<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
Commission File Number: 0-1889
NEOPATH, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1436093
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8271 - 154TH AVENUE NE, REDMOND, WASHINGTON 98052
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206)869-7284
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at July 30, 1996
(Common stock, $.01 par value) 13,160,661
</TABLE>
<PAGE> 2
NEOPATH, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements _____________________________________ 1
Balance Sheets -- June 30, 1996 (unaudited) and December
31, 1995
Statements of Operations (unaudited) -- for the three months
and six months ended June 30, 1996 and 1995
Statements of Cash Flows (unaudited) -- for the three months
and six months ended June 30, 1996 and 1995
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ____________________________ 6
PART II OTHER INFORMATION
Item 1. Legal Proceedings _________________________________________ 8
Item 4. Submission of Matters to a Vote of Security Holders _______ 8
Item 6. Exhibits and Reports on Form 8-K __________________________ 8
Signatures ___________________________________________________________ 9
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOPATH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 856,003 $ 4,150,923
Securities available-for-sale 71,203,449 19,278,839
Accounts receivable 358,515 -
Inventories 4,203,410 1,841,560
Other current assets 545,080 229,555
------------- -------------
Total current assets 77,166,457 25,500,877
Pay-per-use systems, net 2,816,536 -
Property and equipment, net 3,686,266 2,192,984
Deposits 252,053 245,068
Other assets - 77,227
------------- -------------
Total assets $ 83,921,312 $ 28,016,156
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,063,014 $ 987,977
Salaries and wages payable 1,669,910 1,443,131
Customer deposits 52,500 -
Deferred revenue 500,000 -
Current portion of obligations under capital leases 120,410 193,442
------------- -------------
Total current liabilities 4,405,834 2,624,550
Obligations under capital leases, less current portion 219,183 258,395
Shareholders' equity:
Common stock 134,898,898 71,649,971
Deferred compensation (85,520) (175,782)
Accumulated deficit (55,517,083) (46,340,978)
------------- -------------
Total shareholders' equity 79,296,295 25,133,211
------------- -------------
Total liabilities and shareholders' equity $ 83,921,312 $ 28,016,156
============= =============
</TABLE>
See accompanying notes.
1
<PAGE> 4
NEOPATH, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 253,008 $ - $ 626,627 $ -
Cost of revenues 228,868 565,708 -
------------ ------------ ------------ ------------
Gross margin 24,140 - 60,919 -
Operating expenses:
Research and development 2,591,642 2,414,212 5,283,876 4,605,340
Selling, general and administrative 2,805,228 1,480,769 4,843,404 2,592,392
------------ ------------ ----------- -----------
Total operating expenses 5,396,870 3,894,981 10,127,280 7,197,732
------------ ------------ ------------ ------------
Loss from operations 5,372,730 3,894,981 10,066,361 7,197,732
Interest expense 11,080 19,935 27,576 43,029
Interest income (836,261) (511,737) (1,944,314) (823,569)
============ ============ ============ ============
Net loss $ 4,547,549 $ 3,403,179 $ 8,149,623 $ 6,417,192
============ ============ ============ ============
Net loss per share $0.35 $0.35 $0.65 $0.78
====== ====== ====== =====
Shares used in computation of
net loss per share 13,063,029 9,640,155 12,592,560 8,257,283
============ ============ ============ ============
Pro forma, reflecting assumed conversion
of convertible preferred stock:
Pro forma net loss per share $0.35 $0.35 $0.65 $0.71
====== ====== ====== =====
Shares used in computation of pro forma
net loss per share 13,063,029 9,640,155 12,592,560 9,067,509
============ ============ ============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 5
NEOPATH, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (8,149,623) $ (6,417,192)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 685,323 226,682
Deferred compensation 66,517 145,839
Common stock issued for services/donation - 350,000
Accrued interest on securities available-for-sale 220,550 (56,334)
Net change in operating accounts:
Accounts receivable (358,515) -
Inventories and pay-per-use systems (5,314,999) (8,609)
Accounts payable and accrued liabilities 1,354,316 (100,525)
Deferred revenue 500,000 -
Other (315,525) 175,174
--------------- ---------------
Net cash used in operating activities (11,311,956) (5,684,965)
INVESTING ACTIVITIES
Purchases of securities available-for-sale (74,248,408) (29,996,848)
Maturities of securities available-for-sale 21,076,766 2,498,921
Additions to property and equipment (2,041,992) (873,935)
Other 70,242 44,948
--------------- ---------------
Net cash used in investing activities (55,143,392) (28,326,914)
FINANCING ACTIVITIES
Issuance of common stock, net 61,740,351 34,740,266
Exercise of stock options/warrants 1,532,321 151,482
Proceeds from sale/leaseback transactions - 297,098
Principal payments on capital leases (112,244) (99,858)
--------------- ---------------
Net cash provided by financing activities 63,160,428 35,088,988
--------------- ---------------
Net increase (decrease) in cash and cash
equivalents (3,294,920) 1,077,109
Cash and cash equivalents:
Beginning of period 4,150,923 -
=============== ===============
End of period $ 856,003 $ 1,077,109
=============== ===============
</TABLE>
Supplemental disclosure of non-cash item -- during the six months ended June 30,
1996, $2,953,149 was transferred from inventories to pay-per-use systems
See accompanying notes.
3
<PAGE> 6
NEOPATH, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
NeoPath, Inc. (the "Company") in accordance with generally accepted accounting
principles for interim financial information and according to the rules and
regulations of the Securities and Exchange Commission (the "Commission").
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have been
included. The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The results of operations for the
three-month and six-month periods ended June 30, 1996, are not necessarily
indicative of results to be expected for the entire year ending December 31,
1996 or for any other fiscal period. For further information, refer to the
financial statements and footnotes thereto included in the Company's Form 10-K
for the year ended December 31, 1995.
NOTE 2 - REVENUE RECOGNITION
The Company recognizes pay-per-use revenue based on the number of
customer slides processed, subject to agreed-upon minimum processing levels,
beginning in the month an AutoPap System is initially placed in commercial use
at the customer site and is accepted by the customer. Sales of AutoPap Systems
are recognized at date of shipment. In the event sales contracts may establish
commitments for installation and testing prior to final customer acceptance,
revenue is recognized upon notification of customer acceptance.
NOTE 3 - FOLLOW-ON PUBLIC OFFERING
In January 1996, the Company completed its follow-on public offering
for the sale of 2,875,000 shares of common stock at $23.00 per share. The net
proceeds, after underwriting discounts and offering expenses, from the sale of
the common stock was $61.7 million.
NOTE 4 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $2,782,243 $ 789,142
Work-in-process 726,198 343,306
Finished goods 694,969 709,112
--------- ----------
$4,203,410 $1,841,560
========== ==========
</TABLE>
NOTE 5 - LITIGATION
On July 15, 1996, Neuromedical Systems, Inc. filed a lawsuit against
NeoPath, Inc. in the United States District Court for the Southern District of
New York. The complaint alleges patent infringement, unfair competition,
false advertising, and related claims. The Company believes it has a strong
position in this action and will defend itself vigorously.
4
<PAGE> 7
NOTE 6 - SUBSEQUENT EVENT
On July 18, 1996, the Company announced that the United States Food and
Drug Administration (the "FDA") Division of Clinical Laboratory Devices had
tentatively scheduled a meeting of the Hematology and Pathology Devices Panel
to be held on September 27, 1996 to review the Company's most recent premarket
approval (PMA) submission. This filing with the FDA seeks approval for a new
intended use for the AutoPap System as a Primary Screener of Pap smear slides.
The Company's PMA supplement was accepted for filing on June 6, 1996.
NOTE 7 - RECLASSIFICATIONS
Certain prior-period amounts have been reclassified to conform to the
current-period presentation.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
NeoPath, Inc. (the "Company") develops and markets products that
automate the interpretation of medical images. The Company's initial products
are two automated screening systems used to analyze and classify Pap smear
slides. In September 1995, the United States Food and Drug Administration (the
"FDA") cleared for commercial use the Company's first product, the AutoPap 300
QC Automatic Pap Screener System (the "AutoPap QC"). In July 1996, the Company
announced that the FDA Division of Clinical Laboratory Devices had tentatively
scheduled a meeting of the Hematology and Pathology Devices Panel to be held on
September 27, 1996 to review the Company's most recent premarket approval (PMA)
submission. This filing with the FDA seeks approval for the Company's second
product, the AutoPap 300 Automatic Pap Screener System (the "AutoPap Screener"
and, together with the AutoPap QC, the "AutoPap Systems"). The Company's PMA
supplement was accepted for filing on June 6, 1996.
During the first quarter of 1996, the Health Care Financing
Administration officially allowed clinical laboratories to use the AutoPap QC
in the quality control review of Pap smear slides that have been initially
screened by cytologists as normal. The decision allows AutoPap QCs to replace
the federally mandated rescreening requirement.
The Company will typically be compensated on a pay-per-use basis
(subject to certain minimum payments). Under its pay-per-use program, the
Company retains ownership of AutoPap Systems placed at customer sites while
assessing customers a charge for each Pap smear slide analyzed. The retention
of ownership of the AutoPap Systems entails a significant capital commitment to
purchase the components of and to manufacture AutoPap Systems. The cost of
each AutoPap System is reclassified from inventories to depreciable equipment
upon shipment to the clinical laboratory. Such equipment, reflected on the
balance sheet under "pay-per-use systems, net" is depreciated on a
straight-line basis over a three-year period, commencing upon commercial
operation.
RESULTS OF OPERATIONS
The Company recognized revenues of $253,000 in the second quarter of
1996, consisting entirely of pay-per-use service contracts in the U.S.
Pay-per-use revenues increased from $24,000 in the first quarter of 1996 as the
result of the Company's continuing fulfillment of service contracts. Total
revenues of $374,000 in the first quarter of 1996, representing the Company's
first revenues, included $350,000 relating to the sale of AutoPap 300 QCs in
Australia which will ultimately lead to pay-per-use pricing for primary
screening. The Company recognized total revenues of $627,000 for the six-month
period ended June 30, 1996.
The primary components of cost of revenues include depreciation on
pay-per-use systems and allocated service and support costs, and, with regard
to the AutoPap Systems sold in the first quarter of 1996, the related cost of
those units. Because manufacturing and service and support functions are at an
early stage, cost of revenues for the three and six-month periods ended June
30, 1996 is not necessarily indicative of future cost of revenues.
Research and development expenses for the three months ended June 30,
1996 increased 7.3 percent to $2.6 million from the comparable period in 1995.
For the six months ended June 30, 1996, research and development expenses
increased 14.7 percent to $5.3 million from the amount recognized in the six
months ended June 30, 1995. The increase from prior periods is primarily a
result of additional research and development personnel.
Selling, general and administrative expenses increased 89.4 percent to
$2.8 million for the three months ended June 30, 1996 from the second quarter
of 1995, and increased 86.8 percent to $4.8 million for the six months ended
June 30, 1996 from the comparable period in 1995. The increase from prior
periods reflects the Company's continued expansion of its marketing, sales, and
service functions to support commercialization of the
6
<PAGE> 9
AutoPap Systems. The Company expects selling, general and administrative
expenses to continue to increase in support of the AutoPap Systems'
commercializations.
Interest income for the second quarter of 1996 increased to $836,000
compared to $512,000 for the comparable quarter in 1995. For the six months
ended June 30, 1996, interest income increased to $1.9 million from $824,000 in
the six months ended June 30, 1995. The increase in interest income was due
primarily to the increase in cash equivalents and securities available-for-sale
as a result of the Company's follow-on public stock offering completed in
January 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and securities available-for-sale
totaled $72.1 million as of June 30, 1996, which represents an increase of
$48.6 million from December 31, 1995. The increase is primarily a result of the
Company's follow-on public stock offering, completed in January 1996, net of
cash used in the Company's operations. The Company received $61.7 million in
net proceeds from the stock offering.
During the six months ended June 30, 1996, $11.3 million was used to
fund the Company's operating activities, including $3.0 million for inventories
subsequently classified as pay-per-use systems, and $2.0 million was invested
in property and equipment. Negative cash flows were partially offset by the
receipt of a $500,000 nonrefundable fee from a foreign distributor with which
the Company has entered into a letter of intent. The Company has deferred
revenue recognition of the nonrefundable fee in accordance with generally
accepted accounting principles. The investment in pay-per-use systems is
expected to increase as the Company continues to place AutoPap Systems into
commercial service. The Company anticipates increased investments in property
and equipment due to expansion of the Company's facilities and personnel-related
equipment requirements.
The Company expects negative cash flow from operations to continue for
the next few years as it manufactures AutoPap Systems to support its
pay-per-use program, expands its marketing and sales and customer service and
support capabilities, continues its research and development activities, and
satisfies regulatory requirements to market its products. The Company currently
estimates that its existing cash, cash equivalents and securities
available-for-sale will be sufficient to fund its operations for at least the
next two years. There can be no assurance, however, that the Company will not be
required to seek additional capital at an earlier date. The Company's future
capital requirements will depend on many factors, including those factors listed
below.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
The forward-looking statements in this report are subject to certain
risks and uncertainties that could cause actual results to differ materially,
including without limitation, market acceptance of the Company's products; the
acceptance of the Company's pay-per-use program; product and manufacturing
regulatory approvals; the Company's limited manufacturing, marketing, customer
service and support capabilities; the Company's sole or limited source of
supply of certain components; the status of competing products; and
uncertainties relating to international transactions. These and other risks
are detailed in the Company's reports filed with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
7
<PAGE> 10
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 15, 1996, Neuromedical Systems, Inc. filed a lawsuit against
NeoPath, Inc. in the United States District Court for the Southern District of
New York. See Note 5 of the Notes to Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on June 25, 1996
(the "Annual Meeting"), the following Class 2 Directors were elected by the
vote set forth below:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
David A. Thompson 9,468,514 13,690
Gail R. Wilensky 9,468,714 13,490
</TABLE>
The following proposals were also approved at the Annual Meeting:
<TABLE>
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C> <C>
Amendment of NeoPath, Inc.
1989 Restated Stock Option Plan 7,024,440 420,024 15,227
Amendment of NeoPath, Inc. Stock
Plan for Nonemployee Directors 7,508,764 157,105 16,627
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Description
----------- -----------
10.1* NeoPath, Inc. Proposal to SmithKline Beecham Clinical
Laboratories, accepted May 9, 1996
10.2* NeoPath, Inc. Proposal to Laboratory Corporation of
America Holdings, accepted May 15, 1996
10.3* NeoPath, Inc. Amended and Restated Proposal to Kaiser
IMMC Agreement No. 0249, accepted June 25, 1996
11 Computation of net loss per share
27 Financial Data Schedule
-------------
* Confidential treatment requested
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
8
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NeoPath, Inc.
Date: August 13, 1996 By: /s/ ALAN C. NELSON
------------------------
Alan C. Nelson
President, Chief Executive Officer
By: /s/ ROBERT C. BATEMAN
----------------------
Robert C. Bateman
Corporate Controller
Acting Chief Accounting Officer
9
<PAGE> 12
NeoPath, Inc.
Index to Exhibits
Exhibit No. Description
----------- -----------
10.1* NeoPath, Inc. Proposal to SmithKline Beecham
Clinical Laboratories, accepted May 9, 1996
10.2* NeoPath, Inc. Proposal to Laboratory Corporation
of America Holdings, accepted May 15, 1996
10.3* NeoPath, Inc. Amended and Restated Proposal to Kaiser
IMMC Agreement No. 0249, accepted June 25, 1996
11 Computation of net loss per share
27 Financial Data Schedule
----------------
* Confidential treatment requested
<PAGE> 1
Exhibit 10.1
[NEOPATH LOGO]
PROPOSAL
TO
SMITHKLINE BEECHAM CLINICAL LABORATORIES
1201 South Collegeville Road
Collegeville, PA 19426
OVERVIEW OF PROPOSAL
NeoPath, Inc. (NeoPath) proposes to provide SmithKline Beecham Clinical
Laboratories (SBCL) [*] AutoPap(R) 300 QC [*] to handle approximately [*] Pap
smears per year at the Atlanta facility, or one instrument for every [*] slides
processed.
Because NeoPath supports SBCL as an early adopter of our products, we would ask
that SBCL continue to serve as reference sites for financial individuals or
organizations interested in the AutoPap Systems. Site visits will be mutually
agreed upon in advance with notice provided to the laboratory.
1. OFFER
1.1 PRICING AND AVAILABILITY
The AutoPap 300 QC Systems will be offered on a
fee-per-slide-processed: $[*] per slide for all slides from managed
care contracts, up to 18 months or until re-negotiated, whichever comes
first, and up to a maximum of [*] of the total volume, $[*] per slide
for all other slides processed. This offer is based on a minimum volume
of [*] slides per year per instrument.
1.2 EXCLUSIVITY
For the term of this contract, SBCL agrees to utilize AutoPap Systems
for all of their automated Pap smear reading needs.
- ----------------------------------
[*]Confidential treatment requested
SmithKline Beecham Clinical Laboratories
<PAGE> 2
1.3 TERMS
The term of this Agreement is for a period of 3 years from the date
installation completion of the first AutoPap 300 QC System with
provision for automatic annual renewals thereafter, unless a 60-day
prior written notification is issued by either party to the other at
the end of the term. As per the NeoPath STANDARD TERMS AND CONDITIONS,
NeoPath will deliver the AutoPap 300 QC Systems FOB carrier at the
NeoPath manufacturing facility. SBCL is responsible for all
transportation costs (including, but not limited to: shipping charges,
premiums for freight insurance, and transporting the AutoPap 300 QC
Systems to the shipping destination).
1.4 CANCELLATION OF AGREEMENT
If it is determined during the initial [*] after the installation of
the first AutoPap 300 QC Systems that they will not perform to the
agreed upon specifications, the instruments may be returned and the
Agreement dissolved. (Please see Section 4). In any case, NeoPath will
have 60 days from notification of a technical problem to correct said
problem, or replace the entire instrument.
2.1 SERVICE
2.1.1 WARRANTY
NeoPath will warrant each AutoPap System against defects in
materials and workmanship for the period of the Agreement as
provided for in the STANDARD TERMS AND CONDITIONS.
2.1.2 LEVEL OF SUPPORT
NeoPath, or its authorized service representative, will
provide timely repairs, maintenance, enhancements, and
inspections, as required, to assure that the AutoPap Systems
perform to specifications.
2.1.3 PRICE
Routine service, as defined by NeoPath, is included in the
per-slide fee. However, the cost of service and/or repairs
resulting from negligence, misuse, abuse and/or non-routine
causes will be charged to SBCL.
2.2 INSTALLATION
Prices Quoted for the proposed AutoPap Systems include installation and
training provided by NeoPath. All such work will be done under the
supervision of SBCL.
- ----------------------------------
[*]Confidential treatment requested
-2-
SmithKline Beecham Clinical Laboratories
<PAGE> 3
3. ACCESSORIES
3.1 Each offered AutoPap System includes the following NeoPath accessories:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
-------- -----------
<S> <C>
[*] AutoPap Slide Trays
1 Operator Manual
1 Start-Up Kit*
</TABLE>
* Start-Up Kit will include one pack of printer paper and one roll
of Bar Code Labels [*] sets of [*] labels per roll
3.2 The following additional accessories are offered by NeoPath at the
indicated prices:
<TABLE>
<CAPTION>
DESCRIPTION PRICE
----------- -----
<S> <C>
Bar Code Labels [*] (U.S.) per roll
AutoPap Slide Tray [*] (U.S.) per tray
</TABLE>
4. ACCEPTANCE CRITERIA FOR AUTOPAP(R) 300 QC SYSTEM ACQUISITION
The AutoPap System will perform in accordance with the Product Insert.
5. PROPOSAL ACCEPTANCE
5.1 DURATION OF PROPOSAL
This Proposal shall remain valid through March, 1996.
5.2 ACCEPTANCE OF OFFER
NEOPATH, INC. SMITHKLINE BEECHAM CLINICAL LABORATORIES
By: /s/ VOLKER R. KETTERING By: /s/ EDWARD A. KAUFMAN
- --------------------------------- -------------------------------------------
Volker R. Kettering Edward A. Kaufman, M.D.
Vice President and
Vice President, Sales National Medical Director
- --------------------------------- -------------------------------------------
Title Title
March 7, 1996 May 9, 1996
- --------------------------------- -------------------------------------------
Date Date
- ---------------------------------
[*]Confidential treatment requested
-3-
SmithKline Beecham Clinical Laboratories
<PAGE> 4
NEOPATH(R), INC.
AUTOPAP(R) 300 QC AUTOMATIC PAP SCREENER SYSTEM
INDICATION FOR USE
INTENDED USE
The AutoPap 300 QC System is an automated cervical cytology rescreening device
intended for use in the quality control and rescreening of previously screened
Papanicolaou (Pap) smear slides. The AutoPap 300 QC System is to be used only on
conventionally prepared Pap smear slides that have been previously classified as
within normal limits (WNL) and satisfactory for interpretation by a screening
cytologist. The AutoPap 300 QC System is not intended to replace the current
laboratory slide review processes referred to as "high-risk rescreen."
SUMMARY AND EXPLANATION OF THE SYSTEM
The AutoPap 300 QC System is an automated cytology rescreening device that uses
a high-speed video microscope, image interpretation software, and specially
designed field-of-view computers to image, analyze, and classify cells within
the complex images on a Pap smear slide.
The AutoPap 300 QC System is intended to detect evidence of squamous carcinoma
and adenocarcinoma and their usual precursor conditions missed on prior manual
microscopic examination of Pap smear slides. These abnormalities fall within the
following diagnostic categories of The Bethesda System:
EPITHELIAL CELL ABNORMALITIES
Squamous Cell
Atypical squamous cells of undetermined significance (ASCUS)
Low-grade squamous intraepithelial lesions (LSIL)
High-grade squamous intraepithelial lesions (HSIL)
Squamous cell carcinoma
Glandular Cell
Atypical glandular cells of undetermined significance (AGUS)
Endocervical adenocarcinoma
Endometrial adenocarcinoma
Extrauterine adenocarcinoma
Pap smear slides screened as WNL and adequate for analysis by a screening
cytotechnologist are to be rescreened by the AutoPap 300 QC System. Based on
cytologic evidence, the device then identifies, for manual quality control (QC)
review, slides with the highest probability of being a false negative to create
an enriched sample. The result is that there is a higher prevalence of false
negative slides in the sample selected for manual QC review.
The System classifies each slide into one of three categories:
QC REVIEW Further human review recommended; specimen is potentially
abnormal.
- ----------------------------------
[*] Confidential treatment requested
-1-
SmithKline Beecham Clinical Laboratories
<PAGE> 5
NO REVIEW No evidence to recommend further human review.
REVIEW Squamous component not detected; OR, not enough cellular
material for analysis.
Slides that are not successfully processed are classified as Process Review or
Rerun. These slides may be able to be reprocessed based upon the information
provided in the slide report and the instructions provided in the Operator's
Manual. If a slide cannot be successfully reprocessed, it is recommended that
the laboratory conduct its usual procedure for routine QC selection.
The laboratory also should select for manual microscopic review the Pap smear
slides from patients or groups of patients that have been identified as having a
high probability of developing cervical cancer, based on available patient
information.
