UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

December 31, 2010


 
DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
000-50789
33-0145723
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

13950 Stowe Drive
Poway, California  92064
 (Address of principal executive offices, including zip code)

(858) 726-1600
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 


 
 

 
 
Item 5.02.  Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
On December 31, 2010, the Board of Directors, or the Board, of Digirad Corporation, or the Company, approved the salaries and bonuses to be paid to the Company's executive officers for the 2011 fiscal year and adopted the Company's 2011 Cash Bonus Incentive Plan for the 2011 fiscal year, or the 2011 Bonus Plan, after such matters were approved and recommended by the Board's Compensation Committee.
 
Previously, on June 1, 2010, the Company entered into agreements with the Company’s named executive officers providing for 5% reductions to such named executive officers annual based salaries.  Effective January 1, 2011, the new annual base salaries of such named executive officers will return to prior levels and be as follows:

   
Base Salary
   
New Base Salary
 
Todd Clyde
  $ 318,250     $ 335,000  
Richard Slansky
  $ 242,250     $ 255,000  
Virgil Lott
  $ 209,000     $ 220,000  
Randy Weatherhead
  $ 190,000     $ 200,000  

Also effective January 1, 2011, the Company’s 2011 Bonus Plan for our named executive officers will be based on a percentage of base salary and payable based on the following payment targets :

   
Cash Target
   
Target % of Salary
 
Todd Clyde
  $ 201,000       60 %
Richard Slansky
  $ 102,000       40 %
Virgil Lott
  $ 88,000       40 %
Randy Weatherhead
  $ 130,0000       65 %

Bonuses for each of the named executive officers, except Mr. Weatherhead, will be based 25% on the achievement of 2011 product gross margin objectives, 25% on the achievement of 2011 DIS operating profit objectives, and 25% on the achievement of 2011 DIS free cash flow objectives, as established by the Compensation Committee.  The remaining 25% of these bonus targets will be based on the achievement of strategic objectives to be established by the Board.  For Mr. Weatherhead, 70% of his bonus will be based on the achievement of 2011 product gross margin objectives and 30% on the achievement of 2011 product operating profit objectives, as established by the Compensation Committee.  In addition, the Board has authority under the 2011 Bonus Plan to adjust the percentages attributable to the objectives listed above for each of the named executive officers.  Mr. Weatherhead’s bonus payments may be increased by 120% to 140% of his target based on the number of ergo cameras sold during 2011.  All bonuses payable to each named executive officer under the 2011 Bonus Plan are capped at a maximum 200% of each such named executive officer’s applicable payment target.  

The actual bonuses payable (if any) for the achievement of such objectives will be determined by the Compensation Committee, and will be payable upon the completion of the financial audit of the consolidated financial statements, but no later than March 15, 2011, subject to the named executive officer’s employment through the date of payment.
 
On December 31, 2010, the Company also awarded restricted stock units, or RSUs, to our executive officers in the amounts set forth below:
 
 
Restricted Stock Units
Todd Clyde
75,000
Richard Slansky
50,000
Randy Weatherhead
20,000
Virgil Lott
50,000
 
 
 

 
 
The RSUs granted above vest ratably over a three-year period, with one-twelfth of such RSUs vesting on the first day of each quarter following the grant date. At the end of each quarter when one-twelfth of the RSU grant vests, stock will be issued in settlement of the RSUs.  The RSU grants were made under the Company’s 2004 Stock Incentive Plan, pursuant to the terms of Restricted Stock Unit Agreements entered into with each named executive officer. A form of the Restricted Stock Unit Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Also on December 31, 2010, the Board approved amendments to the executive employment agreements of each of Todd Clyde and Richard Slansky, which were initially entered into with Mr. Clyde and Mr. Slansky on October 30, 2008 and February 7, 2009, respectively.  The amendments to their executive employment agreements are attached hereto as Exhibit 10.2 and 10.3, and incorporated herein by reference. The amendments increase the severance payable to Mr. Clyde and Mr. Slansky in the event their employment with the Company is terminated without cause.  Under Mr. Clyde’s amended agreement, the Company increased the potential severance due to Mr. Clyde from 12 months’ base salary to the greater of (a) 18 months’ base salary or (b) $502,500.  Under Mr. Slansky’s amended agreement, the Company increased the potential severance due to Mr. Slansky from 6 months’ base salary to the greater of (a) 12 months’ base salary or (b) $255,000.

