses incurred by the
Indemnitee in defending any action or proceeding covered by Section 1,
accompanied by documentation of the expenses incurred and by an undertaking by
the Indemnitee to repay the amount advanced as and to the extent required by
Section 145 of the Delaware General Corporation Law, the Company shall pay an
amount requested to or as directed by the Indemnitee notwithstanding the absence
of the final disposition of the action or proceeding.
4. Voluntary Proceedings. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Indemnitee shall not be entitled to indemnification or any
advance pursuant to this Agreement in connection with any claim, action, or
proceeding initiated by the Indemnitee against the Company or any director or
officer of the Company except to enforce Indemnitee's rights under this
Agreement or any other written agreement between Indemnitee and the Company
unless the institution of such claim, action or proceeding was authorized prior
to its commencement by a majority vote of the Board of Directors or the
Indemnitee is successful, in whole or, with regard to the repayment of Expenses,
substantial part, on the merits in such claim, action or proceeding.
5. Other Rights; Continuation of Right to Indemnification. The
------------------------------------------------------
indemnification and advances of Expenses provided by this Agreement shall not be
deemed exclusive of any other rights consistent with the laws of the State of
Delaware to which a director seeking indemnification may be entitled under any
law (common or statutory), provision of the Company's certificate of
incorporation or by-laws, resolution of stockholders or directors, other
agreement or otherwise, both as to action in the Indemnitee's official capacity
and as to action in another capacity for the Company, and shall continue
notwithstanding that the Indemnitee may have ceased to be a director. The
provisions of this Agreement shall inure to the benefit of
________________________________________________________________________________
Director Indemnity Agreement Page 2 of 4 ACCESS Radiology Corporation
<PAGE>
the estate, heirs, executors, administrators and other personal representatives
of the Indemnitee.
6. Amendments. This Agreement may not be amended without the
----------
agreement in writing of the Company and the Indemnitee.
7. Severability. If any portion of this Agreement shall be deemed
------------
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, and the Company shall nevertheless indemnify
the Indemnitee as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated and to the
fullest extent permitted by applicable law.
8. Survival Clause. The Company acknowledges that, in providing
---------------
services to the Company, the Indemnitee is relying on this Agreement.
Accordingly, the Company agrees that its obligation hereunder will survive (i)
any actual or purported termination of this Agreement by the Company or its
successors or assigns whether by operation of law or otherwise, (ii) any change
in the Company's certificate of incorporation or by-laws and (iii) termination
of the Indemnitee's services to the Company (whether such services were
terminated by the Company or the Indemnitee), whether or not a claim is made or
an action or proceeding is threatened or commenced before or after the actual or
purported termination of this Agreement, change in the certificate of
incorporation or by-laws or termination of the Indemnitee's services.
9. Successors and Assigns of the Company. This Agreement shall be
-------------------------------------
binding on the successors and assigns of the Company whether by operation of law
or otherwise.
10. Governing Law. This Agreement will be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflict
laws).
(Remainder of page intentionally left blank)
________________________________________________________________________________
Director Indemnity Agreement Page 3 of 4 ACCESS Radiology Corporation
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first written above.
ACCESS Radiology Corporation
By: _______________________________________
Scott S. Sheldon
President
INDEMNITEE:
By: _______________________________________
________________________________________________________________________________
Director Indemnity Agreement Page 4 of 4 ACCESS Radiology Corporation
<PAGE>
EXHIBIT 10.16
DIRECTOR WORK PRODUCT AGREEMENT
The undersigned, a member of the Board of Directors of ACCESS Radiology
Corporation (the "Company") hereby agrees with the Company as follows:
If, at any time that I am a member of the Company's Board of Directors, the
Company and I shall communicate regarding any invention, modification,
discovery, design, development, improvement, process, software program,
documentation, formula, data, technique, know-how, secret or other intellectual
property (collectively, "Developments") that relates to the business of the
Company, all Developments involved in or resulting from such communication shall
be the sole property of the Company and its assigns. I agree to take (at the
Company's expense) all such actions and execute all such documents, including
without limitation applications for and assignments of patents and copyrights,
as the Company shall reasonably request to confirm or give effect to the rights
of the Company or its assigns hereunder.
Agreed:
____________________________________
Date:
____________________________________
<PAGE>
EXHIBIT 10.17
DIRECTOR CONFIDENTIALITY AGREEMENT
In connection with my membership on the Board of Directors of ACCESS
Radiology Corporation ("ACCESS" or the "Company"), I hereby agree with the
Company as follows:
1. Confidential Information.
------------------------
(a) As used herein, "Confidential Information" shall mean all present
and future confidential information created, discovered or developed by, or
otherwise known to, the Company (including, without limitation, confidential
information created, discovered, developed or made known to me by the Company),
or in which property rights have been or may in the future be assigned or
otherwise conveyed to the Company, which information has or may in the future
include, for example, trade secrets, processes, formulae, data and know-how,
discoveries, developments, designs, improvements, inventions, techniques,
marketing plans, strategies, forecasts, new products, unpublished financial
statements, budgets, projections, licenses, prices, costs and customer and
supplier lists. Confidential Information does not include, however, information
which (i) is approved for release by written authorization of the Company, (ii)
may be required by law or an order of any court, agency or proceeding to be
disclosed, (iii) is acquired by me outside of the course of my duties for the
Company or from third party rightfully possessed of such information that is not
otherwise proprietary to the Company, or (iv) was known by me prior to my
service as a member of the Board of Directors of the Company.
(b) I agree that all Confidential Information and rights relating
thereto shall be the sole property of the Company and that I will not disclose
to anyone outside of the Company or use for my own benefit or for the benefit of
others any Confidential Information without the Company's written permission and
shall keep secret all matters entrusted to me and shall not use or attempt to
use any such information in any manner which may injure or cause loss or may be
calculated to injure or cause loss whether directly or indirectly to the
Company.
2. Specific Performance.
--------------------
I agree that any breach of this Agreement by me will cause irreparable
damage to the Company and that in the event of such breach the Company shall
have, in addition to any and all remedies at law, the right to an injunction,
specific performance or other equitable relief to prevent the violation of my
obligation hereunder.
3. Miscellaneous.
-------------
(a) No Employment Obligation. I understand that this Agreement does
------------------------
not create any obligation on the part of the Company or any other person or
entity to continue my service as a member of the Board of Directors of the
Company.
(b) Entire Agreement; Modification. This Agreement constitutes the
------------------------------
whole agreement among the parties concerning the subject matter hereof and
supersedes all prior agreements related to such subject matter, and there are no
terms other than those contained herein. No variation hereof shall be deemed
valid unless in writing and signed by the parties hereto.
________________________________________________________________________________
Director Confidentiality Agreement Page 1 of 3 ACCESS Radiology Corporation
<PAGE>
(c) Severability. The invalidity or unenforceability of any
------------
provision hereof shall in no way affect the validity or enforceability of any
other provision, and any invalid or unenforceabable provision shall be reformed
so as to be valid and enforceable to the maximum extent permitted by law.
(d) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Massachusetts.
(e) Notices. All notices hereunder shall be deemed given when sent
-------
by certified mail to the recipient's last known address.
(f) Non-Waiver. The waiver by any party of a breach of any provision
----------
of the Agreement shall not operate or be construed as a waiver of any subsequent
breach.
(g) Assignment by the Company. The Company shall have the right to
-------------------------
assign this Agreement to its successors and assigns, and all covenants and
agreements hereunder shall inure to the benefit of and be enforceable by its
successors or assigns.
(h) Acknowledgments. I hereby acknowledge and agree that the
---------------
enforcement of this Agreement is necessary to ensure the preservation,
protection and continuity of the business, trade secrets and goodwill of the
Company. I agree that, due to the proprietary nature of the Company's business,
the restrictions set forth in the Agreement are reasonable as to time and scope.
(Remainder of page intentionally left blank)
________________________________________________________________________________
Director Confidentially Agreement Page 2 of 3 ACCESS Radiology Corporation
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ACCESS Radiology Corporation DIRECTOR:
By: ____________________________ ____________________
Scott S. Sheldon--President Director Name
Date: ____________________________ Date:_______________
________________________________________________________________________________
Director Confientiality Agreement Page 3 of 3 ACCESS Radiology Corporation
<PAGE>
EXHIBIT 10.18
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.
THE WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE PROVISIONS OF A
SECURITY HOLDER'S AGREEMENT DATED AS OF MARCH 8TH, 1996, BY AND BETWEEN THE
COMPANY AND THE HOLDER NAMED THEREIN, AS IT MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION.
ACCESS RADIOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
WARRANT NO. __________ SHARES DATE:_______
HOLDER:
1. Right to Purchase; Exercise Price. Subject to the terms and conditions
---------------------------------
set forth herein, the holder of this Warrant shall have the right to purchase
from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company shall issue
and sell to ____________________ ("the Holder"),( , ) fully paid and non-
----------
assessable shares of Common Stock of the Company at a price of $.50 per share
(the "Exercise Price"). This Warrant may be exercised in whole or in part on any
business day on or after the date of issue until the close of business on March
31, 2001, after which this Warrant shall cease to be exerciseable. The Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant are subject to adjustment as provided in Section 3.
2. Procedure For Exercise. (a) This Warrant shall be exercised by
----------------------
surrender to the Company at its principal office of this Warrant, with the form
of election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. Upon receipt of this Warrant, with the
form of election to purchase set forth as Exhibit 1 duly completed and executed
by the holder, and payment of the Exercise Price as provided above, the Company
will promptly deliver to the holder a certificate for the Common Stock issuable
upon exercise, registered in the name of the holder.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Common Stock subject hereto, a new Warrant shall be
issued by the Company to the holder evidencing the right to purchase those
shares of Common Stock with respect to which this Warrant remains unexercised.
(c) If any fractional share of Common Stock would be delivered upon
exercise, the Company may issue such fractional share or pay to the holder an
amount in cash equal to the fair market value of such fractional share as
determined in good faith by the Board of Directors of the Company.
3. Adjustments. (a) In case the Company shall at any time subdivide (by
-----------
any stock split, stock dividend or otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
________________________________________________________________________________
ACCESS Radiology Corporation Page 1 of 4
Warrant
<PAGE>
(b) If any merger or consolidation of the Company with or into any other
entity, any sale or other disposition of all or substantially all of the
Company's assets, or any capital reorganization or reclassification of the
capital stock of the Company shall be effected, in any such case in such a way
that holders of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such merger or consolidation, sale or other disposition of assets or
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the exercise
of this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such exercise had such merger or consolidation, sale
or other disposition of all or substantially all assets or reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustment of the Exercise Price) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
(c) Upon each adjustment of the Exercise Price pursuant to paragraph (a) of
this Section 3, this Warrant shall, after such adjustment, represent the right
to purchase, at the adjusted Exercise Price, a number of shares of Common Stock
obtained by (i) multiplying the number of shares purchasable upon the exercise
of this Warrant prior to such adjustment by the Exercise Price in effect prior
to such adjustment and (ii) dividing the product so obtained by the Exercise
Price in effect after such adjustment.