LIMITATIONS
AutoPap 300 QC System performance has not been established for use as a primary
screener of Pap smears.
Clinical data demonstrated that use of the AutoPap 300 QC System will improve
the recovery of false negative slides in the laboratory over a random selection
method. However, this device does not recover all false negative slides; false
negative readings should still be expected to occur with the use of this
device.
The AutoPap 300 QC System is not intended or recommended for use as a
confirmatory screener for slides that have been previously classified as
abnormal or unsatisfactory for interpretation.
The performance characteristics of the AutoPap 300 QC System have not been
established for the detection of the cervical abnormalities that fall within the
following diagnostic categories of The Bethesda System:
- Benign cellular changes due to infection
- Reactive changes associated with inflammation, atrophy with
inflammation, radiation, and intrauterine contraceptive device
(IUD)
- Endometrial cells, cytologically benign, in a postmenopausal
woman
- Adenocarcinoma, not otherwise specified (NOS) (specimen contains
cellular evidence of adenocarcinoma but unable to further
subclassify as to site of origin)
- Other malignant neoplasms
Use of the AutoPap 300 QC System is intended to be performed only under the
direct supervision of licensed and/or certified cytotechnologists,
cytopathologists, or laboratory directors who have been trained and certified to
use the AutoPap 300 QC System by NeoPath, Inc., one of its subsidiaries, or an
educational institution certified by NeoPath, Inc., to conduct training.
The AutoPap 300 QC System is designed to be compatible with a wide range of
staining procedures currently implemented in clinical laboratories. However, the
device is not compatible with all staining methods currently in use. The
compatibility of a laboratory's staining process will be assessed by NeoPath
prior to clinical use of the device by the laboratory. NeoPath may recommend
alternate staining procedures intended to optimize the performance of the device
while maintaining the integrity and current performance level of the human
review process.
The AutoPap 300 QC System is intended for use in processing only conventionally
prepared cervical/vaginal Pap smear slides that meet the slide, coverslip and
staining characteristics provided in the Operator's Manual.
This device is intended for use only with glass microscope slides and glass
coverslips.
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WARNINGS AND PRECAUTIONS
WARNINGS
Broken Glass Hazard when Handling Slides
Do not drop or break slides during slide preparation and when loading and
unloading slides into trays. If slides are broken, injuries may occur.
Moving Parts Hazard when Loading/Unloading Trays
Remove all potentially obstructive jewelry and clothing before loading or
unloading trays. After opening a hopper door, be sure all moving parts in the
hopper have stopped before inserting or removing a tray. If trays are inserted
before all moving parts have stopped, injuries may occur or the device may jam.
Shock Potential when Cleaning the Monitor
Failure to remove power to the monitor before performing the procedure could
result in an electric shock. See Operator's Manual.
Shock Potential when Power Applied Improperly
The symbol next to the power connector indicates potential shock hazard. Ensure
that the system is connected to a power receptacle that provides voltage and
current within the specified rating for the system. Use of an incompatible power
receptacle may produce electrical shock and fire hazards.
Shock Potential when Improperly Grounded
Never use a two-prong plug adapter to connect primary power to the system. Use
of a two-prong adapter disconnects the utility ground, creating a potential
shock hazard. Always connect the system power cord directly to an appropriate
receptacle with a functional ground.
Shock Potential when Cleaning with Power Applied
Always turn off the power switch and unplug the power cord before cleaning the
outer surfaces or internal components of the device.
Shock Potential from Spilled Liquids
Do not place containers with liquids on the device or the workstation cart. Do
not spill liquids on the system; fluid seepage into internal components creates
a potential shock hazard. Shut down the device, disconnect from the power source
and wipe up all spills immediately. Do not operate the system if internal
components have been exposed to fluid.
PRECAUTIONS
Compliance with Standards
Prior to using the device, a laboratory must ensure that the use of the AutoPap
300 QC System as a quality control method complies with all applicable federal,
state and local requirements for that laboratory. NeoPath will provide available
information and assistance in this regard, upon request.
Slide and Coverslip Requirements
This device is intended for use only with glass microscope slides and glass
coverslips.
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This device cannot be recommended for use with slides and coverslips that do not
comply with the specifications provided in the Operator's Manual, particularly
slides with plastic coverslips, broken slides, dirty or marked slides and
non-standard slide or coverslip sizes.
Backup Procedures
When performing the backup procedures, NeoPath recommends that two tapes be used
in rotation; each tape would be used every other day. This will ensure minimum
loss of data in the unlikely event of workstation failure.
Shutdown Procedures
Except in an emergency situation, such as those described in the Warnings
section, shutting down the AutoPap 300 QC System should be performed only with
prior authorization of a company representative in order to avoid loss of data.
If no emergency situation exists, contact NeoPath, Inc., or its designated
representative before attempting to shut down the device.
Power Down Procedures
It is important to shut down the system components in the proper order. See
Operator's Manual.
Restart Procedures
The AutoPap 300 QC Workstation must always be turned on and booted BEFORE the
AutoPap 300 QC Instrument is turned on. It is important to apply power to the
system components in the proper order. See Operator's Manual.
Installation and Service
The device should be installed only by company authorized personnel. Only
technically qualified personnel, trained by NeoPath, should perform
troubleshooting and service procedures on internal components.
Replacement Fuses
Use replacement fuses with the required current rating and specification. Using
improper fuses or short-circuiting the fuse holders may cause fire or damage the
device.
REPORTS OF CLINICAL STUDIES
Several multi-center, well-controlled clinical studies were conducted to
evaluate the performance of the device. An intended use study confirmed the
accuracy of the AutoPap 300 QC System using a masked, prospective design.
Several sensitivity and precision studies were conducted to confirm the
performance characteristics and reliability of the device.
ACCURACY STUDY: THE CLINICAL EVALUATION STUDY
The Clinical Evaluation Study was designed to compare the effectiveness of a
random selection quality control practice in a cytology laboratory to the
effectiveness of the AutoPap 300 QC System using a quality control application.
The AutoPap 300 QC System was operated, as nearly as possible, in a manner
similar to that recommended for routine laboratory use.
The objective of the study was to test the hypothesis that the device is capable
of providing a higher proportion of false negative slides for quality control
review than can be achieved by a random selection method. This hypothesis was
evaluated over a range of quality control review rates.
A 100% manual rescreen of all processed slides was performed in this study to
identify, as nearly as possible, the total population of false negative slides
available for review. This population of false negative slides was then used as
the target population to measure the efficacy of the device in identifying these
false negative slides
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<PAGE> 8
at a 10% QC review rate. The study design ensured that the site personnel were
effectively masked and enhanced the probability of detecting the false negative
slides present within the entire study population. The total number of slides
used in the analysis was 14,914.
Each false negative slide recovered during the study was reviewed by an Internal
Discrepancy Panel of study site personnel as well as an External Discrepancy
Panel of independent pathologists. The results of the External Discrepancy Panel
review are used to demonstrate the efficacy of the device.
These results demonstrate that the AutoPap 300 QC System identifies a subset of
manual screen negative Pap smear slides that have been enriched through computer
selection of false negative slides. A manual screening of this enriched subset
10% of the total manual screen negative slides will identify up to 50% of false
negatives when compared to a 100% manual rescreen. This compares to the expected
identification of only 10% of false negatives by a completely random selection
review.
TABLE 1 Clinical Evaluation Study
Sensitivity to False Negative Slides by Diagnostic
Category and Overall
10% QC Review Rate,
% Sensitivity, (N)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(1))
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Review Rate(2) 11.2% 11.8% 37.2% 9.4% 6.1% 19.3% 11.8%
- --------------------------------------------------------------------------------------------------------------------------
FN-ASCUS 22.5% 36.7% 47.4% 33.3% 35.7% 0.0% 29.7%
(41/138)
- --------------------------------------------------------------------------------------------------------------------------
FN-AGUS 100.0% 20.0% 100.0% 0.0% 37.5% 50.0% 29.4%
(5/17)
- --------------------------------------------------------------------------------------------------------------------------
FN-LSIL 57.1% 83.3% 100.0% 0.0% 42.9% 100.0% 51.6%
(16/31)
- --------------------------------------------------------------------------------------------------------------------------
FN-HSIL 100.0% NA NA 100.0% 42.9% NA 60.0%
(6/10)
- --------------------------------------------------------------------------------------------------------------------------
FN-Cancer NA 0.0% NA NA NA NA 0.0%
(0/1)
- --------------------------------------------------------------------------------------------------------------------------
All FN(3) 32.0% 38.1% 56.5% 25.0% 37.6% 16.7% 34.5%
(68/197)
- --------------------------------------------------------------------------------------------------------------------------
All FN-LSIL+(4) 66.7% 71.4% 100.0% 25.0% 42.9% 100.0% 52.4%
(22/42)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Site 3 is excluded from overall results due to incompatibility of
staining procedure with the device.
2. Review Rate: Average percent identified as QC Review using the global
10% QC review rate.
3. All FNs: Includes the diagnostic categories of ASCUS, AGUS, LSIL, HSIL
and Carcinoma.
4. ALL FN-LSIL+: Includes the diagnostic categories of LSIL, HSIL and
Carcinoma.
Analysis of the overall performance of the device in detecting the presence or
absence of an endocervical component shows the following:
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- 85% of normal slides with endocervical component are correctly
classified. 15% of the normal slides with endocervical component
are reported as "endocervical component not detected." However,
this result does not affect the computation of the QC score.
- 73% of normal slides without endocervical component are correctly
classified.
SENSITIVITY STUDIES
Two large, multi-center sensitivity studies were performed using abnormal
slides. Each selected abnormal slide required a normal matched control slide.
The Current Archive Sensitivity Study used recent abnormal slides processed by
the laboratory. The diagnostic categories selected included ASCUS, AGUS, LSIL,
HSIL, cancer (squamous, glandular, and extrauterine) and detected false negative
slides. The total number of slides used in the analysis, including matched
controls, was 2,584.
The Historical Archive Sensitivity Study used abnormal slides retrieved from the
archived records of each trial site. The diagnostic categories selected included
AGUS, LSIL, HSIL, cancer (squamous, glandular, and extrauterine) and detected
false negative slides. The total number of slides used in the analysis,
including matched controls, was 3,589 (see Table 2).
TABLE 2 Sensitivity to Abnormal Slides by Diagnostic Category
Historical Sensitivity Study
10% QC Review Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(2))
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
AGUS 45.0% 33.3% 60.0% 45.9% NA 34.4% 39.5%
(80) (30) (5) (37) (96) (243)
- --------------------------------------------------------------------------------------------------------------------------
LSIL 67.4% 62.2% 68.3% 68.7% 46.2% 60.5% 60.9%
(89) (90) (63) (67) (80) (86) (412)
- --------------------------------------------------------------------------------------------------------------------------
HSIL 84.7% 79.0% 90.4% 87.7% 70.3% 88.6% 82.1%
(85) (81) (73) (57) (74) (88) (385)
- --------------------------------------------------------------------------------------------------------------------------
Cancer 100.0% 86.5% 66.7% 61.5% 50.0% 71.1% 79.1%
(21) (52) (3) (26) (2) (38) (139)
- --------------------------------------------------------------------------------------------------------------------------
Review Rate(1) 16.5% 13.5% 34.2% 13.3% 7.6% 10.4% 12.9%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Review Rate: Average percent identified as QC Review at each laboratory
using the global 10% QC review rate.
2. Site 3 is excluded from overall results due to incompatibility of
staining procedure with the device.
- --------------------------------------------------------------------------------
The data derived from processing these abnormal slides demonstrate that the
AutoPap 300 QC System has significant sensitivity to all tested categories of
abnormal slides (see Table 3).
TABLE 3 Sensitivity to Abnormal Slides by Diagnostic Category
Current Archive Study (CAS) and Historical
Sensitivity Study (HSS)
10% QC Review Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ASCU AGUS LSIL HSIL CANCER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAS 36.1% 27.3% 60.0% 80.2% 62.5%
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
(205) (22) (410) (202) (8)
- --------------------------------------------------------------------------------
HSS NA 39.5% 60.9% 82.1% 79.1%
(243) (412) (385) (139)
- --------------------------------------------------------------------------------
</TABLE>
An analysis was conducted of the subset of cancer slides retrieved from the
archived records. This subset represented the larger sample size from the two
sensitivity studies. The sensitivity rates, by subclassification category, are
reported in Table 4. (These subclassifications are derived from the procedures
used across all the participating laboratories and may not coincide with
individual laboratory practice.)
These results show the device has a significant sensitivity to cancer slides.
TABLE 4 Sensitivity to Subset of Cancer Slides
10% QC Review Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Squamous AdenoCA Malignant Endocervical Endometrial AIS(3) All Cancer
CA(1) NOS(2) NOS AdenoCA AdenoCA Slides
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
91.3% 52.6% 40.0% 100.0% 66.7% 58.8% 77.7%
(80) (19) (5) (3) (15) (17) (139)
- -------------------------------------------------------------------------------------------
</TABLE>
1. CA: Carcinoma
2. NOS: Not otherwise specified (specimen contains cellular evidence of
adenocarcinoma but unable to further subclassify as to site of origin)
3. AIS: Adenocarcinoma in situ
- --------------------------------------------------------------------------------
A second subset analysis was conducted for the HSIL and cancer slides identified
by the clinical trial sites as having a biopsy-confirmed diagnosis. The slides
were selected from both the Historical Sensitivity Study and the Current Archive
Sensitivity Study.
These results indicate the device has a significant sensitivity to
biopsy-confirmed HSIL and cancer slides (see Table 5).
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TABLE 5 Sensitivity to Subset of Biopsy-Confirmed HSIL and Cancer
Slides
10% QC Review Rate
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
No. of Biopsies No. of Biopsies Confirmed Biopsies Called % Sensitivity
Confirmed "Review"
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HSIL 60 51 43 84.3%
- ----------------------------------------------------------------------------------------------------------------------
CANCER 35 33 22 66.7%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 95 84 65 77.4%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PRECISION STUDIES
Two studies were conducted to assess precision, or repeatability, of the device.
The first study was the Multi-Run Standardized Sample Set Study which used a set
of 32 well-characterized slides, processed up to 30 times on each of three
separate devices. Of the 32 slides, 25 demonstrated 100% repeatability (see
Table 6). The average percent agreement on all slides was 99.6% overall. These
results confirm that the repeatability of the device in calling a slide QC
Review or No Review is consistent from device to device (inter-device
repeatability) and within each tested device (intra-device repeatability).
TABLE 6 Summary Results of Precision Study
Multi-Run of Standardized Sample Set
% Repeatability of QC Review/No Review
Outcome for Each Slide
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Barcode QC Review Site 0 Site 1 Site 4 Overall Diagnosis
No Review
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
940006439 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006443 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006464 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006467 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006472 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006473 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006476 No Review 100% 100% 96% 99% Normal
- -----------------------------------------------------------------------------------------------------------------
940006487 No Review 97% 93% 100% 96% Normal
- -----------------------------------------------------------------------------------------------------------------
940006489 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006492 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006493 No Review 100% 100% 100% 100% Normal
- -----------------------------------------------------------------------------------------------------------------
940006497 No Review NA 100% 96% 98% Normal
- -----------------------------------------------------------------------------------------------------------------
940007379 QC Review 100% 100% 96% 99% ASCUS
- -----------------------------------------------------------------------------------------------------------------
940007381 QC Review 97% 100% 100% 99% ASCUS
- -----------------------------------------------------------------------------------------------------------------
940007409 QC Review 100% 100% 96% 99% ASCUS
- -----------------------------------------------------------------------------------------------------------------
940007410 QC Review 97% 100% 96% 98% ASCUS
- -----------------------------------------------------------------------------------------------------------------
940007416 QC Review 100% 100% 100% 100% ASCUS
- -----------------------------------------------------------------------------------------------------------------
921011542 QC Review 100% 100% NA 100% AGUS
- -----------------------------------------------------------------------------------------------------------------
940006420 QC Review 100% 100% 100% 100% LSIL
- -----------------------------------------------------------------------------------------------------------------
940006425 QC Review 100% 100% 100% 100% LSIL
- -----------------------------------------------------------------------------------------------------------------
940006428 QC Review 100% 100% 100% 100% LSIL
- -----------------------------------------------------------------------------------------------------------------
940006430 QC Review 100% 100% 100% 100% LSIL
- -----------------------------------------------------------------------------------------------------------------
940006436 QC Review 100% 100% 100% 100% LSIL
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Barcode QC Review Site 0 Site 1 Site 4 Overall Diagnosis
No Review
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
940006390 QC Review 100% 100% 100% 100% HSIL
- -----------------------------------------------------------------------------------------------------------------
940006393 QC Review NA 100% 100% 100% HSIL
- -----------------------------------------------------------------------------------------------------------------
940006397 QC Review 100% 100% 100% 100% HSIL
- -----------------------------------------------------------------------------------------------------------------
940006398 QC Review 100% NA 100% 100% HSIL
- -----------------------------------------------------------------------------------------------------------------
940007261 QC Review 100% NA 100% 100% HSIL
- -----------------------------------------------------------------------------------------------------------------
921011561 QC Review 100% 100% 100% 100% HSIL/CIS(1)
- -----------------------------------------------------------------------------------------------------------------
921011562 QC Review 100% 100% 100% 100% HSIL/CIS
- -----------------------------------------------------------------------------------------------------------------
921011565 QC Review 100% 100% 100% 100% HSIL/CIS
- -----------------------------------------------------------------------------------------------------------------
921011574 QC Review NA 100% NA 100% SquamCarc
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
1. CIS = Carcinoma in situ
- --------------------------------------------------------------------------------
The second precision study required multiple processing runs of the abnormal
slides selected for use in the Historical Sensitivity Study. The total number of
slides used in the analysis was 10,674. The results demonstrate that the device
produces substantially equivalent sensitivity estimates when repeatedly
processing large sets of abnormal and matched control slides. The data presented
illustrates a high degree of between-run agreement overall (see Table 7).
TABLE 7 Combined Results of Precision Study
Multi-Run of Historical Sensitivity Study Slide Set
10% QC Review Rate, % Sensitivity
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AGUS LSIL HSIL Cancer Review
Rate(1)
<S> <C> <C> <C> <C> <C> <C>
Site 1 Run 1 45.0% 67.4% 84.7% 100.0% 16.5%
Run 2 48.1% 72.0% 86.2% 100.0% 14.8%
Run 3 43.6% 72.7% 87.1% 100.0% 16.3%
Site 2 Run 1 33.3% 62.2% 79.0% 86.5% 13.5%
Run 2 36.7% 54.4% 80.5% 85.0% 12.3%
Run 3 33.3% 57.6% 84.0% 87.8% 15.6%
Site 3 Run 1 60.0% 68.3% 90.4% 66.7% 34.2%
Run 2 50.0% 75.7% 95.5% 75.0% 32.2%
Run 3 40.0% 68.5% 92.2% 75.0% 27.5%
Site 4 Run 1 45.9% 68.7% 87.7% 61.5% 13.3%
Run 2 52.8% 71.2% 83.6% 53.1% 11.0%
Run 3 41.9% 66.7% 91.2% 57.1% 13.8%
Site 5 Run 1 N/A 46.2% 70.3% 50.0% 7.6%
Run 2 N/A 37.2% 74.3% 50.0% 6.7%
Run 3 N/A 42.9% 68.7% 100.0% 7.1%
Site 6 Run 1 34.4% 60.5% 88.6% 71.1% 10.4%
Run 2 32.6% 62.9% 84.2% 72.7% 10.8%
Run 3 30.7% 54.9% 84.8% 69.0% 10.5%
</TABLE>
1. Review Rate: Average percent identified as QC Review at each
laboratory using the global 10% QC Review rate.
- --------------------------------------------------------------------------------
HISTORICAL CONSISTENCY STUDY: EFFECTS CAUSED BY AGE OF SLIDES
The Historical Consistency Study was conducted to confirm the effects on the
device, if any, caused by changes in staining and slide age. The results
indicate no effects on the performance of the device (in terms of assignment of
QC score) as a result of changes to slides caused by age or the consistency of
staining over time.
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CONCLUSIONS DRAWN FROM STUDIES
The results from the Clinical Evaluation Study, a masked, prospective study
using the device in an intended-use mode, show that the AutoPap 300 QC System
identifies a subset of manual screen negative Pap smear slides that have been
enriched through computer selection for false negative slides. A manual
screening of this enriched subset (10% of the total manual screen negative
slides) will identify up to 50% of false negatives when compared to a 100%
manual rescreen. This compares to the expected identification of only 10% of
false negatives by a completely random 10% manual review.
In addition, the data results show that the device has a significant sensitivity
to cancer slides and to biopsy-confirmed HSIL and cancer slides.
The sensitivity of the device over a random selection method was shown to be
true under all studied review rates (10%, 15% and 20%) for all claimed
diagnostic categories of false negatives (including ASCUS and AGUS) and at even
higher efficiencies for those false negatives at severities of LSIL and above.
Acceptable sensitivities were demonstrated for all categories of abnormality
across study sites; all the sensitivities were above the random selection
proportions generated by the various thresholds selected for study. This
consistent pattern of sensitivities above random selection ensured that the
performance demonstrated in the intended-use prospective mode could be assured
for any other combination of abnormal slides presented to the devise; thus,
significant improvement over random could be expected for any laboratory's
prevalence rate of abnormals and type of abnormalities and under any combination
of cytotechnologist sensitivities at initial screening. The sensitivities of the
device were further demonstrated on both current and archived abnormal slides.
The AutoPap 300 QC System demonstrated virtually identical sensitivities upon
repeated processing of standard sets of slides. This consistency was
demonstrated both in selected slide sets and in wide selections of archived
abnormal slides.
The results demonstrate that this device detected a higher proportion of
undetected abnormal slides than can be produced by random selection procedures.
MATERIALS REQUIRED
MATERIALS PROVIDED
The AutoPap 300 QC System consists of the following components:
- AutoPap 300 QC Device
- Nitrogen tank
- Slide trays
- Workstation:
Computer (CPU) Monitor, keyboard, mouse, mouse pad, Modem,
Printer, Tape drive, Ethernet transceiver unit, Cart
- Electronic Cables: Ethernet, printer to Ethernet, AutoPap to CPU,
monitor to CPU, tape drive to CPU, modem to CPU, keyboard to CPU
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- Power strip (6-outlet)
- Power cords: Instrument, CPU, monitor, printer, tape drive, modem
Additional items supplied:
- Printer paper (starter package)
- Head cleaning tape
- Slide barcode labels
- Backup tapes
- SCSI bus terminator
- Air filters
- Line protector and/or power supply (optional, at additional cost)
MATERIALS REQUIRED BUT NOT PROVIDED
- Dedicated 20 amp power line
- Dedicated 15 amp power line
- Telephone line
- Dustproof bins to store empty slide trays
- 70% Isopropyl Alcohol
- Cotton swabs or soft bristle brush
- Lint-free cloth
- Glass cleaning solution (non-alcohol based)
STORAGE
Do not expose the system to direct sunlight or temperature extremes (i.e., air
flow from heating or cooling systems).