On December 31, 2010, the Company entered into severance agreements with executive officers Virgil Lott and Mr. Weatherhead.  Under these agreements, in the event their employment with the Company is terminated without cause, each would receive a severance payment in amount equal to 6 months of their respective base salaries.  These agreements are attached hereto as Exhibit 10.4 and 10.5, and incorporated herein by reference.

Item 8.01.  Other Events.
 
Previously, on June 29, 2010, the Company approved a 5% reduction in the non-employee directors’ annual cash compensation.   On December 31, 2010, the Company reversed the 5% reduction in the non-employee directors’ annual cash compensation.  Accordingly, effective as of January 1, 2011, non-employee members of the Board will receive a $36,000 annual retainer for their service, an annual fee of $4,500 for serving on the Audit Committee and an annual fee of $4,000 for serving on each of the Compensation and Corporate Governance Committees.

Effective as of such date, the chairman of the Board will receive an annual retainer of $15,000, the chairman of the Audit Committee will receive an annual retainer of $10,000, and the chairman of the Compensation Committee and the chairman of the Corporate Governance Committee will each receive an annual retainer of $5,000.

Also, effective as of such date, the Board granted to the Company’s non-employee directors RSUs valued at $40,000, based on the stock price three days after the Company releases earning in connection with its 2011 annual meeting, rounded to the nearest 1,000 shares.
 
Item 9.01.  Financial Statements and Exhibits
 
(d) Exhibits.

Exhibit Number
 
Exhibit Title
 
Form of the Restricted Stock Unit Agreement.
 
Amendment to Employment Agreement, by and between the Company and Todd Clyde, dated December 31, 2010.
 
Amendment to Employment Agreement, by and between the Company and Richard Slansky, dated December 31, 2010.
 
Severance Agreement, by and between the Company and Virgil Lott , dated December 31, 2010.
 
Severance Agreement, by and between the Company and Randy Weatherhead , dated December 31, 2010.
 
 
 

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
DIGIRAD CORPORATION
     
By: 
/s/ Todd Clyde
 
 
Todd Clyde
Chief Executive Officer
 

Date:
January 3, 2011
 
 


Exhibit 10.1
 
DIGIRAD CORPORATION
 
2004 STOCK INCENTIVE PLAN
 
RESTRICTED STOCK UNIT AGREEMENT
 
NOTICE OF GRANT OF RESTRICTED STOCK UNITS
 
Unless otherwise defined herein, the terms defined in the 2004 Stock Incentive Plan (the “Plan”) will have the same defined meanings in this Notice of Grant of Restricted Stock Units (the “Notice of Grant”) and Terms and Conditions of Restricted Stock Units, attached hereto as Exhibit A (together, the “Agreement”).
 
Participant:
 
 
 
     
Address:
 
 
 
     
   
 
 
 
Participant has been granted an Award of Restricted Stock Units, subject to the terms and conditions of the Plan and this Agreement, as follows:
 
Date of Grant
 
 
 
     
Number of Restricted Stock Units
 
 
 
 
Vesting Schedule :
 
Subject to any acceleration provisions contained in the Plan or set forth below, the Restricted Stock Units will vest in accordance with the following schedule:
 
One-twelfth (1/12 th ) of the Restricted Stock Units subject to the Award will vest on the first day of each calendar quarter following the Date of Grant, subject to Participant continuing to be a Service Provider through each such date.
 
In the event Participant ceases to be a Service Provider for any or no reason before Participant vests in the Restricted Stock Unit, the Restricted Stock Unit and Participant’s right to acquire any Shares hereunder will immediately terminate.
 
Settlement Date:
 
Once vested, Shares shall nevertheless not be issued until the first to occur of: (1) the end of each quarter when 1/12th of the Restricted Stock Unit grant vests; or (2) termination of service as a Service Provider.
 
By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Award is granted under and governed by the terms

 
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and conditions of the Plan and this Agreement. Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.
 
PARTICIPANT
 
DIGIRAD CORPORATION
     
     
Signature
 
By
     
Print Name
 
Title

 
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EXHIBIT A
 
TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
 
1. Grant . The Company hereby grants to the Participant named in the Notice of Grant (the “Participant”) under the Plan the number of Restricted Stock Units indicated in the Notice of Grant, subject to all of the terms and conditions in this Agreement and the Plan, which is incorporated herein by reference. Subject to Section 13(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan will prevail.
 