(d) Upon any adjustment of the Exercise Price or the number of shares of
Common Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
(e) In case at any time:
(1) the Company shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Company shall offer for subscription pro rata to the
--- ----
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of said
cases, the Company shall give, by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, addressed to the holder at
the address of the holder as shown on the books of the Company, (a) at least 20
days' prior written notice of the date on which the books of the Company shall
close or a record shall be
________________________________________________________________________________
ACCESS Radiology Corporation Page 2 of 4
Warrant
<PAGE>
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up and
(b) in the case of such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
(f) The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise in full of this Warrant. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Exercise
Price in effect at the time. The Company will not take any action which results
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
(g) As used in this Warrant, the term "Common Stock" shall mean and include
the Company's authorized Common Stock, par value $.01 per share, as constituted
on the date of this Warrant, and shall also include any capital stock of any
class of the Company thereafter authorized which shall neither be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; provided that the shares of Common Stock issuable upon exercise
of this Warrant shall include only shares designated as Common Stock of the
Company on the date of this Warrant, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in paragraph 3(b).
4. Restrictions on Transfer. The holder understands that (i) this Warrant
------------------------
and the Common Stock issuable upon exercise hereof have not been registered
under the Securities Act of 1933 or any state securities law by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and such state laws,
(ii) this Warrant and the Common Stock issuable upon exercise hereof must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act and such state securities laws or is exempt from such
registration, (iii) this Warrant and the Common Stock issuable upon conversion
thereof will bear a legend to such effect, and (iv) the Company will make a
notation on its transfer books to such effect.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
(b) This Warrant may be amended or modified, and any provision hereof may
be waived, with and only with the written consent of the Company and the holder.
________________________________________________________________________________
ACCESS Radiology Corporation Page 3 of 4
Warrant
<PAGE>
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:_____________________________
Scott S. Sheldon--President
________________________________________________________________________________
ACCESS Radiology Corporation Page 4 of 4
Warrant
<PAGE>
Exhibit 1
to Form of Warrant
NOTICE OF EXERCISE
To ACCESS Radiology Corporation:
The undersigned, the holder of Common Stock Purchase Warrant No. of
--------
ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase ___________ shares of Common Stock of
the Company subject to such Warrant. The holder is delivering with this notice
the Warrant and payment of the aggregate exercise price of $__________ by
certified or official bank check or wire transfer as provided in the Warrant.
Signed:
__________________________________
Name of Holder:
__________________________________
Address:
__________________________________
__________________________________
<PAGE>
EXHIBIT 10.19
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.THE
WARRANT REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE PROVISIONS OF A
SECURITIES PURCHASE AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS
OF XXXX, 1998, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON
FILE AT THE OFFICES OF THE CORPORATION.
ACCESS RADIOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
WARRANT NO.___ _______ SHARES DATE: __________, 1998
1. Right to Purchase; Exercise Price. (a) Subject to the terms and
----------------------------------
conditions set forth herein, the holder of this Warrant shall have the right to
purchase from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company
shall issue and sell to the holder, __________ (______) fully paid and non-
assessable shares of Common Stock of the Company at a price of $.01 per share
(the "Exercise Price"). The Exercise Price and the number of shares of Common
Stock issuable upon exercise of this Warrant are subject to adjustment as
provided in Section 3.
(b) This Warrant may be exercised in whole or in part on any business day
on or after the first to occur of (i) payment in full of the purchase price of
Series K Preferred Stock of the Company issuable to the initial holder of this
Warrant under the Securities Purchase Agreement pursuant to which this Warrant
was issued, or (ii) expiration of the period during which the Company may elect
to sell Series K Preferred Stock pursuant to such Securities Purchase Agreement
without the Company having made any such election. This Warrant will expire at
the close of business on May 31, 2008, after which this Warrant shall cease to
be exercisable; provided that if the initial holder of this Warrant shall breach
or default under its obligation to purchase securities of the Company under the
Securities Purchase Agreement under which this Warrant was issued, then this
Warrant shall, immediately upon such breach or default and without further
action by the Company or any other party, be void and of no effect.
2. Procedure For Exercise. (a) This Warrant shall be exercised by surrender
-----------------------
to the Company at its principal office of this Warrant, with the form of
election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. The holder may, in lieu of
<PAGE>
payment of the Exercise Price, authorize the Company to withhold from the shares
of Common Stock deliverable upon exercise a number of shares of Common Stock
having a Fair Market Value (as defined below) as of the date of notice of
exercise equal to the Exercise Price that would otherwise be payable. Upon
receipt of this Warrant, with the form of election to purchase set forth as
Exhibit 1 duly completed and executed by the holder, and (if applicable) payment
of the Exercise Price as provided above, the Company will promptly deliver to
the holder a certificate for the Common Stock issuable upon exercise, registered
in the name of the holder. For purposes of this Section 2(a), the "Fair Market
Value" of a share of Common Stock means the closing price per share of the
Common Stock on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading or, if not then listed or admitted
to trading on any such exchange, on the Nasdaq National Market, or if not then
listed or traded on any such exchange or system, the average of the bid and
offer price per share on Nasdaq, in each case averaged over the ten trading days
consisting of the day as of which the current fair market value of the Common
Stock is being determined and the nine consecutive business days prior to such
day. If at any time such quotations are not available, the Fair Market Value of
a share of Common stock shall mean the highest price per share that the Company
could obtain from a willing buyer (not a current employee or director) for
Common Stock sold by the Company, as determined in good faith by the Company,
unless (i) the Company shall become subject to a merger, acquisition or other
consolidation pursuant to which the Company is not the surviving party, in which
case the Fair Market Value of a share of Common Stock shall mean the value
received by the holders of the Company's Common Stock for each share of Common
Stock in such transaction; or (ii) the holder shall exercise this Warrant within
15 days prior to the closing date of the initial underwritten public offering of
the Common Stock registered under the Securities Act, in which case the Fair
Market Value of a share of Common Stock shall mean shall mean the price per
share at which Common Stock is sold in such offering.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Common Stock subject hereto, a new Warrant on the same
terms as this one shall be issued by the Company to the holder evidencing the
right to purchase those shares of Common Stock with respect to which this
Warrant remains unexercised.
(c) If any fractional share of Common Stock would be delivered upon
exercise, the Company may issue such fractional share or pay to the holder an
amount in cash equal to the fair market value of such fractional share as
determined in good faith by the Company.
3. Adjustments. (a) In case the Company shall at any time subdivide (by any
------------
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased.
-2-
<PAGE>
(b) If any merger or consolidation of the Company with or into any other
entity, any sale or other disposition of all or substantially all of the
Company's assets, or any capital reorganization or reclassification of the
capital stock of the Company shall be effected, in any such case in such a way
that holders of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such merger or consolidation, sale or other disposition of assets or
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock that would otherwise be receivable upon the exercise
of this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock that would
otherwise be receivable upon such exercise had such merger or consolidation,
sale or other disposition of all or substantially all assets or reorganization
or reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustment of the Exercise Price) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
(c) Upon each adjustment of the Exercise Price pursuant to paragraph (a) of
this Section 3, this Warrant shall, after such adjustment, represent the right
to purchase, at the adjusted Exercise Price, a number of shares of Common Stock
obtained by (i) multiplying the number of shares purchasable upon the exercise
of this Warrant prior to such adjustment by the Exercise Price in effect prior
to such adjustment and (ii) dividing the product so obtained by the Exercise
Price in effect after such adjustment.
(d) Upon any adjustment of the Exercise Price or the number of shares of
Common Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
(e) In case at any time prior to the expiration of the term of this
Warrant:
(1) the Company shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Company shall offer for subscription pro rata to the holders
--- ----
of its Common Stock any additional shares of stock of any class or other rights;
-3-
<PAGE>
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to the holder at the address of the holder as shown on the
books of the Company, (a) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(f) The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise in full of this Warrant. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Exercise
Price in effect at the time. The Company will not take any action which results
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
(g) As used in this Warrant, the term "Common Stock" shall mean and include
the Company's authorized Common Stock, par value $.01 per share, as constituted
on the date of this Warrant, and shall also include any capital stock of any
class of the Company thereafter authorized which shall neither be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; provided that the
-4-
<PAGE>
shares of Common Stock issuable upon exercise of this Warrant shall include only
shares designated as Common Stock of the Company on the date of this Warrant, or
in case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in paragraph 3(b).
4. Securities Laws. The holder understands that (i) this Warrant and the
----------------
Common Stock issuable upon exercise hereof have not been registered under the
Securities Act of 1933 or any state securities law by reason of their issuance
in a transaction exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act") and such state laws, (ii) this
Warrant and the Common Stock issuable upon exercise hereof must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and such state securities laws or is exempt from such
registration, (iii) this Warrant and the Common Stock issuable upon conversion
thereof will bear a legend to such effect, and (iv) the Company will make a
notation on its transfer books to such effect. Notwithstanding anything else
contained in the Warrant, this Warrant may not be exercised if such exercise
would result in a violation of federal or state securities laws; provided that,
notwithstanding the foregoing, if the Investor shall be an "Accredited Investor"
(as defined Regulation D under the Securities Act) at the time of exercise and
shall make written representations to the Company of appropriate facts to
determine such status, then the Investor may exercise this Warrant.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of Delaware.
(b) This Warrant is part of a series of warrants originally issued pursuant
to a Securities Purchase Agreement dated __, 1998 (the "Series K Warrants").
This Warrant may be amended or modified only with the written consent of the
Company and the holders of outstanding and unexercised Series K Warrants
exercisable for at least two thirds of all of the shares of Common Stock for
which all outstanding and unexercised Series K Warrants are then exercisable in
the aggregate. Any amendment or waiver effected with the written consent of the
Company and such holders shall be binding upon all holders of Series K Warrants.
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:________________________________
Scott S. Sheldon-President
-6-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To ACCESS Radiology Corporation:
The undersigned, the holder of Common Stock Purchase Warrant No.__ of
ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase ___________ shares of Common Stock of
the Company subject to such Warrant. Unless the "cashless exercise" box is
checked below, the holder is delivering with this notice the Warrant payment of
the aggregate exercise price of $__________ by certified or official bank check
or wire transfer as provided in the Warrant.
CHECK BOX BELOW FOR CASHLESS EXERCISE:
/ / By checking this box, the holder authorizes the Company, in lieu of
- -------
receiving payment of the Exercise Price, to withhold from the shares of Common
Stock deliverable hereunder a number of shares of Common Stock having a fair
market value (as defined in the Warrant) equal to the Exercise Price that would
otherwise be payable.
Signed:___________________________
Name of Holder:
Address:
-7-
<PAGE>
EXHIBIT 10.20
(Form of Preferred Stock Purchase Warrant)
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE THEREWITH.