TECHNICAL SERVICE AND PRODUCT INFORMATION
For technical service and assistance related to use of the AutoPap 300 QC
System, contact NeoPath, Inc.:
Telephone: 1-800-NEOPATH (outside Washington State)
(1-800-636-7284) or
1-206-869-7284 (inside Washington State)
Fax: 1-206-869-5325
NeoPath, Inc., 8271 - 154th Ave. NE
Redmond, Washington 98052, USA, 1-800-NEOPATH
(206) 869-7284/Fax (206) 869-5325
(C)1996 NeoPath, Inc.
NeoPath(R) and AutoPap(R) are registered trademarks of NeoPath, Inc.
U.S. Patent Numbers 5,315,700 and 5,361,140. Other U.S. and foreign patents
pending. 041-091395R2
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NEOPATH, INC.
STANDARD TERMS AND CONDITIONS
1. AGREEMENT. These Terms and Conditions, together with any order or other
agreement signed by both NeoPath, Inc. ("NeoPath") and the customer ("Customer")
(collectively, the "Agreement") govern all purchase and sale, rental, lease,
fee-per-slide processed and other transactions between NeoPath and Customer
involving NeoPath products ("Products") . NeoPath will not be bound by, and
specifically objects to, any term, condition, or other provision which is
different from or in addition to the provisions of this Agreement (whether or
not it would materially alter this Agreement) which is proffered by Customer in
any purchase order, receipt, acceptance, confirmation, correspondence, or
otherwise, unless NeoPath specifically agrees to such provision in a written
instrument signed by NeoPath. NeoPath's acceptance of any order by Customer is
expressly conditioned on Customer's agreement to the terms and conditions of
this Agreement.
2. ACCEPTANCE. NeoPath will deliver to Customer, and Customer will accept and
pay for, all Products and Services ordered by Customer pursuant to an order
which has been accepted by NeoPath. All orders are subject to acceptance by
NeoPath either in writing or by shipping Products. NeoPath may accept any order
in whole or in part and NeoPath's shipment of less than all Products ordered
will constitute acceptance only as to those Products shipped.
3. FIRM ORDER. Customer may not modify, rescind or cancel any order, in whole or
in part, without NeoPath's written consent.
4. DELIVERY. NeoPath will use reasonable efforts to meet any delivery date
specified in the orders, but will not be liable for any failure to meet such
dates. Unless otherwise specified in this Agreement, NeoPath will deliver the
Products FOB carrier at NeoPath's manufacturing facility. Customer is
responsible for all transportation costs (including, but not limited to,
shipping charges, premiums for freight insurance, inspection fees, customs,
duties, import or export fees, assessments, and all other costs incurred in
transporting the Products to the shipping destination). Customer will promptly
reimburse NeoPath for any such amounts paid by NeoPath. Customer will be
responsible for any claims against the carrier arising from or relating to
shipment.
5. PRICES. Unless specified otherwise in this Agreement, the purchase prices,
fee-per-slide processed, charges, and other amounts payable by Customer for the
Products will be as specified by NeoPath in its then-current standard price list
or fee-per-slide processed schedule.
6. TAXES. The prices described in paragraph 5 do not include any sales, use or
similar taxes. Customer will pay or reimburse NeoPath for all taxes or other
amounts payable to governmental authorities in connection with the applicable
transactions, or will provide NeoPath with an exemption certificate satisfactory
to NeoPath.
7. PAYMENT. NeoPath will issue invoices for all amounts payable under this
Agreement. Customer will pay the amount set forth on NeoPath's invoice within
thirty (30) days from the date of such invoice. Any amount not paid within such
thirty (30) day period will be subject to a finance charge equal to 1.5% per
month or the highest rate allowable by applicable law, whichever is less,
determined and compounded daily from the date due until the date paid. Payment
of such finance charges will not excuse or cure Customer's breach or default for
late payment. Further, Customer will reimburse any costs or expenses (including,
but not limited to, reasonable attorneys' fees) incurred by NeoPath to collect
any amount which is not paid when due. NeoPath may accept any check or payment
in any amount without prejudice to NeoPath's right to recover the balance of the
amount due or to pursue any other right or remedy. No endorsement or statement
on any check or payment or in any letter accompanying a check or payment or
elsewhere will be construed as an accord or satisfaction. All amounts payable
under this Agreement are denominated in United States dollars, and Customer will
pay all such amount in lawful money of the United States unless expressly agreed
otherwise.
8. LIMITED WARRANTY AND REMEDY. NeoPath warrants that, upon delivery, each
Product will be free from defects in materials and workmanship. This warranty
will not apply to any Product that (a) has not been operated and maintained in
accordance with applicable instructions and manuals, (b) has been repaired or
altered by unauthorized personnel, or (c) has been misused, abused, damaged or
subjected to operation for which it was not intended. This warranty does not
apply to expendable items such as lamps or external tubing. NeoPath will either
repair or replace any Product that does not substantially conform to the
foregoing warranty.
9. PRODUCT LIABILITY INDEMNIFICATION. NeoPath will defend and indemnify Customer
from and against any third party claim arising out of bodily injury (including
death) or property damage to the extent caused by any defect in the design or
manufacture of the Products, provided that Customer: gives NeoPath prompt
written notice of the claim; allows NeoPath to assume control of the defense and
settlement of the claim; assists and cooperates with NeoPath in connection with
the defense and settlement of the claim; and does not settle the claim without
NeoPath's prior written consent. This paragraph will not apply to any claim
arising out of the negligence of Customer or any third party.
10. PATENT INDEMNIFICATION. NeoPath will defend and indemnify Customer against
any third party claim arising out of any alleged or actual infringement by the
Product and associated software of any patent arising under the laws of the
United States or any other country in which NeoPath has been granted a patent on
the Product, provided that Customer: gives NeoPath prompt written notice of the
claim; allows NeoPath to assume control of the defense and settlement of the
claim; assists and cooperates with NeoPath in connection with the defense and
settlement of the claim; complies with any court order or settlement made in
connection with the claim (e.g., as to future use of any infringing Product);
and does not settle the claim without NeoPath's prior written consent. This
paragraph will not apply to any claim resulting from any use in connection with
any equipment or other items not furnished by NeoPath or from any use not in
conformity with applicable instructions and manuals.
11. DISCLAIMER AND RELEASE. THE WARRANTIES, OBLIGATIONS, AND LIABILITIES OF
NEOPATH AND THE REMEDIES OF CUSTOMER SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE
AND IN SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES, AND DISCLAIMS,
ALL OTHER WARRANTIES, OBLIGATIONS, AND LIABILITIES OF NEOPATH AND ALL OTHER
RIGHTS, CLAIMS, AND REMEDIES OF CUSTOMER AGAINST NEOPATH, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO THE PRODUCTS AND ANY OTHER GOODS OR
SERVICES DELIVERED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO: (A) ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (B) ANY
IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE
OF TRADE; (C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE
-1-
<PAGE> 16
(ACTIVE, PASSIVE, OR IMPUTED), PRODUCT LIABILITY, OR STRICT LIABILITY OF
NEOPATH; AND (D) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY FOR
INFRINGEMENT.
12. EXCUSED PERFORMANCE. NeoPath will not be responsible for or be considered to
be in breach of or default under this Agreement on account of any cause beyond
NeoPath's reasonable control or not occasioned by NeoPath's fault or negligence
(including, but not limited to, NeoPath's inability, after due and timely
diligence, to procure materials, parts, equipment, or services).
13. NEOPATH WILL NOT IN ANY EVENT BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, OR INDIRECT DAMAGES, OR FOR LOSS OF REVENUE, LOSS OF BUSINESS, OR
OTHER FINANCIAL LOSS, ARISING OUT OF OR IN CONNECTION WITH ANY PRODUCT OR OTHER
GOODS OR SERVICES FURNISHED UNDER THIS AGREEMENT.
14. SOFTWARE. NeoPath retains title to all software, computer programs and other
software furnished with any Product. Customer will use such software only in
conjunction with the use or operation of such Product and in accordance with
applicable instructions and manuals furnished by NeoPath. Customer will not
copy, modify, make any derivative work based upon, publish or distribute any
such software. Further, Customer will not reverse engineer, decompile or attempt
to discover or recreate any source code to any such software.
15. INTELLECTUAL PROPERTY RIGHTS. The Products involve valuable patent,
copyright, trademark, trade secret and other intellectual property rights of
NeoPath. NeoPath reserves all such rights. No title to or ownership of any
intellectual property rights related to any Product is transferred to Customer
pursuant to this Agreement. Customer will not attempt to reverse engineer any
Product or component thereof or to otherwise misappropriate, circumvent or
violate any of NeoPath's intellectual property rights.
16. CONFIDENTIAL INFORMATION. NeoPath may disclose to Customer certain trade
secret, proprietary or confidential information ("Confidential Information").
Except as otherwise authorized by NeoPath in writing, Customer will use such
Confidential Information only for the purposes for which it is disclosed by
NeoPath, will not disclose it to any third party and will take appropriate steps
to protect it from any unauthorized use or disclosure; provided that, upon or
promptly after disclosure by NeoPath, the information is marked or otherwise
identified as trade secret, proprietary or confidential or the Customer
otherwise knows or has reason to know that the same is trade secret, proprietary
or confidential.
17. TRANSFERS. NeoPath retains title to all Products. Customer will not ship or
otherwise transfer any Product to any third Party or to any location other than
the location to which it is shipped by NeoPath, without prior written approval
of NeoPath.
18. UNENFORCEABLE PROVISION. The invalidity or unenforceability of any provision
of this Agreement will not affect the other provisions hereof, and this
Agreement will be construed in all respects as if such invalid or unenforceable
provision were replaced with a valid and enforceable provision as similar as
possible to the one replaced.
19. NONWAIVER. Any failure by NeoPath to insist upon or enforce performance by
Customer of any of the provisions of this Agreement or to exercise any right or
remedy under this Agreement or applicable law will not be construed as a waiver
or relinquishment to any extent of NeoPath's right to assert or rely upon any
such provision, right or remedy in that or any other instance; rather the same
will be and remain in full force and effect.
20. ASSIGNMENT. This Agreement will inure to the benefit of and be binding upon
the parties and their respective successors, assigns and legal representatives.
21. APPLICABLE LAW. This Agreement will be interpreted, construed, and enforced
in all respects in accordance with the laws of the State of Washington, without
reference to its choice of law principles. The U.N. Convention on Contracts for
the International Sale of Goods will not apply to this Agreement.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement, and
supersedes any and all prior agreements, between NeoPath and Customer with
regard to the Products. No amendment, modification, or waiver of this Agreement
will be valid unless set forth in a written instrument signed by the party to be
bound.
-2-
<PAGE> 1
Exhibit 10.2
[NEOPATH LOGO]
PROPOSAL
TO
LABORATORY CORPORATION OF AMERICA HOLDINGS
REVISED MAY 10, 1996
OVERVIEW OF PROPOSAL
NeoPath, Inc. (NeoPath) proposes to provide Laboratory Corporation of
America(TM) Holdings (LCA) [*] AutoPap(R) 300 QC [*] to be installed at:
LabCorp
2039 Willow Springs Lane
Burlington, NC 27215
LCA shall accept the AutoPap(R) 300 QC [*] based on the terms and
conditions of this Agreement.
1. OFFER
1.1 PRICING AND AVAILABILITY
The AutoPap(R) 300 QC [*] shall be available to LCA on a successfully
processed fee-per-slide basis at a rate of [*] per each successfully
screened slide with a minimum monthly billing of [*] slides. There will
be no fee for any slide that cannot be screened or is rejected by the
AutoPap(R) 300 QC [*]. This fee-per-slide rate is based upon a good
faith estimate by the parties that the AutoPap(R) 300 QC [*] will
process approximately [*] successfully screened slides per month.
1.2 TERMS
The term of this Agreement shall be for a period of five years from the
date of shipment of the AutoPap 300 QC [*] with provision for automatic
annual renewals thereafter. NeoPath will deliver the AutoPap 300 QC [*]
FOB destination. LCA will pay, or reimburse NeoPath, for reasonable and
customary transportation costs from NeoPath's manufacturing facility.
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<PAGE> 2
1.3 CANCELLATION OF AGREEMENT
If it is determined during the initial [*] months after the
installation of an AutoPap 300 QC instrument that it will not perform
to the agreed upon specifications as per this Agreement and the product
insert attached hereto as Exhibit A, the instrument may be returned for
exchange at no cost to LCA or the Agreement may be dissolved or
modified with a written 90 day notice. In the event of early
cancellation by LCA (within the twelve month period), return shipping
costs to NeoPath's Redmond facility will be at LCA's sole expense,
unless such termination is due to the instrument's failure to perform
adequately or reliably, as per this Agreement and the product insert.
In case NeoPath cancels this Agreement for any reason other than cause,
or any time after the expiration of the full term of this contract,
NeoPath will be responsible for all shipping costs to return the
instrument to its facilities. In any event, LCA may terminate this
Agreement at any time during the five year term of this Agreement with
or without cause, upon 90-day prior written notice to NeoPath. In the
event this Agreement is terminated under this section 1.3, LCA's sole
liability to NeoPath shall be to pay the amounts owed in connection
with the use of [*] prior to the return of the [*].
2.1 SERVICE
2.1.1 WARRANTY
NeoPath will warrant each AutoPap(R) 300 QC instrument against
defects in materials and workmanship and that each AutoPap(R)
300 QC instrument will perform in accordance with NeoPath's
published specifications as per the attached product insert
for the period of this Agreement.
2.1.2 LEVEL OF SUPPORT
NeoPath, or its authorized service representative, will
provide telephone response within two hours of notification of
a service problem and no more than 24 hours will pass before a
service engineer is on site. Routine maintenance,
enhancements, and inspections, as required to assure that the
AutoPap(R) 300 QC instrument performs to specifications are
included in this proposal.
Software updates for the AutoPap(R) 300 QC [*] will be
provided to LCA at no additional cost. If and when a primary
screening version receives FDA approval, NeoPath will offer to
LCA the option to upgrade at a price to be determined after
such approval has been obtained, [*].
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<PAGE> 3
2.1.3 PRICE
Service, as set forth in Section 2.1 and 2.2 of the
Supplemental Terms and conditions attached hereto as Exhibit
B, is included in the per-slide fee. However, the cost of
service and/or repairs resulting from LCA's sole negligence or
misuse, will be charged to LCA at the current catalogue rate
(see attached catalogue).
2.2 INSTALLATION
Prices quoted for the proposed AutoPap instrument include installation
and two days of on-site training provided by NeoPath at no costs to
LCA.
3. ACCESSORIES
3.1 Each offered AutoPap(R) 300 QC includes the following NeoPath
accessories:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
-------- -----------
<S> <C>
[*] AutoPap Slide Trays
1 Operator Manual
1 Start-Up Kit*
</TABLE>
* Start-Up Kit will include one pack of printer paper and one
roll of Bar Code Labels ([*] sets of [*] labels per roll)
3.2 The following additional accessories are offered by NeoPath at the
indicated prices:
<TABLE>
<CAPTION>
DESCRIPTION PRICE
<S> <C>
Bar Code Labels $[*] (U.S.) per roll
AutoPap Slide Tray $[*] (U.S.) per tray
</TABLE>
[*]. The parties understand and agree that in no event shall LCA be
required to purchase any accessories from NeoPath, but any such
purchase shall be at the sole discretion of LCA.
4. ACCEPTANCE CRITERIA FOR AUTOPAP(R) 300 QC SYSTEM ACQUISITION
The AutoPap(R) 300 QC System will perform in accordance with the terms
of this Agreement and the product insert attached hereto.
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<PAGE> 4
5. PROPOSAL ACCEPTANCE
5.1 DURATION OF PROPOSAL
This proposed offer will expire on June 1, 1996 if not signed by both
parties.
This Agreement is intended by the parties as the final expression of
their agreement and as a complete understanding of the terms thereof,
and shall supersede all previous understandings and agreements. If the
terms and conditions contained in any exhibit or attachment to the
Agreement is in conflict with this Agreement, then such terms and
conditions shall be null and void and the terms and conditions set
forth in this Agreement shall control.
5.2 ACCEPTANCE OF OFFER
NEOPATH, INC. LABORATORY CORPORATION OF
AMERICA(TM) HOLDINGS
By: /s/ MARTIN S. REID By: /s/ NEVIN BREEDLOVE
- --------------------------------- ----------------------------------
Martin S. Reid Nevin Breedlove
National Director,
National Sales Manager Automation & Diagnostics
- --------------------------------- ----------------------------------
Title Title
5-10-96 5-15-96
- --------------------------- ----------------------------
Date Date
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<PAGE> 5
Exhibit A
NEOPATH(R), INC.
AUTOPAP(R) 300 QC AUTOMATIC PAP SCREENER SYSTEM
INDICATION FOR USE
INTENDED USE
The AutoPap 300 QC System is an automated cervical cytology rescreening
device intended for use in the quality control and rescreening of previously
screened Papanicolaou (Pap) smear slides. The AutoPap 300 QC System is to be
used only on conventionally prepared Pap smear slides that have been previously
classified as within normal limits (WNL) and satisfactory for interpretation by
a screening cytologist.
The AutoPap 300 QC System is not intended to replace the current
laboratory slide review processes referred to as "high-risk rescreen."
SUMMARY AND EXPLANATION OF THE SYSTEM
The AutoPap 300 QC System is an automated cytology rescreening device
that uses a high-speed video microscope, image interpretation software, and
specially designed field-of-view computers to image, analyze, and classify cells
within the complex images on a Pap smear slide.
The AutoPap 300 QC System is intended to detect evidence of squamous
carcinoma and adenocarcinoma and their usual precursor conditions missed on
prior manual microscopic examination of Pap smear slides. These abnormalities
fall within the following diagnostic categories of The Bethesda System:
EPITHELIAL CELL ABNORMALITIES
Squamous Cell
Atypical squamous cells of undetermined significance (ASCUS)
Low-grade squamous intraepithelial lesions (LSIL)
High-grade squamous intraepithelial lesions (HSIL)
Squamous cell carcinoma
Glandular Cell
Atypical glandular cells of undetermined significance (AGUS)
Endocervical adenocarcinoma
Endometrial adenocarcinoma
Extrauterine adenocarcinoma
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<PAGE> 6
Pap smear slides screened as WNL and adequate for analysis by a
screening cytotechnologist are to be rescreened by the AutoPap 300 QC System.
Based on cytologic evidence, the device then identifies, for manual quality
control (QC) review, slides with the highest probability of being a false
negative to create an enriched sample. The result is that there is a higher
prevalence of false negative slides in the sample selected for manual QC review.
The System classifies each slide into one of three categories:
QC REVIEW Further human review recommended; specimen is potentially
abnormal.
NO REVIEW No evidence to recommend further human review.
REVIEW Squamous component not detected; OR, not enough cellular
material for anlysis.
Slides that are not successfully processed are classified as Process
Review or Rerun. These slides may be able to be reprocessed based upon the
information provided in the slide report and the instructions provided in the
Operator's Manual. If a slide cannot be successfully reprocessed, it is
recommended that the laboratory conduct its usual procedure for routine QC
selection.
The laboratory also should select for manual microscopic review the Pap
smear slides from patients or groups of patients that have been identified as
having a high probability of developing cervical cancer, based on available
patient information.
LIMITATIONS
AutoPap 300 QC System performance has not been established for use as a
primary screener of Pap smears.
Clinical data demonstrated that use of the AutoPap 300 QC System will
improve the recovery of false negative slides in the laboratory over a random
selection method. However, this device does not recover all false negative
slides; false negative readings should still be expected to occur with the use
of this device.
The AutoPap 300 QC System is not intended or recommended for use as a
confirmatory screener for slides that have been previously classified as
abnormal or unsatisfactory for interpretation.
The performance characteristics of the AutoPap 300 QC System have not
been established for the detection of the cervical abnormalities that fall
within the following diagnostic categories of The Bethesda System:
- Benign cellular changes due to infection
- Reactive changes associated with inflammation, atrophy with
inflammation, radiation, and intrauterine contraceptive device
(IUD)
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<PAGE> 7
- Endometrial cells, cytologically benign, in a postmenopausal
woman
- Adenocarcinoma, not otherwise specified (NOS) (specimen contains
cellular evidence of adenocarcinoma but unable to further
subclassify as to site of origin)
- Other malignant neoplasms
Use of the AutoPap 300 QC System is intended to be performed only under
the direct supervision of licensed and/or certified cytotechnologists,
cytopathologists, or laboratory directors who have been trained and certified to
use the AutoPap 300 QC System by NeoPath, Inc., one of its subsidiaries, or an
educational institution certified by NeoPath, Inc., to conduct training.
The AutoPap 300 QC System is designed to be compatible with a wide
range of staining procedures currently implemented in clinical laboratories.
However, the device is not compatible with all staining methods currently in
use. The compatibility of a laboratory's staining process will be assessed by
NeoPath prior to clinical use of the device by the laboratory. NeoPath may
recommend alternate staining procedures intended to optimize the performance of
the device while maintaining the integrity and current performance level of the
human review process.
The AutoPap 300 QC System is intended for use in processing only
conventionally prepared cervical/vaginal Pap smear slides that meet the slide,
coverslip and staining characteristics provided in the Operator's Manual.
This device is intended for use only with glass microscope slides and
glass coverslips.
WARNINGS AND PRECAUTIONS
WARNINGS
Broken Glass Hazard when Handling Slides
Do not drop or break slides during slide preparation and when loading
and unloading slides into trays. If slides are broken, injuries may occur.
Moving Parts Hazard when Loading/Unloading Trays
Remove all potentially obstructive jewelry and clothing before loading
or unloading trays. After opening a hopper door, be sure all moving parts in the
hopper have stopped before inserting or removing a tray. If trays are inserted
before all moving parts have stopped, injuries may occur or the device may jam.
Shock Potential when Cleaning the Monitor
Failure to remove power to the monitor before performing the procedure
could result in an electric shock. See Operator's Manual.
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<PAGE> 8
Shock Potential when Power Applied Improperly
The symbol next to the power connector indicates potential shock
hazard. Ensure that the system is connected to a power receptacle that provides
voltage and current within the specified rating for the system. Use of an
incompatible power receptacle may produce electrical shock and fire hazards.
Shock Potential when Improperly Grounded
Never use a two-prong plug adapter to connect primary power to the
system. Use of a two-prong adapter disconnects the utility ground, creating a
potential shock hazard. Always connect the system power cord directly to an
appropriate receptacle with a functional ground.
Shock Potential when Cleaning with Power Applied
Always turn off the power switch and unplug the power cord before
cleaning the outer surfaces or internal components of the device.
Shock Potential from Spilled Liquids
Do not place containers with liquids on the device or the workstation
cart. Do not spill liquids on the system; fluid seepage into internal components
creates a potential shock hazard. Shut down the device, disconnect from the
power source and wipe up all spills immediately. Do not operate the system if
internal components have been exposed to fluid.
PRECAUTIONS
Compliance with Standards
Prior to using the device, a laboratory must ensure that the use of the
AutoPap 300 QC System as a quality control method complies with all applicable
federal, state and local requirements for that laboratory. NeoPath will provide
available information and assistance in this regard, upon request.
Slide and Coverslip Requirements
This device is intended for use only with glass microscope slides and
glass coverslips.
