<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996
SEC REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
ACCUMED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2835 36-4054899
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
--------------------------
900 NORTH FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
(312) 642-9200
(Address and Telephone Number of Registrant's Principal Executive Offices)
------------------------------
PETER P. GOMBRICH
CHIEF EXECUTIVE OFFICER
ACCUMED INTERNATIONAL, INC.
900 NORTH FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
(312) 642-9200
(Name, Address, and Telephone Number, of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
GILLES S. ATTIA, ESQ.
KEVIN A. COYLE, ESQ. CHARLES W. MULANEY, JR., ESQ.
GRAHAM & JAMES LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
400 CAPITOL MALL, SUITE 2400 333 WEST WACKER DRIVE, SUITE 2100
SACRAMENTO, CALIFORNIA 95814 CHICAGO, ILLINOIS 60606
FACSIMILE: (916) 441-6700 FACSIMILE: (312) 407-0411
TELEPHONE: (916) 558-6700 TELEPHONE: (312) 407-0531
</TABLE>
Approximate date of commencement of proposed sale to the public: as soon as
practicable on or after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED (1) PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, Par
Value $0.01.......................... 5,462,500 shares $5.31 $29,005,875 $10,003
</TABLE>
(1) Includes 712,500 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended, based on $5.31 per share, the average of the high and low
sales prices reported for the Common Stock on July 23, 1996.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS, DATED JULY 26, 1996
PROSPECTUS
4,750,000 SHARES
[LOGO]
COMMON STOCK
Of the 4,750,000 shares of Common Stock offered hereby (the "Offering"),
2,750,000 shares are being sold by AccuMed International, Inc. ("AccuMed" or the
"Company") and 2,000,000 shares are being sold by certain selling stockholders
of the Company (the "Selling Stockholders"). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."
The Common Stock is quoted on the Nasdaq Market under the symbol "ACMI." The
Company has applied for inclusion of the Common Stock on the Nasdaq National
Market under the symbol "ACMI." On July 23, 1996, the last reported sale price
of the Common Stock on the Nasdaq Market was $5.38 per share. See "Price Range
of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
Per Share....................... $ $ $ $
<S> <C> <C> <C> <C>
Total(3)........................ $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $614,350.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 712,500 additional shares of Common Stock on the same terms
and conditions set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company, and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
--------------------------
The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that delivery of such shares will be made at the
offices of the agent of Vector Securities International, Inc. in New York, New
York on or about , 1996.
------------------------
Vector Securities International, Inc. Tucker Anthony
Incorporated
, 1996
<PAGE>
[GRAPHIC]
The graphic consists of two photographs. The first photograph is of the
TracCell-TM- 2000 automated specimen maping workstation along with the caption
"TracCell-TM- automated specimen maping workstation (pictured right), currently
in development, will require FDA pre-marketing clearance."
The second photograph is of the AcCell-TM- 2001 automated slide-handling and
microscopy workstation along with the caption "AcCell-TM- 2001 automated
slide-handling and microscopy workstation (pictured left)."
The following are tradenames and trademarks of the Company used in this
Prospectus: the "Alamar" logo and name, alamarBlue-TM-, AccuMed, Inc., AccuMed
International, Inc., the "AccuMed" logo and name, AcCell-TM-, TracCell-TM-,
MacroVision-TM-, Sensititre-Registered Trademark-, SensiTouch-TM-, ARIS-TM-,
AutoReader-TM-, AutoInnoculator-TM-. This Prospectus also contains trademarks of
other companies.
------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this Prospectus
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
following: the Company's history of losses and uncertainty of profitability; the
uncertainty of market acceptance of the Company's products; the Company's
limited sales, marketing and distribution experience and dependence on
distributors; the Company's highly competitive industry and rapid technological
change within such industry; the Company's ability to obtain rights to
technology and obtain and enforce patents and other proprietary rights; the
Company's ability to commercialize and manufacture products; the results of
clinical studies; the results of
2
<PAGE>
the Company's research and development activities; the business abilities and
judgment of the Company's personnel; the availability of qualified personnel;
changes in, or failure to comply with, governmental regulations; the ability to
obtain adequate financing in the future; general and business conditions; and
other factors referenced in this Prospectus. See "Risk Factors."
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS,
INCLUDING INFORMATION UNDER "RISK FACTORS." EXCEPT AS OTHERWISE NOTED, ALL
INFORMATION IN THIS PROSPECTUS, INCLUDING FINANCIAL INFORMATION AND SHARE AND
PER SHARE DATA, ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
SEE "UNDERWRITING." SPECIAL NOTE: CERTAIN STATEMENTS SET FORTH BELOW CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE REFORM ACT. SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 2 FOR ADDITIONAL FACTORS
RELATING TO SUCH STATEMENTS.
THE COMPANY
AccuMed designs, manufactures and markets diagnostic screening products for
clinical diagnostic laboratories serving the cytopathology and microbiology
markets. The Company's primary focus is on the development of cytopathology
products that support the review and analysis of Pap smears in order to improve
the quality of cell analysis and increase accuracy and productivity in the
laboratory. The Company commenced sales of its initial cytopathology product,
the AcCell-TM- Series 2000 automated slide handling and microscopy workstation,
at the end of the first quarter of 1996. The Company is currently testing a
prototype specimen mapping workstation, the TracCell-TM- 2000, which
automatically pre-screens Pap smear slides to identify and create a computerized
map of empty space and certain non-clinically relevant portions of the specimen
to permit a more efficient analysis of the test slide. The Company expects to
file a 510(k) pre-market notification with the United States Food and Drug
Administration (the "FDA") for the TracCell 2000 by the end of 1996. The Company
has recently entered into an agreement with Olympus America Inc. ("Olympus
America"), a leading supplier of microscopes to the cytopathology market,
pursuant to which Olympus America has exclusive third party distribution rights
to the AcCell Series 2000 and TracCell 2000 in North, Central and South America.
An estimated 440,000 new cases of cervical cancer are reported annually
worldwide. The American Cancer Society estimates that, in the United States in
1996, 15,700 women will be diagnosed with invasive cervical cancer and 4,900
women will die of cervical cancer. However, virtually all cervical cancer cases
can be effectively treated with timely intervention if detected early.
Furthermore, in 1996, an estimated 65,000 American women will be diagnosed with
cervical carcinoma IN SITU, a precancerous condition. The Pap smear is currently
the most widely-used screening test for early detection of cervical cancer and
related precancerous conditions. It is estimated that in 1996 over 150 million
Pap smear tests will be screened worldwide, including over 50 million in the
United States. According to the American Cancer Society, widespread and regular
use of the Pap smear as a screening test is believed to have contributed to a
greater than 70% decrease in mortality from cervical cancer in the United States
in the past 45 years.
Initial Pap smear testing is performed by specially trained professionals
known as cytotechnologists, who use a microscope to screen and interpret up to
100 slides per day. In general, this process is complex and tedious, and is
prone to error. Over 90% of specimens reviewed are negative. Even non-negative
specimens may contain only 20 to 30 abnormal cells out of a total of as many as
50,000 to 300,000 cells on the slide. As a result, slide interpretation errors
can be caused by fatigue of the cytotechnologist and the habituation effect of
constantly viewing predominantly negative specimens. According to the JOURNAL OF
THE AMERICAN MEDICAL ASSOCIATION, clinical laboratories generally experience
false negative Pap smear diagnosis rates of 5% to 30%. In addition, conventional
Pap smear testing is subject to administrative errors and exposes clinical
laboratories to the risk of litigation and consequent liability.
The Company's cytopathology products are intended to provide cost-effective
solutions to many of the problems of conventional Pap smear testing without
significantly modifying existing laboratory practices. The Company's Accell
Series 2000 workstations consist of an interactive computer-controlled slide
handling and precision microscopy workstation that is supported with a
comprehensive data management system. The TracCell 2000, currently under
development, is designed to automatically pre-screen Pap smear slides to
identify and create a computerized map of empty space and certain non-clinically
relevant material. Tests conducted by the Company suggest that the TracCell
2000, by locating and mapping such empty space and non-clinically relevant
material, can eliminate 15% to 50% of the
3
<PAGE>
slide area required to be reviewed by a cytotechnologist. The Company believes
that the Accell Series 2000 and the TracCell 2000 have the potential to reduce
cytotechnologist fatigue and habituation, reduce the time needed to evaluate
specimens, and allow the cytotechnologist to focus on more thoroughly evaluating
potential abnormalities. The Company is also developing software and hardware
for a second generation, fully automated, high volume mapping product, the
TracCell 3000, and is developing a series of related educational and testing
products. There can be no assurance that any such products will be successfully
developed or marketed.
The Company also develops, manufactures and markets IN VITRO diagnostic
microbiology products for the clinical laboratory, veterinary and pharmaceutical
markets. The Company offers the microbiology laboratory a variety of FDA-cleared
products, under the tradename Sensititre-Registered Trademark-, for the minimum
inhibitory concentration and identification ("MIC/ID") testing of bacteria
suspected of causing infections and for measuring the susceptibility of such
bacteria to different types and concentrations of antibiotics. AccuMed's
microbiology products include disposable test kits and a range of automated
instruments. The Company also markets alamarBlue-TM-, a proprietary, non-toxic
indicator reagent that measures cell growth for IN VITRO testing. The Company is
developing an automated instrument designed to read the results of a Kirby-Bauer
method susceptibility test and, pursuant to an agreement with RADCO Ventures,
Inc. ("RADCO"), a joint-venture formed by the Company and certain investors, is
developing a diagnostic microbiology test panel and an automated reading
instrument. There can be no assurance that any of such products will be
successfully developed or marketed.
AccuMed's objective is to establish the AcCell Series 2000 and TracCell 2000
as the leading microscopy workstations for the primary screening and analysis of
cytology specimens while developing other new cytopathology and microbiology
products. The key elements of the Company's strategy include: (i) establishing
the AcCell Series 2000 and, if cleared for marketing by the FDA and other
applicable regulatory agencies, the TracCell 2000 in the worldwide Pap smear
testing market through distribution agreements and strategic alliances with
major market participants, (ii) exploiting other applications for the Company's
cytopathology technology such as histology and pathology laboratory work, (iii)
continuing to acquire, develop and enhance technologies that complement the
Company's existing technology base and (iv) integrating the Company's
proprietary microbiology technologies into new products.
On July 3, 1996, the Company entered into a letter of intent to acquire a
two-thirds equity interest in Oncometrics Imaging Corp. ("Oncometrics") for
aggregate consideration of $4.0 million in cash (the "Oncometrics Acquisition").
Of such consideration, $2.0 million would be paid to Oncometrics' parent
company, Xillix Technologies Corp. ("Xillix"), for currently outstanding
Oncometrics stock and $2.0 million would be paid to Oncometrics for newly issued
Oncometrics stock. Oncometrics is developing an automated instrument designed to
capture and analyze images from microscope slides that have been stained using
Oncometrics' proprietary staining method. Prototypes of the Oncometrics
instrument have been developed which are capable of isolating small variations
in cell nucleus DNA, which can assist the cytotechnologist in detecting lung
cancer in an early stage of development. The Company believes that the
Oncometrics technology may potentially have applications in the early detection
of cervical cancer as well. The Company is also negotiating to acquire the
outstanding shares of common stock of RADCO and approximately $1.2 million in
aggregate principal amount of certain promissory notes sold by RADCO to its
initial investors for an aggregate purchase price of approximately $1.4 million
in cash (the "RADCO Acquisition"). Such acquisitions are contingent upon, among
other things, consummation of the Offering and execution of definitive
agreements. See "Use of Proceeds," "Business -- Cytopathology -- Potential
Acquisition of Interest in Oncometrics" and "-- Microbiology -- Potential
Acquisition of RADCO."
BACKGROUND
The Company was incorporated in California in June 1988 under the name
Alamar Biosciences, Inc. Prior to December 29, 1995, the Company was engaged in
developing, manufacturing and marketing microbiology products, including
alamarBlue and certain diagnostic test kits under the name Alamar.
4
<PAGE>
AccuMed, Inc., an Illinois corporation, was formed in February 1994 and was
engaged in researching and developing cytopathology products. Effective January
1995, AccuMed, Inc. acquired the Sensititre microbiology business by purchasing
certain assets of a division of Radiometer America, Inc. and purchasing from
Radiometer (UK) Limited all of the shares of Sensititre Limited, an English
registry company (renamed AccuMed International Limited, "Sensititre," and
collectively, such businesses are referred to as "AccuMed, Inc."). On December
29, 1995, AccuMed, Inc. merged with and into the Company (the "Merger"). The
Company then changed its name to AccuMed International, Inc., reincorporated
under Delaware law and changed its fiscal year end from September 30 to December
31. The Company has recently discontinued the manufacture of Alamar microbiology
products, except for alamarBlue.
The Company's principal executive offices are located at 900 North Franklin
Street, Suite 401, Chicago, Illinois 60610, and its telephone number is (312)
642-9200.
5
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
Common Stock offered by:
<S> <C>
The Company.................................... 2,750,000 shares
The Selling Stockholders....................... 2,000,000 shares
Common Stock to be outstanding after the 21,973,333 shares (1)
Offering........................................
Use of proceeds by the Company................... To fund product research and development; scale-up
of manufacturing; the Oncometrics Acquisition; the
RADCO Acquisition; and working capital and general
corporate purposes, including reduction in
accounts payable. See "Use of Proceeds."
Nasdaq Market symbol............................. ACMI
Proposed Nasdaq National Market symbol........... ACMI
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTH
FISCAL TRANSITION
YEAR ENDED PERIOD ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1995 MARCH 31, 1996
------------------- ------------------ -----------------------------------
PRO FORMA (2) PRO FORMA (2) ACTUAL PRO FORMA (2)
------------------- ------------------ -------- ----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................................... $ 4,144 $ 1,184 $ 1,188 $ 1,190
Operating loss.................................. (7,056) (7,060)(3) (4,789)(3) (5,010)(3)
Net loss........................................ (6,740) (7,077) (2,649) (2,795)
Net loss per common share....................... (0.69) (0.60) )(0.17 (0.18)
Weighted average common shares outstanding...... 9,832 11,743 15,797 15,797
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
1995 ------------------------------
------------- PRO FORMA
ACTUAL ACTUAL AS ADJUSTED (4)
------------- ------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................................ $ (2,459) $ (184) $ 11,128
Total assets......................................................... 5,974 9,316 24,242
Long-term liabilities, net of current portion (5).................... 90 68 295
Total stockholders' equity........................................... 729 5,029 18,915
</TABLE>
- ------------------------------
(1) Based upon shares outstanding at July 19, 1996, of which 940,955 shares are
subject to forfeiture if certain specified earnings per share or stock price
performance thresholds are not met during 1997. Excludes: (i) an aggregate
of 6,007,805 shares reserved for issuance upon exercise of warrants
outstanding at July 19, 1996 (of which 480,402 shares will be issued upon
exercise prior to consummation of the Offering and sold in the Offering)
with a weighted average exercise price of $3.21 per share; (ii) an aggregate
of 1,789,638 shares reserved for issuance upon the exercise of stock options
outstanding at July 19, 1996 (of which 124,395 shares will be issued upon
exercise prior to consummation of the Offering and sold in the Offering)
with a weighted average exercise price of $2.62 per share; and (iii) an
aggregate of 476,631 shares reserved for issuance upon exercise of options
available for future grant under the Company's stock option plans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Stock Option Plans" and Note 16 of Notes to
Consolidated Financial Statements.
(2) Includes the operating results of AccuMed, Inc. and Oncometrics on a pro
forma basis assuming that the Merger and the Oncometrics Acquisition
occurred on October 1, 1994. See "The Company" and Pro Forma Condensed
Combining Financial Statements.
(3) Includes $4.0 million and $3.5 million for the three month transition period
ended December 31, 1995 and three months ended March 31, 1996, respectively,
recorded as a non-cash charge against operations relating to the write-off
of in-process research and development acquired in connection with the
Merger. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(4) Includes the net assets of Oncometrics and RADCO assuming the Oncometrics
Acquisition and the RADCO Acquisition occurred on March 31, 1996. Adjusted
to reflect the receipt and application of the net proceeds from the sale of
2,750,000 shares of Common Stock offered by the Company hereby at an assumed
offering price of $5.38 per share, and the receipt of proceeds to the
Company of approximately $754,000 in connection with the exercise of
outstanding stock options and warrants to purchase an aggregate of 604,797
shares of Common Stock to be sold by certain Selling Stockholders in the
Offering. See "Use of Proceeds," "Principal and Selling Stockholders" and
"Description of Capital Stock."
(5) Long-term liabilities consists of capital lease obligations. See Note 13 of
Notes to Consolidated Financial Statements.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS. SPECIAL
NOTE: CERTAIN STATEMENTS SET FORTH BELOW CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE REFORM ACT. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 2 FOR ADDITIONAL FACTORS RELATING TO SUCH
STATEMENTS.
LIMITED RELEVANT OPERATING HISTORY; SIGNIFICANT OPERATING LOSSES;
ACCUMULATED DEFICIT; SUBSTANTIAL COSTS OF INTEGRATION AND CONSOLIDATION;
UNCERTAINTY OF PROFITABILITY. The Company was formed in 1988 under the name
Alamar Biosciences, Inc. and was engaged primarily in research and development
of microbiology products based on the alamarBlue technology. Prior to the
Merger, the Company never realized any significant revenues from product sales.
AccuMed, Inc. was incorporated in February 1994 and in February 1995 acquired
the Sensititre microbiology business. Until such acquisition, AccuMed, Inc. had
no revenues and operations consisted of a limited amount of cytopathology
research and development. Accordingly, although the Sensititre business had a
significant operating history and revenues from sales, AccuMed, Inc., as a
separate entity, had very limited operating history prior to the Merger. Upon
consummation of the Merger, the operations of the Company and AccuMed, Inc. were
combined, and the Company began to develop, manufacture and sell both the
alamarBlue and the Sensititre microbiology products and recently began to
commercialize certain AccuMed cytopathology products. Thus, the Company has a
limited relevant operating history upon which an evaluation of its prospects can
be made. Such prospects must be considered in light of the risks, expenses and
difficulties frequently encountered in establishing a new business in a
continually evolving industry with an increasing number of market entrants and
intense competition as well as the risks, expenses and difficulties encountered
in the shift from development to commercialization of new products based on
innovative technology.
The Company has incurred significant net operating losses in each fiscal
quarter since its inception. For the fiscal years ended September 30, 1994 and
1995, and for the transition period ended December 31, 1995 and the three months
ended March 31, 1996, the Company's operating losses were approximately $3.1
million, $3.8 million, $5.7 million and $2.6 million, respectively. Losses for
the fiscal years ended September 30, 1994 and 1995 and for the transition period
ended December 31, 1995 relate solely to the Company's operations prior to the
Merger. As of March 31, 1996, the Company had an accumulated deficit of
approximately $25.4 million. Losses are expected to continue for the foreseeable
future until such time, if ever, as the Company is able to attain sales levels
sufficient to support its operations. There can be no assurance that the Company
will be able to implement successfully its operating strategy, generate
increased revenues or ever achieve profitable operations. See "-- Uncertainty of
Market Acceptance and Initial Investment in Cytopathology Products."
UNCERTAINTY OF MARKET ACCEPTANCE AND INITIAL INVESTMENT IN CYTOPATHOLOGY
PRODUCTS. The Company has generated limited revenues from the sale of its
cytopathology products to date. The Company's success, growth and profitability
will depend primarily on market acceptance of the AcCell Series 2000 and the
TracCell 2000, if cleared for marketing by the FDA and other applicable
regulatory agencies, for use in connection with cervical cancer screening by
cytopathology laboratories. Market acceptance will depend on the Company's
ability to demonstrate to such laboratories that the limitations associated with
conventional Pap smear screening and analysis can be cost effectively addressed
by its products. There can be no assurance that the Company can demonstrate that
the high initial cost of equipping existing laboratories with the AcCell Series
2000 and TracCell 2000, if cleared for marketing, will be offset by a reduction
in costs associated with increased efficiency and decreased malpractice
liability risks resulting from more accurate diagnosis, better data management
capability and better documentation of slide review procedures. The Company
believes that many clinical laboratories offer Pap smear tests at lower gross
margins than other tests in order to receive orders for other, higher margin,
laboratory tests. As a result, clinical laboratories may be reluctant or
unwilling to accept the additional costs related to installing and utilizing the
AcCell Series 2000 and the TracCell 2000. Furthermore, clinical laboratories
have recently been presented with a variety of new products claimed to improve
the cervical cancer
7
<PAGE>
screening process either through changing the slide preparation method,
automating the re-examination or rescreening of conventional specimens
previously diagnosed as negative or rescreening such specimens using reagents to
detect certain RNA/DNA hybrid cells claimed to indicate the presence of cervical
cancer. This proliferation of competing claims, products and approaches to
cervical cancer screening may cause market confusion which could result in a
laboratory maintaining its current equipment and practices or delaying a
decision of whether to purchase the Company's products or a competing product.
See "-- Technological Change and Competition."
LIMITED NUMBER OF CUSTOMERS. Due in part to a recent trend toward
consolidation of clinical laboratories, the Company expects that the number of
potential domestic customers for its cytopathology products will decrease. Due
to the relative size of the largest U.S. laboratories, it is likely that a
significant portion of the sales of the AcCell Series 2000 and TracCell 2000, if
cleared for marketing, will be concentrated among a relatively small number of
customers. In order to promote acceptance in the market, the Company will need
to foster an awareness of and acceptance by these potential customers of the
AcCell Series 2000 and the TracCell 2000 and of the benefits of such systems
over current methods. The Company's dependence on sales to large laboratories
may strengthen the purchasing leverage of these potential customers. There can
be no assurance that the Company will be successful in selling its products, or
that any such sales will result in sufficient revenue to allow the Company to
become profitable.
DELAYED OR UNSUCCESSFUL PRODUCT DEVELOPMENT. The Company's growth and
profitability will depend, in part, upon its ability to complete development of
and successfully introduce new products, including the TracCell 2000. The
Company will likely be required to undertake time-consuming and costly
development activities and seek regulatory approval for new products. There can
be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products, that regulatory clearance or approval of these or any new products
will be granted on a timely basis, if ever, or that the new products will
adequately meet the requirements of the applicable market or achieve market
acceptance. The completion of the development of any of the Company's products
under development remains subject to all the risks associated with the
commercialization of new products based on innovative technologies, including
unanticipated technical or other problems, manufacturing difficulties and the
possible insufficiency of the funds allocated for the completion of such
development, which could result in a change in the design, delay in the
development or the abandonment of such products. Consequently, there can be no
assurance that any of the Company's products under development will be
successfully developed or manufactured or, if developed and manufactured, that
such products will meet price or performance objectives, be developed on a
timely basis or prove to be as effective as competing products. The inability to
successfully complete development of a product or application, or a
determination by the Company, for financial, technical or other reasons, not to
complete development of any product or application, particularly in instances in
which the Company has made significant capital expenditures, could have a
material adverse affect on the Company's business, financial condition and
results of operations and could cause the Company to reassess its business
strategy. Such reassessment could lead to changes in the Company's overall
business plan, including the relative emphasis on current, as well as future,
products. See "-- Government Regulation," "Business -- Cytopathology --
Cytopathology Products" and "-- Microbiology -- Microbiology Products."
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE; DEPENDENCE ON THIRD
PARTY DISTRIBUTORS. In order for the Company to increase revenues and achieve
profitability, the Company's products, particularly its current and proposed
cytopathology products, must achieve a significant degree of market acceptance.
The Company has only limited experience marketing and selling its cytopathology
products. The Company intends to distribute its cytopathology products primarily
through a limited number of distributors. The Company has only recently entered
into its only current distribution arrangement, which is an exclusive, three
year distribution agreement for North, Central and South America (the "Olympus
Territory") with Olympus America. The Company will be required to enter into
additional distribution arrangements in order to achieve broad distribution of
its cytopathology products. There
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can be no assurance that the Company will be able to maintain the distribution
arrangement with Olympus America or that the Company will be able to enter into
and maintain arrangements with additional distributors on acceptable terms, or
on a timely basis, if at all. The Company will be dependent upon these
distributors to assist it in promoting market acceptance of and demand for its
products. In addition, because the Company intends to rely on a limited number
of distributors, sales to these distributors could account for a significant
portion of the Company's revenues. There can be no assurance that these
distributors will devote the resources necessary to provide effective sales and
marketing support to the Company. In addition, the Company's distributors may
give higher priority to the products of other medical suppliers or their own
products, thus reducing their efforts to sell the Company's products. If any of
the Company's distributors become unwilling or unable to promote, market and
sell its products, the Company's business, financial condition and results of
operations would be materially adversely affected. Further, Olympus America is
the exclusive distributor of the AcCell Series 2000 and, if successfully
developed and cleared for marketing, the TracCell 2000 in the Olympus Territory,
and other distributors may also have exclusive distribution arrangements. To the
extent any exclusive distributor fails to adequately promote, market and sell
the Company's products, the Company may not be able to secure a replacement
distributor until after the term of the distribution contract is complete or
unless such contract can otherwise be terminated.
TECHNOLOGICAL CHANGE AND COMPETITION. The Company's AcCell Series 2000
currently faces, and the TracCell 2000, if successfully developed and cleared
for marketing, will face competition from companies that may be developing
competing systems. The Company believes that many of the Company's existing and
potential competitors possess substantially greater financial, marketing, sales,
distribution and technical resources than the Company, and more experience in
research and development, clinical trials, regulatory matters, manufacturing and
marketing. The Company is aware of two companies that currently market imaging
systems to re-examine or rescreen conventional Pap smears previously diagnosed
as negative as well as two companies that are developing devices for the
preparation and analysis of Pap smear slides. The Company is aware that at least
one such company has submitted an imaging system for use as a primary means of
screening Pap smear slides under a pre-market approval (a "PMA") application to
the FDA under the United States Food, Drug and Cosmetic Act (the "FD&C Act").
Another company markets a manual rescreening test claimed to detect the presence
of cervical cancer using reagents to detect certain RNA/DNA hybrid cells. If any
company currently marketing rescreening products receives FDA clearance or
approval for use of its product as a primary screening system to replace or work
in conjunction with conventional Pap smear testing or if automated analysis
systems are developed and receive FDA clearance or approval, the use of
conventional Pap smear tests could be substantially affected and the Company's
business, financial condition and results of operations could be materially
adversely affected.
The market for the Company's current and, if developed, proposed
microbiology products is highly competitive, and the Company competes with
numerous well-established foreign and domestic companies, most of which possess
substantially greater financial, technical, marketing, personnel and other
resources than the Company and have established reputations for success in the
development, sale and service of manual and/or automated IN VITRO diagnostic
testing products. A significant portion of the MIC/ ID testing market in the
United States is controlled by two companies, MicroScan, Inc., a wholly-owned
subsidiary of Dade International, Inc. ("MicroScan"), and bioMerieux Vitek, a
division of bioMerieux, a French company ("bioMerieux Vitek"). Difco
Laboratories, Inc. ("Difco") has been issued a U.S. patent covering technology
related to the alamarBlue technology covered in one of the Company's patents.
There can be no assurance that Difco, which has substantially greater resources
and experience in research, development, manufacturing and marketing than the
Company, will not use its patented technology to develop products that will
compete directly with the Company's microbiology products.
The medical diagnostics industry is characterized by rapid product
development and technological advances. There can be no assurance that other
technologies or products that are functionally similar to those of the Company
are not currently available or under development, or that other companies with
expertise and resources that would encourage them to attempt to develop and
market competitive
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products will not develop new products directly competitive with the Company's
products. The Company's products could be rendered obsolete or uneconomical by
the introduction and market acceptance of competing products, technological
advances of the Company's current or potential competitors, or by other
approaches. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competition,
including the development and commercialization of new products and technology,
will not have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Competition."
GOVERNMENT REGULATION. The Company's products and manufacturing processes
are regulated by state and federal agencies, including the FDA and comparable
agencies in certain states and other countries. United States regulatory
requirements promulgated under the FD&C Act provide that many of the Company's
products may not be shipped in interstate commerce without prior authorization
from the FDA. Such authorization is based on a review of a product's safety and
effectiveness for its intended uses. Medical devices may be authorized by the
FDA for marketing either pursuant to a pre-market notification under Section
510(k) of the FD&C Act (a "510(k) Notification") or a PMA under the FD&C Act.
The process of obtaining clearances or approvals from the FDA and other
applicable regulatory agencies can be expensive, uncertain and time consuming,
frequently requiring several years from the commencement of clinical trials to
the receipt of regulatory approval.
A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to existing products that are currently permitted to be marketed.
An applicant is permitted to begin marketing a product as to which it has
submitted a 510(k) Notification at such time as the FDA issues a written finding
of substantial equivalence. Requests for additional information may delay the
market introduction of an applicant's products and, in practice, initial
approval of products can take substantially longer than the FDA pre-market
notification review period of 90 days.
A PMA consists of the submission to the FDA of information sufficient to
establish independently that a device is safe and effective for its intended
use. A PMA application must be supported by extensive data, including
preclinical and clinical trial data, as well as extensive literature to prove
the safety and effectiveness of the device. By statute, the FDA is required to
respond to a PMA within 180 days from the date of its submission; however, the
approval process usually takes substantially longer, often three or more years.
During the review period, the FDA may conduct extensive reviews of the Company's
facilities, deliver multiple requests for additional information and
clarifications and convene advisory panels to assist in its determination.
FDA clearances and approvals, if granted, may include significant
limitations on the intended uses for which a product may be marketed. FDA
enforcement policy strictly prohibits the promotion of cleared or approved
medical devices for non-approved or "off-label" uses. In addition, product
clearances or approvals may be withdrawn for failure to comply with regulatory
standards or the occurrence of unforeseen problems following initial marketing.
Marketing of the AcCell Series 2000 in the United States does not require
FDA clearance or approval. Marketing of the TracCell 2000 in the United States,
however, will require pre-marketing clearance by the FDA. The Company
anticipates that such clearance will be sought through submission of a 510(k)
Notification rather than a PMA. The Company is currently conducting the required
testing of the TracCell 2000 and expects to submit a 510(k) Notification with
respect to the TracCell 2000 by the end of 1996. There can be no assurance that
the Company will successfully complete the necessary testing on a timely basis,
if ever, that the TracCell 2000 510(k) Notification will be submitted to the FDA
by the end of 1996, if ever, or that the FDA will clear the TracCell 2000 for
marketing in the United States on a timely basis, if ever. It is also possible
that the FDA could require a PMA submission for the TracCell 2000, which would
result in significant delays in bringing the TracCell 2000 to the U.S. market
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
Marketing of the Company's MIC/ID microbiology products in the United States
requires FDA clearance through the 510(k) Notification process. With respect to
the Company's MIC/ID testing
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products, 510(k) Notifications must be filed and cleared with respect to each
antibiotic used. The Company may submit applications to add individual
antibiotics to those previously cleared as the market warrants. However, there
can be no assurance that clearances will continue to be obtained or that
obtained clearances will not be withdrawn. Marketing of alamarBlue to the
industrial and research markets does not require FDA clearance or approval.
Marketing in the United States of the Company's products under development
may require additional FDA clearances or approvals. For example, the Company's
proposed next-generation specimen mapping product, the TracCell 3000, if
developed, may not be sold in the United States unless and until the Company has
obtained FDA clearance or approval, either through a 510(k) Notification or a
PMA. In addition, marketing of the Company's proposed Kirby-Bauer reading
instrument (the "KB Reader") and other proposed microbiology products, if
developed, are likely to require FDA clearance through 510(k) Notifications. The
Company is currently researching and developing such products and has not yet
begun clinical trials. There can be no assurance that any such products will be
developed or, if developed, that such products will be cleared or approved for
marketing or, if such clearance or approval is received, that it will not be
withdrawn. See "Business -- Cytopathology -- Cytopathology Products" and "--
Microbiology -- Microbiology Products."
Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary from country to country. The time required to
obtain approval by a foreign country may be longer or shorter than that required
for FDA clearance or approval, and the requirements may differ. Export sales of
certain devices that have not received FDA marketing clearance or approval
generally are subject to both FDA export permit requirements and, in some cases,
general U.S. export regulations. In order to obtain an FDA export permit, the
Company may be required to provide the FDA with documentation from the medical
device regulatory authority of the country in which the purchaser is located. No
assurance can be given that foreign regulatory approvals will be granted on a
timely basis, if ever. The Company intends to seek qualification for its
international manufacturing operations under the International Standards
Organization ("ISO") 9001 Series of Standards, and to seek the "CE" mark for the
AcCell Series 2000 and proposed products. The CE mark is recognized by countries
that are members of the European Union and the European Free Trade Association
and, effective in 1998, will be required to be affixed to all medical devices
sold in the European Union. The AcCell Series 2000 is expected to be certified
as complying with CE mark requirements upon completion of this process; however,
no assurance can be given that the Company will obtain the CE mark for the
AcCell Series 2000 or any proposed products or satisfy ISO 9001 standards, or
that any product that the Company may develop or commercialize will obtain the
CE mark or will obtain any other required regulatory clearance or approval on a
timely basis, if ever.
The Company is subject to certain FDA registration, record-keeping and
reporting requirements, and certain of the Company's manufacturing facilities
are obligated to follow FDA Good Manufacturing Practice ("GMP") guidelines and
are subject to periodic FDA inspection. The Company's facilities that
manufacture FDA-cleared products currently meet applicable GMP guidelines and
FDA regulations. There can be no assurance, however, that the facilities used to
manufacture the Company's products will continue to meet applicable GMP or other
FDA guidelines.
Federal, state and foreign regulations regarding the manufacture and sale of
healthcare products and diagnostic devices are subject to future change. The
Company cannot predict what material impact, if any, such changes might have on
its business. Future changes in regulations or enforcement policies could impose
more stringent requirements on the Company, compliance with which could
adversely affect the Company's business. Such changes may relax certain
requirements, which could prove beneficial to the Company's competitors and thus
adversely affect the Company's business. In addition, regulations of the FDA and
state and foreign laws and regulations, including GMP guidelines, depend heavily
on administrative interpretations, and there can be no assurance that future
interpretations made by the FDA, or other regulatory bodies, with possible
retroactive effect, will not adversely affect the Company. See "-- Technological
Change and Competition."
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In addition to the regulations directly pertaining to the Company and its
products, many of the Company's existing and potential customers are subject to
extensive regulation and governmental oversight. Regulatory changes in the
healthcare industry that adversely affect the business of the Company's
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Government
Regulation."
DEPENDENCE ON KEY EMPLOYEES. The Company believes that its success will
depend to a significant extent upon the efforts and abilities of a small group
of executive, scientific and marketing personnel, and in particular on Peter P.
Gombrich, the Company's Chairman of the Board, Chief Executive Officer and
President. The loss of the services of one or more of these key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company's future success will depend
upon its ability to continue to attract and retain qualified scientific and
management personnel who are in great demand. There can be no assurance that the
Company will be successful in attracting and retaining such personnel.
PROTECTION OF INTELLECTUAL PROPERTY. The Company relies on a combination of
patents, licensing arrangements, trade names, trademarks, trade secrets and
confidentiality agreements to protect its intellectual property rights. The
Company has filed or been assigned eight U.S. patent applications covering
certain aspects of its cytopathology products. The Company holds certain
licenses on several U.S. and foreign patents and other intellectual property
rights regarding aspects of the technology embodied in the Sensititre product
line and is the licensee of certain automated cell analysis technology. The
Company holds a U.S. patent and has received a notice of intent to grant a
related European patent with respect to a portion of the alamarBlue microbiology
technology.
None of the Company's patent applications has been granted as of the date of
this Prospectus, and there can be no assurance that any such patent application
will result in an issued patent. The Company may, in the future, file additional
patent applications; however, there can be no assurance that the Company will be
successful in obtaining approval of any future patent applications it files with
respect to its technologies. In addition, since patent applications in the
United States are maintained in secrecy until patents issue, and since
publications of discoveries in the scientific or patent literature tend to lag
behind actual discoveries by several months, the Company cannot be certain that
the Company or other relevant patent application filer was the first creator of
inventions covered by pending patent applications or that such persons were the
first to file patent applications for such inventions.
There can be no assurance that the aforementioned patents, patent
applications and licenses will adequately protect the Company from potential
infringement by third parties. Such patents, patent applications and licenses
may cover only portions of the Company's technologies. Other portions may be in
the public domain or protectable only under trade secret laws. The Company has,
in the past, been required to undertake costly litigation to enforce its
intellectual property rights and, although the Company is not currently aware of
any potential infringement, there can be no assurance that the Company will not
be required to take action to enforce its rights in the future.
The Company has filed two U.S. trademark applications, and is currently
preparing three more trademark applications for filing. The Company may file
additional U.S. and foreign trademark applications in the future. However, no
trademark registrations have yet been granted to the Company, and there can be
no assurance that any such registrations will be granted. In addition, there can
be no assurance that third parties have not or will not adopt or register marks
that are the same or substantially similar to those of the Company, or that such
third parties will not be entitled to use such marks to the exclusion of the
Company. Selecting new trademarks to resolve such situations could involve
significant costs, including the loss of goodwill already gained by the marks
previously used.
The Company also relies for protection of its intellectual property on trade
secret law and nondisclosure and confidentiality agreements with its employees,
consultants, distributors, researchers and advisors. There can be no assurance
that such agreements will provide meaningful protection for the
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Company's trade secrets or proprietary know-how in the event of any unauthorized
use or disclosure of such trade secrets or know-how. In addition, others may
obtain access to, or independently develop, technologies or know-how similar to
that of the Company.
The Company's success will also depend on its ability to avoid infringement
of patent or other proprietary rights of others. The Company is not aware that
it is infringing any such rights of a third party, nor is it aware of
proprietary rights of others for which it will be required to obtain a license
in order to develop its products. However, there can be no assurance that the
Company is not infringing proprietary rights of others, or that the Company will
be able to obtain any technology licenses it may require in the future. See
"Business -- Intellectual Property."
POTENTIAL FLUCTUATIONS IN FUTURE QUARTERLY RESULTS. The Company expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on various factors, many of which are outside the
Company's control. These factors include the success of the marketing efforts of
the Company and its distribution partners, the likelihood, timing and costs
associated with obtaining necessary regulatory clearances or approval, the
timing and level of expenditures associated with expansion of sales and
marketing activities and overall operations, the Company's ability to cost
effectively expand manufacturing capacity and maintain consistently acceptable
yields, the timing of establishment of strategic distribution arrangements and
the success of the activities conducted under such arrangements, changes in
demand for the Company's products, order cancellations, competition, changes in
government regulation and other factors, the timing of significant orders from
and shipments to customers, and general economic conditions. These factors are
difficult to forecast, and these or other factors could have a material adverse
effect on the Company's business, financial condition and results of operations.
Fluctuations in quarterly demand for products may adversely affect the
continuity of the Company's manufacturing operations, increase uncertainty in
operational planning, disrupt cash flow from operations and increase the
volatility of the Company's stock price. The Company's expenditures are based in
part on the Company's expectations as to future revenue levels and to a large
extent are fixed in the short term. If revenues do not meet expectations, the
Company's business, financial condition and results of operations could be
materially adversely affected. The Company believes that period to period
comparisons of its operating results are not necessarily meaningful and should
not be relied upon as indications of future performance. As a result of the
foregoing factors, it is likely that in some future quarter the Company's
revenue or operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
could be materially adversely affected.
Additionally, if specified earnings per share or stock price performance
thresholds are met during 1997, contingencies will be satisfied with respect to
940,955 shares of Common Stock and warrants to purchase 63,472 shares of Common
Stock issued in connection with the merger of AccuMed, Inc. with and into the
Company (the "Merger") and an amount equal to the fair market value of such
securities at the date on which such contingencies are satisfied is expected to
be recorded as goodwill and amortized over ten years. Under the terms of the
Agreement and Plan of Reorganization (the "Merger Agreement"), such
contingencies will be satisfied if, during 1997, (i) earnings, on a fully
diluted basis, exceed $0.03, per share of Common Stock or (ii) the fair market
value of the Common Stock equals or exceeds $2.50 per share for a period of 45
consecutive trading days. Furthermore, the Company has entered into a letter of
intent to acquire a two-thirds equity interest in Oncometrics for approximately
$4.0 million in cash. It is expected that the allocation of the purchase price
will include approximately $1.6 million of acquired in-process research and
development and approximately $1.1 million of purchased technology. The
purchased technology is expected to be amortized over the expected useful life
of such technology, currently anticipated to be ten years, with the acquired
in-process research and development expensed in the Company's consolidated
statement of operations as a non-cash charge against operations in the period of
acquisition. The Company is negotiating to acquire the remaining outstanding
shares of Common Stock of RADCO for approximately $1.4 million in cash.
Approximately $630,000 of the purchase price is expected to be allocated to
acquired in-process research and development and charged
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against operations in the Company's consolidated statement of operations in the
period of acquisition. In addition, if the Company determines in accordance with
its existing accounting policy that the undiscounted future operating cash flows
from its operations are insufficient to support the aggregate amount of its
unamortized goodwill, the Company will be required to reflect an impairment
charge in the amount of unrecoverable goodwill against then current earnings.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Pro Forma Condensed Combining Financial Statements.
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON PROCEEDS OF THE OFFERING;
POSSIBLE NEED FOR ADDITIONAL CAPITAL. The Company intends to expend substantial
funds for research and product development, scale-up of cytopathology
manufacturing capacity, reduction of accounts payable, possible acquisitions,
and other working capital and general corporate purposes. Although the Company
believes that the net proceeds of the Offering, together with interest thereon,
existing cash balances and internally generated funds will be sufficient to
finance the Company's projected operations through at least the next twelve
months, there can be no assurance to that effect. The Company's future liquidity
and capital requirements will depend upon numerous factors, including the costs
and timing of expansion of manufacturing capacity, the costs, timing and success
of the Company's product development efforts, the costs and timing of potential
acquisitions, the extent to which the Company's existing and new products gain
market acceptance, competing technological and market developments, the progress
of commercialization efforts by the Company and its distributors, the costs
involved in preparing, filing, prosecuting, maintaining, enforcing and defending
patent claims and other intellectual property rights, developments related to
regulatory and third party reimbursement matters and Clinical Laboratory
Improvement Amendments of 1988 ("CLIA"), and other factors. If additional
financing is needed, the Company may seek to raise additional funds through
public or private financings, collaborative relationships or other arrangements.
The Company currently has no commitments with respect to sources of additional
financing, and there can be no assurance that any such financing sources, if
needed, would be available to the Company or that adequate funds for the
Company's operations, whether from the Company's revenues, financial markets,
collaborative or other arrangements with corporate partners or from other
sources, will be available when needed or on terms satisfactory to the Company.
The failure of the Company to obtain adequate additional financing may require
the Company to delay, curtail or scale back some or all of its research and
development programs, sales and marketing efforts, manufacturing operations,
clinical studies and regulatory activities and, potentially, to cease its
operations. Any additional equity financing may involve substantial dilution to
the Company's then-existing stockholders. See "Use of Proceeds."
NEED TO MANAGE EXPANDING OPERATIONS. If the Company is successful in
achieving market acceptance for its current products or products under
development, the Company will be required to expand its operations, particularly
in the areas of sales and marketing and manufacturing. Such expansion will
likely result in new and increased responsibilities for management personnel and
place significant strain upon the Company's management, operating and financial
systems and resources. To accommodate any such growth and compete effectively,
the Company may be required to implement and/or improve its information systems,
procedures and controls, and to expand, train, motivate and manage its work
force. The Company's future success will depend to a significant extent on the
ability of its current and future management personnel to operate effectively,
both independently and as a group. There can be no assurance that the Company's
personnel, systems, procedures and controls will be adequate to support the
Company's future operations. Any failure to implement and improve the Company's
operational, financial and management systems or to expand, train, motivate or
manage employees as required by future growth, if any, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RISK OF LITIGATION; RISK OF PRODUCT RECALLS; POTENTIAL UNAVAILABILITY OF
INSURANCE. Commercial screening of Pap smear tests have been characterized by
significant malpractice litigation. The Company faces a risk of exposure to
product liability, errors and omissions or other claims if the use of its AcCell
Series 2000 or any future potential products, including the TracCell 2000, if
approved for marketing, is
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alleged to have contributed to or resulted in a false negative diagnosis. While
neither the AcCell Series 2000 nor the TracCell 2000 purports to offer any
clinical diagnosis, there can be no assurance that the Company will avoid
significant litigation. The Company also faces the possibility that defects in
designs or manufacture of its products could result in product recall.
The Company currently maintains a product liability insurance policy
providing maximum coverage of $10 million and per occurrence coverage of $10
million. The medical device industry in general has experienced increasing
difficulty in obtaining and maintaining reasonable product liability coverage,
and substantial increases in insurance premium costs in many cases have rendered
coverage economically impractical. There can be no assurance that the Company's
existing product liability insurance will be adequate or continue to be
available, or that additional product liability insurance will be available to
the Company when needed or at a reasonable cost. An inability to maintain
insurance at acceptable costs or otherwise protect against potential product
liability could prevent or inhibit the continued commercialization of the
Company's products. In addition, a product liability claim in excess of relevant
insurance coverage or a product recall could have a material adverse effect on
the Company's business, financial condition and results of operations.
ENVIRONMENTAL REGULATION. The Company is subject to a variety of local,
state, federal and foreign government regulations relating to the storage,
discharge, handling, emission, generation, manufacture and disposal of toxic,
infectious and other hazardous substances used to manufacture the Company's
products. The failure to comply with current or future regulations could result
in the imposition of substantial fines against the Company, suspension of
production, alteration of its manufacturing processes or cessation of
operations. There can be no assurance that the Company will not be required to
incur significant costs to comply with any such laws and regulations in the
future, or that such laws or regulations will not have a material adverse effect
on the Company's business, financial condition and results of operations. Any
failure by the Company to control the use, disposal, removal or storage of, or
to adequately restrict the discharge of, or assist in the cleanup of, hazardous
chemicals or hazardous, infectious or toxic substances could subject the Company
to significant liabilities, including joint and several liability under certain
statutes. The imposition of such liabilities could have a material adverse
effect on the Company's business, financial condition and results of operations.
UNCERTAINTY OF PROFITABLE CYTOPATHOLOGY MANUFACTURING. The Company has only
recently developed the AcCell Series 2000 and marketing and sales of the AcCell
Series 2000 have only recently begun. The Company is also currently developing
the manufacturing processes for the TracCell 2000. There can be no assurance
that the Company will be able to sell sufficient numbers of systems or develop
volume manufacturing processes that will lead to the cost-effective manufacture
of the AcCell Series 2000 or the TracCell 2000. The Company also faces the
possibility that defects in designs or manufacture of its products could result
in product recall. See "Business -- Manufacturing."
DEPENDENCE ON SUPPLIERS. Certain key components and raw materials used in
the manufacturing of the Company's products are currently obtained from single
vendors. Although the Company believes that alternative sources for such
components and raw materials are available, any supply interruption in a
single-sourced component or raw material would have a material adverse effect on
the Company's ability to manufacture products until a new source of supply were
qualified. There can be no assurance that the Company would be successful in
qualifying additional sources on a timely basis, if ever. Failure to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, an uncorrected impurity or supplier's
variation in a raw material, either unknown to the Company or incompatible with
the Company's manufacturing process, could have a material adverse effect on the
Company's ability to manufacture certain of its products. See "Business --
Manufacturing."
IMPACT OF MEDICARE, MEDICAID AND OTHER THIRD PARTY REIMBURSEMENT. In the
United States, some Pap smear tests and MIC/ID tests are currently paid for by
the patient directly, and the level of reimbursement by third party payors that
do provide reimbursement varies considerably. Third party
15
<PAGE>
payors (Medicare/Medicaid, private health insurance, health administration
authorities in foreign countries and other organizations) may affect the demand,
pricing or relative attractiveness of the Company's products and services by
regulating the frequency and maximum amount of reimbursement for Pap smear
testing and MIC/ID testing provided by such payors or by not providing any
reimbursement at all. Restrictions on reimbursement for Pap smear testing and
MIC/ID testing may limit the price that the Company can charge for its products
or reduce the demand for them. In addition, if the level of reimbursement
provided by Medicare and Medicaid is significantly below the amount laboratories
and hospitals charge patients to perform Pap smear testing and MIC/ID testing,
respectively, the size of the potential market available to the Company may be
reduced. There can be no assurance that the level of reimbursement for Pap smear
testing and MIC/ID testing will achieve, or be maintained at, levels necessary
to permit the Company to generate substantial revenues or be profitable.
In the international market, reimbursement by private third party medical
insurance providers, including governmental insurers and providers, varies from
country to country. In certain countries, the Company's ability to achieve
significant market penetration may depend upon the availability of third party
or governmental reimbursement.
UNCERTAINTY AND POSSIBLE NEGATIVE EFFECTS OF HEALTH CARE REFORM. The health
care industry is undergoing fundamental changes that are the result of
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to control the escalation of
health care expenditures within the economy. Reforms that have been, and may be,
considered include controls on health care spending through limitations on the
increase in private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and other
fundamental changes to the health care delivery system. Health care reform
could, for example, result in a reduction in the recommended frequency of Pap
smear testing or limitations on reimbursement which would likely reduce the
demand for the Company's cytopathology products. Demand for the Company's MIC/ID
products could be similarly affected. The Company anticipates that Congress and
state legislatures will continue to review and assess cost containment measures,
alternative health care delivery systems and methods of payment, and that public
debate of these issues will likely continue. Due to uncertainties regarding the
outcome of health care reform initiatives and their enactment and
implementation, the Company cannot predict what reforms will be proposed or
adopted or the effect that such proposals or their adoption may have on the
Company. There can be no assurance that future health care legislation or other
changes in the administration or interpretation of government health care or
third party reimbursement programs will not have a material adverse effect on
the Company's business, financial condition and results of operations.
INTERNATIONAL SALES AND OPERATIONS RISKS. The Company sells microbiology
products and intends to sell its cytopathology and any future products to
customers both domestically and internationally. International sales and
operations may be limited or disrupted by the imposition of government controls,
export license requirements, political instability, trade restrictions, changes
in tariffs or difficulties in staffing and managing international operations.
Foreign regulatory agencies often establish product standards different from
those in the United States and any inability to obtain foreign regulatory
approvals on a timely basis could have a material adverse effect on the
Company's international business operations. Additionally, the Company's
business, financial condition and results of operations may be adversely
affected by increases in duty rates and difficulties in obtaining required
licenses and permits. There can be no assurance that the Company will be able to
successfully commercialize its products, or any future products, in any foreign
market.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the shares of the
Company's Common Stock, like that of the common stock of many other medical
products and high technology companies, has in the past been, and is likely in
the future to continue to be, highly volatile. Factors such as fluctuations in
the Company's operating results, announcements of technological innovations or
new commercial products by the Company or competitors, government regulation,
changes in the current structure of the health care financing and payment
systems, developments in or disputes regarding patent or other proprietary
rights, economic and other external factors and general market conditions may
have a
16
<PAGE>
significant effect on the market price of the Common Stock. Moreover, the stock
market has from time to time experienced extreme price and volume fluctuations
which have particularly affected the market prices for medical products and high
technology companies and which have often been unrelated to the operating
performance of such companies. These broad market fluctuations, as well as
general economic, political and market conditions, may adversely affect the
market price of the Company's Common Stock. In the past, following periods of
volatility in the market price of a company's common stock, securities class
action litigations have occurred against the issuing company. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and diversion of
management's attention and resources, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
adverse determination in such litigation could also subject the Company to
significant liabilities.
LACK OF DIVIDENDS. The Company has never paid cash or other dividends on
its Common Stock and does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
AUTHORIZATION AND POTENTIAL ISSUANCE OF PREFERRED STOCK; DELAWARE
ANTI-TAKEOVER LAW. The Company's Certificate of Incorporation authorizes the
issuance of preferred stock with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Company's Common Stock. Although the Company does not currently intend to
issue any shares of its preferred stock, in the event of issuance, such shares
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. There can be no
assurance that the Company will not, under certain circumstances, issue shares
of its preferred stock. Furthermore, the Company may in the future adopt other
measures that may have the effect of delaying, deferring or preventing a change
in control of the Company. Certain of such measures may be adopted without any
further vote or action by the stockholders, although the Company has no present
plans to adopt any such measures. The Company is also afforded the protections
of Section 203 of the Delaware General Corporation Law, which could delay or
prevent a change in control of the Company, impede a merger, consolidation or
other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control of
the Company. See "Description of Capital Stock -- Preferred Stock" and
"Description of Capital Stock -- Delaware Anti-Takeover Law.