THIS WARRANT MAY NOT BE TRANSFERRED SEPARATELY FROM CONVERTIBLE UNSECURED NOTES
OF ACCESS RADIOLOGY CORPORATION. THE WARRANT REPRESENTED BY THIS INSTRUMENT IS
SUBJECT TO THE PROVISIONS OF A SECURITY HOLDER'S AGREEMENT DATED AS OF JUNE
_____, 1997, BY AND BETWEEN THE COMPANY AND THE HOLDER NAMED THEREIN, AS IT MAY
BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE OFFICES OF
ACCESS RADIOLOGY CORPORATION.
ACCESS RADIOLOGY CORPORATION
PREFERRED STOCK PURCHASE WARRANT
WARRANT NO.________ DATE:___________, 1997
1. Right to Purchase; Exercise Price. Subject to the terms and conditions
---------------------------------
set forth herein, the holder of this Warrant shall have the right to purchase
from ACCESS RADIOLOGY CORPORATION (the "Company"), and the Company shall issue
and sell to the holder, that number of fully paid and non-assessable shares of
Preferred Stock (as defined below) equal to the number of shares of Preferred
Stock that would be received by a purchaser in the Equity Financing (as defined
below) upon payment of an aggregate purchase price of $[30% OF HOLDERS NOTE] at
a price per share of Preferred Stock equal to the purchase price of a share of
Preferred Stock in the Equity Financing (the "Exercise Price"). This Warrant may
be exercised in whole or in part on any business day on or after the date of the
Closing of the sale of the Preferred Stock in the Equity Financing until the
close of business on June 30, 2002, after which this Warrant shall cease to be
exercisable. The Exercise Price and the amount and kind of securities issuable
upon exercise of this Warrant are subject to adjustment as provided in Section
3. This Warrant is one of a series of warrants to purchase the Preferred Stock
issued by the Company (collectively, the "Warrants"). "Equity Financing" means
the first issuance by the Company, after the date of this Warrant, of equity
securities for gross proceeds (including cash or cancellation of outstanding
indebtedness) of at least $3,500,000. An Equity Financing shall be deemed to
have completed on the first day that the aggregate level of $3,500,000 in gross
proceeds specified in the preceding sentence shall have been reached. "Preferred
Stock" shall mean securities having the same terms as those issued to investors
in the Equity Financing.
-1-
<PAGE>
2. Procedure for Exercise. (a) This Warrant shall be exercised by
----------------------
surrender to the Company at its principal office of this Warrant, with the form
of election to purchase set forth as Exhibit 1 duly completed and signed by the
holder, and upon payment of the Exercise Price to the Company by certified or
official bank check or by wire transfer. Upon receipt of this Warrant, with the
form of election to purchase set forth as Exhibit 1 duly completed and executed
by the holder, and payment of the Exercise Price as provided above, the Company
will promptly deliver to the holder a certificate for the Preferred Stock
issuable upon exercise, registered in the name of the holder.
(b) In case the holder shall exercise this Warrant with respect to fewer
than all of the shares of Preferred Stock subject hereto, a new Warrant shall be
issued by the Company to the holder evidencing the right to purchase those
shares of Preferred Stock with respect to which this Warrant remains
unexercised.
(c) Fractional shares of Preferred Stock shall be issued and delivered
upon the exercise of this Warrant, except that this Warrant may not be partially
exercised for any amount of Preferred Stock that includes fractional shares.
3. Adjustments. (a) In case the Company shall at any time after the
-----------
completion of the Equity Financing, subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Preferred Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Preferred Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.
(b) Upon each adjustment of the Exercise Price pursuant to paragraph (a)
of this Section 3, this Warrant shall, after such adjustment, represent the
right to purchase, at the adjusted Exercise Price, a number of shares of
Preferred Stock obtained by (i) multiplying the number of shares purchasable
upon the exercise of this Warrant prior to such adjustment by the Exercise Price
in effect prior to such adjustment and (ii) dividing the product so obtained by
the Exercise Price in effect after such adjustment.
(c) Upon any adjustment of the Exercise Price or the number of shares of
Preferred Stock purchasable upon exercise of this Warrant, then and in each such
case the Company shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Exercise Price and
number of shares resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
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<PAGE>
(d) In case at any time:
(1) the Company shall declare any dividend upon its common stock
payable in cash or stock or make any other distribution to the holders of its
common stock;
(2) the Company shall offer for subscription pro rata to the holders
--- ----
of its common stock any additional shares of stock of any class or other rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or a consolidation or merger of the Company
with or into another entity or entities, or a sale, lease, abandonment, transfer
or other disposition of all or substantially all of the assets of the Company;
or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to the holder at the address of the holder as shown on the
books of the Company, (a) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of common
stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of common stock
shall be entitled to exchange their common stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(e) From and after the completion of the Equity Financing, the Company
will at all times reserve and keep available, solely for the purpose of issuance
upon the exercise of this Warrant as herein provided, such number of shares of
Preferred Stock as shall then be issuable upon the exercise in full of this
Warrant. The Company covenants that all shares of Preferred Stock which shall
be so issued shall be duly and validly issued and fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, the Company covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Preferred Stock is at all times equal
to or less than the Exercise Price in effect at the time. The Company will not
take any action which results in any adjustment of the Exercise Price if the
total number of shares of Preferred Stock issued and issuable after such action
upon exercise of this Warrant would exceed the total number of shares of
Preferred Stock then authorized by the Certificate of Incorporation.
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<PAGE>
(f) The Company covenants with the holder of this Warrant that the Company
shall give effect to any relevant provisions of the Certificate of Incorporation
of the Company relating to the Preferred Stock, commencing on the date of the
completion of the Equity Financing, so that upon conversion of any Preferred
Stock issued upon exercise of this Warrant the converting holder shall receive
the number of shares of common stock (or such other securities or assets) that
such holder would have received had such Preferred Stock been outstanding from
the date of the completion of the Equity Financing until the date of conversion.
Notwithstanding anything else contained in this Warrant, if the Preferred Stock
shall become automatically convertible into common stock pursuant to the terms
of the Certificate of Incorporation prior to the exercise of this Warrant, then
on and after the date of such event this Warrant shall be exercisable for, and
upon exercise the holder will receive, that number of shares of common stock
into which the Preferred Stock that would otherwise have been purchased upon
exercise would have been convertible on the date of such event.
(g) From and after the completion of the Equity Financing, the Company
will not amend the terms of the Preferred Stock in a manner adverse to holder of
Preferred Stock without the prior written consent of holders of a number of
shares of Preferred Stock, and/or holders of Warrants entitling the holders to
purchase a number of shares of Preferred Stock equal in the aggregate to at
least two-thirds of the aggregate number of shares of Preferred Stock that are
either then outstanding or then subject to purchase upon the exercise of
Warrants.
4. Restrictions on Transfer. (a) This Warrant may not be assigned,
pledged or otherwise transferred except upon the simultaneous transfer of
$10,000 in principal amount of Convertible Subordinated Notes of the Company for
every transfer of Warrants with an aggregate Exercise Price of $3,000.
(b) The holder understands that (i) this Warrant, the Preferred Stock
issuable upon exercise hereof, and any common stock issuable upon conversion of
the Preferred Stock, have not been registered under the Securities Act of 1933
or any state securities law by reason of their issuance in a transaction except
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") and such state laws, (ii) this Warrant, the Preferred
Stock issuable upon exercise hereof, and any common stock issuable upon
conversion of the Preferred Stock, must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and such state
securities laws or is exempt from such registration, (iii) this Warrant, the
Preferred Stock issuable upon exercise hereof, and any common stock issuable
upon conversion of the Preferred Stock, will bear a legend to such effect, and
(iv) the Company will make a notation on its transfer books to such effect.
5. Miscellaneous. (a) This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
(b) This Warrant may be amended or modified, and any provision hereof may
be waived, with and only with the written consent of the Company and the holder.
-4-
<PAGE>
(c) Subject to the restrictions on transfer contained herein, this Warrant
shall be binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal representatives, and shall be
binding upon any permitted assignee or transferee of this Warrant.
(d) The titles and subtitles used in this Warrant are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement
IN WITNESS WHEREOF, this Warrant has been executed by ACCESS RADIOLOGY
CORPORATION as of the date first above written.
ACCESS RADIOLOGY CORPORATION
By:__________________________________
Scott S. Sheldon - President
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<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To ACCESS RADIOLOGY CORPORATION
The undersigned, the holder of Preferred Stock Purchase Warrant No. _____
of ACCESS Radiology Corporation (the "Company") hereby irrevocably elects to
exercise the holder's right to purchase _____________ shares of Preferred Stock
of the Company subject to such Warrant. The holder is delivering with this
notice the Warrant and payment of the aggregate exercise price of
$_________________ by certified or official bank check or wire transfer as
provided in the Warrant:
Signed: ___________________________________
Name of Holder:
Address:
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<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. EMED expects to offer the Web Product to customers under
a plan in which the customer's initial payment upon installation of the Web
Product would be [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] Licenses granted under
such a plan are referred to as "Subscription Sales". Customers are also expected
to be offered the [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] License fees payable
with respect to Subscription Sales will be calculated as provided in subsection
(b) below, and license fees payable with respect to all other sales of licenses
of
CONFIDENTIAL TREATMENT
3
<PAGE>
the Web Product will be calculated as provided in subsection (c) below.
(b) With respect to each Subscription Sale of the Web Product, EMED will pay
to AWARE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] of Net Client License Revenue (as
defined in subsection (d) below) attributable to licenses of the client portion
of the Web Product. These fees are in addition to, and not in lieu of, the
license fees payable for compression software under the 1997 Agreement.
(c) With respect to sales of the Web Product other than Subscription Sales,
EMED will pay to AWARE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] of Net Software License
Revenue.
(d) Net Client License Revenue means amounts paid to EMED in Subscription
Sales for [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION] (excluding taxes, shipping, insurance,
the interest portion of payments under rental or leasing arrangements, actual
customer returns, customs duties, and any charges for services).
(e) Net Software License Revenue means amounts paid to EMED by customers for
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] (excluding taxes, shipping, insurance, the
interest portion of payments under rental or leasing arrangements, actual
customer returns, customs duties, and any charges for services), [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
] "High End Storage and Network Hardware" is defined in
Schedule II.
CONFIDENTIAL TREATMENT
4
<PAGE>
(f) No royalties shall be payable under this Section 2.02 for beta testing
installations, or demonstration or loaner units. The duration of beta testing
will be limited to a period of time no longer than that which is determined by
EMED to be reasonably necessary for satisfaction of the requirements for
commercial marketing of the product or release being tested. Loaner units will
be provided for a period of time no longer than that which is reasonably
necessary for the customer to assess the functionality and desirability of the
product or release being loaned. EMED will not make the Web Product available
without charge except for (i) beta testing installations, demonstration or
loaner units 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. If the agreed results of such inspection show
that EMED has underpaid AWARE by [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] then EMED shall
pay to AWARE the reasonable and
CONFIDENTIAL TREATMENT
5
<PAGE>
documented out of pocket costs of conducting such inspection, and allow
inspection of the books and supporting data for the prior two years. AWARE shall
otherwise bear the costs it incurs in performing any inspection.