2. Company’s Obligation to Pay . Each Restricted Stock Unit represents the right to receive a Share on the Settlement Date (to the extent vested). Unless and until the Restricted Stock Units will have vested in the manner set forth in Sections 3, 4 or Section 11 of the Plan, Participant will have no right to payment of any such Restricted Stock Units. Prior to the Settlement Date, such Restricted Stock Units will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. Any Restricted Stock Units that vest in accordance with this Agreement will be paid to Participant (or in the event of Participant’s death, to his or her properly designated beneficiary or estate) in whole Shares, subject to Participant satisfying any applicable tax withholding obligations as set forth in this Agreement. Subject to the provisions of Section 4, such vested Restricted Stock Units shall be paid in Shares as soon as practicable after the Settlement Date.
 
3. Vesting Schedule . Except as provided in Sections 4 and 11 and Section 11 of the Plan, and subject to Section 5, the Restricted Stock Units awarded by this Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Restricted Stock Units scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in Participant in accordance with any of the provisions of this Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.
 
4. Administrator Discretion . The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Administrator; however such vested Restricted Stock Units shall not be settled through the issuance of Shares until the Settlement Date.
 
Notwithstanding anything in the Plan or this Agreement to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units is accelerated in connection with Participant’s termination as a Service Provider (provided that such termination is a “separation from service” within the meaning of Section 409A, as determined by the Company), other than due to death, and if (x) Participant is a “specified employee” within the meaning of Section 409A at the time of such termination as a Service Provider and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of additional tax under Section 409A if paid to Participant on or within the six (6) month period following Participant’s termination as a Service Provider, then the payment of such accelerated Restricted

 
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Stock Units will not be made until the date six (6) months and one (1) day following the date of Participant’s termination as a Service Provider, unless the Participant dies following his or her termination as a Service Provider, in which case, the Restricted Stock Units will be paid in Shares to the Participant’s estate as soon as practicable following his or her death. It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the Restricted Stock Units provided under this Agreement or Shares issuable thereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. For purposes of this Agreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and any proposed, temporary or final Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.
 
5. Forfeiture upon Termination of Status as a Service Provider . Notwithstanding any contrary provision of this Agreement, the balance of the Restricted Stock Units that have not vested as of the time of Participant’s termination as a Service Provider for any or no reason will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company and Participant’s right to acquire any Shares hereunder will immediately terminate.
 
6. Death of Participant . Any distribution or delivery to be made to Participant under this Agreement will, if Participant is then deceased, be made to Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator or, if no such beneficiary has been designated or survives Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
 
7. Withholding of Taxes . When the Restricted Stock Units vest and/or when Shares are issued on the Settlement Date as payment for vested Restricted Stock Units, the Company (or the employing Parent or Subsidiary) will have the right in its sole discretion to withhold a portion of the Shares that have an aggregate market value sufficient to pay the minimum federal, state and local income, employment and any other applicable taxes required to be withheld by the Company (or the employing Parent or Subsidiary) with respect to the Shares, if any, unless the Company, in its sole discretion, requires the Participant to make alternate arrangements satisfactory to the Company for such withholdings in advance of the arising of any withholding obligations. The number of Shares withheld pursuant to the prior sentence will be rounded up to the nearest whole Share, with no refund provided for any value of the Shares withheld in excess of the tax obligation as a result of such rounding, all pursuant to such procedures as the Administrator may specify from time to time.
 
Notwithstanding any contrary provision of this Agreement, no Shares will be issued unless and until all income, employment and other taxes which the Company determines must be withheld or collected with respect to such Shares have been withheld. In addition and to the maximum extent permitted by law, the Company (or the employing Parent or Subsidiary) has the right to retain without notice from salary or other amounts payable to the Participant, cash having a sufficient value to satisfy any tax withholding obligations that the Company determines cannot be satisfied through the withholding of otherwise deliverable Shares. All income and other taxes related to the Restricted Stock Units and any Shares delivered in payment thereof are the sole responsibility of the Participant.

 
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8. Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
 
9. No Guarantee of Continued Service . PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
 
10. Address for Notices . Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company, in care of its Secretary, at 13950 Stowe Drive, Poway, CA 92064, or at such other address as the Company may hereafter designate in writing.
 