IMMEDIATE AND SUBSTANTIAL DILUTION; OUTSTANDING WARRANTS AND
OPTIONS. Because the offering price will be substantially higher than the book
value per share of the Common Stock, purchasers of shares of Common Stock in the
Offering will incur immediate and substantial dilution. In addition, investors
purchasing shares in the Offering will incur additional dilution to the extent
outstanding stock options and warrants are exercised. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market after the Offering, or the possibility of such sales
occurring, could adversely affect prevailing market prices for the Common Stock
or the future ability of the Company to raise capital through an offering of
equity securities. Upon completion of the Offering, the Company will have
outstanding 21,973,333 shares of Common Stock (based on shares outstanding as of
July 19, 1996 and assuming no exercise of the Underwriters' over-allotment
option). In addition to the 4,750,000 shares to be sold in the Offering,
8,611,616 shares have been sold or are available for immediate sale in the
public market pursuant to effective registration statements or exemptions from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), subject in some cases to certain restrictions on shares held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. An additional 2,074,868 shares of Common Stock that were issued
in connection with the Merger will become available for sale on June 30, 1997,
upon the expiration of certain restrictions placed on such shares and assuming
the Company meets certain earnings per share or stock price targets with respect
to 429,938 of such shares currently subject to forfeiture. Pursuant to the terms
of a development agreement between the Company
17
<PAGE>
and a stockholder, 116,000 shares of Common Stock are being held in escrow
pending the achievement by such stockholder of certain performance goals and
would be immediately available for sale upon the achievement of such goals. An
additional 25,000 shares are restricted securities that can be sold in the
public market only if they are registered or if they qualify for an exemption
from registration under the Securities Act. Holders of the remaining 6,395,849
shares, including the Selling Stockholders and all of the Company's executive
officers and directors, have agreed to enter into so-called "lock-up" agreements
with Vector Securities International, Inc. and Tucker Anthony Incorporated, as
representatives (the "Representatives") of the Underwriters. In accordance with
such lock-up agreements, an aggregate of 1,162,917 shares will become available
for sale in the public market commencing 91 days after the date of this
Prospectus, 1,162,913 shares will become available for sale in the public market
commencing 181 days after the date of this Prospectus and 4,070,019 shares will
become available for sale in the public market commencing 271 days after the
date of this Prospectus, subject in some cases to certain restrictions on sales
by affiliates and assuming that the Company meets certain earnings per share or
stock price targets with respect to 511,017 of such shares currently subject to
forfeiture. The Representatives may, in their sole discretion and at any time
without notice, release all or any portion of the shares subject to such lock-up
agreements. Any shares that are so released may be eligible for sale in the
public market immediately thereafter, subject in certain cases to restrictions
on shares held by affiliates. The Company has also agreed that it will not,
without the prior written consent of the Representatives, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock for a period of one year following the date of this Prospectus
other than pursuant to existing stock option plans or upon the exercise of
outstanding warrants. The Company has registered the issuance of 1,823,040
shares of Common Stock issuable upon the exercise of options currently
outstanding or available to be granted pursuant to the Company's stock option
plans. Such shares are available for immediate sale in the open market upon
exercise of the options, subject in certain circumstances to limitations on
resale by affiliates of the Company. Holders of approximately 707,000 of such
options have agreed to execute lock-up agreements with the Representatives
restricting the sale of such shares in the public market for a period of 90 days
with respect to 169,000 shares, 180 days with respect to 169,000 shares and 270
days with respect to 369,000 shares. The Company has currently outstanding
warrants to purchase 6,007,805 shares of Common Stock. Of such shares, 480,402
shares are being sold in the Offering and approximately 4,814,628 shares have
been registered for sale under the Securities Act and are available for
immediate sale in the public market upon exercise of the warrants, subject in
some cases to certain restrictions on sales by affiliates. Holders of
approximately 2,712,000 of such warrants have agreed to execute lock-up
agreements with the Representatives restricting the sale of shares underlying
such warrants in the public market for a period of 90 days with respect to
904,000 shares, 180 days with respect to 904,000 shares and 270 days with
respect to 904,000 shares. See "Description of Capital Stock" and
"Underwriting."
18
<PAGE>
THE COMPANY
The Company was incorporated in California in June 1988 under the name
Alamar Biosciences, Inc. From its inception, the Company was engaged in
developing, manufacturing and marketing microbiology products including,
alamarBlue and diagnostic test kits under the name Alamar. AccuMed, Inc. was
incorporated in Illinois in November 1994 to acquire products and technologies
in the fields of cytology and microbiology. Effective January 1995, AccuMed,
Inc. acquired Sensititre as a wholly-owned subsidiary and acquired certain
assets relating to Sensititre products in the United States from the
microbiology division of Radiometer America, Inc. Sensititre has been renamed
AccuMed International Limited and is currently a wholly-owned subsidiary of the
Company. In April 1995, the Company and AccuMed, Inc. entered into the Merger
Agreement providing for the merger of AccuMed, Inc. into the Company. Pending
consummation of the Merger, the Company's facilities in California were closed,
its manufacturing, sales, marketing and research and development functions were
conducted under contract by AccuMed, Inc. and its executive offices were moved
to Chicago, Illinois. The Merger was consummated on December 29, 1995, at which
time the surviving company was renamed AccuMed International, Inc. and was
reincorporated under Delaware law. The Company commenced sales of its initial
cytopathology product, the AcCell Series 2000, at the end of the first quarter
of 1996. The Company has recently discontinued manufacturing of Alamar
microbiology products, except for alamarBlue. The Company is headquartered in
Chicago, Illinois with additional facilities in Westlake, Ohio and East
Grinstead, Sussex, England.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,750,000 shares of
Common Stock offered by the Company hereby are estimated to be $13.1 million
($16.7 million if the Underwriters' over-allotment option is exercised in full),
based on an assumed offering price of $5.38 per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses. The Company will also receive $754,000 in proceeds in connection with
the exercise of options and warrants to acquire on aggregate of 604,797 shares
of Common Stock.
Management anticipates that up to $4.0 million of the net proceeds from the
Offering will be used for the research, development, testing and pursuit of
regulatory approval for new cytopathology product offerings, and up to
approximately $2.0 million will be used to scale-up manufacturing for the AcCell
Series 2000 and, if cleared for marketing, the TracCell 2000. The Company
intends to use $4.0 million of the net proceeds from the Offering to fund the
proposed Oncometrics Acquisition and approximately $1.4 million of the net
proceeds to fund the proposed RADCO Acquisition. The balance of the net proceeds
will be used for working capital and other general corporate purposes, including
up to $1.0 million to reduce accounts payable. A portion of the proceeds
allocated for working capital and general corporate purposes may be used to
acquire complementary businesses, products or technologies, although there are
no current agreements, arrangements or understandings with respect to any
material acquisitions, other than as described in this Prospectus. Pending such
uses, the Company intends to invest such funds in short-term, interest-bearing,
investment grade obligations.
The amounts actually expended for each purpose may vary significantly,
depending on numerous factors, including the cost and timing of expansion of
manufacturing capacity, the costs, timing and success of the Company's product
development efforts, the costs and timing of potential acquisitions, the extent
to which the Company's existing and new products gain market acceptance,
competing technological and market developments, the progress of
commercialization efforts of the Company and its distributors, the costs
involved in preparing, filing, prosecuting, maintaining, enforcing and defending
patent claims and other intellectual property rights, developments relating to
regulatory and third party reimbursement matters and CLIA and other matters. The
Company will not receive any proceeds from the sale of shares of Common Stock
offered by the Selling Stockholders. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- Cytopathology --
Potential Acquisition of Interest in Oncometrics," "-- Microbiology -- Potential
Acquisition of RADCO" and "Principal and Selling Stockholders."
20
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the Nasdaq Market under the symbol
"ACMI." The Company has applied for inclusion of the Common Stock on the Nasdaq
National Market under the symbol "ACMI." On July 23, 1996, the last reported
sale price of the Common Stock on the Nasdaq Market was $5.38 per share. The
table below sets forth, for the periods indicated, the range of high and low
sales prices for the Common Stock on the Nasdaq Market. At July 23, 1996, the
Company had approximately 260 stockholders of record.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1994 FISCAL YEAR
First Quarter.......................................................... $ 4.13 $ 2.13
Second Quarter......................................................... 3.00 1.75
Third Quarter.......................................................... 2.75 1.00
Fourth Quarter......................................................... 2.63 1.25
1995 FISCAL YEAR
First Quarter.......................................................... $ 1.75 $ 0.31
Second Quarter......................................................... 1.75 0.50
Third Quarter.......................................................... 1.50 0.81
Fourth Quarter......................................................... 1.50 0.75
TRANSITION PERIOD (1)
October 1, 1995 through December 31, 1995.............................. $ 1.69 $ 1.00
1996 FISCAL YEAR (1)
First Quarter.......................................................... $ 6.25 $ 1.06
Second Quarter......................................................... 9.38 4.88
Third Quarter (through July 23, 1996).................................. 7.00 5.13
</TABLE>
- --------------------------
(1) On December 31, 1995, the Company changed its fiscal year from September 30
to December 31.
DIVIDEND POLICY
The Company has not paid any cash or other dividends on its Common Stock to
date. The Company currently intends to retain future earnings, if any, to
finance the growth and development of its business and does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future.
21
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company (i) at March 31, 1996, and (ii) giving pro forma effect to (a) the
Oncometrics Acquisition for $4.0 million in cash, (b) the RADCO Acquisition for
$1.4 million in cash, (c) the sale of the 2,750,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $5.38 per share,
after deducting estimated underwriting discounts and commissions and the
estimated expenses of the Offering, and (d) the receipt by the Company of
$754,000 in connection with the exercise of options and warrants to purchase an
aggregate of 604,797 shares of Common Stock to be sold by certain Selling
Stockholders in the Offering. This table should be read in conjunction with the
Consolidated Financial Statements of the Company, including the related Notes
thereto and the Pro Forma Condensed Combining Financial Statements, appearing
elsewhere in this Prospectus. See also "Use of Proceeds" and "Business --
Cytopathology -- Potential Acquisition of Interest in Oncometrics," "--
Microbiology -- Potential Acquisition of RADCO" and "Principal and Selling
Stockholders."
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
PRO FORMA AS
ACTUAL ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current portion of long-term liabilities (1)................. $ 1,039 $ 1,046
Long-term liabilities, net of current portion (2)....................................... 68 295
--------- ------------
Minority interest....................................................................... -- 677
--------- ------------
Total debt.......................................................................... 1,107 1,341
--------- ------------
Stockholders' equity:
Preferred Stock, $.01 par value: 5,000,000 shares authorized; no shares issued and
outstanding (actual and pro forma as adjusted)....................................... -- --
Common Stock, $.01 par value: 30,000,000 shares authorized; 16,605,034 shares issued
and outstanding, actual; 19,959,831 shares issued and outstanding, pro forma as
adjusted (3)......................................................................... 166 199(4)
Additional paid-in capital............................................................ 30,273 44,126(4)
Accumulated deficit................................................................... (25,410) (25,410)
---------
Total stockholders' equity.......................................................... 5,029 18,915
--------- ------------
Total capitalization.............................................................. $ 6,136 $ 20,933
--------- ------------
--------- ------------
</TABLE>
- ------------------------
(1) Includes notes payable and capital lease obligations due within one year.
(2) Includes long-term portion of capital lease obligations.
(3) Based on the number of shares outstanding as of March 31, 1996, of which
940,955 shares are subject to forefeiture if certain specified earnings per
share or stock price performance thresholds are not met during 1997.
Excludes: (i) an aggregate of 6,149,305 shares reserved for issuance upon
exercise of warrants outstanding at July 19, 1996 (of which 480,402 shares
will be issued upon exercise prior to the consummation of the Offering and
sold in the Offering) at exercise prices ranging from $0.25 to $5.00 per
share, with a weighted average exercise price of $3.21 per share; (ii) an
aggregate of 1,812,918 shares reserved for issuance upon the exercise of
stock options outstanding at July 19, 1996 (of which 124,395 shares will be
issued upon exercise prior to consummation of the Offering and sold in the
Offering) at exercise prices ranging from $0.63 to $8.38 per share, with a
weighted average exercise price of $2.62 per share; and (iii) an aggregate
of 476,631 shares reserved for issuance upon exercise of options available
at July 19, 1996 for future grant under the Company's stock option plans.
See "Management -- Stock Option Plans" and Note 11 of Notes to Consolidated
Financial Statements.
(4) Includes receipt of $754,000 in connection with the exercise of options and
warrants to purchase an aggregate of 604,797 shares of Common Stock to be
sold by certain Selling Stockholders in the Offering.
22
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at March 31, 1996 was
negative approximately $2.8 million or $(0.17) per share of Common Stock. Pro
forma net tangible book value per share represents the amount of the Company's
total pro forma tangible net worth (pro forma tangible assets less total pro
forma liabilities), after giving effect to the Oncometrics Acquisition and the
RADCO Acquisition, divided by 16,605,034, the number of shares of Common Stock
outstanding at March 31, 1996. Without taking into account any other changes in
pro forma net tangible book value after March 31, 1996, other than to give
effect to the receipt and application of the estimated net proceeds from the
sale of the 2,750,000 shares of Common Stock offered by the Company at an
assumed offering price of $5.38 per share and the issuance of an aggregate of
604,797 shares of Common Stock, upon exercise of warrants and options by certain
Selling Stockholders, to be sold in the Offering and the receipt by the Company
of $754,000 in connection therewith, the pro forma net tangible book value of
the Company as of March 31, 1996 would have been approximately $11.0 million or
$0.56 per share of Common Stock. This represents an immediate increase in pro
forma net tangible book value of $0.73 per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $4.82 per share to
new investors purchasing shares in the Offering. The following table illustrates
this per share dilution to new investors in the Offering:
<TABLE>
<CAPTION>
Assumed offering price per share.................................... $ 5.38
<S> <C> <C>
Pro forma net tangible book value per share at March 31, 1996..... $ (0.17)
Increase per share attributable to new investors.................. 0.73
---------
Pro forma net tangible book value per share after the Offering...... 0.56
---------
Dilution per share to new investors................................. $ 4.82
---------
---------
</TABLE>
Excludes: (i) an aggregate of 6,007,805 shares reserved for issuance upon
exercise of warrants outstanding at July 19, 1996 (of which 480,402 shares will
be issued upon exercise prior to consummation of the Offering and sold in the
Offering) at exercise prices ranging from $0.25 to $5.00 per share, with a
weighted average exercise price of $3.21 per share; (ii) an aggregate of
1,812,918 shares reserved for issuance upon the exercise of stock options
outstanding at July 19, 1996 (of which 124,395 shares will be issued upon
exercise prior to consummation of the Offering and sold in the Offering) at
exercise prices ranging from $0.63 to $8.38 per share, with a weighted average
exercise price of $2.62 per share; and (iii) an aggregate of 476,631 shares
reserved for issuance upon exercise of options available for future grant at
July 19, 1996 under the Company's stock option plans. See "Management -- Stock
Option Plans" and Note 11 of Notes to Consolidated Financial Statements.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data for the fiscal year ended
September 30, 1995 and for the three month transition period ended December 31,
1995 have been derived from the audited consolidated financial statements of the
Company as adjusted, where indicated, to reflect the Merger. The Consolidated
Financial Statements for the fiscal year ended September 30, 1995 have been
audited by Coopers & Lybrand, L.L.P., independent certified public accountants.
The Consolidated Financial Statements for the three month transition period
ended December 31, 1995 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The information presented for the three months
ended March 31, 1996 is unaudited, but, in the opinion of the Company's
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the information for such period have been
made. Results for interim periods are not necessarily indicative of the results
that may be expected for the full year. The following should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Consolidated Financial Statements and
related Notes thereto and the Pro Forma Condensed Combining Financial Statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTH
TRANSITION
FISCAL YEAR ENDED PERIOD ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1995 MARCH 31, 1996
------------------ ------------------ ----------------------------
PRO FORMA (1) PRO FORMA (1) ACTUAL PRO FORMA (1)
------------------ ------------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................................. $ 4,144 $ 1,184 $ 1,188 $ 1,190
Cost of sales......................................... (3,674) (1,183) (595) (597)
------- ------- ------------- -------------
Gross profit (loss)................................... 470 1 (593) 593
Operating expenses.................................... 7,526 7,058(2) 5,382(2) 5,603
------- ------- ------------- -------------
Operating loss........................................ (7,056) (7,060) (4,789) (5,010)
Other income (expense)................................ (113) (81) 2,141 2,141
Provision for income taxes............................ (1) (1) (1) (1)
Minority interest..................................... 430 65 -- 75
Net loss.............................................. $ (6,740) $ (7,077) $ (2,649) $ (2,795)
------- ------- ------------- -------------
------- ------- ------------- -------------
Net loss per common share............................. $ (0.69) $ (0.60) $ (0.17) $ (0.18)
------- ------- ------------- -------------
------- ------- ------------- -------------
Weighted average common shares outstanding............ 9,832 11,743 15,797 15,797
------- ------- ------------- -------------
------- ------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, 1995 ----------------------------
------------------ PRO FORMA
ACTUAL ACTUAL AS ADJUSTED (3)
------------------ ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................................. $ (2,459) $ (184) $ 11,128
Total assets.............................................................. 5,974 9,316 24,242
Long-term liabilities, net of current portion (4)......................... 90 68 295
Total stockholders' equity................................................ 729 5,029 18,915
</TABLE>
- --------------------------
(1) Includes the operating results of AccuMed, Inc. and Oncometrics on a pro
forma basis assuming the Merger and the Oncometrics Acquisition occurred on
October 1, 1994. See "The Company" and Pro Forma Condensed Combining
Financial Statements.
(2) Includes $4.0 million and $3.5 million for the three month transition period
ended December 31, 1995 and the three months ended March 31, 1996,
respectively, recorded as a non-cash charge against operations relating to
the write-off of in-process research and development acquired in connection
with the Merger.
(3) Includes the net assets of Oncometrics and RADCO assuming that the
Oncometrics Acquisition and the RADCO Acquisition occurred on March 31,
1996, adjusted to reflect receipt and application of the net proceeds from
the sale of the 2,750,000 shares of Common Stock offered by the Company
hereby at an assumed offering price of $5.38 per share and the receipt of
24
<PAGE>
the proceeds to the Company of $754,000 in connection with the exercise of
outstanding stock options and warrants, prior to the consummation of the
Offering, to purchase an aggregate of 604,797 shares of Common Stock. See
"Use of Proceeds" and "Description of Capital Stock."
(4) Long-term liabilities consists of capital lease obligations. See Note 13 to
Notes to Consolidated Financial Statements.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THE FACTORS DISCUSSED BELOW AS WELL AS THE FACTORS DISCUSSED
IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. SPECIAL NOTE: CERTAIN
STATEMENTS SET FORTH BELOW CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE REFORM ACT. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 2 FOR ADDITIONAL FACTORS RELATING TO SUCH STATEMENTS.
OVERVIEW
Effective December 29, 1995, AccuMed, Inc. was merged with and into the
Company. The results of operations reflected in the Company's consolidated
statement of operations for the quarter ended March 31, 1996 include the
operations of the two merged businesses, whereas results of operations from
prior periods and years reflect the operations and sales of the Alamar
microbiology product line only. The historical results of operations of the
Company presented herein are not necessarily indicative of future results of
operations of the Company. See "The Company."
The Merger has been accounted for as a purchase, which resulted in certain
charges. The value of the securities not subject to contingencies issued by the
Company upon consummation of the Merger exceeded the value of the assets
acquired by $6.6 million. At December 31, 1995, $4.0 million of such amount was
allocated to acquired in-process research and development and written off
immediately as a non-cash charge against operations. The remaining $2.6 million
was booked as purchased technology and is being amortized over ten years
beginning December 31, 1995. Certain of the securities issued by the Company
upon consummation of the Merger were subject to forfeiture if specified earnings
per share or stock price performance goals were not met following the Merger.
During the quarter ended March 31, 1996, the contingencies were satisfied with
respect to a portion of such securities having a then current fair market value
of $5.4 million. Of such amount, $3.5 million was allocated to acquired in-
process research and development and written off immediately as a non-cash
charge against operations. The remaining $1.9 million was booked as purchased
technology and is being amortized over ten years beginning March 31, 1996. If
specified contingencies applicable to the remaining 940,955 shares of Common
Stock and warrants to purchase up to 63,473 shares of Common Stock issued in the
Merger are met during 1997, an amount equal to the fair market value of such
securities at the time such contingencies are satisfied will be recorded as
goodwill. It is anticipated that such goodwill will be amortized over ten years
and that the Company will continue to assess the recoverability of such asset as
prescribed by the Company's current accounting policies. See "Risk Factors --
Potential Fluctuations in Future Quarterly Reports" and Note 1 to Notes to
Consolidated Financial Statements.
Pending consummation of the Merger, the Company took various actions to
streamline and relocate its operations. The Company's manufacturing facility in
Sacramento, California was closed in August 1995, and all obligations under its
lease were satisfied during the second quarter of 1996. During the summer and
fall of 1995, the Company terminated the employment of all its employees, other
than two officers. From July 1, 1995 until consummation of the Merger, the
Company's manufacturing, marketing, sales, distribution and research and
development functions were performed by AccuMed, Inc. under contracts. After
consummation of the Merger, the Company resumed research and development,
manufacturing and marketing and sales activities, and hired a significant number
of employees.
At March 31, 1996, the Company had an accumulated deficit of $25.4 million.
On December 31, 1995, the Company changed its fiscal year end from September 30
to December 31.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenues from sales for the quarter ended March 31, 1996 increased to $1.2
million compared to $172,000 for the quarter ended March 31, 1995, primarily due
to the inclusion of sales of the Sensititre product line as a result of the
acquisition of the Sensititre business at the end of 1995. Other income
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increased by $2.4 million in the 1996 quarter principally due to payments of
$3.5 million from Becton, Dickinson and Company ("Becton") pursuant to a license
agreement. At December 31, 1995, $1.4 million of such payments had been recorded
as deferred revenues pending the resolution of subsequently resolved litigation.
Offsetting such income was $954,000 of expense during the 1996 quarter recorded
as a non-cash charge representing the fair market value of warrants issued. Of
such amount, (i) $852,000 is attributable to warrants to purchase an aggregate
of 687,500 shares of Common Stock, with a weighted average exercise price of
$3.73 per share, issued to investors in connection with the initial
capitalization of RADCO, and (ii) $102,000 is attributable to warrants to
purchase an aggregate of 100,000 shares of Common Stock, at an exercise price of
$1.25 per share, issued in consideration of a loan to the Company of $250,000
from the warrantholder.
Cost of sales increased from $219,000 in the 1995 quarter to $595,000 in the
1996 quarter due to the additional cost of sales of the microbiology product
line and initial cytopathology instrument sales. General and administrative
expenses increased from $275,000 in the 1995 quarter to $914,000 in the 1996
quarter, primarily due to (i) recognition of a non-cash charge attributable to
the issuance of warrants to purchase an aggregate of 100,000 shares of Common
Stock at an exercise price of $2.125 per share as compensation for consulting
services, (ii) costs of consolidating staff and relocating operations, and (iii)
increased investor relations efforts. Research and development expenses
increased from $69,000 in the 1995 quarter to $4.0 million in the 1996 quarter.
The increase in the 1996 quarter was primarily due to a non-cash charge against
operations of $3.5 million representing the write-off of in-process research and
development acquired in connection with the Merger, and resumption of research
and development activities following the Merger. Sales and marketing expenses
increased from $28,000 in the 1995 quarter to $393,000 in the 1996 quarter, due
to reinstatement of domestic sales and marketing efforts which had been
suspended during the prior quarter.
Net loss increased from $431,000 for the 1995 quarter to $2.6 million for
the 1996 quarter, primarily attributable to the non-cash charge against
operations relating to the write-off of in-process research and development and
the fair value of warrants issued, as described above. The net loss per share
for the 1996 quarter was $0.17 compared to $0.09 for the 1995 quarter. The
increased net loss was somewhat diluted by an increase in the weighted average
shares outstanding.
The Company's accounts payable were $2.5 million in the 1996 quarter, an
increase of $500,000 from the 1995 quarter due primarily to an increase in raw
materials and inventories acquired to support sales of the AcCell Series 2000.
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
The three months ended December 31, 1995 represents the transition period
resulting from the change in the Company's fiscal year end from September 30 to
December 31. While revenues remained virtually unchanged, cost of sales
increased from $227,000 in the 1994 quarter to $339,000 in the 1995 quarter.
General and administrative costs increased substantially from $384,000 in the
1994 quarter to $1.4 million in the 1995 quarter, primarily due to (i) legal
expenses related to subsequently resolved litigation, (ii) expenses of
relocating the Company's operations, and (iii) payments to AccuMed, Inc. for its
services pursuant to manufacturing, distribution and research and development
agreements pending consummation of the Merger. Research and development expenses
increased from $151,000 in the 1994 quarter to $4.0 million in the 1995 quarter,
due to a non-cash charge against operations relating almost entirely to the
write-off of in-process research and development acquired in connection with the
Merger. Sales and marketing expenses decreased from $171,000 in the 1994 quarter
to $7,000 in the 1995 quarter, as the sales and marketing activities were
performed by AccuMed, Inc. prior to the Merger pursuant to a distribution
agreement.
The net loss increased from $846,000 for the 1994 quarter to $5.7 million
for the 1995 quarter. The increase resulted primarily from a non-cash charge
against operations relating to the write-off of in-process research and
development acquired in connection with the Merger, and increased administrative
expense. The net loss per share for the 1995 quarter was $0.49 compared to $0.17
for the 1994 quarter.
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FISCAL YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
Revenues for the fiscal years ended September 30, 1995, 1994 and 1993 were
$515,000, $1.2 million and $419,000, respectively. Revenues in fiscal 1994
included approximately $473,000 of international instrument shipments and
$92,000 of contract research, both of which were absent from the fiscal 1995
year and account for the decrease in revenues from fiscal 1994 to fiscal 1995.
During fiscal 1994, the Company had additional products available for sale that
were in development during fiscal 1993. Cost of sales increased from $911,000 in
fiscal 1993 to $1.5 million in fiscal 1994 and decreased slightly to $1.4
million in fiscal 1995. General and administrative expenses increased slightly
from $1.1 million in fiscal 1993 to $1.2 million in fiscal 1994, and increased
substantially to $2.1 million in fiscal 1995. The increase from fiscal 1994 to
fiscal 1995 was primarily due to legal and accounting expenses related to the
Merger and subsequently resolved litigation. Research and development expenses
decreased from $683,000 in fiscal 1993 to $580,000 in fiscal 1994 and to
$387,000 in fiscal 1995. Sales and marketing expenses decreased from $960,000 in
fiscal 1994 to $309,000 in fiscal 1995, due to suspension of virtually all of
the Company's domestic sales and marketing efforts beginning in November 1994.
The net loss for fiscal 1995 increased to $3.8 million from $3.1 million for
fiscal 1994 primarily due to increased legal and administrative expenses
associated with subsequently resolved litigation. The net loss for fiscal 1994
was virtually unchanged from fiscal 1993. The net loss per share decreased to
$0.59 for fiscal 1995 from $0.65 for fiscal 1994 and from $1.00 for fiscal 1993,
primarily due to increases in the weighted average shares outstanding offset in
part by a lower net loss in fiscal 1994 compared to fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been substantially dependent on the private placements of
its debt and equity securities and the proceeds of its initial public offering
of securities consummated in October 1992 to fund its cash requirements. From
the initial public offering through March 31, 1996, the Company has raised
approximately $21.0 million in aggregate net proceeds from the initial public
offering and such private placements. The Company's most recent private
placements were closed in May and June 1996, resulting in the issuance of an
aggregate of 255,000 shares of Common Stock for net proceeds of approximately
$1.4 million. During the second quarter of 1996, the Company expected to receive
$2.0 million in cash consideration for a debenture that was to have been issued
effective April 30, 1996; however, such consideration was not received and such
debenture was not issued. During the second quarter of 1996, the Company
received an aggregate of $477,000 upon the exercise of certain stock options and
an aggregate of $441,000 upon the exercise of certain warrants.
In connection with the Company's initial public offering and certain private
placements, the Company issued warrants to purchase an aggregate of 2,702,905
shares of Common Stock (the "Redeemable Warrants"). If the closing price per
share of Common Stock exceeds $7.50 (subject to adjustment) per share for a
minimum of 20 consecutive trading days, the Company would have the right to
redeem the Redeemable Warrants, upon notice of not less than 60 days given to
holders within three days following any such 20 day period, at a redemption
price of $0.25 per underlying share. The exercise price of the Redeemable
Warrants, which expire October 1, 1997, is $5.00 per share. If all Redeemable
Warrants were exercised, of which there can be no assurance, the Company would
receive approximately $13.5 million in gross proceeds. If the Offering is
completed, the Company has agreed with the Underwriters not to redeem the
Redeemable Warrants, without the Representatives' consent, prior to one year
following the date of this Prospectus.
Pursuant to the License Agreement entered into between the Company and
Becton in October 1995 (the "License Agreement"), Becton has a semi-exclusive,
worldwide license to the Company's alamarBlue technology for a specific field of
use. Becton was obligated to pay $3.5 million in cash for use of the technology,
of which $1.5 million was received during 1995 and $2.0 million was received
during the first quarter of 1996. Of such amount, $500,000 will be creditable
against future royalty payments, if any.
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Becton is obligated to pay the Company royalties on net sales of products
incorporating the technology licensed under the License Agreeement during its
five-year term. As of the date of this Prospectus, there have been no sales of
products incorporating such technology.
At June 30, 1996, the Company had $2.1 million of accounts payable, of which
$1.7 million was past the respective original due dates. In late 1995 and early
1996, the Company reached agreements with certain vendors providing for the
extended repayment of amounts owed by the Company to such vendors. At June 30,
1996, pursuant to such agreements, approximately $522,000 remained payable by
the Company to such vendors in scheduled monthly installments through the
remainder of 1996. Other amounts owed to various vendors and suppliers may be
subject to late charges of up to 1.5% per month. The Company intends to apply up
to $1.0 million of the net proceeds of the Offering to the repayment of a
portion of the accounts payable not subject to extended repayment agreements.
The Company intends to expend substantial funds for research and product
development, possible acquisitions, scale-up of manufacturing capacity,
reduction of accounts payable and other working capital and general corporate
purposes. Although the Company believes that the net proceeds of the Offering,
together with interest thereon, existing cash balances and internally generated
funds will be sufficient to finance the Company's projected operations through
at least the next twelve months, there can be no assurance to that effect. The
Company's future liquidity and capital requirements will depend upon numerous
factors, including the costs and timing of expansion of manufacturing capacity,
the costs, timing and success of the Company's product development efforts, the
costs and timing of potential acquisitions, the extent to which the Company's
existing and new products gain market acceptance, competing technological and
market developments, the progress of commercialization efforts of the Company
and its distributors, the costs involved in preparing, filing, prosecuting,
maintaining, enforcing and defending patent claims and other intellectual
property rights, developments related to regulatory and third party
reimbursement matters and CLIA, and other factors. If additional financing is
needed, the Company may seek to raise additional funds through public or private
financings, collaborative relationships or other arrangements.
The Company currently has no commitments with respect to sources of
additional financing, and there can be no assurance that any such financing
sources, if needed, would be available to the Company or that adequate funds for
the Company's operations, whether from the Company's revenues, financial
markets, collaborative or other arrangements with corporate partners or from
other sources, will be available when needed or on terms satisfactory to the
Company. The failure of the Company to obtain adequate additional financing may
require the Company to delay, curtail or scale back some or all of its research
and development programs, sales and marketing efforts, manufacturing operations,
clinical studies and regulatory activities and, potentially, to cease its
operations. Any additional equity financing may involve substantial dilution to
the Company's then-existing stockholders. See "Use of Proceeds" and the Pro
Forma Condensed Combining Financial Statements and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.
POTENTIAL IMPACT OF ACQUISITION OF INTEREST IN ONCOMETRICS
The Company intends to acquire a two-thirds equity interest, on a
fully-diluted basis, in Oncometrics for aggregate cash consideration of $4.0
million. Of such consideration, $2.0 million would be paid to Xillix for
currently outstanding Oncometrics stock, and $2.0 million would be paid to
Oncometrics for newly issued Oncometrics stock. It is anticipated that such
transaction would be accounted for under the purchase method of accounting,
resulting in approximately $1.6 million of acquired in-process research and
development and approximately $1.1 million of purchased technology. Amounts
recorded as acquired in-process research and development would be written off as
a charge to earnings in the period of acquisition. Amounts recorded as purchased
technology would be amortized over the expected useful life of such technology,
currently anticipated to be ten years. Furthermore, at May 31, 1996, Oncometrics
had approximately $234,000 in long-term, third party debt, including the
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current portion of long-term debt, which the Company would assume if the
Oncometrtics Acquisition is consummated. See "Use of Proceeds" and "Business --
Cytopathology -- Potential Acquisition of Interest in Oncometrics" and Pro Forma
Condensed Combining Financial Statements.
POTENTIAL IMPACT OF ACQUISITION OF RADCO
The Company is negotiating to acquire common stock of RADCO and
approximately $1.2 million in aggregate principal amount of certain promissory
notes issued by RADCO in connection with the initial capitalization of RADCO for
an aggregate purchase price of approximately $1.4 million in cash. It is
anticipated that such transaction would be accounted for under the purchase
method of accounting, resulting in approximately $630,000 of acquired in-process
research and development. Such amount is expected to be written-off as a charge
to earnings in the period of the RADCO Acquisition. See "Use of Proceeds" and
"Business -- Microbiology -- Potential Acquisition of RADCO" and Pro Forma
Condensed Combining Financial Statements.
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BUSINESS
AccuMed designs, manufactures and markets diagnostic screening products for
clinical diagnostic laboratories serving the cytopathology and microbiology
markets. The Company's primary focus is on development and commercialization of
cytopathology products that support the review and analysis of Pap smear tests
in order to improve the quality of cell analysis and increase accuracy and
productivity in the laboratory. The Company commenced sales of its initial
cytopathology product, the AcCell Series 2000 automated slide handling and
microscopy workstation, at the end of the first quarter of 1996. The Company is
currently testing a prototype specimen mapping workstation, the TracCell 2000,
which automatically pre-screens Pap smears to locate and eliminate from the
scope of review empty space and certain non-clinically relevant portions of the
specimen. The Company expects to file a 510(k) Notification with the FDA for the
TracCell 2000 by the end of 1996. The Company has recently entered into an
agreement with Olympus America, a leading supplier of microscopes to the
cytopathology market, pursuant to which Olympus America has exclusive third
party distribution rights to the AcCell Series 2000 and, if successfully
developed and cleared for marketing by the FDA and other applicable foreign
regulatory authorities, TracCell 2000 in the Olympus Territory.
The Company also develops, manufactures and markets IN VITRO diagnostic
tests for the clinical laboratory, veterinary and pharmaceutical markets. The
Company offers the microbiology laboratory a variety of FDA-cleared products,
under the tradename Sensititre, for the MIC/ID testing of bacteria suspected of
causing infections and for measuring the susceptibility of such bacteria to
different types and concentrations of antibiotics. AccuMed's microbiology
products include disposable test kits and a range of automated instruments. The
Company also markets alamarBlue, a proprietary, non-toxic indicator reagent that
measures cell growth for IN VITRO testing. The Company is developing an
automated instrument designed to read the results of a Kirby-Bauer method
susceptibility test and, pursuant to an agreement with RADCO, is developing a
microbiology diagnostic panel and an automated reading instrument. There can be
no assurance that any of such products will be successfully developed.
AccuMed's objective is to establish the AcCell Series 2000 and TracCell 2000
as the leading microscopy workstations for the primary screening and analysis of
cytology specimens while developing new cytopathology and microbiology product
offerings. The key elements of the Company's strategy include: (i) establishing
the AcCell Series 2000 and, if cleared for marketing, the TracCell 2000 in the
worldwide Pap smear testing market through distribution agreements and strategic
alliances with major market participants, (ii) exploiting other applications for
the Company's cytopathology technology such as histology and pathology
laboratory work, (iii) continuing to acquire, develop and enhance technologies
that complement the Company's existing technology base and (iv) integrating the
Company's proprietary microbiology technologies into new products.
CYTOPATHOLOGY
CERVICAL CANCER SCREENING
An estimated 440,000 new cases of cervical cancer are reported annually
worldwide. The American Cancer Society estimates that, in 1996 in the United
States, 15,700 women will be diagnosed with invasive cervical cancer and 4,900
women will die of cervical cancer. However, virtually all cervical cancer cases
can be effectively treated with timely intervention if detected early.
Furthermore, in 1996, an estimated 65,000 American women will be diagnosed with
cervical carcinoma IN SITU, a precancerous condition. The treatment of cervical
cancer after it reaches the invasive stage, however, may require surgery and
chemotherapy or radiation treatments, which are difficult, expensive and may be
unsuccessful. Cervical cancer is preceded by curable precancerous lesions that
progress without symptoms over a period of years until they become invasive,
penetrating the cervical epithelium (cellular covering) and entering the
bloodstream or lymph system. In order to detect these precancerous lesions,
gynecologists in the United States typically recommend annual screening
examinations for all women over the age of 18. The Pap smear test is currently
the most widely-used screening test for early detection of cervical cancer and
related precancerous conditions. Pap smear tests are generally performed by an
estimated 4,500 clinical laboratories in the United States, including hospital
laboratories, commercial laboratories, reference
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laboratories and gynecologists' office laboratories. It is estimated that in
1996, over 150 million Pap smear specimens will be screened worldwide, including
over 50 million in the United States. According to the American Cancer Society,
widespread and regular use of the Pap smear as a screening test is believed to
have contributed to a greater than 70% decrease in mortality from cervical
cancer in the United States in the past 45 years.
PAP SMEAR TESTS
The conventional Pap smear testing process begins with the collection of a
cervical specimen during a gynecological examination. The physician then
manually smears the specimen onto a clean microscope slide, which is then
submitted to the clinical laboratory for cytopathological microscopic
examination, along with patient data such as medical history, day in menstrual
cycle, family history and known risk factors. Gathering and collating these
patient data, which are critical to the proper evaluation of a specimen, is a
time-consuming and labor-intensive process at both the physician's office and
the laboratory. The laboratory administrative personnel who gather such data are
also responsible for manually recording the results of the Pap smear tests and
ensuring that both the slide and paperwork provided to the cytotechnologist
relate to the same patient.
At the laboratory, a cytotechnologist, a medical professional with special
training in the examination and interpretation of human cells, conducts an
initial microscopic review of a prepared slide. The cytotechnologist screens
each slide with a microscope to differentiate diseased or abnormal cells from
healthy cells based on numerous physical characteristics, including size, shape
and structural details of the cells and nuclei. Other factors considered are the
texture of the specimen, the structure of cell grouping, background of the smear
and the patient medical data supplied by the referring physician. Typically,
each Pap smear specimen is then classified in accordance with The Bethesda
System for Reporting Cervical/Vaginal Cytologic Diagnoses into one of several
categories ranging from normal (negative) to cancerous. Any specimen classified
as other than negative is generally referred to a senior cytotechnologist and
then a pathologist for further review and final diagnosis. A woman with an
abnormal Pap smear test may have a repeat Pap smear test or undergo costly
colposcopy and biopsy procedures.
Cytotechnologists are regulated under CLIA, which requires cytology
laboratories to perform proficiency testing and quality control by testing
cytotechnologists to assure a minimum competence level. Pap smear screening is
exceedingly complex and tedious work. Cytotechnologists are required by CLIA to
screen 100% of each Pap smear slide, which when done correctly takes six to
eight minutes of microscope viewing per slide. Over 90% of specimens reviewed
are negative. Even non-negative specimens may contain only 20 or 30 abnormal
cells out of a total of as many as 50,000 to 300,000 cells on the slide. As a
result, slide interpretation errors can be caused by fatigue of the
cytotechnologist and the habituation effect of constantly viewing predominately
negative specimens. To potentially reduce the effects of fatigue and
habituation, CLIA limits to 100 the number of slides that a cytotechnologist is
permitted to screen in a day, and many states and foreign countries require
fewer screenings per day. Although CLIA permits a cytotechnologist to review up
to 100 slides per day, management estimates that, as a practical matter, the
manual review process requiring 100% slide review limits the ability of the
cytotechnologist to reviewing an average of 60 slides per day.
In conducting the conventional Pap smear test, cytotechnologists are
required to locate and review information from the patient's file, load and
position the slide on the microscope stage, manually move the slide and
continually focus the microscope on as many as 400 fields of view per slide.
They then place a mark on selected abnormal cells on the slide and manually
record the diagnosis. CLIA requires that at least 10% of specimens, classified
as negative be rescreened for quality control. Rescreening is accomplished
either by the methods described above or by rescreening instruments. See "--
Competition."
CONVENTIONAL PAP SMEAR TEST LIMITATIONS
The conventional Pap smear testing process has significant limitations,
primarily relating to how individual cytotechnologists and administrative
personnel analyze slides, diagnose, record the results of
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such analysis, document the screening process and gather and collate relevant
patient data. Any breakdown in this process could result in slide interpretation
errors, administrative errors and increased potential for litigation/liability
risks.
SLIDE INTERPRETATION ERRORS. The process of screening and interpreting a
Pap smear test is complex and tedious, and is prone to error due to the
difficulty of properly locating, evaluating and categorizing subtle changes in a
very small number of cells among a vastly larger cell population as well as the
fact that most of the specimens reviewed are classified as negative. In
addition, cytotechnologists are usually encouraged by laboratory economics to
review as many slides as possible within the current CLIA constraint of 100 per
day. As a result, slide interpretation errors can be caused by cytotechnologist
fatigue and the habituation effect of constantly viewing predominantly negative
specimens. A false negative diagnosis may allow the disease to progress to a
later stage of development before being detected, thereby requiring a more
expensive and invasive course of treatment and diminishing the likelihood of
successful treatment. According to the JOURNAL OF THE AMERICAN MEDICAL
ASSOCIATION, clinical laboratories generally experience false negative rates of
5% to 30%.
ADMINISTRATIVE ERRORS. Gathering accurate patient data and ensuring that
the data are correctly matched with the patient's slides provide significant
administrative challenges. Laboratories employ full-time administrative
personnel to assemble patient data, enter patient data on a physical report and
collate that data with the corresponding slide. However, the volume of
information that must be processed and organized manually can lead to
mismatching errors which, in turn, may lead to diagnostic errors.
LITIGATION/LIABILITY RISKS. Failure by a laboratory to properly diagnose a
Pap smear specimen can result in significant legal liability. Because there are
no current means to objectively demonstrate what procedures were conducted by
the cytotechnologist or that 100% of the slide was reviewed, suits claiming
negligent misdiagnosis are difficult to defend and may result in unwarranted
liability.
CYTOPATHOLOGY PRODUCTS
AccuMed's primary focus is on the development and marketing of cytopathology
products that support the review and analysis of cervical Pap smears, including
slide management and mapping and critical data management functions. The
Company's products are designed to automate multiple aspects of the Pap smear
screening process without significantly modifying existing laboratory practices.
The Company's current cytopathology products are the AcCell Series 2000
workstations. The Company has developed and is currently testing a prototype of
the TracCell 2000 slide mapping workstation. The Company is developing software
and hardware for a second generation, fully automated, high volume, mapping
product, the TracCell 3000, to augment its workstation product offering. The
Company is also developing a series of educational and testing products.
THE ACCELL SERIES 2000. The AcCell Series 2000 workstations consist of the
AcCell 2000 and AcCell 2001. The AcCell 2000 is an interactive
computer-controlled slide handling and precision microscopy workstation that is
supported with comprehensive data management capabilities. The workstation
consists of a high quality precision microscope (supplied by the Company or the
customer), a computer-controlled moveable stage, a bar code reader, a
proprietary slide marking mechanism (the "dotter"), an optional personal
computer for the data management system and a stage-control mouse developed by
the Company. The system operates in a Microsoft Windows-Registered Trademark-
environment using the Company's proprietary software. The AcCell 2001 contains
all the features of the AcCell 2000 in addition to an automated cassette slide
loading and unloading system which handles up to 30 slides per cassette. The
AcCell 2001 is designed to be used in conjunction with a TracCell 2000.
The AcCell Series 2000 can be linked to the gynecologist's office and to the
laboratory's internal information system in order to provide computerized
support, from the time of entering patient information when the specimen is
taken through the time of generating reports at the laboratory and doctor's
office and finally to billing of the patient or payor. After specimen collection
by the gynecologist, using software provided by the Company through the
laboratory either on a network or on a disk, the
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gynecologist's staff enters the patient's relevant medical history into the
system and generates a bar code that is placed on the slide and the hard copy of
the work order sent with the slide to the laboratory. The bar code contains
basic patient information such as the patient's name and date of specimen
collection. The slides and patient data, either in electronic format or hard
copy, are then transferred from the gynecologist to the clinical laboratory for
review.
At the laboratory, the slide is assigned by the laboratory administrator to
the cytotechnologist for review. The slide is placed, either manually or
automatically, on the AcCell stage and is read by the bar code reader to ensure
that proper patient data is displayed on the computer monitor for
cytotechnologist review. The slide is then automatically moved under the
microscope, and the microscope is power-focused by the cytotechnologist. The
AcCell Series 2000 automatically moves the stage under the microscope in a
pattern and at a speed selected by the cytotechnologist, that the
cytotechnologist can override at any time. As the slide is moved under the
microscope, the cytotechnologist records into the system's memory the exact
coordinates of abnormal cells by clicking a button on the stage-control mouse.
At the conclusion of the review, selected abnormal cells are automatically
marked by the dotter with a small physical dot on the slide so that they may be
relocated easily for further manual review. The AcCell Series 2000 will record a
complete analysis only after 100% of the slide has been scanned or a sufficient
number of abnormal cells have been located to designate the slide as potentially
positive. Typically, review of a single slide takes five to seven minutes using
the AcCell Series 2000.
After completing review of the slide, the cytotechnologist selects the
appropriate diagnosis from a table in the data management system. The data
management system records all aspects of the Pap smear screening and saves the
information for future review. The AcCell Series 2000 generates management
reports, records the exact location of marked cells for a given specimen,
digitally stores relevant information and provides full documentation for
laboratory quality control and regulatory compliance. The Company believes that
by providing a variety of automated features and a comprehensive data management
system, the AcCell Series 2000 has the potential to reduce the risk of human
slide reading and administrative error.
To extend the functionality of the AcCell Series 2000, numerous system
configuration options are available, and multiple workstations can be networked
together within a laboratory. The MacroVision-TM-, a proprietary image
enhancement system, can be attached to the AcCell platform in order to allow a
cytotechnologist to view on a monitor the specimen being reviewed under the
microscope. The Company is currently developing proprietary telepathology
software which, if developed, would enable the AcCell workstation to be operated
remotely using the Company's MacroVision product.
Although the Pap smear test is the largest volume cytology test, the
cytopathology laboratory routinely conducts other tests based on samples from
numerous organs and areas of the body, all of which require precision microscopy
and careful management of data to be effectively implemented. Although, to date,
the Company has not developed any products for these applications, the Company
believes that its AcCell technology may be adapted for use in connection with
the analysis of these tests in a manner similar to that of Pap smear tests.
THE TRACCELL 2000. The Company has developed a prototype of the TracCell
2000 pre-screening, mapping and slide handling product designed to identify and
create a computerized map of empty space and certain non-clinically relevant
areas on the slide and thereby reduce the amount of matter on the specimen that
must be reviewed by the cytotechnologist using the AcCell Series 2000. Much of
the material contained in a Pap smear specimen is not clinically relevant to
cervical cancer screening. In addition to human cells, a typical Pap smear slide
contains a certain amount of vacant space, blood, mucus and other non-clinically
relevant material. Currently, the cytotechnologist is required to review all
portions of the slide, including those portions that are not relevant to
diagnosis, because there is no basis upon which to distinguish such material
until it is reviewed under the microscope.
The TracCell 2000 is designed to first evaluate whether a sample is properly
stained and has sufficient material to be statistically significant. The
TracCell 2000 then automatically pre-screens the slide to locate and create a
computerized map of empty space and certain non-clinically relevant material. In
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tests conducted by the Company, it has been demonstrated that the TracCell 2000
can eliminate from 15% to 50% of the slide area to be reviewed. As a result, the
Company believes that the TracCell 2000 has the potential to reduce the time
needed to evaluate specimens and allow the cytotechnologist to focus on more
thoroughly evaluating potential abnormalities. See "Risk Factors -- Uncertainty
of Market Acceptance and Initial Investment in Cytopathology Products" and "--
Government Regulation."
The TracCell 2000 is designed to be used before the slide is reviewed using
the AcCell 2001. A single TracCell 2000 is designed to support up to five AcCell
2001 instruments based on normal laboratory usage. The TracCell 2000 creates a
pre-screening pattern for the slide based on the computerized map, which is used
by the AcCell 2001 to automatically move the slide to the relevant area and
automatically focus the microscope during the cytotechnologist's review. If the
cytotechnologist wants to alter the prescreened sequence, he or she can override
the system for a particular slide. Regardless of whether the cytotechnologist
chooses to override the prescribed sequence, the system is designed to
facilitate and document 100% review of the slide. The TracCell 2000, if
successfully developed and cleared for marketing, will be marketed with software
for which the laboratory will pay a software license fee each time a slide is
reviewed.
The Company is currently testing the TracCell 2000 with the goal of
supporting the filing of a 510(k) Notification by the end of 1996. There can be
no assurance that the testing will be successfully completed, that the 510(k)
Notification will be submitted to the FDA on a timely basis, if ever, that the
FDA or other applicable regulatory authorities will clear the TracCell 2000 or
that the TracCell 2000 will be successfully marketed. See "Risk Factors --
Uncertainty of Market Acceptance and Initial Investment in Cytopathology
Products" and "-- Government Regulation."
THE TRACCELL 3000. The Company is developing a second generation specimen
pre-screening and slide mapping product, the TracCell 3000, to further automate
the mapping process. The TracCell 3000, if successfully developed, will
eliminate not only empty space, debris and other material eliminated by the
TracCell 2000, but will also eliminate certain normal cellular material. The
Company believes, based on preliminary studies it has conducted, that the
technology embodied in the TracCell 3000 may be capable of further reducing the
portion of the specimen required to be reviewed by the cytotechnologist. The
TracCell 3000 is being designed to accommodate automated mapping of 500 slides
per eight hour period. Further testing and development and additional resources
are necessary to determine whether a commercially viable TracCell 3000
instrument can be developed. Development of the TracCell 3000 is subject to all
of the risks associated with the development of new products based on innovative
technologies and new software, including unanticipated technical or other
problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a change in the design,
delay in the development, or abandonment of such products. There can be no
assurance that the Company will successfully develop the TracCell 3000, that the
TracCell 3000 will be cleared or approved for marketing by the FDA or other
applicable regulatory authorities, or that the TracCell 3000 will be
successfully marketed. See "Risk Factors -- Uncertainty of Market Acceptance and
Initial Investment in Cytopathology Products" and "-- Government Regulation."
CYTOPATHOLOGY EDUCATIONAL AND TRAINING PRODUCTS. The Company has recently
developed the MacroVision feature, a specially modified AcCell product for
on-screen specimen review. This system can also by used by teaching institutions
and laboratories which can provide effective hands-on cytotechnology training
through a single microscope. Cytotechnologists are required by CLIA to attain
and maintain minimum standards of competence, and cytology laboratories are
charged with ensuring that their cytology professionals meet such competency
standards through continuing training and testing. Current training and testing
involve the use of multiple microscopes or specialized microscopes equipped with
multiple eyepieces which are difficult to use. Using the MacroVision feature,
the teacher or trainer can display the specimen being reviewed on one or more
computer monitors. The monitor can be viewed directly by the students or can be
linked with other computers and monitors to provide remote or even off-site
viewing. For testing purposes, AccuMed is also developing a glass slide
Proficiency Testing Station that provides automated scoring of the screener's
locator and identification skills on user defined test slide sets.
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In addition, the Company is developing the Relational Cytopathology
Reference Guide (the "Reference Guide"), a library of electronically stored,
digitized cell images. The Reference Guide may be used in training to allow
students to analyze typical and atypical specimens as slides are being reviewed.
In the clinical laboratory, the Reference Guide is being designed to provide a
reference database to assist the cytotechnologist and cytopathologist in Pap
smear analysis. The Company also intends to develop a customized tutorial
program expected to generate computer-controlled interactive training modules
for specific learning needs of individual screeners. Each of the Company's
educational products is being designed to record and document continuing
education activity to assist in compliance with CLIA requirements.
POTENTIAL ACQUISITION OF INTEREST IN ONCOMETRICS
On July 3, 1996, the Company entered into a letter of intent to acquire a
two-thirds equity interest in Oncometrics for aggregate consideration of $4.0
million in cash.
Oncometrics was formed in 1995 as a wholly-owned subsidiary of Xillix to
complete the development of an automated instrument designed to be used in the
detection, diagnosis and prognosis of early-stage cancer by measuring the DNA in
cells on microscope slides. Oncometrics is developing a proprietary high
resolution image cytometer that uses a solid state microscope, a high resolution
digital camera, proprietary image analysis software and high speed computer
processors to capture and analyze cell images from a microscope slide that has
been stained using Oncometrics' proprietary staining method. Prototypes of the
Oncometrics instrument have been developed that are capable of isolating small
variations in cell nucleus DNA, which assists the cytotechnologist in detecting
lung cancer in an early stage of development. Because the presence of cancer
cells can cause changes in the nuclear DNA of normal cells, in some cases the
Oncometrics instrument can detect cancer even in the absence of cells with
visibly detectable disease.
Oncometrics has demonstrated the feasibility of its technology as it applies
to the detection of early cancer in lung mucus. Oncometrics believes that its
technology may be potentially applied to other types of cancer, such as cervical
cancer.