This device cannot be recommended for use with slides and coverslips
that do not comply with the specifications provided in the Operator's Manual,
particularly slides with plastic coverslips, broken slides, dirty or marked
slides and non-standard slide or coverslip sizes.
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<PAGE> 9
Backup Procedures
When performing the backup procedures, NeoPath recommends that two
tapes be used in rotation; each tape would be used every other day. This will
ensure minimum loss of data in the unlikely event of workstation failure.
Shutdown Procedures
Except in an emergency situation, such as those described in the
Warnings section, shutting down the AutoPap 300 QC System should be performed
only with prior authorization of a company representative in order to avoid loss
of data. If no emergency situation exists, contact NeoPath, Inc., or its
designated representative before attempting to shut down the device.
Power Down Procedures
It is important to shut down the system components in the proper order.
See Operator's Manual.
Restart Procedures
The AutoPap 300 QC Workstation must always be turned on and booted
BEFORE the AutoPap 300 QC Instrument is turned on. It is important to apply
power to the system components in the proper order. See Operator's Manual.
Installation and Service
The device should be installed only by company authorized personnel.
Only technically qualified personnel, trained by NeoPath, should perform
troubleshooting and service procedures on internal components.
Replacement Fuses
Use replacement fuses with the required current rating and
specification. Using improper fuses or short-circuiting the fuse holders may
cause fire or damage the device.
REPORTS OF CLINICAL STUDIES
Several multi-center, well-controlled clinical studies were conducted
to evaluate the performance of the device. An intended use study confirmed the
accuracy of the AutoPap 300 QC System using a masked, prospective design.
Several sensitivity and precision studies were conducted to confirm the
performance characteristics and reliability of the device.
ACCURACY STUDY: THE CLINICAL EVALUATION STUDY
The Clinical Evaluation Study was designed to compare the effectiveness
of a random selection quality control practice in a cytology laboratory to the
effectiveness of the
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<PAGE> 10
AutoPap 300 QC System using a quality control application. The AutoPap 300 QC
System was operated, as nearly as possible, in a manner similar to that
recommended for routine laboratory use.
The objective of the study was to test the hypothesis that the device
is capable of providing a higher proportion of false negative slides for quality
control review than can be achieved by a random selection method. This
hypothesis was evaluated over a range of quality control review rates.
A 100% manual rescreen of all processed slides was performed in this
study to identify, as nearly as possible, the total population of false negative
slides available for review. This population of false negative slides was then
used as the target population to measure the efficacy of the device in
identifying these false negative slides at a 10% QC review rate. The study
design ensured that the site personnel were effectively masked and enhanced the
probability of detecting the false negative slides present within the entire
study population. The total number of slides used in the analysis was 14,914.
Each false negative slide recovered during the study was reviewed by an
Internal Discrepancy Panel of study site personnel as well as an External
Discrepancy Panel of independent pathologists. The results of the External
Discrepancy Panel review are used to demonstrate the efficacy of the device.
These results demonstrate that the AutoPap 300 QC System identifies a
subset of manual screen negative Pap smear slides that have been enriched
through computer selection of false negative slides. A manual screening of this
enriched subset (10% of the total manual screen negative slides will identify up
to 50% of false negatives when compared to a 100% manual rescreen. This compares
to the expected identification of only 10% of false negatives by a completely
random selection review.
TABLE 1 Clinical Evaluation Study
Sensitivity to False Negative Slides by Diagnostic
Category and Overall 10% QC Review Rate, % Sensitivity,
(N)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(1))
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Review Rate(2) 11.2% 11.8% 37.2% 9.4% 6.1% 19.3% 11.8%
- ---------------------------------------------------------------------------------------------------------------------------
FN-ASCUS 22.5% 36.7% 47.4% 33.3% 35.7% 0.0% 29.7%
(41/138)
- ---------------------------------------------------------------------------------------------------------------------------
FN-AGUS 100.0% 20.0% 100.0% 0.0% 37.5% 50.0% 29.4%
(5/17)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
FN-LSIL 57.1% 83.3% 100.0% 0.0% 42.9% 100.0% 51.6%
(16/31)
- ---------------------------------------------------------------------------------------------------------------------------
FN-HSIL 100.0% NA NA 100.0% 42.9% NA 60.0%
(6/10)
- ---------------------------------------------------------------------------------------------------------------------------
FN-Cancer NA 0.0% NA NA NA NA 0.0%
(0/1)
- ---------------------------------------------------------------------------------------------------------------------------
All FN (3) 32.0% 38.1% 56.5% 25.0% 37.6% 16.7% 34.5%
(68/197)
- ---------------------------------------------------------------------------------------------------------------------------
All FN-LSIL+(4) 66.7% 71.4% 100.0% 25.0% 42.9% 100.0% 52.4%
(22/42)
- --------------------------------------------------------------------------------
</TABLE>
1. Site 3 is excluded from overall results due to incompatibility of
staining procedure with the device.
2. Review Rate: Average percent identified as QC Review using the global
10% QC review rate.
3. All FNs: Includes the diagnostic categories of ASCUS, AGUS, LSIL, HSIL
and Carcinoma.
4. ALL FN-LSIL+: Includes the diagnostic categories of LSIL, HSIL and
Carcinoma.
- --------------------------------------------------------------------------------
Analysis of the overall performance of the device in detecting the
presence or absence of an endocervical component shows the following:
- 85% of normal slides with endocervical component are correctly
classified. 15% of the normal slides with endocervical component
are reported as "endocervical component not detected." However,
this result does not affect the computation of the QC score.
- 73% of normal slides without endocervical component are
correctly classified.
SENSITIVITY STUDIES
Two large, multi-center sensitivity studies were performed using
abnormal slides. Each selected abnormal slide required a normal matched control
slide.
The Current Archive Sensitivity Study used recent abnormal slides
processed by the laboratory. The diagnostic categories selected included ASCUS,
AGUS, LSIL, HSIL, cancer (squamous, glandular, and extrauterine) and detected
false negative slides. The total number of slides used in the analysis,
including matched controls, was 2,584.
The Historical Archive Sensitivity Study used abnormal slides retrieved
from the archived records of each trial site. The diagnostic categories selected
included AGUS, LSIL, HSIL, cancer (squamous, glandular, and extrauterine) and
detected false negative slides. The total number of slides used in the analysis,
including matched controls, was 3,589 (see Table 2).
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<PAGE> 12
TABLE 2 Sensitivity to Abnormal Slides by Diagnostic Category
Historical Sensitivity Study 10% QC Review Rate,
% Sensitivity, (N)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(2))
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AGUS 45.0% 33.3% 60.0% 45.9% NA 34.4% 39.5%
(80) (30) (5) (37) (96) (243)
- ----------------------------------------------------------------------------------------------------------------------------
LSIL 67.4% 62.2% 68.3% 68.7% 46.2% 60.5% 60.9%
(89) (90) (63) (67) (80) (86) (412)
- ----------------------------------------------------------------------------------------------------------------------------
HSIL 84.7% 79.0% 90.4% 87.7% 70.3% 88.6% 82.1%
(85) (81) (73) (57) (74) (88) (385)
- ----------------------------------------------------------------------------------------------------------------------------
Cancer 100.0% 86.5% 66.7% 61.5% 50.0% 71.1% 79.1%
(21) (52) (3) (26) (2) (38) (139)
- ----------------------------------------------------------------------------------------------------------------------------
Review Rate(1) 16.5% 13.5% 34.2% 13.3% 7.6% 10.4% 12.9%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
1. Review Rate: Average percent identified as QC Review at each laboratory
using the global 10% QC review rate.
2. Site 3 is excluded from overall results due to incompatibility of
staining procedure with the device.
- --------------------------------------------------------------------------------
The data derived from processing these abnormal slides demonstrate that
the AutoPap 300 QC System has significant sensitivity to all tested categories
of abnormal slides (see Table 3).
TABLE 3 Sensitivity to Abnormal Slides by Diagnostic Category
Current Archive Study (CAS) and Historical Sensitivity
Study (HSS) 10% QC Review Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
ASCUS AGUS LSIL HSIL CANCER
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAS 36.1% 27.3% 60.0% 80.2% 62.5%
(205) (22) (410) (202) (8)
- -----------------------------------------------------------------------------------
HSS NA 39.5% 60.9% 82.1% 79.1%
(243) (412) (385) (139)
- -----------------------------------------------------------------------------------
</TABLE>
An analysis was conducted of the subset of cancer slides retrieved from
the archived records. This subset represented the larger sample size from the
two sensitivity studies. The sensitivity rates, by subclassification category,
are reported in Table 4. (These subclassifications are derived from the
procedures used across all the participating laboratories and may not coincide
with individual laboratory practice.)
These results show the device has a significant sensitivity to cancer
slides.
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TABLE 4 Sensitivity to Subset of Cancer Slides 10% QC Review
Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Squamous AdenoCA Malignant Endocervical Endometrial AIS(3) All Cancer
CA(1) NOS(2) NOS AdenoCA AdenoCA Slides
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
91.3% 52.6% 40.0% 100.0% 66.7% 58.8% 77.7%
(80) (19) (5) (3) (15) (17) (139)
- --------------------------------------------------------------------------------------------
</TABLE>
1. CA: Carcinoma
2. NOS: Not otherwise specified (specimen contains cellular evidence of
adenocarcinoma but unable to further subclassify as to site of origin)
3. AIS: Adenocarcinoma in situ
- --------------------------------------------------------------------------------
A second subset analysis was conducted for the HSIL and cancer slides
identified by the clinical trial sites as having a biopsy-confirmed diagnosis.
The slides were selected from both the Historical Sensitivity Study and the
Current Archive Sensitivity Study.
These results indicate the device has a significant sensitivity to
biopsy-confirmed HSIL and cancer slides (see Table 5).
TABLE 5 Sensitivity to Subset of Biopsy-Confirmed HSIL and Cancer
Slides 10% QC Review Rate
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
No. of Biopsies No. of Biopsies Confirmed Biopsies Called % Sensitivity
Confirmed "Review"
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HSIL 60 51 43 84.3%
- -----------------------------------------------------------------------------------------------------------
CANCER 35 33 22 66.7%
- -----------------------------------------------------------------------------------------------------------
TOTAL 95 84 65 77.4%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
PRECISION STUDIES
Two studies were conducted to assess precision, or repeatability, of
the device. The first study was the Multi-Run Standardized Sample Set Study
which used a set of 32 well-characterized slides, processed up to 30 times on
each of three separate devices. Of the 32 slides, 25 demonstrated 100%
repeatability (see Table 6). The average percent agreement on all slides was
99.6% overall. These results confirm that the repeatability of the device in
calling a slide QC Review or No Review is consistent from device to device
(inter-device repeatability) and within each tested device (intra-device
repeatability).
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TABLE 6 Summary Results of Precision Study Multi-Run of
Standardized Sample Set % Repeatability of QC Review/No
Review Outcome for Each Slide
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Barcode QC Review Site 0 Site 1 Site 4 Overall Diagnosis
No Review
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
940006439 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006443 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006464 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006467 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006472 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006473 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006476 No Review 100% 100% 96% 99% Normal
- ------------------------------------------------------------------------------------------------------------------
940006487 No Review 97% 93% 100% 96% Normal
- ------------------------------------------------------------------------------------------------------------------
940006489 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006492 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006493 No Review 100% 100% 100% 100% Normal
- ------------------------------------------------------------------------------------------------------------------
940006497 No Review NA 100% 96% 98% Normal
- ------------------------------------------------------------------------------------------------------------------
940007379 QC Review 100% 100% 96% 99% ASCUS
- ------------------------------------------------------------------------------------------------------------------
940007381 QC Review 97% 100% 100% 99% ASCUS
- ------------------------------------------------------------------------------------------------------------------
940007409 QC Review 100% 100% 96% 99% ASCUS
- ------------------------------------------------------------------------------------------------------------------
940007410 QC Review 97% 100% 96% 98% ASCUS
- ------------------------------------------------------------------------------------------------------------------
940007416 QC Review 100% 100% 100% 100% ASCUS
- ------------------------------------------------------------------------------------------------------------------
921011542 QC Review 100% 100% NA 100% AGUS
- ------------------------------------------------------------------------------------------------------------------
940006420 QC Review 100% 100% 100% 100% LSIL
- ------------------------------------------------------------------------------------------------------------------
940006425 QC Review 100% 100% 100% 100% LSIL
- ------------------------------------------------------------------------------------------------------------------
940006428 QC Review 100% 100% 100% 100% LSIL
- ------------------------------------------------------------------------------------------------------------------
940006430 QC Review 100% 100% 100% 100% LSIL
- ------------------------------------------------------------------------------------------------------------------
940006436 QC Review 100% 100% 100% 100% LSIL
- ------------------------------------------------------------------------------------------------------------------
940006390 QC Review 100% 100% 100% 100% HSIL
- ------------------------------------------------------------------------------------------------------------------
940006393 QC Review NA 100% 100% 100% HSIL
- ------------------------------------------------------------------------------------------------------------------
940006397 QC Review 100% 100% 100% 100% HSIL
- ------------------------------------------------------------------------------------------------------------------
940006398 QC Review 100% NA 100% 100% HSIL
- ------------------------------------------------------------------------------------------------------------------
940007261 QC Review 100% NA 100% 100% HSIL
- ------------------------------------------------------------------------------------------------------------------
921011561 QC Review 100% 100% 100% 100% HSIL/CIS(1)
- ------------------------------------------------------------------------------------------------------------------
921011562 QC Review 100% 100% 100% 100% HSIL/CIS
- ------------------------------------------------------------------------------------------------------------------
921011565 QC Review 100% 100% 100% 100% HSIL/CIS
- ------------------------------------------------------------------------------------------------------------------
921011574 QC Review NA 100% NA 100% SquamCarc
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1. CIS = Carcinoma in situ
- --------------------------------------------------------------------------------
The second precision study required multiple processing runs of the
abnormal slides selected for use in the Historical Sensitivity Study. The total
number of slides used in the analysis
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was 10,674. The results demonstrate that the device produces substantially
equivalent sensitivity estimates when repeatedly processing large sets of
abnormal and matched control slides. The data presented illustrates a high
degree of between-run agreement overall (see Table 7).
TABLE 7 Combined Results of Precision Study Multi-Run of
Historical Sensitivity Study Slide Set 10% QC Review
Rate, % Sensitivity
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
AGUS LSIL HSIL Cancer Review
Rate(1)
<S> <C> <C> <C> <C> <C> <C>
Site 1 Run 1 45.0% 67.4% 84.7% 100.0% 16.5%
Run 2 48.1% 72.0% 86.2% 100.0% 14.8%
Run 3 43.6% 72.7% 87.1% 100.0% 16.3%
Site 2 Run 1 33.3% 62.2% 79.0% 86.5% 13.5%
Run 2 36.7% 54.4% 80.5% 85.0% 12.3%
Run 3 33.3% 57.6% 84.0% 87.8% 15.6%
Site 3 Run 1 60.0% 68.3% 90.4% 66.7% 34.2%
Run 2 50.0% 75.7% 95.5% 75.0% 32.2%
Run 3 40.0% 68.5% 92.2% 75.0% 27.5%
Site 4 Run 1 45.9% 68.7% 87.7% 61.5% 13.3%
Run 2 52.8% 71.2% 83.6% 53.1% 11.0%
Run 3 41.9% 66.7% 91.2% 57.1% 13.8%
Site 5 Run 1 N/A 46.2% 70.3% 50.0% 7.6%
Run 2 N/A 37.2% 74.3% 50.0% 6.7%
Run 3 N/A 42.9% 68.7% 100.0% 7.1%
Site 6 Run 1 34.4% 60.5% 88.6% 71.1% 10.4%
Run 2 32.6% 62.9% 84.2% 72.7% 10.8%
Run 3 30.7% 54.9% 84.8% 69.0% 10.5%
</TABLE>
1. Review Rate: Average percent identified as QC Review at each laboratory
using the global 10% QC Review rate.
- --------------------------------------------------------------------------------
HISTORICAL CONSISTENCY STUDY: EFFECTS CAUSED BY AGE OF SLIDES
The Historical Consistency Study was conducted to confirm the effects
on the device, if any, caused by changes in staining and slide age. The results
indicate no effects on the performance of the device (in terms of assignment of
QC score) as a result of changes to slides caused by age or the consistency of
staining over time.
CONCLUSIONS DRAWN FROM STUDIES
The results from the Clinical Evaluation Study, a masked, prospective
study using the device in an intended-use mode, show that the AutoPap 300 QC
System identifies a subset of manual screen negative Pap smear slides that have
been enriched through computer selection for false negative slides. A manual
screening of this enriched subset (10% of the total manual screen
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<PAGE> 16
negative slides) will identify up to 50% of false negatives when compared to a
100% manual rescreen. This compares to the expected identification of only 10%
of false negatives by a completely random 10% manual review.
In addition, the data results show that the device has a significant
sensitivity to cancer slides and to biopsy-confirmed HSIL and cancer slides.
The sensitivity of the device over a random selection method was shown
to be true under all studied review rates (10%, 15% and 20%) for all claimed
diagnostic categories of false negatives (including ASCUS and AGUS) and at even
higher efficiencies for those false negatives at severities of LSIL and above.
Acceptable sensitivities were demonstrated for all categories of
abnormality across study sites; all the sensitivities were above the random
selection proportions generated by the various thresholds selected for study.
This consistent pattern of sensitivities above random selection ensured that the
performance demonstrated in the intended-use prospective mode could be assured
for any other combination of abnormal slides presented to the devise; thus,
significant improvement over random could be expected for any laboratory's
prevalence rate of abnormals and type of abnormalities and under any combination
of cytotechnologist sensitivities at initial screening. The sensitivities of the
device were further demonstrated on both current and archived abnormal slides.
The AutoPap 300 QC System demonstrated virtually identical
sensitivities upon repeated processing of standard sets of slides. This
consistency was demonstrated both in selected slide sets and in wide selections
of archived abnormal slides.
The results demonstrate that this device detected a higher proportion
of undetected abnormal slides than can be produced by random selection
procedures.
MATERIALS REQUIRED
MATERIALS PROVIDED
The AutoPap 300 QC System consists of the following components:
- AutoPap 300 QC Device
- Nitrogen tank
- Slide trays
- Workstation:
Computer (CPU)
Monitor, keyboard, mouse, mouse pad
Modem
Printer
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Tape drive
Ethernet transceiver unit
Cart
- Electronic Cables: Ethernet, printer to Ethernet, AutoPap to CPU,
monitor to CPU, tape drive to CPU, modem to CPU, keyboard to CPU
- Power strip (6-outlet)
- Power cords: Instrument, CPU, monitor, printer, tape drive, modem
Additional items supplied:
- Printer paper (starter package)
- Head cleaning tape
- Slide barcode labels
- Backup tapes
- SCSI bus terminator
- Air filters
- Line protector and/or power supply (optional, at additional cost)
MATERIALS REQUIRED BUT NOT PROVIDED
- Dedicated 20 amp power line
- Dedicated 15 amp power line
- Telephone line
- Dustproof bins to store empty slide trays
- 70% Isopropyl Alcohol
- Cotton swabs or soft bristle brush
- Lint-free cloth
- Glass cleaning solution (non-alcohol based)
STORAGE
Do not expose the system to direct sunlight or temperature extremes
(i.e., air flow from heating or cooling systems).
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TECHNICAL SERVICE AND PRODUCT INFORMATION
For technical service and assistance related to use of the AutoPap 300
QC System, contact NeoPath, Inc.:
Telephone: 1-800-NEOPATH (outside Washington State)
(1-800-636-7284) or
1-206-869-7284 (inside Washington State)
Fax: 1-206-869-5325
NeoPath, Inc., 8271 - 154th Ave. NE
Redmond, Washington 98052, USA, 1-800-NEOPATH
(206) 869-7284/Fax (206) 869-5325
(C)1996 NeoPath, Inc.
NeoPath(R) and AutoPap(R) are registered trademarks of NeoPath, Inc.
U.S. Patent Numbers 5,315,700 and 5,361,140. Other U.S. and foreign patents
pending.
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EXHIBIT B
NEOPATH, INC.
STANDARD TERMS AND CONDITIONS
(AS REVISED FOR LABORATORY CORPORATION OF AMERICA HOLDINGS 5/10/96)
1. FIRM ORDER. Customer may not modify, rescind or cancel any order, in whole
or in part, without NeoPath's written consent, which consent shall not be
withheld unreasonably. In the event of any cancellation, without NeoPath's
consent and Product(s) having been shipped to Customer, Customer will pay
NeoPath a cancellation fee determined in accordance with NeoPath's
standard cancellation policy then in effect or, if NeoPath does not then
have such a policy, fifteen percent (15%) of the amount otherwise payable
under the Agreement for the canceled Products.
2. DELIVERY. Customer may modify, rescind, or cancel any order prior to
shipment. NeoPath will use reasonable efforts to meet any delivery date
specified in the orders, but will not be liable for any failure to meet
such dates. Unless otherwise specified in this Agreement, NeoPath will
deliver the Products FOB carrier at NeoPath's manufacturing facility.
Customer is responsible for all transportation costs (including, but not
limited to, shipping charges, premiums for freight insurance, inspection
fees, customs, duties, import or export fees, assessments, and all other
costs incurred in transporting the Products to the shipping destination).
Customer will promptly reimburse NeoPath for any such amounts paid by
NeoPath. Customer will be responsible for any claims against the carrier
arising from or relating to shipment.
3. PRICES. Unless specified otherwise in this Agreement, the purchase prices,
fee-per-slide processed, charges, and other amounts payable by Customer
for the Products will be as specified by NeoPath in its then-current
standard price list or fee-per-slide processed schedule.
4. TAXES. The prices described in paragraph 5 do not include any sales, use
or similar taxes. Customer will pay or reimburse NeoPath for all taxes or
other amounts payable to governmental authorities in connection with the
applicable transactions, or will provide NeoPath with an exemption
certificate satisfactory to NeoPath.
5. PAYMENT. NeoPath will issue invoices for all amounts payable under this
Agreement. Customer will pay the amount set forth on NeoPath's invoice
within [*] days from the date of such invoice. Any amount not paid within
such [*] day period will be subject to a finance charge equal to 1.5% per
month or the highest rate allowable by applicable law, whichever is less,
determined and compounded daily from the date due until the date paid.
Payment of such finance charges will not excuse or cure Customer's breach
or default for late payment. Further, Customer will reimburse any costs or
expenses (including, but not limited to, reasonable attorneys' fees)
incurred by NeoPath to collect any amount which is not paid when due.
NeoPath may accept any check or payment in any amount without prejudice to
NeoPath's right to recover the balance of the amount due or to pursue any
other right or remedy. No endorsement or statement on any check or payment
or in any letter accompanying a check or payment or elsewhere will be
construed as an accord or satisfaction. All amounts payable under this
Agreement are denominated in United States dollars, and Customer will pay
all such amount in lawful money of the United States unless expressly
agreed otherwise.
6. LIMITED WARRANTY AND REMEDY. NeoPath warrants that, upon delivery, each
Product will be free from defects in materials and workmanship. This
warranty will not apply to any Product that (a) has not been operated and
maintained in accordance with applicable instructions and manuals, (b) has
been repaired or altered by unauthorized personnel, or (c) has been
misused, abused, damaged or subjected to operation for which it was not
intended. This warranty does not apply to expendable items such as lamps
or external tubing. NeoPath will either repair or replace any Product that
does not substantially conform to the foregoing warranty.