11. Changes in Restricted Stock Units . In the event that as a result of a stock or extraordinary cash dividend, stock split, distribution, reclassification, recapitalization, combination of Shares or the adjustment in capital stock of the Company or otherwise, or as a result of a merger, consolidation, spin-off or other corporate transaction or event, the Restricted Stock Units will be increased, reduced or otherwise affected, and by virtue of any such event the Participant will in his or her capacity as owner of unvested Restricted Stock Units which have been awarded to him or her (the “Prior Restricted Stock Units”) be entitled to new or additional or different shares of stock, cash or other securities or property (other than rights or warrants to purchase securities); such new or additional or different shares, cash or securities or property will thereupon be considered to be unvested Restricted Stock Units and will be subject to all of the conditions and restrictions that were applicable to the Prior Restricted Stock Units pursuant to this Agreement and the Plan. If the Participant receives rights or warrants with respect to any Prior Restricted Stock Units, such rights or warrants may be held or exercised by the Participant, provided that until such exercise any such rights or warrants and after such exercise any shares or

 
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other securities acquired by the exercise of such rights or warrants will be considered to be unvested Restricted Stock Units and will be subject to all of the conditions and restrictions which were applicable to the Prior Restricted Stock Units pursuant to the Plan and this Agreement. The Administrator in its absolute discretion at any time may accelerate the vesting of all or any portion of such new or additional shares of stock, cash or securities, rights or warrants to purchase securities or shares or other securities acquired by the exercise of such rights or warrants; provided, however, that the payment of such new or additional awards shall be made at the same time or times as if such awards had vested in accordance with the vesting schedule set forth on the first page of this Agreement (whether or not the Participant remains employed by the Company or by one of its Affiliates as of such date(s)).
 
12. Grant is Not Transferable . Except to the limited extent provided in Section 6, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.
 
13. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
 
14. Restrictions on Sale of Securities . The Shares issued as payment for vested Restricted Stock Units under this Agreement will be registered under U.S. federal securities laws and will be freely tradable upon receipt. However, Participant’s subsequent sale of the Shares may be subject to any market blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other applicable securities laws.
 
15. Additional Conditions to Issuance of Stock . The Company shall not be required to issue any certificate or certificates for Shares hereunder prior to fulfillment of all the following conditions: (a) the admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; (b) the completion of any registration or other qualification of such Shares under any U.S. state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; (c) the obtaining of any approval or other clearance from any U.S. state or federal governmental agency, which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; and (d) the lapse of such reasonable period of time following the date of vesting of the Restricted Stock Units as the Administrator may establish from time to time for reasons of administrative convenience.
 
15. Plan Governs . This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.

 
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16. Administrator Authority . The Administrator will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.
 
17. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
 
18. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
 
19. Agreement Severable . In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions of this Agreement will continue in full force and effect.
 
20 Modifications to the Agreement . This Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the parties agree to work in good faith to revise this Agreement as necessary or advisable to comply with Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A in connection to this Award of Restricted Stock Units.
 
21. Amendment, Suspension or Termination of the Plan . By accepting this Award, Participant expressly warrants that he or she has received an Award of Restricted Stock Units under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.
 
22. Governing Law . This Agreement shall be governed by the laws of the State of California, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Award of Restricted Stock Units or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California , and agree that such litigation shall be conducted in the courts of San Diego County, California , or the federal courts for the United States for the Southern District of California, and no other courts, where this Award of Restricted Stock Units is made and/or to be performed.
 
 
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Exhibit 10.2

DIGIRAD CORPORATION

AMENDMENT TO EMPLOYMENT AGREEMENT

This amendment (the “ Amendment ”) is made by and between Todd P. Clyde (“ Executive ”) and Digirad Corporation, a Delaware corporation (the “ Company ” and together with the Executive hereinafter collectively referred to as the “ Parties ”) on December 31, 2010.
 
WHEREAS , the Parties previously entered into an employment agreement dated October 30, 2008 (the “ Agreement ”); and
 
WHEREAS , the Company and Executive wish to amend certain provisions of the Agreement in order to increase the amount of severance which will be paid to Executive for certain qualifying termination events.
 