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. It is the intention of the parties that license fees shall be consistent
with the rate of [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION] of Net Software License
Revenue as described in this Agreement.
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
CONFIDENTIAL TREATMENT
6
<PAGE>
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 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.
3.02. AWARE shall pay royalties to EMED for licenses granted under this
Article III in amounts to be agreed between EMED and AWARE, and at intervals and
under procedures substantially the same as those set forth for payments by EMED
in Section 2.03. The royalties payable to EMED shall be a percentage (the
"Royalty Percentage") of amounts paid to AWARE for license of the Joint Product.
The Royalty Percentage shall be a percentage of not less than [*The confidential
portion has been omitted and filed separately with the Securities and Exchange
Commission.] which shall reflect the contribution of EMED during the term of
this Agreement to aspects of the Joint Product developed for uses other than
Medical Use. The Royalty Percentage will be determined based upon the principle
that the Royalty Percentage will be fixed at [*The confidential portion has been
omitted and filed separately with the Securities and Exchange Commission.] if
EMED contributes little or nothing to during the term of this Agreement to
aspects of the Joint Product developed for uses other than Medical Use, and will
approach [*The confidential portion has been omitted and filed separately with
the Securities and Exchange Commission.] if EMED contributes significantly to
such aspects. The exact percentage will depend on the mutual agreement of the
parties as to the significance of EMED's contribution. Promptly upon completion
of the functional product descriptions and design specifications
CONFIDENTIAL TREATMENT
7
<PAGE>
for the Joint Product, AWARE and EMED will negotiate in good faith to reach
agreement on the Royalty Percentage. As it is not contemplated that EMED will
contribute development efforts to aspects of the Joint Product other than
Medical Use, if no agreement is reached within [*The confidential portion has
been omitted and filed separately with the Securities and Exchange Commission.]
days, the Royalty Percentage shall be fixed at [*The confidential portion has
been omitted and filed separately with the Securities and Exchange Commission.]
Except as agreed in writing with EMED, AWARE will not make the Joint Product
available without charge.
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 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.
CONFIDENTIAL TREATMENT
8
<PAGE>
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) Notwithstanding Section 2.01, AWARE may continue to perform its
contractual obligations to a party previously identified to EMED by AWARE
through July 30, 2000.
(c) Notwithstanding section 2.01, AWARE may until December 30, 1999 grant to a
second party previously identified to EMED by AWARE, licenses for Medical Use of
compression libraries and plugins, and may permit such party to include copies
of such software in equipment made available to end users. During the period
from the effectiveness of this agreement until December 30, 1999 AWARE shall
not improve in any material way the functionality of the software licensed to
this party.
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. EMED will dedicate full-time engineering
management, and make substantial and continued resources available for sales,
marketing, support, installation and training for the Web Product. EMED will
continue to make modifications to its core image server (Compression Server)
products to accommodate greater functionality, performance,
CONFIDENTIAL TREATMENT
9
<PAGE>
and reliability of the complete product offering. EMED will also either develop
or source other products that improve the functionality and marketability of
EMED's web and client/server products as appropriate in the judgment of EMED.
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. AWARE will dedicate to these activities a
minimum of [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] qualified full-time software engineers
who are knowledgeable in compression and web technology, a part time test
engineer, and additional engineering management resources as required.
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) If the term of this Agreement shall expire (and this Agreement shall not
have been terminated for breach pursuant to Section 6.02), the licenses granted
in Section 2.01 and Section 3.01 shall remain in effect for five years from the
date of expiration; provided that such licenses shall be modified so that they
are no longer exclusive.
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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. AWARE and EMED shall negotiate
in good faith for at least three months after effectiveness of license
modification pursuant to subsection (b) to reach agreement on modified license
fees and royalties. 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).
(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,
CONFIDENTIAL TREATMENT
11
<PAGE>
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 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
CONFIDENTIAL TREATMENT
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<PAGE>
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.
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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
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
CONFIDENTIAL TREATMENT
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<PAGE>
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 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
CONFIDENTIAL TREATMENT
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<PAGE>
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, 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; provided that AWARE's liability for damages arising from such
inability shall be [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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 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;
provided that EMED's liability for damages arising from such inability shall be
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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 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
CONFIDENTIAL TREATMENT
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<PAGE>
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 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.
CONFIDENTIAL TREATMENT
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<PAGE>
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 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.
CONFIDENTIAL TREATMENT
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<PAGE>
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.
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
CONFIDENTIAL TREATMENT
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<PAGE>
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 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/Howard Pinsky By: /s/ Edmund C. Reiter
----------------- --------------------
Name: Howard Pinsky Name: Edmund C. Reiter
Title: Chief Technology Title: Senior Vice President
Officer
CONFIDENTIAL TREATMENT
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<PAGE>
Schedule 1
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.
CONFIDENTIAL TREATMENT
24
<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.
(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
CONFIDENTIAL TREATMENT
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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 shall prepay to AWARE a
----------------------
nonrefundable fee of [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] on account of the
license and other rights granted to ACCESS hereunder (the "Prepayment"). The
Prepayment shall be due on August 30, 1997. The Prepayment shall bear interest
at the rate of 1% per month from August 30, 1997 if not paid on or before that
date.
(b) [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] of the Prepayment shall be applied to
pay a [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] AWARE acknowledges that ACCESS has
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
CONFIDENTIAL TREATMENT
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] as of the date of
this Agreement (the "Old Agreement Licenses"). [*THE CONFIDENTIAL PORTION
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] of the Prepayment to license fees at the rate provided in this
subsection, [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] This pricing will
apply to the Compression Software product identified in Schedule I, and not
to the "Joint Product" developed pursuant to Article III.
(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. After [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.] of the Prepayment and the [*THE CONFIDENTIAL PORTION
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] each quarterly statement shall be accompanied by payment of license
fees due. 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 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. If the agreed results
of such inspection show that ACCESS has underpaid AWARE by [*THE CONFIDENTIAL
PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] or more, then ACCESS shall pay to AWARE the reasonable and
documented out of pocket costs of conducting such inspection, and allow
inspection of the books and supporting data
CONFIDENTIAL TREATMENT
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<PAGE>
for the prior two years. 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 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.
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(b) From the Effective Date until the termination of exclusivity as
provided herein, AWARE will be the exclusive supplier to ACCESS of compression
and web based viewing software for use in ACCESS's current product line
(together with upgrades and new versions thereof) and the Joint Product
contemplated by Article III, and ACCESS will not purchase or license from any
other party compression software or web based viewing software for ACCESS's
current product line (together with upgrades and new versions thereof) or the
Joint Product contemplated by Article III.
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) Notwithstanding Section 2.01, AWARE may grant licenses for Medical Use
of the current release of the Compression Software as described in Schedule I,
and may permit such customers to include copies of the Excepted Release in
equipment made available to end users.
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 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
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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 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,
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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.
(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. Royalties payable to AWARE will be calculated as a percentage (the
"Royalty Percentage") of Net Software License Revenue. "Net Software License
Revenue" means amounts paid to ACCESS by customers for the Joint Product
(excluding taxes, shipping, insurance, the
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<PAGE>
interest portion of payments under rental or leasing arrangements, actual
customer returns, customs duties, and any charges for services), reduced by (x)
costs of software that is obtained from third parties (other than AWARE) in bona
fide arms length negotiations and that ACCESS has determined in its judgment is
reasonably appropriate for inclusion in the Joint Product, (y) [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.] of the costs of High End Storage and Network Hardware
and (z) [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] of the costs of all other hardware.
"High End Storage and Network Hardware" is defined in Schedule II.
(b) The Royalty Percentage shall be a percentage of not less than [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.] nor more than [*THE CONFIDENTIAL PORTION HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] which
shall reflect the contribution of AWARE to the development of the Joint Product,
and in particular the server software. 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 Royalty
Percentage.
(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 Net Software License Revenue 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) ACCESS will pay to AWARE, in addition to the royalties described in
subsection (a) above, a [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] of Net Software License
Revenue [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] ACCESS will cooperate with AWARE in
marketing efforts and keep AWARE informed of market developments in general and
ACCESS marketing programs in particular.
(e) No royalties shall be payable under this Section 3.03 for beta
testing installations, demonstration or loaner units. The duration of beta
testing will be limited to a period of time
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<PAGE>
no longer than that which is determined by ACCESS to be reasonably necessary for
satisfaction of the requirements for commercial marketing of the product or
release being tested. Loaner units will be provided for a period of time no
longer than that which is reasonably necessary for the customer to assess the
functionality and desirability of the product or release being loaned. 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. AWARE and ACCESS intend that ACCESS will pay support fees to
AWARE that represent a percentage equal to the Royalty Percentage of the
aggregate maintenance revenues received by ACCESS with respect to the Joint
Product. 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 the Royalty Percentage.
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 3.05
does not include use by indemnity insurance companies and that AWARE may
grant licenses to such companies; provided that no such license may permit
the use of the Joint Product by a business unit of any such company that
competes directly with ACCESS.
CONFIDENTIAL TREATMENT
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<PAGE>
(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.
AWARE shall pay royalties to ACCESS for licenses granted under this Section 3.05
in amounts to be agreed between ACCESS and AWARE. 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 parties under this Agreement shall remain in effect
unless and until terminated in accordance with this Article IV.
(b) Subject to subsection (d) below, the exclusivity obligations of AWARE
and ACCESS will terminate on December 31, 1998 if AWARE has not received, on or
before that date, aggregate payments from ACCESS of at least [*THE CONFIDENTIAL
PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] At least [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] of such amount must
CONFIDENTIAL TREATMENT
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<PAGE>
consist of royalties and fees for the Joint Product, license fees for
Compression Software, or software maintenance revenues. The Prepayment will not
be counted towards this [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] minimum.
(c) Subject to subsection (d) below, the exclusivity obligations of AWARE
and ACCESS will terminate on December 31 of any year after 1998 if AWARE has not
received aggregate payments from ACCESS of at least [*THE CONFIDENTIAL PORTION
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] during the year ended on that date. This entire amount must consist
of royalties and fees for the Joint Product, license fees for Compression
Software in excess of the portion of the Prepayment applied thereto, or software
maintenance revenues.
(d) The dates set forth in subsections (b) and (c) above shall be extended
for a number of months (not exceeding twelve months) equal to the number of
whole months elapsed between December 31, 1997 and the date of a commercial
release of version 1.0 of the Joint Product that has been produced in compliance
with "good manufacturing practices" as defined by the U.S. Food and Drug
Administration (the "FDA"), and has received clearance for commercial marketing
for medical use from the FDA. This extension shall be effective if and only if
ACCESS shall have pursued clearance by the FDA and performance of ACCESS's
development responsibilities diligently and in good faith.
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. Unless otherwise agreed in writing, upon termination of exclusivity
pursuant to Section 4.01, the licenses granted in Sections 1.01, 3.02 and 3.05
shall remain in effect until five years from the date of termination of
exclusivity, except that (i) the licenses granted to ACCESS shall be modified so
that they shall no longer be exclusive, and (ii) the license granted to AWARE
shall be modified so that it shall no longer be limited to non-Medical Uses. 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
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<PAGE>
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. AWARE and ACCESS
shall negotiate in good faith for at least three months after effectiveness of
license modifications pursuant to subsection (a) to reach agreement on modified
license fees and royalties. 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.