Oncometrics is currently testing several prototypes of its system with
scientists and cancer research institutions. There can be no assurance that
Oncometrics or the Company will successfully develop this system for lung or
cervical cancer applications or, if developed, that this system will be approved
for marketing by the FDA or other applicable regulatory authorities or that it
will be successfully marketed.
Of the consideration, $2.0 million would be paid to Xillix for currently
outstanding Oncometrics stock and $2.0 million would be paid to Oncometrics in
consideration for newly issued Oncometrics stock. The Company and Xillix are
expected to agree to provide operating funding to Oncometrics on a pro rata
basis, of which the Company's portion is estimated to be $1.0 million during the
24 months following the date of this Prospectus. If a definitive agreement can
be reached, the Company expects to use a portion of the net proceeds of the
Offering to fund the Oncometrics Acquisition. Consummation of the transaction
with Xillix is subject to various conditions, including consummation of the
Offering, execution of a definitive agreement, and satisfactory due diligence
review. There can be no assurance that the transaction will be consummated. See
"Use of Proceeds."
CYTOPATHOLOGY SALES AND MARKETING
Pap smear testing is performed in approximately 4,500 laboratories in the
United States. The Company is currently marketing AcCell Series 2000
workstations to the clinical laboratory market, primarily in the United States.
In order to expand its markets, the Company is implementing a dual-track
marketing strategy pursuant to which it intends to enter into distribution
arrangements with major market participants, as well as establish a direct
marketing group to support the marketing activities of its distribution
partners. The Company intends to tailor its marketing strategy by region and
country as appropriate to address significant differences among such markets.
The AcCell Series 2000 is distributed in the Olympus Territory by Olympus
America pursuant to an exclusive agreement entered into in May 1996. The Company
currently has a two-person direct cytopathology sales force and is planning to
add additional sales personnel to support distributors of its products.
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Olympus America is a leading supplier of precision microscopes to the
cytology market in the United States and throughout the Olympus Territory. The
Olympus Agreement grants to Olympus America exclusive third party distribution
rights to the AcCell Series 2000 and the TracCell 2000, currently being tested,
in the Olympus Territory through May 1999. These products are expected to be
incorporated with the Olympus microscope and marketed under and labeled with the
Olympus America and AcCell names. The Olympus Agreement permits the Company to
conduct direct sales efforts in the United States and direct or indirect sales
efforts throughout the world. Olympus America is required to purchase specified
minimum units of the AcCell Series 2000 in each year of the term, although
direct sales by the Company in the Olympus Territory can be used to satisfy the
minimum purchase obligation. Olympus America has a right of first refusal to
distribute in the Olympus Territory certain additional cytopathology products
that may be developed by AccuMed. The Company's direct sales staff will work in
concert to train the Olympus America sales team and support their efforts at
industry trade shows and conventions, and will be compensated directly by
Olympus America for providing training and installation support for the
distributed products.
MICROBIOLOGY
The Company develops, manufactures and markets IN VITRO diagnostic tests for
the clinical laboratory, veterinary and pharmaceutical markets. The Company
offers the microbiology laboratory a variety of FDA-cleared products, under the
tradename Sensititre, for identifying bacteria suspected of causing infections
and measuring the susceptibility of such bacteria to different types and
concentrations of antibiotics. AccuMed's microbiology products include a series
of disposable test kits and a range of automated instruments. The Company also
markets alamarBlue, a proprietary, non-toxic indicator reagent that measures
cell growth for IN VITRO testing. The Company is developing an automated
instrument designed to read the results of a Kirby-Bauer method susceptibility
test. In conjunction with RADCO, the Company is also developing a diagnostic
microbiology test panel and an automated reading instrument. There can be no
assurance that any of such products will be successfully developed, that such
products will be cleared or approved for marketing by the FDA or other
applicable regulatory authorities, or that such products will be successfully
marketed. See "Risk Factors -- Delayed or Unsuccessful Product Development" and
"-- Government Regulation."
BACKGROUND
MIC/ID testing by hospitals and laboratories assists physicians, other
health care professionals and veterinarians in determining the most effective
course of treatment for bacterial infections. MIC/ID testing technology measures
the ability of organisms or cells to grow in different combinations and
concentrations of an antibiotic or other introduced substance. By measuring
growth, MIC/ID testing products can, for example, provide physicians and
veterinarians guidance in determining which antibiotics are most effective in
treating a given case of bacterial infection.
Current MIC/ID testing technology consists of a variety of methodologies
employing a plastic panel with a matrix of testing microwells and the
Kirby-Bauer disk diffusion method. Panel testing technology involves the
placement of a solution known as a "reagent" containing selected antibiotics in
a matrix of microwells and adding to each microwell a broth which contains a
sample of the patient's blood or other fluid in which bacteria may be present.
After an incubation period, the effectiveness of the antibiotic can be
determined by observing chemical changes to the solution. By constructing a
matrix of testing wells with specific antibiotics in increasing concentrations,
it is possible to determine not only the effectiveness of a given antibiotic but
also the minimum required dosage. Kirby-Bauer testing involves placing paper
disks impregnated with a selected antibiotic in a culture containing bacterium
and observing, after the incubation period, whether the bacterium continues to
grow in proximity to the disk. The results of such a test determine whether a
given antibiotic is effective against the bacterium but offer no information as
to the minimum dosage required.
MICROBIOLOGY PRODUCTS
SENSITITRE. Sensititre, which was acquired by the Company in 1995, first
began offering MIC/ID testing products over 15 years ago. Sensititre was one of
the first companies to introduce a range of
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systems for MIC/ID testing utilizing microwell panel technology. The Sensititre
products incorporate a range of accessories including substrate strips, dosing
heads, broths, and test panels for both susceptibility and identification
applications. The Sensititre panels have significant advantages over competitors
including a two-year shelf life and the ability to be stored at room
temperature. The Sensititre product line also includes four automated
instruments, each of which uses compatible technologies, and allows customers to
upgrade without replacing the entire system. The AutoReader-TM- is a
microprocessor-based fluorimeter designed to automatically and rapidly measure
intensity levels of fluorescence from MIC/ID testing panels. ARIS-TM- is a fully
automated panel handling, incubating and reading instrument that offers robotic
processing of testing plates. SensiTouch-TM- is a device that guides the user
through the manual reading of Sensititre susceptibility test panels and
transmits the data to a host computer. The AutoInoculator-TM- is a rapid
microprocessor-controlled dispensing instrument designed to automatically
deliver the proper amount of the patient's specimen to a Sensititre test panel.
The Company also offers the Sensititre Automated Microbiology System, which is a
sophisticated data management system that provides a wide range of data tracking
and reporting capabilities.
ALAMARBLUE. The Company manufactures and markets alamarBlue, a proprietary,
non-toxic, water-soluble indicator reagent that measures cell growth for IN
VITRO testing. alamarBlue has applications in biological research, bacteria
testing, toxicity testing for consumer products, and pharmaceutical and
therapeutic research. For example, companies that produce consumer products such
as soaps, shampoos, lotions or cosmetics can conduct IN VITRO cell culture
toxicity tests in lieu of live animal testing. Until recently, the Company
marketed a series of MIC/ID panel tests using alamarBlue under the tradename
Alamar. The Company has determined that continuing to manufacture and sell
Alamar MIC/ID products it is not desirable and has ceased manufacturing and
marketing these products. The Company may resume marketing Alamar MIC/ID
products or may license the manufacture of Alamar MIC/ID products to a third
party in the future, although there can be no assurance to that effect.
In October 1995, the Company entered into the License Agreement with Becton
pursuant to which Becton has rights in and to the Company's alamarBlue
technology and related trade secrets, know-how and patent rights (the "Licensed
Technology") for the production and sale of disposable anti-microbial testing
panels. The worldwide license is exclusive to Becton for certain applications in
the microbiology market; however, the license permits the Company to continue to
practice all rights in the Licensed Technology, subject to certain restrictions
on the Company's ability to sublicense the Licensed Technology or to engage in
significant transactions with substantial competitors of Becton. Becton is
obligated to pay royalties on net sales of any product which encompasses or
incorporates the Licensed Technology for five years following the first
commercial use of the Licensed Technology, subject to certain conditions and
restrictions, and Becton has paid the Company a total of $3.5 million, which
includes $500,000 creditable against future royalties. To the Company's
knowledge, as of the date of this Prospectus, Becton has not produced or sold
any products incorporating the Licensed Technology. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
KB READER. In February 1996, the Company entered into a joint venture with
Biokit, S.A., Barcelona, Spain, to develop a low cost KB Reader designed to read
automatically the results of a Kirby-Bauer method susceptibility test.
Currently, most laboratories interpret the results of a disk diffusion test
visually and manually enter the test result. The Company has licensed from
Biokit, S.A. certain software algorithms that are intended to be integrated into
the hardware being developed by the Company. The Company has developed a
prototype KB Reader and expects to begin clinical trials by the end of 1996. The
Company has an exclusive worldwide license to manufacture and market the KB
Reader, except that only Biokit, S.A. can sell the KB Reader in Italy.
Development of the KB Reader is subject to all of the risks associated with the
development of new products based on innovative technologies and new software,
including unanticipated technical or other problems and the possible
insufficiency of the funds allocated for the completion of such development,
which could result in a change in the design, delay in the development, or
abandonment of such products. Consequently, there can be no assurance that the
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KB Reader will be successfully developed, that the KB Reader will be cleared for
marketing by the FDA or other applicable regulatory authorities or successfully
marketed. See "Risk Factors -- Delayed or Unsuccessful Product Development" and
"-- Government Regulation."
POTENTIAL ACQUISITION OF RADCO
In March 1996, the Company and certain investors formed RADCO for the
purpose of developing a diagnostic microbiology test panel and an automated
reading instrument. The RADCO automated product, if developed, would allow
AccuMed to provide a single product to both low-end and high-end volume users.
RADCO was initially capitalized through the private placements of units
consisting of an aggregate of 400,000 shares of RADCO common stock (the "RADCO
Stock"), 10% promissory notes in the aggregate principal amount of approximately
$1.2 million (the "RADCO Notes"), and warrants to purchase an aggregate of
687,500 shares of AccuMed Common Stock with a weighted average exercise price of
$3.73 per share. In consideration for issuance of such warrants, the Company
received 10% of the outstanding RADCO Stock. The Company is negotiating to
acquire the outstanding RADCO Stock not owned by it and the outstanding RADCO
Notes for an aggregate purchase price of approximately $1.4 million in cash. If
a definitive agreement can be reached, the Company expects to use a portion of
the net proceeds of the Offering to fund the RADCO Acquisition. Consummation of
the transaction is subject to various conditions, including consummation of the
Offering and execution of a definitive agreement. There can be no assurance that
the transaction will be consummated. The Company's research indicates that the
RADCO system may be feasible; however, development of the RADCO diagnostic test
panel and automated reading instrument is subject to all of the risks associated
with the development of new products based on innovative technologies and new
software, including unanticipated technical or other problems and the possible
insufficiency of the funds allocated for the completion of such development,
which could result in a change in the design, delay in the development, or
abandonment of such products. Consequently, there can be no assurance that the
RADCO products will be successfully developed, cleared for marketing or
successfully marketed. See "Risk Factors -- Delayed or Unsuccessful Product
Development" and "-- Government Regulation."
MICROBIOLOGY SALES AND MARKETING
The Company's Sensititre products are marketed in the pharmaceutical,
veterinary laboratory and clinical/hospital reference laboratory markets. The
Company markets alamarBlue to industrial and research customers, including the
biotechnology industry. The Company markets its microbiology products in the
United States with a seven-person direct sales staff and in certain foreign
countries through exclusive diagnostic manufacturers and distributors. Most
sales to the veterinary market are through direct sales. alamarBlue is being
marketed by the Company, primarily to industrial and research customers,
directly through advertising and trade shows.
COMPETITION
The Company believes that the principal competitive factors in the market
for both cytopathology and microbiology products include functionality and
features of product, effectiveness of the product in standard medical practice,
the cost of the product to the laboratory and the demonstrated cost/benefit
justification for purchasing new products. The Company believes that it is also
important to provide products that enhance and assist standard practice rather
than products that require completely new practices. The Company believes that
it competes favorably with respect to these factors. In particular, the Company
has developed a model which is designed to demonstrate, on a test-by-test basis,
the potential increased profitability a laboratory may experience by using the
AcCell Series 2000 and TracCell 2000. With respect to its cytopathology
products, the Company also competes by developing products that in many cases
are designed to work with products offered by competitors of the Company.
Automated solutions, which are by necessity limited to an analysis of the Pap
smear specimen against a pre-programmed range of cells, still require
examination, interpretation and diagnosis by a cytotechnologist, which can be
accomplished using the AcCell Series 2000. The AcCell Series 2000 is also
compatible with other Pap smear testing techniques, such as monolayer
preparation slides.
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The Company's AcCell Series 2000 currently faces, and the TracCell 2000, if
successfully developed and cleared for marketing, will face, competition from
companies that have developed or may be developing competing systems. The
Company believes that many of the Company's existing and potential competitors
possess substantially greater financial, marketing, sales, distribution and
technical resources than the Company, and more experience in research and
development, clinical trials, regulatory matters, manufacturing and marketing.
The Company is aware of two companies that currently market imaging systems to
re-examine or rescreen conventional Pap smear specimens previously diagnosed as
negative as well as two companies that are developing devices for the
preparation and analysis of Pap smear slides. The Company is aware that at least
one such company has submitted an imaging system for use as a primary means of
screening Pap smear slides under a PMA application. Another company markets a
manual rescreening test claimed to detect the presence of cervical cancer using
reagents to detect certain RNA/DNA hybrid cells. If any company currently
marketing rescreening products receives FDA clearance or approval for use of its
product as a primary screening system to replace or work in conjunction with
conventional Pap smear testing or if automated analysis systems are developed
and receive FDA clearance or approval, the use of conventional Pap smear tests
could be substantially affected and the Company's business, financial condition
and results of operations would be materially adversely affected.
The market for the Company's current and, if developed, proposed
microbiology products is highly competitive, and the Company competes with
numerous well-established foreign and domestic companies, many of which possess
substantially greater financial, technical, marketing, personnel and other
resources than the Company and have established reputations for success in the
development, sale and service of manual and/or automated IN VITRO diagnostic
testing products. A significant portion of the MIC/ ID testing market in the
United States is controlled by MicroScan and bioMerieux Vitek. These companies
market a range of medically related products and have resources far greater than
those of the Company. Difco has been issued a U.S. patent covering technology
related to the alamarBlue technology covered in one of the Company's patents.
There can be no assurance that Difco, which has substantially greater resources
and experience in research, development, manufacturing and marketing than the
Company, will not use its patented technology to develop products that will
compete directly with the Company's microbiology products.
The medical diagnostic industry is characterized by rapid product
development and technological advances. The Company expects its competitors to
continue to attempt to improve the design and performance of their current
products and to introduce new systems and processes with improved price/
performance characteristics. There can be no assurance that other technologies
or products that are functionally similar to those of the Company are not
currently available or under development, or that other companies with expertise
and resources that would encourage them to attempt to develop and market
competitive products will not develop new products directly competitive with the
Company's products. The Company's products could be rendered obsolete or
uneconomical by the introduction and market acceptance of competing products,
technological advances of the Company's current or potential competitors, or by
other approaches. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competition,
including the development and commercialization of new products and technology,
will not have a material adverse effect on the Company's business, financial
condition and results or operations.
MANUFACTURING
The Company assembles and tests its cytopathology products at its Chicago
manufacturing facility. The Company's microbiology products are manufactured at
the Company's GMP-approved manufacturing facility in England. The Company
believes that it has sufficient manufacturing capacity to meet production
requirements for the foreseeable future. Product components are purchased or are
custom fabricated by third party vendors. The Company has purchased and modified
the stage-control mouse for use with the AcCell Series 2000 but is currently
developing a proprietary stage-control mouse which it expects to manufacture
along with the AcCell Series 2000. The Company has only recently developed and
begun marketing and selling the AcCell Series 2000. The Company is also
currently developing the
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manufacturing processes for the TracCell 2000. There can be no assurance that
the Company will be able to sell sufficient numbers of systems or develop volume
manufacturing processes that will lead to the cost-effective manufacture of the
AcCell Series 2000 or TracCell 2000. See "Risk Factors -- Uncertainty of
Profitable Cytopathology Manufacturing."
Certain key components and raw materials used in the manufacturing of the
Company's products are currently provided by single-source vendors. Although the
Company believes that alternative sources for such components and raw materials
are available, any supply interruption in a single-sourced component or raw
material would have a material adverse effect on the Company's ability to
manufacture products until a new source of supply were qualified. There can be
no assurance that the Company would be successful in qualifying additional
sources on a timely basis, if ever, which would have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, an uncorrected impurity or supplier's variation in a raw material,
either unknown to the Company or incompatible with the Company's manufacturing
process, could have a material adverse effect on the Company's ability to
manufacture products. See "Risk Factors -- Dependence on Suppliers."
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on introducing
new products as well as enhancement of its existing products. The Company
believes that a commitment to research and development is critical to its
ability to achieve its strategic plan. During the fiscal years ended September
30, 1994 and 1995, the three month transition period ended December 31, 1995 and
the three months ended March 31, 1996, the amounts recorded for research and
development were $580,000, $387,000, $4.0 million and $4.0 million,
respectively. Of the amounts recorded for the three month transition period
ended December 31, 1995 and the three months ended March 31, 1996, $4.0 million
and $3.5 million, respectively, reflected certain significant non-cash charges
against operations representing the write-off of in-process research and
development acquired in connection with the Merger. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
INTELLECTUAL PROPERTY
The Company relies on a combination of patents, licensing arrangements,
trade names, trademarks, trade secrets and confidentiality agreements to protect
its intellectual property rights. As of the date of this Prospectus, the Company
has filed or been assigned eight U.S. patent applications covering aspects of
its cytopathology products. The Company holds certain licenses on several U.S.
and foreign patents and other intellectual property rights regarding aspects of
the technology embodied in the Sensititre product line and is the licensee of
certain automated cell analysis technology. The Company holds a U.S. patent and
has received a notice of intent to grant a related European patent with respect
to a portion of the alamarBlue microbiology technology.
None of the Company's patent applications has been granted as of the date of
this Prospectus, and there can be no assurance that any of such patent
applications will result in an issued patent. The Company may, in the future,
file additional patent applications; however, there can be no assurance that the
Company will be successful in obtaining approval of any future patent
applications it files with respect to its technologies. In addition, since
patent applications in the United States are maintained in secrecy until patents
issue, and since publications of discoveries in the scientific or patent
literature tend to lag behind actual discoveries by several months, the Company
cannot be certain that it or the relevant patent filer was the first creator of
inventions covered by pending patent applications or that such persons were the
first to file patent applications for such inventions.
There can be no assurance that the aforementioned patents, patent
applications and licenses will adequately protect the Company from potential
infringement by third parties. Such patents, patent applications and licenses
may cover only portions of the Company's technologies. Other portions may be in
the public domain or protectable only under trade secret laws. The Company has,
in the past, been
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required to undertake costly litigation to enforce its intellectual property
rights and, although the Company is not currently aware of any potential
infringment, there can be no assurance that the Company will not be required to
take action to enforce its rights in the future.
The Company also relies for protection of its intellectual property on trade
secret law and nondisclosure and confidentiality agreements with its employees,
consultants, distributors, researchers and advisors. There can be no assurance
that such agreements will provide meaningful protection for the Company's trade
secrets or proprietary know-how in the event of any unauthorized use or
disclosure of such trade secrets or know-how. In addition, others may obtain
access to, or independently develop, technologies or know-how similar to that of
the Company.
The Company's success will also depend on its ability to avoid infringement
of patent or other proprietary rights of others. The Company is not aware that
it is infringing any such rights of a third party, nor is it aware of
proprietary rights of others for which it will be required to obtain a license
in order to develop its products. However, there can be no assurance that the
Company is not infringing proprietary rights of others, or that the Company will
be able to obtain any technology licenses it may require in the future.
GOVERNMENT REGULATION
The Company's products and manufacturing processes are regulated by state
and federal agencies, including the FDA and comparable agencies in certain
states and other countries. United States regulatory requirements promulgated
under the FD&C Act provide that many of the Company's products may not be
shipped in interstate commerce without prior authorization from the FDA. Such
authorization is based on a review of the product's safety and effectiveness for
its intended uses. Medical devices may be authorized by the FDA for marketing in
the United States either pursuant to a 510(k) Notification or a PMA. The process
of obtaining FDA and other required regulatory clearances or approvals can be
time-consuming, expensive and uncertain, frequently requiring several years from
the commencement of clinical trials to the receipt of regulatory approval.
A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to existing products that are currently permitted to be marketed.
An applicant is permitted to begin marketing a product as to which it has
submitted a 510(k) Notification at such time as the FDA issues a written finding
of substantial equivalence. Requests for additional information may delay the
market introduction of certain of an applicant's products and, in practice,
initial approval of products can take substantially longer than the FDA pre-
market notification review period of 90 days.
A PMA consists of the submission to the FDA of information sufficient to
establish independently that a device is safe and effective for its intended
use. A PMA application must be supported by extensive data, including
preclinical and clinical trial data, as well as extensive literature to prove
the safety and effectiveness of the device. By statute, the FDA is required to
respond to a PMA within 180 days from the date of its submission; however, the
approval process usually takes substantially longer, often as long as several
years. During the review period, the FDA may conduct extensive reviews of the
Company's facilities, deliver multiple requests for additional information and
clarifications and convene advisory panels to assist in its determination.
FDA clearances and approvals, if granted, may include significant
limitations on the intended uses for which a product may be marketed. FDA
enforcement policy strictly prohibits the promotion of cleared or approved
medical devices for non-approved or "off-label" uses. In addition, product
clearances or approvals may be withdrawn for failure to comply with regulatory
standards or the occurrence of unforeseen problems following initial marketing.
Marketing of the AcCell Series 2000 in the United States does not require
FDA clearance or approval. Marketing of the TracCell 2000 in the United States,
however, will require pre-marketing clearance or approval. The Company
anticipates seeking such clearance through submission to the FDA of a 510(k)
Notification. The Company is currently conducting the required testing of the
TracCell 2000 and expects
41
<PAGE>
to submit a 510(k) Notification with respect to the TracCell 2000 by the end of
1996. There can be no assurance that the Company will successfully complete the
necessary testing on a timely basis, if ever, that the TracCell 2000 510(k)
Notification will be submitted to the FDA by the end of 1996, if ever, or that
the FDA will clear the TracCell 2000 for marketing in the United States on a
timely basis.
Marketing of the Company's MIC/ID microbiology products in the United States
requires FDA clearance through the 510(k) Notification process. With respect to
the Company's MIC/ID testing products, 510(k) Notifications must be filed and
cleared with respect to each antibiotic used. The Company may submit
applications to add individual antibiotics to those previously cleared as the
market warrants. However, there can be no assurance that clearances will
continue to be obtained or that obtained clearances will not be withdrawn.
Marketing of alamarBlue to the industrial and research markets does not require
FDA clearance or approval.
Marketing in the United States of the Company's proposed products currently
under development may require additional FDA clearances or approvals. For
example, the Company's proposed automated pre-screening, specimen mapping
workstation, the TracCell 3000, if developed, may not be sold in the United
States unless and until the Company has obtained FDA clearance or approval,
either through a 510(k) Notification or a PMA. In addition, marketing of the
Company's proposed KB Reader and other proposed microbiology products, if
developed, are likely to require FDA clearance through 510(k) Notifications. The
Company is currently conducting research and development with respect to such
products and has not yet begun clinical trials. There can be no assurance that
any such products will be developed and, if developed, that such products will
be cleared or approved for marketing or, if such clearance or approval is
received, that such clearance or approval will not be withdrawn. See "--
Cytopathology -- Cytopathology Products" and "-- Microbiology -- Microbiology
Products."
Sales of medical devices outside of the United States are subject to foreign
regulatory requirements that vary from country to country. The time required to
obtain approval by a foreign country may be longer or shorter than that required
for FDA approval, and the requirements may differ. Export sales of certain
devices that have not received FDA marketing clearance generally are subject to
both FDA export permit requirements and, in some cases, general U.S. export
regulations. In order to obtain FDA export permit, the Company may be required
to provide the FDA with documentation from the medical device regulatory
authority of the country in which the purchaser is located. No assurance can be
given that foreign regulatory approvals will be granted on a timely basis, or at
all. The Company intends to seek ISO 9001 qualification, an international
manufacturing quality standard, and to seek the "CE" mark for the AcCell Series
2000 and proposed products. The CE mark is recognized by countries that are
members of the European Union and the European Free Trade Association and,
effective in 1998, will be required to be affixed to all medical devices sold in
the European Union. The AcCell Series 2000 is expected to be certified as
complying with CE mark requirements upon completion of the CE mark qualification
process which is underway; however, no assurance can be given that the Company
will obtain the CE mark for the AcCell Series 2000 products or any proposed
products or satisfy ISO 9001 standards, or that any product which the Company
may develop or commercialize will obtain the CE mark or will obtain any other
required regulatory clearance or approval on a timely basis, if ever.
The Company is subject to certain FDA registration, record-keeping and
reporting requirements, and certain of the Company's manufacturing facilities
are obligated to follow FDA GMP guidelines and are subject to periodic FDA
inspection. The Company's facilities that manufacture FDA-cleared products
currently meet applicable GMP guidelines and other FDA guidelines. There can be
no assurance, however, that the facilities used to manufacture the Company's
products will continue to meet applicable GMP or other FDA guidelines.
Federal, state and foreign regulations regarding the manufacture and sale of
healthcare products and diagnostic devices are subject to future change. The
Company cannot predict what material impact, if any, such changes might have on
its business. Future changes in regulations or enforcement policies could impose
more stringent requirements on the Company, compliance with which could
adversely affect the Company's business. Such changes may relax certain
requirements, which could prove
42
<PAGE>
beneficial to the Company's competitors and thus adversely affect the Company's
business. In addition, regulations of the FDA and state and foreign laws and
regulations, including GMP guidelines, depend heavily on administrative
interpretations, and there can be no assurance that future interpretations made
by the FDA, or other regulatory bodies, with possible retroactive effect, will
not adversely affect the Company. See "Risk Factors -- Technological Change and
Competition."
In addition to the regulations directly pertaining to the Company and its
products, many of the Company's existing and potential customers are subject to
extensive regulation and governmental oversight. Regulatory changes in the
healthcare industry that adversely affect the business of the Company's
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances in the United States or internationally on a
timely basis, if ever. Delays in receipt of, or failure to receive, such
approvals or clearances, the loss of previously received approvals or
clearances, or failure to comply with existing or future regulatory requirements
would have a material adverse effect on the Company's business, financial
condition and results of operations.
EMPLOYEES
As of July 19, 1996, the Company had a total of 85 employees, of whom two
are part-time employees, in the following departments: 20 in general and
administrative, 14 in sales and marketing, 32 in manufacturing and 19 in
research and development. The Company considers its relations with its employees
to be good.
FACILITIES
The Company currently leases (i) a 5,088 square foot facility at 900 North
Franklin Street, Chicago, Illinois, pursuant to a lease expiring September 30,
2004, and (ii) an additional 3,110 square foot facility located at 920 North
Franklin Street, Chicago, Illinois, pursuant to a lease expiring September 30,
2004, each subject to renewal by the Company. The Company's executive offices
were relocated to the 900 North Franklin Street facility in July 1996.
Collectively, the Company's Chicago, Illinois facilities also house its research
and development facilities, an engineering laboratory and cytopathology product
assembly facilities.
The Company's also leases a 10,980 square foot facility in Westlake, Ohio,
pursuant to a five year lease expiring April 1, 2005 which is renewable by the
Company. Sensititre leases an 18,000 square foot microbiology manufacturing
facility in East Grinstead, West Sussex, England, pursuant to a lease expiring
in 2009.
The Company believes that its facilities are adequate for its proposed needs
though 1996 and that additional suitable space is likely to be available, if
required.
LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation and is not
aware of any pending or threatened litigation against the Company that could
have a material adverse effect upon the Company's business, operating results or
financial condition.
43
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and directors of the Company and their
ages, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --------- ------------------------------------------------------------
<S> <C> <C>
Peter P. Gombrich............................ 58 Chairman of the Board, Chief Executive Officer and President
Norman J. Pressman, Ph.D..................... 47 Senior Vice President of AccuMed and President,
Cytopathology Division
Michael D. Burke............................. 45 Senior Vice President of AccuMed and President, Microbiology
Division
Mark L. Santor............................... 42 Chief Financial Officer
Richard A. Domanik, Ph.D..................... 49 Senior Vice President
Dawn H. Grohs................................ 53 Senior Vice President, Cytopathology Division
John H. Abeles, M.D.......................... 51 Director
Harold S. Blue............................... 35 Director
Jack H. Halperin, Esq. (1)................... 50 Director
Paul F. Lavallee (1)......................... 56 Director
Joseph W. Plandowski......................... 55 Director
Leonard M. Schiller, Esq. (1)................ 54 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee and Compensation Committee.
EXECUTIVE OFFICERS
PETER P. GOMBRICH. Mr. Gombrich served as Acting Chief Executive Officer
and a director of the Company from the date of execution of the Merger
Agreement, April 21, 1995, until consummation of the Merger on December 29, 1995
(the "Merger Date"), at which time he became Chairman of the Board of Directors,
Chief Executive Officer and President. Mr. Gombrich founded AccuMed, Inc. in
February 1994, and, from then until the Merger Date, Mr. Gombrich served as
Chairman, President and Chief Executive Officer of AccuMed, Inc. Mr. Gombrich
was a consultant in the cytology and microbiology industries from August 1990
until forming AccuMed, Inc., serving companies including Accuron Corporation, a
designer of automated Pap smear screening systems. From July 1985 until November
1990, Mr. Gombrich was the President and Chief Executive Officer of CliniCom
Incorporated, a bedside clinical information systems company which he founded.
From 1982 until 1985, Mr. Gombrich was Executive Vice President of the ventures
group of ADC Telecommunications. From January 1980 until February 1982, Mr.
Gombrich was President of the pacemaker division of St. Jude Medical, Inc., a
company that he co-founded in 1976 and of which he served as Executive Vice
President from July 1976 to January 1980. Mr. Gombrich has more than 27 years of
experience in the healthcare industry. Mr. Gombrich has a B.S. degree in
electrical engineering and a M.B.A. degree from the University of Denver.
44
<PAGE>
NORMAN J. PRESSMAN, PH.D. Dr. Pressman has been a Senior Vice President of
AccuMed and President of the Company's Cytopathology Division since July 1996.
From July 1993 until joining the Company, Dr. Pressman was Manager for
Biotechnology Development, Strategic Business Development Group of Olympus
America, the exclusive distributor of the Company's AcCell Series 2000 and
TracCell 2000 in the Olympus Territory. Between July and September 1989, Dr.
Pressman was engaged in the formation of Cell Systems International, Inc., a
consulting firm in biomedical specimen collection, processing and analysis, of
which he served as President from September 1989 until July 1993. Dr. Pressman
was the lead research scientist in the Cytometry and Histometry program of the
Central Research and Development Department at E.I. du Pont de Nemours & Company
from December 1986 until July 1989. From September 1976 until December 1986, he
was an Assistant Professor (Pathology and Engineering) at The Johns Hopkins
University School of Medicine and Head of the Quantitative Cytopathology
Laboratories at The Johns Hopkins Medical Institutions. Dr. Pressman has a B.S.
degree in electrical engineering from Columbia University, a M.S. degree in
systems engineering and a Ph.D. in biomedical engineering from the University of
Pennsylvania.
MICHAEL D. BURKE. Mr. Burke has been a Senior Vice President of AccuMed and
President of the Company's Microbiology Division since the Merger Date. From May
1995 until the Merger Date, Mr. Burke was a Senior Vice President and President
of the Microbiology Division of AccuMed, Inc. From April 1992 until joining
AccuMed, Inc., Mr. Burke was Vice President -- Sales and Distribution, and from
November 1982 until April 1992 was Vice President -- Operations, for Picker
International, Inc., a diagnostic imaging manufacturer and supplier. Mr. Burke
has a B.A. degree in political science from Knox College.
MARK L. SANTOR. Mr. Santor has been Chief Financial Officer of the Company
since June 1991 and Secretary since November 1994. Mr. Santor has also served
the Company as Vice President, Finance and Operations from November 1992 until
June 1996, and as Assistant Secretary from May 1994 until November 1994. From
July 1989 until joining the Company, Mr. Santor served as Vice President,
Finance of Oncotech, Inc., a medical diagnostic company. From November 1987 to
June 1989, he served as Director of Finance of M.P.D.I., Inc., a provider of
magnetic resonance image scanning services and related software products. Mr.
Santor has a M.S. degree in materials engineering from M.I.T. and a M.B.A degree
from the Wharton School of Business. Mr. Santor's employment with the Company is
scheduled to terminate on August 30, 1996.
KEY EMPLOYEES
RICHARD A. DOMANIK, PH.D. Dr. Domanik has been Senior Vice President of
Technology of the Company since May 1996 and was Vice President of Technology
from the Merger Date until May 1996. From August 1994 until the Merger Date, Dr.
Domanik was Vice President of Engineering of AccuMed, Inc. From June 1979 until
joining AccuMed, Inc., Dr. Domanik served Abbott Laboratories in several
positions relating to research and development of healthcare products, including
Laboratory Manager and Research and Development Manager. Dr. Domanik has a B.S.
degree in chemistry from Ripon College and a Ph.D. in biochemistry from
Northwestern University.
DAWN H. GROHS. Ms. Grohs has been Senior Vice President of the Company's
Cytopathology Division since May 1996 and served as Vice President -- Corporate
Development of the Company's Cytopathology Division from the Merger Date until
May 1996. From March 1994 until the Merger Date, Ms. Grohs was a consultant to
AccuMed, Inc. From 1983 until August 1995, Ms. Grohs was President of The Med
Companies, a healthcare business development management company. Ms. Grohs has a
M.S. degree in mathematics from Memphis State University.
DIRECTORS
JOHN H. ABELES, M.D. Dr. Abeles has been a director of the Company since
October 1988. Since March 1996, Dr. Abeles has been the President and a director
of Health Care Acquisition Corp., a special purpose acquisition company. Since
1992, Dr. Abeles has also been a general partner of Northlea Partners, Ltd., an
investment and venture capital partnership. Since 1980, Dr. Abeles has also been
the President of
45
<PAGE>
MedVest, Inc., a medical consulting company. Dr. Abeles has a M.D. from the
University of Birmingham, England. Dr. Abeles is a member of the boards of
directors of I-Flow Corporation, Oryx Technology Corp. and DUSA Pharmaceuticals,
Inc.
HAROLD S. BLUE. Mr. Blue has been a director of the Company since July
1996. Since February 1993, Mr. Blue has been Chief Executive Officer and
Chairman of the Board of ProxyMed, Inc., a healthcare information technology
company. From July 1992 until February 1995, Mr. Blue served as Chairman of the
Board and Chief Executive Officer of Health Services of Miami Lakes, Inc.,
Health Services of Pembroke Lakes, Inc. and Health Services of North Miami,
Inc., each a physician practice management group. From June 1979 to February
1992, Mr. Blue was President and Chief Executive Officer of Budget Drugs, Inc.,
a retail discount pharmacy chain. From September 1984 to August 1988, Mr. Blue
was Executive Vice President of Best Generics Incorporated, a national generic
distribution company, which he co-founded.
JACK H. HALPERIN, ESQ. Mr. Halperin has been a director of the Company
since June 1991 and served as Chairman of the Board of Directors from April 1995
until the Merger Date. Mr. Halperin is a corporate attorney with expertise in
venture capital financing and has been practicing law independently since 1987.
Mr. Halperin has a B.A. degree in english from Columbia University and a law
degree from New York University School of Law. Mr. Halperin is also a member of
the boards of directors of Xytronyx, Inc., I-Flow Corporation and Memry
Corporation.
PAUL F. LAVALLEE. Mr. Lavallee has been a director of the Company since
December 1995. Since January 1996, Mr. Lavallee has served as a consultant to
Sigmedics, Inc., a biomedical company. From 1989 until December 1995, Mr.
Lavallee served as Chairman, President and Chief Executive Officer of Sigmedics,
Inc. Mr. Lavallee has a B.S. degree in biology from Bates College and a M.B.A.
degree from the University of Chicago.
JOSEPH W. PLANDOWSKI. Mr. Plandowski has been a director of the Company
since December 1995. He has been President of The Lakewood Group, a healthcare
consulting firm, since February 1995. From May 1993 until February 1995, Mr.
Plandowski was Vice President -- Acquisitions of National Health Laboratories
Inc., which owns clinical and anatomic laboratories nationwide. From October
1992 through May 1993, he was Chief Operating Officer of Nichols Institute, a
clinical reference laboratory. From February 1991 through October 1992, Mr.
Plandowski was President, Chief Executive Officer and a director of Genetrix,
Inc. Mr. Plandowski has a B.S. degree in mechanical engineering and a M.B.A.
degree from the State University of New York.
LEONARD M. SCHILLER, ESQ. Mr. Schiller has been a director of the Company
since April 1995. Since 1970, Mr. Schiller has been practicing real estate law,
specializing in contesting real estate taxes in the State of Illinois. Since
1980, he has also been President of The Dearborn Group, a residential property
management and real estate acquisition company. Mr. Schiller has a B.A. degree
in liberal arts from the University of Iowa and a law degree from the ITT Kent
College Law School.
46
<PAGE>
MEDICAL ADVISORY BOARD
AccuMed's Cytopathology Medical Advisory Board is composed of physicians,
scientists and professors who provide advisory consultation to the Company
regarding technology application, design, development, marketing and customer
support issues relative to the Company's cytopathology products.
<TABLE>
<CAPTION>
BOARD MEMBER POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
William J. Frable, M.D.................................. Director of the Division of Surgical & Cytopathology at
the Medical College of Virginia
Shirley E. Greening, M.S., J.D., CFIAC.................. Chairman and Professor of the Department of Laboratory
Sciences, Thomas Jefferson University
Heinz K. Grohs, M.D. ................................... Chairman, Associate Director of Pathology and Chief of
Cytopathology, North Shore Medical Center, Salem,
Massachusetts
L. Patrick James, M.D................................... Director of Laboratories, Health Midwest, Kansas City,
Missouri
Perry A. Lambird, M.D. ................................. President and Chief Executive Officer, PATHCOR, Oklahoma
City, Oklahoma
Bjorn Stenkvist, M.D., Ph.D. ........................... Director of Clinical Cytology, Karolinska Institute and
Hospital, Stockholm, Sweden
David S. Weinberg, M.D., Ph.D........................... Staff Pathologist, Department of Pathology, Brigham and
Women's Hospital, Boston, Massachusetts
</TABLE>
BOARD OF DIRECTORS
Directors are elected at each annual meeting to serve one-year terms.
Pursuant to the Merger Agreement, from the Merger Date until the next annual
meeting of stockholders of the Company, the Board of Directors is to be
comprised as follows: (i) Mr. Gombrich, as Chairman of the Board of Directors,
(ii) two directors designated by AccuMed, Inc., (iii) three directors designated
by Commonwealth Associates and American Equities Overseas, Inc. ("AEO"),
jointly, and (iv) one director selected mutually by the other six directors. In
accordance therewith, (i) Commonwealth Associates and AEO have designated
Messrs. Schiller, Blue and Halperin (who is legal counsel to AEO), (ii) AccuMed,
Inc. has designated Messrs. Lavallee and Plandowski, and (iii) the other six
directors selected Dr. Abeles to serve on the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS.
The Company has established Audit and Compensation Committees. Each of these
committees is responsible to the full Board of Directors, and its activities are
therefore subject to approval of the Board of Directors. The functions performed
by these committees are summarized below.
The Audit Committee is responsible for reviewing the Company's internal
accounting controls, meeting and conferring with the Company's certified public
accountants, and reviewing the results of the accountants' auditing engagement.
The Compensation Committee of the Board of Directors is comprised entirely
of "disinterested" directors (within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")). The
Compensation Committee determines base compensation and discretionary cash
bonuses for the Company's senior executives. These determinations are subject to
the approval or ratification of the full Board of Directors. The Compensation
Committee also determines the number and terms of stock options to be granted to
employees, directors and consultants of the Company under the Company' stock
option plans. See "-- Stock Option Plans."
47
<PAGE>
DIRECTOR COMPENSATION
Pursuant to the Board of Directors Compensation Plan (the "Board Plan"),
adopted by the Board of Directors on January 18, 1996, each non-employee
director is entitled to the following compensation for services as a director:
(i) an immediately exercisable, nonqualified stock option to purchase 20,000
shares of Common Stock to be granted upon appointment to the Board of Directors,
and (ii) an immediately exercisable, nonqualified stock option to purchase
20,000 shares of Common Stock to be granted on the first trading day of each
January thereafter during which a non-employee director continues to serve on
the Board of Directors. Such options are to be granted under the Company's 1995
Stock Option Plan or subsequent option plans. The exercise price per share shall
be the fair market value of a share of Common Stock on the date of grant.
Directors are reimbursed for reasonable expenses incurred in attending meetings
of the Board of Directors and committees thereof.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION. The following table sets forth
information concerning compensation paid or accrued for the fiscal years ended
September 30, 1993, 1994 and 1995 and the twelve months ended December 31, 1995
by the Company to or on behalf of the Chief Executive Officer and the only other
executive officer of the Company whose total salary and bonus for the fiscal
year ended September 30, 1995 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLES
<TABLE>
<CAPTION>
FISCAL ANNUAL
YEAR ENDED COMPENSATION/
NAME AND PRINCIPAL POSITION SEPTEMBER 30, SALARY
- ---------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Peter P. Gombrich ................................................................ 1995 $ 65,625
Acting Chief Executive Officer (1)
Kenneth D. Miller ................................................................ 1995 110,556
former Chief Executive Officer (2) 1994 114,000
1993 117,500
</TABLE>
- ------------------------------
(1) Mr. Gombrich became Acting Chief Executive Officer of the Company on April
21, 1995 and became Chairman of the Board of Directors, Chief Executive
Officer and President on December 29, 1995.
(2) Mr. Miller served as Chief Executive Officer until April 21, 1995. He
served as Senior Vice President from April 21, 1995 until June 30, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1995
-------------------------------------------------------------
LONG-TERM
COMPENSATION AWARDS
---------------------
ANNUAL COMPENSATION/ ALL OTHER SHARES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY COMPENSATION STOCK OPTIONS(#)(1)
- --------------------------------------------------- ---------------------- -------------- ---------------------
<S> <C> <C> <C>
Peter P. Gombrich ................................. $ 103,125 $ -- 200,000
Chief Executive Officer (2)
Kenneth D. Miller ................................. 116,463 21,952 75,000
former Chief Executive Officer (3)
</TABLE>
- ------------------------------
(1) All such options were granted under the 1995 Stock Option Plan at an
exercise price of $1.13 per share, the last reported sale price of the
Common Stock on the Nasdaq Market on the date of grant.
(2) Mr. Gombrich became Acting Chief Executive Officer of the Company on April
21, 1995 and became Chairman of the Board of Directors, Chief Executive
Officer and President on December 29, 1995.
(3) Mr. Miller served as Chief Executive Officer until April 21, 1995. He
served as Senior Vice President from April 21, 1995 until June 30, 1996.
The amount listed under the column "All Other Compensation" represents a
relocation allowance.
STOCK OPTION GRANTS. The following table contains information concerning
grants of stock options to the Named Executive Officers during the twelve months
ended December 31, 1995. All such options were granted under the Company's 1995
Stock Option Plan.
48
<PAGE>
OPTION GRANTS DURING THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NUMBER OF % OF TOTAL SHARES
SHARES UNDERLYING
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES PRICE PER
NAME GRANTED (#) IN YEAR. (1) ($/SHARE) (2) EXPIRATION DATE
- ---------------------------------------- ------------ ------------------- ------------- ---------------
<S> <C> <C> <C> <C>
Peter P. Gombrich....................... 200,000 17.6% $ 1.13 12/29/05
Kenneth D. Miller (3)................... 75,000 6.6 1.13 12/29/05
</TABLE>
- ------------------------------
(1) The Company granted to employees options to purchase an aggregate of
1,111,000 shares of Common Stock during the twelve months ended December 31,
1995.
(2) All such options were granted under the 1995 Stock Option Plan at an
exercise price of $1.13 per share, the last reported sale price of the
Common Stock on the Nasdaq Market on the date of grant.
(3) Mr. Miller was granted an option to purchase 75,000 shares of Common Stock
on December 29, 1995. The option was immediately exercisable with respect to
25,000 shares and was to become exercisable with respect to an additional
25,000 shares on December 29, 1996 and with respect to the remaining 25,000
shares on December 29, 1997. Pursuant to the terms of the 1995 Stock Option
Plan, the remaining options to purchase 50,000 shares will terminate
automatically on September 30, 1996 (unless previously exercised), three
months following the date on which Mr. Miller's employment terminates. See
"-- Stock Option Plans."
49
<PAGE>
YEAR-END OPTION HOLDINGS. The following table provides certain information
regarding the unexercised options held by the Named Executive Officers as of
December 31, 1995. No options were exercised by the Named Executive Officers
during the twelve months ended December 31, 1995.
UNEXERCISED OPTIONS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED OPTIONS
AT DECEMBER 31, 1995
(#)(1)
--------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Peter P. Gombrich..................................................... 66,666 133,334
Kenneth D. Miller..................................................... 167,000 50,000
</TABLE>
- ------------------------------
(1)None of such options was in the money at December 31, 1995, based on the
last reported sale price of the Common Stock on December 29, 1995, which
was the last trading day prior to December 31, 1995.
EMPLOYMENT, SEVERANCE AND SEPARATION AGREEMENTS
GOMBRICH EMPLOYMENT AND SEVERANCE AGREEMENT. Pursuant to an Employment
Agreement dated August 1, 1994 between Peter P. Gombrich and AccuMed, Inc. which
was assumed by the Company as a result of the Merger (the "Gombrich Employment
Agreement"), Mr. Gombrich serves as Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Pursuant to the Gombrich
Employment Agreement, Mr. Gombrich is entitled to receive (i) annual
compensation of $175,000 and (ii) a minimum annual cash bonus equal to 30% of
base salary for the relevant year, and additional bonuses as determined by the
Board of Directors, at its discretion. If the Company terminates Mr. Gombrich's
employment without cause or Mr. Gombrich terminates his employment for good
reason or at any time after 180 days following the date on which a Change of
Control (as defined below) occurs, Mr. Gombrich would be entitled to a lump-sum
severance payment equal to three times his annual salary. In addition, upon the
occurrence of a Change of Control, any stock options held by Mr. Gombrich would
immediately vest and be fully exercisable. For purposes of the Gombrich
Employment Agreement, a Change of Control shall be deemed to occur if: (i) any
third party directly or indirectly acquires 20% or more of the outstanding
Common Stock, (ii) the Company engages in a merger, consolidation or
reorganization that results in holders of Common Stock immediately prior to such
transaction holding less than a majority of the voting power of the resulting
entity, (iii) the Company sells all or substantially all of its assets or (iv)
Mr. Gombrich's employment is terminated by the Company on a date within 90 days
prior to the date on which a Change of Control occurs.
The employment term continues until August 1, 1999. Thereafter, the term
will be automatically extended for additional one-year periods unless either
party delivers notice of election not to extend the employment at least 60 days
prior to the end of the then current term.
PRESSMAN EMPLOYMENT AGREEMENT. Pursuant to the Employment Agreement dated
June 13, 1996 as amended July 16, 1996, between the Company and Dr. Pressman
(the "Pressman Employment Agreement"), Dr. Pressman will serve as President,
Cytopathology Division and Corporate Senior Vice President of the Company for
five years beginning July 5, 1996. Dr. Pressman's annual salary is $157,500 and
he is eligible to receive annually (i) cash bonuses of up to 30% of such annual
salary, and (ii) incentive stock options to purchase up to 50,000 shares of
Common Stock based on the achievement of mutually agreed upon goals and
objectives. On July 8, 1996, Dr. Pressman was granted an option to purchase an
aggregate of 250,000 shares of Common Stock at an exercise price of $6.25 per
share (the last reported sale price of the Common Stock on the Nasdaq Market on
the date on which Dr. Pressman's employment commenced) which is immediately
exercisable with respect to 50,000 shares and will become exercisable with
respect to 50,000 additional shares on each of the first through fourth
anniversaries of the grant date. Dr. Pressman was granted 25,000 shares of
Common Stock on the date on which Dr. Pressman's employment commenced. Such
shares may not be transferred during the 18-month period following the date of
issuance and would be forfeited to the Company if Dr. Pressman terminates the
Pressman Employment Agreement during such period, other than due to a breach by
the Company. Dr. Pressman
50
<PAGE>
is entitled to borrow up to $85,200 from the Company for the purpose of paying
taxes due in connection with the grant of such shares. Such loan shall be repaid
without interest in installments to be mutually agreed upon by Dr. Pressman and
the Company. The Company may terminate Dr. Pressman's employment for cause at
anytime upon written notice. The Company may terminate his employment without
cause upon six months' written notice, in which case Mr. Pressman would be
entitled to an amount equal to twelve months' salary as severance, paid over
twelve months. Mr. Pressman may terminate the Pressman Employment Agreement for
any reason upon six months' written notice.
MILLER SEPARATION AGREEMENT. Pursuant to the Merger Agreement, Mr. Miller
and the Company entered into a letter agreement dated as of November 21, 1995
(the "Miller Employment Letter") pursuant to which Mr. Miller served as Senior
Vice President of the Company. Pursuant to the Miller Employment Letter, Mr.
Miller was entitled to receive (i) an annual salary of $105,000 and (ii) a
quarterly bonus of $6,250. He also received 25,000 shares of Common Stock in
January 1996 and an option to purchase 75,000 shares of Common Stock at an
exercise price of $1.13 per share (the last reported sale price of the Common
Stock on the Nasdaq Market on the Merger Date). The employment term commenced
October 1, 1995. Pursuant to the Employment Separation Agreement and Release
(the "Miller Separation Agreement") dated June 24, 1996 between Mr. Miller and
the Company, Mr. Miller voluntarily resigned from the Company effective June 30,
1996. During July through October 1996, Mr. Miller is to spend 70% of the normal
work week discharging responsibilities as acting President of RADCO and as a
consultant to the Company. For rendering such services, Mr. Miller is to receive
$1,875 per month from the Company and $4,250 per month from RADCO. Pursuant to
the Miller Separation Agreement, Mr. Miller received approximately $8,600 in
respect of accrued vacation time and $7,437 with respect to relocation expenses
and is entitled to receive as a severance payment up to an additional $35,000 to
be paid in monthly installments prior to February 1997. Mr. Miller has also
agreed to a one-year covenant-not-to-compete with the Company.
SANTOR EMPLOYMENT LETTER AND SEPARATION AGREEMENT. Pursuant to a letter
agreement between Mr. Santor and the Company dated as of February 28, 1995 (the
"Santor Employment Letter"), Mr. Santor serves as Chief Financial Officer and,
until June 1996, served as Vice President of Finance and Operations of the
Company. Pursuant to the Santor Employment Letter, Mr. Santor is entitled to
receive (i) an annual salary of $105,000 and (ii) an annual bonus of $15,000. He
also received 35,000 shares of Common Stock in January 1996 and an option to
purchase 75,000 shares of Common Stock at an exercise price of $1.13 per share
(the last reported sale price of the Common Stock on the Nasdaq Market on the
Merger Date). Pursuant to an Employment Separation Agreement and Release (the
"Santor Separation Agreement") between Mr. Santor and the Company dated June 10,
1996, Mr. Santor will continue to serve as Chief Financial Officer until August
30, 1996. On June 11, 1996, Mr. Santor's outstanding stock options to purchase
106,961 shares of Common Stock accelerated and became fully exercisable.
Pursuant to the Santor Separation Agreement, the Company also forgave $3,300 of
the principal balance due to the Company under a promissory note made by Mr.
Santor. Mr. Santor has also agreed to a one-year covenant-not-to-compete with
the Company.
STOCK OPTION PLANS
The Company has in effect three stock option plans, the 1995 Stock Option
Plan, as amended (the "1995 Plan"), the Amended and Restated 1992 Stock Option
Plan (the "1992 Plan"), and the Amended and Restated 1990 Stock Option Plan (the
"1990 Plan," and together with the 1995 Plan and the 1992 Plan, the "Plans").
Administration of the Plans has been delegated to the Compensation Committee of
the Board of Directors, consisting entirely of "disinterested" directors within
the meaning of Rule 16b-3 promulgated under the Exchange Act. Each Plan
authorizes the Compensation Committee to grant to employees, directors and
consultants of the Company incentive stock options intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended, as
well as nonqualified stock options. The terms of the Plans are summarized below.
As of July 19, 1996, (i) options to purchase an aggregate of 1,598,000
shares of Common Stock were outstanding under the 1995 Plan and 402,000 shares
remained available for future grant thereunder,
51
<PAGE>
(ii) options to purchase an aggregate of 169,711 shares of Common Stock were
outstanding under the 1992 Plan and 37,337 shares remained available for future
grant thereunder, and (iii) options to purchase an aggregate of 7,815 shares of
Common Stock were outstanding under the 1990 Plan and 80,794 shares remained
available for future grant thereunder.