NOW, THEREFORE , in consideration of the foregoing and for other good and valuable consideration, Executive and the Company agree that the Agreement is hereby amended as follows:

1.             Termination Without Cause .  Section 4.2 of the Agreement is hereby amended and replaced as follows:

“4.2         Termination Without Cause . The Company may voluntarily terminate this Agreement, and Executive’s employment, without Cause by giving written notice to Executive. Any such notice shall specify the exact date of termination (the “Termination Date”). If Executive’s employment under this Agreement is terminated by the Company without Cause (as defined herein), Executive shall be entitled to receive severance payments in an amount equal to the higher of (A) his Base Salary at the rate currently being paid as of the Termination Date for an additional eighteen (18) months of service as an employee, or (B) $502,500 (with such severance payments being paid over the eighteen (18) months following such termination in accordance with the Company’s general payroll practices, as and when such amounts would have been paid had Executive’s employment not been terminated). The Company also agrees to provide Executive with the same level of health coverage and benefits as in effect for Executive (and his eligible dependants) on the day immediately preceding the Termination Date; provided, however, that (1) Executive constitutes a qualified beneficiary, as defined in Section 4980(B)(g)(1) of the Code; and (2) Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time prescribed pursuant to COBRA. The Company will continue to provide such continuation coverage through the earlier of (A) the date eighteen (18) months after the Termination Date, or (B) the date upon which the Executive and Executive’s eligible dependents become covered under another health plan. Executive will thereafter be responsible for the payment of COBRA premiums (including, without limitation, all administrative expenses) for the remaining COBRA period.  The severance payments provided for in this paragraph shall be in lieu of, and not in addition to, severance, if any, payable under any other plan or policy now in effect or adopted or modified from time to time by the Company. Notwithstanding anything in this agreement to the contrary, Executive’s right to receive severance pay is conditioned upon Executive’s execution and delivery of a release of claims agreement, releasing all claims Executive may have or claim to have against the Company and its respective agents and representatives, in a form acceptable to the Company, in its sole discretion (the “Release”). The Release must be executed and returned to the Company prior to any payment of severance benefits under this Agreement, and in all cases prior to the date sixty (60) days after the Termination Date. Executive shall not be under any obligation to mitigate the Company’s obligation by securing other employment or otherwise.”

 
 

 
 
2.             Full Force and Effect .  To the extent not expressly amended hereby, the Agreement shall remain in full force and effect.

3.             Entire Agreement .  This Amendment and the Agreement constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof.  This Amendment may be amended at any time only by mutual written agreement of the Parties.
 
4.             Counterparts .  This Amendment may be executed in counterparts, all of which together shall constitute one instrument, and each of which may be executed by less than all of the parties to this Amendment.
 
5.             Governing Law .  This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).
 
IN WITNESS WHEREOF , each of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the date set forth above.
 
 
 
DIGIRAD CORPORATION
     
     
Dated:   December 31, 2010
By:
/s/ R. King Nelson
     
 
Name: R. King Nelson
 
Title: Chairman
     
     
 
TODD P. CLYDE
     
     
Dated:   December 31, 2010
/s/ Todd P. Clyde
 
 
2


Exhibit 10.3

DIGIRAD CORPORATION

AMENDMENT TO EMPLOYMENT AGREEMENT

This amendment (the “ Amendment ”) is made by and between Richard Slansky (“ Executive ”) and Digirad Corporation, a Delaware corporation (the “ Company ” and together with the Executive hereinafter collectively referred to as the “ Parties ”) on December 31, 2010.
 
WHEREAS , the Parties previously entered into an employment agreement dated February 9, 2009 (the “ Agreement ”); and
 
WHEREAS , the Company and Executive wish to amend certain provisions of the Agreement in order to increase the amount of severance which will be paid to Executive for certain qualifying termination events.
 
NOW, THEREFORE , in consideration of the foregoing and for other good and valuable consideration, Executive and the Company agree that the Agreement is hereby amended as follows:

1.             Termination Without Cause or Resignation for Good Reason .  Section 4.2.1 of the Agreement is hereby amended and replaced as follows:

“4.2.1.     The Company may voluntarily terminate this Agreement, and Executive’s employment, without Cause by giving written notice to Executive.  Any such notice shall specify the exact date of termination (the “Termination Date”).  If Executive’s employment under this Agreement is terminated by the Company without Cause (as defined herein), or if Executive resigns for Good Reason (as defined herein), Executive shall be entitled to receive severance payments in an amount equal to the higher of (A) his Base Salary at the rate currently being paid as of the Termination Date for an additional twelve (12) months of service as an employee, or (B) $255,000 (with such severance payments being paid over the twelve (12) months following such termination in accordance with the Company’s general payroll practices, as and when such amounts would have been paid had Executive’s employment not been terminated).  The Company also agrees to provide Executive with the same level of health coverage and benefits as in effect for Executive (and his eligible dependants) on the day immediately preceding the Termination Date; provided, however, that (1) Executive constitutes a qualified beneficiary, as defined in Section 4980(B)(g)(1) of the Code; and (2) Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time prescribed pursuant to COBRA.  The Company will continue to provide such continuation coverage through the earlier of (A) the date twelve (12) months after the Termination Date, or (B) the date upon which the Executive and Executive’s eligible dependents become covered under another health plan.  Executive will thereafter be responsible for the payment of COBRA premiums (including, without limitation, all administrative expenses) for the remaining COBRA period.  The severance payments provided for in this paragraph shall be in lieu of, and not in addition to, severance, if any, payable under any other plan or policy now in effect or adopted or modified from time to time by the Company.  Notwithstanding anything in this agreement to the contrary, Executive’s right to receive severance pay is conditioned upon Executive’s execution and delivery of a release of claims agreement, releasing all claims Executive may have or claim to have against the Company and its respective agents and representatives, in a form acceptable to the Company, in its sole discretion (the “Release”).  The Release must be executed and returned to the Company prior to any payment of severance benefits under this Agreement, and in all cases prior to the date sixty (60) days after the Termination Date.  Executive shall not be under any obligation to mitigate the Company’s obligation by securing other employment or otherwise.”
 
 
 

 
 
2.             Full Force and Effect .  To the extent not expressly amended hereby, the Agreement shall remain in full force and effect.

3.              Entire Agreement .  This Amendment and the Agreement constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof.  This Amendment may be amended at any time only by mutual written agreement of the Parties.
 
4.             Counterparts .  This Amendment may be executed in counterparts, all of which together shall constitute one instrument, and each of which may be executed by less than all of the parties to this Amendment.
 
5.             Governing Law .  This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).
 
IN WITNESS WHEREOF , each of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the date set forth above.
 
 
 
DIGIRAD CORPORATION
     
     
Dated:   December 31, 2010
By:
/s/ Todd P. Clyde
     
 
Name: Todd P. Clyde
 
Title: President and Chief Executive Officer
     
     
 
RICHARD SLANSKY
     
     
Dated:   December 31, 2010
/s/ Richard Slansky
 
 
2


Exhibit 10.4
 
DIGIRAD CORPORATION
 
SEVERANCE AGREEMENT
 
This Severance Agreement (the “ Agreement ”) is entered into effective as of December 31, 2010 (the “ Effective Date ”), by and between Digirad Corporation (the “ Company ”) and Virgil Lott (“ Employee ”).
 
WHEREAS, the Company believes that it is imperative to provide the Employee with certain severance benefits upon certain terminations of employment and these benefits will provide the Employee with enhanced financial security and incentive and encouragement to remain with the Company.  Certain capitalized terms used in the Agreement are defined below.
 
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows:
 
1.     Term of Agreement .  This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
 
2.     Severance Payment .  In the event the Employee is terminated involuntarily by the Company without Cause, as defined below, (the date of such termination, the “ Termination Date ”) and provided that the Employee executes and does not revoke a separation agreement, including a full release of claims with the Company, in a form satisfactory to the Company (the “ Release ”) that becomes effective and irrevocable no later than the date that is sixty (60) days following the Termination Date (the “ Release Deadline ”), Employee will receive a cash payment equal to six (6) months of his base salary as in effect immediately prior to the Termination Date (the “ Severance Payment ”) with such Severance Payment to be paid in a single lump sum payment as soon as practicable after the Termination Date and in all cases within thirty (30) business days following the Termination Date; provided, that the Severance Payment will not be paid prior to the date that the separation agreement becomes effective and irrevocable.  If the separation agreement does not become effective and irrevocable prior to the Release Deadline, the Employee will not receive the Severance Payment.
 
3.     Termination .  Employee shall not be entitled to receive the Severance Payment if Employee: (a) voluntarily terminates his employment with the Company for any reason; or (b) is terminated by the Company for Cause.  For purposes of this Agreement, “ Cause ” means (i) Employee’s willful and deliberate failure to perform assigned duties or responsibilities to the Company or the lawful directions of the Employee’s supervisor after notice thereof from the Company describing Employee’s failure to perform such duties or responsibilities and a reasonable period in which to cure such failure; (ii) Employee’s engaging in any act of dishonesty, fraud or misrepresentation in connection with Employee’s duties that is intended to result in Employee’s personal enrichment; (iii) a willful act by Employee which constitutes gross misconduct and which is materially injurious to the Company; (iv) Employee’s engaging in any act of embezzlement against the Company; (v) Employee’s breach of any confidentiality agreement or invention assignment agreement with the Company; or (vi) Employee’s conviction of, or entering a plea of nolo contendere to, a felony.
 