(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.
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<PAGE>
(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, 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
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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 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
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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, 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
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<PAGE>
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 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:
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(i) ACCESS has full authority to enter into this Agreement and
grant the licenses and rights set forth herein.
(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; provided that
AWARE's liability for damages arising from such inability shall be [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
(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 action, and (ii) ACCESS
has sole control of the defense and settlement of such claim or action. In
CONFIDENTIAL TREATMENT
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<PAGE>
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; provided that ACCESS's liability for damages
arising from such inability shall be [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
(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) 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 TREATMENT
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<PAGE>
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 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
CONFIDENTIAL TREATMENT
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<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 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.
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
CONFIDENTIAL TREATMENT
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<PAGE>
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.
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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:
(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
CONFIDENTIAL TREATMENT
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<PAGE>
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/ Howard Pinsky By: /s/ Edmund C. Reiter
----------------- --------------------
Name: Howard Pinsky Name: Edmund C. Reiter
Title: Vice President of Title: Senior Vice President
Technology
CONFIDENTIAL TREATMENT
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<PAGE>
Schedule 1
1. Existing Accurad Product and Plugin Specifications
--------------------------------------------------
1.a AccuPress for Radiology Version 3.6 for Unix and DOS User's Guide and
Developer's Kit
1.b AWARE AccuRad Plugin User's Guide: Plugin revision history
1.c AWARE AccuRad Plugin User's Guide: Embed Options Reference
1.d AWARE AccuRad Plugin User's Guide: Using the Plugin
2. Agreed to Supported AWARE Customer List
---------------------------------------
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
CONFIDENTIAL TREATMENT
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<PAGE>
SCHEDULE 2
Summary of Project "Butterfly"
Joint software development resulting in a client/server product that provides
for wide-spread distribution and web-based viewing and editing of compressed
medical images. The Product is intended to be marketable on a world-wide basis
to a broad OEM and direct user base assuming no prior and perhaps no potential
future ACCESS content. The product is intended to draw from the core
competencies from both organizations; wavelet (and other algorithms as
appropriate) compression and web image processing from AWARE, and general
medical market imaging knowledge and Compression Server development from ACCESS.
ACCESS and AWARE plan to derive revenues from software licenses from developed
products according to an agreed schedule to be determined.
BUTTERFLY PRODUCT CONCEPT
The Butterfly product concept is to provide wide-spread image distribution over
both LAN and WAN combining "Web" technology with compression technology. More
specifically, the concept is to develop:
. A browser based client application that provides sufficient capabilities to
allow effective review of both diagnostic and referral quality radiology,
pathology and other types of medical images. It should also provide
interactive multimedia capabilities to allow reporting, synchronous
consultation, and medical record review.
. A server that manages the collection, storage and distribution of
multimedia medical information including images, text, video and audio.
The server should also provide compression capabilities, configurable
workflow tools, and DICOM/HL7/http interfaces.
The Butterfly product focuses not only on image distribution but also on
improving workflow within the environment of use. As such, the product
architecture will embrace component technology e.g. COM, and provide "task
centric" operation at both the client and server.
CONFIDENTIAL TREATMENT
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<PAGE>
ASSIGNMENT OF RESPONSIBILITIES AND WORK
Broad responsibilities will be assigned as follows:
<TABLE>
<CAPTION>
ACCESS ACTIVITIES AWARE ACTIVITIES
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Product Definition Assist in Product Definition
- ---------------------------------------------------------------------------------------------------------
Primary Web Compression Server Application . Primary Client Software Development
Software Development . Sole Provider/Developer of Compression
Software Medical Library
. Primary Web Interface Level (CGI) Server
Software Development
. Secondary Server Application Software
Development
- ---------------------------------------------------------------------------------------------------------
Overall Project Management Internal Project Management
- ---------------------------------------------------------------------------------------------------------
Clinical Site Management
- ---------------------------------------------------------------------------------------------------------
Regulatory Affairs and Filings
- ---------------------------------------------------------------------------------------------------------
Good Manufacturing Practices Compliance with GMP Software Development
Requirements
- ---------------------------------------------------------------------------------------------------------
Medical Direct and OEM Channel Sales & Marketing Cross-License non-Medical Marketing
- ---------------------------------------------------------------------------------------------------------
Ongoing Server Application Software Support Ongoing Client, Server Component, and Compression
Software Support
- ---------------------------------------------------------------------------------------------------------
Installation & Customer Support
- ---------------------------------------------------------------------------------------------------------
Complaint Handling
- ---------------------------------------------------------------------------------------------------------
License & Revenue Accounting Periodic Examination
- ---------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL TREATMENT
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<PAGE>
ANTICIPATED TIMETABLES & KEY EVENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
TASK RESPONSIBILITY DATE
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Complete Term Sheet ACCESS, AWARE 4/18/98
- ----------------------------------------------------------------------------------------------------------
Complete Contract ACCESS, AWARE 5/28/97
- ----------------------------------------------------------------------------------------------------------
Announce to Market ACCESS, AWARE TBD
- ----------------------------------------------------------------------------------------------------------
Complete Regulatory Review ACCESS 6/21/97
Complete Regulatory 510(k) Filings as Needed ACCESS
- ----------------------------------------------------------------------------------------------------------
Complete Functional Specification ACCESS
Review Functional Specification AWARE
Finalize Functional Specification ACCESS 6/30/97
- ----------------------------------------------------------------------------------------------------------
Complete Product and Software Delivery Plan ACCESS 7/7/97
- ----------------------------------------------------------------------------------------------------------
Sign up Clinical Beta Partners ACCESS 6/30/97
- ----------------------------------------------------------------------------------------------------------
Complete Server Application Design Specification ACCESS
Complete Server CGI Design Specification AWARE
Complete Client Design Specification AWARE
Complete Review of Design Specifications ACCESS & AWARE
Finalize Design Specification ACCESS 8/1/97
- ----------------------------------------------------------------------------------------------------------
Complete Operational Plan including: ACCESS 8/1/97
Strategy and Global market Positioning
Sales & Marketing
Packaging & Pricing
Sales Forecasts
P & L
- ----------------------------------------------------------------------------------------------------------
Complete Test Plans ACCESS & AWARE 8/1/97
- ----------------------------------------------------------------------------------------------------------
Complete Alpha Development & Testing ACCESS & AWARE 11/15/97
- ----------------------------------------------------------------------------------------------------------
Start Beta Testing ACCESS 11/15/97
- ----------------------------------------------------------------------------------------------------------
Receive FDA 510(k) Market Clearance FDA 12/1/97
- ----------------------------------------------------------------------------------------------------------
Implement Installation and Support Staff Ramp-up Plan ACCESS 1/1/98
- ----------------------------------------------------------------------------------------------------------
Product Sales and Marketing Launch ACCESS 12/1/97
- ----------------------------------------------------------------------------------------------------------
Complete First Phase Beta ACCESS 1/1/97
- ----------------------------------------------------------------------------------------------------------
Complete GMA Documentation and Notification of Validation & ACCESS 1/1/98
Testing to FDA
- ----------------------------------------------------------------------------------------------------------
Complete Customer Support Plan ACCESS 1/1/98
- ----------------------------------------------------------------------------------------------------------
Begin US Commercialization ACCESS 1/1/98
- ----------------------------------------------------------------------------------------------------------
Install West Coast and International End-User Partnership ACCESS 1/15/97
Accounts
- ----------------------------------------------------------------------------------------------------------
Support and Release Products Accordingly ACCESS & AWARE On-going
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL TREATMENT
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<PAGE>
SCHEDULE 3: TRADEMARKS
FrameWave is a registered trademark belonging to ACCESS Radiology Corporation.
AccuPress for Radiology is a registered trademark belonging to AWARE, Inc.
CONFIDENTIAL TREATMENT
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<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
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<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 "Qualifying Contractor Sale" means a sale of an ISG Device
or Devices made through a prime contractor or systems integrator to an end user
in which (i) [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.] and (ii) ISG Devices shall be a
part of a range of ACCESS products for sale under the arrangements between
ACCESS and the prime contractor, systems integrator or other intermediary.
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.
CONFIDENTIAL TREATMENT
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<PAGE>
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:
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
CONFIDENTIAL TREATMENT
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<PAGE>
(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.
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 [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
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
CONFIDENTIAL TREATMENT
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<PAGE>
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,
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
CONFIDENTIAL TREATMENT
-6-
<PAGE>
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.
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 [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] 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.
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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 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.
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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
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.
CONFIDENTIAL TREATMENT
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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.
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.
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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 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.
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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 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 of [*THE CONFIDENTIAL
PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] to be invoiced on June 30, 1997 and [*THE CONFIDENTIAL PORTION HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
to be invoiced on June 30, 1998. ACCESS and ISG will, not less than annually,
review the foregoing support fees and the records of both parties relating to
service provided to customers, and will discuss in good faith whether any change
in such fees is appropriate in light of the time and effort actually expended by
ISG on support under this Agreement. Prior to March 31, 1999, ACCESS and ISG
will negotiate pricing for support to be provided by ISG after that date. 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
CONFIDENTIAL TREATMENT
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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.
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:
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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 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.
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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 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.
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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 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.
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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 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.
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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 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
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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.
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.
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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
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,
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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
(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
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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 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.
CONFIDENTIAL TREATMENT
-22-
<PAGE>
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:
---------------------------- ----------------------------
Name: David Lang Name: Peter Bak
---------------------------- ----------------------------
Title: Vice President of Title: Vice President of
Business Operations Product Development
CONFIDENTIAL TREATMENT
-23-
<PAGE>
SCHEDULE I
----------
LICENSED WORKS DESCRIPTION AND PRICING
--------------------------------------
PRICING TABLE 1
<TABLE>
<CAPTION>
==========================================================================================================
PRODUCT FEATURE VRS-NT-200 VRS-NT-600 VRS-NT-ICU VRS-NT-DX VRS-NT-XS VRS-UNIX DX VRS-UNIX XS
(V1.1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BASE PRICING
==========================================================================================================
[*] [*] [*] [*] [*] [*] [*] [*]
==========================================================================================================
OPTIONS PRICING
==========================================================================================================
[*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
==========================================================================================================
</TABLE>
* THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
-24-
<PAGE>
PRICING TABLE 2
<TABLE>
<CAPTION>
==========================================================================================================
PRODUCT FEATURE VRS-NT-200 VRS-NT-600 VRS-NT-ICU VRS-NT-DX VRS-NT-XS VRS-UNIX DX VRS-UNIX XS
(V1.1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BASE PRICING
==========================================================================================================
[*] [*] [*] [*] [*] [*] [*] [*]
==========================================================================================================
OPTIONS PRICING
==========================================================================================================
[*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*]
==========================================================================================================
</TABLE>
* THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Base Unit Feature Content:
- --------------------------
The features included in the Base Unit for each Product are detailed in the
attached Marketing Specifications Documents as follows:
VRS-NT 200 Product -
1. Viewing and Reading Stations on NT (VRS-NT)
Release 1.0
Marketing Specifications Document v1.1
November 29, 1997
2. VRS-NT 200 Release 1.1
ACCESS Radiology Corporation Additional Features to VRS-
NT 200 Release 1.0
VRS-NT 600, ICU, DX and XS Products -
1. Document 1997-00295
Rev. 12.0-approved
31 March 1997
VRS-UNIX Products -
1. Viewing and Reading Stations (VRS) Release 2.1
Marketing Specifications Document v5.0
November 29, 1997
CONFIDENTIAL TREATMENT
-25-
<PAGE>
2. VRS UNIX Release 2.1 Patch / Release 2.2
ACCESS Radiology Corporation Additional Features to VRS
UNIX Release 2.1
Exceptions to the detailed features are as follows:
- "Advanced Viewing Protocols" is an option for the VRS-NT DX and
VRS-UNIX DX.