7. PRODUCT LIABILITY INDEMNIFICATION. NeoPath will defend and indemnify
Customer from and against any third party claim arising out of bodily
injury (including death) or property damage to the extent caused by any
defect in the design or manufacture of the Products, provided that
Customer: gives NeoPath prompt written notice of the claim; allows NeoPath
to assume control of the defense and settlement of the claim; assists and
cooperates with NeoPath in connection with the defense and settlement of
the claim; and does not settle the claim without NeoPath's prior written
consent, which consent shall not be withheld unreasonably. This paragraph
will not apply to any claim arising out of the negligence of Customer or
any third party.
8. PATENT INDEMNIFICATION. NeoPath will defend and indemnify Customer against
any third party claim arising out of any infringement by the Product of
any patent arising under the laws of the United States or any other
country in which NeoPath has been granted a patent on the Product,
provided that Customer: gives NeoPath prompt written notice of the claim;
allows NeoPath to assume control of the defense and settlement of the
claim; assists and cooperates with NeoPath in connection with the defense
and settlement of the claim; complies with any court order or settlement
made in connection with the claim (e.g., as to future use of any
infringing Product); and does not settle the claim without NeoPath's prior
written consent, which consent shall not be withheld unreasonably. NeoPath
will also reimburse Customer for any loss incurred by Customer in the
event any NeoPath Product infringes the patent rights of a third party.
This paragraph will not apply to any claim resulting from any use in
connection with any equipment or other items not furnished by NeoPath or
from any use not in conformity with applicable instructions and manuals.
9. DISCLAIMER AND RELEASE. THE WARRANTIES, OBLIGATIONS, AND LIABILITIES OF
NEOPATH AND THE REMEDIES OF CUSTOMER SET FORTH IN THIS AGREEMENT ARE
EXCLUSIVE AND IN SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES,
AND DISCLAIMS, ALL OTHER WARRANTIES, OBLIGATIONS, AND LIABILITIES OF
NEOPATH AND ALL OTHER RIGHTS, CLAIMS, AND REMEDIES OF CUSTOMER AGAINST
NEOPATH, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO
THE PRODUCTS AND ANY OTHER GOODS OR SERVICES DELIVERED UNDER THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO: (A) ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (B) ANY IMPLIED
WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE
OF TRADE; AND (C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY FOR
INFRINGEMENT.
10. EXCUSED PERFORMANCE. NeoPath will not be responsible for or be considered
to be in breach of or default under this Agreement on account of any cause
beyond NeoPath's reasonable control or not occasioned by NeoPath's fault
or negligence (including, but not limited to, NeoPath's inability, after
due and timely diligence, to procure materials, parts, equipment, or
services).
11. LIMITATIONS OF LIABILITY. EXCEPT FOR A PATENT INFRINGEMENT AND EXCEPT FOR
ANY THIRD PARTY CLAIMS AGAINST CUSTOMER, NEOPATH WILL NOT IN ANY EVENT BE
LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES, OR
FOR LOSS OF REVENUE, LOSS OF BUSINESS, OR OTHER FINANCIAL LOSS, ARISING
OUT OF OR IN CONNECTION WITH ANY PRODUCT OR OTHER GOODS OR SERVICES
FURNISHED UNDER THIS AGREEMENT.
12. SOFTWARE. NeoPath retains title to all software, computer programs and
other software furnished with any Product. Customer will use such software
only in conjunction with the use or operation of such Product and in
accordance with applicable instructions and manuals furnished by NeoPath.
Customer will not copy, modify, make any derivative work based upon,
publish or distribute any such software. Further, Customer will not
reverse engineer, decompile or attempt to discover or recreate any source
code to any such software.
13. INTELLECTUAL PROPERTY RIGHTS. The Products involve valuable patent,
copyright, trademark, trade secret and other intellectual property rights
of NeoPath. NeoPath reserves all such rights. No title to or ownership of
any intellectual property rights related to any Product is transferred to
Customer pursuant to this Agreement. Customer will not attempt to reverse
engineer any Product or component thereof or to otherwise misappropriate,
circumvent or violate any of NeoPath's intellectual property rights.
14. CONFIDENTIAL INFORMATION. NeoPath may disclose to Customer certain trade
secret, proprietary or confidential information ("Confidential
Information"). Except as otherwise authorized by NeoPath in writing,
Customer will use such Confidential Information only for the purposes for
which it is disclosed by NeoPath, will not disclose it to any third party
and will take appropriate steps to protect it from any unauthorized use or
disclosure; provided that, upon or promptly after disclosure by NeoPath,
the information is marked or otherwise identified as trade secret,
proprietary or confidential or the Customer otherwise knows or has reason
to know that the same is trade secret, proprietary or confidential. This
restriction shall not apply to information in the public domain,
information disclosed to Customer through a third party, or information in
the possession of Customer prior to this Agreement.
15. TRANSFERS. Customer will not ship or otherwise transfer any Product to a
location outside the country to which the Product is shipped by NeoPath.
If Customer transfers any Product to a location other than the location to
which it is shipped by NeoPath, Customer will give NeoPath a minimum of 5
days advance written notice thereof (including the date of the transfer,
the address and telephone number of the new location and the name, address
and telephone number of the individual under whose direction the Product
is used at such location). Customer may not transfer any Product to a
third party without approval by NeoPath.
16. UNENFORCEABLE PROVISION. The invalidity or unenforceability of any
provision of this Agreement will not affect the other provisions hereof,
and this Agreement will be construed in all respects as if such invalid or
unenforceable provision were replaced with a valid and enforceable
provision as similar as possible to the one replaced.
17. NONWAIVER. Any failure by NeoPath to insist upon or enforce performance by
Customer of any of the provisions of this Agreement or to exercise any
right or remedy under this Agreement or applicable law will not be
construed as a waiver or relinquishment to any extent of NeoPath's right
to assert or rely upon any such provision, right or remedy in that or any
other instance; rather the same will be and remain in full force and
effect.
18. ASSIGNMENT. This Agreement will inure to the benefit of and be binding
upon the parties and their respective successors, assigns and legal
representatives.
19. APPLICABLE LAW. This Agreement will be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Washington, without reference to its choice of law principles. The U.N.
Convention on Contracts for the International Sale of Goods will not apply
to this Agreement.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement, and
supersedes any and all prior agreements, between NeoPath and Customer with
regard to the Products. No amendment, modification, or waiver of this
Agreement will be valid unless set forth in a written instrument signed by
the party to be bound.
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<PAGE> 20
EXHIBIT B
NEOPATH, INC.
SUPPLEMENTAL TERMS AND CONDITIONS
(AS REVISED FOR LABORATORY CORPORATION OF AMERICA HOLDINGS 5/10/96)
This Exhibit B, Supplemental Terms and Conditions, is a NeoPath form document.
The Agreement/Proposal it is attached to is a specific document intended by
NeoPath and LCA to apply to their relationship. The parties have tried to modify
this Exhibit to fit the specific arrangement between them as set forth in the
Proposal/Agreement. NeoPath and LCA specifically agree that this form Exhibit B
shall not apply in the event it contains any terms and conditions which are
inconsistent with or which are in addition to any terms and conditions contained
in the specific Agreement/Proposal between the parties.
These Supplemental Terms and Conditions are a part of the Equipment User
Agreement ("Agreement") between NeoPath, Inc. ("NeoPath") and the customer
identified in the Agreement ("Customer"). NeoPath and Customer agree as follows:
SECTION 1. DEFINITIONS
"BASE MONTHLY FEE" means the Base Monthly Fee specified in this
Agreement. The Base Monthly Fee will be prorated on a daily basis for
any Month less than a full calendar month.
"CUSTOMER'S SITE" means Customer's place of business at the location
specified in this Agreement or such other location as may be agreed
upon in writing by the parties.
"EQUIPMENT" means the Equipment described in this Agreement, together
with any repairs, replacements, corrections, alterations, additions,
improvements or modifications made during the Term or otherwise
pursuant to this Agreement.
"FEE-PER-SLIDE" or "FPS" means the Fee-Per-Slide or FPS specified in
this Agreement.
"MONTH" means any calendar month during the Term, except that: (a) the
first Month will begin with the first day of the Term and end with the
last day of the calendar month which includes the first day of the
Term; and (b) the last Month will end with the last day of the Term and
will begin with the first day of the calendar month which includes the
last day of the Term.
"TERM" means the Term specified in Section 4.
"USER DOCUMENTATION" means any user manual, instructions and other
documentation furnished by NeoPath relating to Customer's use of the
Equipment, as the same may be revised, updated or replaced by NeoPath
from time to time during the Term.
SECTION 2. THE EQUIPMENT
2.1 MAINTENANCE. NeoPath will provide maintenance for the Equipment
throughout the Term. Upon Customer's request, NeoPath will promptly
repair, replace or otherwise correct any Equipment that does not
operate in accordance with the applicable User Documentation. Customer
will immediately notify NeoPath of any defect, malfunction or failure
to operate in accordance with the User Documentation. NeoPath will
provide remote support services between 8:00 a.m. and 5:00 p.m. Pacific
time, Monday through Friday, excluding holidays, with pager back-up
during other hours. Unless otherwise agreed by the parties, any
maintenance required to be performed at Customer's Site will be
performed between 8:00 a.m. and 5:00 p.m. local time at Customer's
Site, Monday through Friday, excluding holidays.
2.2 USE AND OPERATION. Customer will use the Equipment only for the
purposes specified in the User Documentation. Customer will not use or
permit the use of the Equipment for any other purpose. Customer will
operate the Equipment in strict accordance with the User Documentation.
2.3 LOCATION. Customer will keep the Equipment in its sole possession
and control at Customer's Site throughout the Term. Without limitation
of the foregoing, Customer will not lease, rent or transfer the
Equipment to any third party. Customer will not move the Equipment to
any location other than the one in which it is installed by NeoPath
without the prior written consent of NeoPath. NeoPath may inspect the
Equipment at any time during Customer's normal business hours.
2.4 REMOTE ACCESS. Throughout the Term, Customer will provide a
dedicated telecommunication line for NeoPath's remote access to the
Equipment (e.g., for maintenance and monitoring of the Equipment).
2.5 TITLE. No title to or ownership of any Equipment, or to any
proprietary rights related to any Equipment, are transferred to
Customer by virtue of this Agreement. Customer acknowledges that the
Equipment: (a) will be owned by NeoPath or its assignees; and (b)
involves valuable patent, copyright, trade secret and other proprietary
rights of NeoPath. Customer will: (i) not remove, obscure or alter any
label, decal, plate, plaque, tag, marking or other notice of NeoPath's
ownership or rights; (ii) not disassemble, decompile or reverse
engineer any of the Equipment; (iii) make the Equipment available only
to Customer's employees and independent contractors in connection with
their use of the Equipment for the purposes and in accordance with the
requirements of this Agreement; (iv) keep the Equipment free from any
and all security interests, mortgages, deeds of trust, liens,
encumbrances and other claims arising by, through, at the request of,
or on behalf of Customer; and (v) take such action (including, but not
limited to, the execution, acknowledgment, delivery, filing or
recording of any UCC financing statements and other document) as
NeoPath may reasonably request to protect, perfect or evidence its
ownership and other rights in the Equipment.
2.6 ALTERATIONS. Customer will not make any alterations, additions,
improvements or modifications to the Equipment without the prior
written consent of NeoPath. Any alteration, addition, improvement or
modification to the Equipment will become the property of NeoPath when
made and will be surrendered to NeoPath with the Equipment at the end
of the Term. Customer hereby assigns to and transfers to NeoPath any
right, title and interest that it may have in any alteration, addition,
improvement or modification.
2.7 RISK OF LOSS AND INSURANCE. Customer assumes all risk of loss,
casualty, damage or injury relating to the Equipment from the date of
delivery of the Equipment to Customer until the Equipment is returned
to NeoPath at the end of the Term. Customer will immediately notify
NeoPath of any loss, casualty, damage or injury relating to the
Equipment.
SECTION 3. COMPENSATION
3.1 BASE MONTHLY FEE. Customer will pay NeoPath the Base Monthly Fee
for each Month during the Term. Concurrently with the execution of this
Agreement, Customer will pay NeoPath the Base Monthly Fee for the first
and last Months during the Term. Customer will pay NeoPath the Base
Monthly Fee for any other Month during the Term on or before the first
day of such Month.
3.2 USAGE FEES. If the Base Monthly Fee for any Month is less than the
product of the number of slides processed with the Equipment during
such Month multiplied by the applicable FPS, then Customer will pay
NeoPath the difference within thirty (30) days after the end of such
Month. Customer will keep and maintain an accurate record of the number
of slides processed with the Equipment during each Month of the Term.
Upon NeoPath's request, Customer will: (a) submit to NeoPath a written
report of the number of slides processed with the Equipment during any
Month; and (b) make such records available for examination by NeoPath
or its representative.
3.3 MAINTENANCE FEES. Customer will not be required to pay any
additional fees for normal maintenance during the hours specified in
paragraph 2.2. However, Customer will pay NeoPath in accordance with
NeoPath's then-current standard rates and charges for any repair,
replacement, correction or other maintenance required: (a) during any
other hours; or (b) at any time on account of any: (i) use of the
Equipment for any purpose other than the purposes specified in the
applicable User Documentation, (ii) failure to operate the Equipment in
strict accordance with the applicable User Documentation, (iii)
unauthorized use, operation, repair, alteration, addition, improvement
or modification of the Equipment, (iv) loss, casualty, damage or injury
relating to the Equipment, or (v) breach or default by Customer.
- ----------------------------------
[*]Confidential treatment requested
Laboratory Corporation of America Holdings
<PAGE> 21
3.4 TAXES. The fees described in paragraphs 3.1, 3.2, 3.3 and 3.4 do
not include any personal property, sales, use or similar taxes.
Customer will pay or reimburse NeoPath for any and all such taxes.
SECTION 4. TERM
4.1 GENERAL. The Term will commence upon the date the Equipment is
installed at Customer's Site and will terminate upon the earlier of:
(a) the expiration date set forth in This Agreement; or (b) the
effective date of any termination pursuant to paragraph 4.2 or 4.3.
4.2 TERMINATION BY NEOPATH. NeoPath may terminate the Term by giving
Customer written notice of such termination if: (a) Customer fails to
make any payment under Section 3 when due, NeoPath gives Customer
written notice of such failure and such failure is not cured within
thirty (30) days (or such longer period as may be permitted by NeoPath)
after Customer's receipt of NeoPath's notice of the failure; (b)
Customer commits a material breach of or default under this Agreement,
NeoPath gives Customer written notice of the breach or default, and the
breach or default is not cured within thirty (30) days (or such longer
period as may be permitted by NeoPath) after Customer's receipt of
NeoPath's notice of the breach or default; or (c) Customer files or has
filed against it a petition to have Customer adjudged bankrupt or for
reorganization or arrangement of Customer under any bankruptcy,
moratorium, insolvency, reorganization, liquidation, conservatorship or
other debtor relief law, Customer makes any general assignment for the
benefit of its creditors under any debtor relief law, a trustee or
receiver is appointed to take possession of all or substantially all of
Customer's assets under any debtor relief law, all or substantially all
of Customer's assets are attached or seized, or Customer dissolves,
liquidates or adopts any plan or dissolution or liquidation.
4.3 TERMINATION BY CUSTOMER. Customer may terminate the Term by giving
NeoPath written notice of such termination if: (a) NeoPath commits a
material breach of or default under this Agreement, Customer gives
NeoPath written notice of the breach or default, and the breach or
default is not cured within thirty (30) days (or such longer period as
may be permitted by Customer) after NeoPath's receipt of Customer's
notice of the breach or default; or (b) NeoPath files or has filed
against it a petition to have NeoPath adjudged bankrupt or for
reorganization or arrangement of NeoPath under any bankruptcy,
moratorium, insolvency, reorganization, liquidation, conservatorship or
other debtor relief law, NeoPath makes any general assignment for the
benefit of its creditors under any debtor relief law, a trustee or
receiver is appointed to take possession of all or substantially all of
NeoPath's assets under any debtor relief law, all or substantially all
of NeoPath's assets are attached or seized, or NeoPath dissolves,
liquidates or adopts any plan or dissolution or liquidation.
4.4 END OF THE TERM. Unless otherwise agreed by the parties, Customer
will return the Equipment to NeoPath at the end of the Term in at least
as good condition and state of repair as it was in when delivered to
Customer under this Agreement, subject to ordinary wear and tear
resulting from Customer's use of the Equipment in accordance with this
Agreement. Customer will deliver the Equipment to NeoPath F.O.B.
NeoPath's manufacturing facility in King County, Washington. Any
termination pursuant to paragraph 4.2 or 4.3 will be without prejudice
to any other rights or remedies for any breach or default under this
Agreement.
SECTION 5. MISCELLANEOUS
5.1 RESTRICTION ON ASSIGNMENT BY CUSTOMER. Customer will not assign
this Agreement or any of its rights hereunder without the prior written
consent of NeoPath, not to be withheld unreasonably. No assignment by
Customer, with or without NeoPath's consent, will relieve Customer from
any of its obligations under this Agreement. Transfer of Customer
rights and obligations under this Agreement to a wholly owned
subsidiary or affiliate shall not constitute an assignment for purposes
of this Agreement. Nor shall a transfer resulting from a change in
ownership of Customer be deemed an assignment hereunder. Customer
agrees it will not assign this Agreement to Roche Image Analysis
Systems, or any successor to Roche Image Analysis Systems.
- ----------------------------------
[*]Confidential treatment requested
-2-
Mutual Confidentiality Agreement
<PAGE> 1
NEOPATH, INC. AMENDED AND RESTATED PROPOSAL TO KAISER IMMC AGREEMENT NO. 249
Exhibit 10.3
From: Kaiser Permanente Medical Care Program
Regional Purchasing Department
1950 Franklin Street, REG 9105
Oakland, California 94612-2998
(510) 987-2135
Fax: (510) 873-5053
Mailing Address:
P.O. Box 12916
Oakland, California 94604-2928
June 20, 1996
To: Mr. Martin S. Reid
NeoPath, Inc.
8271 - 154th Avenue NE
Redmond, WA 98052
Subject: AMENDED AND RESTATED KAISER IMMC AGREEMENT NO.0249
Dear Mr. Reid:
Kaiser Foundation Health Plan, Inc., Northern California Region (Kaiser) is
pleased to accept the NeoPath, Inc. (NeoPath) proposal dated 6-14- 96 (see Item
1) and signed by Mr. Martin Reid and as amended by Mr. Reid, NeoPath on 6-19-96
(see Exhibit B) to provide our requirement for NeoPath AutoPap 300 QC Systems
for QC rescreening of conventional Pap smear slides. This Agreement is between
NeoPath and Kaiser on behalf of the affiliated Health Plan corporations and
participating Northern and Southern California Regions each of which expects to
diligently work towards achieving the approximate level of purchasing a minimum
of [*] of its needs for the subject goods and services from NeoPath should the
evaluation of the NeoPath AutoPap 300 QC System be successful as described
below.
AUTOPAP 300 EVALUATION
NeoPath will deliver and install [*] AutoPap 300 QC [*] to Kaiser
Permanente Regional Laboratory, Berkeley, California no later than [*].
The trial period will be for [*], with an objective of processing [*] slides in
a QC mode.
Evaluation success will be determined by the ability of the AutoPap 300 QC
System to perform to the specifications as outlined in the NeoPath Product
Insert (Exhibit A) and Kaiser Regional Laboratory NeoPath Evaluation Quality
Expectations (Exhibit B).
If the AutoPap 300 QC System does not perform to the specifications as outlined
in the NeoPath Product Insert and Kaiser Regional Laboratory NeoPath Evaluation
Quality Expectations, Kaiser has the option of canceling the Agreement and
returning the instrument with no further obligation.
If the AutoPap 300 QC System performs to the specifications as outlined in the
NeoPath Product Insert and Kaiser Regional Laboratory NeoPath Evaluation
Quality Expectations, this Agreement will remain in effect with the following
pricing terms and conditions to apply:
<PAGE> 2
NEOPATH, INC. AMENDED AND RESTATED PROPOSAL TO KAISER IMMC AGREEMENT NO. 249
TERMS OF AGREEMENT
The term of this Agreement shall be effective from 9-1-96 through 12-31-99.
This Agreement recognizes NeoPath as primary supplier who is fully endorsed by
the Kaiser Interregional Materiel Management Committee to provide automated
systems for the rescreening of Pap smear test slides contingent on the
successful outcome of the evaluation of the NeoPath AutoPap 300 QC System by
Kaiser Permanente Northern California Region Regional Laboratory, Berkeley, CA.
As a result of such endorsement, NeoPath may anticipate that Kaiser expects to
use its best efforts to see that each participating Kaiser region diligently
works towards achieving standardization in using the NeoPath AutoPap 300 QC
System for rescreening conventional Pap smear slides. Kaiser regions in
Colorado, Connecticut, Georgia, Hawaii, Mid-Atlantic States, North Carolina,
Northwest, Ohio and Texas regions may, at their option, order their
requirements at the same prices and terms. This order may be extended to any
new Kaiser region.
NeoPath and Kaiser consider the pricing specifics of the Agreement to be
confidential information for Kaiser Permanente personnel only.
All the terms, conditions and instructions and general requirements of the
NeoPath Proposal are incorporated into this Agreement by this reference and
shall be binding on NeoPath. In addition, purchase orders will be issued
separately by each participating Kaiser region. All terms and conditions of
such issued purchase orders also shall apply to the transactions between
NeoPath and that participating Kaiser region; provided, however, that the
provisions of the IMMC Agreement shall prevail in the event of any direct
conflict between the provisions of a Kaiser region's purchase order and the
provisions of the IMMC Agreement.
PRICING
NEOPATH CHARGE PER SLIDE
With the expectation of Kaiser Permanente Southern California Region committing
QC rescreening of conventional Pap smear slides utilizing the NeoPath AutoPap
300 QC instrument, NeoPath agrees to charge Kaiser $[*] per slide for use of
NeoPath equipment and service.
In the event that Kaiser Permanente Southern California Region does not commit
to using the NeoPath AutoPap 300 QC System, NeoPath has the option to increase
the price per slide to $[*] for the period [*] through [*]. If NeoPath opts to
increase the charge to $[*] per slide, then Kaiser Permanente Northern
California Region shall have the option to reduce the commitment of utilizing
the NeoPath AutoPap 300 QC System from [*] to [*] years and may cancel this
Agreement anytime after 12-31-98 with 30 day advanced written notice to
NeoPath.
Kaiser shall receive the benefit of any price reduction in NeoPath published
list prices by the same percentage decrease in list price being applied to
Kaiser net prices during the period of this Agreement.
PAYMENT TERMS
PAYMENT FOR TRIAL PERIOD: $[*] ([*] slides at $[*] per slide) will be invoiced
after complete installation of [*] [*] NeoPath AutoPap 300 QC [*] at
Kaiser Regional Laboratory, Berkeley, CA. An adjustment for the number of
slides exceeding [*] slides during the trial period will be billed separately
at $[*] per slide. Conversely, a credit adjustment will be made by NeoPath
reimbursing Kaiser for the number of slides less than [*] slides during the
trial period at $[*] per slide.