1995 PLAN
The 1995 Plan was adopted by the Company's Board of Directors and
stockholders in October 1995 and December 1995, respectively, authorizing the
granting of a combination of incentive stock options and nonqualified stock
options to purchase an aggregate of up to 1,500,000 shares of Common Stock. In
July 1996, the Board of Directors amended the 1995 Plan, subject to stockholder
approval, to increase from 1,500,000 to 2,000,000 the number of shares available
for issuance upon exercise of options authorized to be granted under the 1995
Plan. No option may be granted after October 6, 2005.
Under the 1995 Plan, full-time employees of the Company, including officers
and directors who are employees of the Company, are eligible to receive grants
of either incentive stock options or nonqualified stock options. Consultants and
non-employee directors are eligible to be granted only nonqualified stock
options under the 1995 Plan. The Compensation Committee, within the parameters
of the 1995 Plan, has authority to determine to whom options are granted, the
number of shares underlying options granted, and the terms of such options. Each
option grant is evidenced by a stock option agreement.
EXERCISE PRICE. The option exercise price per share with respect to
nonqualified stock options granted under the 1995 Plan must be at least 75% of
the fair market value per share of the Company's Common Stock on the date of
grant of the option. The exercise price per share of Common Stock underlying
incentive stock options granted under the 1995 Plan must be at least the fair
market value of the Common Stock on the grant date, except that incentive stock
options granted to an employee who on the grant date owns more than 10% of the
combined voting power of all classes of stock of the Company (a "Ten Percent
Holder") must have an exercise price of at least 110% of fair market value. Fair
market value for purposes of the 1995 Plan is the last reported sale price of
the Common Stock on the Nasdaq Market on the date of grant.
EXERCISE. The options may be immediately exercisable on the date of grant
or the right to acquire shares underlying the options may become vested as
determined by the Compensation Committee and specified in the stock option
agreement. In no event may any option be exercised more than ten years, or in
the case of incentive stock options held by a Ten Percent Holder, more than five
years, after the date of grant. Payment of the exercise price is to be made in
cash, by the delivery to the Company of shares of Common Stock or, in the case
of nonqualified options, by a so-called "cashless exercise." Common Stock
surrendered in payment of the exercise price will be valued at its fair market
value as of the exercise date.
TERMINATION. The 1995 Plan provides that an optionee whose engagement by or
employment with the Company has terminated, other than by reason of retirement,
death or permanent disability, may exercise his or her outstanding incentive
stock options for a period of 30 days from the date of such termination. If an
incentive stock option holder retires after the age of 55, dies or is
permanently disabled, such optionee, or his or her personal representative, may
exercise such outstanding incentive stock options within one year after the date
of such retirement, death or disability. A nonqualified stock option granted to
directors may be exercised by the optionee after he or she ceases to be a
director of the Company until such option expires in accordance with the option
agreement governing such option. The Compensation Committee shall specify in
each nonqualified stock option agreement the circumstances under and time
periods during which an optionee who is no longer an employee or consultant of
the Company may exercise his or her outstanding nonqualified stock options. To
the extent that an optionee was not entitled to exercise options at the date of
termination of his or her employment, or if the optionee does not exercise such
options within the time specified in the applicable stock option agreement, the
options terminate. Under no circumstances will an option be exercisable after
the termination date specified in the option agreement governing the option.
52
<PAGE>
1990 PLAN AND 1992 PLAN
The 1990 Plan was adopted by the Board of Directors and stockholders in
October 1990 and February 1991, respectively. The 1990 Plan authorizes the
granting of incentive stock options and nonqualified stock options to purchase
an aggregate of 177,324 shares of Common Stock. The 1992 Plan was adopted by the
Board of Directors and stockholders in February 1992 and May 1992, respectively.
The 1992 Plan authorizes the granting of incentive stock options and
nonqualified stock options to purchase an aggregate of 505,000 shares of Common
Stock.
The 1990 Plan and the 1992 Plan permit the granting of incentive stock
options to employees and nonqualified stock options to employees, directors and
consultants. The Compensation Committee, within the parameters of the respective
Plans, has the authority to determine to whom options are granted and the terms
of such options. Each option grant is evidenced by a stock option agreement.
EXERCISE PRICE. The exercise price of options granted under the 1990 Plan
or the 1992 Plan is determined by the Compensation Committee and must be at
least the fair market value of the Common Stock on the date of grant of the
option, except that an incentive stock option granted to a Ten Percent Holder
must have an exercise price of at least 110% of such fair market value.
EXERCISE. The options may be immediately exercisable on the date of grant
or the right to acquire shares underlying the options may become vested as
determined by the Compensation Committee and specified in the option agreement,
except that all options shall become exercisable with respect to at least 20% of
the underlying shares per year on each of the first through fifth anniversaries
of the grant date. In no event may any option be exercised more than five years
after the date of grant. Payment of the exercise price is to be made in cash, by
the delivery to the Company of shares of Common Stock or by such other method as
the Compensation Committee may approve.
IMMEDIATELY EXERCISABLE OPTIONS. The 1990 Plan and the 1992 Plan permit the
Compensation Committee to grant immediately exercisable nonqualified options for
which the Company will retain a repurchase option. The Company's repurchase
option lapses over a period of time in accordance with the terms of a restricted
stock purchase agreement governing the terms of the grant.
TERMINATION. The 1990 Plan and the 1992 Plan provide that an optionee whose
engagement by or employment with the Company has terminated, other than by
reason of his or her death or permanent disability, may exercise his or her
stock options upon the terms provided in the applicable stock option agreement,
provided that all incentive stock options shall terminate three months after the
optionee ceases to be an employee of the Company. If an optionee's employment
with or position as a director of the Company is terminated because of the death
or disability of the optionee, the option, to the extent exercisable by the
optionee on the date of such termination, may be exercised by the optionee (or
the optionee's legal representative) until the earlier of the twelve months
following the termination date or the date upon which such option expires. To
the extent that an optionee was not entitled to exercise the options at the date
of termination of his or her employment, or if the optionee does not exercise
such options within the time specified in the applicable stock option agreement,
the options terminate, under no circumstances will an option be exercisable
after the termination date specified in the option agreement governing the
option.
53
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Commonwealth Associates is a principal stockholder and a Selling
Stockholder. Pursuant to a letter agreement dated as of February 14, 1995 among
the Company, AccuMed, Inc. and Commonwealth Associates, Commonwealth Associates
was paid a fee for acting as a "finder" in connection with the Merger. The fee
was paid in the form of $50,000 in cash, 444,444 shares of Common Stock, and a
five-year warrant to purchase up to 750,000 shares of Common Stock at an
exercise price of $1.25 per share. During 1995, Commonwealth Associates acted as
placement agent for the Company in certain private placements of Common Stock
for which Commonwealth Associates received an aggregate of (i) $353,000 in cash
commissions, (ii) a non-accountable expense allowance of $106,000, (iii)
approximately $10,600 in reimbursement for the fees and expenses of counsel,
(iv) a warrant to purchase an aggregate of 564,840 shares of the Common Stock at
an exercise price of $0.625 per share. During 1995, the Company paid
Commonwealth Associates an aggregate of $59,000 in cash pursuant to a Consulting
Agreement in effect from January 1, 1996 through December 31, 1996. As
reimbursement for certain expenses incurred by Commonwealth Associates in
connection with a terminated private placement of securities for which
Commonwealth Associates was to act as placement agent, the Company (i) issued to
Commonwealth Associates on December 31, 1994, a five-year warrant to purchase an
aggregate of 420,000 shares of Common Stock at an exercise price of $0.25 per
share and (ii) issued to designees of Commonwealth Associates on December 29,
1995 five-year warrants to purchase an aggregate of 104,000 shares of Common
Stock at an exercise price of $2.125 per share, which warrants expire on October
31, 1997. Commonwealth Associates acted as a placement agent for a portion of
the private placements of securities by the Company from July through September
1993 for which Commonwealth Associates received aggregate cash commissions of
$276,000 and a non-accountable expense allowance of $20,000.
The Company has agreed, with respect to the exercise of the Redeemable
Warrants issued in connection with the Company's initial public offering, to pay
to Commonwealth Associates a fee of 5% of the exercise price of each Redeemable
Warrant exercised; provided however, that Commonwealth Associates will not be
entitled to receive such compensation for Redeemable Warrant exercise
transactions in which: (i) the market price of the Common Stock at the time of
the exercise is lower than the exercise price of the Redeemable Warrants; (ii)
the Redeemable Warrants are held in any discretionary account; (iii) disclosure
of compensation arrangements is not made in documents provided to holders of
Redeemable Warrants at the time of exercise; (iv) the exercise of the Redeemable
Warrants is unsolicited; and (v) the transaction was in violation of Rule 10b-6
promulgated under the Exchange Act. As of July 19, 1996, no Redeemable Warrants
had been exercised.
The Company issued to American Equities Overseas, Inc. ("AEO"), an
immediately a Selling Stockholder, exercisable, five-year warrant to purchase up
to 100,000 shares of Common Stock at an exercise price of $0.25 per share. The
AEO Warrants were issued to AEO by the Company as reimbursement for expenses
incurred by AEO in connection with a terminated private placement in 1994 and
advisory services in connection with certain of the Company's European
stockholders. In March 1996, the Company issued to AEO immediately exercisable
five-year warrants to purchase an aggregate of 42,500 shares of Common Stock at
an exercise price of $3.87 per share and 20,000 shares at an exercise price of
$3.42 per share, as partial compensation for its services in placing warrants to
purchase Common Stock and securities of RADCO in connection with the
capitalization of RADCO. AEO acted as placement agent in connection with the
sale of Common Stock to certain European investors in May 1996, for which it
received aggregate cash commissions of $56,250. Pursuant to an Agreement dated
July 18, 1996 among the Company, RADCO and AEO, the Company will be obligated to
pay to AEO a fee of $15,000 in cash upon consummation of the RADCO Acquisition.
Pursuant to the Merger Agreement, from the Merger Date until the next annual
meeting of stockholders of the Company, the Board of Directors is to be
comprised as follows: (i) Mr. Gombrich, as Chairman of the Board of Directors,
(ii) two directors designated by AccuMed, Inc., (iii) three directors designated
mutually by Commonwealth Associates and AEO, and (iv) one director selected
mutually by
54
<PAGE>
the other six directors. In accordance therewith, (i) Commonwealth Associates
and AEO have designated Messrs. Schiller, Blue and Halperin (legal counsel to
AEO), (ii) AccuMed, Inc. designated Messrs. Lavallee and Plandowski, and (iii)
the other six directors selected Dr. Abeles, to serve on the Board of Directors.
The Company loaned to Peter P. Gombrich, Chairman of the Board of Directors,
Chief Executive Officer and President of the Company and a Selling Stockholder,
$61,000 evidenced by a promissory note made May 22, 1996, initially bearing
interest at a rate of 10% per annum and currently bearing interest at 17% per
annum, payable monthly in arrears, with principal and accrued interest due
within ten days following the date of such promissory note (the "Maturity Date")
until paid in full. At June 30, 1996, the outstanding principal and accrued and
unpaid interest thereunder was $62,019.
The Board of Directors of the Company issued a warrant to purchase 75,000
shares of Common Stock to Leonard M. Schiller, a director of the Company and a
Selling Stockholder, in consideration for services provided by Mr. Schiller to
AccuMed, Inc. in connection with the Merger. Such warrant is currently
exercisable at $1.13 per share (the closing sale price of the Common Stock on
the Nasdaq Market on the date of issuance of such warrant) and expires on
December 29, 2000.
Gwenda Jay Gombrich, the wife of Peter P. Gombrich, the Company's Chairman
of the Board of Directors and Chief Executive Officer, loaned to AccuMed, Inc.
an aggregate of $65,000 pursuant to a Letter Agreement between AccuMed, Inc. and
Ms. Gombrich dated October 28, 1994, which was assumed by the Company in
connection with the Merger. Interest was payable at the rate of 1% per month on
the outstanding balance, with a minimum interest payment of $750. In June 1996
the loan balance was paid in full.
Ms. Gombrich contributed an aggregate of $75,000 to AccuMed, Inc. prior to
the Merger, evidenced by Promissory Notes dated May 18, 1994 and August 31, 1994
(the "Gombrich Promissory Notes") and the Interim Financing Agreements dated May
18, 1994 and December 1994 (the "Interim Financing Agreements") each among
AccuMed, Inc. and Ms. Gombrich as custodian for minor children. Pursuant to the
Interim Financing Agreements, the principal amount and the accrued and unpaid
interest on the Gombrich Promissory Notes were required to be converted into
shares of common stock of AccuMed, Inc. prior to the Merger. Such conversion did
not take place. Upon consummation of the Merger, the obligations of AccuMed,
Inc. to Ms. Gombrich pursuant to the Interim Financing Agreements and the
Gombrich Promissory Notes were assumed by the Company. In June 1996 the Company
issued to Ms. Gombrich as custodian for certain minor children an aggregate of
166,586 shares of the Company's Common Stock in full satisfaction of the
Company's obligations pursuant to the Interim Financing Agreements and the
Gombrich Promissory Notes.
Hultquist Capital LLC ("Hultquist"), a Selling Stockholder, acted as special
advisor to the Board of Directors of the Company in connection with the Merger.
Pursuant to the agreement providing for such services, Hultquist (i) was issued
56,000 shares of Common Stock on the Merger Date and (ii) was entitled to be
paid cash compensation in the aggregate amount of $105,000, of which $66,000 had
been paid and $39,000 was payable as of June 30, 1996.
Robert Priddy, a Selling Stockholder, loaned the Company $250,000 evidenced
by a Promissory Note made January 25, 1995, bearing interest at a rate of 11%
per annum, payable monthly in arrears, with principal and accrued interest due
on or prior to 90 days following the date thereof. The indebtedness evidenced
thereby was repaid in May 1996.
55
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information as of July 19, 1996 (the
"Reference Date") with respect to the beneficial ownership of Common Stock by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (ii) each director, (iii) the Named
Executive Officers, (iv) officers and directors as a group, and (v) the Selling
Stockholders. On the Reference Date, there were 18,618,536 shares of Common
Stock outstanding.
<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING (1) SHARES TO AFTER OFFERING (1)
NAME AND ADDRESS --------------------------- BE SOLD IN ------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERING NUMBER PERCENT
- ------------------------------------------------------------------ ----------------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS, EXECUTIVE OFFICERS
AND 5% STOCKHOLDERS(2)
Peter P. Gombrich................................................. 3,556,950(3) 19.0% 250,000 3,306,950 15.0%
Michael Falk ..................................................... 2,796,931(4) 13.4 225,000 2,571,931 10.8
c/o Commonwealth Associates
733 Third Avenue
New York, NY 10017
Commonwealth Associates .......................................... 1,889,300(5) 9.3 100,000 1,789,300 7.6
733 Third Avenue
New York, NY 10017
John H. Abeles.................................................... 326,657(6) 1.8 41,020 285,637 1.3
Jack H. Halperin.................................................. 80,388(7) * 20,000 60,388 *
Michael D. Burke.................................................. 85,797(8) * 12,000 73,797 *
Leonard M. Schiller............................................... 172,159(9) * 8,000 164,159 *
Paul F. Lavallee.................................................. 25,000(10) * 7,500 17,500 *
Mark L. Santor.................................................... 144,247(11) * -- 144,247 *
Norman J. Pressman................................................ 75,000(12) * -- 75,000 *
Harold S. Blue.................................................... 40,000(13) * -- 40,000 *
Joseph W. Plandowski.............................................. 25,000(14) * -- 25,000 *
All directors and executive officers as a group (10 persons)...... 4,531,198(15) 23.6% 338,520 4,157,678 18.7%
OTHER SELLING STOCKHOLDERS
Clarion Capital Corp.............................................. 320,000 1.7 257,455 62,545 *
Robert Priddy..................................................... 900,000(16) 4.8 200,000 700,000 3.2%
Anne Falk(17)(18)................................................. 907,631 4.7 125,000 782,631 3.5
Gallagher Investment Corp......................................... 240,000 1.3 72,000 168,000 *
Richard Friedman.................................................. 80,000 * 71,630 8,370 *
Hultquist Capital LLC (19)........................................ 56,000 * 54,327 1,673 *
John Robinson..................................................... 88,742(17)(20) * 50,000 38,742 *
G&G Diagnostics LP I.............................................. 75,000 * 50,000 25,000 *
Fred Kassner...................................................... 160,000 * 48,000 112,000 *
Andrew B. Hart.................................................... 40,000 * 40,000 -- *
Charles Potter.................................................... 40,000 * 40,000 -- *
William R. and Barbara J. Schoen.................................. 40,000 * 40,000 -- *
Ann F. Gallagher.................................................. 80,000 * 35,000 45,000 *
Christopher C. Gallagher.......................................... 80,000 * 35,000 45,000 *
Vincent LaBarbara................................................. 110,696(14)(17) * 30,000 80,696 *
J.A. Cardwell..................................................... 80,000 * 30,000 50,000 *
John Luck......................................................... 40,000 * 30,000 10,000 *
G & G Dispensing, Inc............................................. 320,000(21) 1.7 28,000 292,000 1.3
American Equities Overseas, Inc................................... 221,275(14)(17) 1.2 25,000 196,275 *
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING (1) SHARES TO AFTER OFFERING (1)
NAME AND ADDRESS --------------------------- BE SOLD IN ------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERING NUMBER PERCENT
- ------------------------------------------------------------------ ----------------- ------- ---------- --------- -------
Philip L. Thomas.................................................. 461,312(22) 2.4 24,000 437,312 2.0
<S> <C> <C> <C> <C> <C>
Joseph L. Schocken................................................ 23,495(23) * 23,495 -- *
Frederick J. Oswald............................................... 40,000 * 20,000 20,000 *
James A. Cardwell, Jr............................................. 40,000 * 20,000 20,000 *
Richard S. Corbin................................................. 35,000(24) * 20,000 15,000 *
Broadmark Capital Corporation..................................... 15,600(25) * 15,600 -- *
The P.L. Thomas Group, Inc........................................ 301,312(26) 1.6 15,500 285,812 1.3
Leslie Hannefy.................................................... 37,929(14)(17) * 15,000 22,929 *
Alan Hammerman.................................................... 40,000 * 12,000 28,000 *
Steven Warner..................................................... 37,929(14)(17) * 11,379 26,550 *
Murray Segal...................................................... 10,298(14)(17) * 10,298 -- *
Richard A. Voell.................................................. 40,000 * 10,000 30,000 *
Shiela Y. Schiller................................................ 40,000 * 10,000 30,000 *
Suzanne Schiller.................................................. 40,000 * 10,000 30,000 *
Cathy Ross........................................................ 20,000(14)(17) * 10,000 10,000 *
Joel S. Kanter (27)............................................... 9,215 * 9,215 -- *
Hamilton T. Bailey................................................ 40,000 * 8,000 32,000 *
Donald M. Earhart (28)............................................ 22,895 * 7,700 15,195 *
Joseph D. Ferrone................................................. 32,000 * 6,400 25,600 *
Alan Ebler........................................................ 6,000(14) * 6,000 -- *
David Panvelle.................................................... 6,000(14) * 6,000 -- *
Peggy Howard...................................................... 6,000(14) * 6,000 -- *
Peter Korreng..................................................... 6,000(14) * 6,000 -- *
Sharon Gignac..................................................... 6,000(14) * 6,000 -- *
Daniel R. Lee..................................................... 80,000 * 5,000 75,000 *
Paul Goldenheim................................................... 10,000 * 5,000 5,000 *
Robert O'Sullivan................................................. 7,174(14)(17) * 5,000 2,174 *
Henry T. Wilson (29).............................................. 8,550 * 4,050 4,500 *
Wertheimer Partnership............................................ 40,000 * 4,000 36,000 *
Keith Rosenbloom.................................................. 12,542(14)(17) * 4,000 8,542 *
Robert Tucker..................................................... 3,530(14) * 3,530 -- *
Vincent Ricciardi................................................. 2,337(14)(17) * 2,337 -- *
Bani Ascuitto..................................................... 1,988(14)(17) * 1,988 -- *
Marc Siegel....................................................... 1,988(14)(17) * 1,988 -- *
Alan C. and Linda Alhadeff........................................ 1,906 * 1,906 -- *
Leslie Group...................................................... 3,530(14)(17) * 1,788 1,742 *
Russell Bailenson................................................. 1,000(14)(17) * 1,000 -- *
Eric Rand......................................................... 597(14)(17) * 597 -- *
Marco Giudice..................................................... 397(14)(17) * 397 -- *
</TABLE>
- ------------------------------
* Represents less than 1%.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
including shares, underlying options or warrants which are exercisable by
such person currently, or within 60 days following the Reference Date, and
excluding shares underlying options and warrants held by any other person.
(2) Except as otherwise noted, the address for each person is c/o AccuMed
International, Inc., 900 North Franklin Street, Suite 401, Chicago, Illinois
60610.
(3) Includes 66,666 shares underlying stock options held by Mr. Gombrich that
are exercisable currently or within 60 days following the Reference Date.
Includes 513,818 shares held of record by Gwenda Gombrich, Mr. Gombrich's
wife, directly or as
57
<PAGE>
custodian for minor children, as to which Mr. Gombrich disclaims beneficial
ownership. Includes 537,381 shares subject to forfeiture if the Company
fails to meet certain earnings per share or stock price performance
thresholds during 1997 (the "Performance Shares"). See "Risk Factors --
Potential Fluctuations in Future Quarterly Results."
(4) Includes 222,222 shares, and 1,667,078 shares underlying warrants that are
exercisable currently or within 60 days following the Reference Date, held
by Commonwealth Associates (excluding securities held in Commonwealth
Associates' trading account). Mr. Falk is a control person of the corporate
general partner of Commonwealth Associates and may be deemed to be
beneficial owner of securities held by Commonwealth Associates. Also
includes 100,000 shares underlying warrants that are exercisable currently
or within 60 days following the Reference Date held by Anne Falk, Mr. Falk's
spouse. Mr. Falk disclaims beneficial ownership of the securities held by
Commonwealth Associates except to the extent of his percentage ownership
interests in Commonwealth Associates. Shares and warrants held directly by
Mr. Falk were transferred to him by Commonwealth Associates. Commonwealth
Associates disclaims beneficial ownership of such shares and warrants and
the underlying warrant shares. Such shares and warrants were issued to
Commonwealth Associates as compensation for certain services rendered to the
Company. See "Certain Relationships and Related Transactions."
(5) Includes 1,667,078 shares underlying warrants held by Commonwealth
Associates that are exercisable currently or within 60 days following the
Reference Date. Excludes securities held in Commonwealth Associates' trading
account. See "Certain Relationships and Related Transactions."
(6) Includes 34,895 shares underlying stock options held by Dr. Abeles that are
exercisable currently or within 60 days following the Reference Date.
Includes 253,713 shares of Common Stock held of record, and 38,049 shares
underlying warrants exercisable currently or within 60 days following the
Reference Date, by Northlea Partners Limited, as to which Dr. Abeles
disclaims beneficial ownership.
(7) Includes 35,800 shares underlying stock options held by Mr. Halperin that
are exercisable currently or within 60 days following the Reference Date.
Includes 1,968 Performance Shares.
(8) Includes 25,000 shares underlying stock options held by Mr. Burke that are
exercisable currently or within 60 days following the Reference Date.
Includes 9,841 Performance Shares.
(9) Includes 100,000 shares underlying stock options or warrants held by Mr.
Schiller that are exercisable currently or within 60 days following the
Reference Date.
(10) Consists of shares underlying stock options held by Mr. Lavallee that are
exercisable currently or within 60 days following the Reference Date.
Includes 1,968 Performance Shares.
(11) Includes 106,961 shares underlying stock options held by Mr. Santor that
are exercisable currently or within 60 days following the Reference Date.
(12) Includes 50,000 shares underlying stock options held by Mr. Pressman that
are exercisable currently or within 60 days of the Reference Date.
(13) Consists of shares underlying stock options or warrants held by Mr. Blue
that are exercisable currently or within 60 days following the Reference
Date.
(14) Consists of shares underlying stock options or warrants that are
exercisable currently or within 60 days following the Reference Date.
(15) Includes 547,371 shares underlying warrants or options held by officers and
directors that are exercisable currently or within 60 days of the Reference
Date.
(16) Includes 100,000 shares underlying warrants held by Mr. Priddy that are
exercisable currently or within 60 days following the Reference Date. See
"Certain Relationships and Related Transactions."
(17) Shares listed as being offered in the Offering by the Selling Stockholder
underlie currently exercisable warrants transferred to the Selling
Stockholder by Commonwealth Associates. The Selling Stockholder is currently
or was formerly associated with Commonwealth Associates. Commonwealth
Associates disclaims beneficial ownership of such warrants and the
underlying warrant shares. Such warrants were issued to Commonwealth
Associates as compensation for certain services rendered to the Company. See
"Certain Relationships and Related Transactions."
(18) Includes 222,222 shares, and 585,409 shares underlying warrants that are
exercisable currently or within 60 days following the Reference Date, held
by Ms. Falk's spouse, Michael Falk. Ms. Falk disclaims beneficial ownership
of shares held by Mr. Falk.
(19) Hultquist Capital LLC served as advisor to the Company, in connection with
the Merger. See "Certain Relationships and Related Transactions."
(20) Includes 28,097 shares underlying warrants held by Mr. Robinson that are
exercisable currently or within 60 days following the Reference Date.
(21) Includes 116,000 shares held in escrow In accordance with an agreement
between G&G Dispensing, Inc. and the Company that provides for such shares
to vest upon the achievement by G&G Dispensing, Inc. of certain goals with
respect to the development of products for the Company. See "Description of
Capital Stock -- Warrants -- Privately-Issued Warrants." Includes 175,000
shares underlying warrants held by G&G Dispensing that are exercisable
currently or within 60 days following the Reference Date.
(22) Includes 301,312 shares underlying warrants that are exercisable currently
or within 60 days following the Reference Date held by The P.L. Thomas
Group, Inc., of which Mr. Thomas may be deemed the beneficial owner. Philip
L. Thomas is the President and sole shareholder of The P.L. Thomas Group,
Inc. See footnote 26.
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(23) Includes 7,895 shares underlying stock options held by Mr. Schocken and
15,600 shares underlying warrants held by Broadmark Capital Corporation that
are exercisable currently or within 60 days following the Reference Date.
Mr. Schocken was a director of the Company from November 1992 until April
1995. Mr. Schocken is President of Broadmark Capital Corporation and may be
deemed to be the beneficial owner of shares held by Broadmark Capital
Corporation. Mr. Schocken disclaims beneficial ownership of the shares held
by Broadmark Capital Corporation. See footnote 25.
(24) Includes 25,000 shares underlying stock options held by Dr. Corbin that are
exercisable currently or within 60 days following the Reference Date. Dr.
Corbin was a director of the Company from April 1995 to July 1996.
(25) Consists of shares underlying warrants that are exercisable currently or
within 60 days following the Reference Date. See footnote 23.
(26) Consists of shares underlying warrants that are exercisable currently or
within 60 days following the Reference Date. See footnote 22.
(27) Mr. Kanter was a director of the Company from June 1991 through April 21,
1995.
(28) Mr. Earhart was a director of the Company from May 1994 through December
29, 1995.
(29) Mr. Wilson was a director of the Company from March 1992 through April 21,
1995.
The Company has agreed to indemnify certain of the Selling Stockholders and
the Selling Stockholders have agreed to indemnify the Company and the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act.
Except as noted in the footnotes above and under the caption "Certain
Relationships and Related Transactions," none of the Selling Stockholders has
held any office or had any material relationship with the Company during the
past three years.
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DESCRIPTION OF CAPITAL STOCK
The following summary is a description of certain provisions of the
Company's Certificate of Incorporation and Bylaws. Such summary does not purport
to be complete and is subject to, and is qualified in its entirety by, all of
the provisions of the Certificate of Incorporation and Bylaws, including the
definitions therein of certain terms. Copies of the Certificate of Incorporation
and Bylaws are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
COMMON STOCK
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority to issue up to 30,000,000 shares of Common Stock. As
of July 19, 1996, there were 18,618,536 shares of Common Stock outstanding and
held of record by 260 stockholders. Each holder of Common Stock is entitled to
one vote per share held of record on all matters submitted to a vote of the
stockholders. There are no cumulative voting or preemptive rights applicable to
any shares of Common Stock. All shares of Common Stock are entitled to
participate pro rata in distributions and in such dividends as may be declared
by the Board of Directors out of funds legally available therefor, subject to
any preferential dividend rights of any outstanding shares of Preferred Stock.
Subject to the prior rights of creditors, all shares of Common Stock are
entitled, in the event of liquidation, dissolution or winding up of the Company,
to participate ratably in the distribution of all the remaining assets of the
Company after distribution in full of preferential amounts, if any, to be
distributed to holders of Preferred Stock. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of any series of Preferred Stock that the Company may
designate and issue in the future.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of Preferred Stock, in one or more series and to
fix the designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights of the Common Stock. The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. Additionally, the issuance of Preferred
Stock may have the effect of decreasing the market price of the Common Stock,
and may adversely affect the voting and other rights of the holders of Common
Stock. At present, there are no shares of Preferred Stock outstanding and the
Company has no plans to issue any Preferred Stock.
WARRANTS
As of July 19, 1996, the Company had outstanding warrants to purchase up to
6,007,805 shares of Common Stock, including warrants to purchase up to 480,402
shares to be exercised by certain Selling Stockholders prior to consummation of
the Offering and sold in the Offering. See "Principal and Selling Stockholders."
REDEEMABLE WARRANTS
Redeemable Warrants to purchase a total of 2,702,905 shares of Common Stock
are tradeable on the Nasdaq Market under the symbol "ACMIW." The Company has
applied for listing of the Redeemable Warrants on Nasdaq National Market under
the symbol "ACMIW." The Redeemable Warrants are exercisable at any time prior to
October 15, 1997, at an exercise price of $5.00 per share. The Redeemable
Warrants are redeemable by the Company at any time prior to their expiration at
a price of $.25 per underlying share, provided that: (i) notice of not less than
60 days is given to the warrantholders; (ii) the closing bid quotation of the
Common Stock on each of the 20 trading days ending on the third day prior to the
date on which the Company gives notice has been at least 150% (currently $7.50,
subject to
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adjustment) of the then effective exercise price of the Redeemable Warrants; and
(iii) the warrantholders shall have exercise rights until the close of business
on the date fixed for redemption. The Company has agreed with the Underwriters
not to redeem the Redeemable Warrants for a period of one year from the date of
this Prospectus without the consent of the Representatives. See "Underwriting."
PRIVATELY-ISSUED WARRANTS
The Company has from time to time issued warrants to purchase shares of
Common Stock to various vendors and financial advisors. Currently outstanding
warrants are as follows:
On March 14, 1996, the Company issued warrants to purchase up to 687,500
shares to certain investors as part of a private placement and purchase of Units
consisting of a promissory note of RADCO, common stock of RADCO and warrants of
the Company. Of the RADCO warrants, 220,000 are exercisable at a price of $3.42
per share and 467,500 are exercisable at a price of $3.87 per share (subject to
adjustment) for a period of three years. As of July 19, 1996, warrants to
purchase an aggregate of 125,000 shares had been exercised with aggregate
proceeds to the Company of $373,250.
On January 25, 1996, the Company issued to Robert Priddy a warrant (the
"Priddy Warrant") to purchase up to 100,000 shares of Common Stock exercisable
at a price of $1.25 per share (subject to adjustment).
On January 18, 1996, the Company issued to The Research Works, Inc. a
warrant to purchase up to 100,000 shares of Common Stock exercisable at a price
of $2.125 per share (subject to adjustment) for a period of five years, in
consideration of certain research services to be performed by The Research
Works, Inc. A portion of the warrant was first exercisable on January 18, 1996.
The remaining portion of the warrant is exercisable in increments upon
completion of the second and third research reports by The Research Works, Inc.
On December 29, 1995, the Company (i) issued to Commonwealth Associates and
certain of its designees warrants to purchase an aggregate of 750,000 shares of
Common Stock at an exercise price of $1.25 per share (subject to adjustment) for
a period of five years, (ii) issued to Commonwealth Associates and certain of
its designees warrants to purchase up to 104,000 shares of Common Stock, from
the date of issuance to October 31, 1997, at an exercise price of $2.125 per
share (subject to adjustment), and (iii) issued to Leonard Schiller a warrant to
purchase up to 75,000 shares of Common Stock at an exercise price of $1.13 per
share for a period of five years. See "Certain Relationships and Related
Transactions."
On December 29, 1995, the Company also issued to The P.L. Thomas Group
warrants to purchase up to an aggregate of 364,785 shares of Common Stock. One
third of such warrants are exercisable at a price of $0.82 per share, one third
are exercisable at a price of $1.64 per share and one-third are exercisable at a
price of $2.47 per share. Such warrants are exercisable at any time with respect
to 301,312 of the underlying shares and with respect to the remaining 63,473
shares will become exercisable only if specified earnings per share and stock
price performance goals are met during 1997.
On September 1, 1995, the Company issued to AEO warrants to purchase up to
100,000 shares of Common Stock at an exercise price of $0.25 per share (subject
to adjustment) for a period of five years. As of July 19, 1996, warrants to
purchase an aggregate of 16,500 shares had been exercised.
On May 9, 1995, August 14, 1995 and August 22, 1995 the Company issued to
Commonwealth Associates and certain of its designees warrants to purchase up to
an aggregate of 564,840 shares of Common Stock at an exercise price of $0.625
per share (subject to adjustment) for a period of five years. See "Certain
Relationships and Related Transactions."
On December 31, 1994, the Company issued to Commonwealth Associates and
certain of its designees warrants to purchase up to 420,000 shares of Common
Stock at an exercise price of $0.25 per share (subject to adjustment) for a
period of five years. As of July 19, 1996, warrants to purchase an aggregate of
20,000 shares had been exercised. See "Certain Relationships and Related
Transactions."
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On March 29, 1994, the Company issued to G&G Dispensing, Inc. warrants to
purchase up to 175,000 shares of Common Stock at an exercise price of $5.00 per
share (subject to adjustment).
On April 30, 1990, the Company issued to AEO a warrant to purchase up to
25,275 shares of Common Stock at an exercise price of $5.00 per share (subject
to adjustment).
REGISTRATION RIGHTS
The Company has granted certain demand and so-called "piggy-back"
registration rights to certain holders of Common Stock and warrants to purchase
Common Stock. In addition, the Company has offered to register under the
Securities Act the offer and resale of certain shares of Common Stock by holders
not contractually entitled to such registration. The holders of such rights,
many of whom are Selling Stockholders, have agreed with the Underwriters to
limit the sale of shares of Common Stock owned by them, other than those to be
sold in the Offering, during specified periods. In satisfaction of the Company's
obligations to such holders, the Company has agreed with such holders to file
with the Commission promptly following consummation of the Offering a
Registration Statement covering the offer and resale of an aggregate of
approximately 5,495,334 shares of Common Stock (including shares of Common Stock
underlying certain warrants) held by such persons who have agreed to enter into
lock-up agreements with the Underwriters. No other holders of the Company's
securities are entitled to registration rights. See "Risk Factors -- Shares
Eligible for Future Sale" and "Underwriting."
RIGHT OF FIRST REFUSAL IN CERTAIN EQUITY OFFERINGS
Pursuant to a Securities Purchase Agreement dated May 31, 1996 between the
Company and affiliated purchasers of an aggregate of 170,000 shares of Common
Stock, such purchasers are entitled to a right of first refusal in connection
with certain equity offerings by the Company between the date of such agreement
until May 31, 1997. Such right of first refusal does not apply to (i) the
issuance of securities pursuant to an underwritten public offering, (ii) the
issuance of securities upon exercise or conversion of options, warrants or other
convertible securities outstanding as of May 31, 1996, (iii) the grant of
additional options or warrants or other securities under a stock option plan or
restricted stock plan for employees, directors or consultants of the Company, or
any exercise of options by employees, directors or consultants, (iv) issuances
of securities in certain specified proposed private placements, and (v)
issuances of securities in connection with commercial banking arrangements, a
merger, consolidation or sale of assets or strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital) or in
connection with the disposition or acquisition of a business, product or license
by the Company. If the Company proposes to offer equity securities under
circumstances other than as described in the preceding sentence, the Company
must give such purchasers written notice of the proposed offering at least ten
business days prior to the proposed closing date of such offering. During such
ten day period, such purchasers would be entitled to elect to purchase their
respective pro rata percentages (determined with reference to the percentage of
such 170,000 shares purchased by a specified purchaser) of the securities
offered on the same terms as the proposed offering.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Co. is the transfer agent and registrar for
the Company's Common Stock.
DELAWARE ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"), an anti-takeover law. In general, the statute
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is, or the transaction in which the
person became an interested stockholder was, approved in a prescribed manner or
another prescribed exemption applies. For purposes of Section 203, a "business
combination" is defined broadly to include a merger, asset sale or other
transaction resulting in
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a financial benefit to the interested stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within the three years prior to such transaction did own) 15% or more of the
corporation's voting stock.
In addition, certain provisions of the Company's Certificate of
Incorporation may have the effect of preventing, discouraging or delaying any
change in control of the Company. The authorization of undesignated Preferred
Stock makes it possible for the Board of Directors to issue Preferred Stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of the Company. See "-- Preferred Stock."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the DGCL, the Company has adopted provisions
in the Certificate of Incorporation that eliminate the personal liability of its
directors to the Company or its stockholders for monetary damages for breach of
their fiduciary duty as a director to the fullest extent permitted by the DGCL
except for liability (i) for any breach of their duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (unlawful payments of dividends or unlawful stock
repurchases or redemptions), or (iv) for any transaction from which the director
derived an improper personal benefit. This provision also does not affect a
director's responsibilities under any other laws, such as the federal securities
laws or state or federal environmental laws.
The Company's Certificate of Incorporation contains provisions indemnifying
directors, officers, employees and agents of the Company against certain
liabilities that may arise by reason of their status or service as such
directors, officers, employees or agents. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission (the "Commission") such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Vector Securities
International, Inc. and Tucker Anthony Incorporated are acting as
Representatives, have severally agreed to purchase from the Company and the
Selling Stockholders, and the Company and the Selling Stockholders have agreed
to sell to the Underwriters, the following respective number of shares of Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Vector Securities International, Inc.............................................
Tucker Anthony Incorporated......................................................
-----------
Total........................................................................ 4,750,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel. The nature
of the Underwriters' obligation is such that they are committed to purchase all
shares of Common Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus, and
to certain dealers at such price less a concession not in excess of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the public offering of the shares of Common Stock, the offering price and other
selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable at any
time during the 30-day period after the date of this Prospectus, to purchase up
to an additional 712,500 shares of Common Stock at the public offering price set
forth on the cover page of this Prospectus, less underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with the Offering. To the extent
such option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares of Common Stock set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
listed in the table.
The offering of shares is made for delivery when, as and if accepted by the
Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The executive officers, directors and certain stockholders, warrantholders
and optionholders of the Company, including the Selling Stockholders, have
agreed that they will not, without the prior written consent of the
Representatives, offer, sell or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them (other than through
the Offering) for a period of 270 days after the date of this Prospectus, except
that the holders may (i) between 90 and 180 days following the date of this
Prospectus, dispose of one third of their shares of Common Stock and (ii)
between 180 and 270 days
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following the date of this Prospectus, dispose of an additional one third of
their shares of Common Stock. Mr. Gombrich has agreed that he will not, without
the prior written consent of the Representatives, offer, sell or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable for or convertible into shares of Common
Stock owned by him (other than through the Offering) for a period of 270 days
after the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of the Representatives, offer, sell, or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock for a period of 180 days after the date of this Prospectus,
except that the Company may grant additional options under its stock options
plans, or issue shares upon the exercise of outstanding stock options or
warrants. Furthermore, the Company has agreed that it will not, without the
prior written consent of the Representatives, redeem the Redeemable Warrants
prior to one year following the date of this Prospectus. See "Risk Factors --
Shares Eligible for Future Sale."
CHANGE IN INDEPENDENT ACCOUNTANTS
Coopers & Lybrand LLP ("C&L") were previously the principal accountants for
the Company. On January 15, 1996, C&L's appointment as principal accountants was
terminated and the Company engaged KPMG Peat Marwick LLP as the Company's
principal accountants. The Company's Board of Directors approved the decision to
change accountants. The opinions of C&L on the balance sheet of AccuMed, Inc. as
of December 31, 1994, and the statement of operations, stockholders' deficit,
and cash flows for the period from February 7, 1994 (inception) through December
31, 1994, the balance sheets of Alamar Biosciences, Inc. as of September 30,
1995 and 1994, and the statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995, and
the balance sheet of Sensititre/Alamar, the Microbiology Division of AccuMed,
Inc., as of December 31, 1994 and the statements of net sales, cost of sales,
and selling expenses for the eight months ended December 31, 1994 and for each
of the two years in the period ended April 30, 1994 did not contain any adverse
opinions or disclaimers or opinions, or modifications as to uncertainty, audit
scope or accounting principles, except that for the opinions related to AccuMed,
Inc. and Alamar Biosciences, Inc., C&L modified its reports to include an
uncertainty explanatory paragraph which expressed substantial doubt as to
AccuMed, Inc.'s and Alamar Biosciences, Inc.'s ability to continue as a going
concern. There were no disagreements between the Company and C&L on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of C&L, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following regional offices: New
York Regional Office, 7 World Trade Center, Room 1400, New York, New York 10048
and Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a site on the World
Wide Web that contains reports, proxy statements, information statements and
other information regarding companies that file such documents with the
Commission electronically. The website address is http://www.sec.gov. The Common
Stock is quoted on The Nasdaq Market and reports and other information regarding
the Company may be inspected at the National Association of Securities Dealers,
Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have heretofore been filed by the Company with
the Commission pursuant to the Exchange Act, are incorporated by reference
herein and shall be deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the year ended September
30, 1995.
(2) The Company's Current Report on Form 8-K filed with the Commission on
January 16, 1996.
(3) The Company's Current Report on Form 8-K filed with the Commission on
January 17, 1996.
(4) The Company's Current Report on Form 8-K filed with the Commission on
January 19, 1996.
(5) The Company's Amendment No. 1 to the Current Report on Form 8-K/A filed
with the Commission on January 24, 1996.
(6) The Company's Transition Report on Form 10-KSB for the transition period
ended December 31, 1995.
(7) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.
(8) The description of Common Stock contained in the Company's Registration
Statement on Form 8-A filed with the Commission on September 18, 1992 by
which the Common Stock of the Company was registered under Section 12 of
the Exchange Act, and the description of the Common Stock incorporated
therein by reference to the Registration Statement on Form S-1 (Regis.
No. 33-48302) filed with the Commission on June 3, 1992 and amended on
June 25, 1992, July 23, 1992 and September 10, 1992, under the caption
"Description of Securities" therein.
(9) The description of the Common Stock contained in the Company's Amendment
No. 1 to Registration Statement on Form 8-A/A filed with the Commission
on January 2, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus, and prior to the
termination of the Offering, shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof, from the date of filing, of such
documents. Any statement incorporated by reference herein shall be deemed to be
modified, or superseded for purposes of this Prospectus, to the extent that a
statement contained herein, or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein, modifies or
supersedes such statement. Any statement, so modified or superseded, shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide, without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference in this Prospectus (not including
exhibits and other information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Requests for
such documents should be directed to AccuMed International, Inc., located at 900
North Franklin Street, Suite 401, Chicago, Illinois 60610, Attention: Chief
Financial Officer, telephone (312) 642-9200.
ADDITIONAL INFORMATION
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-2 of which this
Prospectus forms a part, and the exhibits thereto filed with the Commission
under the Securities Act. For further information pertaining to the Company and
the securities offered hereby, reference is made to the Registration Statement
and the exhibits thereto, which may be inspected without charge at, and copies
may be obtained at prescribed fees from, the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
The Company furnishes stockholders with annual reports containing audited
financial statements and other periodic reports as the Company may deem to be
appropriate, or as required by law or the rules of the National Association of
Securities Dealers, Inc.
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LEGAL MATTERS
The legality of the securities offered by this Prospectus will be passed
upon for the Company and the Selling Stockholders by Graham & James LLP,
Sacramento, California. Certain partners in Graham & James LLP own an aggregate
of 1,458 shares of Common Stock and 1,000 Redeemable Warrants. Certain legal
matters relating to the Offering will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois.
EXPERTS
The balance sheet of AccuMed, Inc as of December 31, 1994, and the
statements of operations, stockholders' deficit, and cash flows for the period
from February 7, 1994 (inception) through December 31, 1994, the balance sheets
of Alamar Biosciences, Inc. as of September 30, 1995 and 1994, incorporated
herein by reference in this Prospectus, and the statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1995, included in this Prospectus, and the balance sheet of
Sensititre/Alamar, the Microbiology Division of AccuMed, Inc., as of December
31, 1994 and the statements of net sales, cost of sales, and selling expenses
for the eight months ended December 31, 1994 and for each of the two years in
the period ended April 30, 1994, incorporated herein by reference in this
Prospectus, have been so included or incorporated by reference in reliance on
the reports, which included explanatory paragraphs related to AccuMed, Inc.'s
and Alamar Biosciences, Inc.'s ability to continue as going concerns, of C&L,
given on the authority of said firm as experts in accounting and auditing.
The balance sheets of AccuMed International Limited as of December 31, 1994,
April 30, 1994 and 1993, and the statements of operations and cash flows for the
eight months ended December 31, 1994, and for each of the two years in the
period ended April 30, 1994, as incorporated herein by reference in this
Prospectus, have been included herein in reliance on the report of C&L, given on
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of AccuMed International, Inc. and
subsidiaries as of December 31, 1995, and for the three months ended December
31, 1995, included in this Prospectus and incorporated herein by reference from
the Company's Transition Report on Form 10-KSB for the three month period ended
December 31, 1995 have been so included or incorporated by reference in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants ("KPMG"), and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Oncometrics Imaging Corp. as of August 31, 1995,
December 31, 1995 and May 31, 1996, and for the year ended August 31, 1995, for
the four months ended December 31, 1995 and for the five months ended May 31,
1996, included in this Prospectus, have been so included in reliance upon the
report of KPMG, chartered accountants, and upon the authority of said firm as
experts in accounting and auditing.
Statements in this Prospectus under the captions "Risk Factors -- Protection
of Intellectual Property" and "Business -- Intellectual Property," insofar as
they relate to patent matters, other than with respect to the Company's
microbiology technology, have been reviewed and approved by Banner & Allegretti,
Ltd., special patent counsel to the Company, and have been included herein in
reliance upon the review and approval by such firm as experts in patent law.
Statements in this Prospectus under the captions "Risk Factors -- Protection
of Intellectual Property" and "Business -- Intellectual Property," insofar as
they relate to patent matters in connection with the Alamar microbiology
technology and the trade secret litigation which occurred from late 1994 until
early 1996, have been reviewed and approved by Townsend and Townsend and Crew
LLP, special patent counsel to the Company, and have been included herein in
reliance upon the review and approval by such firm as experts in patent law.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................................. F-2
Independent Accountants' Report.......................................................................... F-3
Consolidated Balance Sheets as of September 30, 1995, December 31, 1995 and March 31, 1996 (unaudited)... F-4
Consolidated Statements of Operations for the years ended September 30, 1994 and 1995, for the three
months ended December 31, 1995 and for the three months ended March 31, 1996 (unaudited)................ F-5
Consolidated Statements of Stockholders' Equity for the years ended September 30, 1994 and 1995, for the
three months ended December 31, 1995 and for the three months ended March 31, 1996 (unaudited).......... F-6
Consolidated Statements of Cash Flows for the years ended September 30, 1994 and 1995, for the three
months ended December 31, 1995 and for the three months ended March 31, 1996 (unaudited)................ F-7
Notes to Consolidated Financial Statements............................................................... F-8
ONCOMETRICS IMAGING CORP.
Auditors' Report......................................................................................... F-23
Balance Sheets as of August 31, 1995, December 31, 1995 and May 31, 1996................................. F-24
Statements of Operations and Deficit for the year ended August 31, 1995, for the four months ended
December 31, 1995 and for the five months ended May 31, 1996............................................ F-25
Statements of Changes in Financial Position for the year ended August 31, 1995, for the four months ended
December 31, 1995 and for the five months ended May 31, 1996............................................ F-26
Notes to Financial Statements............................................................................ F-27
PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Condensed Combining Balance Sheet as of March 31, 1996......................................... F-31
Pro Forma Condensed Combining Statement of Operations for the three months ended
March 31, 1996.......................................................................................... F-32
Pro Forma Condensed Combining Statement of Operations for the three months ended December 31, 1995....... F-33
Pro Forma Condensed Combining Statement of Operations for the year ended September 30, 1995.............. F-34
Notes to Pro Forma Condensed Combining Financial Statements.............................................. F-35
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
AccuMed International, Inc.:
We have audited the accompanying consolidated balance sheet of AccuMed
International, Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the three months ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AccuMed
International, Inc. and subsidiaries as of December 31, 1995, and the results of
their operations and their cash flows for the three months ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Chicago, Illinois
April 5, 1996
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
The Stockholders
Alamar Biosciences, Inc.
We have audited the accompanying balance sheet of Alamar Biosciences, Inc.,
as of September 30, 1995 and related statements of operations, stockholders'
equity, and cash flows for the years ended September 30, 1994 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provided a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alamar Biosciences, Inc., at
September 30, 1995, and the results of its operations and its cash flows for the
years ended September 30, 1994 and 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3, the Company is
involved in litigation and is proposing to merge with another company. The
Company has taken certain actions to meet cash flow requirements, including a
reduction in work force, overhead and product development, until the disputes
can be resolved. There can be no assurance that the Company's efforts related to
the lawsuits will be successful. In addition, there can be no assurance that
combined operations of the proposed merger will produce the necessary cash flow
required. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
/s/ COOPERS & LYBRAND L.L.P.