- "Scout View and Image Cross Reference" is an option for VRS-NT 600,
VRS-NT DX and VRS-UNIX DX.
- "Multi-planar Reformat" is an option for VRS-NT XS and VRS-UNIX XS.
- "Maximum Intensity Projection" is an option for VRS-NT XS.
- "DICOM 3.0 Export" is an option for VRS-NT 600 and VRS-NT ICU.
Options Pricing Legend:
- -----------------------
X = Cannot be purchased as an option
$xx = Price of option in US$
. = Option included in base unit
CONFIDENTIAL TREATMENT
-26-
<PAGE>
COMMITMENT TABLE
================================================================================
QUARTER AMOUNT INVOICE DATE PAID DATE
(ON OR BEFORE) (ON OR BEFORE)
================================================================================
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
================================================================================
* THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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.
================================================================================
FEATURE DESCRIPTION
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
CONFIDENTIAL TREATMENT
-28-
<PAGE>
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
================================================================================
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.
================================================================================
FEATURE DESCRIPTION
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
CONFIDENTIAL TREATMENT
-30-
<PAGE>
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
================================================================================
CONFIDENTIAL TREATMENT
-31-
<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.
================================================================================
FEATURE DESCRIPTION
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
- --------------------------------------------------------------------------------
[*THE [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
CONFIDENTIAL AND FILED SEPARATELY WITH THE SECURITIES AND
PORTION HAS EXCHANGE COMMISSION.]
BEEN OMITTED
AND FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION.]
================================================================================
CONFIDENTIAL TREATMENT
-32-
<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
-33-
<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.
CONFIDENTIAL TREATMENT
-34-
<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, ACCESS 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. The Base Unit price for the VRS 300 Product is [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.] There are no options for the VRS 300 Product. 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 [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
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
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] 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 [*THE CONFIDENTIAL PORTION HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
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
CONFIDENTIAL TREATMENT
-2-
<PAGE>
will enable ACCESS to produce such CD-ROMS from an original 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 Business
Operations of Product Development
CONFIDENTIAL TREATMENT
-3-
<PAGE>
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) ACCESS will purchase [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] copies of the VRS 300
licensed work for a total cost of [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] A purchase
order must be received by December 31, 1998 for the full amount. ISG will
invoice ACCESS for the full amount, with payment terms of one quarter the total
amount due on the first day of each quarter of 1999 commencing January 1, 1999.
Access will make the VRS 300 software available as part of a larger product
offering. Access may, at ACCESS's option, during the calendar year of 1999
purchase and pay for additional copies of software for [*THE CONFIDENTIAL
PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] per copy after the [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] copies have been
purchased.
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>
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.
iii) [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.]
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 [*THE CONFIDENTIAL PORTION HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] per license.
B) [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.]
CONFIDENTIAL TREATMENT
<PAGE>
7) ACCESS plans to add ACCESS developed application software to the ISG VRS
products to improve functionality as it relates to end-user workflow. To
accomplish this, ISG will support the VRS COM Interface Specification V3.0
for the VRS 300 product, as well as all other VRS Windows (non-UNIX) based
products, and will support the extensions and modifications of the
specification on future versions of the VRS product. In addition, ISG will
make reasonable efforts to modify the above interface Specification as
requirements and changes are specified by ACCESS. The VRS COM Interface (VR
Server/Broker) consist of a Development Tool Kit priced at [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] and run time licenses at [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] per license for the VRS 300 and [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] per license for all other VR WIN
models. The Development Tool Kit will be purchased as part of agreement and
the run time license can be purchased as an option at any time.
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.
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<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 _______________________________
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<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 April 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 1.0" 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
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<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 format, 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,
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<PAGE>
support of ACCESS customers and processing of data in
the regular course of 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 party.
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
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<PAGE>
4.1.1 A [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
for DAP for Windows and a [*THE CONFIDENTIAL PORTION HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.] for DAP for UNIX.
4.1.2 A [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
for each copy of Lumiscan which is sublicensed to an
ACCESS customer.
4.1.3 A [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
for each copy of any application incorporating DAP for
Windows which is sublicensed to an ACCESS customer;
provided that if any copy of such application software
replaces a copy of Lumiscan for which a license fee has
previously been paid pursuant to Section 4.1.2, then
ACCESS shall only be required to pay an upgrade fee of
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
with respect to such replacement copy.
4.1.4 A [*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
for each copy of software incorporating DAP for UNIX
which is sublicensed to an ACCESS customer. Copies of
Server Software may in such application software at [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
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.
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
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<PAGE>
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 [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] 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. This fee shall be equal to [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.]
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
CONFIDENTIAL TREATMENT
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<PAGE>
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 knowledge, the
documentation and code of the Mitra Software do not
infringe upon any copyright or other proprietary right
of any third party.
CONFIDENTIAL TREATMENT
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<PAGE>
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 implied or arising by custom or
trade usage and specifically makes no warranty of
merchantability.
CONFIDENTIAL TREATMENT
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<PAGE>
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 expiration shall survive such termination or
expiration, and Sections 6.2, 6.3 and 7.1 shall survive any such
termination or expiration.
CONFIDENTIAL TREATMENT
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<PAGE>
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.
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
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<PAGE>
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/ Howard Pinsky By: /s/ Eric Petersen
----------------------------- ----------------------------
Name: Howard Pinsky Name: Eric Petersen
Vice President of Technology President
----------------------------- ----------------------------
Title Title
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<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
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<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 defined
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.
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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. A License fee of [*THE CONFIDENTIAL PORTION HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] for each copy of application software incorporating [*THE
CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] which is sublicensed to an Access
customer.
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/ Howard Pinsky By: /s/ Eric Petersen
---------------------------- ---------------------------
Name: Howard Pinsky Name: Eric Petersen
Vice President of Technology President
---------------------------- ---------------------------
Title: Title:
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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:
MITRA agrees to offer and ACCESS aggrees to accept a [*THE CONFIDENTIAL PORTION
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
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).
Upon execution of this Amendment, MITRA will invoice ACCESS in the amount of
[*THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.] (US funds). ACCESS will issue payment of
this invoice within thirty days of the receipt of the invoice.
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.
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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
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Exhibit 10.30
[ISG Technologies logo appears here]
October 13, 1999
Howard Pinsky
Chief Technical Officer
EMED Technologies
25 Hartwell Avenue
Lexington, MA 02173
Dear Howard:
RE: VALUE ADDED RESELLER AGREEMENT DATED MARCH 31, 1997
ISG Technolgies extends to EMED Technologies, formerly Access Radiology
Corporation, the option of extending the Value Added Reseller Agreement, dated
March 31, 1997 and amended by further agreements dated September 21, 1998 and
December 31, 1998.
All the terms and conditions of the original Value Added Reseller agreement and
amendments shall remain in effect for an additional two years from the original
expiry date. The new termination date will be March 31, 2002.
The option to extend does not restrict both parties from mutually agreeing upon
amending or replacing this agreement in the future.
Sincerely,
/s/ Alyn Bord
- --------------
Alyn Bord
Vice President and General Manager
Image Management Group
ISG Document Number 1999-02098
<PAGE>
Exhibit 10.31
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of
the 17th day of January, 2000 between eMed Technologies Corporation
("Employer"), a Delaware corporation, and Caren Mason ("Executive"). Where not
otherwise defined herein, capitalized terms used herein have the meanings set
forth in Section 7.1 of this Agreement.
WHEREAS, Employer wishes to employ Executive in an executive capacity, as
its Chief Executive Officer, and Executive wishes to accept such employment, on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, Employer and Executive hereby agree as follows:
1. Term.
----
1.1 Employer employs Executive and Executive accepts such employment,
for a period ending on December 31, 2001 (the "Initial Term").
1.2 This Agreement shall be automatically renewed for additional one-
year terms (a "Renewal Term") upon the expiration of the Initial Term or any
Renewal Term unless either party delivers to the other written notice of
expiration within 60 days prior to the end of the then current term.
1.3 This Agreement may be terminated prior to the expiration of the
Initial Term or any Renewal Term as provided in Section 4 of this Agreement.
2. Positions and Duties.
--------------------
2.1 During the term of this Agreement, Employer shall employ Executive
to serve as Chief Executive Officer of Employer subject to the terms of this
Agreement and except as Executive and Employer otherwise agree in writing.
Executive shall perform such executive, administrative, and operational duties
customary for executives in such capacity or as may be assigned to Executive
from time to time by the Board of Directors of Employer.
2.2 Executive agrees to serve Employer faithfully and to the best of
Executive's ability and to devote substantially all of Executive's business
time, attention and efforts to the interests and business of Employer and its
Subsidiaries. Nothing contained herein shall preclude Executive from serving on
the board of one business corporation (other than Employer and its subsidiaries)
and on boards of not-for-profit organizations and trade groups, nor from
participating in community affairs, provided that such activities do not
materially interfere with Executive's performance of her duties and
responsibilities to Employer. The Executive warrants to Employer that Executive
is not under any contractual commitment prohibiting or limiting Executive's
employment by Employer. Executive will also serve as chief executive officer of
any subsidiaries of Employer, unless otherwise mutually agreed between Executive
and Employer.
<PAGE>
2.3 Executive agrees at all times to perform her duties in accordance
with applicable laws, rules, and regulations and the policies and procedures of
Employer applicable to senior executives.
3. Compensation, Benefits, and Expenses.
------------------------------------
3.1 Salary. During the period from the Effective Date through the
------
Initial Term and any Renewal Term of the Agreement, and except as otherwise
provided in the Agreement, Employer shall pay to Executive an annual base salary
of $225,000, or such greater amount as may be determined from time to time by
the Board of Directors (the "Base Salary Amount"), in installments pursuant to
Employer's standard payroll policies and subject to such withholding or
deductions as may be mutually agreed between Employer and Executive or required
by law. The Board of Directors shall review Executive's salary not less
frequently than annually, prior to February 1 of each year.