DEPOSIT: $[*] per instrument due upon issuance of purchase order. All deposits
will be applied toward the final [*] of the user Agreement.
2
<PAGE> 3
NEOPATH, INC. AMENDED AND RESTATED PROPOSAL TO KAISER IMMC AGREEMENT NO. 249
SHIPPING CHARGE: [*] per instrument will be billed in the invoice for the
first billing period.
MONTHLY SLIDE PAYMENTS: $[*] per instrument will be invoiced at the end of each
calendar month. A semi-annual adjustment for the number of slides exceeding
[*] slides per instrument in the six (6) month adjustment period total will be
billed separately. The average monthly minimum slides to be charged is [*]
slides per instrument for each six (6) month adjustment period. Kaiser will
not be required to meet the [*] minimum monthly slide average per instrument if
Kaiser is not able to use the instrument(s) due to prolonged instrument
malfunction, labor work stoppage, or natural disaster rendering the Kaiser
laboratory to be inoperable.
The Payment Terms of all NeoPath invoices are net 30 days after receipt of
invoice by Kaiser.
DELIVERY OF AUTOPAP 300 INSTRUMENTS
NeoPath will deliver and install up to [*] additional AutoPap 300 QC Systems at
Kaiser Permanente Regional Laboratory, Berkeley, CA no later than [*]. NeoPath
also agrees to install up to [*] additional AutoPap 300 QC [*] at Kaiser
Regional Laboratory, Berkeley, CA within sixty (60) days after receipt of order
from Kaiser.
For any Kaiser region submitting purchase orders for NeoPath AutoPap 300 QC
Systems within thirty-one (31) days after the evaluation trial period, NeoPath
guarantees delivery of the following AutoPap 300 QC instruments by [*]:
<TABLE>
<CAPTION>
KAISER REGION NUMBER OF AUTOPAP 300 INSTRUMENTS
------------- ---------------------------------
<S> <C>
Southern California [*]
Northwest [*]
Hawaii [*]
Colorado [*]
Connecticut [*]
Georgia [*]
North Carolina [*]
Mid-Atlantic States [*]
Ohio [*]
Texas [*]
</TABLE>
NeoPath Charge Per Slide
If and when performance improvements and/or a primary screening version
receives FDA approval, NeoPath will offer to Kaiser the option to upgrade at a
price to be determined if and when such approval has been obtained, [*]
ADAPTABILITY TO THIN PREP TECHNOLOGY
NeoPath intends to pursue adapting the AutoPap 300 QC System with GYN monolayer
preparation technology. Should an inability of the AutoPap system to read
monolayer prepared slides put Kaiser at a competitive disadvantage, Kaiser and
NeoPath shall have the option to renegotiate the pricing terms, and conditions
of this agreement.
TECHNOLOGY CLAUSE
Kaiser and NeoPath have the option to renegotiate the pricing, terms and
conditions of this Agreement whenever introduction of new products/technologies
or whenever the pricing of this Agreement has the potential of putting Kaiser
at a competitive disadvantage in the marketplace.
LABORATORY TRAINING
NeoPath's field Cytology group will conduct a complete training program at
Kaiser on appropriate and efficient use of the AutoPap and will set the
threshold for the appropriate sort rate.
INSTALLATION
The AutoPap Systems will be installed at Kaiser by authorized NeoPath service
engineers at no cost.
3
<PAGE> 4
NEOPATH, INC. AMENDED AND RESTATED PROPOSAL TO KAISER IMMC AGREEMENT NO. 249
SERVICE
NeoPath, or its authorized service representative, will provide telephone
response within 2 hours of notification of a service problem and no more than
24 hours will pass before a service engineer is on site.
Routine service (as defined by NeoPath), maintenance, enhancements, and
inspections, as required to assure that the AutoPap Systems perform to
specifications are included at no additional cost. The cost of service and/or
repairs resulting from negligence, misuse and/or non-routine causes will be
charged to Kaiser.
UPGRADES
Software updates for the AutoPap 300 QC Systems will be provided to Kaiser at
no additional cost. If and when performance improvements and/or a primary
screening version receives FDA approval, NeoPath will offer to Kaiser the
option to upgrade at a price to be determined if and when such approval has
been obtained.
LITERATURE
Up to [*] patient education pamphlets per instrument will be provided to Kaiser
at no cost. At Kaiser's request, the Kaiser name and logo may be added at no
cost as well. Additional quantities may be purchased for $[*] per pamphlet.
SALES TRAINING
NeoPath's Sales and Marketing team will be available for training of Kaiser
sales representatives at Kaiser's request.
AUTOMATION SEMINAR
At Kaiser's request, NeoPath will present a seminar on Automated Image
Interpretation directed towards Pathologists, GPs, OB-GYNs, Cytotechnologists
and any other people deemed appropriate.
AUTOPAP 300 SCREENER UPGRADE
Kaiser will be offered priority upgrade to a fully automated screener upon FDA
approval if and when such approval is obtained by NeoPath.
WARRANTY
NeoPath will warrant each AutoPap System against defects in materials and
workmanship and that each AutoPap System will perform in accordance with
NeoPath's published specifications as per the attached Product Insert for the
period of this Agreement.
4
<PAGE> 5
NEOPATH, INC. AMENDED AND RESTATED PROPOSAL TO KAISER IMMC AGREEMENT NO. 249
ACCESSORIES
Each offered AutoPap System includes the following NeoPath accessories:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
-------- -----------
<S> <C>
[*] AutoPap Slide Trays
1 Operator Manual
1 Start-Up Kit*
</TABLE>
* Start-Up Kit will include one (1) pack of printer paper and
one (1) roll of Bar Code Labels ([*] sets of [*] labels per roll).
The following additional accessories are offered by NeoPath at the indicated
prices:
<TABLE>
<CAPTION>
DESCRIPTION PRICE
----------- -----
<S> <C>
Bar Code Labels $[*] (U.S.) per roll
AutoPap Slide Tray $[*] (U.S.) per tray
</TABLE>
Pricing of any NeoPath product not covered by this Agreement will be negotiated
between NeoPath and Kaiser before the product is added to this Agreement.
ORDER PLACEMENT
Purchase orders will be issued separately by each participating Kaiser region.
All terms and conditions of such issued purchase orders also shall apply to the
transactions between NeoPath and that participating Kaiser region.
Sincerely,
KAISER PERMANENTE
/s/Stacie Burch
- ---------------
Jason Yang/Stacie Burch
cc: Howard Koo, Kaiser Regional Laboratory, Berkeley, CA
Gene Pawlick, MD, TPMG, Regional Laboratory, Berkeley, CA
ACCEPTED AND AGREED TO BY:
NEOPATH, INC.
By: /s/ MARTIN REID Date: 6-25-96
--------------- -------
Martin Reid, National Sales Manager
By: /s/ VOLKER R. KETTERING Date: 6-25-96
----------------------- -------
Volker R. Kettering, Vice President, Sales
5
<PAGE> 6
NEOPATH(R), INC.
AUTOPAP(R) 300 QC AUTOMATIC PAP SCREENER SYSTEM
INDICATION FOR USE
INTENDED USE
The AutoPap 300 QC System is an automated cervical cytology
rescreening device intended for use in the quality control and rescreening of
previously screened Papanicolaou (Pap) smear slides. The AutoPap 300 QC System
is to be used only on conventionally prepared Pap smear slides that have been
previously classified as within normal limits (WNL) and satisfactory for
interpretation by a screening cytologist.
The AutoPap 300 QC System is not intended to replace the current
laboratory slide review processes referred to as "high-risk rescreen."
SUMMARY AND EXPLANATION OF THE SYSTEM
The AutoPap 300 QC System is an automated cytology rescreening device
that uses a high-speed video microscope, image interpretation software, and
specially designed field-of-view computers to image, analyze, and classify
cells within the complex images on a Pap smear slide.
The AutoPap 300 QC System is intended to detect evidence of squamous
carcinoma and adenocarcinoma and their usual precursor conditions missed on
prior manual microscopic examination of Pap smear slides. These abnormalities
fall within the following diagnostic categories of The Bethesda System:
EPITHELIAL CELL ABNORMALITIES
Squamous Cell
Atypical squamous cells of undetermined significance (ASCUS)
Low-grade squamous intraepithelial lesions (LSIL)
High-grade squamous intraepithelial lesions (HSIL)
Squamous cell carcinoma
Glandular Cell
Atypical glandular cells of undetermined significance (AGUS)
Endocervical adenocarcinoma
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-1-
<PAGE> 7
Endometrial adenocarcinoma
Extrauterine adenocarcinoma
Pap smear slides screened as WNL and adequate for analysis by a
screening cytotechnologist are to be rescreened by the AutoPap 300 QC System.
Based on cytologic evidence, the device then identifies, for manual quality
control (QC) review, slides with the highest probability of being a false
negative to create an enriched sample. The result is that there is a higher
prevalence of false negative slides in the sample selected for manual QC
review.
The System classifies each slide into one of three categories:
QC REVIEW Further human review recommended; specimen is
potentially abnormal.
NO REVIEW No evidence to recommend further human review.
REVIEW Squamous component not detected; OR, not enough
cellular material for anlysis.
Slides that are not successfully processed are classified as Process
Review or Rerun. These slides may be able to be reprocessed based upon the
information provided in the slide report and the instructions provided in the
Operator's Manual. If a slide cannot be successfully reprocessed, it is
recommended that the laboratory conduct its usual procedure for routine QC
selection.
The laboratory also should select for manual microscopic review the
Pap smear slides from patients or groups of patients that have been identified
as having a high probability of developing cervical cancer, based on available
patient information.
LIMITATIONS
AutoPap 300 QC System performance has not been established for use as
a primary screener of Pap smears.
Clinical data demonstrated that use of the AutoPap 300 QC System will
improve the recovery of false negative slides in the laboratory over a random
selection method. However, this device does not recover all false negative
slides; false negative readings should still be expected to occur with the use
of this device.
The AutoPap 300 QC System is not intended or recommended for use as a
confirmatory screener for slides that have been previously classified as
abnormal or unsatisfactory for interpretation.
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[*] Confidential Treatment Requested
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<PAGE> 8
The performance characteristics of the AutoPap 300 QC System have not
been established for the detection of the cervical abnormalities that fall
within the following diagnostic categories of The Bethesda System:
# Benign cellular changes due to infection
# Reactive changes associated with inflammation, atrophy with
inflammation, radiation, and intrauterine contraceptive
device (IUD)
# Endometrial cells, cytologically benign, in a postmenopausal woman
# Adenocarcinoma, not otherwise specified (NOS) (specimen contains
cellular evidence of adenocarcinoma but unable to further
subclassify as to site of origin)
# Other malignant neoplasms
Use of the AutoPap 300 QC System is intended to be performed only
under the direct supervision of licensed and/or certified cytotechnologists,
cytopathologists, or laboratory directors who have been trained and certified
to use the AutoPap 300 QC System by NeoPath, Inc., one of its subsidiaries, or
an educational institution certified by NeoPath, Inc., to conduct training.
The AutoPap 300 QC System is designed to be compatible with a wide
range of staining procedures currently implemented in clinical laboratories.
However, the device is not compatible with all staining methods currently in
use. The compatibility of a laboratory's staining process will be assessed by
NeoPath prior to clinical use of the device by the laboratory. NeoPath may
recommend alternate staining procedures intended to optimize the performance of
the device while maintaining the integrity and current performance level of the
human review process.
The AutoPap 300 QC System is intended for use in processing only
conventionally prepared cervical/vaginal Pap smear slides that meet the slide,
coverslip and staining characteristics provided in the Operator's Manual.
This device is intended for use only with glass microscope slides and
glass coverslips.
WARNINGS AND PRECAUTIONS
WARNINGS
Broken Glass Hazard when Handling Slides
Do not drop or break slides during slide preparation and when loading
and unloading slides into trays. If slides are broken, injuries may occur.
__________________________________
[*] Confidential Treatment Requested
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<PAGE> 9
Moving Parts Hazard when Loading/Unloading Trays
Remove all potentially obstructive jewelry and clothing before loading
or unloading trays. After opening a hopper door, be sure all moving parts in
the hopper have stopped before inserting or removing a tray. If trays are
inserted before all moving parts have stopped, injuries may occur or the device
may jam.
Shock Potential when Cleaning the Monitor
Failure to remove power to the monitor before performing the procedure
could result in an electric shock. See Operator's Manual.
Shock Potential when Power Applied Improperly
The symbol next to the power connector indicates potential shock
hazard. Ensure that the system is connected to a power receptacle that provides
voltage and current within the specified rating for the system. Use of an
incompatible power receptacle may produce electrical shock and fire hazards.
Shock Potential when Improperly Grounded
Never use a two-prong plug adapter to connect primary power to the
system. Use of a two-prong adapter disconnects the utility ground, creating a
potential shock hazard. Always connect the system power cord directly to an
appropriate receptacle with a functional ground.
Shock Potential when Cleaning with Power Applied
Always turn off the power switch and unplug the power cord before
cleaning the outer surfaces or internal components of the device.
Shock Potential from Spilled Liquids
Do not place containers with liquids on the device or the workstation
cart. Do not spill liquids on the system; fluid seepage into internal
components creates a potential shock hazard. Shut down the device, disconnect
from the power source and wipe up all spills immediately. Do not operate the
system if internal components have been exposed to fluid.
PRECAUTIONS
Compliance with Standards
Prior to using the device, a laboratory must ensure that the use of
the AutoPap 300 QC System as a quality control method complies with all
applicable federal, state and local requirements for that laboratory. NeoPath
will provide available information and assistance in this regard, upon request.
__________________________________
[*] Confidential Treatment Requested
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<PAGE> 10
Slide and Coverslip Requirements
This device is intended for use only with glass microscope slides and
glass coverslips.
This device cannot be recommended for use with slides and coverslips
that do not comply with the specifications provided in the Operator's Manual,
particularly slides with plastic coverslips, broken slides, dirty or marked
slides and non-standard slide or coverslip sizes.
Backup Procedures
When performing the backup procedures, NeoPath recommends that two
tapes be used in rotation; each tape would be used every other day. This will
ensure minimum loss of data in the unlikely event of workstation failure.
Shutdown Procedures
Except in an emergency situation, such as those described in the
Warnings section, shutting down the AutoPap 300 QC System should be performed
only with prior authorization of a company representative in order to avoid
loss of data. If no emergency situation exists, contact NeoPath, Inc., or its
designated representative before attempting to shut down the device.
Power Down Procedures
It is important to shut down the system components in the proper
order. See Operator's Manual.
Restart Procedures
The AutoPap 300 QC Workstation must always be turned on and booted
BEFORE the AutoPap 300 QC Instrument is turned on. It is important to apply
power to the system components in the proper order. See Operator's Manual.
Installation and Service
The device should be installed only by company authorized personnel.
Only technically qualified personnel, trained by NeoPath, should perform
troubleshooting and service procedures on internal components.
Replacement Fuses
Use replacement fuses with the required current rating and
specification. Using improper fuses or short-circuiting the fuse holders may
cause fire or damage the device.
__________________________________
[*] Confidential Treatment Requested
-5-
<PAGE> 11
REPORTS OF CLINICAL STUDIES
Several multi-center, well-controlled clinical studies were conducted
to evaluate the performance of the device. An intended use study confirmed the
accuracy of the AutoPap 300 QC System using a masked, prospective design.
Several sensitivity and precision studies were conducted to confirm the
performance characteristics and reliability of the device.
ACCURACY STUDY: THE CLINICAL EVALUATION STUDY
The Clinical Evaluation Study was designed to compare the
effectiveness of a random selection quality control practice in a cytology
laboratory to the effectiveness of the AutoPap 300 QC System using a quality
control application. The AutoPap 300 QC System was operated, as nearly as
possible, in a manner similar to that recommended for routine laboratory use.
The objective of the study was to test the hypothesis that the device
is capable of providing a higher proportion of false negative slides for
quality control review than can be achieved by a random selection method. This
hypothesis was evaluated over a range of quality control review rates.
A 100% manual rescreen of all processed slides was performed in this
study to identify, as nearly as possible, the total population of false
negative slides available for review. This population of false negative slides
was then used as the target population to measure the efficacy of the device in
identifying these false negative slides at a 10% QC review rate. The study
design ensured that the site personnel were effectively masked and enhanced the
probability of detecting the false negative slides present within the entire
study population. The total number of slides used in the analysis was 14,914.
Each false negative slide recovered during the study was reviewed by
an Internal Discrepancy Panel of study site personnel as well as an External
Discrepancy Panel of independent pathologists. The results of the External
Discrepancy Panel review are used to demonstrate the efficacy of the device.
These results demonstrate that the AutoPap 300 QC System identifies a
subset of manual screen negative Pap smear slides that have been enriched
through computer selection of false negative slides. A manual screening of this
enriched subset (10% of the total manual screen negative slides will identify
up to 50% of false negatives when compared to a 100% manual rescreen. This
compares to the expected identification of only 10% of false negatives by a
completely random selection review.
__________________________________
[*] Confidential Treatment Requested
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<PAGE> 12
TABLE 1 Clinical Evaluation Study
Sensitivity to False Negative Slides by Diagnostic
Category and Overall 10% QC Review Rate, %
Sensitivity, (N)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(1)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
Review Rate(2) 11.2% 11.8% 37.2% 9.4% 6.1% 19.3% 11.8%
----------------------------------------------------------------------------------------------------
FN-ASCUS 22.5% 36.7% 47.4% 33.3% 35.7% 0.0% 29.7%
(41/138)
----------------------------------------------------------------------------------------------------
FN-AGUS 100.0% 20.0% 100.0% 0.0% 37.5% 50.0% 29.4%
(5/17)
----------------------------------------------------------------------------------------------------
FN-LSIL 57.1% 83.3% 100.0% 0.0% 42.9% 100.0% 51.6%
(16/31)
----------------------------------------------------------------------------------------------------
FN-HSIL 100.0% NA NA 100.0% 42.9% NA 60.0%
(6/10)
----------------------------------------------------------------------------------------------------
FN-Cancer NA 0.0% NA NA NA NA 0.0%
(0/1)
----------------------------------------------------------------------------------------------------
All FN(3) 32.0% 38.1% 56.5% 25.0% 37.6% 16.7% 34.5%
(68/197)
----------------------------------------------------------------------------------------------------
All FN-LSIL+(4) 66.7% 71.4% 100.0% 25.0% 42.9% 100.0% 52.4%
(22/42)
----------------------------------------------------------------------------------------------------
</TABLE>
1. Site 3 is excluded from overall results due to
incompatibility of staining procedure with the
device.
2. Review Rate: Average percent identified as QC
Review using the global 10% QC review rate.
3. All FNs: Includes the diagnostic categories of
ASCUS, AGUS, LSIL, HSIL and Carcinoma.
4. ALL FN-LSIL+: Includes the diagnostic categories
of LSIL, HSIL and Carcinoma.
Analysis of the overall performance of the device in detecting the
presence or absence of an endocervical component shows the following:
o 85% of normal slides with endocervical component are correctly
classified. 15% of the normal slides with endocervical component
are reported as "endocervical component not detected." However,
this result does not affect the computation of the QC score.
o 73% of normal slides without endocervical component are correctly
classified.
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<PAGE> 13
SENSITIVITY STUDIES
Two large, multi-center sensitivity studies were performed using
abnormal slides. Each selected abnormal slide required a normal matched control
slide.
The Current Archive Sensitivity Study used recent abnormal slides
processed by the laboratory. The diagnostic categories selected included ASCUS,
AGUS, LSIL, HSIL, cancer (squamous, glandular, and extrauterine) and detected
false negative slides. The total number of slides used in the analysis,
including matched controls, was 2,584.
The Historical Archive Sensitivity Study used abnormal slides
retrieved from the archived records of each trial site. The diagnostic
categories selected included AGUS, LSIL, HSIL, cancer (squamous, glandular, and
extrauterine) and detected false negative slides. The total number of slides
used in the analysis, including matched controls, was 3,589 (see Table 2).
TABLE 2 Sensitivity to Abnormal Slides by Diagnostic Category
Historical Sensitivity Study 10% QC Review Rate, %
Sensitivity, (N)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Site 1 Site 2 Site 3 Site 4 Site 5 Site 6 All Sites
(excluding
Site 3(2))
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
AGUS 45.0% 33.3% 60.0% 45.9% NA 34.4% 39.5%
(80) (30) (5) (37) (96) (243)
----------------------------------------------------------------------------------------------------
LSIL 67.4% 62.2% 68.3% 68.7% 46.2% 60.5% 60.9%
(89) (90) (63) (67) (80) (86) (412)
----------------------------------------------------------------------------------------------------
HSIL 84.7% 79.0% 90.4% 87.7% 70.3% 88.6% 82.1%
(85) (81) (73) (57) (74) (88) (385)
----------------------------------------------------------------------------------------------------
Cancer 100.0% 86.5% 66.7% 61.5% 50.0% 71.1% 79.1%
(21) (52) (3) (26) (2) (38) (139)
----------------------------------------------------------------------------------------------------
Review Rate(1) 16.5% 13.5% 34.2% 13.3% 7.6% 10.4% 12.9%
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Review Rate: Average percent identified as
QC Review at each laboratory using the
global 10%
QC review rate.
(2) Site 3 is excluded from overall results due
to incompatibility of staining procedure
with the device.
The data derived from processing these abnormal slides demonstrate
that the AutoPap 300 QC System has significant sensitivity to all tested
categories of abnormal slides (see Table 3).
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TABLE 3 Sensitivity to Abnormal Slides by Diagnostic Category
Current Archive Study (CAS) and Historical
Sensitivity Study (HSS) 10% QC Review Rate, %
Sensitivity, (N)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ASCUS AGUS LSIL HSIL CANCER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
CAS 36.1% 27.3% 60.0% 80.2% 62.5%
- -------------------------------------------------------------------------------------------------------
(205) (22) (410) (202) (8)
- -------------------------------------------------------------------------------------------------------
HSS NA 39.5% 60.9% 82.1% 79.1%
- -------------------------------------------------------------------------------------------------------
(243) (412) (385) (139)
- -------------------------------------------------------------------------------------------------------
</TABLE>
An analysis was conducted of the subset of cancer slides retrieved
from the archived records. This subset represented the larger sample size from
the two sensitivity studies. The sensitivity rates, by subclassification
category, are reported in Table 4. (These subclassifications are derived from
the procedures used across all the participating laboratories and may not
coincide with individual laboratory practice.)
These results show the device has a significant sensitivity to cancer
slides.
TABLE 4 Sensitivity to Subset of Cancer Slides 10% QC Review
Rate, % Sensitivity, (N)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Squamous AdenoCA Malignant Endocervical Endometrial AIS(3) All Cancer
CA(1) NOS(2) NOS AdenoCA AdenoCA Slides
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
91.3% 52.6% 40.0% 100.0% 66.7% 58.8% 77.7%
(80) (19) (5) (3) (15) (17) (139)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1. CA: Carcinoma
2. NOS: Not otherwise specified (specimen
contains cellular evidence of
adenocarcinoma but unable to further
subclassify as to site of origin)
3. AIS: Adenocarcinoma in situ
A second subset analysis was conducted for the HSIL and cancer slides
identified by the clinical trial sites as having a biopsy-confirmed diagnosis.