Sacramento, California
November 19, 1995
F-3
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 716,211 $ 180,508 $ 1,382,128
Restricted cash................................................. 185,000 363,000 310,000
Accounts receivable............................................. 245,092 874,712 869,357
Prepaid expenses and deposits................................... 73,260 124,836 113,453
Production inventory............................................ 314,006 1,143,120 1,348,678
-------------- -------------- --------------
Total current assets........................................ 1,533,569 2,686,176 4,023,616
-------------- -------------- --------------
Fixed assets, net................................................. 411,126 528,402 677,843
Notes receivable.................................................. 700,000 -- --
Deferred merger costs............................................. 299,650 -- --
Intangible assets................................................. -- 2,644,556 4,493,055
Other assets...................................................... 44,621 115,069 121,577
-------------- -------------- --------------
$ 2,988,966 $ 5,974,203 $ 9,316,091
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 1,017,103 $ 2,005,861 $ 2,481,492
Other current liabilities....................................... 203,497 870,313 687,218
Deferred revenue................................................ 470,238 1,454,450 --
Notes payable................................................... -- 726,514 956,960
Capital lease obligations due within one year................... 89,406 88,270 82,093
-------------- -------------- --------------
Total current liabilities................................... 1,780,244 5,145,408 4,207,763
-------------- -------------- --------------
Long-term portion of capital lease obligations.................... 110,806 89,810 67,766
Deferred rent..................................................... -- 10,278 11,836
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 shares authorized,
10,929,339 shares issued and outstanding at September 30, 1995,
15,571,184 at December 31, 1995 and 16,605,034 at March 31,
1996........................................................... 109,293 155,712 166,050
Additional paid in capital...................................... 18,008,086 23,334,495 30,273,297
Accumulated deficit............................................. (17,019,463) (22,761,500) (25,410,621)
-------------- -------------- --------------
Total stockholders' equity.................................. 1,097,916 728,707 5,028,726
-------------- -------------- --------------
$ 2,988,966 $ 5,974,203 $ 9,316,091
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, THREE MONTHS
-------------------------- ENDED DECEMBER
1994 1995 31, 1995
------------ ------------ -------------- THREE MONTHS ENDED MARCH
31,
--------------------------
1995 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................... $ 1,161,822 $ 514,776 $ 100,130 $ 171,845 $ 1,187,701
Cost of sales........................... (1,549,350) (1,431,187) (338,730) (219,448) (595,210)
------------ ------------ -------------- ------------ ------------
Gross profit (loss)..................... (387,528) (916,411) (238,600) (47,603) 592,491
------------ ------------ -------------- ------------ ------------
Operating expenses:
General and administrative............ 1,219,249 2,094,890 1,418,797 274,827 914,057
Research and development.............. 580,180 386,882 3,997,600 68,935 4,074,786
Sales and marketing................... 959,519 309,208 7,197 28,106 393,177
------------ ------------ -------------- ------------ ------------
Total operating expenses.......... 2,758,948 2,790,980 5,423,594 371,868 5,382,020
------------ ------------ -------------- ------------ ------------
Operating loss.......................... (3,146,476) (3,707,391) (5,662,194) (419,471) (4,789,529)
------------ ------------ -------------- ------------ ------------
Other income (expense):
Interest income....................... 46,624 7,949 4,748 177 5,837
Interest expense...................... (12,836) (46,657) (10,862) (11,528) (326,831)
Other................................. 298 (13,211) (72,929) -- 2,462,252
------------ ------------ -------------- ------------ ------------
Total other income (expense)...... 34,086 (51,919) (79,043) (11,351) 2,141,258
------------ ------------ -------------- ------------ ------------
Loss before income taxes................ (3,112,390) (3,759,310) (5,741,237) (430,822) (2,648,271)
Income tax expense...................... 800 800 800 200 850
------------ ------------ -------------- ------------ ------------
Net loss.......................... $ (3,113,190) $ (3,760,110) $ (5,742,037) $ (431,022) $ (2,649,121)
------------ ------------ -------------- ------------ ------------
------------ ------------ -------------- ------------ ------------
Net loss per share...................... $ (0.65) $ (0.59) $ (0.49) $ (0.09) $ (0.17)
------------ ------------ -------------- ------------ ------------
------------ ------------ -------------- ------------ ------------
Weighted average common shares
outstanding............................ 4,776,139 6,375,627 11,742,980 4,957,735 15,797,315
------------ ------------ -------------- ------------ ------------
------------ ------------ -------------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances at September 30, 1993.............. 4,710,553 $ 47,106 $14,243,494 ($10,146,163) $ 4,144,437
Issuances of common stock:
November 1993 at $0.80.................... 3,491 35 2,758 -- 2,793
December 1993 at $0.80.................... 1,250 12 988 -- 1,000
December 1993 at $2.50.................... 50,000 500 124,500 -- 125,000
March 1994 at $2.07....................... 29,000 290 59,710 -- 60,000
August 1994 at $2.50...................... 50,000 500 124,500 -- 125,000
Net loss.................................... -- -- -- (3,113,190) (3,113,190)
---------- ----------- ----------- ------------ -------------
Balances at September 30, 1994.............. 4,844,294 48,443 14,555,950 (13,259,353) 1,345,040
---------- ----------- ----------- ------------ -------------
Issuances of common stock:
November 1994 at $2.50.................... 100,000 1,000 249,000 -- 250,000
March 1995 at $0.62....................... 80,645 807 41,693 -- 42,500
May 1995 at $.625......................... 2,648,400 26,484 1,369,115 -- 1,395,599
August 1995 at $.625...................... 3,000,000 30,000 1,505,887 -- 1,535,887
August 1995 at $.625...................... 240,000 2,400 128,100 -- 130,500
August 1995 at $1.00...................... 16,000 160 15,840 -- 16,000
Issuances of warrants....................... -- -- 142,500 -- 142,500
Net loss.................................... -- -- -- (3,760,110) (3,760,110)
---------- ----------- ----------- ------------ -------------
Balances at September 30, 1995.............. 10,929,339 109,294 18,008,085 (17,019,463) 1,097,916
---------- ----------- ----------- ------------ -------------
Issuances of common stock:
October 1995 at $0.625.................... 50,000 500 30,750 -- 31,250
November 1995 at $0.625................... 20,000 200 12,300 -- 12,500
December 1995 at $1.125................... 4,431,845 44,318 4,941,508 -- 4,985,826
Issuance of warrants........................ -- -- 308,252 -- 308,252
Warrants exercised December 1995 @ $0.25.... 140,000 1,400 33,600 -- 35,000
Net loss.................................... -- -- -- (5,742,037) (5,742,037)
---------- ----------- ----------- ------------ -------------
Balances at December 31, 1995............... 15,571,184 155,712 23,334,495 (22,761,500) 728,707
---------- ----------- ----------- ------------ -------------
Issuances of common stock (unaudited):
January 1996 at $1.125.................... 60,000 600 66,900 -- 67,500
March 1996 at $5.50....................... 940,955 9,410 5,165,842 -- 5,175,252
Issuances of warrants (unaudited)........... -- -- 1,689,464 -- 1,689,464
Stock options exercised (unaudited):
March 1996 at $0.63....................... 7,895 78 4,895 -- 4,974
March 1996 at $1.39....................... 5,000 50 6,900 -- 6,950
Warrants exercised (unaudited):
January 1996 at $0.25..................... 17,500 175 4,200 -- 4,375
March 1996 at $0.25....................... 2,500 25 600 -- 625
Net loss (unaudited)........................ -- -- -- (2,649,121) (2,649,121)
---------- ----------- ----------- ------------ -------------
Balances at March 31, 1996 (unaudited).... 16,605,034 $ 166,050 $30,273,297 ($25,410,621) $ 5,028,726
---------- ----------- ----------- ------------ -------------
---------- ----------- ----------- ------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER
30, THREE MONTHS
------------------------ ENDED DECEMBER
1994 1995 31, 1995
----------- ----------- -------------- THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $(3,113,190) $(3,760,110) $ (5,742,037) $(431,022) ($2,649,121)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization.......... 216,603 235,529 38,400 64,964 133,344
Write-off of acquired in-process
research and development.............. -- -- 3,965,000 -- 3,499,727
Expenses paid with issuance of common
stock................................. 60,000 166,000 606,750 -- --
Expenses paid with issuance of
warrants.............................. -- 142,500 -- -- 1,350,390
Loss on disposal of assets............. -- 63,609 -- -- --
Changes in assets and liabilities:
Restricted cash...................... -- (185,000) (178,000) -- 53,000
Accounts receivable.................. (389,087) 271,145 107,906 127,665 5,355
Prepaid expenses and deposits........ 44,417 20,035 1,833 15,906 11,383
Production inventory................. (338,395) 193,796 64,999 45,600 (205,558)
Other assets......................... -- (1,525) 80,059 (2,885) (6,508)
Accounts payable..................... 52,762 766,900 168,460 106,084 475,631
Other current liabilities............ 53,150 8,571 155,941 16,513 (115,595)
Deferred merger costs................ -- (299,650) (750,352) -- --
Deferred revenue..................... -- 470,238 946,429 -- (1,454,450)
----------- ----------- -------------- ----------- -----------
Net cash provided by (used in)
operating activities................ (3,413,740) (1,907,962) (534,612) (57,175) 1,097,598
----------- ----------- -------------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets................. (42,657) (49,834) (62,196) -- (200,685)
Acquisition of business, net............. -- -- 48,237 -- --
----------- ----------- -------------- ----------- -----------
Net cash used in investment
activities............................ (42,657) (49,834) (13,959) -- (200,685)
----------- ----------- -------------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuances of common
stock................................... 253,793 3,830,250 35,000 50,000 16,924
Common stock issuance costs.............. -- (625,764) -- (7,500) --
Proceeds from issuance of notes
payable................................. -- -- -- -- 314,446
Notes receivable issued.................. -- (700,000) -- -- --
Payment of capital lease obligation...... (32,312) (50,115) (22,132) (19,290) (26,663)
----------- ----------- -------------- ----------- -----------
Net cash provided by financing
activities............................ 221,481 2,454,371 12,868 23,210 304,707
----------- ----------- -------------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................... (3,234,916) 496,575 (535,703) (33,965) 1,201,620
Cash and cash equivalents at beginning of
period.................................... 3,454,552 219,636 716,211 42,173 180,508
----------- ----------- -------------- ----------- -----------
Cash and cash equivalents at end of
period.................................... $ 219,636 $ 716,211 $ 180,508 $ 8,208 $1,382,128
----------- ----------- -------------- ----------- -----------
----------- ----------- -------------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
AccuMed International, Inc. and subsidiaries develop, manufacture and market
state-of-the-art medical devices and instruments for laboratories, hospitals and
others. The Company was founded in January 1988, incorporated in June 1988 and
reincorporated in Delaware in 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of AccuMed
International, Inc. and its subsidiary ("the Company")(formerly Alamar
Biosciences, Inc.). All significant intercompany accounts and transactions have
been eliminated in consolidation.
REVENUE RECOGNITION
The Company recognizes revenue from sale of products when the products are
shipped to its customers. Contract revenue from research agreements is recorded
when earned and as the related costs are incurred. Payments received which are
related to future performance are deferred and recognized as revenue when earned
over future performance periods.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and short-term investments
with original maturities of three months or less.
RESTRICTED CASH
The restricted cash as of December 31, 1995 consists of $310,000 of
certificates of deposit with maturities less than one year which were placed as
collateral against a loan made by a financial institution and $53,000 held in an
escrow account.
Restricted cash as of September 30, 1995 includes an escrow deposit of
$150,000 pursuant to an agreement entered into in 1995 between the Company and
an outside legal counsel to the Company. Pursuant to the agreement the Company
issued to their counsel 240,000 shares of common stock, net of issuance costs of
$19,500, in exchange for a reduction of $150,000 in accounts payable. The escrow
deposits were released in proportion to the amounts realized by the counsel from
the sale of such shares in the public market. As of December 31, 1995 $97,000
had been released from the escrow account with the remaining $53,000 released in
February 1996.
INVENTORIES
Inventories consist primarily of raw materials and finished goods and are
stated at the lower of cost (average cost) or market. Cost is determined by the
first-in first-out method (FIFO).
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of plant and equipment is
provided using the straight line method over the estimated useful lives of the
assets. Amortization of leasehold improvements is provided on the straight-line
method over the shorter of the estimated useful life of the improvement or the
term of the lease. Expenditures for repairs and maintenance are charged to
operations when incurred.
INTANGIBLE ASSETS
Intangible assets consists principally of values assigned to acquired
proprietary technology and the excess of cost over the fair value of net assets
acquired. Such amounts are being amortized on a straight-line basis over the
expected periods to be benefited, generally 10 years. The Company assesses the
F-8
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recoverability of the excess of cost over the fair value of net assets acquired
by determining whether the amortization of the balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during each period. Common equivalent shares from stock
options and warrants are excluded from the computation as their effect is
antidilutive.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements as of March 31, 1995 and 1996 are
unaudited. In the opinion of management, the unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position and results of
operations for such periods. Results of operations for interim periods are not
necessarily indicative of results that will be achieved for the entire year.
3. BASIS OF PRESENTATION FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994 AND 1995
In November 1994, the Company filed a lawsuit in United States District
Court against Difco, a competitor, alleging misappropriation of its trade
secrets, and is seeking a constructive trust over a patent covering important
aspects of the Company's technology issued to Difco. The patent, which was
issued to Difco as a result of its alleged misappropriation, covers the basic
technology used in the Company's manual testing kits. Difco has agreed to a
Stipulated Order that it will not market or sell products based on the patent in
controversy unless it gives the Company 60 days advance notice. Upon receipt of
such notice, the Company would have an opportunity to renew its Preliminary
Injunction Motion originally scheduled for February 1995, but suspended in light
of the Stipulated Order. The judge has allowed Difco to file a complaint
alleging infringement of the disputed patent by the Company. A hearing on
Difco's summary judgment against the Company was held on September 8, 1995. Due
to the discovery of the alleged misappropriation, the Company declined to accept
the proceeds of a $2,500,000 financing scheduled to close on November 10, 1994
and implemented significant cutbacks in operations pending the outcome of the
lawsuit, including the elimination of its domestic sales force and suspension of
F-9
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. BASIS OF PRESENTATION FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994 AND
1995 (CONTINUED)
research and development efforts and contract research. The judge in the case
has set a trial date of January 28, 1996, to hear the merits of the case. (The
above referenced litigation has been subsequently settled, see note 15).
On May 2, 1995, the Company received notice that MicroScan, Inc.,
(MicroScan), a wholly-owned subsidiary of Dade International, Inc., filed an
intervention complaint with the court against both the Company and Difco, which
alleges that one of the Company's founders misappropriated confidential
information of MicroScan while an employee of MicroScan prior to co-founding the
Company in 1988, and used such information to develop the Company's technology.
The Company filed a motion for summary judgment and, on October 17, 1995, the
Court granted the Company's summary judgment motion and dismissed the
intervention complaint with prejudice.
As discussed in note 7 and note 16, the Company merged with AccuMed and
loaned AccuMed $700,000 to support their operations. In addition, the Company
completed two financings in 1995 and received advances for a licensing agreement
which substantially improved its cash position. The Company closed it's
Sacramento manufacturing facility in August 1995 and has significantly reduced
overhead costs. Manufacturing and distribution agreements have been established
with AccuMed.
There can be no assurance that combined operations of the proposed merger
will produce the necessary cash flow required. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
4. CHANGE IN FISCAL YEAR
In 1995, the Company changed to a fiscal year ending December 31. The
consolidated statement of operations for the three months ended December 31,
1994 (unaudited) is presented for comparative purposes only.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Sales....................................................................................... $ 100,614
Less cost of sales.......................................................................... (227,300)
----------
Gross profit (loss)......................................................................... (126,686)
----------
Operating expenses:
General and administrative................................................................ 384,181
Research and development.................................................................. 150,983
Sales and marketing....................................................................... 171,420
----------
Total operating expenses................................................................ 706,584
----------
Operating loss.............................................................................. (833,270)
----------
Other income (expense):
Interest income........................................................................... 664
Interest expense.......................................................................... (13,267)
----------
Total other income (expense)............................................................ (12,603)
----------
Loss before income taxes.................................................................... (845,873)
Income tax expense.......................................................................... 200
----------
Net loss.................................................................................... $ (846,073)
----------
----------
Net loss per share.......................................................................... $ (0.17)
----------
----------
Weighted average common shares outstanding.................................................. 4,894,294
----------
----------
</TABLE>
F-10
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCOUNTS RECEIVABLE
Accounts receivable includes the following at:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- -------------
<S> <C> <C>
Trade receivables.................................................................. $ 221,767 $ 842,994
Contract refunds due............................................................... 43,050 43,050
Other receivables.................................................................. -- 6,600
Allowance for doubtful accounts.................................................... (19,725) (17,932)
------------- -------------
Total............................................................................ $ 245,092 $ 874,712
------------- -------------
------------- -------------
</TABLE>
Accounts receivable are carried at their net realizable value.
6. FIXED ASSETS
Fixed assets includes the following at:
<TABLE>
<CAPTION>
ESTIMATED SEPTEMBER 30, DECEMBER 31,
USEFUL LIFE 1995 1995
------------- ------------- -------------
<S> <C> <C> <C>
Equipment.......................................................... 3 - 5 years $ 776,867 $ 1,029,554
Leasehold improvements............................................. 5 - 13 years -- 60,947
Equipment under capital lease...................................... 5 years 299,090 299,090
------------- -------------
1,075,957 1,389,591
Less accumulated depreciation and amortization..................... 664,831 861,189
------------- -------------
$ 411,126 $ 528,402
------------- -------------
------------- -------------
</TABLE>
7. NOTES RECEIVABLE
Pursuant to the merger agreement (note 16), the Company extended the
following loans, which bear interest at 10% per annum, to AccuMed Inc. to
provide working capital.
<TABLE>
<CAPTION>
DATE AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
May 9, 1995....................................................................... $ 150,000
May 31, 1995...................................................................... 125,000
June 28, 1995..................................................................... 125,000
August 7, 1995.................................................................... 125,000
August 29, 1995................................................................... 175,000
----------
$ 700,000
----------
----------
</TABLE>
On November 20, 1995, the Company's Board of Directors agreed to consolidate
the various notes above into a single $700,000 note. Upon consummation of the
merger on December 29, 1995, such amounts have been eliminated in consolidation.
F-11
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following at:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- -------------
<S> <C> <C>
Deferred rent............................................................ $ -- $ --
Payroll and related costs................................................ 84,970 286,998
Sales & use taxes........................................................ 908 --
Customer deposits........................................................ 2,169 47,169
Accrued rent............................................................. 89,750 64,255
Other accrued expenses................................................... 18,913 471,891
------------- -------------
Total................................................................ $ 203,497 $ 870,313
------------- -------------
------------- -------------
</TABLE>
9. DEFERRED REVENUE
On May 3, 1995, the Company entered into a letter of intent with Becton
Dickinson, Inc., (Becton) pursuant to which the Company agreed to grant Becton a
semi-exclusive, worldwide license of the Company's alamarBlue-TM- technology for
a specific field of use. On October 10, 1995, the license agreement (License)
between the Company and Becton was executed.
On signing the letter of intent, Becton paid the Company $100,000. On June
28, 1995, Becton paid an additional $400,000 to the Company. In October 1995,
the Company received $250,000 for executing the license agreement, and $750,000
upon the initial favorable resolution of the MicroScan lawsuit. In February
1996, Becton paid an additional $1,000,000 upon final favorable resolution of
the MicroScan lawsuit and $1,000,000 in March 1996 upon final favorable
resolution of the Difco lawsuit. Of this last amount, $500,000 is creditable
against future royalties.
The $1,500,000 received by the Company through December 31, 1995 has been
deferred pending resolution of the above mentioned lawsuits. Due to the
settlement of the lawsuits in February and March 1996, all of the remaining
deferred revenues will become income during the quarter ending March 31, 1996.
10. NOTES PAYABLE
Notes payable consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
Note payable to bank, guaranteed by stockholders, interest at 11.75% payable
monthly with principal payment due on April 30, 1996.......................... $ 100,000
Note payable to bank, guaranteed by stockholders, interest at 10.75% payable
monthly with principal payment due on April 30, 1996.......................... 455,000
Notes payable to stockholders, interest at 10%, due on demand.................. 90,610
Bank line of credit, collateralized by substantially all assets of AccuMed
International Limited, a wholly-owned subsidiary of the Company, due on
demand........................................................................ 80,904
-------------
$ 726,514
-------------
-------------
</TABLE>
11. STOCKHOLDERS' EQUITY
The Board of Directors is authorized to issue 5,000,000 shares of preferred
stock, the terms and rights to be established upon issuance. Of these shares,
382,500 have been designated as Series A 8% Cumulative Preferred Stock. None of
these shares have been issued.
F-12
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
In February 1995, the Company granted warrants to a consulting firm for the
right to purchase 140,000 shares of the Company's common stock at a price of
$.25 per share in lieu of the Company's liability of $105,000 to the consulting
firm. These warrants were exercised in December 1995. In May 1995, the Company
granted warrants to a placement agent for the right to purchase 100,000 shares
of the Company's common stock at a price of $.25 per share as compensation for
services performed relating to the canceled $2.5 million financing in November
1994. The warrants expire in August 2000. The difference between the fair market
value of the stock and the common stock purchase price has been recorded as
issuance of common stock warrants.
Additionally, contingent upon consummation of the merger, a consulting firm
was granted a five year warrant to purchase up to 750,000 shares of common at a
price of $1.25 per share, subject to certain limitations. The fair value of
these warrants has been recorded as issuance of common stock warrants.
At December 31, 1995, outstanding warrants to purchase shares of common
stock at any time through the expiration date were as follows:
<TABLE>
<CAPTION>
SHARES PRICE EXPIRATION DATE
- ---------- ----------- -----------------
<S> <C> <C>
2,702,905 5.00 10/97
104,000 2.125 10/97
420,000 0.25 12/99
175,000 5.00 12/99
25,275 5.00 4/00
264,840 0.625 5/00
300,000 0.625 8/00
100,000 0.25 8/00
79,280 0.82 8/00
79,280 1.64 8/00
79,280 2.47 8/00
750,000 1.25 12/00
75,000 1.125 12/00
- ----------
5,154,860
- ----------
- ----------
</TABLE>
STOCK OPTION PLAN
The Company has in effect three stock option plans for certain employees. On
October 15, 1990, the Company adopted the 1990 Stock Option Plan (1990 Plan).
The Company's employees, directors, and consultants are eligible to participate
in the Plan. The Company has reserved 177,324 shares of authorized but unissued
common stock for issuance under the 1990 Plan.
On February 4, 1992, the Company adopted the 1992 Stock Option Plan (1992
Plan), for which the Company has reserved an additional 405,000 shares of
authorized but unissued common stock. Options issued under the 1992 Plan are
issued, exercisable, and governed by substantially the same terms as options
issued under the 1990 Plan, with the exception of provisions in the 1990 Plan
accelerating the vesting of options in instances of acquisition or liquidation,
which have been deleted from the 1992 Plan.
On November 17, 1992, the Board of Directors also approved an increase,
approved by the stockholders on March 2, 1993, of the number of shares of common
stock reserved for issuance under the 1992 Plan from 405,000 to 505,000 shares.
F-13
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED)
On December 29, 1995, the Company adopted the 1995 Stock Option Plan (1995
Plan), for which the Company has reserved an additional 1,500,000 shares of
authorized but unissued common stock. Options issued under the 1995 Plan are
issued, exercisable, and governed by substantially the same terms as options
issued under the 1992 Plan.
Terms of the Plans include:
EXERCISE PRICE -- For the 1990 Plan, fair market value determined by the
Board of Directors and not less than 110% of the determined fair market value in
certain instances. For the 1992 Plan and the 1995 Plan fair market value as
determined by the closing price of the Common Stock on the date of issuance as
reported by NASDAQ.
VESTING PERIOD -- A portion of the options granted to participants vests
immediately with the remaining options vesting on varying schedules not
exceeding three years from date of grant.
EXERCISE PERIOD -- The options are exercisable as to be determined by the
Board of Directors provided that not less than 20% of the options are
exercisable per year and no option shall be exercisable after ten years from the
date the option is granted.
SHARES AVAILABLE -- The maximum number of shares that may be issued under
the 1995 Plan is 1,500,000 at December 31, 1995.
In the year ended September 30, 1994, options for 4,741 shares were
exercised at a price of $0.80 per share and options to purchase 81,834 shares
were canceled. In the year ended September 30, 1995, no options were exercised
and options to purchase 123,023 shares were canceled. In the three months ended
December 31, 1995, no options were exercised and options to purchase 32,917
shares were canceled.
F-14
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1995, there were 1,586,845 shares under options outstanding
of which 913,499 were exercisable as follows:
<TABLE>
<CAPTION>
GRANT EXERCISE EXPIRATION
DATE GRANTED EXERCISABLE PRICE DATE
- --------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
11/88 627 627 $ .80 12/96
5/91 4,028 4,028 1.39 5/96
6/91 85,000 85,000 1.39 6/96
3/92 1,153 1,153 1.39 3/97
5/92 303,890 303,890 1.39 5/97
7/92 5,625 5,625 1.39 7/97
11/92 7,455 7,455 1.39 11/97
3/93 5,000 5,000 1.39 3/98
6/93 1,500 1,500 1.39 6/98
7/93 1,500 1,500 1.39 7/98
8/93 4,457 4,457 1.39 8/98
11/93 3,450 3,450 1.39 11/98
5/94 42,000 42,000 1.39 5/99
11/94 10,160 10,160 0.75 11/99
3/95 50,000 50,000 0.63 3/00
4/95 10,000 10,000 1.44 4/00
8/95 5,000 5,000 1.00 11/98
12/95 36,000 36,000 1.00 12/00
12/95 1,010,000 336,654 1.13 12/05
------------ -----------
1,586,845 913,499
------------ -----------
------------ -----------
</TABLE>
COMMON STOCK
In March 1994, the Company finalized an agreement with one of the Company's
distributors, to purchase the Company's securities in exchange for certain
distribution, licensing and product development rights. Under the terms of the
agreement, the Company was obligated to issue 200,000 shares of common stock for
a total consideration of $500,000. At September 30, 1994, the distributor had
purchased $250,000 in common stock. In November 1994, the distributor purchased
the remaining $250,000 in common stock and was issued warrants to purchase
166,667 additional shares of stock at an exercise price of $3.00 per share,
which warrants expired in December 1995.
In March 1995, the Company granted 80,645 shares of the Company's common
stock at a price $0.62 per share for a total of $42,500 (net of financing costs
of $7,500) to a private investor.
During May and August 1995, the Company completed two separate private
offerings for an aggregate of 5,648,400 shares of the Company's common stock
providing net proceeds of $2,931,486 (net of $598,764 of financing expenses).
Also, the Company's placement agent received warrants for the future purchase of
564,840 shares of the Company's common stock at an exercise price of $0.625.
Such warrants expire from May through August 2000.
In August 1995, the Company granted 16,000 shares of the Company's common
stock at a price of $1 per share to a vendor as compensation for services
performed in lieu of the Company's liability of $16,000 to the vendor.
F-15
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED)
In October 1995, the Company granted to each nonemployee director of the
Company 10,000 shares of the Company's common stock at a price of $.625 per
share as compensation for services performed. Compensation expense in the amount
of $31,250 has been reflected in the Consolidated Statements of Operations.
In November 1995, the Company granted 20,000 shares of the Company's common
stock at a price of $.625 per share to a director for consulting services
performed related to the merger. Consulting expense in the amount of $12,500 has
been reflected in the Consolidated Statements of Operations.
12. INCOME TAXES
Effective October 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 (SFAS No. 109), ACCOUNTING FOR INCOME
TAXES. SFAS No. 109 requires the recognition of deferred tax liabilities and
assets resulting from differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years. Prior to October 1,
1993, the Company accounted for income taxes in accordance with Accounting
Principles Board Opinion No. 11. The effect of this change on operating results
for the year ended September 30, 1994, the year of implementation, was not
material.
The net deferred tax assets and liabilities consist of the following at:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------- DECEMBER 31,
1994 1995 1995
------------ ------------ -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 4,400,000 $ 5,460,000 $ 6,520,000
Research and development credits............... 285,000 295,000 300,000
Capitalized research and development costs..... 274,000 280,000 --
Depreciation................................... 158,000 175,000 162,000
Other.......................................... 58,000 65,000 114,000
------------ ------------ -------------
Total...................................... 5,175,000 6,275,000 7,096,000
Valuation allowance.............................. (5,175,000) (6,275,000) (7,096,000)
------------ ------------ -------------
Net deferred tax assets and liabilities........ $ -- $ -- $ --
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
At December 31, 1995, the Company had approximately $18,641,000 and
$3,101,000 in net operating losses for federal and state tax purposes,
respectively, available to be carried forward to future periods. The
carryforwards expire from 2003 to 2011 for federal purposes and from 2010 to
2011 for state purposes. The Company also has credits for research and
development of $300,000 available to offset future federal income taxes, which
expire from 2003 to 2011.
As a result of providing a valuation allowance equal to the deferred tax
assets, there is no federal tax provision. The provision for tax is the state
minimum tax.
During the last three years, the Company has had more than a 50% change in
ownership. Section 382 of the Internal Revenue Code and comparable state
statutes impose certain annual limitations on the utilization of net operating
loss carryforwards and research and development credits that can be used to
offset income in future periods.
F-16
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. LEASES
OPERATING LEASES
The Company leased its facilities and one automobile under operating leases.
Rental expense is recognized on a straight-line basis over the life of the
lease. Rental expense for the years ended September 30, 1994 and 1995 and for
the three months ended December 31, 1995 was $172,000, $156,000 and $71,000,
respectively.
Minimum future annual rent payments are as follows for years ending December
31:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------ ------------
<S> <C>
1996 $ 380,205
1997 315,950
1998 315,950
1999 309,642
2000 164,348
Thereafter 1,861,574
------------
Total $ 3,347,669
------------
------------
</TABLE>
CAPITAL LEASES
In July and September 1994, the Company entered into capital leases for
production equipment in the total amount of $231,693, with principal and
interest payable monthly, interest at approximately 21%, and total residuals of
$34,754 due in July and September 1997.
In October 1994, the Company entered into a capital lease for office
equipment in the total amount of $29,000, with principle and interest payable
monthly, interest at 8.71%, and a residual of $4,350, due in October 1997.
Future minimum lease payments under capital lease obligations for the years
ending December 31 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------------------------------------------ ----------
<S> <C>
1996............................................ $ 114,417
1997............................................ 97,598
----------
212,015
Less amount representing interest............... (33,935)
----------
178,080
Less current portion............................ (88,270)
----------
Long-term portion............................... $ 89,810
----------
----------
</TABLE>
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash investing and financing activities:
During the years ended September 30, 1994 and 1995 and the three month
period ending December 31, 1995, the Company acquired assets under capital
leases in the amounts of $231,693, $21,341 and $0, respectively.
During the three months ended December 31, 1995, the Company acquired all of
the outstanding shares of AccuMed, Inc. in exchange for common stock of the
Company. The fair value of net liabilities assumed was $828,476. Cash acquired
totaled $48,237.
F-17
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (CONTINUED)
Cash paid for interest and income taxes:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-------------------- THREE MONTHS ENDED
1994 1995 DECEMBER 31, 1995
--------- --------- --------------------
<S> <C> <C> <C>
Cash paid during the period for:
Interest...................................... $ 12,836 $ 46,657 $ 19,122
Income taxes.................................. 800 800 --
</TABLE>
15. COMMITMENTS
PFIZER AGREEMENT
In October 1992, the Company entered into an agreement to conduct a research
project for the purpose of developing a testing procedure for another entity.
The maximum payments the Company may receive for completion of the agreement are
$246,000. As of December 31, 1995, the Company had received payments of $184,500
based on procedures completed to date.
LEGAL PROCEEDINGS
In November 1994, the company initiated a civil action against a competitor
for misappropriation of the Company's trade secrets covering a key technology in
the Company's principle product line while under a confidentiality and non-use
agreement. The Company settled this lawsuit in February 1996 for technology
rights and other consideration.
16. MERGER AND RELATED TRANSACTIONS
On December 29, 1995, the Company acquired all of the common stock of
AccuMed, Inc. and its wholly owned subsidiary ("AccuMed"). AccuMed is primarily
engaged in the research and development of diagnostic screening products for the
cytopathology and microbiology clinical laboratory, pharmaceutical and
veterinary segments of the health care industry. Following the acquisition,
AccuMed ceased to exist as a legal entity and the merged entity was renamed
AccuMed International, Inc. Pursuant to the terms of the merger agreement the
Company issued 3,931,401 unconditional shares of common stock valued at
$4,422,826 and 237,840 warrants valued at $68,252 on December 29, 1995. An
additional 1,881,910 shares and 126,945 warrants were issued to AccuMed
stockholders on December 29, 1995, however, such shares and warrants are
contingent and subject to forfeiture if specified performance goals are not
achieved by the merged entity during the 24 months beginning January 1, 1996.
The contingent consideration will be recorded when the goals are achieved and
will be computed based upon the stock price on such date.
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon the fair values at the date
of acquisition. The excess of the purchase price over the fair value of the
tangible assets has been allocated to identifiable intangibles of acquired
proprietary technology ($2,644,556) and in-process research and development
($3,965,000). The acquired proprietary technology will be amortized over the
expected period to be benefited, which is estimated to be 10 years with the
in-process research and development charged to operations at the date of
acquisition.
The contingency associated with 940,955 shares and 63,472 warrants was
resolved (performance goal achieved) in March 1996 resulting in contingent
consideration of approximately $5,273,000. Such amount will be allocated to
acquired proprietary technology ($1,775,000) and in-process research and
development ($3,498,000) and recorded in March 1996.
F-18
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. MERGER AND RELATED TRANSACTIONS (CONTINUED)
The results of operations of AccuMed have not been included in the
Consolidated Statements of Operations because the acquisition occurred at the
end of the three month period ended December 31, 1995. The following pro forma
information has been prepared assuming that the acquisition had taken place at
the beginning of the respective periods. The pro forma information includes
adjustments for the amortization of intangibles and write-off of in-process
research and development arising from the transaction. The pro forma financial
information is not necessarily indicative of the results of operations as they
would have been had the transaction been effected on the assumed dates.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
SEPTEMBER 30, 1995 DECEMBER 31, 1995
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Sales........................................................... $ 3,979,930 $ 1,109,506
Net loss........................................................ (9,844,326) (7,016,824)
Net loss per share.............................................. $ (1.00) $ (.60)
</TABLE>
The Company, AccuMed and AccuMed International Limited, a wholly-owned
subsidiary of AccuMed, entered into a Manufacturing and Supply Agreement
effective as of July 1, 1995, (the Manufacturing Agreement) pursuant to which
the Company purchased ID/MIC panels from Sensititre Limited. The Manufacturing
Agreement was terminated on December 29, 1995. Amounts paid to AccuMed for the
year ended September 30, 1995 under the Manufacturing Agreement were $277,172.
Additionally, the Company gave a deposit to AccuMed of $50,000 in October 1995,
for the purchase of supplies and raw materials in relation to this agreement.
Pursuant to a Distributor Agreement effective as of July 1, 1995 between
AccuMed and the Company (the Distributor Agreement), the Company appointed
AccuMed as its distributor for microbiology products. AccuMed was the exclusive
distributor in the United States, Canada, Mexico, Puerto Rico, Japan, the Far
East, Australia and Europe (except Italy, Portugal, Germany, Austria, Belgium,
Cyprus, Greece, Luxembourg, The Netherlands, Switzerland and Turkey), and a
non-exclusive distributor in Central America, South America, Africa, South
Africa, Korea, East Europe, the Middle East, China and Taiwan. The Distributor
Agreement was terminated on December 29, 1995. Amounts paid to AccuMed for the
year ended September 30, 1995 under the Distributor Agreement were $35,677.
Pursuant to an oral agreement (the Oral Agreement), the Company paid AccuMed
an amount equal to 30% of AccuMed's lease payment (approximately $2,500 per
month) for its manufacturing facility in Cleveland, Ohio and 30% of AccuMed's
general overhead expenses in consideration for AccuMed providing sales,
marketing and distribution services on behalf of the Company. Such arrangement
terminated on December 29, 1995. Amounts paid to AccuMed for the year ended
September 30, 1995, under this Oral Agreement were $67,508.
Pursuant to a Research and Development Agreement, effective as of July 1,
1995, (the R&D Agreement) between the Company and AccuMed the Company granted to
Sensititre Limited, a wholly-owned subsidiary of AccuMed, a non-exclusive
license to use the Company's intellectual property, including know-how, trade
secrets and technology relating to alamarBlue-TM- for the sole purpose of
conducting research and development activities using such intellectual property.
Under the R&D Agreement, the Company paid the actual hourly wage per employee
hour spent on such research and development and reimburses AccuMed for its
expenses relating thereto. The R&D Agreement terminated on December 29, 1995.
Amounts paid to AccuMed for the year-ended September 30, 1995, under this R&D
Agreement were $20,000.
At September 30, 1995, the Company had recorded an accounts receivable of
$53,499 from AccuMed which resulted from the sale of inventory to AccuMed.
Additionally, the Company had recorded
F-19
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. MERGER AND RELATED TRANSACTIONS (CONTINUED)
approximately $123,000 of accounts payable to AccuMed for services received
pursuant to the Manufacturing, Distributor and Oral Agreements. Upon
consummation of the merger on December 29, 1995 such amounts were eliminated in
consolidation.
The Company recorded a deferred asset at September 30, 1995, of $299,650
relating to direct costs paid to unrelated entities for services performed
related to the merger. These deferred costs have been included in determining
the cost of AccuMed.
In February 1995, the Company and AccuMed entered into an agreement with a
consulting firm (Consulting Firm) to pay the Consulting Firm an aggregate
finders fee for assistance with the merger, of which $50,000 was paid with
proceeds from the Company's private offering in August 1995 and is non-
refundable. The remaining obligation was satisfied through the issuance of
444,444 shares of common stock on December 29, 1995 and the issuance of a
five-year warrant to purchase 750,000 shares of common stock at $1.25 per share.
The total finders fee of $790,000 has been included as direct costs of the
acquisition.
The Company entered into an agreement with Bridgemere Capital (Bridgemere),
which has been acting as special advisor to the Company, pursuant to which the
Company has paid to Bridgemere a fee of $50,000 and has agreed to pay an
additional $55,000 in cash and issued 56,000 shares of common stock on December
29, 1995. The total finders fee of $168,000 has been included as direct costs of
the acquisition.
17. RELATED-PARTY TRANSACTIONS
All nonemployee directors have received an option to purchase 750 common
shares and option to purchase 250 additional shares annually. In 1993 and 1994,
all nonemployee directors received an option to purchase 1,000 shares and 5,000
shares of the Company's common stock, respectively. In 1995, all nonemployee
directors received options to purchase 5,000 to 9,215 shares of the Company's
common stock, contingent upon their length of service. These directors will
receive options for 5,000 additional shares annually. All such awards are made
pursuant to the 1992 Plan.
On November 21, 1994, the Company issued to certain officers and employees
of the Company options to purchase an aggregate of 16,020 shares of the
Company's common stock at an exercise price of $0.75 per share. Also, on August
31, 1995, the Company issued to certain employees of the Company options to
purchase an aggregate of 30,000 shares of the Company's common stock at an
exercise price of $1 per share.
In December 1994, the Company entered into a Consulting Services Agreement,
effective January 1, 1995, with a Placement Agent, also a stockholder of the
Company, pursuant to which the Placement Agent agreed to provide certain
financial consulting services to the Company for a period of 12 months with an
option to renew the agreement for an additional 12 months at the consent of both
the Placement Agent and the Company. In exchange for the consulting services,
the Company will pay the Placement Agent an aggregate sum of $58,500. At
September 30, 1995, the Company had paid the Placement Agent $42,500.
In September 1995, the Company paid $12,500 to a director for consulting
services performed related to the private financings in May and August 1995 and
the proposed merger between the Company and AccuMed. Additionally, in November
1995, the Company issued 20,000 shares of the Company's common stock at a price
of $.625 per share to the same director for the consulting services described
above.
F-20
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. RELATED-PARTY TRANSACTIONS (CONTINUED)
During the year ended September 30, 1994, the Company entered into an
agreement with an Italian company, which is also a stockholder, for distribution
of the Company's products in Europe. Sales to this stockholder constituted 51%
and 18% of the Company's total sales for the years ended September 30, 1994 and
1995, respectively. At September 30, 1994 and 1995, accounts receivable from the
stockholder amounted to approximately $313,000 and $65,000, respectively. The
distributor is no longer a stockholder of the Company.
18. SUBSEQUENT EVENTS (UNAUDITED)
In January 1996, the Company received $250,000 cash in exchange for a note
payable bearing interest at 11% due in April 1996, and warrants to purchase
100,000 shares of common stock at $1.25 per share. The total proceeds received
of $250,000 were allocated to the warrants based on their estimated fair value
of $352,000. The difference of $102,000 has been reflected as other expense in
the Consolidated Statement of Operations for the three month period ended March
31, 1996. The original issue discount of $250,000 relating to the notes payable
will be amortized over the term of the note with $166,000 reflected as interest
expense in the Consolidated Statement of Operations for the three month period
ended March 31, 1996.
At December 31, 1995, the Company had deferred revenue of $1,454,550 pending
resolution of the Microscan lawsuit and the Difco lawsuit. Upon settlement of
these lawsuits in February 1996, the Company received an additional $2,000,000
from Becton, $1,000,000 each in February and March 1996, per the terms of the
worldwide license agreement executed on October 10, 1995. Total income
recognized for the three month period ended March 31, 1996 per the terms of this
agreement was $3,454,450 and has been reflected as other income in the
Consolidated Statement of Operations.
On December 29, 1995, the Company acquired all of the common stock of
AccuMed and its wholly-owned subsidiary. Pursuant to the terms of the merger
agreement, 1,881,910 shares of common stock and 126,945 warrants were issued to
AccuMed stockholders which were contingent and subject to forfeiture if
specified performance goals were not achieved by the merged entity. The
contingency associated with 940,955 shares of common stock and 63,472 warrants
was resolved (performance goal achieved) in March 1996 resulting in contingent
consideration of $5,430,326. Such amount has been allocated to identifiable
intangibles of acquired proprietary technology ($1,930,599) and in-process
research and development ($3,499,727). The acquired proprietary technology will
be amortized over the expected period to be benefited, which is estimated to be
ten years, with the in-process research and development charged to operations
during the three months ended March 31, 1996.
In March 1996, the Company granted to an individual in exchange for
consulting services rendered warrants to purchase 100,000 shares of common stock
at a price of $2.125 per share. These warrants expire in January 2001. The fair
market value of these warrants of $230,000 has been recorded as issuance of
common stock warrants with an offsetting charge reflected as administration
expense in the Consolidated Statement of Operations for the three month period
ended March 31, 1996.
In March 1996, the Company granted to certain investors in a related party
warrants to purchase 675,000 shares of common stock at a price of $3.42 to $3.87
per share. These warrants expire in March 1999. The fair market value of these
warrants of $852,390 has been recorded as issuance of common stock warrants with
an offsetting charge reflected as other expense in the Consolidated Statement of
Operations for the three month period ended March 31, 1996.
For the three month period ended March 31, 1996, the Company granted options
to purchase 240,000 shares at prices of $1.75 to $3.75 per share, options for
12,895 shares were exercised at prices of $0.63 to $1.39 per share and options
to purchase 2,032 shares were canceled.
F-21
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
In April 1996, the Company agreed to acquire the assets of Accuron
Corporation, an Ohio corporation ("Accuron"), in consideration for the issuance
of 100,000 shares of Common Stock, a value of approximately $600,000. The assets
to be acquired consist largely of U.S. and foreign patents in the areas of image
analysis and automated cytology. The Company will not assume any liabilities of
Accuron.
In June 1996, 166,586 shares of common stock were issued to a related party
pursuant to an agreement requiring conversion of the outstanding principal and
the accrued and unpaid interest totalling $75,000 into 68,500 shares of common
stock of AccuMed prior to the merger with the Company.
In July 1996, the Company signed a letter of intent to acquire a two-thirds
interest in Oncometrics Imaging Corp. ("Oncometrics") for a total purchase price
of approximately $4.0 million which includes approximately $2.0 million to be
used solely as working capital for Oncometrics.
In July 1996, the Company signed a letter of intent to acquire the remaining
90% interest in Radco Ventures, Inc. ("Radco"), for approximately $1.4 million
in cash.
During July 1996, the Company publicly registered the 255,000 shares of
common stock issued pursuant to a private placement.
F-22
<PAGE>
AUDITORS' REPORT
To the Board of Directors
Oncometrics Imaging Corp.
We have audited the balance sheets of the AIC division of Xillix
Technologies Corp. as at August 31, 1995 and December 31, 1995 and Oncometrics
Imaging Corp. at May 31, 1996 and the statements of operations and deficit and
changes in financial position for the periods then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Division and the Company as at August
31, 1995, December 31, 1995, and May 31, 1996 and the results of its operations
and the changes in its financial position for the periods then ended in
accordance with generally accepted accounting principles. As required by the
Company Act (British Columbia), we report that, in our opinion, these principles
have been applied on a basis consistent with that of the preceding year.
Generally accepted accounting principles in Canada vary in certain
significant respects from generally accepted accounting principles in the United
States. As indicated in note 12 there are no material differences which affect
the results of operations in each of the periods and shareholders' deficiency as
of August 31, 1995, December 31, 1995 and May 31, 1996.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
July 18, 1996
F-23
<PAGE>
ONCOMETRICS IMAGING CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, MAY 31,
1995 1995 1996
----------- ------------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................................... $ -- $ -- $ 18,006
Accounts receivable..................................................... 37,818 222,576 35,960
Inventories (note 3) 147,592 80,249 138,050
Other................................................................... -- -- 5,438
----------- ------------- ----------
185,410 302,825 197,454
----------- ------------- ----------
Capital assets, net (note 4).............................................. 244,916 238,197 236,847
----------- ------------- ----------
$ 430,326 $ 541,022 $ 434,301
----------- ------------- ----------
----------- ------------- ----------
LIABILITIES AND EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued liabilities (note 5)....................... $ 45,600 $ 22,700 $ 105,962
Current portion of long-term debt (note 6).............................. 10,000 10,000
----------- ------------- ----------
45,600 32,700 115,962
----------- ------------- ----------
Long-term debt (note 6)................................................... 318,338 308,338 308,338
----------- ------------- ----------
Equity (deficiency):
Share capital (note 7).................................................. -- -- 199,984
Xillix divisional equity, net of operating loss (note 8)................ 66,388 199,984 --
Xillix capital contributions (note 9)................................... -- -- 302,374
----------- ------------- ----------
66,388 199,984 502,358
Deficit................................................................. -- -- (492,357)
----------- ------------- ----------
66,388 199,984 10,001
----------- ------------- ----------
$ 430,326 $ 541,022 $ 434,301
----------- ------------- ----------
----------- ------------- ----------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
ONCOMETRICS IMAGING CORP.
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS
ENDED FOUR MONTHS ENDED ENDED
AUGUST 31, 1995 DECEMBER 31, 1995 MAY 31, 1996
--------------- ------------------ ------------
<S> <C> <C> <C>
Revenues
Product sales............................................... $ 220,862 $ 198,845 $ 7,012
Interest income............................................. -- -- 1,554
--------------- -------- ------------
220,862 198,845 8,566
--------------- -------- ------------
Cost and expenses:
Cost of sales............................................... 183,927 119,325 4,297
Marketing, sales and support................................ -- -- 82,062
Research and development.................................... 1,290,188 300,853 283,522
General and administrative.................................. -- -- 100,435
General and administrative allocation from parent company... 235,826 60,320 --
Depreciation and amortization............................... 71,840 23,680 30,607
--------------- -------- ------------
1,781,781 504,178 500,923
--------------- -------- ------------
Loss for the period........................................... $ 1,560,919 $ 305,333 492,357
--------------- --------
--------------- --------
Deficit, beginning of period.................................. --
------------
Deficit, end of period........................................ $ 492,357
------------
------------
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
ONCOMETRICS IMAGING CORP.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS
ENDED FOUR MONTHS ENDED ENDED
AUGUST 31, 1995 DECEMBER 31, 1995 MAY 31, 1996
--------------- ------------------ ------------
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Loss for the period......................................... $ (1,560,919) $ (305,333) $ (492,357)
Depreciation and amortization an item not involving cash.... 71,840 23,680 30,607
--------------- ---------- ------------
(1,489,079) (281,653) (461,750)
--------------- ---------- ------------
Changes in non-cash operating working capital:
Accounts receivable....................................... (37,818) (184,758) 186,616
Inventories............................................... (147,592) 67,343 (57,801)
Other current assets...................................... -- -- (5,438)
Accounts payable and accrued liabilities.................. 45,600 (22,900) 83,262
--------------- ---------- ------------
(1,628,889) (421,968) (255,111)
--------------- ---------- ------------
Financing:
Increase in equity.......................................... 1,627,307 438,929 302,374
Increase in long-term debt.................................. 318,338 -- --
--------------- ---------- ------------
1,945,645 438,929 302,374
--------------- ---------- ------------
Investments:
Purchase of capital assets, net............................. (316,756) (16,961) (29,257)
--------------- ---------- ------------
Increase in cash.............................................. -- -- 18,006
Cash, beginning of period..................................... -- -- --
--------------- ---------- ------------
Cash, end of period........................................... $ -- $ -- $ 18,006
--------------- ---------- ------------
--------------- ---------- ------------
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
ONCOMETRICS IMAGING CORP.
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND OPERATIONS:
A Division of Xillix Technologies Inc. ("Xillix") has specialized in the
research and development of Automated Image Cytometry equipment ("AIC
Division").
In contemplation of raising additional capital for the AIC Division,
Oncometrics Imaging Corp. (the "Company") was formed as a wholly-owned
subsidiary of Xillix in October 1995. Effective January 1, 1996 the operations
of the AIC Division were transferred to the Company. The net assets of the AIC
Division were transferred on January 20, 1996 in consideration of shares of the
Company. The value assigned to the shares was equal to the historical value of
net assets transferred.
The accompanying financial statements include the accounts of the Company
for the period January 1, 1996 to May 31, 1996 and the accounts of the AIC
Division for the year ended August 31, 1995 and the four months ended December
31, 1995.
The financial statements for the year ended August 31, 1995 and four months
ended December 31, 1995 include an allocation of the overhead of Xillix
applicable to the AIC Division, based on proportionate wages.
2. SIGNIFICANT ACCOUNTING POLICIES:
These financial statements have been prepared by management in accordance
with generally accepted accounting principles in Canada (Canadian GAAP) and
presented in Canadian dollars. These financial statements also conform, in all
material respects, with those accounting principles that are generally accepted
in the United States (US GAAP), except for these matters referred to in note 12.
(a) Basis of presentation:
These financial statements are prepared for inclusion in a SEC filing
statement for purposes of funding the acquisition of a 66 2/3% equity interest
of Oncometrics Imaging Corp. pursuant to a letter of intent dated July 3, 1996.
The financial statements have been prepared on the basis which assumes the
realization of assets and settlement of liabilities in the normal course of
business. The ability of the Company to continue its planned course of action is
dependent upon continued financial support from its parent company and upon
additional financing and obtaining future profitable operations.
(b) Inventories:
Inventories are included at the lower of average cost and net realizable
value.
(c) Capital assets:
Capital assets are stated at cost. Depreciation is provided using the
following methods and annual rates:
<TABLE>
<CAPTION>
ASSET BASIC RATE
- ----------------------------------------------------- ------------------------------- ---------
<S> <C> <C>
Computer and laboratory equipment declining-balance 30%
Furniture and office equipment declining-balance 20%
Demonstration equipment straight-line over 3 years
Leasehold improvements straight-line over 5 years
Intellectual property and patents straight-line over 17 years
</TABLE>
(d) Research and development costs:
Research and development (R&D) costs are expensed as incurred. Research and
related government assistance is accounted for using the cost reduction method
and is credited against R&D expenditures.
F-27
<PAGE>
ONCOMETRICS IMAGING CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(e) Estimates:
Preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these estimates.
3. INVENTORIES:
Inventories comprises finished goods of $ nil (August 31, 1995 -- $70,000;
December 31, 1995 -- $ nil) and materials of $138,050 (August 31, 1995 --
$77,592; December 31, 1995 -- $80,249).
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, MAY 31,
1995 1995 1996
----------- ------------- ----------
<S> <C> <C> <C>
Computer and laboratory equipment......................................... $ 194,130 $ 207,891 $ 221,811
Furniture and office equipment............................................ 7,923 7,923 11,339
Demonstration equipment................................................... 107,562 108,623 108,623
Leasehold improvements.................................................... -- -- 3,883
Intellectual property and patents......................................... 121,901 124,040 132,078
----------- ------------- ----------
431,516 448,477 477,734
Less accumulated depreciation and amortization............................ 186,600 210,280 240,887
----------- ------------- ----------
$ 244,916 $ 238,197 $ 236,847
----------- ------------- ----------
----------- ------------- ----------
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accrued liabilities include a warranty reserve of $9,120 (August 31, 1995 --
$20,000; December 31, 1995 -- $10,000) and accrued salary and vacation pay of $
nil (August 31, 1995 -- $25,600; -- December 31, 1995 -- $ nil).
6. LONG-TERM DEBT:
Long-term debt consists of repayable contribution from the Western Economic
Diversification Program which was assumed from Xillix Technologies Corp.
("Xillix") and is still in the name of Xillix as follows:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, MAY 31,
1995 1995 1996
----------- ------------- ----------
<S> <C> <C> <C>
Balance assumed........................................................... $ 318,338 $ 318,338 $ 318,338
Less current portion...................................................... -- 10,000 10,000
----------- ------------- ----------
$ 318,338 $ 308,338 $ 308,338
----------- ------------- ----------
----------- ------------- ----------
</TABLE>
The Western Diversification construction does not bear interest. This is
repayable in semi-annual contributions commencing January 31, 1994. Repayments
are based on future sales of the ACCESS device.
The estimated aggregate maximum repayments for each of the five years
subsequent to December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996...................................................................... $ 10,000
1997...................................................................... 100,000
1998...................................................................... 100,000
1999...................................................................... 100,000
2000...................................................................... 8,338
</TABLE>
F-28
<PAGE>
ONCOMETRICS IMAGING CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SHARE CAPITAL:
(a) Authorized:
The authorized share capital of the Company consists of 50,000,000 common
shares without par value.
(b) Issued:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, MAY 31,
1995 1995 1996
----------- --------------- ----------
<S> <C> <C> <C>
1,775,000 (1 -- December 31, 1995) common shares.......................... $ N/A $ -- $ 199,984
----------- --- ----------
----------- --- ----------
</TABLE>
8. DIVISIONAL EQUITY:
The divisional equity at December 31, 1995 and August 31, 1995 represents
the sum of cash contributions, plus the net assets of the division less the
divisional loss.
9. XILLIX CAPITAL CONTRIBUTION:
This represents loans by Xillix to the Company which will be converted to
shares.
10. INCOME TAXES:
As at May 31, 1996 the Company has non-capital losses for income tax
purposes of approximately $256,000 available to reduce taxes of future years,
which expire in 2000. The Company also has Scientific Research Experimental
Development Expenditures of approximately $214,000 at May 31, 1996.
No recognition has been given in these financial statements to the potential
future tax benefits which may arise from claiming these losses and Scientific
Research and Experimental Development Expenditures.
11. EXPORT SALES:
The Company's division had export sales in the following geographic regions:
<TABLE>
<CAPTION>
FOUR MONTHS
TWELVE MONTHS ENDED FIVE MONTHS
ENDED AUGUST DECEMBER 31, ENDED MAY 31,
31, 1995 1995 1996
-------------- ------------- -------------
<S> <C> <C> <C>
United States................................... $ 148,453 $ 8,190 $ 4,326
Europe.......................................... 2,428 129,675 2,186
-------------- ------------- ------
$ 150,881 $ 137,865 $ 6,512
-------------- ------------- ------
-------------- ------------- ------
</TABLE>
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES:
In February 1992, the Financial Accounting Standards Board issued Statement
No. 109, "ACCOUNTING FOR INCOME TAXES". Statement 109 changed the method
companies used to account for income taxes from the deferral method to the asset
and liability method. This statement is effective for fiscal years beginning
after December 15, 1992. The Company has determined that the adoption of
Statement 109 does not result in a material effect on the net deferred income
tax position of the Company as any deferred tax assets initially recognized are
fully offset by a valuation allowance as at December 31, 1995.