4.     At-Will Employment .  The Company and Employee agree that Employee’s employment with the Company is and shall continue to be “at-will” and may be terminated at any time with or without cause or notice by either the Company or Employee.  No provision of this Agreement shall be construed as conferring upon Employee a right to continue as an employee of the Company.

 
 

 
 
 
5.
Successors .
 
(a)   Company’s Successors .  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the Company’s obligations under this Agreement and agree expressly to perform the Company’s obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” shall include any parent or subsidiary of the Company or any successor to the Company’s business and/or assets or which becomes bound by the terms of this Agreement by operation of law.  Notwithstanding the foregoing, this Section 5(a) shall not apply to a transfer of assets of the Company to a subsidiary of the Company or to a Company owned by stockholders of the Company in connection with any  spin-off, spin-out or restructuring of the Company.
 
(b)   Employee’s Successors .  Without the written consent of the Company, Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity.  Notwithstanding the foregoing, the terms of this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
 
6.     Section 409A .  It is intended that the Severance Payment will be exempt from the requirements of Section 409A of the U.S. Internal Revenue Code of 1986, as amended and the regulations and guidance issued thereunder and any applicable state law equivalent (collectively, “ Section 409A ”), pursuant to the “short-term deferral” exception under Section 409A, and any ambiguities and/or ambiguous terms hereunder will be interpreted to comply with the requirements of such exception or to otherwise be exempt from or comply with the requirements of Section 409A.  Notwithstanding the foregoing, the payment of the Severance Payment will be delayed until the first payroll date that occurs on or after the date that is six (6) months and one (1) day following the Termination Date if and to the extent necessary to avoid subjecting the Employee to an additional tax under Section 409A on the Severance Payment.  The Company may, in good faith and without the Employee’s consent, make any amendments and take such reasonable actions which it deems necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition under Section 409A prior to actual payment to the Employee.
 
7.     Integration .  This Agreement represents the entire agreement and understanding between the parties as to the subject matter hereof and supersedes all prior or contemporaneous agreements whether written or oral.  No waiver, alteration, or modification of any of the provisions of this Agreement shall be binding unless in writing and signed by the parties hereto or their duly authorized representatives.
 
8.     Severability .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
 
9.     Waiver .  No provision of this Agreement may be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Employee and by an authorized officer of the Company (other than Employee).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 
 

 
 
10.   Headings .  All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
 
11.   Applicable Law .  This Agreement shall be governed by and construed in accordance with the internal substantive laws, but not the choice of law rules, of the State of California.  Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in the State of California for any action or proceeding arising from or relating to this Agreement and/or relating to any arbitration in which the parties are participants.
 
12.   Withholding Taxes .  All payments made pursuant to this Agreement shall be subject to withholding of applicable income, employment and other taxes.
 
13.   Counterparts .  This Agreement 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.

 
 

 
 
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

 
 
DIGIRAD CORPORATION
     
     
 
By:
/s/ Todd P. Clyde
     
 
Title:
President and Chief Executive Officer
     
     
 
EMPLOYEE:
     
     
 
     /s/ Virgil Lott
   
 
Virgil Lott
 
 


Exhibit 10.5
 
DIGIRAD CORPORATION
 
SEVERANCE AGREEMENT
 
This Severance Agreement (the “ Agreement ”) is entered into effective as of December 31, 2010 (the “ Effective Date ”), by and between Digirad Corporation (the “ Company ”) and Randy Weatherhead (“ Employee ”).
 
WHEREAS, the Company believes that it is imperative to provide the Employee with certain severance benefits upon certain terminations of employment and these benefits will provide the Employee with enhanced financial security and incentive and encouragement to remain with the Company.  Certain capitalized terms used in the Agreement are defined below.
 
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows:
 
1.      Term of Agreement .  This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
 
2.      Severance Payment .  In the event the Employee is terminated involuntarily by the Company without Cause, as defined below, (the date of such termination, the “ Termination Date ”) and provided that the Employee executes and does not revoke a separation agreement, including a full release of claims with the Company, in a form satisfactory to the Company (the “ Release ”) that becomes effective and irrevocable no later than the date that is sixty (60) days following the Termination Date (the “ Release Deadline ”), Employee will receive a cash payment equal to six (6) months of his base salary as in effect immediately prior to the Termination Date (the “ Severance Payment ”) with such Severance Payment to be paid in a single lump sum payment as soon as practicable after the Termination Date and in all cases within thirty (30) business days following the Termination Date; provided, that the Severance Payment will not be paid prior to the date that the separation agreement becomes effective and irrevocable.  If the separation agreement does not become effective and irrevocable prior to the Release Deadline, the Employee will not receive the Severance Payment.
 