The slides were selected from both the Historical Sensitivity Study and the
Current Archive Sensitivity Study.
These results indicate the device has a significant sensitivity to
biopsy-confirmed HSIL and cancer slides (see Table 5).
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TABLE 5 Sensitivity to Subset of Biopsy-Confirmed HSIL and
Cancer Slides 10% QC Review Rate
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
No. of Biopsies No. of Biopsies Confirmed Biopsies Called % Sensitivity
confirmed "Review"
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
HSIL 60 51 43 84.3%
- -----------------------------------------------------------------------------------------
CANCER 35 33 22 66.7%
- -----------------------------------------------------------------------------------------
TOTAL 95 84 65 77.4%
- -----------------------------------------------------------------------------------------
</TABLE>
PRECISION STUDIES
Two studies were conducted to assess precision, or repeatability, of
the device. The first study was the Multi-Run Standardized Sample Set Study
which used a set of 32 well-characterized slides, processed up to 30 times on
each of three separate devices. Of the 32 slides, 25 demonstrated 100%
repeatability (see Table 6). The average percent agreement on all slides was
99.6% overall. These results confirm that the repeatability of the device in
calling a slide QC Review or No Review is consistent from device to device
(inter-device repeatability) and within each tested device (intra-device
repeatability).
TABLE 6 Summary Results of Precision Study Multi-Run of
Standardized Sample Set % Repeatability of QC
Review/No Review Outcome for Each Slide
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Barcode QC Review Site 0 Site 1 Site 4 Overall Diagnosis
No Review
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
940006439 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006443 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006464 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006467 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006472 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006473 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006476 No Review 100% 100% 96% 99% Normal
- -------------------------------------------------------------------------------------------
940006487 No Review 97% 93% 100% 96% Normal
- -------------------------------------------------------------------------------------------
940006489 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006492 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006493 No Review 100% 100% 100% 100% Normal
- -------------------------------------------------------------------------------------------
940006497 No Review NA 100% 96% 98% Normal
- -------------------------------------------------------------------------------------------
940007379 QC Review 100% 100% 96% 99% ASCUS
- -------------------------------------------------------------------------------------------
940007381 QC Review 97% 100% 100% 99% ASCUS
- -------------------------------------------------------------------------------------------
940007409 QC Review 100% 100% 96% 99% ASCUS
- -------------------------------------------------------------------------------------------
940007410 QC Review 97% 100% 96% 98% ASCUS
- -------------------------------------------------------------------------------------------
940007416 QC Review 100% 100% 100% 100% ASCUS
- -------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
921011542 QC Review 100% 100% NA 100% AGUS
- ---------------------------------------------------------------------------------------
940006420 QC Review 100% 100% 100% 100% LSIL
- ---------------------------------------------------------------------------------------
940006425 QC Review 100% 100% 100% 100% LSIL
- ---------------------------------------------------------------------------------------
940006428 QC Review 100% 100% 100% 100% LSIL
- ---------------------------------------------------------------------------------------
940006430 QC Review 100% 100% 100% 100% LSIL
- ---------------------------------------------------------------------------------------
940006436 QC Review 100% 100% 100% 100% LSIL
- ---------------------------------------------------------------------------------------
940006390 QC Review 100% 100% 100% 100% HSIL
- ---------------------------------------------------------------------------------------
940006393 QC Review NA 100% 100% 100% HSIL
- ---------------------------------------------------------------------------------------
940006397 QC Review 100% 100% 100% 100% HSIL
- ---------------------------------------------------------------------------------------
940006398 QC Review 100% NA 100% 100% HSIL
- ---------------------------------------------------------------------------------------
940007261 QC Review 100% NA 100% 100% HSIL
- ---------------------------------------------------------------------------------------
921011561 QC Review 100% 100% 100% 100% HSIL/CIS(1)
- ---------------------------------------------------------------------------------------
921011562 QC Review 100% 100% 100% 100% HSIL/CIS
- ---------------------------------------------------------------------------------------
921011565 QC Review 100% 100% 100% 100% HSIL/CIS
- ---------------------------------------------------------------------------------------
921011574 QC Review NA 100% NA 100% SquamCarc
- ---------------------------------------------------------------------------------------
</TABLE>
1. CIS = Carcinoma in situ
The second precision study required multiple processing runs of the
abnormal slides selected for use in the Historical Sensitivity Study. The total
number of slides used in the analysis was 10,674. The results demonstrate that
the device produces substantially equivalent sensitivity estimates when
repeatedly processing large sets of abnormal and matched control slides. The
data presented illustrates a high degree of between-run agreement overall (see
Table 7).
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<PAGE> 17
TABLE 7 Combined Results of Precision Study Multi-Run of
Historical Sensitivity Study Slide Set 10% QC Review
Rate, % Sensitivity
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
AGUS LSIL HSIL Cancer Review
Rate(1)
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
Site 1 Run 1 45.0% 67.4% 84.7% 100.0% 16.5%
-----------------------------------------------------------------------------------
Run 2 48.1% 72.0% 86.2% 100.0% 14.8%
-----------------------------------------------------------------------------------
Run 3 43.6% 72.7% 87.1% 100.0% 16.3%
-----------------------------------------------------------------------------------
Site 2 Run 1 33.3% 62.2% 79.0% 86.5% 13.5%
-----------------------------------------------------------------------------------
Run 2 36.7% 54.4% 80.5% 85.0% 12.3%
-----------------------------------------------------------------------------------
Run 3 33.3% 57.6% 84.0% 87.8% 15.6%
-----------------------------------------------------------------------------------
Site 3 Run 1 60.0% 68.3% 90.4% 66.7% 34.2%
-----------------------------------------------------------------------------------
Run 2 50.0% 75.7% 95.5% 75.0% 32.2%
-----------------------------------------------------------------------------------
Run 3 40.0% 68.5% 92.2% 75.0% 27.5%
-----------------------------------------------------------------------------------
Site 4 Run 1 45.9% 68.7% 87.7% 61.5% 13.3%
-----------------------------------------------------------------------------------
Run 2 52.8% 71.2% 83.6% 53.1% 11.0%
-----------------------------------------------------------------------------------
Run 3 41.9% 66.7% 91.2% 57.1% 13.8%
-----------------------------------------------------------------------------------
Site 5 Run 1 N/A 46.2% 70.3% 50.0% 7.6%
-----------------------------------------------------------------------------------
Run 2 N/A 37.2% 74.3% 50.0% 6.7%
-----------------------------------------------------------------------------------
Run 3 N/A 42.9% 68.7% 100.0% 7.1%
-----------------------------------------------------------------------------------
Site 6 Run 1 34.4% 60.5% 88.6% 71.1% 10.4%
-----------------------------------------------------------------------------------
Run 2 32.6% 62.9% 84.2% 72.7% 10.8%
-----------------------------------------------------------------------------------
Run 3 30.7% 54.9% 84.8% 69.0% 10.5%
-----------------------------------------------------------------------------------
</TABLE>
(1) Review Rate: Average percent identified as
QC Review at each laboratory using the
global 10% QC Review rate.
HISTORICAL CONSISTENCY STUDY: EFFECTS CAUSED BY AGE OF SLIDES
The Historical Consistency Study was conducted to confirm the effects
on the device, if any, caused by changes in staining and slide age. The
results indicate no effects on the performance of the device (in terms of
assignment of QC score) as a result of changes to slides caused by age or the
consistency of staining over time.
CONCLUSIONS DRAWN FROM STUDIES
The results from the Clinical Evaluation Study, a masked, prospective
study using the device in an intended-use mode, show that the AutoPap 300 QC
System identifies a subset of manual screen negative Pap smear slides that have
been enriched through computer selection for false negative slides. A manual
screening of this enriched subset (10% of the total manual screen negative
slides) will identify up to 50% of false negatives when compared to a 100%
manual rescreen. This compares to the expected identification of only 10% of
false negatives by a completely random 10% manual review.
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<PAGE> 18
In addition, the data results show that the device has a significant
sensitivity to cancer slides and to biopsy-confirmed HSIL and cancer slides.
The sensitivity of the device over a random selection method was shown
to be true under all studied review rates (10%, 15% and 20%) for all claimed
diagnostic categories of false negatives (including ASCUS and AGUS) and at even
higher efficiencies for those false negatives at severities of LSIL and above.
Acceptable sensitivities were demonstrated for all categories of
abnormality across study sites; all the sensitivities were above the random
selection proportions generated by the various thresholds selected for study.
This consistent pattern of sensitivities above random selection ensured that
the performance demonstrated in the intended-use prospective mode could be
assured for any other combination of abnormal slides presented to the devise;
thus, significant improvement over random could be expected for any
laboratory's prevalence rate of abnormals and type of abnormalities and under
any combination of cytotechnologist sensitivities at initial screening. The
sensitivities of the device were further demonstrated on both current and
archived abnormal slides.
The AutoPap 300 QC System demonstrated virtually identical
sensitivities upon repeated processing of standard sets of slides. This
consistency was demonstrated both in selected slide sets and in wide selections
of archived abnormal slides.
The results demonstrate that this device detected a higher proportion
of undetected abnormal slides than can be produced by random selection
procedures.
MATERIALS REQUIRED
MATERIALS PROVIDED
The AutoPap 300 QC System consists of the following components:
# AutoPap 300 QC Device
# Nitrogen tank
# Slide trays
# Workstation:
Computer (CPU)
Monitor, keyboard, mouse, mouse pad
Modem
Printer
Tape drive
Ethernet transceiver unit
Cart
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# Electronic Cables: Ethernet, printer to Ethernet, AutoPap to CPU,
monitor to CPU, tape drive to CPU, modem to CPU, keyboard to CPU
# Power strip (6-outlet)
# Power cords: Instrument, CPU, monitor, printer, tape drive, modem
Additional items supplied:
# Printer paper (starter package)
# Head cleaning tape
# Slide barcode labels
# Backup tapes
# SCSI bus terminator
# Air filters
# Line protector and/or power supply (optional, at additional cost)
MATERIALS REQUIRED BUT NOT PROVIDED
# Dedicated 20 amp power line
# Dedicated 15 amp power line
# Telephone line
# Dustproof bins to store empty slide trays
# 70% Isopropyl Alcohol
# Cotton swabs or soft bristle brush
# Lint-free cloth
# Glass cleaning solution (non-alcohol based)
STORAGE
Do not expose the system to direct sunlight or temperature extremes
(i.e., air flow from heating or cooling systems).
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<PAGE> 20
TECHNICAL SERVICE AND PRODUCT INFORMATION
For technical service and assistance related to use of the AutoPap 300
QC System, contact NeoPath, Inc.:
Telephone: 1-800-NEOPATH (outside Washington State)
(1-800-636-7284) or
1-206-869-7284 (inside Washington State)
Fax: 1-206-869-5325
NeoPath, Inc., 8271-154th Ave. NE
Redmond, Washington 98052, USA, 1-800-NEOPATH
(206) 869-7284/Fax (206) 869-5325
(C)1996 NeoPath, Inc.
NeoPath(R) and AutoPap(R) are registered trademarks of NeoPath, Inc.
U.S. Patent Numbers 5,315,700 and 5,361,140. Other U.S. and foreign patents
pending.
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<PAGE> 21
KAISER IMMC AGREEMENT
NO. 0249 EXHIBIT B
NEOPATH QUALITY EXPECTATIONS
INTRODUCTION:
Regional Cytology will evaluate the NeoPath AUTOPAP(R) 300 QC SYSTEM to
determine if the instrument can improve our quality. During the 90 day
evaluation period, the instrument will rescreen slides that have been reviewed
and signed out at Within Normal Limits or Benign Cellular Changes by a
certified Cytotechnologist. The AUTOPAP(R) 300 QC SYSTEM will then flag a
minimum of 10% of the slides for final review by a quality control
Cytotechnologist.
PROCEDURE:
1. A total of 35,000 routine Gyn slides with a diagnosis of Within Normal
Limits or Benign Cellular Changes will be loaded into an AUTOPAP(R) 300 QC
SYSTEM instrument for analysis. The instrument will select a minimum of 10%
of the slides for review by a QC Cytotechnologist. If more than 10% of the
cases are abnormal, the additional slides will be flagged for review.
2. All slides selected will be reviewed with complete documentation to
monitor any and all discrepancies between the QC Cytotechnologist and the
AUTOPAP(R) 300 QC SYSTEM.
3. All discrepancies will be put into two categories, 1) false positive or
2) false negative diagnoses. Our present false negative rate, kept by
current standards, is very low. Since 100% rescreening of all negative
cases has never been done before by Regional Cytology, all false positive
cases will be scrutinized and reviewed very carefully.
4. We will introduce known abnormal cases into our review process and
monitor how the instrument performs. The same case will then be run on
another instrument to determine consistence between instruments for quality
and accuracy.
EXPECTATIONS: IN ADDITION TO THE NEOPATH PRODUCT SHEET DESCRIBING FEATURES AND
BENEFITS:
1. False negative slides selected by the AUTOPAP(R) 300 QC SYSTEM should show
abnormalities that fit established criteria known by the ASCP and other
governing agencies.
2. The selection process by the AUTOPAP(R) 300 QC SYSTEM should not
significantly increase our false positive rate. We understand that the
AutoPap will select 10% of normals for review plus any slide with a QC
score greater than the threshold setting.
3. AutoPap should significantly increase our detection rate of false negative
results as decided by our stake holders in a cost effective manner.
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<PAGE> 22
4. AutoPap 300 QC System should also enhance our operational performance in
terms of process and workload flow.
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<PAGE> 23
KAISER IMMC AGREEMENT
NO. 0249 ITEM 1
Section o Section o Section o Section o Section o Section o Section o
Section o Section o Section o Section o Section o Section o
Section o Section o Section o Section o Section o Section o Section
NEOPATH, INC.
PROPOSAL
TO
NORTHERN CALIFORNIA
KAISER PERMANENTE REGIONAL LABORATORY
1725 EASTSHORE HIGHWAY
BERKELEY, CA 94710
JUNE 14, 1996
Section o Section o Section o Section o Section o Section o Section o
Section o Section o Section o Section o Section o Section o
Section o Section o Section o Section o Section o Section o Section
OVERVIEW OF PROPOSAL
NeoPath, Inc. (NeoPath) proposes to provide Northern California Kaiser
Permanente Regional Laboratory (Kaiser) up to [*] AutoPap(R) 300 QC [*]
for QC rescreening. Approximate delivery dates: [*] [*] in [*] and
[*] [*] in [*].
1. ALLIANCE PROGRAM
Kaiser will be enrolled in the NeoPath Alliance Program for the term
of this agreement. Membership in this program includes:
1.1 SITE EVALUATION
An initial site evaluation will be conducted by NeoPath to
determine the compatibility of Kaiser's current slide
preparation process with the AutoPap. If necessary,
suggestions will be made to improve the compatibility of the
slide preparation process with the AutoPap. Also evaluated
are the electrical, telephone and physical facilities.
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[*] Confidential Treatment Requested
<PAGE> 24
1.2 LABORATORY TRAINING
NeoPath's field cytology group will conduct a complete
training program at Kaiser on appropriate and efficient use of
the AutoPap, and will set the threshold for the appropriate
sort rate.
1.3 INSTALLATION
The AutoPap systems will be installed at Kaiser by authorized
NeoPath service engineers at no cost.
1.4 SERVICE
NeoPath, or its authorized service representative, will
provide telephone response within 2 hours of notification of a
service problem and no more than 24 hours will pass before a
service engineer is on site.
Routine service (as defined by NeoPath), maintenance,
enhancements, and inspections, as required to assure that the
AutoPap Systems perform to specifications are included at no
additional cost. The cost of service and/or repairs resulting
from negligence, misuse, abuse and/or non-routine causes will
be charged to Kaiser.
1.5 UPGRADES
Software updates for the AutoPap 300 QC systems will be
provided to Kaiser at no additional cost. If and when
performance improvements and/or a primary screening version
receives FDA approval, NeoPath will offer to Kaiser the option
to upgrade at a price to be determined after such approval has
been obtained.
1.6 LITERATURE
Up to [*] patient education pamphlets will be provided to
Kaiser at no cost. At Kaiser's request, the Kaiser name and
logo may be added at no cost as well. Additional quantities
may be purchased for [*] each.
1.7 SALES TRAINING
NeoPath's sales and marketing team will be available for
training of Kaiser sales representatives at Kaiser's request.
1.8 AUTOMATION SEMINAR
At Kaiser's request, NeoPath will present a seminar on
Automated Image Interpretation directed towards Pathologists,
GP's, OB-GYN's, Cytotechnologists, and any other people deemed
appropriate. The seminar would be conducted by NeoPath
personnel and certification for CME credits would be applied
for.
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<PAGE> 25
Cytotechnologists, and any other people deemed apropriate.
The seminar would be conducted by NeoPath personnel and
certification for CME credits would be applied for.
1.9 AUTOPAP(R) 300 SCREENER UPGRADE
Kaiser will be offered priority upgrade to a fully automated
screener upon FDA approval.
2. WARRANTY
NeoPath will warrant each AutoPap System against defects in materials
and workmanship and that each AutoPap System will perform in
accordance with NeoPath's published specifications as per the attached
Product Insert for the period of this agreement.
3. ACCESSORIES
3.1 Each offered AutoPap System includes the following NeoPath
accessories:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
-------- -----------
<S> <C>
[*] AutoPap Slide Trays
1 Operator Manual
1 Start-Up Kit*
</TABLE>
* Start-Up Kit will include one pack of printer paper and
one roll of Bar Code Labels ([*] sets of [*] labels per roll)
3.2 The following additional accessories are offered by NeoPath at
the indicated prices:
<TABLE>
<CAPTION>
DESCRIPTION PRICE
----------- -----
<S> <C>
Bar Code Labels [*] (U.S.) per roll
AutoPap Slide Tray [*] (U.S.) per tray
</TABLE>
4. OFFER
4.1. PRICING AND AVAILABILITY
The AutoPap 300 QC Systems will be offered for quality control
rescreening on a fee-per-slide-processed basis at a rate of
[*] per slide, based on a minimum of [*] slides per year per
instrument (a minimum monthly fee of [*] per month per
instrument). A deposit of [*] per AutoPap 300 QC is required
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<PAGE> 26
to reserve an instrument. This deposit is applied towards the
final two months of the lease agreement.
4.2 EXCLUSIVITY
For the term of this contract, Kaiser agrees to utilize
AutoPap Systems for all of their automated Pap smear reading
needs.
4.3 TERMS
The term of this Agreement is for a period of three years from
the date of shipment of the first AutoPap 300 QC System, at
the end of which Kaiser and NeoPath agree to negotiate in good
faith an extension or modification of this agreement. NeoPath
will deliver the AutoPap 300 QC Systems FOB NeoPath. Kaiser
will pay, or reimburse, NeoPath for all transportation costs
from NeoPath's manufacturing facility as per STANDARD TERMS
AND CONDITIONS.
4.4 CANCELLATION OF AGREEMENT
Kaiser has the option of canceling this agreement with a sixty
day written notice at the completion of a trial period (the
trial period shall be defined as [*] months from receipt of
the [*] AutoPap 300 QC system) should the instruments not
perform to the agreed upon specifications as per the Product
Insert. The instruments may be returned for exchange, or the
Agreement may be dissolved or modified. In the event of early
cancellation by Kaiser, return shipping costs to NeoPath's
Redmond facility will be at Kaiser's sole expense with
shipping costs not to exceed NeoPath's standard shipping costs
per instrument. In case NeoPath cancels this agreement for
any reason other than cause, or any time after the expiration
of the full term of this contract, NeoPath will be responsible
for all shipping costs to return the instrument(s).
5. ACCEPTANCE CRITERIA FOR AUTOPAP 300 QC SYSTEM RENTAL
The AutoPap 300 QC System(s) will perform in accordance with the
Product Insert.
6. PROPOSAL ACCEPTANCE
6.1 DURATION OF PROPOSAL
This Proposal shall remain valid through June, 1996.
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<PAGE> 27
6.2 ACCEPTANCE OF OFFER
[S] [C]
NEOPATH, INC. NORTHERN CALIFORNIA KAISER PERMANENTE
REGIONAL LABORATORY
By: /s/ MARTIN S. REID Signature: /s/ Stacie Burch
-------------------------- -----------------------------
Martin S. Reid Print Name: Stacie Burch
National Sales Manager
-------------------------- -----------------------------
Title Title
June 14, 1996
-------------------------- -----------------------------
Date Date
- -------------------------------------
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<PAGE> 28
'ATTACHMENT B' TO 'ITEM 1' ...PAGE 1 OF 2
NEOPATH, INC.
STANDARD TERMS AND CONDITIONS
1. AGREEMENT. These Terms and Conditions, together with any order or other
agreement signed by both NeoPath, Inc. ("NeoPath") and the customer
("Customer") (collectively, the "Agreement") govern all purchase and sale,
rental, lease, fee-per-slide processed and other transactions between NeoPath
and Customer involving NeoPath products ("Products"). NeoPath will not be
bound by, and specifically objects to, any term, condition, or other provision
which is different from or in addition to the provisions of this Agreement
(whether or not it would materially alter this Agreement) which is proffered by
Customer in any purchase order, receipt, acceptance, confirmation,
correspondence, or otherwise, unless NeoPath specifically agrees to such
provision in a written instrument signed by NeoPath. NeoPath's acceptance of
any order by Customer is expressly conditioned on Customer's agreement to the
terms and conditions of this Agreement.
2. ACCEPTANCE. NeoPath will deliver to Customer, and Customer will accept
and pay for, all Products and Services ordered by Customer pursuant to an order
which has been accepted by NeoPath. All orders are subject to acceptance by
NeoPath either in writing or by shipping Products. NeoPath may accept any
order in whole or in part and NeoPath's shipment of less than all Products
ordered will constitute acceptance only as to those Products shipped.
3. FIRM ORDER. Customer may not modify, rescind or cancel any order, in whole
or in part, without NeoPath's written consent. In the event of any
cancellation, with or without NeoPath's consent, Customer will pay NeoPath a
cancellation fee determined in accordance with NeoPath's standard cancellation
policy then in effect or, if NeoPath does not then have such a policy, fifteen
percent (15%) of the amount otherwise payable under the Agreement for the
canceled Products.
4. DELIVERY. NeoPath will use reasonable efforts to meet any delivery date
specified in the orders, but will not be liable for any failure to meet such
dates. Unless otherwise specified in this Agreement, NeoPath will deliver the
Products FOB carrier at NeoPath's manufacturing facility. Customer is
responsible for all transportation costs (including, but not limited to,
shipping charges, premiums for freight insurance, inspection fees, customs,
duties, import or export fees, assessments, and all other costs incurred in
transporting the Products to the shipping destination). Customer will promptly
reimburse NeoPath for any such amounts paid by NeoPath. Customer will be
responsible for any claims against the carrier arising from or relating to
shipment.
5. PRICES. Unless specified otherwise in this Agreement, the purchase prices,
fee-per-slide processed, charges, and other amounts payable by Customer for the
Products will be as specified by NeoPath in its then-current standard price
list or fee-per-slide processed schedule.