F-29
<PAGE>
PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The accompanying pro forma condensed combining financial statements reflects
the probable acquisition of a 66% interest in Oncometrics Imaging Corp.
(Oncometrics) by AccuMed International, Inc. (AccuMed International) (formerly
Alamar Biosciences, Inc), the proposed acquisition of the remaining 90% interest
in Radco Ventures, Inc. (Radco), the merger of AccuMed International and AccuMed
Inc. (AccuMed), and the purchase of certain assets and the assumption of certain
liabilities from Sensititre US and Sensititre Ltd. by AccuMed.
The pro forma condensed combining balance sheet as of March 31, 1996 assumes
that the proposed acquisition of the 66% interest in Oncometrics and the
proposed acquisition of the remaining 90% interest in Radco occurred on March
31, 1996. The pro forma condensed combining statements of operations for the
three months ended March 31, 1996, for the three months ended December 31, 1995
and for the year ended September 30, 1995 assume that the probable acquisition
of the 66% interest in Oncometrics occurred on October 1, 1994. In addition, the
pro forma condensed combining statements of operations for the three months
ended December 31, 1995 and for the year ended September 30, 1995 assume that
the merger of AccuMed International with Accumed and the purchase of Sensititre
US and Sensititre Ltd. occurred on October 1, 1994. The condensed combining
statements of operations do not reflect results of operations for Radco since
its' incorporation on March 6, 1996. Such results are not deemed significant.
The transactions have been accounted for using purchase accounting. The pro
forma adjustments are based on preliminary assumptions of the allocation of the
purchase price and are subject to substantial revision once evaluations of the
fair value of the assets and liabilities are completed. Actual purchase
accounting adjustments may differ from the pro forma adjustments presented
herein.
The respective Oncometrics financial results have been translated from
Canadian dollars to U.S. dollars using an exchange rate of .7451 for the year
ended September 30, 1995, .7391 for the three months ended December 31, 1995,
.7343 for the three months ended March 31, 1996, and .7357 as of March 31, 1996.
The pro forma condensed combining financial information is not necessarily
indicative of the results that actually would have occurred if the acquisitions
had been completed on the assumed dates nor are the statements indicative of
future combined financial position or earnings.
F-30
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINING BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMED ONCOMETRICS RADCO
INTERNATIONAL, IMAGING VENTURES,
INC. CORP. (A) INC. (B) ADJUSTMENTS PRO FORMA
-------------- ------------ ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents........... $ 1,382,128 $ 13,246 $ 800,000 $ 2,000,000(1) $ 4,195,374
Restricted cash..................... 310,000 -- -- -- 310,000
Accounts receivable................. 869,357 26,455 -- -- 895,812
Prepaid expenses and deposits....... 113,453 -- -- -- 113,453
Production inventory................ 1,348,678 101,559 -- -- 1,450,237
-------------- ------------ ------------ ---------------- --------------
Total current assets.............. 4,023,616 141,260 800,000 2,000,000 6,964,876
-------------- ------------ ------------ ---------------- --------------
Fixed assets, net................... 677,843 174,241 -- 852,084
Intangible assets................... 4,493,055 -- -- 2,670,000(1) 7,793,055
630,000(2)
Other assets........................ 121,577 4,001 -- 125,578
-------------- ------------ ------------ ---------------- --------------
$ 9,316,091 $ 319,502 $ 800,000 $ 5,300,000 $ 15,735,593
-------------- ------------ ------------ ---------------- --------------
-------------- ------------ ------------ ---------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt... $ -- $ 7,357 $ -- $ -- $ 7,357
Capital lease obligations due within
one year........................... 82,093 -- -- -- 82,093
Accounts payable.................... 2,481,492 77,952 50,000 2,609,444
Due to Xillix Technologies Corp..... -- -- -- 4,000,000(1) 4,000,000
Due to Radco Ventures............... -- -- -- 1,380,000(2) 1,380,000
Other current liabilities........... 687,218 -- -- -- 687,218
Notes payable....................... 956,960 -- -- -- 956,960
-------------- ------------ ------------ ---------------- --------------
Total current liabilities......... 4,207,763 85,309 50,000 5,380,000 9,723,072
-------------- ------------ ------------ ---------------- --------------
Long-term portion of capital lease
obligations........................ 67,766 -- -- -- 67,766
Long-term debt...................... -- 226,835 -- -- 226,835
Deferred rent....................... 11,836 -- -- -- 11,836
Minority interest................... -- -- -- 677,358 677,358
Stockholders' equity:
Common stock...................... 166,050 -- -- -- 166,050
Additional paid-in capital........ 30,273,297 -- 750,000 (750,000)(2) 30,273,297
Accumulated deficit............... (25,410,621) 7,358 -- (7,358)(1) (25,410,621)
-------------- ------------ ------------ ---------------- --------------
Total stockholders' equity...... 5,028,726 7,358 750,000 (677,358) 5,028,726
-------------- ------------ ------------ ---------------- --------------
$ 9,316,091 $ 319,502 $ 800,000 $ 5,300,000 $ 15,735,593
-------------- ------------ ------------ ---------------- --------------
-------------- ------------ ------------ ---------------- --------------
</TABLE>
- ------------------------
(A) Represents net assets of Oncometrics as of May 31, 1996.
(B) Represents net assets of Radco as of June 30, 1996.
See accompanying notes to the pro forma condensed
combining financial statements.
F-31
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMED ONCOMETRICS
INTERNATIONAL, IMAGING
INC. CORP. (A) ADJUSTMENTS PRO FORMA
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales.................................................. $ 1,187,701 $ 2,153 $ -- $ 1,189,854
Cost of sales.......................................... (595,210) (1,678) -- (596,888)
------------- ------------ ------------ -------------
Gross profit........................................... 592,491 475 -- 592,966
------------- ------------ ------------ -------------
Operating expenses:
General and administrative........................... 914,057 42,433 27,000(4) 983,490
Research and development............................. 4,074,786 119,971 -- 4,194,757
Sales and marketing.................................. 393,177 31,847 -- 425,024
------------- ------------ ------------ -------------
Total operating expenses........................... 5,382,020 194,250 27,000 5,603,270
------------- ------------ ------------ -------------
Operating loss......................................... (4,789,529) (193,775) (27,000) (5,010,304)
Other income (expense):
Interest income...................................... 5,837 1 -- 5,838
Interest expense..................................... (326,831) -- -- (326,831)
Other income......................................... 2,462,252 -- -- 2,462,252
------------- ------------ ------------ -------------
Loss before income taxes and minority interest......... (2,648,271) (193,774) (27,000) (2,869,045)
Income tax expense..................................... 850 850
------------- ------------ ------------ -------------
Net loss before minority interest...................... (2,649,121) (193,774) (27,000) (2,869,895)
Minority interest...................................... -- -- 75,000(5) 75,000
------------- ------------ ------------ -------------
Net earnings (loss)................................ $(2,649,121) $ (193,774) $ 48,000 $ (2,794,895)
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
Net loss per share..................................... $ (0.18)
-------------
-------------
Weighted average common shares outstanding............. 15,797,315
-------------
-------------
</TABLE>
- ------------------------
(A) Includes the three months ended March 31, 1996 for Oncometrics.
See accompanying notes to the pro forma condensed
combining financial statements.
F-32
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMED ONCOMETRICS
INTERNATIONAL, IMAGING
INC. ACCUMED INC. CORP. (A) ADJUSTMENTS PRO FORMA
------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Sales.................................... $ 100,130 $ 1,009,376 $ 146,959 $ (73,005)(6) $ 1,183,460
Cost of sales............................ (338,730 ) (830,497 ) (88,189 ) 71,892(7) (1,185,524)
------------- ------------- ------------ ------------- ------------
Gross profit (loss)...................... (238,600 ) 178,879 58,770 (1,113 ) (2,064)
------------- ------------- ------------ ------------- ------------
Operating expenses:
General and administration............. 1,418,797 758,066 49,759 27,000(4) 2,253,622
Research and development............... 3,997,600 338,178 172,259 -- 4,508,037
Sales and marketing.................... 7,197 289,360 -- -- 296,557
------------- ------------- ------------ ------------- ------------
Total operating expenses................. 5,423,594 1,385,604 222,018 27,000 7,058,216
------------- ------------- ------------ ------------- ------------
Operating loss........................... (5,662,194 ) (1,206,725 ) (163,248 ) (28,113 ) (7,060,280)
Other income (expense):
Interest income........................ 4,748 -- -- -- 4,748
Interest (expense)..................... (10,862 ) (1,948 ) -- -- (12,810)
Other.................................. (72,929 ) -- -- -- (72,929)
------------- ------------- ------------ ------------- ------------
Loss before income taxes and minority
interest................................ (5,741,237 ) (1,208,673 ) (163,248 ) (28,113 ) (7,141,271)
Provision for income taxes............... 800 -- -- -- 800
------------- ------------- ------------ ------------- ------------
Net loss before minority interest........ (5,742,037 ) (1,208,673 ) (163,248 ) (28,113 ) (7,142,071)
Minority interest........................ -- -- -- 65,000(5) 65,000
------------- ------------- ------------ ------------- ------------
Net earnings (loss)...................... $ (5,742,037 ) $ (1,208,673 ) $ (163,248 ) $ 36,887 $ (7,077,071)
------------- ------------- ------------ ------------- ------------
------------- ------------- ------------ ------------- ------------
Net loss per share....................... $ (0.60)
------------
------------
Weighted average common shares
outstanding............................. 11,742,980
------------
------------
</TABLE>
- ------------------------
(A) Includes the three months ended December 31, 1995 for Oncometrics.
See accompanying notes to the pro forma condensed
combining financial statements.
F-33
<PAGE>
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
HISTORICAL ACCUMED,
------------- AS ADJUSTED,
ACCUMED HISTORICAL FOR THE YEAR
INTERNATIONAL ---------------------------------- ENDED
YEAR ENDED SENSITITRE SENSITITRE SEPTEMBER 30,
SEPTEMBER 30, ACCUMED US UK 1995
1995 (A) (B) (B) ADJUSTMENTS (C)
------------- ------------ --------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales..................................... $ 514,776 $ 2,609,233 $ 409,360 $ 639,561 $ (193,000)(6) $ 3,465,154
Cost of sales............................. (1,431,187) (1,510,143) (247,860) (457,056) 109,000(7) (2,106,059)
------------- ------------ --------- --------- -------------- -------------
Gross profit (loss)....................... (916,411) 1,099,090 161,500 182,505 (84,000) 1,359,095
------------- ------------ --------- --------- -------------- -------------
Operating expenses:
General and administration.............. 2,094,890 1,040,083 208,420 74,589 100,000(8) 1,423,092
Research and development................ 386,882 453,277 -- 88,872 -- 542,149
Sales and marketing..................... 309,208 1,187,177 -- -- -- 1,187,177
------------- ------------ --------- --------- -------------- -------------
Total operating expenses.................. 2,790,980 2,680,537 208,420 163,461 100,000 3,152,418
------------- ------------ --------- --------- -------------- -------------
Operating income (loss)................... (3,707,391) (1,581,447) (46,920) 19,044 (184,000) (1,793,323)
Other income (expense):
Interest income......................... 7,949 12,930 -- -- -- 12,930
Interest expense........................ (46,657) (40,201) -- -- (35,475)(9) (75,676)
Other income............................ 32,566 1,308 -- -- -- 1,308
Other expense........................... (45,777) -- -- -- -- --
------------- ------------ --------- --------- -------------- -------------
Earnings (loss) before income taxes and
minority interest........................ (3,759,310) (1,607,410) (46,920) 19,044 (219,475) (1,854,761)
Provision for income taxes................ 800 -- -- -- -- --
------------- ------------ --------- --------- -------------- -------------
Net earnings (loss) before minority
interest................................. (3,760,110) (1,607,410) (46,920) 19,044 (219,475) (1,854,761)
------------- ------------ --------- --------- -------------- -------------
Minority interest......................... -- -- -- -- -- --
------------- ------------ --------- --------- -------------- -------------
Net earnings (loss)....................... $ 3,760,110) $ (1,607,410) $ (46,920) $ 19,044 $ (219,425) $(1,854,761)
------------- ------------ --------- --------- -------------- -------------
------------- ------------ --------- --------- -------------- -------------
Net loss per equivalent share............. $ (0.59) $ (0.92) $ (1.06)
------------- ------------ -------------
------------- ------------ -------------
Weighted average shares outstanding (F)... 6,375,627 1,748,940 1,748,940
------------- ------------ -------------
------------- ------------ -------------
<CAPTION>
PRO FORMA
-----------------------------
ACCUMED
INTERNATIONAL
AS ADJUSTED HISTORICAL
FOR THE YEAR -----------
ENDED ONCOMETRICS
SEPTEMBER 30, IMAGING
1995 CORP.
ADJUSTMENTS (D) (E) ADJUSTMENTS PRO FORMA
-------------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Sales..................................... $ -- $ 3,979,930 $ 164,552 $ -- $ 4,144,482
Cost of sales............................. -- (3,537,246) (137,034) -- (3,674,280)
-------------- ------------- ----------- -------------- -----------
Gross profit (loss)....................... -- 442,684 27,518 -- 470,202
-------------- ------------- ----------- -------------- -----------
Operating expenses:
General and administration.............. 284,570 (10 3,802,552 229,225 108,000(4) 4,139,777
Research and development................ -- 929,031 961,248 -- 1,890,279
Sales and marketing..................... -- 1,496,385 -- 1,496,385
-------------- ------------- ----------- -------------- -----------
Total operating expenses.................. 284,570 6,227,968 1,190,473 108,000 7,526,441
-------------- ------------- ----------- -------------- -----------
Operating income (loss)................... (284,570) (5,785,284) (1,162,955) (108,000) (7,056,239)
Other income (expense):
Interest income......................... -- 20,879 -- -- 20,879
Interest expense........................ -- (122,333) -- -- (122,333)
Other income............................ -- 33,874 -- -- 33,874
Other expense........................... -- (45,777) -- -- (45,777)
-------------- ------------- ----------- -------------- -----------
Earnings (loss) before income taxes and
minority interest........................ (284,570) (5,899,441) (1,162,955) (108,000) (7,169,596)
Provision for income taxes................ -- 800 -- 800
-------------- ------------- ----------- -------------- -----------
Net earnings (loss) before minority
interest................................. (284,570) (5,899,441) (1,162,955) (108,000) (7,170,396)
-------------- ------------- ----------- -------------- -----------
Minority interest......................... -- -- -- 430,000(5) 430,000
-------------- ------------- ----------- -------------- -----------
Net earnings (loss)....................... $ (284,570) $(5,899,441) ($1,162,955) $ 322,000 $(6,740,396)
-------------- ------------- ----------- -------------- -----------
-------------- ------------- ----------- -------------- -----------
Net loss per equivalent share............. $ (0.60) $ (0.69)
------------- -----------
------------- -----------
Weighted average shares outstanding (F)... 9,831,682 9,831,682
------------- -----------
------------- -----------
</TABLE>
- ----------------------------------
(A) Includes the twelve months and nine months ended September 30, 1995 for
AccuMed, Inc. and Sensititre US/UK, respectively.
(B) Includes the three months ended December 31, 1994, before the acquisitions
by AccuMed, Inc.
(C) AccuMed Consolidated includes AccuMed, Inc., Sensititre US, and Sensititre
UK, Ltd. after purchase accounting adjustments
(D) AccuMed International Consolidated includes AccuMed International (formerly
Alamar Biosciences, Inc.), and AccuMed Consolidated after purchase
accounting adjustments.
(E) Includes the twelve months ended August 31, 1995 for Oncometrics.
(F) Weighted average shares outstanding are 9,831,682 which represents 6,375,627
shares for AccuMed International before the merger plus the weighted average
(3,456,055) of the 4,178,104 shares (6,178,104 shares per the merger
agreement less 2,000,000 shares issued but subject to forfeiture) to be
issued in connection with the AccuMed merger. The weighted average shares
outstanding for AccuMed gives effect to the shares issued by AccuMed during
the year ended September 30,1995 using the exchange ratio of 1.98 to 1. The
total shares outstanding at September 30, 1995 are 15,107,443 (10,929,339
shares of AccuMed International and 4,178,104 shares issued to AccuMed)
which does not include the 2,000,000 shares issued but subject to
forfeiture.
See accompanying notes to the pro forma condensed
combining financial statements.
F-34
<PAGE>
ACCUMED INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- DESCRIPTION OF ACQUISITIONS
On December 29, 1995, AccuMed International (the "Company") (formerly Alamar
Biosciences, Inc.) acquired all of the common stock of AccuMed, which included
the recent acquisition of certain assets and assumption of certain liabilities
of Sensititre US and Sensititre Ltd. by AccuMed. Pursuant to the terms of the
merger agreement, the Company issued 3,931,401 unconditional shares of common
stock valued at $4,422,826 and 237,840 warrants valued at $68,252. An additional
1,881,910 shares and 126,945 warrants were issued to AccuMed shareholders on
December 29, 1995, however, such shares and warrants are contingent and subject
to forfeiture if specified performance goals are not achieved by the merged
entity during the 24 months beginning January 1, 1996. In March 1996 the
contingency associated with 940,955 shares and 63,472 warrants was resolved
(performance goal achieved) resulting in contingent consideration of $5,430,326.
The remaining contingent consideration will be recorded when the goals are
achieved and will be computed based upon the stock price on such date. The
acquisition has been accounted for using the purchase method of accounting.
On July 3, 1996, the Company signed a letter of intent to acquire a 66%
interest in Oncometrics Imaging Corp. (Oncometrics), for approximately $4.0
million in cash. The closing of this transaction is subject to the execution of
a definitive Transaction Agreement and the satisfaction of conditions customary
in such agreements. It is expected that the acquisition will be accounted for
using the purchase method of accounting and that a portion of the purchase price
will be charged to acquired in-process research and development in the period in
which the transaction is consummated.
On July 18, 1996, the Company signed a letter of intent to acquire the
remaining 90% interest in Radco Ventures, Inc. (Radco), for approximately $1.4
million in cash. The closing of this transaction is subject to the approval of
the Radco Stockholders and the satisfaction of conditions customary in
acquisition agreements. It is expected that the acquisition will be accounted
for using the purchase method of accounting and that a portion of the purchase
price will be charged to acquired in-process research and development in the
period in which the transaction is consummated.
NOTE B -- PRO FORMA ADJUSTMENTS
The following adjustments are reflected in the Pro Forma Condensed Combining
Financial Statements under the columns headed "Adjustments".
(1) Purchase Price Allocation-Oncometrics
To reflect the estimated allocation of the $4 million purchase price
associated with the probable acquisition of the 66% interest in Oncometrics.
The purchase price will be paid from the net proceeds of the Offering and
has been reflected in the Pro Forma Condensed Combining Balance Sheet as Due
to Xillix Technologies Corp. The allocation of the purchase price represents
an estimate of the fair value of the assets acquired and liabilities
assumed, includes approximately $1.6 million of acquired in-process research
and development and $1.1 million of purchased technology and reflects the
33% minority interest holdings. The Pro Forma Condensed Combining Balance
Sheet reflects the estimated $1.6 million of acquired in-process research
and development as Intangible Assets. Such amount will be written off as a
charge to earnings in the period subsequent to the acquisition. The
allocation is subject to change and is not necessarily indicative of the
ultimate purchase price allocation.
(2) Purchase Price Allocation -- Radco
To reflect the estimated allocation of the $1.4 million purchase price
associated with the proposed acquisition of the remaining 90% interest in
Radco. The purchase price will be paid from the net
F-35
<PAGE>
ACCUMED INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE B -- PRO FORMA ADJUSTMENTS (CONTINUED)
proceeds of The Offering and has been reflected in The Pro Forma Condensed
Combining Balance Sheet as Due to Radco Ventures, Inc. The allocation of the
purchase price represents an estimate of the fair value of the assets
acquired and liabilities assumed and includes approximately $630,000 of
acquired in-process research and development. The Pro Forma Condensed
Combining Balance Sheet reflects the estimated $630,000 of acquired
in-process research and development as Intangible Assets. Such amount will
be written off as a charge to earnings in the period subsequent to the
acquisition. The allocation is subject to change and is not necessarily
indicative of the ultimate purchase price allocation.
(3) Acquired In-Process Research and Development
The estimated charges of approximately $1.6 million and $630,000 for
acquired in-process research and development relating to the Oncometric and
Radco acquisitions, respectively, are not reflected in the accompanying Pro
Forma Condensed Combining Statements of Operations. Such amounts will result
in a charge to earnings in the period subsequent to the acquisitions.
The charge for acquired in-process research and development relating to the
AccuMed acquisition is not reflected in the accompanying Pro Forma Condensed
Combined Statements of Operations for the year ended September 30, 1995.
This charge in the amount of approximately $4.0 million has been reflected
in the historical financial results of AccuMed International in the
accompanying Pro Forma Condensed Combining Statement of Operations for the
three months ended December 31, 1995. In addition, a charge of $3.5 million
relating to the allocation of purchase price to acquire in-process research
and development following the resolution of a portion of the contingency has
been reflected in the historical financial results of AccuMed International
in the accompanying Pro Forma Condensed Combining Statement of Operations
for the three months ended March 31, 1996.
(4) Amortization of Intangibles
To reflect the amortization of the excess of cost over net assets acquired
and purchased technology of Oncometrics using the straight-line method over
10 years.
(5) To reflect the minority interest share (33%) of net loss of Oncometrics
Imaging Corp.
(6) To eliminate intercompany sales from AccuMed International Limited
(formerly Sensititre UK Ltd.) to AccuMed (formerly Sensititre U.S.).
(7) To eliminate intercompany profit from the cost of product sold from AccuMed
International Limited (formerly Sensititre UK Ltd.) to Accumed (formerly
Sensititre U.S.).
(8) To reduce amortization expense ($20,000) for the amortization of the
purchase price of AccuMed in excess of the fair market value of acquired
assets, less assumed liabilities, and transaction costs incurred with the
acquisition of AccuMed, amortized over a 10 year life, and to adjust
amortization expense for Sensititre U.S., and Sensititre UK Ltd.
Adjustment to reflect a reasonable estimation ($120,000) of corporate
overhead costs for the three months ended December 31, 1994 carve out period
for Sensititre U.S. The estimate is based on a percentage of total sales of
Radiometer America Inc., (of which Sensititre U.S. was a division) to the
Sensititre U.S. product line.
(9) To adjust interest expense for $35,475, assuming that the $430,000 loan to
finance the Sensititre acquisition occurred on October 1, 1994.
F-36
<PAGE>
ACCUMED INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE B -- PRO FORMA ADJUSTMENTS (CONTINUED)
(10)To adjust amortization expense for the amortization of the purchase price
of AccuMed in excess of the fair market value of acquired assets, less
assumed liabilities, and transaction costs incurred with the Merger of
AccuMed, amortized over a 10 year life, and to adjust amortization expense
for Sensititre U.S., and Sensititre UK Ltd.
F-37
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON IS AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SUCH SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
The Company.................................... 19
Use of Proceeds................................ 20
Price Range Of Common Stock.................... 21
Dividend Policy................................ 21
Capitalization................................. 22
Dilution....................................... 23
Selected Consolidated Financial Data........... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 25
Business....................................... 30
Management..................................... 44
Certain Relationships and Related
Transactions.................................. 54
Principal and Selling Stockholders............. 56
Description of Capital Stock................... 60
Underwriting................................... 64
Change in Certifying Accountants............... 65
Available Information.......................... 65
Incorporation of Certain Documents by
Reference..................................... 66
Additional Information......................... 66
Legal Matters.................................. 67
Experts........................................ 67
Index to Consolidated Financial Statements..... F-1
</TABLE>
4,750,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
VECTOR SECURITIES INTERNATIONAL, INC.
TUCKER ANTHONY
INCORPORATED
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the issuance and distribution of the securities being registered hereunder.
All of the amounts shown are estimates (except for the SEC and NASD registration
fees).
<TABLE>
<CAPTION>
SEC registration fee........................................... $ 10,003
<S> <C>
NASD registration fee.......................................... 3,401
Printing and engraving expenses................................ 95,000
Accounting fees and expenses................................... 73,500
Legal fees and expenses........................................ 390,000
Blue Sky fees and expenses..................................... 30,000
Miscellaneous.................................................. 12,446
---------
TOTAL...................................................... $ 614,350
---------
---------
</TABLE>
None of these expenses will be paid by the Selling Stockholders pursuant to
the terms of the agreements under which the shares of Common Stock to be sold
hereby are being registered.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provisions in its Certificate of Incorporation which
eliminate the liability of the Company's directors to the Company and its
stockholders for monetary damages to the fullest extent permissible under
Delaware law and provisions which authorize the Company to indemnify its
directors and agents by Bylaws, agreements or otherwise, to the fullest extent
permitted by law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Company's
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by Delaware law, including circumstances in which
indemnification is otherwise discretionary under Delaware law.
The Company's officers and directors are covered by a directors' and
officers' liability insurance policy maintained by the Company. Under the
insurance policy, the Company is entitled to be reimbursed for indemnity
payments that it is required or permitted to make to its directors and officers.
ITEM 16. EXHIBITS AND INDEX OF EXHIBITS.
(a) Exhibits. The following exhibits are filed herewith.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report on Form 10-KSB for the transition period ended December 31, 1995 (the "Transition
Report")).
3.2 Bylaws of the Registrant (incorporated by reference to the Transition Report).
4.1 Specimen stock certificate for Common Stock (incorporated by reference to the Transition Report).
4.2 Certificate of Appointment of American Stock Transfer & Trust Company as Transfer Agent and Registrar
(incorporated by reference to Pre-Effective Amendment No. 4 to the Registration Statement on Form
S-1 (Reg. No. 33-48302), filed with the Commission on October 9, 1993 ("Pre-Effective Amendment No.
4 to Form S-1").
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
4.3 Warrant Agreement between the Registrant and American Equities Overseas, Inc. dated as of September
1, 1995 (incorporated by reference to the Registrant's Registration Statement on Form S-3 (Reg. No.
33-98902, the "Form S-3") filed with the Commission on October 31, 1995).
<C> <S>
4.4 Securities Purchase Agreement between the Registrant and G&G Dispensing, Inc. dated as of March 22,
1994 (incorporated by reference to the Form S-3).
4.5 Common Stock Purchase Warrant dated as of March 22, 1994 by the Registrant in favor of G&G
Dispensing, Inc. (incorporated by reference to the Form S-3).
4.6 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 31,
1994 (incorporated by reference to the Form S-3).
4.7 Form of Common Stock Purchase Warrant dated as of December 31, 1994 by the Registrant in favor of
Commonwealth Associates, Inc. (incorporated by reference to the Form S-3).
4.8 Warrant Agreement between the Registrant and Commonwealth Associates dated as of May 9, 1995
(incorporated by reference to the Form S-3).
4.9 Form of Common Stock Purchase Warrant dated as of May 9, 1995 by the Registrant in favor of
Commonwealth Associates, Inc. (incorporated by reference to the Form S-3).
4.10 Warrant Agreement between the Registrant and Commonwealth Associates dated as of August 22, 1995
(incorporated by reference to the Form S-3).
4.11 Form of Common Stock Purchase Warrant dated as of August 22, 1995 by the Registrant in favor of
Commonwealth Associates (incorporated by reference to the Form S-3).
4.12 Form of Letter Agreement between the Registrant and John Robinson dated as of February 21, 1995
(incorporated by reference to the Form S-3).
4.13 Form of Registration Rights Agreement between the Registrant and John Robinson dated as of February
21, 1995 (incorporated by reference to the Form S-3).
4.14 Form of Common Stock Purchase Warrant dated as of December 29, 1995 by the Registrant in favor of
Commonwealth Associates (incorporated by reference to the Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3 (Reg. No. 33-98902), filed with the Commission on May
30, 1996) ("Post-Effective Amendment No. 1 to Form S-3").
4.15 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 29,
1995 pertaining to Warrants to purchase up to 750,000 shares of Common Stock of the Company
(incorporated by reference to the Post-Effective Amendment No. 1 to Form S-3).
4.16 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 237,840 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.17 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 63,473 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.18 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 63,472 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
4.19 Warrant Agreement dated as of January 25, 1996 between the Registrant and Robert Priddy (incorporated
by reference to the Post-Effective Amendment No. 1 to the Form S-3).
<C> <S>
4.20 Warrant Certificate dated as of January 25, 1996 registered in the name of Robert Priddy representing
the right to purchase 100,000 shares of Common Stock of the Registrant (incorporated by reference to
the Post-Effective Amendment No. 1 to the Form S-3).
4.21 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 29,
1995 pertaining to Warrants to purchase up to 104,000 shares of Common Stock of the Registrant,
including form of Warrant Certificate issued to designees of Commonwealth Associates dated as of
December 29, 1995 representing the right to purchase up to an aggregate of 104,000 shares of Common
Stock of the Registrant (incorporated by reference to the Post-Effective Amendment No. 1 to the Form
S-3).
4.22 Form of Warrant Agreement dated March 14, 1996 between the Registrant and certain of the Selling
Securityholders, including form of Warrant Certificate evidencing right to purchase Common Stock at
$3.42 per share (incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.23 Form of Warrant Agreement dated March 14, 1996 between the Registrant and certain of the Selling
Securityholders, including form of Warrant Certificate evidencing right to purchase Common Stock at
$3.87 per share (incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.*
10.1 Agreement and Plan of Reorganization dated as of April 21, 1995 between the Registrant and AccuMed,
Inc., as amended by Amendment No. 1 dated as of August 1, 1995 and Amendment No. 2 dated as of
October 6, 1995 (incorporated by reference to the Registrant's Registration Statement on Form S-4
(File No. 33-99680) (the "Form S-4") filed with the Commission on November 22, 1995).
10.2 The Registrant's Board of Directors Compensation Plan (the "Plan") (incorporated by reference to
Exhibit 10.11 to Form S-1) with Minutes of Board of Directors meeting dated January 18, 1996
amending the Plan by authorizing grants of stock options to non-employee directors (incorporated by
reference to the Transaction Report).**
10.3 Sale and Leaseback Agreement between the Registrant and Leasetec, Inc. (incorporated by reference to
the Registration Statement or Form S-1 (Reg. No. 33-48302) filed with the Commission on June 3,
1992) ("Form S-1").
10.4 Employment Agreement between the Registrant and Peter P. Gombrich dated August 1, 1994 (incorporated
by reference to the Transition Report).**
10.5 Employment Letter between the Registrant and Kenneth Miller dated March 2, 1995 (incorporated by
reference to the Transition Report).**
10.6 Employment Letter between the Registrant and Mark L. Santor dated February 28, 1995 (incorporated by
reference to the Transition Report).**
10.7 Employment Letter between the Registrant and Michael Burke dated April 21, 1995 (incorporated by
reference to the Transition Report).**
10.8 Employment Agreement between the Registrant and Norman J. Pressman dated June 13, 1996 and Addendum
to Employment Agreement between the Registrant and Norman J. Pressman dated July 16, 1996.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
10.9 European Distributor Agreement, dated November 22, 1993, by and between the Company and Sclavo
(incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the
year ended September 30, 1994 (the "1994 10-K").
<C> <S>
10.10 United States Distributor Agreement, dated November 22, 1993, by and between the Registrant and
Sclavo (incorporated by reference to the 1994 10-K).
10.11 Joint Research and Development Agreement, dated November 22, 1993, by and between the Registrant and
Sclavo (incorporated by reference to Exhibit 10.24 to the 1994 10-K).
10.12 Securities Purchase Agreement, dated November 22, 1993, by and between the Registrant and Sclavo
(incorporated by reference to Exhibit 10.25 to the 1994 10-K).
10.13 Escrow Agreement dated as of March 22, 1994, between the Registrant and G&G Dispensing, Inc.
(incorporated by reference to Exhibit 10.13 to the Form S-4).
10.14 License Agreement between the Registrant and Becton, Dickinson and Company effective as of October
11, 1995 (incorporated by reference to Exhibit 10.17 to the Form S-4).
10.15 Research and Development Service Agreement between the Registrant and RADCO Ventures, Inc. dated
March 15, 1996.+
10.16 License and Distribution Agreement dated February 20, 1996 between the Registrant and BioKit, S.A.
(incorporated by reference to the Transition Report).
10.17 1995 Stock Option Plan (incorporated by reference to the Transition Report).
10.18 Form of Non-Qualified Stock Option Agreement governing options granted to former employees of
AccuMed, Inc. pursuant to the Agreement and Plan of Reorganization dated as of April 21, 1995, as
amended (incorporated by reference to the Transition Report).
10.19 Form of Non-Qualified Stock Option Agreement governing options granted to employees and consultants
under the 1995 Stock Option Plan (incorporated by reference to the Transition Report).
10.20 Form of Incentive Stock Option Agreement Governing options granted to employees under the 1995 Stock
Option Plan (incorporated by reference to the Transition Report).
10.21 Amended and Restated 1990 Stock Option Plan (incorporated by reference to Form S-1).
10.22 The Company's Amended and Restated 1992 Stock Option Plan (incorporated by reference to Pre-Effective
Amendment No. 1 to Form SB-2, filed with the Commission on November 8, 1993).
10.23 Lease between the Company and NCP, LTD dated February 20, 1995 pertaining to the offices located at
29299 Clemens, Suite I-K, Westlake, Ohio 44145 (incorporated by reference to the Transition Report).
10.24 Franklin Square Commercial Lease dated July 13, 1994 between the Company and the Lumber Company as
Agent for the Beneficiary of LaSalle National Trust, N.A. pertaining to the premises located at
Suite 401, 4th Floor North, 900 North Franklin Street, Chicago, Illinois (incorporated by reference
to the Transition Report).
10.25 Rider 1 to Franklin Square Commercial Lease between the Company and the Lumber Company dated May 30,
1996.
10.26 License Agreement dated July 6, 1994, between the Company, Vanellus AB, and Uppsala Bildbehandlings
AB (incorporated by reference to the Transition Report).
10.27 Collaboration Agreement and Worldwide Exclusive License between the Company and G&G Dispensing, Inc.
dated March 22, 1994.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
10.28 Form of Custody Agreement by each of the Selling Stockholders.
<C> <S>
10.29 Form of Lock-Up Agreement between each of the Selling Stockholders and the Underwriters.
10.30 Form of Irrevocable Power of Attorney of Selling Stockholders.
10.31 O.E.M. Supply Agreement between Olympus America, Inc., Precision Instrument division and the Company
dated March 31, 1996.+
10.32 Securities Purchase Agreement dated May 31, 1996 among the Company, Kingdon Associates, L.P., Kingdon
Partners, L.P., and Kingdon Offshore N.V. (incorporated by reference to the Registration Statement
on Form S-3 (Reg. No. 333-07681) filed with the Commission on July 3, 1996).
10.33 Promissory Note in the original principal amount of $61,000 made May 22, 1996 by Peter P. Gombrich in
favor of the Registrant.
10.34 Non-negotiable Promissory Note in the original principal amount of $775,000 made July 22, 1996 by the
Registrant in favor of RADCO Ventures, Inc.
10.35 Employment Separation Agreement and Release between the Registrant and Kenneth D. Miller dated June
27, 1996.**
10.36 Employment Separation Agreement and Release between the Registrant and Mark L. Santor dated June 10,
1996.**
23.1 Consent of Graham & James, LLP (contained in Exhibit 5.1).
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of KPMG.
23.6 Consent of Banner & Allegreti, Ltd.
23.7 Consent of Townsend and Townsend and Crew.
24.1 Powers of Attorney included on signature page to this Registration Statement.
</TABLE>
- ------------------------
* Indicates an Exhibit to be filed by amendment.
** Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Registration Statement.
+ Confidential treatment requested as to certain portions.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for the purpose of determining any liability under the
Securties Act, the Registrant will treat the information ommitted from the
form of Prospectus filed as part of this Registration Statement as of the
time the Commission declares it effective.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act
II-5
<PAGE>
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-2 and duly caused this Registration Statement
to be signed on its behalf by the undersigned, hereunto duly authorized, in the
City of Chicago, State of Illinois on July 26, 1996.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-----------------------------------
Peter P. Gombrich
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Peter P. Gombrich and
Mark L. Santor, and each of them, attorneys-in-fact for the undersigned, each
with the power of substitution, for the undersigned in any and all capacities,
to sign any and all amendments to this Registration Statement (including post-
effective amendments) and any new registration statement filed under Rule 462(b)
under the Securities Act of 1933) and any post-effective amendment thereto, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming that each of said attorneys-in-fact or his substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
/s/ PETER P. GOMBRICH Chairman of the Board, Chief Executive July 26, 1996
------------------------------------------- Officer and President
(Peter P. Gombrich) (Principal Executive Officer)
/s/ MARK L. SANTOR Chief Financial Officer (Principal July 26, 1996
------------------------------------------- Financial and Accounting Officer)
(Mark L. Santor)
/s/ JOHN H. ABELES Director July 26, 1996
-------------------------------------------
(John H. Abeles)
/s/ HAROLD S. BLUE Director July 26, 1996
-------------------------------------------
(Harold S. Blue)
/s/ JACK H. HALPERIN Director July 26, 1996
-------------------------------------------
(Jack H. Halperin)
</TABLE>
II-11
<PAGE>
<TABLE>
<C> <S> <C>
Director , 1996
-------------------------------------------
(Paul F. Lavallee)
/s/ JOSEPH W. PLANDOWSKI Director July 26, 1996
-------------------------------------------
(Joseph W. Plandowski)
/s/ LEONARD M. SCHILLER Director July 26, 1996
-------------------------------------------
(Leonard M. Schiller)
</TABLE>
II-12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant (incorporated by reference to the Registrant's
Transition Report on Form 10-KSB for the transition period ended December 31, 1995 (the "Transition
Report")).
3.2 Bylaws of the Registrant (incorporated by reference to the Transition Report).
4.1 Specimen stock certificate for Common Stock (incorporated by reference to the Transition Report).
4.2 Certificate of Appointment of American Stock Transfer & Trust Company as Transfer Agent and Registrar
(incorporated by reference to Pre-Effective Amendment No. 4 to the Registration Statement on Form
S-1 (Reg. No. 33-48302), filed with the Commission on October 9, 1993 ("Pre-Effective Amendment No.
4 to Form S-1").
4.3 Warrant Agreement between the Registrant and American Equities Overseas, Inc. dated as of September
1, 1995 (incorporated by reference to the Registrant's Registration Statement on Form S-3 (Reg. No.
33-98902, the "Form S-3") filed with the Commission on October 31, 1995).
4.4 Securities Purchase Agreement between the Registrant and G&G Dispensing, Inc. dated as of March 22,
1994 (incorporated by reference to the Form S-3).
4.5 Common Stock Purchase Warrant dated as of March 22, 1994 by the Registrant in favor of G&G
Dispensing, Inc. (incorporated by reference to the Form S-3).
4.6 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 31,
1994 (incorporated by reference to the Form S-3).
4.7 Form of Common Stock Purchase Warrant dated as of December 31, 1994 by the Registrant in favor of
Commonwealth Associates, Inc. (incorporated by reference to the Form S-3).
4.8 Warrant Agreement between the Registrant and Commonwealth Associates dated as of May 9, 1995
(incorporated by reference to the Form S-3).
4.9 Form of Common Stock Purchase Warrant dated as of May 9, 1995 by the Registrant in favor of
Commonwealth Associates, Inc. (incorporated by reference to the Form S-3).
4.10 Warrant Agreement between the Registrant and Commonwealth Associates dated as of August 22, 1995
(incorporated by reference to the Form S-3).
4.11 Form of Common Stock Purchase Warrant dated as of August 22, 1995 by the Registrant in favor of
Commonwealth Associates (incorporated by reference to the Form S-3).
4.12 Form of Letter Agreement between the Registrant and John Robinson dated as of February 21, 1995
(incorporated by reference to the Form S-3).
4.13 Form of Registration Rights Agreement between the Registrant and John Robinson dated as of February
21, 1995 (incorporated by reference to the Form S-3).
4.14 Form of Common Stock Purchase Warrant dated as of December 29, 1995 by the Registrant in favor of
Commonwealth Associates (incorporated by reference to the Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3 (Reg. No. 33-98902), filed with the Commission on May
30, 1996) ("Post-Effective Amendment No. 1 to Form S-3").
4.15 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 29,
1995 pertaining to Warrants to purchase up to 750,000 shares of Common Stock of the Company
(incorporated by reference to the Post-Effective Amendment No. 1 to Form S-3).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.16 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 237,840 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.17 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 63,473 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.18 Warrant Certificate dated as of December 29, 1995 registered in the name of The P.L. Thomas Group,
Inc. representing the right to purchase up to 63,472 shares of Common Stock of the Registrant
(incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.19 Warrant Agreement dated as of January 25, 1996 between the Registrant and Robert Priddy (incorporated
by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.20 Warrant Certificate dated as of January 25, 1996 registered in the name of Robert Priddy representing
the right to purchase 100,000 shares of Common Stock of the Registrant (incorporated by reference to
the Post-Effective Amendment No. 1 to the Form S-3).
4.21 Form of Warrant Agreement between the Registrant and Commonwealth Associates dated as of December 29,
1995 pertaining to Warrants to purchase up to 104,000 shares of Common Stock of the Registrant,
including form of Warrant Certificate issued to designees of Commonwealth Associates dated as of
December 29, 1995 representing the right to purchase up to an aggregate of 104,000 shares of Common
Stock of the Registrant (incorporated by reference to the Post-Effective Amendment No. 1 to the Form
S-3).
4.22 Form of Warrant Agreement dated March 14, 1996 between the Registrant and certain of the Selling
Securityholders, including form of Warrant Certificate evidencing right to purchase Common Stock at
$3.42 per share (incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
4.23 Form of Warrant Agreement dated March 14, 1996 between the Registrant and certain of the Selling
Securityholders, including form of Warrant Certificate evidencing right to purchase Common Stock at
$3.87 per share (incorporated by reference to the Post-Effective Amendment No. 1 to the Form S-3).
5.1 Opinion of Graham & James LLP, counsel to the Registrant, regarding the legality of the securities
offered hereby.*
10.1 Agreement and Plan of Reorganization dated as of April 21, 1995 between the Registrant and AccuMed,
Inc., as amended by Amendment No. 1 dated as of August 1, 1995 and Amendment No. 2 dated as of
October 6, 1995 (incorporated by reference to the Registrant's Registration Statement on Form S-4
(File No. 33-99680) (the "Form S-4") filed with the Commission on November 22, 1995).
10.2 The Registrant's Board of Directors Compensation Plan (the "Plan") (incorporated by reference to
Exhibit 10.11 to Form S-1) with Minutes of Board of Directors meeting dated January 18, 1996
amending the Plan by authorizing grants of stock options to non-employee directors (incorporated by
reference to the Transaction Report).**
10.3 Sale and Leaseback Agreement between the Registrant and Leasetec, Inc. (incorporated by reference to
the Registration Statement or Form S-1 (Reg. No. 33-48302) filed with the Commission on June 3,
1992) ("Form S-1").
10.4 Employment Agreement between the Registrant and Peter P. Gombrich dated August 1, 1994 (incorporated
by reference to the Transition Report).**
10.5 Employment Letter between the Registrant and Kenneth Miller dated March 2, 1995 (incorporated by
reference to the Transition Report).**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.6 Employment Letter between the Registrant and Mark L. Santor dated February 28, 1995 (incorporated by
reference to the Transition Report).**
10.7 Employment Letter between the Registrant and Michael Burke dated April 21, 1995 (incorporated by
reference to the Transition Report).**
10.8 Employment Agreement between the Registrant and Norman J. Pressman dated June 13, 1996 and Addendum
to Employment Agreement between the Registrant and Norman J. Pressman dated July 16, 1996.**
10.9 European Distributor Agreement, dated November 22, 1993, by and between the Registrant and Sclavo
(incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the
year ended September 30, 1994 (the "1994 10-K").
10.10 United States Distributor Agreement, dated November 22, 1993, by and between the Registrant and
Sclavo (incorporated by reference to the 1994 10-K).
10.11 Joint Research and Development Agreement, dated November 22, 1993, by and between the Registrant and
Sclavo (incorporated by reference to Exhibit 10.24 to the 1994 10-K).
10.12 Securities Purchase Agreement, dated November 22, 1993, by and between the Registrant and Sclavo
(incorporated by reference to Exhibit 10.25 to the 1994 10-K).
10.13 Escrow Agreement dated as of March 22, 1994, between the Registrant and G&G Dispensing, Inc.
(incorporated by reference to Exhibit 10.13 to the Form S-4).
10.14 License Agreement between the Registrant and Becton, Dickinson and Registrant effective as of October
11, 1995 (incorporated by reference to Exhibit 10.17 to the Form S-4).
10.15 Research and Development Service Agreement between the Registrant and RADCO Ventures, Inc. dated
March 15, 1996.+
10.16 License and Distribution Agreement dated February 20, 1996 between the Registrant and BioKit, S.A.
(incorporated by reference to the Transition Report).
10.17 1995 Stock Option Plan (incorporated by reference to the Transition Report).
10.18 Form of Non-Qualified Stock Option Agreement governing options granted to former employees of
AccuMed, Inc. pursuant to the Agreement and Plan of Reorganization dated as of April 21, 1995, as
amended (incorporated by reference to the Transition Report).
10.19 Form of Non-Qualified Stock Option Agreement governing options granted to employees and consultants
under the 1995 Stock Option Plan (incorporated by reference to the Transition Report).
10.20 Form of Incentive Stock Option Agreement Governing options granted to employees under the 1995 Stock
Option Plan (incorporated by reference to the Transition Report).
10.21 Amended and Restated 1990 Stock Option Plan (incorporated by reference to Form S-1).
10.22 The Registrant's Amended and Restated 1992 Stock Option Plan (incorporated by reference to
Pre-Effective Amendment No. 1 to Form SB-2, filed with the Commission on November 8, 1993).
10.23 Lease between the Registrant and NCP, LTD dated February 20, 1995 pertaining to the offices located
at 29299 Clemens, Suite I-K, Westlake, Ohio 44145 (incorporated by reference to the Transition
Report).
10.24 Franklin Square Commercial Lease dated July 13, 1994 between the Registrant and the Lumber Registrant
as Agent for the Beneficiary of LaSalle National Trust, N.A. pertaining to the premises located at
Suite 401, 4th Floor North, 900 North Franklin Street, Chicago, Illinois (incorporated by reference
to the Transition Report).
10.25 Rider 1 to Franklin Square Commercial Lease between the Registrant and the Lumber Registrant dated
May 30, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.26 License Agreement dated July 6, 1994, between the Registrant, Vanellus AB, and Uppsala
Bildbehandlings AB (incorporated by reference to the Transition Report).
10.27 Collaboration Agreement and Worldwide Exclusive License between the Registrant and G&G Dispensing,
Inc. dated March 22, 1994.
10.28 Form of Custody Agreement by each of the Selling Stockholders.
10.29 Form of Lock-Up Agreement between each of the Selling Stockholders and the Underwriters.
10.30 Form of Irrevocable Power of Attorney of Selling Stockholders.
10.31 O.E.M. Supply Agreement between Olympus America, Inc., Precision Instrument division and the
Registrant dated March 31, 1996.+
10.32 Securities Purchase Agreement dated May 31, 1996 among the Registrant, Kingdon Associates, L.P.,
Kingdon Partners, L.P., and Kingdon Offshore N.V. (incorporated by reference to the Registration
Statement on Form S-3 (Reg. No. 333-07681) filed with the Commission on July 3, 1996).
10.33 Promissory Note in the original principal amount of $61,000 made May 22, 1996 by Peter P. Gombrich in
favor of the Registrant.
10.34 Non-negotiable Promissory Note in the original principal amount of $775,000 made July 22, 1996 by the
Registrant in favor of RADCO Ventures, Inc.
10.35 Employment Separation Agreement and Release between the Registrant and Kenneth D. Miller dated June
27, 1996.**
10.36 Employment Separation Agreement between the Registrant and Mark L. Santor dated June 10, 1996.**
23.1 Consent of Graham & James, LLP (contained in Exhibit 5.1).
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (UK).
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of KPMG.
23.6 Consent of Banner & Allegreti, Ltd.
23.7 Consent of Townsend and Townsend and Crew.
24.1 Powers of Attorney included on signature page to this Registration Statement.
</TABLE>
- ------------------------
* Indicates an Exhibit to be filed by amendment.
** Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Registration Statement.
+ Confidential treatment requested as to certain portions.
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made this 13th day of June, 1996,
by and between AccuMed International, Inc., a Delaware corporation (the
"Employer"), and Norman J. Pressman (the "Executive").
WITNESSETH
WHEREAS, Employer desires to employ Executive and Executive is willing to accept
such employment, all upon the terms and conditions hereinafter set forth and
those terms and conditions set forth in the Employer's Letter Offer to Executive
which is superseded by the terms and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES. Employer hereby employs Executive and Executive
accepts employment with Employer as President, Cytopathology Division and
Corporate Senior Vice President, reporting to the Chairman/CEO of the
employer, and Executive shall perform those duties as usual and customary
as a Division President and Corporate Senior Vice President (i.e. to
include but not be limited to Financial and Administrative duties).
Executive shall perform such other or additional duties as shall be
assigned to Executive from time to time by the Chairman/CEO consistent with
his position.
<PAGE>
2. COMPENSATION AND BENEFITS. During the term of this Agreement, Employer
shall pay Executive the following compensation:
a. SALARY Executive shall receive an annual salary which shall be no
less than $157,500.00 payable semi-monthly in accordance with
Employer's regular payroll procedures. Executive shall also receive
annual performance and compensation reviews which will be conducted by
the Chairman/CEO and the Compensation Committee of the Board of
Directors, or its designee.
b. BONUS Executive shall be eligible to receive bonuses which shall be
up to thirty percent (30%) of Executive's annual salary, based upon
performance of mutually agreed upon goals/objectives. Two thirds
(2/3) of said bonus shall be based on quarterly objectives and shall
be paid quarterly. One third (1/3) of said bonus shall be based upon
annual objectives and shall be paid annually. However, Executive's
1996 bonus shall be pro-rated. The bonus year shall be the calendar
year. The Employer, at its sole and absolute discretion may pay
Executive a bonus in excess of thirty percent (30%) of his annual
salary.
c. STOCK OPTIONS Pursuant to the terms of the Employer's stock option
plan entitled "Alamar Biosciences, Inc. 1995 Stock Option Plan" (the
"Plan") (a copy of which is attached hereto as Exhibit B), Executive
has been granted an option to purchase 250,000 shares of the
Employer's
-2-
<PAGE>
Common Stock, which option shall be exercisable in accordance with
the following schedule:
Exercise Amount
Date ------
--------
7/5/96 - 50,000 shares
7/5/97 - 50,000 shares
7/5/98 - 50,000 shares
7/5/99 - 50,000 shares
7/5/00 - 50,000 shares
The price of the first grant of 50,000 options, which is exercisable
on the later of July 5, 1996 or the date Executive commences active
employment, will be set at 75% of the Fair Market Value ("FMV" being
the NASDAQ closing price of the stock) of a share of the Common Stock
of the Employer on the date this Agreement is signed and may be
exercisable at not less than the grant price. The price of the
remaining 200,000 options will be set at 100% of the FMV on the later
of July 5, 1996 or the date Executive commences active employment, and
the exercise price shall be not more than the grant price.
d. HIRING BONUS Employer shall grant Executive 25,000 shares of
Employer's Common Stock at FMV on the date of the signing of this
Agreement. Said shares shall be delivered no later than thirty (30)
days after Executive commences active employment. Executive shall be
prohibited from selling or assigning said Stock for a period of
eighteen (18) months from the date of the grant. In the event of
Executive's death, this restriction shall be lifted and the
Executive's estate,
-3-
<PAGE>
trustee, or beneficiary entitled to such Stock by reason of his death
shall be permitted to sell such Stock without restriction.
e. INCENTIVE STOCK OPTION PLAN In each year of his employment, the
Executive shall be eligible to earn a grant of incentive stock
options, of up to 50,000 shares of the Employer's Common Stock, in
accordance with the terms of the Plan and approval by the Chairman/CEO
and Board of Directors, and based upon performance of mutually agreed
upon goals and objectives.
f. BENEFITS The Executive shall be eligible for such Employer benefits
as exist for senior executives of Employer and subject to the terms
and conditions of third party policies. Should Executive not be
eligible to receive any of the Employer's benefits or should any
carrier decline to cover Executive, Employer will use its best efforts
to find a comparable replacement policy on an individual basis. Those
benefits which exist on July 5, 1996 are as follows:
(1) Medical Insurance with $15,000 Life/AD&D fully paid by Employer.