3.2 Incentive Compensation. (a) In addition to the salary set forth in
----------------------
Section 3.1, Executive shall be entitled to earn an annual bonus of up to 70% of
base salary at the discretion of the Board of Directors based upon performance.
It is the present intention of Employer that an annual bonus of at least 35% of
base salary will be paid.
(b) An additional bonus of $120,000 for the year 2000 will be paid to
Executive if certain milestones established by the Compensation Committee
of the Board of Directors of Employer are achieved within six months of the
Effective Date.
(c) Executive may, at her option, elect to receive all or part of any
bonus payable hereunder in the form of common stock of Employer. Any such
election shall be made in writing after the award of such bonus and prior
to payment. Employer shares shall be valued for this purpose at their Fair
Market Value as of the date of delivery of the election.
3.3 Stock Options. (a) Employer will grant to Executive, effective upon
-------------
the Effective Date, options under Employer's 1994 Stock Plan to purchase 461,760
shares of Employer's Common Stock (which are equal to 4% of Employer's fully
diluted common stock as of December 31, 1999) at an exercise price of $ 2.75 per
share. Employer will grant to Executive, not later than the first anniversary
of the Effective Date and subject to Executive having continuously served as
Chief Executive Officer until that date, options under the 1994 Plan to purchase
a number of shares equal to 1% of the fully diluted common stock of Employer as
of the date of grant. All options granted to Executive will be qualified as
incentive stock options under the Internal Revenue Code to the maximum extent
permitted by applicable law. The option grants contemplated by this Section 3.3
are subject to amendment of Employer's 1994 Stock Plan to increase the number of
shares available for grant thereunder. The Board of Directors of Employer has
approved such an amendment and Employer will promptly and diligently seek
shareholder approval of such amendment.
(b) Options granted to Executive will vest in equal quarterly
installments over four years, with the first installment of the initial
grant vesting on March 31, 2000. Vesting of options will be subject to
acceleration upon a Change of Control so that (i) if a Change of Control
occurs within 6 months after the Effective Date, vesting will be
accelerated to the extent that Option Value of all vested options then held
would be equal
2
<PAGE>
to $2,000,000; (ii) if a Change of Control occurs after six months and
within 18 months of the Effective Date, vesting of 50% of the then unvested
options will be accelerated; and (iii) if a Change of Control occurs more
than 18 months after the Effective Date, all options will be vested.
Definitions of certain capitalized terms used in this Section 3.3 are set
forth in Section 7.1.
3.4 Benefits. During the period of her employment, Executive shall be
--------
entitled to participate in Employer's plans for the welfare and benefit of its
employees available to senior executive officers (including health, disability,
and life insurance programs, retirement plans, deferred compensation
arrangements, and vacation periods) as shall be established and modified from
time to time.
3.5 Expenses. During the term of this Agreement, Employer authorizes
--------
Executive to incur reasonable and necessary out-of-pocket expenses in the course
of performing her duties and rendering services hereunder in accordance with
Employer's policies with respect thereto, and Employer shall reimburse Executive
for all such expenses, provided (i) such expenses and the purpose for which they
were incurred are in accordance with Employer's policies, and (ii) Executive
timely submits to the Employer expense reports and substantiation of the
expenses in accordance with Employer's policies.
3.6 Relocation. Executive agrees to relocate to the Boston,
----------
Massachusetts metropolitan area within a reasonable time after the Effective
Date. Employer will reimburse reasonable and documented costs of sale of
Executive's existing residence (including real estate commissions), closing
costs of purchase of a new residence (including real estate commissions to the
extent payable by Executive as the buyer), costs of two trips to the Boston area
to search for a new residence, and moving costs.
4. Termination.
-----------
4.1 Termination. Executive's employment by Employer shall terminate on
-----------
the earliest Date of Termination upon the occurrence of any of the following
events:
4.1.1 Executive's death.
4.1.2 Executive is determined to be "permanently disabled" as defined
under the disability insurance policy covering Executive, as of the date that
benefits commence being paid.
4.1.3 Termination of Executive by Employer for Cause, provided, however,
that the Board of Directors has given Executive 30 days' written notice of its
intention to terminate Executive for Cause, specifying with particularity the
grounds on which the proposed termination for Cause is contemplated, which shall
be acts or failures to act on the part of Executive of which the Board first had
knowledge no more than six months prior to the giving of such notice. The Board
of Directors shall, on or before the expiration of the 30 day notice period,
consider whether the Cause specified in the notice has been cured by Executive.
Whether any such cure is possible and, if possible, has been effected, shall be
determined by the Board of Directors in their sole judgment.
3
<PAGE>
4.1.4 Termination of employment by Executive upon 30 days' written notice
to Employer because of Constructive Termination Without Cause.
4.1.5 Resignation by Executive, which shall be upon 30 days' written
notice to Employer.
4.1.6 Termination of Executive by Employer without Cause.
4.2 Time of Termination. Executive's employment with Employer (including
-------------------
all positions held with Employer or its Subsidiaries or affiliates) shall
terminate immediately upon the Date of Termination without further action by
Employer.
4.3 Effect of Termination of Employment.
-----------------------------------
(a) Termination Due to Death. In the event that Executive's employment
------------------------
is terminated due to death, her estate or designated beneficiaries shall be
entitled to the following:
(i) continuation of installments of the Base Salary Amount in
effect as of the date of death for a period of six months following
the date of death, payable on Employer's standard payroll cycle;
(ii) on account of the bonus to which Executive is entitled under
Section 3.2(a) , an amount equal to the amount earned by the
Executive as of the Date of Termination, pro rated for the portion
of the calendar year elapsed prior to the Date of Termination, and
payable on the date it would otherwise have been payable;
(iii) the bonus payable under Section 3.2(b), if earned and unpaid
as of the Date of Termination;
(iv) the right to exercise any stock option held by Executive
which is then exercisable (other than any option qualified as an
incentive stock option under the Internal Revenue Code (an "ISO"))
on the date of death for the remainder of its term;
(v) any other amounts payable on death pursuant to any written
plans or policies of Employer; and
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to
Executive.
(b) Termination Due to Disability. In the event that Executive's
-----------------------------
employment is terminated due to permanent or total disability, Executive or
her legal representative shall be entitled to the following:
(i) on account of the bonus to which Executive is entitled under
Section 3.2(a) , an amount equal to the amount earned by the
Executive as of the Date of Termination, pro rated for the portion
of the calendar year elapsed prior to the Date of Termination, and
payable on the date it would otherwise have been payable;
4
<PAGE>
(ii) the bonus payable under Section 3.2(b), if earned and unpaid
as of the Date of Termination;
(iii) the right to exercise any stock option held by Executive
which is then exercisable (other than any ISO) on the Date of
Termination for the remainder of its term;
(iv) continuation of medical benefits and life insurance as
provided in Section 3.4 of this Agreement for so long as such
continuation may be provided at reasonable cost to Employer under
its insurance arrangements in effect from time to time (provided
that if Executive accepts employment with another employer that
offers medical and/or life insurance benefits, then Employer's
obligation to provide such benefits under this clause shall
terminate upon 30 days' notice from Employer to Executive);
(v) any other amounts payable according to Employer's disability
policies; provided that disability payments that would be funded by
insurance on the date hereof shall be made to the extent that funds
are available under insurance policies maintained by Employer which
are then in effect;
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to
Executive
(c) Termination without Cause or Constructive Termination Without Cause.
-------------------------------------------------------------------
In the event of termination by Employer without Cause (other than by death
or disability) or if there is a Constructive Termination Without Cause,
Executive shall be entitled to the following:
(i) continuation of installments of the Base Salary Amount in
effect as of the Date of Termination for a period of six months
following the Date of Termination, payable on Employer's standard
payroll cycle;
(ii) on account of the bonus to which Executive is entitled under
Section 3.2(a), an amount equal to the amount earned by Executive as
of the Date of Termination, pro rated for the portion of the
calendar year elapsed prior to the Date of Termination, and payable
on the date it would otherwise have been payable;
(iii) the bonus payable under Section 3.2(b), if earned and unpaid
as of the Date of Termination;
(iv) the right to exercise any stock option held by Executive
which is then exercisable (other than any ISO) on the Date of
Termination for the remainder of its term;
(v) continuation for six months of medical benefits and life
insurance as provided in Section 3.4 of this Agreement and
participation in other welfare benefit plans (provided that if
within such period Executive accepts employment with another
employer that offers medical and/or life insurance benefits, then
Employer's obligation to provide such benefits under this clause
shall terminate); and
(vi) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to
Executive
5
<PAGE>
(d) Termination for Cause or Resignation. In the event Executive's
------------------------------------
employment is terminated by Employer for Cause or by Executive by
Resignation (but not upon Constructive Termination Without Cause), Executive
shall receive:
(i) Base Salary Amount in effect on, and payable through, the
Date of Termination in accordance with Employer's standard payroll
policies; and
(ii) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to
Executive.
(e) Termination due to Expiration of Term. In the event Employer elects
-------------------------------------
to not renew Executive's employment at the expiration of the Initial Term
or any Renewal Term, Executive shall receive:
(i) continuation of installments of the Base Salary Amount in
effect as of the Date of Termination for a period of six months
following the Date of Termination, payable on Employer's standard
payroll cycle;
(ii) on account of the bonus to which Executive is entitled under
Section 3.2(a), an amount equal to the amount earned by the
Executive as of the Date of Termination, pro rated for the portion
of the calendar year elapsed prior to the Date of Termination, and
payable on the date it would otherwise have been payable;
(iii) the right to exercise any stock option held by Executive
which is then exercisable (other than any ISO) on the Date of
Termination for the remainder of its term;
(iv) continuation for six months of medical benefits and life
insurance as provided in Section 3.4 of this Agreement and
participation in other welfare benefit plans (provided that if
within such period the Executive accepts employment with another
employer that offers medical and/or life insurance benefits, then
the Employer's obligation to provide such benefits under this clause
shall terminate); and
(v) any other amounts that accrued and became due and payable
prior to termination but have not yet been paid from Employer to
Executive.
5. Return of Employer's Property.
-----------------------------
Immediately upon termination of the Executive's employment with the
Employer, the Executive shall deliver to the Employer all confidential
information of the Employer, including, but not limited to, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer discs and other electronic media) relating in any way to the
business of the employer in any way obtained by the Executive during the period
of her employment with Employer. Immediately upon termination of Executive's
employment with Employer, Executive shall deliver to Employer all tangible
property of Employer in the possession of Executive. The obligations of
Executive under this Section 5 shall survive the termination of Executive's
employment and the expiration or termination of this Agreement.