6. TAXES. The prices described in paragraph 5 do not include any sales, use
or similar taxes. Customer will pay or reimburse NeoPath for all taxes or
other amounts payable to governmental authorities in connection with the
applicable transactions, or will provide NeoPath with an exemption certificate
satisfactory to NeoPath.
7. PAYMENT. NeoPath will issue invoices for all amounts payable under this
Agreement. Customer will pay the amount set forth on NeoPath's invoice within
thirty (30) days from the date of such invoice. Any amount not paid within
such thirty (30) day period will be subject to a finance charge equal to 1.5%
per month or the highest rate allowable by applicable law, whichever is less,
determined and compounded daily from the date due until the date paid. Payment
of such finance charges will not excuse or cure Customer's breach or default
for late payment. Further, Customer will reimburse any costs or expenses
(including, but not limited to, reasonable attorneys' fees) incurred by NeoPath
to collect any amount which is not paid when due. NeoPath may accept any check
or payment in any amount without prejudice to NeoPath's right to recover the
balance of the amount due or to pursue any other right or remedy. No
endorsement or statement on any check or payment or in any letter accompanying
a check or payment or elsewhere will be construed as an accord or satisfaction.
All amounts payable under this Agreement are denominated in United States
dollars, and Customer will pay all such amount in lawful money of the United
States unless expressly agreed otherwise.
8. LIMITED WARRANTY AND REMEDY. NeoPath warrants that, upon delivery, each
Product will be free from defects in materials and workmanship. This warranty
will not apply to any Product that (a) has not been operated and maintained in
accordance with applicable instructions and manuals, (b) has been repaired or
altered by unauthorized personnel, or (c) has been misused, abused, damaged or
subjected to operation for which it was not intended. This warranty does not
apply to expendable items such as lamps or external tubing. NeoPath will
either repair or replace any Product that does not substantially conform to the
foregoing warranty.
9. PRODUCT LIABILITY INDEMNIFICATION. NeoPath will defend and indemnify
Customer from and against any third party claim arising out of bodily injury
(including death) or property damage to the extent caused by any defect in the
design or manufacture of the Products, provided that Customer: gives NeoPath
prompt written notice of the claim; allows NeoPath to assume control of the
defense and settlement of the claim; assists and cooperates with NeoPath in
connection with the defense and settlement of the claim; and does not settle
the claim without NeoPath's prior written consent. This paragraph will not
apply to any claim arising out of the negligence of Customer or any third
party.
10. PATENT INDEMNIFICATION. NeoPath will defend and indemnify Customer against
any third party claim arising out of any infringement by the Product of any
patent arising under the laws of the United States or any other country in
which NeoPath has been granted a patent on the Product, provided that Customer:
gives NeoPath prompt written notice of the claim; allows NeoPath to assume
control of the defense and settlement of the claim; assists and cooperates with
NeoPath in connection with the defense and settlement of the claim; complies
with any court order or settlement made in connection with the claim (e.g., as
to future use of any infringing Product); and does not settle the claim without
NeoPath's prior written consent. This paragraph will not apply to any claim
resulting from any use in connection with any equipment or other items not
furnished by NeoPath or from any use not in conformity with applicable
instructions and manuals.
11. DISCLAIMER AND RELEASE. THE WARRANTIES, OBLIGATIONS, AND LIABILITIES OF
NEOPATH AND THE REMEDIES OF CUSTOMER SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE
AND IN SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES, AND DISCLAIMS,
ALL OTHER WARRANTIES, OBLIGATIONS, AND LIABILITIES OF NEOPATH AND ALL OTHER
RIGHTS, CLAIMS, AND REMEDIES OF CUSTOMER AGAINST NEOPATH, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO THE PRODUCTS AND ANY OTHER GOODS
OR SERVICES DELIVERED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO: (A)
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE;
(B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING,
OR USAGE OF TRADE; (C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN
TORT, WHETHER OR NOT ARISING FROM THE NEGLIGENCE (ACTIVE, PASSIVE, OR IMPUTED),
PRODUCT LIABILITY, OR STRICT LIABILITY OF NEOPATH; AND (D) ANY OBLIGATION,
LIABILITY, RIGHT, CLAIM, OR REMEDY FOR INFRINGEMENT.
12. EXCUSED PERFORMANCE. NeoPath will not be responsible for or be considered
to be in breach of or default under this Agreement on account of any cause
beyond NeoPath's reasonable control or not occasioned by NeoPath's fault or
negligence (including, but not limited to, NeoPath's inability, after due and
timely diligence, to procure materials, parts, equipment, or services).
13. LIMITATIONS OF LIABILITY. NEOPATH'S LIABILITY (WHETHER IN CONTRACT, TORT,
OR OTHERWISE, AND NOTWITHSTANDING ANY FAULT, NEGLIGENCE, STRICT LIABILITY, OR
PRODUCT LIABILITY OF NEOPATH) WITH REGARD TO ANY PRODUCT OR OTHER GOODS OR
SERVICES FURNISHED UNDER THIS AGREEMENT WILL NOT EXCEED THE PURCHASE PRICE PAID
BY CUSTOMER TO NEOPATH FOR THE SAME. FURTHER, NEOPATH WILL NOT IN ANY EVENT
BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES, OR
FOR LOSS OF REVENUE, LOSS OF BUSINESS, OR OTHER FINANCIAL LOSS, ARISING OUT OF
OR IN CONNECTION WITH ANY PRODUCT OR OTHER GOODS OR SERVICES FURNISHED UNDER
THIS AGREEMENT.
14. SOFTWARE. NeoPath retains title to all software, computer programs and
other software furnished with any Product. Customer will use such software
only in conjunction with the use or operation of such Product and in accordance
with applicable instructions and manuals furnished by NeoPath. Customer will
not copy, modify, make any derivative work based upon, publish or distribute
any such software. Further, Customer will not reverse engineer, decompile or
attempt to discover or recreate any source code to any such software.
15. INTELLECTUAL PROPERTY RIGHTS. The Products involve valuable patent,
copyright, trademark, trade secret and other intellectual property rights of
NeoPath. NeoPath reserves all such rights. No title to or ownership of any
intellectual property rights related to any Product is transferred to Customer
pursuant to this Agreement. Customer will not attempt to reverse engineer any
Product or component thereof or to otherwise misappropriate, circumvent or
violate any of NeoPath's intellectual property rights.
16. CONFIDENTIAL INFORMATION. NeoPath may disclose to Customer certain trade
secret, proprietary or confidential information ("Confidential Information").
Except as otherwise authorized by NeoPath in writing, Customer will use such
Confidential Information only for the purposes for which it is disclosed by
NeoPath, will not disclose it to any third party and will take appropriate
steps to protect it from any unauthorized use or disclosure; provided that,
upon or promptly after disclosure by NeoPath, the information is marked or
otherwise identified as trade secret, proprietary or confidential or the
Customer otherwise knows or has reason to know that the same is trade secret,
proprietary or confidential.
17. TRANSFERS. Customer will not ship or otherwise transfer any Product to a
location outside the country to which the Product is shipped by NeoPath. If
Customer transfers any Product to a location other than the location to which
it is shipped by NeoPath, Customer will give NeoPath a minimum of 5 days
advance written notice thereof (including the date of the transfer, the address
and telephone number of the new location and the name, address and telephone
number of the individual under whose direction the Product is used at such
location). Customer may not transfer any Product to a third party without
approval by NeoPath.
18. UNENFORCEABLE PROVISION. The invalidity or unenforceability of any
provision of this Agreement will not affect the other provisions hereof, and
this Agreement will be construed in all respects as if such invalid or
unenforceable provision were replaced with a valid and enforceable provision as
similar as possible to the one replaced.
19. NONWAIVER. Any failure by NeoPath to insist upon or enforce performance by
Customer of any of the provisions of this Agreement or to exercise any right or
remedy under this Agreement or applicable law will not be construed as a waiver
or relinquishment to any extent of NeoPath's right to assert or rely upon any
such provision, right or remedy in that or any other instance; rather the same
will be and remain in full force and effect.
20. ASSIGNMENT. This Agreement will inure to the benefit of and be binding
upon the parties and their respective successors, assigns and legal
representatives.
21. APPLICABLE LAW. This Agreement will be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Washington, without reference to its choice of law principles. The U.N.
Convention on Contracts for the International Sale of Goods will not apply to
this Agreement.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement, and
supersedes any and all prior agreements, between NeoPath and Customer with
regard to the Products. No amendment, modification, or waiver of this
Agreement will be valid unless set forth in a written instrument signed by the
party to be bound.
__________________________________
[*] Confidential Treatment Requested
-1-
<PAGE> 29
'ATTACHMENT B' TO 'ITEM 1' ...PAGE 2 OF 2
NEOPATH, INC.
EQUIPMENT USER AGREEMENT
SUPPLEMENTAL TERMS AND CONDITIONS
(FEE-PER-SLIDE PROCESSED)
These Supplemental Terms and Conditions are a part of the Equipment User
Agreement ("Agreement") between NeoPath, Inc. ("NeoPath") and the customer
identified in the Agreement ("Customer"). NeoPath and Customer agree as
follows:
Section 1. Definitions
"BASE MONTHLY FEE" means the Base Monthly Fee specified in this Agreement. The
Base Monthly Fee will be prorated on a daily basis for any Month less than a
full calendar month.
"CUSTOMER'S SITE" means Customer's place of business at the location specified
in this Agreement or such other location as may be agreed upon in writing by
the parties.
"EQUIPMENT" means the Equipment described in this Agreement, together with any
repairs, replacements, corrections, alterations, additions, improvements or
modifications made during the Term or otherwise pursuant to this Agreement.
"FEE-PER-SLIDE" or "FPS" means the Fee-Per-Slide or FPS specified in this
Agreement.
"MONTH" means any calendar month during the Term, except that: (a) the first
Month will begin with the first day of the Term and end with the last day of
the calendar month which includes the first day of the Term; and (b) the last
Month will end with the last day of the Term and will begin with the first day
of the calendar month which includes the last day of the Term.
"TERM" means the Term specified in Section 4.
"USER DOCUMENTATION" means any user manual, instructions and other
documentation furnished by NeoPath relating to Customer's use of the Equipment,
as the same may be revised, updated or replaced by NeoPath from time to time
during the Term.
Section 2. The Equipment
2.1 INSTALLATION. NeoPath will install the Equipment at Customer's Site.
Customer will provide suitable space, air conditioning (e.g., heating, cooling,
circulation and filtering), utilities (e.g., electric power) and other
requirements for installation and operation of the Equipment at Customer's Site
in accordance with the User Documentation throughout the Term. If installation
is delayed on account of any event, circumstance or condition at Customer's
Site (e.g., any strike or other labor disturbance, any fire or other casualty,
or any failure of Customer to timely provide suitable space, air conditioning,
utilities and other requirements), then Customer will pay for any additional
work performed or costs incurred by NeoPath in accordance with NeoPath's
then-current standard rate of charges.
2.2 MAINTENANCE. NeoPath will provide maintenance for the Equipment throughout
the Term. Upon Customer's request, NeoPath will promptly repair, replace or
otherwise correct any Equipment that does not operate in accordance with the
applicable User Documentation. Customer will immediately notify NeoPath of any
defect, malfunction or failure to operate in accordance with the User
Documentation. NeoPath will provide remote support services between 8:00 a.m.
and 5:00 p.m. Pacific time, Monday through Friday, excluding holidays, with
pager back-up during other hours. Unless otherwise agreed by the parties, any
maintenance required to be performed at Customer's Site will be performed
between 8:00 a.m. and 5:00 p.m. local time at Customer's Site, Monday through
Friday, excluding holidays.
2.3 USE AND OPERATION. Customer will use the Equipment only for the purposes
specified in the User Documentation. Customer will not use or permit the use
of the Equipment for any other purpose. Customer will operate the Equipment in
strict accordance with the User Documentation.
2.4 LOCATION. Customer will keep the Equipment in its sole possession and
control at Customer's Site throughout the Term. Without limitation of the
foregoing, Customer will not lease, rent or transfer the Equipment to any third
party. Customer will not move the Equipment to any location other than the one
in which it is installed by NeoPath without the prior written consent of
NeoPath. NeoPath may inspect the Equipment at any time during Customer's
normal business hours. Customer will provide NeoPath and its invitees safe and
sufficient access to the Equipment and Customer's Site as reasonably required
for NeoPath to perform its obligations and exercise its rights under this
Agreement or to permit other interested parties to view the Equipment in
operation.
2.5 REMOTE ACCESS. Throughout the Term, Customer will provide a dedicated
telecommunication line for NeoPath's remote access to the Equipment (e.g., for
maintenance and monitoring of the Equipment).
2.6 TITLE. No title to or ownership of any Equipment, or to any proprietary
rights related to any Equipment, are transferred to Customer by virtue of this
Agreement. Customer acknowledges that the Equipment: (a) will be owned by
NeoPath or its assignees; and (b) involves valuable patent, copyright, trade
secret and other proprietary rights of NeoPath. Customer will: (i) not
remove, obscure or alter any label, decal, plate, plaque, tag, marking or other
notice of NeoPath's ownership or rights; (ii) not disassemble, decompile or
reverse engineer any of the Equipment; (iii) make the Equipment available only
to Customer's employees and independent contractors in connection with their
use of the Equipment for the purposes and in accordance with the requirements
of this Agreement; (iv) keep the Equipment free from any and all security
interests, mortgages, deeds of trust, liens, encumbrances and other claims
arising by, through, at the request of, or on behalf of Customer; and (v) take
such action (including, but not limited to, the execution, acknowledgment,
delivery, filing or recording of any UCC financing statements and other
document) as NeoPath may reasonably request to protect, perfect or evidence its
ownership and other rights in the Equipment. Customer hereby authorizes
NeoPath to effect any UCC financing statement or other filing to protect,
perfect or evidence NeoPath's ownership or other rights in the Equipment
without Customer's signature.
2.7 ALTERATIONS. Customer will not make any alterations, additions,
improvements or modifications to the Equipment without the prior written
consent of NeoPath. Any alteration, addition, improvement or modification to
the Equipment will become the property of NeoPath when made and will be
surrendered to NeoPath with the Equipment at the end of the Term. Customer
hereby assigns to and transfers to NeoPath any right, title and interest that
it may have in any alteration, addition, improvement or modification.
2.8 RISK OF LOSS AND INSURANCE. Customer assumes all risk of loss, casualty,
damage or injury relating to the Equipment from the date of delivery of the
Equipment to Customer until the Equipment is returned to NeoPath at the end of
the Term. Customer will immediately notify NeoPath of any loss, casualty,
damage or injury relating to the Equipment. Throughout the Term, Customer will
maintain "all risk" or equivalent insurance covering the Equipment (including,
without limitation, general casualty and property damage insurance covering the
Equipment in an amount not less than its full replacement value) and such other
insurance as NeoPath may reasonably require to protect against any loss,
casualty, damage or injury relating to the Equipment. All such insurance will:
(a) be placed with such insurers and under such forms of policies as may be
acceptable to NeoPath; (b) name NeoPath and its assignees as additional
insureds; and (c) be endorsed to provide that such policies will not be
terminated, modified or allowed to expire without the insurer giving NeoPath at
least thirty (30) days' advance written notice. Customer will deliver to
NeoPath certificates of insurance and such other evidence (such as copies of
the policies) as NeoPath may reasonably request. Customer will ensure that any
other policies of insurance that it carries as insurance covering liability for
injury (including death) to persons or damage to property either: (i) contain
a waiver of subrogation against NeoPath; (ii) name NeoPath and its assignees as
additional insureds; or (ii) include broad-form contractual coverage covering
this Agreement.
Section 3. Compensation
3.1 INSTALLATION FEE. Concurrently with the execution of this Agreement,
Customer will pay NeoPath the installation fees specified in This Agreement.
3.2 BASE MONTHLY FEE. Customer will pay NeoPath the Base Monthly Fee for each
Month during the Term. Concurrently with the execution of this Agreement,
Customer will pay NeoPath the Base Monthly Fee for the first and last Months
during the Term. Customer will pay NeoPath the Base Monthly Fee for any other
Month during the Term on or before the first day of such Month.
3.3 USAGE FEES. If the Base Monthly Fee for any Month is less than the product
of the number of slides processed with the Equipment during such Month
multiplied by the applicable FPS, then Customer will pay NeoPath the difference
within thirty (30) days after the end of such Month. Customer will keep and
maintain an accurate record of the number of slides processed with the
Equipment during each Month of the Term. Upon NeoPath's request, Customer
will: (a) submit to NeoPath a written report of the number of slides processed
with the Equipment during any Month; and (b) make such records available for
examination by NeoPath or its representative.
3.4 MAINTENANCE FEES. Customer will not be required to pay any additional fees
for normal maintenance during the hours specified in paragraph 2.2. However,
Customer will pay NeoPath in accordance with NeoPath's then-current standard
rates and charges for any repair, replacement, correction or other maintenance
required: (a) during any other hours; or (b) at any time on account of any:
(i) use of the Equipment for any purpose other than the purposes specified in
the applicable User Documentation, (ii) failure to operate the Equipment in
strict accordance with the applicable User Documentation, (iii) unauthorized
use, operation, repair, alteration, addition, improvement or modification of the
Equipment, (iv) loss, casualty, damage or injury relating to the Equipment, or
(v) breach or default by Customer.
3.5 TAXES. The fees described in paragraphs 3.1, 3.2, 3.3 and 3.4 do not
include any personal property, sales, use or similar taxes. Customer will pay
or reimburse NeoPath for any and all such taxes.
Section 4. Term
4.1 GENERAL. The Term will commence upon the date the Equipment is installed
at Customer's Site and will terminate upon the earlier of: (a) the expiration
date set forth in This Agreement; or (b) the effective date of any termination
pursuant to paragraph 4.2 or 4.3.
- -------------------------------------
[*] Confidential Treatment Requested
-1-
<PAGE> 30
'ATTACHMENT B' TO 'ITEM 1' ...PAGE 1 OF 2
4.2 TERMINATION BY NEOPATH. NeoPath may terminate the Term by giving Customer
written notice of such termination if: (a) Customer fails to make any payment
under Section 3 when due, NeoPath gives Customer written notice of such failure
and such failure is not cured within ten (10) days (or such longer period as
may be permitted by NeoPath) after Customer's receipt of NeoPath's notice of
the failure; (b) Customer commits a material breach of or default under this
Agreement, NeoPath gives Customer written notice of the breach or default, and
the breach or default is not cured within thirty (30) days (or such longer
period as may be permitted by NeoPath) after Customer's receipt of NeoPath's
notice of the breach or default; or (c) Customer files or has filed against it
a petition to have Customer adjudged bankrupt or for reorganization or
arrangement of Customer under any bankruptcy, moratorium, insolvency,
reorganization, liquidation, conservatorship or other debtor relief law,
Customer makes any general assignment for the benefit of its creditors under
any debtor relief law, a trustee or receiver is appointed to take possession of
all or substantially all of Customer's assets under any debtor relief law, all
or substantially all of Customer's assets are attached or seized, or Customer
dissolves, liquidates or adopts any plan or dissolution or liquidation.
4.3 TERMINATION BY CUSTOMER. Customer may terminate the Term by giving NeoPath
written notice of such termination if: (a) NeoPath commits a material breach
of or default under this Agreement, Customer gives NeoPath written notice of
the breach or default, and the breach or default is not cured within thirty
(30) days (or such longer period as may be permitted by Customer) after
NeoPath's receipt of Customer's notice of the breach or default; or (b) NeoPath
files or has filed against it a petition to have NeoPath adjudged bankrupt or
for reorganization or arrangement of NeoPath under any bankruptcy, moratorium,
insolvency, reorganization, liquidation, conservatorship or other debtor relief
law, NeoPath makes any general assignment for the benefit of its creditors
under any debtor relief law, a trustee or receiver is appointed to take
possession of all or substantially all of NeoPath's assets under any debtor
relief law, all or substantially all of NeoPath's assets are attached or
seized, or NeoPath dissolves, liquidates or adopts any plan or dissolution or
liquidation.
4.4 END OF THE TERM. Unless otherwise agreed by the parties, Customer will
return the Equipment to NeoPath at the end of the Term in at least as good
condition and state of repair as it was in when delivered to Customer under
this Agreement, subject to ordinary wear and tear resulting from Customer's use
of the Equipment in accordance with this Agreement. Customer will deliver the
Equipment to NeoPath F.O.B. NeoPath's manufacturing facility in King County,
Washington. Any termination pursuant to paragraph 4.2 or 4.3 will be without
prejudice to any other rights or remedies for any breach or default under this
Agreement.
Section 5. Miscellaneous
5.1 RESTRICTION ON ASSIGNMENT BY CUSTOMER. Customer will not assign this
Agreement or any of its rights hereunder without the prior written consent of
NeoPath. No assignment by Customer, with or without NeoPath's consent, will
relieve Customer from any of its obligations under this Agreement.
5.2 VENUE. Customer will not commence or prosecute any action, suit,
proceeding or claim arising under or by reason of this Agreement other than the
state or federal courts located in King County, Washington. Customer
irrevocably consents to the jurisdiction of the courts identified in the
preceding sentence in connection with any action, suit, proceeding or claim
arising under or by reason of this Agreement.
- -------------------------------------
[*] Confidential Treatment Requested
-2-
<PAGE> 1
EXHIBIT 11
NEOPATH, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ 4,547,549 $3,403,179 $ 8,149,623 $6,417,192
=========== ========== =========== ==========
HISTORICAL:
Shares used in calculating net loss per share -
Weighted average common shares outstanding 13,063,029 9,640,155 12,592,560 8,257,283
=========== ========== =========== ==========
Net loss per share $0.35 $0.35 $0.65 $0.78
===== ===== ===== =====
PRO FORMA:
Shares used in calculating pro forma net loss per share -
Weighted average common shares outstanding 13,063,029 9,640,155 12,592,560 8,257,283
Weighted average common shares giving effect to
conversion of convertible preferred stock for all periods
subsequent to issuance -- -- -- 810,226
----------- ---------- ----------- ----------
Total 13,063,029 9,640,155 12,592,560 9,067,509
=========== ========== =========== ==========
Pro forma net loss per share $0.35 $0.35 $0.65 $0.71
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 856,003
<SECURITIES> 71,203,449
<RECEIVABLES> 408,515
<ALLOWANCES> 50,000
<INVENTORY> 4,203,410
<CURRENT-ASSETS> 77,166,457
<PP&E> 5,859,900
<DEPRECIATION> 1,648,000
<TOTAL-ASSETS> 83,921,312
<CURRENT-LIABILITIES> 4,405,834
<BONDS> 0
0
0
<COMMON> 134,898,898
<OTHER-SE> (55,602,603)
<TOTAL-LIABILITY-AND-EQUITY> 83,921,312
<SALES> 0
<TOTAL-REVENUES> 626,627
<CGS> 0
<TOTAL-COSTS> 565,708
<OTHER-EXPENSES> 10,127,280
<LOSS-PROVISION> 50,000
<INTEREST-EXPENSE> 27,576
<INCOME-PRETAX> (8,149,623)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,149,623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,149,623)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> 0
</TABLE>