Dependent medical insurance at the option of the employee
(2) Excess Life and AD&D Benefit 1 1/2 times base salary (less
$15,000) up to $150,000 cap, fully paid by the Employer
-4-
<PAGE>
(3) Short Term Disability $500/wk benefit for 26 weeks fully paid by
Employer
(4) Long Term Disability 60% of monthly salary ($6000/mo cap) to age
65/own occupation
(5) Dental Insurance - option available. No Employer contribution
The Employer will reimburse the Executive for any COBRA expense
incurred by Executive to maintain his health insurance during the
waiting period before Executive is eligible to receive the Employer's
medical insurance.
g. EXPENSES Reimbursement of reasonable business expenses with
submission of expense reports and receipts.
h. AUTO ALLOWANCE $500/month plus reasonable maintenance expenses.
i. LOAN The Employer shall loan Executive up to $85,200 without interest
for the use by Executive to pay the tax liability which he will incur
as a result of the Hiring Bonus. Said loan will be repaid by
Executive in installments and in amounts as agreed between Executive
and the Chairman/CEO. The Executive will provide reasonable security
for said loan as required by the Employer. Should Executive terminate
the Agreement for reasons other than due to a breach of this Agreement
by the Employer, the loan shall become due and payable immediately.
j. RELOCATION EXPENSES Other compensation shall be provided as set forth
in Exhibit A, which is made a part hereof.
-5-
<PAGE>
k. OTHER COMPENSATION Nothing herein shall preclude Executive from
receiving any additional compensation or from participating in the
present or future life, major medical, hospitalization, profit
sharing, pension or retirement, sickness or disability or other plan
for the benefit of the employees of Employer. In each case, Executive
will participate to the extent and in the manner approved or
determined by the Board of Directors of the Employer.
3. EXTENT OF SERVICES. Executive shall devote his entire attention and
energy to the business and affairs of the Employer on a full-time basis and
shall not be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
unless Employer otherwise consents; but this shall not be construed as
preventing employee from investing Executive's assets in such form or
manner as will not require any services on the part of the Executive in the
operation of the affairs of the companies in which such investments are
made, provided such investments do not conflict with the Company's
interests or otherwise violate this Agreement.
4. TERM. The term of this Agreement shall be five years, commencing July 5,
1996, subject to the following:
a. ILLNESS OR DISABILITY If Executive is absent from employment by
reason of illness or other incapacity for more than 180 consecutive
days, Employer may, after such 180 days but only if Executive has not
returned to active
-6-
<PAGE>
employment with Employer, terminate Executive's employment by
furnishing him with at least 30 days written notice of such intention
to termination. Employer shall be obligated to pay Executive's salary
to the date of termination , less that amount equal to the weekly Short
Term Disability Benefit, which date shall be for all purposes of this
Agreement, the date of termination of his employment.
b. DEATH. If Executive shall die, thereupon his employment shall
terminate, and Employer shall be only obligated to pay Executive's
salary to the end of the month during which Executive dies.
c. TERMINATION BY EMPLOYER. Upon written notice, Employer may terminate
this Agreement at any time:
(i) For Cause. As used herein, "Cause" is defined to mean (1) any
act of fraud, misappropriation, embezzlement, or like act of
dishonesty; (2) conviction of a felony; (3) other behavior which
adversely reflects on the reputation of Employer such as
substance abuse, public intoxication, etc.; or (4) material
failure to perform the services and duties described herein,
material violation of any other provisions set forth herein, or
material breach of any fiduciary duty to Employer, if the
material failure, violation, or breach unreasonably continues
after written notice thereof is given to the Executive by the
Employer and further provided
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that Executive is given a fair and reasonable opportunity to cure.
In the event of Cause, Employer shall pay Executive's salary up
to the date of the delivery of notice of termination, which date
shall be for all purposes of this Agreement, the date of
termination of his employment.
(ii) Without Cause. In the event the Employer elects to exercise its
right, at its sole discretion, to terminate the Executive without
cause, the Executive shall be given at least six (6) months
notice in writing.
d. TERMINATION BY EXECUTIVE Executive may terminate this Agreement for
any reason after providing six (6) months written notice. If
Employer is in breach of this Agreement, Executive may, in addition
and without prejudice to any other remedies for a breach hereof,
terminate this Agreement, after providing written notice to the
Employer and providing Employer with a reasonable opportunity to cure.
If the Employer thereafter fails to cure, all of Executive's further
obligations hereunder shall terminate, except for the requirements of
Sections 8 and 10 hereof.
5. SEVERANCE.
a. If Executive terminates this Agreement, pursuant to Section 4(d)
hereof, for reasons other than if Employer is in breach of this
Agreement as provided in Section
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4(d) above, within eighteen months of its execution, the stock
granted as a hiring bonus shall be returned to the Employer by the
Executive or the then-holder thereof without payment of any
consideration for such Stock by the Employer.
b. If Executive terminates this Agreement within eighteen months of its
execution, except if Employer is in breach of this Agreement, as
provided in Section 4(d) above housing and moving related expenditures
incurred by Employer on Executive's behalf shall be reimbursed and
returned by Executive to Employer.
c. If Employer terminates this Agreement without Cause within sixty (60)
months of its execution, in addition to the notice requirement
provided in Section 4(c)(ii) above, Employer will pay Executive his
then current annual salary for twelve (12) months, semi-monthly, in
accordance with Employer's regular payroll procedures. If Employer
terminates this Agreement, without Cause, after sixty (60) months of
its execution, Employer will have no severance obligation.
6. VACATION. During the first, second and third calendar years of employment,
Executive shall be entitled to four weeks of vacation with pay. During the
fourth and fifth calendar years of continuous service and during each
subsequent calendar year of continuous service thereafter, the Executive
shall be entitled to six weeks vacation with pay. In the event that the
full vacation is not taken by Executive within 60 days of
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the end of any calendar year, no vacation time shall accrue for use in
future years, without mutual agreement between the Executive and the
Employer.
7. RESTRICTIVE COVENANT. Executive shall not in any manner engage in any
business directly competitive with Employer, or solicit or attempt to
solicit or employ any employee of the Employer, or induce or attempt to
induce any employee, consultant or agent of the Employer to discontinue
services for a period of one year from the date of the termination of this
Agreement under the following circumstances:
a. If this Agreement is terminated for "Cause" by the Employer, pursuant
to Section 4(c)(i) above; or
b. If this Agreement is terminated by Executive, pursuant to Section 4(d)
above, for reasons other than a breach by Employer.
8. CONFIDENTIAL INFORMATION AND DISCOVERIES. Executive agrees that all
information of a technical or business nature such as know-how, trade
secrets, secret business information, plans, data, processes, techniques,
customer information, inventions, discoveries, formulae, patterns, devices,
etc. (the "Confidential Information"), acquired by Executive in the course
of his employment under this Agreement, is a valuable business property
right of the Employer. Executive agrees that such Confidential
Information, whether in written, verbal or model form, shall not be
disclosed to anyone outside the employment of Employer without the express
authorization of Employer, unless said individual is subject to the
Employer's
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non-disclosure agreement or other appropriate contractual arrangement.
This disclosure restriction shall be limited to (a) disclosures for use in
any market in which the Employer may then be doing business or may have
taken any steps toward entering, and (b) for that period of time until the
Confidential Information is generally available to the trade.
Any and all improvements, inventions, discoveries, formulae or
processes in any way related to Employer's business which Executive may
conceive or make during his or her regular working hours or otherwise shall
be the sole and exclusive property of the Employer and Executive will
disclose the same to Employer and will, whenever requested by Employer to
do so (either during the term of this Agreement or thereafter), execute and
assign any and all applications, assignments and/or other instruments and
do all things which Employer may deem necessary or appropriate in order to
apply for, obtain, maintain, enforce and defend patents, copyrights,
trademarks or other forms or protection, or in order to assign and convey
or otherwise make available to Employer the sole and exclusive right, title
and interest in and to said improvements, inventions, discoveries,
formulae, processes, applications or patents. After the termination of
this Agreement, Employer will compensate Employee for his time and effort
to comply with the terms of this paragraph 7 and the Employee may not
decline to comply with any reasonable request.
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<PAGE>
No provision in this Agreement is intended to require assignment of
any of the Executive's rights in an invention if no equipment, supplies,
facilities, or trade secret information of the Employer was used, and the
invention was developed entirely on the Executive's own time; and the
invention does not relate to the business of the Employer or to the
Employer's actual or demonstrably anticipated research or development; and
does not result from any work performed by the Executive for the Employer.
9. ENFORCEMENT. Both parties recognize that the services to be rendered under
this Agreement by Executive are special, unique and of extraordinary
character and that in the event of the breach by Executive of any of the
terms and conditions of this Agreement to be performed by Executive, then
Employer shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach hereof, or to enforce the specific
performance hereof by Executive or to enjoin Executive from performing acts
prohibited above during the period herein covered, but nothing herein
contained shall be construed to prevent such other remedy in the courts as
Employer may elect to invoke.
10. RETURN OF DOCUMENTS. Upon the termination of this Agreement for any
reason, Executive shall forthwith return and deliver to Employer and shall
not retain any original or copies of any books, papers, price lists or
customer contacts, bids or customer lists, files, books of account,
notebooks and other
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<PAGE>
documents and data relating to the performance of services rendered by
Executive hereunder, which were provided to or made available to
Executive by Employer, all of which materials are hereby agreed to be
the property of the Employer.
11. MISCELLANEOUS.
a. NOTICES Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered
or certified mail to Executive or Employer at the address set forth
below their signatures at the end of this Agreement or to such other
address as they shall notify each other in writing.
b. ASSIGNMENT This Agreement shall be binding upon and inure to the
benefit of Employer and its successors and assigns and Executive and
his or her personal representatives, heirs, legatees and
beneficiaries, but shall not be assignable by Executive.
c. APPLICABLE LAW This Agreement shall be deemed to have been made in
Illinois, regardless of the order in which the signatures of the
parties shall be affixed hereto, and shall be interpreted, and the
rights and liabilities of the parties determined, in accordance with
the laws of the State of Illinois. As part of the consideration for
the execution of this Agreement, it is hereby agreed that all actions
or proceedings arising directly or indirectly from this Agreement
shall be litigated only in the courts of the State of Illinois or
United States
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courts located therein, and all parties to this Agreement hereby
consent to the jurisdiction of any local, state or federal court
located within the State of Illinois.
d. HEADINGS Sections headings and numbers herein are included for
convenience of reference only and this Agreement is not to be
construed with reference thereto. If there be any conflict between
such numbers and headings and the text hereof, the text shall control.
e. SEVERABILITY If for any reason any portion of this Agreement shall be
held invalid or unenforceable, it is agreed that the same shall not
affect the validity or enforceability of the remainder hereof.
f. ENTIRE AGREEMENT This Agreement, and its attachments, contains the
entire agreement of the parties with respect to its subject matter and
supersedes all previous agreements between the parties. No officer,
employee or representative of Employer has any authority to make any
representation or promise in connection with this Agreement or the
subject matter hereof that is not contained herein, and the Employer
represents and warrants he has not executed this Agreement in reliance
upon any such representation or promise. No modification of this
Agreement shall be valid unless made in writing and signed by the
parties hereto.
g. WAIVER OF BREACH The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
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h. COUNTERPARTS This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one agreement.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed by its
duly authorized officer and its corporate seal to be affixed hereunto and
Executive has signed this Agreement all on the day and year first above written.
ACCUMED INTERNATIONAL, INC. Executive:
By /s/ Peter P. Gombrich By /s/ Norman J. Pressman
------------------------------- ---------------------------
Its Chairman & CEO
------------------------------
Address 920 N. Franklin #402 Address 119 Wildwood Road
-------------------------- ----------------------
Chicago, IL 60610 Stamford, CT 06903
-------------------------- ----------------------
6-13-96
SEAL
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EXHIBIT A
TITLE: President, Cytopathology Division
Senior Vice President, AccuMed International, Inc.
OTHER CONSIDERATION
RELOCATION:
I. COVERAGE. This policy covers salaried personnel transferred at the request
of the Company and excludes those executives who transfer at their own
request or those whose rates of pay, rules and working conditions are
regulated by a collective bargaining agreement.
II. DEFINITIONS.
A. Family:
Members of the executive's immediate family who will continue to live with
the executive at the new location.
B. Travel and Related Expenses:
- Airline fares for accommodations which are actually used and
which conform with Company guidelines regarding air travel on
Company business.
- Fares for travel by railroad, bus, taxicabs or airport limousine
and tips.
- Auto rental charges, if necessary, locally for house hunting, or
while the executive's car is in transit.
- Highway tolls and parking fees.
- Mileage allowance for a personal car used for house hunting or
for a personal car driven to the new location by the executive or
members of the executive's family until the day after the
furniture is delivered to the new location. Meals, lodging and
tips.
- Charges for care of children or other members of the executive's
family.
C. Home:
The executive's principal home with no more than five acres of land,
be it single family dwelling or a condominium, excluding property held
for investment or any secondary residence. At the new location
similar provisions apply.
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D. Move:
The provisions of this policy shall apply when the Company makes a
permanent or indefinite change in the executive's regular or principal
place of business. A temporary change in principal place of business
would be governed by the Company's policy for reimbursement of
traveling expenses.
III. MISCELLANEOUS RELOCATION ALLOWANCE To help defray those expenses
connected with relocation which are not reimbursed under other sections
of this policy, and to help compensate for the inconveniences which may
result from moving, the Company will pay a miscellaneous relocation
allowance. It will not be accountable. The miscellaneous relocation
allowance will be one month's pay at the annual base rate the executive
will receive immediately following the relocation, or $5,000.00, which-
ever is less. This allowance will be paid thirty (30) days after
permanent move has been completed.
IV. HOUSE HUNTING. The Company will reimburse for the travel and related
expenses of the executive and spouse for two trips to and from the new
location to find a new home. The executive will be reimbursed for
related expenses for up to nine calendar days.
V. DISPOSING OF PRESENT HOME
A. Lease Cancellation;
If the executive is renting present living quarters, when required,
the Company will reimburse for reasonable expenses of canceling a
lease, said amount not to exceed an amount equal to three (3) months
rent.
B. Sale of Home:
Current home will be placed on the market upon immediately giving
notice to current employer, but in any event no later than July 31,
1996. The executive may sell his/her present home directly or through
a broker.
1. Regular Sale Directly or Through Broker
If the executive arranges to sell his/her home directly or through a
broker the Company will pay the selling broker's commission and other
usual closing and transfer fees within thirty (30) days from the
closing date.
C. If, by December 1, 1996 the executive has used reasonable efforts, and
has been unable to sell his home for at least the fair market value as
determined by three independent appraisal (reference Section V., D.),
the Company will commence to make monthly payments against
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the mortgage on the home in the amount of Three Thousand and Six
Hundred Dollars and No Cents ($3,600.00) for such period time as the
Company determines, until the home is sold and the sale closed, or it
may exercise its right to "buy out" the property at its fair market
value (as determined by the average appraisal price referenced in
Section V. D. Upon sale of the home to a third party or to the
Company, the Company will be paid or credited in an amount equal to
the mortgage principle reductions resulting from the $3,600.00
payments made by the Company.
D. Loss on Sale of Home
To be eligible for an allowance under this provision, three appraisals
through an independent certified appraisers must be obtained. Cost of
the appraisals will be paid by the Company. Fair market value will be
based upon an average of the three appraisals. If upon sale of the
present home a loss is experienced, the Company will reimburse the
executive. A loss will occur if the sale price of the home is less
than the average of the three appraisals. The above notwithstanding,
the Executive will not sell his home at a loss without prior approval
of the Company.
Upon sale of the home any loss resulting from personal neglect or
other failure on the part of the executive to maintain such home
properly will not qualify for reimbursement under this section of the
policy.
THIS PROTECTION AGAINST LOSS DOES NOT APPLY TO A MOBILE HOME.
VI. ACQUIRING A NEW HOME
A. Lease Acquisition:
If the executive leases living quarters at their new location, the
Company will pay the expenses, such as broker's fees, required to
obtain a lease. Charges for advance rental, or security or cleaning
deposits will not be reimbursed.
B. In the event that by September 30, 1996 the Executive, using
reasonable efforts, has been unable to sell his home, the company will
arrange interim financing for the amount of the down payment necessary
for the executive to purchase housing in the Chicago metropolitan
area.
Such financing will be secured by means of the Company lending the
down payment to the Executive at the then lowest Applicable Federal
Interest Rate, or by co-signing a note with the Executive. The
property to be purchased
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will be collateral for said note. The executive will be responsible
for the monthly payments (to include principle, interest, taxes and
any other usual and customary charges) and all charges necessary to
maintain the property.
C. Reimbursable Expenses:
The Company will pay the following reasonable costs normally paid by
the buyer in connection with the purchase of a new home:
- Mortgage placement fees, with a maximum of one and one half (1
1/2) points.
- Appraisal fees required by lending institution.
- Title insurance and examination.
- Legal expenses, if required.
- Engineering or structural inspection reports.
VII. STORAGE OF HOUSEHOLD GOODS. The Company will select a reliable mover and
pay for the following expenses in connection with the transportation
of household goods and personal effect (excluding trees, livestock,
valuable papers, negotiable securities, money and dangerous or inflammable
articles) to the new location.
- Packing
- Transportation
- Unpacking
- Insurance, in the amounts customarily provided by carriers.
The Company will make arrangements for movement to the new location of one
automobile registered in the name of any member of the executive's family
who will reside at the new location, and will pay the corresponding
expenses for the insurance and transportation of such vehicles. Boats,
trailers, recreational, or other bulky vehicles are excluded. If household
goods have been moved and immediate possession of the new home cannot be
obtained, the Company will pay for the storage of household goods for a
period not exceeding . one hundred twenty days.
VIII. TEMPORARY LIVING AND TRAVEL EXPENSES.
A. Temporary Living - Former Location
If the executive must vacate his/her present home and must defer
starting travel to the new location, the Company will pay the
reasonable costs of meals and lodging for the executive and his/her
family at the former location for a period of up to seven calendar
days.
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B. Travel to New Location
The Company will pay the travel and related expenses of the executive
and his/her family to the new location by the most direct route.
Included as travel expenses are any allowable expenses for the day
immediately preceding the day of departure from the former location
and allowable expenses for the day of arrival at the new location.
C. Temporary Living - New Location
1. Executive only:
If the executive begins work at the new location before moving, the
Company will arrange for and pay the reasonable cost of meals and
lodging at the new location for up to ninety days, but not longer than
two days after the arrival of furniture and household goods at the new
home. Should special circumstances require a temporary living
allowance for the Executive for more than ninety days, the Executive
will discuss the issue with the Chairman/CEO and a reasonable
accommodation will be made.
2. Family:
Normally, it is expected that the executive's family will remain at
the former location until housing is ready at the new location.
However, if they must vacate the former location before that time, the
Company will arrange for and pay the reasonable cost of meals and
lodging at the new location for up to sixty days, but not longer than
two days after the arrival of the furniture and household goods at the
new home.
IX. NO SUBSTITUTION OF ALLOWANCES. The allowances stated in this policy are
for specific purposes. An expense which exceeds the limits of one
allowance cannot be claimed under another allowance. An expense for which
no allowance is provided cannot be substituted for an allowed expense.
X. TIME LIMITATIONS. Except for the benefits provided under Section VII of
this policy, no benefits will be granted for any expense incurred more than
one year from the effective date of transfer to the new location.
XI. TAX ALLOWANCE. Reimbursement of certain relocation expenses is considered
to be additional compensation to the executive for federal income tax
purposes. Therefore, the Company is required to withhold income tax on
such reimbursement to the extent that it exceeds the amount for which a
deduction can be taken by the executive on his/her individual income tax
return. To minimize the tax burden on the executive, the Company will,
with respect to the nondeductible portion of the
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reimbursement, provide an additional amount as a tax allowance in
accordance with the attached Tax Allowance Schedule. This allowance
will be paid to the Government as additional Federal Income Tax
withholding for the account of the executive. It will be included on
the executive's W-2 as taxable compensation.
XII. MOVING EXPENSE REPORTING. Claims for reimbursement of moving expenses
must be submitted to the Company within 90 days after household goods
are delivered to the new location. Claims should be submitted on the
Company Expense Reporting Form and referred to concerning reporting
moving expenses.
Normally, this reporting should be completed at one time. The claim
must show all allowable moving expenses, and any temporary advances
that the executive has received for moving expenses. Supporting
documents must be attached to the claim.
After necessary approvals of the claim, the executive will receive
reimbursement for any balance due, plus a statement of reimbursement of
relocation expenses, showing the treatment of the various expense
categories for the standpoint of income tax make-up and withholding.
This statement shows only the items reimbursed by the Company. It is
possible to have other moving expenses which quality as a deduction
which are not reimbursable by the Company.
If temporary cash advances from the Company have exceeded the amount of
reimbursable expenses, a check payable to the Company for any balance
due the Company must accompany the claim for reimbursement of expenses.
-A6-
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EXHIBIT B
Alamar Biosciences, Inc.
1995 Stock Option Plan
[To be attached]
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
WHEREAS, AccuMed International, Inc. (hereinafter known as the Employer) and
Norman J. Pressman (hereinafter known as the Executive) entered into an
Employment Agreement on the 13th day of June, 1996.
WHEREAS the Employer and the Executive warrant and acknowledge that it would be
in their mutual best interests to modify said agreement as it pertains to
Section 2.c (Compensation and Benefits - Stock Options) and Section 2.d (Hiring
Bonus) as follows:
2.c.STOCK OPTIONS Paragraph Two shall be modified to read:
The price of the first grant of 50,000 options, which is exercisable on
July 8, 1996, the date the Executive commences employment, will be set at
100% of Fair Market Value ("FMV" being the NASDAQ closing price of the
stock) of $6.25 a share of the common Stock of the Employer, and may be
exercisable at not less than the grant price. The price of the remaining
200,000 options will be set at 100% of FMV ($6.25 a share) on July 8, 1996,
the date the Executive commences employment.
ALL OTHER TERMS AND CONDITIONS IN SECTION 2.c. SHALL REMAIN THE SAME.
2.d.HIRING BONUS First sentence of the Paragraph shall be modified to read:
Employer shall grant the Executive 25,000 shares of the Employer's Common
Stock at the FMV of $6.25 on the date the Executive commences employment
(July 8, 1996). Said shares shall be delivered not later than thirty (30)
days after Executive commences active employment.
ALL OTHER TERMS AND CONDITIONS IN SECTION 2.d. SHALL REMAIN THE SAME.
The parties have read, understand and by virtue of their signatures below,
warrant their agreement with the modifications to the Agreement. This Addendum
shall be incorporated into and made part of the Employment Agreement attached
herein.
ACCUMED INTERNATIONAL, INC. EXECUTIVE
/s/ Peter P. Gombrich /s/ Norman J. Pressman
- ---------------------------------- ---------------------------
Peter P. Gombrich, Chairman & CEO Norman J. Pressman
7/16/96 7/16/96
- -------------------------------- -------------------------
Date Date
<PAGE>
RESEARCH AND DEVELOPMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of the 15th day of March, 1996 by
and between AccuMed International, Inc., a corporation organized under the laws
of the State of Delaware, USA (hereinafter "AccuMed") , with its principal place
of business located at 920 N. Franklin Street, Chicago, Illinois 60610, and
Radco Ventures, Inc., a corporation under the laws of Delaware USA (hereinafter
"RADCO"), with its principal place of business located at 920 N. Franklin
Street, Chicago, Illinois 60610.
INTRODUCTION
A. AccuMed is in the business of designing, developing,
manufacturing and marketing IN VITRO diagnostic products for the clinical,
veterinary, pharmaceutical and hospital laboratory market, and RADCO is in the
business of designing, developing, and manufacturing microbiological instruments
and testing products.
B. AccuMed is acknowledged to possess valuable technology and has
significant expertise and confidential know-how in research and development of
microbiology IN VITRO diagnostic testing products and the engineering of
laboratory instruments.
C. RADCO desires to contract microbiology, engineering and technical
services from AccuMed on the terms and conditions set forth in this agreement
for the purpose of research and potential development of new microbiological and
instrument testing products as agreed upon by the parties.
NOW, THEREFORE, in consideration of the terms and conditions and
mutual agreements contained herein, AccuMed and RADCO agree as follows:
1. TERM.
The initial term of this Agreement shall extend from the date
hereof until March 31, 1999. Either party may terminate this Agreement at any
time on ninety (90) days notice to the other. Upon termination, the RADCO Board
of Directors (as hereinafter defined) shall determine the rights and obligations
of each party with respect to any uncompleted projects or other open matters.
In any event, within thirty (30) days after termination, each party shall
promptly forward to the other party all moneys acknowledged to be owing to each
other with respect to any matter undertaken pursuant to this Agreement. In the
event the RADCO Board of Directors shall be unable to agree on the parties'
rights and obligations after termination within ninety (90) days after such
termination, the parties shall submit their dispute to binding arbitration in
accordance with Section 12 of this Agreement.
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2. RADCO BOARD OF DIRECTORS.
(a) AccuMed shall designate two directors and RADCO shall
designate three directors, collectively to act on the direction and activities
with respect to the evaluation of research and development projects, allocation
of resources, allocation of expenses, rights upon development and other matters
as described elsewhere herein with respect to projects undertaken pursuant to
this Agreement. Such directors, who shall be hereinafter referred to as the
"RADCO Board of Directors," will meet as necessary. Meetings may be conducted in
person or via conference telephone call.
(b) The members of the RADCO Board of Directors will be
empowered by AccuMed's and RADCO's respective Boards of Directors to enter into
binding agreements and other arrangements on behalf of AccuMed and RADCO,
respectively, within the scope of and for the purposes set forth in this
Agreement, PROVIDED, that the members designated by AccuMed shall have no
authority to bind RADCO and the members designated by RADCO shall have no
authority to bind AccuMed, and PROVIDED, FURTHER, that members may not bind
their respective companies with respect to matters that, in the opinion and
discretion of such members, require the consent or approval of such company's
Board of Directors. All decisions of the RADCO Board of Directors shall become
binding obligations of RADCO and/or AccuMed only upon the execution by each
party of a written memorandum memorializing such decisions and each of AccuMed
and RADCO hereby agrees to be bound to any memorandum executed by its
representative.
(c) AccuMed may, at any time, remove and/or replace any AccuMed
designated representative, and RADCO may, at any time, remove and/or replace any
RADCO designated representative, of the RADCO Board of Directors, so long as at
all times, each party shall have at least one member on the RADCO Board of
Directors.
(d) The RADCO Board of Directors will appoint a President to
carry out the direction of the RADCO Board of Directors and the operations of
RADCO and the President will report to the RADCO Board of Directors.
3. RESEARCH AND DEVELOPMENT COLLABORATION.
(a) AccuMed and RADCO hereby agree to act in concert with
respect to the research and development activity undertaken for the purpose of
developing a new integrated technology pursuant to this Agreement (the
"Research") and as defined on Exhibit A, as modified from time to time. The
RADCO Board of Directors shall determine the scope, timing, definition and
termination of any Research projects. During the term of this Agreement,
neither RADCO nor AccuMed shall unilaterally pursue any research and development
activity, nor shall they collaborate on research with any third party, in
connection with or related to any Research then being conducted under this
Agreement, without the prior specific written consent of the other party.
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<PAGE>
(b) Pursuant to its authority under this Agreement, the RADCO
Board of Directors shall determine the place, schedule, management and other
particulars with regards to any Research, as defined on Exhibit A. AccuMed and
RADCO each agree to place at the disposal of any project the resources
(including, without limitation, personnel, facilities, expertise and know-how)
determined by the RADCO Board of Directors to be necessary and appropriate for
the successful completion of the Research and appropriate compensation to
AccuMed per Exhibit A. The RADCO Board of Directors may, in its discretion,
agree to abandon and discontinue any Research if it determines that such
Research is not in the best interests of the parties. Upon termination of any
Research, the RADCO Board of Directors shall determine any and all issues
relating to allocation of expenses, reimbursement, ownership of any developed
property, and the like, pursuant to Termination in Section 1.
(c) AccuMed shall provide laboratory services, scientific,
marketing, and regulatory expertise under contract and as part of this Agreement
to RADCO to undertake the Research, the details of such contracted services as
defined on Exhibit A.
4. USE OF TECHNOLOGY
(a) AccuMed hereby grants to RADCO during the term of this
Agreement the non-exclusive use of AccuMed's [
* ] including any
expertise and confidential know-how that are trade secrets of AccuMed
("Technology"), solely for the purpose of conducting the Research. RADCO agrees
and acknowledges that, notwithstanding any other provision of this Agreement,
this grant does not provide RADCO any rights to manufacture or sell products
containing the AccuMed technologies or to use the AccuMed Technology for any
purpose other than the Research. RADCO shall not disclose to any third party,
without the consent of AccuMed, any trade secrets or other AccuMed Technology.
(b) AccuMed agrees to disclose to RADCO all AccuMed technologies
necessary or appropriate to be disclosed hereunder with respect to any Research.
The grant contained herein does not grant to the parties any other rights in and
to the other party's technology except as specifically provided herein, and each
party disclaims any other rights in or ownership of any of the other party's
technology by virtue of this Agreement.
5. REPORTING REQUIREMENTS.
(a) RADCO shall keep and maintain adequate books, records and
files to furnish complete and accurate information to AccuMed and to the RADCO
Board of Directors regarding all aspects of the Research. Each party shall
document and specify all aspects of any technology or products developed under
this Agreement, and shall retain such items for a period of three (3) years
after termination of this Agreement.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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(b) The RADCO President or RADCO Board of Directors will, from
time to time as requested by AccuMed or RADCO, and no less often than quarterly
during the term of this Agreement, provide to AccuMed and RADCO a detailed
written report specifying all documents, drawings, specifications, programs, and
all other matters relating to the Research including, without limitation, a
description of any patentable inventions and information.
6. CONFIDENTIALITY.
(a) AccuMed and RADCO each agree to take all necessary and
proper action to assure that information related to the Research, the AccuMed
Technology and any resulting technology or products (the "Confidential
Information") is kept confidential. Neither AccuMed nor RADCO will disclose or
permit the disclosure of any Confidential Information to any third person or
otherwise use any Confidential Information for it's own benefit except as
necessary to perform or manage performance of the Research (including such
disclosure as may be required to be made to employees or agents of the parties
under protection of nondisclosure agreements with such employees or agents as
required by Section 6(c) hereof) and any disclosure required by applicable law.
(b) AccuMed and RADCO shall each establish a reasonable security
procedure to prevent unauthorized access to the Confidential Information and
shall maintain a permanent list identifying all persons having access to the
Confidential Information, which shall be available for inspection by either
party upon reasonable notice. AccuMed and RADCO shall each appropriately
identify and mark all reproductions, copies, extracts or the like of any
documents containing Confidential Information as "Confidential" before
distributing the same to its employees, agents or independent contractors. In
addition, the parties will keep confidential at all times any nonpublic
information (including business and financial matters) it may acquire concerning
the other party.
(c) AccuMed and RADCO each further agree that any employees,
agents or independent contractors who are hired or retained by the parties to
perform or manage performance of any of any research and development undertaken
pursuant to this Agreement shall be required to sign agreements whereby such
employees, agents and independent contractors agree to hold in confidence any
Confidential Information and any nonpublic information about the parties of
which they become aware during the course of their duties as employees, agents
or independent contractors.
(d) The obligations imposed on the parties by Section 6 of this
Agreement to protect and not to disclose Confidential Information shall continue
during the term of this Agreement and thereafter, except with respect to such
information that sooner becomes lawfully within the public domain. Upon
termination of this Agreement, the parties shall return to each other all
reproductions, copies, extracts or the like containing any Confidential
Information.
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(e) AccuMed and RADCO shall indemnify and hold each other
harmless with respect to any damage, claim, injury, loss or liability occasioned
by either party's violation of, or failure to comply with, any provision of this
Section 6.
(f) RADCO understands and acknowledges that AccuMed is obligated
to disclose to the public material information regarding AccuMed at various
times under the requirements of the US Securities Exchange Act of 1934, as
amended (the "1934 Act") and the rules applying to companies with securities
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"). Notwithstanding any other provision of this Section 6, any
disclosure by AccuMed required to be made by the 1934 Act, any regulations
promulgated thereunder, the US Securities and Exchange Commission, NASDAQ or any
other securities exchange on which AccuMed securities may be listed shall not be
construed as a violation of the terms of this Agreement.
7. OWNERSHIP OF RESULTING TECHNOLOGY.
Except as otherwise provided, ownership of, and license rights,
if any, to all of the new technology resulting from the Research, including,
without limitation, any design features, processes, manufacturing procedures,
test procedures, parts information, patent rights and applications, engineering
and manufacturing information, schematics, lay-out drawings, assembly drawings,
programs, pamphlets, books, reports, drawings, or other documentation,
trademarks and copyrights, specifications, patentable inventions and
information, and improvements or discoveries developed during the Research
(collectively, the "Resulting Technology"), shall be solely owned by RADCO.
8. DEFAULT.
If any of the following events of default occur at any time
during the term of this Agreement, AccuMed or RADCO, upon written notice to the
other, may terminate this Agreement:
(a) RADCO or AccuMed defaults in the performance or compliance
with any provision of this Agreement required to be performed by them, and such
default has not been remedied within thirty (30) days after the date the non-
defaulting party gives written notice thereof to the defaulting party; or
(b) (i) A receiver is appointed or applied for with respect to
AccuMed or RADCO; (ii) a general assignment of its assets is made by AccuMed or
RADCO for the benefit of creditors; (iii) proceedings for liquidation of AccuMed
or RADCO are commenced pursuant to an agreement of composition of its creditors;
(iv) any proceeding involving RADCO or AccuMed is voluntarily commenced by
either of them under any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute of the United States, any state,
any other country or any political subdivision thereof; or (v) any such
proceedings are involuntarily instituted against RADCO or AccuMed, and such
party by any action indicates its approval thereof or consent thereto or
acquiescence therein; PROVIDED that
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no such default shall become effective with respect to any event described in
clauses (i) through (v) of this subparagraph (b) if such event or proceeding is
dismissed, withdrawn or otherwise removed within thirty (30) days of the date of
initiation or occurrence thereof.
9. INFRINGEMENT.
To AccuMed's knowledge, the AccuMed Technology does not infringe
upon or violate any patent, trademark or other intellectual property right.
AccuMed shall defend or settle any claim, action, suit or proceeding brought
against RADCO with respect to alleged infringement or violation by AccuMed of
any patent or trademark of AccuMed. The cost of such defense shall be borne by
AccuMed. AccuMed shall indemnify and hold RADCO harmless from and against any
actions, claims, suits, proceedings or other obligations incurred by RADCO in
connection with any alleged infringement or violation by AccuMed of any
intellectual property right.
10. GOVERNING LAW; ARBITRATION
This Agreement shall be governed by and construed and governed in all
aspects by the substantive laws of the State of Delaware, USA.
All disputes arising out of or in connection with this Agreement, any
Research or any aspects of any Resulting Technology, which cannot be settled
amicably between AccuMed and the RADCO Board of Directors, including disputes
on any aspects of the arrangements contemplated by this Agreement to be
determined by the RADCO Board of Directors, shall be resolved, to the exclusion
of the ordinary courts by a three-person Arbitral Tribunal in accordance with
the rules of the American Arbitration Association.
The Arbitral Tribunal shall have its seat in Chicago, Illinois, USA
and the proceedings shall be conducted in the English language. Each party
shall nominate an arbitrator. The Chairman of the Arbitral Tribunal shall be
appointed by, and in accordance with the rules of, the American Arbitration
Association.
The determination of the Arbitral Tribunal as to any matter placed
before it shall be final and binding upon the parties, shall be enforceable at
law or equity by any court having jurisdiction and shall not be appealable.
Each party will bear the expense of the arbitrator it selects, and the expenses
of the Chairman of the Arbitral Tribunal shall be borne by the parties equally.
11. WAIVER OF PERFORMANCE.
A failure of either party hereto at any time to require performance by
the other party hereto of any provision hereof required to be performed by such
other party will in no way affect the right of the first party to require such
performance at any time thereafter. The waiver of any provision hereof will in
no way be construed as a waiver of any succeeding breach of such provision or a
waiver of the provision itself.
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12. RELATIONSHIP OF THE PARTIES.
Neither party hereto shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of the
other party or to bind the other party to any contract, agreement or undertaking
with any third party. No partnership or joint venture is created hereby. The
parties are independent contractors, and not employees. The meetings and
proceedings of the RADCO Board of Directors shall be deemed to be the
negotiations and business discussions of independent contractors.
13. MISCELLANEOUS.
(a) Neither this Agreement nor any right here under may be
assigned by either party nor may they delegate any of their duties here under,
without the express prior written consent of the other party.
(b) This Agreement will be binding upon and inure to the benefit
of the successors and permitted assigns of the respective parties hereto.
(c) This Agreement and the other documents delivered in
connection with the transactions contemplated hereby and thereby constitute the
full and entire understanding and agreement of the parties hereto with regard to
the subjects hereof and thereof.
(d) The titles of the sections of this Agreement are for
convenience of reference only and are not to be considered in construing the
Agreement.
(e) This Agreement may not be amended except by a written
instrument signed by all the parties hereto.
(f) In case any provision of this Agreement shall be invalid,
void, illegal, or unenforceable, the remaining provisions hereof nevertheless
will continue in full force and effect without being impaired or invalidated in
any way.
(g) Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon or give to any person, corporation or other
legal entity, other than the parties to this Agreement any rights, remedies or
other benefits under or by reason of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives as of the date first
above written.
RADCO VENTURES, INC ACCUMED INTERNATIONAL, INC.
/s/Kenneth D. Miller /s/Peter P. Gombrich
- ---------------------------------- --------------------------------
By: Kenneth D. Miller By: Peter P. Gombrich
Title: Acting President Title: Chairman/CEO
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EXHIBIT A
RADCO DEVELOPMENT PLAN
The general objective is for Accumed and RADCO to act in concert with
respect to the research and development activity undertaken for the
purpose of developing a new integrated technology pursuant. The RADCO
Board of Directors shall determine the scope, timing, definition and
termination of any Research projects.
The development plan has been structured around specific time and cost saving
strategies:
1. RADCO will develop product specifications by evaluating individual
elements of the product line and utilizing effective testing methods.
2. Clearly defined milestones will reduce risk and save time and money
during the development process.
3. RADCO will contract with AccuMed and others for manufacturing processes
development, instrument engineering and development, and microbiology
development.
A maximum development timetable of two years has been set, requiring maximum
utilization of previously validated solutions and procedures wherever possible.
The work is organized into four phases, with each phase leveraging Accumed's
instrumentation, imaging and microbiology software expertise as well as
utilization of dedicated and contracted staffing throughout the duration of the
work.
PHASE ONE: FEASIBILITY 3 MONTHS
Form team of senior specialists including those presently on staff at Accumed
microbiologists, programmers, engineers) to document specifications and
demonstrate feasibility.
1. Complete set of specifications for the autoinoculator, fully automated
reading instrument and disposable device;
2. Feasibility prototype device constructed;
3. Demonstration that microbiological methods for identification and
susceptibility will give rapid results in such device;
4. Assessment of manufacture ability of the proposed device, i.e., can it be
made in volume at low cost;
5. Inoculator feasibility prototype constructed; and
6. Instrument feasibility prototype constructed.
Cost:
[ * ] per month for research and development,
engineering, marketing research and project management services provided by
AccuMed. AccuMed will bill RADCO separately for any laboratory supplies used
for the Research. Other engineering prototype development and services other
than Accumed will be paid directly by RADCO.
OUTCOME: Explicit final development plan with feasibility demonstrated,
prototyping plan in place, deadlines and milestones set and demonstrable
feasibility prototype built.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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PHASE TWO: PROTOTYPING 6 MONTHS
Expand development team to eight with addition of two microbiologists and one
instrument engineer to focus on prototyping instrumentation and software for
instrument support, microbiology for new system, and manufacture of the product.
1. Extensive formulations work and prototype assembly and testing for
susceptibility
2. Formal prototyping and design of instrumentation
3. Device prototypes, full instrument breadboard, prototyping and instrument
modifications to support microbiology work.
4. Hardware and software engineering for instrumentation.
Cost:
[ * ] per month for research and development,
engineering, regulatory consulting, marketing research and project management
services provided by AccuMed. AccuMed will bill RADCO separately for any
laboratory supplies used for the Research. Other engineering prototype
development and services other than AccuMed will be paid directly by RADCO.
OUTCOME: Engineered prototypes of instrumentation, panels and software to
adequately represent final product for purposes of FDA Clinical Trials
PHASE THREE: REDUCTION TO PRACTICE 6 MONTHS
Expand team with outside third party contractors to assist with data collection
for Clinical Trial preparation and performance of trials for instrumentation,
panels and software.
1. Extensive data collection and analysis for rapid and overnight testing for
susceptibility;
2. Device prototypes, full instrument breadboard prototyping and instrument
construction for support of microbiology work;
3. Prototyping software and hardware work; and
4. Clinical trials at three sites for approximately 60 antibiotics, 3
organisms groups, two identification groups and the instrumentation.
COST:
[ * ] per month for research and development,
engineering, regulatory consulting, laboratory work, data collection and project
management services provided by AccuMed. AccuMed will bill RADCO separately for
any laboratory supplies used for the Research. Other engineering prototype
development and services other than AccuMed will be paid directly by RADCO.
OUTCOME: Data collected and ready for preparation for FDA submission; work
on production lot of instruments underway.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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PHASE FOUR: FDA SUBMISSION 9 MONTHS
Team reduced to core group of two to prepare FDA submissions and respond to FDA
issues; transfer of technology to manufacturing.
1. Prepare, submit and support submission of PMA to the US FDA;
2. Develop manufacturing and GMP documentation; and
3. Develop user operations and service manuals
COST:
[ * ] per month for creating the FDA documentation
for PMA submission, GMP and manufacturing documentation and user manuals. Other
manufacturing prototype and assembly development and services other than Accumed
will be paid directly by RADCO.
OUTCOME: FDA submission and clearance; transfer of technology to manufacturing.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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R-1
Rider to that lease dated July 13, 1994 amended with Rider R-7 and Rider R-20,
between The Lumber Co., Landlord, and AccuMed Inc., Tenant.
Landlord will Lease to Tenant suite 501 consisting of 700 square feet, suite 502
consisting of 740 square feet, suite 503 consisting of 868 square feet, suite
401 consisting of 1980 square feet, and suite 406 consisting of 800 square feet
all located at 900 N. Franklin St. Chicago, IL 60610 and hereby known as
expansion space. This leasing option is granted pursuant to the agreed to Terms
and Conditions as set forth in the Letter of Intent, dated May 15, 1996, and
executed by both parties. The Letter of Intent (Exhibit A) is attached to and
herein made part of this lease agreement. The expansion space will be leased
under the same terms and conditions as the original lease. Rent for the
expansion space will be at the same per square foot rate as Tenant pays for
suite 402 at 920 N. Franklin St. Chicago, IL 60610. The term of lease for the
expansion space will commence July 1, 1996.
Landlord hereby grants a Right of First Refusal for space at 900-920 N.
Franklin. The terms of this right are contained in Rider R-12a.
Landlord will allow Tenant to improve the expansion space based on drawings
submitted to Landlord by Tenant and signed by both parties. All costs and
supervision of said improvements to the expansion space will be the
responsibility of Tenant.
Tenant hereby extends the lease of all Premises, additional space, and expansion
space for an additional five (5) years, after the expiration of the original
lease, under the same terms and conditions as the original lease. The
Expiration date of this extended lease is September 30, 2004.
/s/ John J. Burns /s/ Peter P. Gombrich
- ---------------------------------- --------------------------------
Landlord Tenant
Agent for The Lumber Company
- ---------------------------------- --------------------------------
Landlord Tenant
5/30/96
- ---------------------------------- --------------------------------
Date Date
<PAGE>
COLLABORATION AGREEMENT AND WORLDWIDE EXCLUSIVE LICENSE
AGREEMENT dated March 22, 1994, by and between Alamar Biosciences, Inc., a
California corporation with offices at 4110 North Freeway Boulevard, Sacramento,
California 95834 ("Alamar"), and G&G Dispensing, Inc., a Maryland corporation
with offices at 1005 York Lane, Annapolis, Maryland 21403 ("G&G").
WHEREAS, the parties wish to develop, license, manufacture and market the
G&G invention for liquid transfer for the specific application of microorganism
identification and minimum inhibitory concentration susceptibility ("ID/MIC")
testing in a microwell format regardless of number of wells, columns, rows or
volume of the fluid dispensed; and
WHEREAS, Alamar wishes to secure the worldwide exclusive rights to make,
have made, use and sell the Product and G&G wishes to grant a license to Alamar
to do so, on the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS
The following words or phrases shall, in this Agreement, have the meanings
indicated below:
1.1 "Actuator" shall mean a device which is used with the Disposable to
create and discharge a vacuum.
1.2 "Affiliate" of a party shall mean a corporation or other business
entity controlled by, controlling or under common control with, such party. For
this purpose, control of a corporation or other business entity shall mean
direct or indirect beneficial ownership of fifty percent (50%) or more of the
voting interest in, or a fifty percent (50%) or greater interest in the equity
of such corporation or other business entity.
1.2a "Alamar Application" shall mean the specific application of
microorganism ID/MIC testing in a microwell format regardless of number of
wells, columns, rows or volume of the fluid dispensed and shall include an
Actuator and one or more Disposables (defined below).
1.3 "Disposable" shall mean a disposable pipettor device.
<PAGE>
1.4 "First Commercial Sale" shall mean the date on which Alamar first
transfers title of a Product to a party that is not an Affiliate of Alamar for
monetary or some value equivalent (E.G., a barter arrangement) consideration.
1.5 "G&G Technology" shall mean proprietary or confidential technology,
know-how, trade secrets, data and results, currently existing and owned by G&G
or developed pursuant to this Agreement and becoming the property of G&G
pursuant to Section 3.1 of this Agreement, in each case necessary or appropriate
for the development of the Product.
1.6 "G&G Patent Rights" shall mean all patent applications and patents,
whether United States or foreign, now or hereafter during the term of this
Agreement owned or controlled by G&G and any continuations-in-part, divisions,
reissues, extensions and foreign counterparts of any such patent applications or
patents, which Alamar would infringe by making, having made, using or selling
the Product unless licensed by this Agreement.
1.7 "Person" shall mean an individual, a corporation, a partnership, an
unincorporated association, a joint-stock company, a trust or a government or
political subdivision thereof.
1.8 "Phase I" shall mean when the parties have reached Agreement on a
design concept and specifications for the Product and so indicate in a writing,
an example of which is attached as Exhibit A.
1.9 "Phase II" shall mean when the parties have reached agreement on a
prototype design for the Actuator and Disposable and so indicate in a writing,
an example of which is attached as Exhibit A.
1.10 "Phase III" shall mean when the parties agree that the tooling is
approved for production of the Disposable and a functional Actuator that meets
specifications is delivered and so indicate in a writing, an example of which is
attached as Exhibit A.
1.11 "Phase IV" shall mean the period from the end of Phase III to and
including the date of the First Commercial Sale of the Product.
1.12 "Product" shall mean the G&G invention for liquid transfer for the
Alamar Application.
1.13 "Quarter" shall mean the calendar quarters (3-month periods)
commencing January 1st, April 1st, July 1st and October 1st, respectively.
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2. COLLABORATIVE EFFORT AND OWNERSHIP OF TECHNOLOGY
2.1 OVERALL JOINT EFFORT. Alamar and G&G agree to collaborate on the
development of the Product. The parties shall be under no obligation to perform
specific duties other than those set forth below; however, each party agrees to
provide advice and information to the other to the extent reasonably requested
and reasonably appropriate to the development of the Product.
2.2 DUTIES OF G&G. G&G shall be responsible for (i) the concept, final
design and prototype of the Actuator and (ii) the concept and final design of
the Disposable. Part of G&G's costs in this effort will be paid for by Alamar
in accordance with Section 5.2 below. G&G shall inform Alamar at regular
intervals, and at such times as may be reasonably requested by Alamar, of G&G's
progress in accomplishing the tasks set forth in this Section 2.2. If G&G is
unable to accomplish Phase I, Phase II and Phase III by nine months from the
date of execution of this Agreement, Alamar may, at its option, perform these
functions as well. If Alamar decides to do so then it will notify G&G of its
decision and from that day forward Alamar's out-of-pocket expenses for
accomplishing what G&G has not been able to accomplish of Phase I, Phase II and
Phase III will be credited against any future royalties that Alamar may owe to
G&G under this Agreement.
2.3 DUTIES OF ALAMAR. Alamar will be responsible for the production
tooling of the Disposable for the Alamar Application. Once the final design is
available Alamar will seek one or two additional quotations for the production
of the Disposable. Alamar shall be responsible for the production tooling of
the Actuator for the Alamar Application.
2.4 OWNERSHIP OF TECHNOLOGY EMBODIED IN PRODUCT. Except as otherwise
provided below in this paragraph, all technology developed during the course of
the parties' collaboration under this Agreement (whether developed solely by
G&G, solely by Alamar or jointly) relating to the Actuator, Disposable or the
Product shall automatically, and without further action of the parties, become
and be the sole property of G&G and become G&G Technology or G&G Patent Rights,
PROVIDED, HOWEVER, that any information or technology discovered or developed
during the course of the parties collaboration under this Agreement relating to
Alamar's proprietary technology for microorganism ID/MIC testing in a microwell
format shall automatically, and without further action of the parties, become
and be the sole property of Alamar. The parties will, to the extent necessary
or appropriate, execute all documents and otherwise cooperate with each other to
perfect the respective parties' interests in the results of the collaboration.
2.5 IMPROVEMENTS AND MODIFICATIONS. Any inventions, modifications,
discoveries, and developments, whether or not patentable (collectively, the
"Improvements"), developed or
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acquired by G&G from whatever source, relating to the Actuator or the Disposable
as used in the Product, shall become part of the G&G Technology or the G&G
Patent Rights and shall be automatically licensed to Alamar hereunder. G&G
shall promptly notify Alamar of the development or acquisition of any
Improvements.
2.6 ALAMAR TECHNOLOGY. G&G shall promptly notify and transfer to Alamar
any inventions or discoveries that may be acquired or learned by G&G during the
course of the collaboration under this Agreement relating to Alamar's
proprietary technology.
2.7 ALAMAR GRANT-BACKS. In the event Alamar develops or acquires from
whatever source any Improvements relating to the Actuator or the Disposable, any
such Improvements shall automatically become property of G&G and, to the extent
such falls within the definition of G&G Technology or G&G Patent Rights, part of
the technology licensed to Alamar hereunder. Alamar shall promptly notify G&G
of the acquisition or development of any Improvements and the parties shall
execute documents and otherwise cooperate as may be necessary or appropriate to
effect the transfer and/or license of any Improvements hereunder.
2.8 G&G TECHNOLOGY. Alamar shall promptly notify and transfer to G&G any
inventions or discoveries that may be acquired or learned by Alamar during the
course of the collaboration under this Agreement relating to G&G's proprietary
technology.
2.9 FURNISHING G&G TECHNOLOGY AND G&G PATENT RIGHTS. G&G shall furnish
to Alamar all G&G Technology and G&G Patent Rights licensed hereunder in the
form and at the times as reasonably requested by Alamar.
3. LICENSE
G&G hereby grants and Alamar accepts a worldwide exclusive license, to G&G
Technology and G&G Patent Rights, to make, use and sell the Actuator and the
Disposable solely as part of the Product and solely for the Alamar Application,
subject to Section 5.3(b) below. Alamar will use its best efforts to market and
sell the Product worldwide. G&G shall have and retain the rights to all other
applications and uses of the Actuator or the Disposable and any other G&G
inventions for liquid (or other) transfer.
4. MANUFACTURE OF DISPOSABLE, SUPPLY OF ACTUATOR AND OTHER OBLIGATIONS
4.1 MANUFACTURER OF THE DISPOSABLE. G&G and Alamar will agree on a
common manufacturer(s) of the Disposable to take advantage of the knowledge
gained and to lower the cost of the Disposable for all uses of the Disposable,
whether licensed
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hereunder or not. As long as it makes commercial sense for G&G to do so, G&G
will use the same manufacturer for the Disposable as Alamar. In the event the
parties are unable to agree, the parties may use different manufacturers.
4.2 ALAMAR SUPPLY OBLIGATION. Should G&G (or a third party designated by
G&G) wish to purchase the Actuator from Alamar for use of the Actuator in
applications other than that licensed to Alamar, Alamar agrees to use its best
efforts to manufacture and sell the Actuator to G&G or such third party,
PROVIDED, HOWEVER, that Alamar shall be under no obligation to (i) manufacture
Actuators that differ from the Actuator as used in the Product, or (ii) supply
Actuator's to G&G or any third party in quantities that exceed Alamar's
manufacturing capacity or that would result in an inability of Alamar to satisfy
demand for the Product. In the event that G&G (or its designated third party)
requests Alamar to manufacture and deliver any Actuator that differs from the
Actuator as used in the Product, Alamar may require, as a prerequisite to such
manufacture and delivery, that G&G or its designated third party pay for any and
all retooling costs that may be associated with manufacture of a different
Actuator. At that time, G&G and Alamar will negotiate Alamar's selling price of
the Actuator to G&G or the designated third party, provided, however, that such
selling price of the Actuator will be no more than twenty-five percent (25%)
above Alamar's cost of production of the Actuator.