3.      Termination .  Employee shall not be entitled to receive the Severance Payment if Employee: (a) voluntarily terminates his employment with the Company for any reason; or (b) is terminated by the Company for Cause.  For purposes of this Agreement, “ Cause ” means (i) Employee’s willful and deliberate failure to perform assigned duties or responsibilities to the Company or the lawful directions of the Employee’s supervisor after notice thereof from the Company describing Employee’s failure to perform such duties or responsibilities and a reasonable period in which to cure such failure; (ii) Employee’s engaging in any act of dishonesty, fraud or misrepresentation in connection with Employee’s duties that is intended to result in Employee’s personal enrichment; (iii) a willful act by Employee which constitutes gross misconduct and which is materially injurious to the Company; (iv) Employee’s engaging in any act of embezzlement against the Company; (v) Employee’s breach of any confidentiality agreement or invention assignment agreement with the Company; or (vi) Employee’s conviction of, or entering a plea of nolo contendere to, a felony.
 
4.      At-Will Employment .  The Company and Employee agree that Employee’s employment with the Company is and shall continue to be “at-will” and may be terminated at any time with or without cause or notice by either the Company or Employee.  No provision of this Agreement shall be construed as conferring upon Employee a right to continue as an employee of the Company.

 
 

 
 
 
5.
Successors .
 
(a)   Company’s Successors .  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the Company’s obligations under this Agreement and agree expressly to perform the Company’s obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” shall include any parent or subsidiary of the Company or any successor to the Company’s business and/or assets or which becomes bound by the terms of this Agreement by operation of law.  Notwithstanding the foregoing, this Section 5(a) shall not apply to a transfer of assets of the Company to a subsidiary of the Company or to a Company owned by stockholders of the Company in connection with any  spin-off, spin-out or restructuring of the Company.
 
(b)   Employee’s Successors .  Without the written consent of the Company, Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity.  Notwithstanding the foregoing, the terms of this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
 
6.     Section 409A .  It is intended that the Severance Payment will be exempt from the requirements of Section 409A of the U.S. Internal Revenue Code of 1986, as amended and the regulations and guidance issued thereunder and any applicable state law equivalent (collectively, “ Section 409A ”), pursuant to the “short-term deferral” exception under Section 409A, and any ambiguities and/or ambiguous terms hereunder will be interpreted to comply with the requirements of such exception or to otherwise be exempt from or comply with the requirements of Section 409A.  Notwithstanding the foregoing, the payment of the Severance Payment will be delayed until the first payroll date that occurs on or after the date that is six (6) months and one (1) day following the Termination Date if and to the extent necessary to avoid subjecting the Employee to an additional tax under Section 409A on the Severance Payment.  The Company may, in good faith and without the Employee’s consent, make any amendments and take such reasonable actions which it deems necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition under Section 409A prior to actual payment to the Employee.
 
7.      Integration .  This Agreement represents the entire agreement and understanding between the parties as to the subject matter hereof and supersedes all prior or contemporaneous agreements whether written or oral.  No waiver, alteration, or modification of any of the provisions of this Agreement shall be binding unless in writing and signed by the parties hereto or their duly authorized representatives.
 
8.      Severability .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
 
9.      Waiver .  No provision of this Agreement may be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Employee and by an authorized officer of the Company (other than Employee).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 
 

 
 
10.     Headings .  All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
 
11.     Applicable Law .  This Agreement shall be governed by and construed in accordance with the internal substantive laws, but not the choice of law rules, of the State of California.  Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in the State of California for any action or proceeding arising from or relating to this Agreement and/or relating to any arbitration in which the parties are participants.
 
12.     Withholding Taxes .  All payments made pursuant to this Agreement shall be subject to withholding of applicable income, employment and other taxes.
 
13.     Counterparts .  This Agreement 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.

 
 

 
 
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.


 
DIGIRAD CORPORATION
     
     
 
By:
/s/ Todd P. Clyde
     
 
Title:
President and Chief Executive Officer
     
     
 
EMPLOYEE:
     
     
 
     /s/ Randy Weatherhead
   
 
Randy Weatherhead