6
<PAGE>
6. Remedies.
--------
In the event of any breach or threatened breach, the parties to this
Agreement may pursue any and all remedies available at law or in equity for any
such breach or threatened breach, including the recovery of damages. Executive
shall be under no obligation to mitigate any damages suffered by Executive and
arising in connection with this Agreement, nor (except as provided in Sections
4.3 (c)(v) and 4.3 (e)(iv)) shall any income or amounts payable to Executive
other than pursuant to this Agreement offset damages hereunder. No payment due
Executive under this Agreement shall be subject to any discount based on
accelerated payment or otherwise. Costs of litigation, including, without
limitation, costs of investigations, fees and expenses of attorneys, shall be
borne by Executive (i) if Executive or her estate or beneficiaries shall
actually receive bonus payments or payments of Base Salary (as the case may be)
and medical, life insurance and welfare benefits pursuant to Section 4.3 in the
amounts and on the dates set forth therein (ii) if Executive shall have
resigned or (iii) if Executive shall have been terminated for Cause (provided
that if a court of competent jurisdiction shall determine that Cause did not
exist, then such costs of litigation shall be repaid to Executive). In other
cases such costs of litigation shall be borne by Employer. Each party to this
Agreement acknowledges that Employer would be irreparably harmed by any breach
of Section 5 and that damages alone would be an inadequate remedy for any breach
of such Section. Accordingly, Employer shall be entitled to equitable relief,
including without limitation a preliminary and/or permanent injunction for
specific performance, with respect to any such breach, without requirement of
the posting of a bond or other surety.
7. Miscellaneous.
-------------
7.1 Certain Definitions.
-------------------
(a) "Cause" shall mean (i) breach of this Agreement or any other
agreement between Executive and Employer, (ii) willful refusal to perform
assigned duties, (iii) fraud, (iv) willful injury or attempt to do injury
to Employer, its assets or its business, (v) substance abuse or (vi) any
act that is a felony or any violation of laws or policies relating to
harassment or discrimination.
(b) "Constructive Termination Without Cause" shall mean:
(i) Executive shall have ceased to be the Chief Executive Officer
of Employer, Executive shall have been assigned to duties which are
inconsistent with her position as Chief Executive Officer or
limitations shall have been imposed on Executive's authority that
are inconsistent with her position as Chief Executive Officer, in
each case without Executive's prior written consent, whether as a
result of a transaction after the date hereof (including without
limitation a merger, reorganization, consolidation or similar
transaction) or otherwise;
(ii) The General Electric Company or Siemens, A.G. shall have
acquired effective control of the management of Employer;
(iii) without Executive's prior written consent, there shall have
been a reduction in Executive's then current Base Salary Amount or a
reduction in Executive's target award opportunity (if any) or other
long-term performance incentive which is
7
<PAGE>
proportionately greater than corresponding reductions in base
salary, target award opportunities or long term performance
incentives (as the case may be) for senior management generally, or
Employer shall have terminated or failed to continue to provide to
Executive any employee benefit then otherwise provided to Employer's
senior management generally, or Employer shall have failed to
include Executive in any incentive compensation plan of Employer
unless a plan providing substantially the same opportunity is
substituted;
(iv) Employer shall engage in fraudulent conduct in which
Executive is not a participant;
(v) Employer shall materially breach this Agreement and shall not
cure such breach within thirty days after written notice of such
breach is given by Executive to the Board of Directors of Employer,
including, without limitation, by failing to obtain the confirmation
or assumption of Employer's obligations under this Agreement as
required by Section 7.5 with respect to any transaction referred to
in that Section; or
(vi) Employer shall require that Executive relocate to a principal
place of business outside of the Boston, Massachusetts metropolitan
area.
(c) "Date of Termination" shall mean:
(i) if employment terminates because of Executive's death, the
date of death;
(ii) if employment terminates for "Cause", the expiration of the
30 day notice period under Section 4.1.3;
(iii) if employment terminates due to "Resignation", then the
earlier of Executive's last day of employment or 30 days from the
receipt by Employer of notice of such Resignation;
(iv) if employment terminates because of permanent or total
disability, the date of determination that Executive is disabled as
described in Section 4.1.2 of this Agreement;
(v) if employment terminates for Constructive Termination Without
Cause, on the date set forth in Executive's notice as described in
Section 4.1.4 of this Agreement; or
(vi) if employment terminates due to expiration of term, the date
of expiration.
(d) "Change in Control" means (i) a merger, liquidation, consolidation
or transfer of all or substantially all assets (other than a transaction in
which a majority of the aggregate voting power of the capital stock of
Employer or its successor immediately after the transaction is held by
holders who, in the aggregate, held a majority of the voting power of the
capital stock of Employer immediately before the transaction, calculated in
all cases on a fully diluted basis), or (ii) any other transaction or
series of related transactions that results in the acquisition by any
person or group of beneficial ownership
8
<PAGE>
of securities of Employer representing a majority of the aggregate voting
power of the capital stock of Employer (calculated in all cases on a fully
diluted basis); provided that the acquisition of additional securities by
any person or group that had beneficial ownership, on January 21, 1999, of
securities representing 10% or more of the aggregate voting power of the
capital stock of Employer, shall not be a Change in Control. The terms
"group" and "beneficial ownership" shall have the same meanings as under
the Rules and Regulations of the United States Securities and Exchange
Commission promulgated under the Securities Exchange Act of 1934.
(e) "Effective Date" means the date on which Executive commences
performance of her duties for Employer. Executive shall commence
performance not more than one month after the date of this Agreement.
(f) The "Fair Market Value" of a share of Employer's common stock means
the closing price per share of the common stock on the principal national
securities exchange on which the common stock is then listed or admitted to
trading or, if not then listed or admitted to trading on any such exchange,
on the Nasdaq National Market, or if not then listed or traded on any such
exchange or system, the average of the bid and offer price per share on
Nasdaq, in each case averaged over the ten trading days consisting of the
day as of which the current fair market value of the common stock is being
determined and the nine consecutive business days prior to such day. If at
any time such quotations are not available, the Fair Market Value of a
share of common stock shall mean the highest price per share that Employer
could obtain from a willing buyer (not a current employee or director) for
common stock sold by Employer, as determined in good faith by Employer,
unless Employer shall become subject to a merger, acquisition or other
consolidation pursuant to which Employer is not the surviving party, in
which case the Fair Market Value of a share of common stock shall mean the
value received by the holders of Employer's common stock for each share of
common stock in such transaction.
(g) "Option Value" means, at any time, the excess of the aggregate Fair
Market Value of the Employer common stock subject to options held by
Executive and vested at such time over the aggregate exercise price of such
options.
7.2 Notices. Any notices under this Agreement shall be in writing and
-------
shall be given by personal delivery, by local courier service, by certified or
registered letter, return receipt requested, or by a nationally recognized
overnight delivery service; and shall be deemed given when delivered in person
or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a
nationally recognized overnight delivery service at the addresses set forth
below or to such other address or addresses as either party shall have specified
in writing to the other party hereto.
If to the Employer:
eMed Technologies Corporation
25 Hartwell Avenue
Lexington, MA 02421
Attn.: Secretary
If to Executive:
9
<PAGE>
Caren Mason
W. 303 N. 1593 Arbor Drive
Delafield, WI 53018
7.3 Governing Law. All questions pertaining to the validity,
-------------
construction, execution and performance of this Agreement shall be construed in
accordance with, and be governed by, the laws of the state of Massachusetts
without reference to its principles of conflicts of law.
7.4 Entire Agreement; Amendment or Modification. This Agreement, the
-------------------------------------------
Confidentiality and Work Product Agreement between Employer and Executive, the
Non-Competition Agreement between Employer and Executive and Employer's written
employment manuals and policies are all of the agreements of the parties hereto
relevant to the matters contained herein. No modification or amendment of any of
the provisions of this Agreement shall be effective unless in writing and signed
by Executive and Employer. No failure to exercise any right or remedy hereunder
shall operate as a waiver thereof. No term or condition of this Agreement shall
be deemed to have been waived, nor shall a party be estopped from enforcing any
provision of this Agreement, except by a statement in writing signed by
Executive or Employer, whichever party against whom such waiver or estoppel is
sought. If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid or unenforceable, such provision shall be
reformed to the extent necessary to make it valid or enforceable and to carry
out the intent of the parties, or if such reformation is not possible, the
remaining provisions of this Agreement shall continue in full force and effect.
7.5 Assignability; Binding Nature. This Agreement has been duly
-----------------------------
authorized by the Board of Directors of Employer and shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs (in
the case of Executive) and permitted assigns. No rights or obligations of
Employer under this Agreement may be assigned or transferred by Employer, except
that such rights or obligations may be assigned or transferred pursuant to a
merger or consolidation in which Employer is not the continuing entity, or the
sale of all or substantially all of the assets of Employer, provided that the
assignee or transferee shall expressly assume the liabilities, obligations and
duties of Employer, as contained in this Agreement. If requested by Executive,
Employer will, prior to the effectiveness of any merger or consolidation of
Employer with or into any other entity or any sale of all or substantially all
of the assets of Employer, provide to Executive the express written assumption
of all of Employer's obligations hereunder by the surviving or successor entity
(or express written confirmation of such obligations if Employer is the
surviving entity). Executive may not assign any of his rights hereunder without
the prior written consent of Employer.
7.6 Survival. Executive's obligations under Sections 5 and 6 will
--------
survive the termination of Executive's employment and the termination of
expiration of this Agreement. Employer's obligations under this Agreement will
survive the termination of Executive's employment and the termination or
expiration of this Agreement until paid in full or satisfied.
10
<PAGE>
7.7 Headings. The paragraph and subparagraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
11
<PAGE>
7.8 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
several counterparts, and all counterparts so executed shall constitute one
agreement, binding on the parties hereto, notwithstanding that both parties are
not signatory to the original or the same counterpart. This Agreement shall
become effective as of the date first set forth above when executed by Executive
and Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written, and will be effective for all purposes as of
the Effective Date.
eMed Technologies Corporation
By:
-------------------------------
James Bochnowski
Chairman of the Board
EXECUTIVE
-----------------------------------
Caren Mason
12
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated February 24, 2000 relating to the financial statements and
financial statement schedules of eMed Technologies Corporation, which appear in
such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in 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 Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 2,259,052 4,463,581
<SECURITIES> 0 0
<RECEIVABLES> 5,413,289 6,358,268
<ALLOWANCES> 487,073 460,006
<INVENTORY> 2,011,410 1,567,869
<CURRENT-ASSETS> 9,527,319 12,036,189
<PP&E> 2,100,418 2,639,696
<DEPRECIATION> 1,109,237 1,523,619
<TOTAL-ASSETS> 11,506,326 13,277,146
<CURRENT-LIABILITIES> 10,775,699 8,773,826
<BONDS> 0 0
0 0
77,346 118,775
<COMMON> 4,856 6,027
<OTHER-SE> 306,011 4,299,214
<TOTAL-LIABILITY-AND-EQUITY> 11,506,326 13,277,146
<SALES> 11,299,756 20,250,613
<TOTAL-REVENUES> 12,594,167 23,570,612
<CGS> 7,223,230 8,944,773
<TOTAL-COSTS> 8,976,139 12,317,400
<OTHER-EXPENSES> 8,581,939 13,658,209
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 240,343 296,496
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,963,911) (2,404,997)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,112,954) (2,561,068)
<EPS-BASIC> (11.70) (5.12)
<EPS-DILUTED> (11.70) (5.12)
</TABLE>