4.3 REGULATORY APPROVALS. Alamar shall be responsible for obtaining all
regulatory or other governmental approvals or permissions for the manufacture
and marketing of the Product and Alamar agrees to use its best efforts to do so.
G&G agrees to assist Alamar and provide Alamar with all information reasonably
requested by Alamar to secure any such clearances, approvals or permissions,
including, without limitation, information relating to the research and
development of the Actuator, the Disposable and the Product.
5. FEES AND ROYALTIES
5.1 PAYMENT UPON EXECUTION OF AGREEMENT. Upon the execution of this
Agreement, Alamar will pay G&G the non-refundable sum of U.S. $25,000 by check
sent via overnight delivery service to G&G's address as set forth in Section 14
of this Agreement or wire transfer in accordance with the G&G wire transfer
instructions as provided to Alamar in writing by G&G.
5.2 MONTHLY PAYMENT TO G&G FOR DEVELOPMENT EFFORTS. Until both Phase I,
Phase II and Phase III are completed, Alamar will pay to G&G as part
compensation for its activities in accordance with Section 2.2 above the
non-refundable sum of $2,000 per month in advance retroactive to January 17,
1994 with the first $6,000 due
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upon signing of this Agreement and each subsequent $2,000 due the 17th day of
every month (or if the 17th is not a business day, then the first business day
after the 17th); provided, however, that such payments of $2,000 per month
shall terminate if Alamar elects to perform Phase I, Phase II and Phase III as
provided in Section 2.2 hereof. In addition, Alamar will pay for all of G&G's
reasonable and related travel expenses (any such expense in excess of $50 G&G
will discuss with Alamar before spending).
5.3 MINIMUM ANNUAL ROYALTIES.
(a) AMOUNT. Alamar shall pay to G&G a non-refundable minimum annual
royalty for each twelve month period beginning July 1 and ending June 30 as
follows:
i. First twelve month period (beginning July 1, 1994):
$25,000 (not including the amount paid upon execution of
this Agreement pursuant to Section 5.1 hereof.)
ii. Second and Third twelve month periods: $50,000;
iii. Fourth and Fifth twelve month periods: $75,000;
iv. Sixth twelve month period and each additional twelve
month period through the length of this Agreement as
defined in Section 12.1 below: $100,000
(b) NON-EXCLUSIVITY UNDER CERTAIN CIRCUMSTANCES. If in the ninth
year of this Agreement (beginning July 1, 2002) or in any year thereafter Alamar
does not pay G&G at least $200,000 in royalties then the license granted under
this Agreement will automatically become non-exclusive, with G&G free to license
any other party. All other terms and conditions of this Agreement will remain
the same through the remainder of the Agreement.
(c) TIMING AND METHOD OF PAYMENT. Alamar shall pay to G&G on the
first day of each quarter, beginning July 1, 1994, twenty five percent (25%) of
each year's minimum annual royalty. All payments made under Section 5.3 of this
Agreement shall be made and transmitted as described in Section 5.1 hereof.
5.4 ROYALTIES. Alamar shall make royalty payments to G&G as
follows:
(a) AMOUNT. Subject to Section 5.4 (b) below,
i. U.S. $50.00 for each Actuator sold; and
ii. for each Disposable sold
[a] five cents ($.05) each for the first one million
Disposables sold (1-1,000,000);
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[b] seven and one-half cents ($.075) for each Disposable
sold in excess of one million.
For purposes of determining whether the amounts of Disposables referred to
above have been achieved, sales of Disposables to a dealer, distributor or
direct to the end-user by Alamar, an Affiliate or a sublicensee, shall be
aggregated, unless it, an Affiliate or sublicensee is an end-user, in which case
such sales shall also be taken into account.
(b) DEDUCTION OF QUARTERLY PAYMENTS. The quarterly amounts paid by
Alamar in accordance with Section 5.3 above shall be, within each twelve month
period to which they apply (as set forth in Section 5.3(a) above, credited only
against any royalty payments due and payable under Section 5.4(a) above during
that same twelve month period.
(c) ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. Alamar reserves the
right to adjust royalties (the amount of such adjustment to be agreed to by the
parties) to G&G if it is necessary and agreed upon by both parties to pay a
third party royalties for patents that are held by the third party for products
or inventions that are necessary to complete the proprietary technology of the
Product and therefore protect the added value of G&G's interest in the device.
(d) TIMING AND METHOD OF PAYMENT.
i. Amounts due for the royalties payable under this Section
5.4 will be paid quarterly within thirty days after the end of each calendar
quarter, commencing with the Quarter in which the First Commercial Sale of a
Product occurs. Units used internally for demonstration, evaluations or
research and development will not be included in the calculation of royalties.
Alamar will pay royalties for all product sales to a dealer, distributor or
direct to the end-user by itself, an Affiliate or a sublicensee unless it, an
Affiliate or sublicensee is an end-user in which case it will also pay
royalties.
ii. Each Royalty paid hereunder shall be accompanied by a
statement which shall set forth the number of Disposables and the number of
Actuators sold during that Quarter and the amount prepaid at the beginning of
the quarter under Section 5.3 hereof.
iii. The obligation to pay royalties to G&G under this
Agreement is imposed only once with respect to the same Product regardless of
the number of claims of G&G Patent Rights or the amount of G&G Technology
embodied in such Product.
iv. There shall be no obligation to pay royalties to G&G
under this Agreement on sales or other transfers of Products
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between Alamar and its Affiliates and sublicensees, unless such Affiliates or
sublicensees uses same, but in such instances, the obligation to pay Royalties
shall arise upon the sale by Alamar or its Affiliates or sublicensees to
unrelated third party customers. Payments due under this Section 5 shall be
deemed to accrue when either used by Alamar, its Affiliates or sublicensees or
sold to a dealer, distributor or end-user by Alamar, an Affiliate or a
sublicensee.
v. All amounts payable to G&G under this Agreement shall be
payable in U.S. Dollars and shall be made as described in Section 5.1 of this
Agreement.
5.5 ISSUANCE OF SECURITIES.
(a) COMMON STOCK. Upon execution of this Agreement, Alamar will
issue to G&G a total of $300,000 in Common Stock of Alamar (ALMR), with the
number of shares (the "Shares") to be determined at the time of the execution of
this Agreement by the price of the ten preceding days weighted average trading.
The total number of Shares will be not less than 140,000 or more than 145,000
shares. The Shares shall be issued in accordance with a Securities Purchase
Agreement between the parties hereto dated the same date as this Agreement (the
"Securities Purchase Agreement") in substantially the form attached hereto as
Exhibit B. The Shares will initially be issued without registration under the
Securities Act of 1933, but will contain "piggy-back" registration rights and
Alamar will in good faith attempt to register the Shares as soon as possible.
G&G will be prohibited from trading more than twenty-five percent (25%) of the
total shares within any thirty (30) day period; the registration statement
covering these shares will be kept effective for at least nine months from the
date G&G receives all of the Shares unless G&G has sold all its Shares in a
shorter period. The Shares will be held in escrow by Hackmyer & Nordlicht, 645
Fifth Avenue, New York, New York pursuant to an the Escrow Agreement, and given
to G&G at the completion as follows:
i. Upon completion of Phase I: 20%;
ii. Upon completion of Phase II: 40%;
iii. Upon completion of Phase III: 20%;
iv. Upon completion of Phase IV: the remainder of the Shares
(b) WARRANT. Alamar shall issue to G&G a warrant (the "Warrant") to
purchase a total of an additional 175,000 shares of Alamar's Common Stock (ALMR)
at a per share exercise price of U.S. five dollars (U.S. $5.00). The Warrant
shall not be transferrable for two years from the date it is released to G&G and
will expire on December 31, 1999. Alamar will in good faith attempt to register
the underlying shares as soon as possible after the execution of the Securities
Purchase and Escrow Agreement and
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Alamar will register the Warrant if feasible. The Warrant shall contain such
additional terms as are set forth in the Form of Warrant attached as an exhibit
to the Securities Purchase Agreement. Upon issuance, the Warrant shall be held
in escrow by Hackmyer & Nordlicht pursuant to the terms of the Securities
Purchase Agreement until the date on which the Phase IV portion of the Shares
are released under Section 5.5(a) above, at which time the Warrant shall also be
released to G&G.
6. VERIFICATION
For a period of five (5) years from the date when each royalty
statement is due hereunder Alamar agrees to keep records in sufficient detail
and to allow an independent certified public accounting firm appointed by
G&G, and reasonably acceptable to Alamar, to examine its books and records,
at G&G's sole expense, during business hours, but not more than twice a year,
in order to verify the payments due under this Agreement; provided, however,
that such certified public accounting firm shall not disclose any information
to G&G except that information which should properly have been contained in
such Royalty statement and provided, further, that if such certified public
accounting firm is regularly employed by Alamar and can provide such
information to G&G in the normal course of its activities for Alamar, it
shall do so without charge to G&G and provided, further, that if the
accounting firm determines that Alamar has paid to G&G less than it should
have, Alamar shall bear the costs of the examination.
7. CONFIDENTIAL INFORMATION
7.1 G&G and Alamar agree to work together to develop mutually acceptable
procedures to protect each party's confidential information (as defined in
Section 7.2 below). Such procedures will include, limiting duplication of
confidential documents, restricting dissemination of Confidential Information
only to those employees or representatives requiring it for purposes of
performing this Agreement, and requiring employees to enter into confidentiality
agreements, as the parties normally employ in the protection of their own highly
sensitive technical, confidential information.
7.2 Any information which shall have been or will be communicated in
confidence under this Agreement including all information, whether conveyed in
writing, orally or through other tangible materials designated by the disclosing
party to be confidential (the "Confidential Information") shall be governed by
the provisions of this Section:
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(a) Each party agrees not to use the Confidential Information
disclosed to it for its own benefit except for the purpose of performing its
obligations under this Agreement.
(b) Each party agrees not to disclose the Confidential Information
disclosed to it to any third party or to use such Confidential Information for
the benefit of any third party without the express written permission of the
disclosing party, except that the recipient shall not be prevented from using or
disclosing information:
(i) which recipient can demonstrate by written records was
known to the recipient prior to the date of disclosure by the
disclosing party, provided such information was not obtained by the
recipient through disclosure by a third party receiving such
information in confidence from the disclosing party;
(ii) which is now public knowledge, or becomes public
knowledge in the future other than by breach of this Agreement by the
recipient;
(iii) which, as can be established by written records, is
independently developed by the recipient without benefit of
Confidential Information received from the disclosing party;
(iv) which is disclosed to recipient, after the date of
disclosure by the disclosing party by a third party having a right to
make such disclosure;
(v) which is included in any filing or action taken by Alamar
to obtain governmental approval to develop, promote, market and sell
the Product, provided, however, that when permitted by the provisions
of local law, Alamar will take reasonable steps to protect the
confidentiality of Confidential Information submitted to governmental
agencies or authorities pursuant to this Agreement; or
(vi) which is required in the judgment of the parties to be
disclosed in order to enable Alamar effectively to clinically test or
market a Product.
(c) Each party further agrees to use the same degree of care it uses
to protect its own confidential and proprietary technical information to prevent
the unauthorized disclosure to any third party of the Confidential Information.
(d) Each party agrees that it shall acquire no rights with respect
to Confidential Information disclosed to it by the other party, except as
expressly set forth in this Agreement.
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(e) Each party agrees that the Confidential Information disclosed
to it will not be disclosed to any third party or to any employees, officers,
directors, consultants, advisors or agents of the recipient except to those
employees, officers, directors, consultants, advisors or agents of the
recipient who reasonably require such disclosure for purposes of performing
the recipient's obligations under this Agreement and who are bound by
confidentiality agreements or obligations which are the same as provided in
this Section with respect to Confidential Information.
(f) Upon termination of this Agreement, each party shall return to
the other any tangible copies of any Confidential Information provided to it
hereunder and any notes taken by employees of such party regarding Confidential
Information disclosed to it.
(g) The confidentiality obligations under the terms of this
Agreement shall survive termination hereof, unless such obligations expire by
their terms.
(h) Unless otherwise identified that Confidential Information is
owned by a third party, each party acknowledges that all Confidential
Information is owned solely by the disclosing party and that unauthorized
disclosure or use of such Confidential Information could cause irreparable harm
and significant injury that might be difficult to ascertain or for which money
is inadequate compensation. Accordingly, each party will be entitled to seek
injunctive and other preliminary and equitable relief to enforce this Section 7,
in addition to damages and other available remedies.
(i) Confidential Information relating to the subject matter of this
Agreement disclosed prior to the execution hereof shall be governed by the
provisions of this Section.
8. LABELING
All Products sold shall bear on the label the words, clearly legible to the
naked eye, "Manufactured under license from G&G Dispensing, Inc., Arlington,
Virginia, U.S.A." or any similar wording as may be agreed to by the parties (and
G&G hereby grants Alamar a limited non-exclusive license to use its name solely
in this manner and for this purpose), together with either (i) the words
"Patent Pending" or (ii) after a patent shall be issued for the Product, the
identification of the patent number.
9. PATENTING OF INVENTIONS
The costs of patenting any invention (as well as maintaining existing
patents) relating to the Product developed
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either during the collaboration discussed in Section 2 above or at any other
time for the United States will be borne by G&G. For all other countries the
costs of patenting any invention relating to the Product developed either during
the collaboration discussed in Section 2 above or at any other time (including
initial filing fees, international application fees and patent issuance fees)
will be shared equally by G&G and Alamar. All foreign patent maintenance
expenses shall be borne by Alamar; provided, however, that if any other
applications are used, manufactured or sold in the same country as Alamar's
patent application, G&G will share one-half of the costs of maintaining patents
in such countries. The parties will collaborate and freely inform each other on
all ongoing or planned patenting activities. Within ten (10) days of the end of
each calendar year Alamar shall inform G&G in writing of how much it has spent
for patenting and maintenance, country by country.
10. INFRINGEMENT
10.1 G&G represents to Alamar that G&G owns all G&G technology and G&G
Patent Rights as the same exist on the date hereof, and no other Person has any
direct or indirect rights in or to, or any liens on, any G&G Technology or G&G
Patent Rights, other than as may be granted by this Agreement.
10.2 G&G does not represent or warrant that any patent included or to be
included in the G&G Patent Rights is or will be valid or that the manufacture,
use or sale of the Products is not or will not be an infringement of the rights
of third parties, except that to G&G's knowledge, patent(s) presently applied
for, if any issue, do not infringe on any patent(s) in the United States as of
the date of the filing.
10.3 Each party shall promptly notify the other of any infringement of or
challenge to the validity or enforceability of any patent within G&G Patent
Rights by a third party or parties, promptly after the notifying party learns of
such infringement, and shall provide the other party with any available evidence
of such infringement or challenge. In the event either party receives notice
that manufacture, use or sale of Product infringes on the rights of any third
party because the Product embodies or uses G&G Technology, G&G Patent Rights or
any Alamar technology or patent rights, it shall promptly notify the other.
10.4 Upon notice of infringement or such challenge upon any patent
within G&G Patent Rights by a third party or parties, G&G shall at its sole
option take reasonable steps to enforce such patent against such infringement
or attack, and shall keep Alamar fully informed of the progress of such
proceedings. Any such action shall be at G&G expense and any damages
recovered by G&G from such action shall belong solely to G&G. Alamar shall, if
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requested and at G&G expense, reasonably assist in the prosecution of such
action.
10.5 In the event that G&G refuses or fails to institute and aggressively
prosecute legal proceedings against such infringement or challenge, or to
otherwise defend such patent, then Alamar shall have the right to enforce such
patent at its sole expense. In such case, any damages recovered by Alamar shall
belong to Alamar. G&G shall, if requested and at Alamar's expense, reasonably
assist in the prosecution of such action. If Alamar finds it necessary or
desirable to join G&G as a party plaintiff, G&G shall execute all papers
necessary and perform such other acts as may be reasonably required by Alamar.
11. PRODUCT LIABILITY
Alamar assumes all risk of damage or injury to persons or property arising
out of the clinical testing, manufacture, use or sale of the Products by Alamar,
and shall hold harmless and indemnify G&G, except where due to gross negligence
or wilful misconduct by G&G, from and against any and all personal injury,
property damage, product liability or similar claims, losses and liabilities
arising out of Alamar's manufacture, use or sale of the Products, including
attorneys fees and other costs of defense, except, with reference to a Product,
to the extent that any such damage or injury is clearly attributable to
negligence on the part of G&G should G&G manufacture or conduct clinical trials
of that Product pursuant to this Agreement.
12. TERM AND TERMINATION
12.1 TERM. The term of this Agreement shall be the longer of the life of
any patent licensed hereunder or ten years from the date of First Commercial
Sale of the Product.
12.2 TERMINATION.
(a) BY EITHER PARTY. Either party shall have the right to terminate
this Agreement forthwith by notice in writing to the other party
i. if the other party fails to perform or observe any of the
material terms hereof on its part to be performed and observed and fails to
remedy such breach within thirty (30) days of a notice to remedy the same (such
notice giving adequate particulars of the alleged default and of the intention
of the party serving the notice to terminate this Agreement under this
Section) or, if the breach is one which requires more than thirty (30) days to
remedy, the remedying was not commenced promptly and thereafter diligently
pursued.
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ii. In the event that Phase IV is not completed on or before
eighteen (18) months days from the date of this Agreement.
iii. In the event that: (1) the other party becomes insolvent
or enters in any arrangement or composition with creditors, or makes an
assignment for the benefit of creditors; (2) there is a dissolution, liquidation
or winding-up of the other party's business; or (3) a trustee in bankruptcy of
the assets of the other party is appointed and such trustee does not, within
thirty (30) days after receipt of written notice from the other party, confirm
this Agreement and provide adequate assurance that the terms and conditions
hereof shall faithfully be fulfilled.
(b) BY G&G. If Alamar fails to pay the minimum annual payments or
any other payments when due, G&G shall have the right to terminate or render
non-exclusive Alamar's rights to the Product and Alamar would, in addition, lose
all rights it might have to the technology, and information related to the
Product and any improvements to the Product, PROVIDED, HOWEVER, that prior to
any such termination, G&G shall notify Alamar of its intent to terminate, and
Alamar shall have a period of five (5) days from that date of receipt of
notification that it has failed to pay to pay to G&G all amounts then owing
under this Agreement. If G&G receives payment in full within the five (5) day
period, G&G's right to terminate this Agreement under this paragraph shall
terminate as to that specific failure to pay, and provided, further, that,
alternatively, if Alamar fails to make any payments hereunder when due and such
failure to pay is not cured within the five (5) day period after receipt by
Alamar of notice of such failure to pay, G&G may decline to terminate this
Agreement and, at its option, convert the license under this Agreement to a
non-exclusive license. In such case, all other terms and conditions of this
Agreement shall remain in full force and effect.
12.3 SURVIVAL. The following provisions shall survive any termination of
this Agreement: Sections 6, 7, 11 and 16
12.4 RIGHTS ON TERMINATION. On termination of this Agreement, pursuant to
either Section 12.1 or Section 12.2 above, Alamar shall cease and desist from in
any way manufacturing, using or selling any product using or containing any G&G
Technology or G&G Patent Rights, except
(a) Alamar shall be allowed to manufacture, use and sell Products
for so long as shall be reasonably necessary for Alamar to comply with its then
current distribution and/or purchase contracts or purchase orders relating to
the Product (provided, however, that Alamar will not be entitled to manufacture,
use and sell Products for more than a three (3) month period after termination
in such instance), but Alamar shall not enter into any new contracts or purchase
orders, or modify any existing contracts
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or purchase orders, relating to the Product that would result in any increase in
Alamar's obligations to deliver Products.
(b) Alamar shall pay to G&G all royalties due and payable hereunder for
any post-termination sales or otherwise.
13. GOVERNING LAW, CONCILIATION AND ARBITRATION
13.1 This Agreement shall be governed by and interpreted and enforced in
accordance with the laws of the State of Maryland of the United States of
America regardless of the choice of law principles of New York or any other
jurisdiction.
13.2 in the event that any controversy or claim shall arise under, out of,
in connection with, or relating to this Agreement or the breach thereof, the
party initiating such controversy or making such claim shall provide to the
other party a written notice containing a brief and concise statement of the
initiating party's claims, together with relevant facts supporting them. During
a period of sixty (60) days, or such longer period as may be mutually agreed
upon in writing by the parties, following the date of said notice, the parties
shall make good faith efforts to settle the dispute. Such efforts will include,
but shall not be limited to, full presentation of both parties' claims and
responses, with or without the assistance of counsel, before the President of
G&G and the Chief Executive Officer of Alamar, or an equivalent executive if
such positions do not exist in the respective companies.
13.3 In the event that the parties have been unable to reach accord using
the procedures in Section 13.2 and only if such is the case, either party may
initiate arbitration proceedings. Failure to comply with the provisions of this
Section 13.2 with respect to any controversy or claim shall constitute an
absolute bar to the institution of any arbitration proceedings with respect to
such controversy or claim.
13.4 Subject to the provisions of Sections 13.2 and 13.3, any controversy
or claim which may arise under, out of, in connection with, or relating to this
Agreement or the breach thereof shall be settled by final and binding
arbitration in Arlington, Virginia, U.S.A., in accordance with the then existing
rules of the American Arbitration Association and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In any such arbitration the rights of the parties shall be determined
according to the governing law set forth in Section 13.1. The parties hereto
agree that the service of any notice in the course of such arbitration at the
respective addresses as provided for in Section 14 below shall be valid and
binding.
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13.5 In any arbitration proceeding hereunder, there shall be three (3)
arbitrators. Each party shall appoint one (1) arbitrator, and the two (2)
arbitrators so appointed shall, by mutual agreement, appoint a third arbitrator.
In the event that any party fails to appoint an arbitrator within one (1) month
after the receipt of written notification of the commencement of the arbitration
proceeding, such arbitrator shall, at the written request of the party
requesting arbitration, be appointed by the then President or presiding officer
of the American Arbitration Association in accordance with its then existing
rules of appointment. For the purposes of this Agreement, "commencement of the
arbitration proceeding" shall mean the date on which a written demand for
arbitration is received by the American Arbitration Association. The arbitrators
will render a decision within six months of the date when the third arbitrator
is appointed, except in the extraordinary situation where rendering such
decision within six months would deprive either party of procedural due process.
The decision of a majority of the arbitrators shall be final and binding on the
parties, each arbitrator having one (1) vote.
13.6 The intent of the parties is that, except for the remedy provided in
Section 7.2(h) regarding protection of Confidential Information, and the
entering of an arbitration order in a court of competent jurisdiction, disputes
will be resolved finally in arbitration as provided above, without appeal, and
without recourse to litigation in the courts.
14. NOTICES
Any notice required or permitted to be given hereunder shall be in writing
and shall be deemed sufficient if sent by registered or certified mail or air
express or delivered by hand or via telex or telecopier to the respective party
at the address stated below: (with hard copy to follow via U.S. Mail)
If to G&G:
G&G Dispensing, Inc.
1005 York Lane
Annapolis, Maryland 21403
Attention: Jack Goodman, President
Facsimile No. (703) 276-1806
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with a copy to
Ira S. Nordlicht, Esq.
Hackmyer & Nordlicht
645 Fifth Avenue
New York, New York 10022
Facsimile No. (212) 421-0499
If to Alamar:
Alamar Biosciences, Inc.
4110 Forth Freeway Boulevard
Sacramento, California 95834
Attention: Kenneth D. Miller
Chief Executive Officer
Facsimile No. (916) 567-3987
Any such notice mailed by registered or certified mail or air express or
telecopy of facsimile transmission shall be deemed to have been given when
mailed, telecopied or faxed, as evidenced by the date on the receipt retained by
the sender. Either party may change the address to which notice to it is to be
given by notice as provided herein.
15. ASSIGNABILITY
15.1 This Agreement shall not be assignable without the prior written
consent of the other party hereto other than to an entity acquiring all or
substantially all of the stock or assets of the assignor by merger,
consolidation, purchase or similar transaction. All references to a party in
this Agreement shall, to the extent reasonably necessary to carry out the
purpose of this Section 15, be considered references to each permitted
transferee or assignee of such party.
15.2 This Agreement shall be binding upon and inure to the benefit of the
successors or permitted assigns of Alamar and G&G, respectively.
16. PRIMARY LIABILITY
In the event any of the obligations of a party hereto, including the
payment of monies due hereunder, are assumed by an Affiliate, the party shall
remain bound by such obligations, shall be the primary obligor under this
Agreement and shall be the guarantor of performance of such Affiliate. For
example, in the case of royalty payments, Alamar shall be the guarantor of
payment
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and not of collection. For example, if an Affiliate refuses to pay G&G
royalties, G&G may, without further ado, immediately turn to and receive payment
of those royalties from Alamar.
17. EXCUSED NON-PERFORMANCE
Each of the parties hereto shall be excused from the performance of its
obligations hereunder in the event such performance is prevented by a cause
beyond the reasonable control of such party, including, without limitation, act
of God, act, regulation or law of any government, war civil commotion,
destruction of production facilities or materials by fire, earthquake or storm,
labor disturbance, epidemic and failure of suppliers, public utilities or common
carriers.
18. ENTIRE UNDERSTANDING
This Agreement, with the Securities Purchase Agreement and the Escrow
Agreement and the exhibits hereto and thereto, constitute the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all previous negotiations, representations, and writings relating
thereto. No variation or modification of this Agreement or waiver of any of the
terms or provisions hereof shall be valid unless in writing and signed by the
appropriate party or parties hereto.
19. SEVERABILITY
Should any part of the Agreement be held unenforceable or in conflict with
the applicable laws or regulations of any applicable jurisdiction, the invalid
or unenforceable part or provision shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of the
invalid or unenforceable part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
20. NEWS RELEASE
Neither G&G nor Alamar will issue any news releases or make any public
statements regarding this Agreement without the prior written consent of the
other party, provided that Alamar or G&G may, if considered necessary by its
counsel to fulfill its legal and accounting obligations, respond to inquiries
and make such releases as it considers appropriate if it notifies the other
party in advance of the substance of any such response to release and gives the
other party reasonable opportunity for prior comment.
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21. CAPTIONS
The captions and article headings employed in this Agreement are intended
solely for the convenience of the parties and shall in no way affect or
influence the meaning or interpretation of any of the provisions hereof.
22. CERTAIN REPRESENTATION.
G&G represents that it is successor in interest to Imagination Two, Ltd.
and that all benefits and obligations of Imagination Two Ltd. as set forth in
that certain letter of intent by and between Alamar and Imagination Two Ltd.
have been assumed by G&G.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
G&G Dispensing, Inc.
Attest: By /s/ Jack Goodman
----------------------------
Name: Jack Goodman
-------------------------
Title: President
- ----------------------------------- ------------------------
Alamar Biosciences, Inc.
Attest: By /s/ Kenneth D. Miller
----------------------------
Name: Kenneth D. Miller
-------------------------
/s/ Rebecca D. Fields Title: CEO
- ----------------------------------- ------------------------
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Exhibit 10-28
ACCUMED INTERNATIONAL, INC.
PUBLIC OFFERING
LETTER OF TRANSMITTAL AND CUSTODY AGREEMENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Ladies and Gentlemen:
The undersigned holder of common stock or vested options or warrants to
purchase shares of common stock of AccuMed International, Inc., a Delaware
corporation (the "Company"), understands that the undersigned and certain other
stockholders of the Company (the undersigned and such other stockholders being
hereinafter referred to as the "Selling Stockholders") will sell, and the
Company will issue and sell, shares of common stock, par value $.01 per share,
of the Company (the "Common Stock") to certain underwriters (the "Underwriters")
to be named on Schedule I to that certain underwriting agreement (the
"Underwriting Agreement") to be entered into among the Company, the Selling
Stockholders and Tucker Anthony Incorporated and Vector Securities
International, Inc., as representatives (the "Representatives") of the
Underwriters. The undersigned also understands that in connection with such
offering the Company has filed a Registration Statement on Form S-2 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") to register the shares to be offered under the Securities Act of
1933, as amended (the "Act").
1. DELIVERY OF STOCK CERTIFICATES AND OPTION EXERCISE NOTICES AND
APPOINTMENT OF CUSTODIAN.
Enclosed herewith are (i) a certificate or certificates (the "Stock
Certificate(s)"), in negotiable and deliverable form (with signatures
guaranteed, along with a duly executed stock power(s) (the "Stock Powers"), in
blank, bearing the signature of the undersigned so guaranteed), (ii) a warrant
certificate or certificates (the "Warrant Certificate(s)") and/or (iii) a stock
option agreement (the "Stock Option Agreement(s)"), as appropriate, representing
the number of shares of Common Stock, (or, in the case of the Warrant
Certificate(s) and the Stock Option Agreement(s), the right to purchase such
number of shares of Common Stock) as set forth on Schedule I hereto. The Stock
Certificate(s) and the Warrant Certificate(s) are referred to collectively
herein as the "Certificate(s)." As custodian pursuant to this Letter of
Transmittal and Custody Agreement (this "Custody Agreement"), American Stock
Transfer & Trust Company (the "Custodian") is to hold the Certificate(s)
deposited herewith for the
<PAGE>
account of the undersigned and to dispose of the Certificate(s) in accordance
with this Custody Agreement.
In addition, to the extent that the undersigned proposes to exercise
options or warrants in connection with the sale of shares of Common Stock to the
Underwriters, there is deposited with the Custodian herewith a copy of a notice
of exercise (in the case of warrants, such notice of exercise to be in the form
attached to the applicable Warrant Certificate or warrant agreement) and an
accompanying letter of direction by the Company (collectively, the "Exercise
Notice") with respect to the options (the "Options") or warrants (the
"Warrants") to purchase the number of shares of Common Stock set forth on
Schedule I attached hereto (collectively, the "Options/Warrants"), together with
stock powers duly endorsed in blank by the undersigned (with signatures
guaranteed as described above) and with such other documents and requisites as
may be necessary to place the certificates for Common Stock issuable upon the
exercise of the Options/Warrants in fully negotiable form. Pursuant to the
Exercise Notice, the Options/Warrants will be exercised on the Closing Date (as
defined in the Underwriting Agreement) for the number of shares of Common Stock
designated on Schedule I. The Exercise Notice and the certificates representing
shares of Common Stock issuable upon the exercise of the Options/Warrants are to
be held by the Custodian for the account of the undersigned and are to be dealt
with by the Custodian in accordance with this Custody Agreement.
2. ADDITIONAL DOCUMENTS TO BE DELIVERED BY THE UNDERSIGNED.
If applicable, the undersigned hereby also agrees to deliver the following
documents to the Custodian upon the Custodian's request: (i) If the undersigned
is acting as trustee or in any other fiduciary or representative capacity, duly
certified copies of each trust agreement, will, letters testamentary or other
instrument pursuant to which the undersigned is authorized to act as a Selling
Stockholder; (ii) If the undersigned is a corporation, duly certified
resolutions of its Board of Directors authorizing it to enter into this Custody
Agreement and the Underwriting Agreement and duly certified copies of such
corporation's By-Laws and Articles of Incorporation; or (iii) If the undersigned
is a partnership, extracts of any applicable provisions of its partnership
agreement (and applicable provisions of the charter document or partnership
agreement of the general partner(s) of such partnership) authorizing such
partnership to enter into this Custody Agreement and the Underwriting Agreement.
The undersigned also agrees to deliver to the Attorneys (as defined in this
letter) or to the Custodian such additional documentation as the Attorneys, or
either of them, or the Company, the Representatives, or the Custodian or any of
their respective counsel, may request to effectuate or confirm compliance with
any of the provisions hereof or of the Underwriting Agreement, all of the
foregoing to be in form and substance satisfactory in all respects to the
Attorneys, the Company, the Representatives, the Custodian and their respective
counsel.
2
<PAGE>
3. DELIVERY OF IRREVOCABLE POWER OF ATTORNEY.
At the same time that the undersigned signed and delivered this Custody
Agreement, the undersigned signed an Irrevocable Power Of Attorney of Selling
Stockholder (the "Power of Attorney") authorizing Peter P. Gombrich and Jude
Augustine or their duly designated substitutes (throughout this Custody
Agreement, such individuals are sometimes individually referred to as the
"Attorney" and sometimes collectively referred to as "Attorneys" and in any
capacity described herein, such individuals are fully authorized to act, in
their sole discretion, together or alone), to take certain actions under the
Power of Attorney and for that purpose to execute, deliver and perform the
Underwriting Agreement on behalf of the undersigned.
4. DIRECTIONS TO THE CUSTODIAN.
The Custodian is hereby authorized and directed to hold the Certificate(s),
the Stock Option Agreement(s), the Exercise Notice and the Stock Power(s)
deposited in your custody. If and when the Attorneys shall have furnished the
Custodian with a counterpart of the Underwriting Agreement that has been
executed and delivered by or on behalf of the undersigned and all other parties
thereto, the Custodian is hereby also authorized and directed on behalf of the
undersigned, in the case of Options/Warrants with respect to which an Exercise
Notice is so deposited, to issue on the Closing Date certificates representing
the shares of Common Stock issuable upon the exercise of the Options/Warrants on
the Closing Date, as designated by the undersigned holder, of which the
certificates for shares of Common Stock intended to be sold pursuant to the
Underwriting Agreement by the undersigned shall be without legends restricting
transfer or disposition of such shares. On the Closing Date (as defined in the
Underwriting Agreement), the Custodian is authorized and directed, on behalf of
the undersigned, (i) to cause the number of shares of Common Stock which are to
be sold by the undersigned on such Closing Date be transferred on the books of
the Company into such names as the Representatives shall have instructed the
Custodian, (ii) to purchase all stock transfer tax stamps necessary (if any) in
connection with the transfer of such shares as aforesaid, and (iii) to deliver
new certificates to the Representatives, in such names and denominations as the
Representatives may designate, against payment for such shares of Common Stock
pursuant to the Underwriting Agreement, to give receipt for such payment and to
deposit the same to the Custodian's account. The Custodian is hereby further
authorized and instructed to (i) draw upon such account to (a) pay such
expenses, if any, as the Custodian may be instructed to pay by any one or both
of the Attorneys and (b) in the case of Options/Warrants, to remit promptly to
the Company an amount equal to the sum of (x) the exercise price payable in
connection with the exercise of such Options or Warrants, as the case may be, as
set forth in Schedule I, and (y) the withholding taxes payable in connection
with the exercise of such Options or Warrants, as the case may be, as indicated
in the Exercise Notice, and (ii) to remit promptly to the undersigned, in
accordance with the payment instructions set forth following the signature of
the undersigned at the end of this letter, the balance, after deducting such
expenses and, if applicable, such exercise price and withholding taxes. At the
time of such remittance you shall also return to the undersigned,
3
<PAGE>
personally or by registered or certified United States mail addressed to the
undersigned at the address shown below the signature of the undersigned at the
end of this letter, new stock or warrant certificates (with a legend or legends
restricting the transfer or disposition of such stock or warrants, as the case
may be) representing the number of shares of Common Stock, if any, represented
by the Certificate(s) and the Exercise Notice deposited with you, which are in
excess of the number of shares of Common Stock sold by the undersigned to the
Underwriters.
The Custodian is hereby also authorized and directed (i) to permit
inspection and packaging by the Underwriters of the certificates being delivered
pursuant to the Underwriting Agreement as provided in the Underwriting
Agreement, (ii) to determine, in the sole and absolute discretion of the
Custodian, whether and when, the purpose for, and the manner in which, any power
conferred herein to the Custodian shall be exercised, and the conditions,
provisions and covenants of any instrument or document which may be executed by
the Custodian hereto and (iii) to do all things pursuant to this Custody
Agreement as the Custodian may in its sole discretion deem appropriate,
including, without limitation, the execution and delivery of all certificates,
receipts, instruments, letters of transmittal and other documents and papers
required, contemplated by or deemed by the Custodian appropriate in connection
with this Custody Agreement to the Underwriters or any other person, and the
employment of such counsel or other person or firms as the Custodian in its sole
and absolute discretion shall deem necessary.
Until the Underwriters make payment to the Custodian of the purchase price
for the shares to be sold by the undersigned, the undersigned will remain the
owner of such shares and will have the right to vote such shares and all other
shares, if any, represented by the Stock Certificate(s) or received upon the
exercise of the Options or Warrants, as the case may be, and to receive all
dividends and distributions thereon.
The Custodian will be entitled to act and rely upon any statement, request,
notice or instructions respecting this Custody Agreement given to the Custodian
by the Attorneys or either of them.
In taking any action required by the Underwriters, the Custodian may rely
upon a writing by the Representatives.
5. LIMITATION OF CUSTODIAN LIABILITY; INDEMNIFICATION OF THE
CUSTODIAN.
It is understood that the Custodian assumes no responsibility or liability
to any person other than to deal with the Certificate(s), Stock Option
Agreement(s), Exercise Notice and Stock Power(s) deposited with this letter and
the proceeds from the sale of all or a portion of the shares represented thereby
in accordance with the provisions of this Custody Agreement, and the undersigned
agrees to indemnify and hold the Custodian harmless with respect to
4
<PAGE>
anything done by the Custodian in good faith and in accordance with the
foregoing instructions.
6. TERMINATION OF CUSTODY AGREEMENT.
If the Underwriting Agreement has not been entered into prior to September
30, 1996, then, upon the written request of the undersigned to the Custodian
(accompanied by written notice of termination of the Power of Attorney addressed
to each of the Attorneys) on or after that date, the Custodian shall return to
the undersigned the Certificate(s), Stock Option Agreement(s), Exercise Notice
and Stock Power(s).
Under the terms of the Power of Attorney, authority is granted, made and
conferred subject to and in consideration of the interests of the Attorneys, the
Company, the Underwriters and other Selling Stockholders. Prior to September 30,
1996, the Power of Attorney constitutes an agency coupled with an interest and
is therefore irrevocable and not subject to termination by the undersigned or by
operation of law, whether by the death or incapacity of the undersigned, the
termination of any trust or estate, the dissolution or liquidation of any
corporation or partnership or the occurrence of any other event, and the
obligations of the undersigned under the Underwriting Agreement are similarly
not subject to termination and will remain in full force and effect until such
date.
Accordingly, the Certificate(s), Stock Option Agreement(s), Exercise Notice
and Stock Power(s), as applicable, deposited with the Custodian and the
Custodian's authority by virtue of this letter are subject to the interests of
the Attorneys, the Company, the Underwriters and the other Selling Stockholders,
and this Custody Agreement and the Custodian's authority by virtue of this
letter are irrevocable and are not subject to termination by the undersigned or
by operation of law, whether by the death or incapacity of the undersigned, the
termination of any trust or estate, the dissolution or liquidation of any
corporation or partnership or the occurrence of any other event. If the
undersigned should die or become incapacitated, if any trust or estate should be
terminated, if any corporation or partnership should be dissolved or liquidated
or if any other such event should occur, the Custodian must deliver
certificate(s) for the shares to be sold by the undersigned in accordance with
the terms and conditions of the Underwriting Agreement and this Custody
Agreement, and any action taken by the Custodian pursuant to this Custody
Agreement will be as valid as if such death or incapacity, termination,
dissolution, liquidation or other event had not occurred, regardless of whether
or not the Custodian or the Attorneys, or either of the Attorneys, received
notice of such death, incapacity termination dissolution, liquidation or other
event.
7. TRANSFER TAXES.
The undersigned hereby agrees that it will pay any and all transfer taxes
incident to the transfer to the Underwriters of the shares of stock being sold
by such Selling Stockholder as contemplated herewith.
5
<PAGE>
8. MISCELLANEOUS.
This Custody Agreement will be governed by the laws of the State of
Illinois as applied to transactions taking place wholly within Illinois between
Illinois residents.
This Custody Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the undesigned has executed this Custody Agreement this
_________, 1996.
Selling Stockholder(s)
________________________________________
________________________________________
Printed Name(s)
To be signed exactly as name appears on
deposited Certificate(s) (or, if only an
Exercise Notice is deposited, as name
appears on Exercise Notice).
Signature Guaranteed by:
----------------------------------------
By:_____________________________________
(Note: The signature(s) must be
medallion guaranteed by a national bank
or trust company, or a member firm of
the National Association of Securities
Dealers, Inc., or by a financial
institution that is a participant in the
Security Transfer Agents Medallion
Program or the New York Stock Exchange
Medallion Signature Guarantee Program.
Notarization by a notary public is not
acceptable.)
7
<PAGE>
PAYMENT INSTRUCTIONS
Funds held by the Custodian representing proceeds received upon the sale of
shares of Common Stock less all authorized draws hereunder are to be remitted in
accordance with the provisions of this Letter of Transmittal and Custody
Agreement by mailing a cashier's check (payable to the order of the Selling
Stockholder) to:
Name: ______________________________
Address: ______________________________
______________________________
______________________________
______________________________
(Please Print)
8
<PAGE>
CUSTODIAN'S ACKNOWLEDGMENT AND RECEIPT
American Stock Transfer & Trust Company, as Custodian, acknowledges
acceptance of the duties of Custodian under the foregoing Custody Agreement and
receipt of the Certificate(s), Stock Power(s), Stock Option Agreement(s) and
Exercise Notice, as the case may be, referred to therein.
Dated:_________________________
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: ______________________________
9
<PAGE>
SCHEDULE I
__________________________
__________________________
Stockholder's Name(s)
Maximum Number of Shares of Common Stock
to be Sold by the Undersigned to the
Underwriters:
__________ Initial Shares
Number of Shares to
Number of Shares of be Sold from Stock Certificate
Common Stock if Less Than All Shares
Stock Certificate Represented by Each Represented Thereby
Number(s) Stock Certificate are to be Sold (1)
--------- ----------------- --------------------
___________________ ___________________ ____________________
___________________ ___________________ ____________________
___________________ ___________________ ____________________
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares to
Number of Shares of be Sold from Warrant Certificate
Common Stock if Less Than All Shares
Warrant Certificate Represented by Each Represented Thereby Exercise Price
Number(s) Warrant Certificate are to be Sold(1) per Share
--------- ------------------- ----------------- ---------
___________________ ___________________ ____________________ ____________________
___________________ ___________________ ____________________ ____________________
___________________ ___________________ ____________________ ____________________
- -------------------
(1) If no indication is made, selection to be at the Custodian's discretion.
10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares
to be Sold
Number of Shares of from Exercise
Common Stock Notice if Less Than
Represented by an All Shares Represented Exercise Price
Exercise Notice Thereby are to be Sold (1) per Share
--------------- -------------------------- ---------
___________________ ___________________ ____________________
___________________ ___________________ ____________________
___________________ ___________________ ____________________
</TABLE>
TOTAL NUMBER OF SHARES TO BE SOLD (2)
____________________
(2) This total must be equal to the maximum number of shares of Common Stock to
be sold to the Underwriters, as indicated in the table above.
11
<PAGE>
Exhibit 10-29
ACCUMED INTERNATIONAL, INC.
LOCK-UP LETTER
July 16, 1996
VECTOR SECURITIES INTERNATIONAL, INC.
TUCKER ANTHONY INCORPORATED
c/o VECTOR SECURITIES INTERNATIONAL, INC.
1751 Lake Cook Road, Suite 350
Deerfield, Illinois 60015
Dear Sirs:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and other such firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Accumed International, Inc. (the "Company") from the Company and certain
stockholders and that the Underwriters propose to reoffer the Shares to the
public (the "Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that, without the prior written consent of Vector Securities
International, Inc. and Tucker Anthony Incorporated (the "Representatives") the
undersigned will not, directly or indirectly, sell, offer to sell, solicit an
offer to buy, contract to sell (including, without limitation, any short sale),
grant any option to purchase or right to acquire, acquire any option to dispose
of, or otherwise transfer or dispose of, any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for Common Stock or
such similar securities (other than in the Offering), for a period of two
hundred and seventy (270) days after the date of the final Prospectus relating
to the Offering. Notwithstanding the foregoing, the undersigned, without the
consent of the Representatives, may sell (i) up to one-third of the Common Stock
(including Common Stock issuable upon exercise of outstanding options or
warrants owned by the undersigned) owned by the undersigned on the date hereof
exclusive of Shares to be offered in the Offering (the "Non-offered Shares")
exclusive of Shares to be offered in the Offering (the "Non-offered Shares")
following 90 days after the date of the final Prospectus relating to the
Offering and (ii) up to and an additional one-third of the Non-offered Shares on
the date hereof after 180 days following the date of the final Prospectus
relating to the Offering.
<PAGE>
The undersigned hereby represents that he, she or it has not taken, and
agrees that he, she or it shall not take any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of Common Stock or to facilitate the sale of Shares in the public
offering contemplated by the Underwriting Agreement in violation of law.
The undersigned agrees that the provisions of this Agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and American Stock & Trust
Co., its Transfer Agent, are hereby authorized to decline to make any transfer
of securities if such transfer would constitute a violation or breach of this
letter agreement.
It is understood that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
the delivery of the Shares, you will release us from our obligations under this
letter agreement.
Number of Shares of Common Very truly yours
Stock owned by the undersigned:
_____________ Shares -------------------------
Signature
Number of Shares of Common
Stock underlying options and warrants
owned by the undersigned:
_____________ Shares -------------------------
Printed Name and Title
THE COMPANY REQUESTS THAT THIS LOCK-UP AGREEMENT BE COMPLETED AND DELIVERED
BY FACSIMILE AS SOON AS POSSIBLE TO THE COMPANY'S COUNSEL, GRAHAM & JAMES LLP,
400 CAPITOL MALL, SUITE 2400, SACRAMENTO, CA 95814, ATTN: CHRISTOPHER W. EWING,
ESQ., FACSIMILE (916) 441-6700, TELEPHONE (916) 558-6700.
2
<PAGE>
ACCUMED INTERNATIONAL, INC.
PUBLIC OFFERING
IRREVOCABLE POWER OF ATTORNEY OF SELLING STOCKHOLDER
Mr. Peter P. Gombrich
Ms. Jude Augustine
c/o AccuMed International, Inc.
900 North Franklin Street
Suite 401
Chicago, Illinois 60610
Ladies and Gentlemen:
The undersigned holder of common stock or vested options or warrants to
purchase common stock of AccuMed International, Inc., a Delaware corporation
(the "Company"), understands (a) that certain stockholders of the Company,
including the undersigned (collectively, the "Selling Stockholders"), intend to
sell shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), to certain underwriters (the "Underwriters") to be named in an
underwriting agreement (the "Underwriting Agreement") to be entered into among
the Company, the Selling Stockholders and the Underwriters in connection with a
proposed public offering by the Company and the Selling Stockholders of shares
of Common Stock (the "Public Offering"); (b) that Tucker Anthony, Incorporated
and Vector Securities International, Inc. will be acting as the representatives
of the Underwriters (the "Representatives"); and (c) that the Underwriters
propose to offer and sell such shares of Common Stock to the public. The
undersigned also understands that in connection with such offer and sale, the
Company has filed a Registration Statement on Form S-2 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") to
register the shares to be offered under the Securities Act of 1933, as amended.
Set forth opposite the name of the undersigned at the end of this
instrument is the number of shares of Common Stock that the undersigned proposes
to sell to the Underwriters (the "Firm Shares"). It is also understood that if
the aggregate number of Firm Shares to be sold by the Selling Stockholder to the
Underwriters pursuant to the Underwriting Agreement shall be decreased, the
number of Firm Shares to be sold by the undersigned pursuant to the Underwrit-
<PAGE>
ing Agreement may be adjusted in accordance with Paragraph l(a) below. The Firm
Shares reflecting such adjustment, if any, to be sold by the undersigned
pursuant to the Underwriting Agreement are herein referred to collectively as
the "Shares."
Concurrently with the execution and delivery of this Irrevocable Power of
Attorney, the undersigned is also executing and delivering a Letter of
Transmittal and Custody Agreement (the "Custody Agreement") pursuant to which
the undersigned is depositing with American Stock Transfer & Trust Company, New
York, New York, as custodian (the "Custodian"), some or all of the following:
(i) a certificate or certificates (the "Stock Certificate(s)"), in negotiable
and deliverable form (with signatures guaranteed, along with a duly executed
stock power(s), in blank, bearing the signature of the undersigned so
guaranteed), (ii) a warrant certificate or certificates (the "Warrant
Certificate(s)"), (iii) a stock option agreement (the "Stock Option
Agreement(s)") and (iv) a copy of a notice of exercise (in the case of warrants,
such notice of exercise to be in the form attached to the applicable Warrant
Certificate or warrant agreement) and an accompanying letter of direction by the
Company with respect to the options (the "Options") or warrants (the "Warrants")
to purchase the number of shares of Common Stock set forth on Schedule I
attached to the Custody Agreement, together with stock powers duly endorsed in
blank by the undersigned (with signatures guaranteed as described above) and
with such other documents and requisites as may be necessary to place the
certificates for Common Stock issuable upon the exercise of the Options or the
Warrants in fully negotiable form, representing the number of shares of Common
Stock, (or, in the case of the Warrant Certificate(s) and the Stock Option
Agreement(s), the right to purchase such number of shares of Common Stock) as
set forth on Schedule I to the Custody Agreement. The Stock Certificate(s) and
the Warrant Certificate(s) are referred to collectively herein as the
"Certificate(s)." The number of shares of Common Stock represented by the
Stock Certificate(s), when added to the number of shares of Common Stock to be
issued upon exercise of the Options and/or Warrants, as the case may be, is
greater than or equal to the number of Shares.
1. APPOINTMENT OF ATTORNEY-IN-FACT. In connection with the foregoing,
and intending to be legally bound, the undersigned hereby irrevocably makes,
constitutes and appoints Peter P. Gombrich and Jude Augustine and each of them,
the attorneys-in-fact and agents (individually, an "Attorney" and collectively,
the "Attorneys") of the undersigned effective as of the date of the execution
hereof by the undersigned, each Attorney with full power and authority to act
together or alone, in such Attorney's sole and complete discretion, including
full
2
<PAGE>
power of substitution, in the name of, and for and on behalf of, the undersigned
with respect to all matters arising in connection with the sale of the Shares by
the undersigned, including, but not limited to, the power and authority to take
any and all of the following actions:
a. to sell, assign and deliver to the Underwriters pursuant to the
Underwriting Agreement the Shares or such lesser number of shares of Common
Stock as the Attorneys, or either of them, shall determine, at a purchase
price per share to be paid by the Underwriters, which shall be the same
price per share to be paid by the Underwriters (such price to be determined
by negotiations between the Company and the Underwriters) to each of the
other Selling Stockholders and to the Company for shares issued and sold in
connection with the Underwriting Agreement; and on such other terms as the
Attorneys, or either of them, may, in their sole discretion determine;
b. for the purpose of effecting such sale, to make, execute,
deliver and perform the undersigned's obligations and make the
undersigned's representations and warranties under the Underwriting
Agreement (which is substantially in the form of the draft underwriting
agreement included in the Registration Statement to be delivered to the
undersigned) among the Company, the Attorneys on behalf of the Selling
Stockholders, and the Underwriters, containing such additions or changes in
the terms, provisions and conditions as the Attorneys, or either of them,
shall determine including, subject to the limitation set forth in Paragraph
l(a) of this Irrevocable Power of Attorney, the purchase price per share to
be paid by the Underwriters, the provision of representations and
warranties by the Selling Stockholders, and any additions or changes in the
terms, provisions and conditions relating to the public offering of shares
by the Underwriters;
c. to give such orders and instructions to the Custodian as the
Attorneys, or either of them, in their sole discretion, shall determine,
with respect to (i) in the case of Options or Warrants, the issuance of
shares of Common Stock and any related certificates issuable upon the
exercise thereof, of which any certificates representing shares of Common
Stock intended to be sold pursuant to the Underwriting Agreement by the
undersigned shall be without legends restricting transfer or disposition of
the Shares, (ii) the transfer on the books of the Company of the Shares to
effect the sale thereof (including giving the names in which new certifi-
3
<PAGE>
cates for such shares are to be issued and the denominations thereof),
(iii) the delivery to or for the account of the Underwriters of certificates
for such Shares against receipt by the Custodian of the purchase price to
be paid therefor, (iv) the payment by the Custodian out of the proceeds of
such sale of that portion of all expenses of the offer, sale and delivery
of such shares which is to be borne by the undersigned in connection with
such offer, sale and delivery, (v) in the case of Options or Warrants, the
payment to the Company out of the proceeds of such sale of an amount equal
to the exercise price and any withholding taxes payable in connection with
the exercise of such options, (vi) the remittance to the undersigned of the
balance of the proceeds from such sale, and (vii) the return to the
undersigned of new certificates (with a legend or legends restricting the
transfer or disposition of such shares, if applicable) representing that
number of shares of Common Stock, if any, represented by the certificates
(and/or the option exercise notice) deposited with the Custodian which are
in excess of the number of Shares sold by the undersigned to the
Underwriters;
d. to reduce the number of Shares to be sold to the Underwriters (if
required by the Underwriters), to incur such selling expenses on behalf of
the undersigned as the Attorneys, or either of them, in their sole
discretion shall consider necessary for the aforesaid sale of the Shares to
the Underwriters and to provide in accordance with the Underwriting
Agreement and this Irrevocable Power of Attorney for the payment of such
expenses;
e. to retain Graham & James LLP as legal counsel in connection with
any and all matters referred to in this Irrevocable Power of Attorney
(Graham & James LLP is counsel for the Company);
f. to instruct the Custodian as to the number of Shares to be sold
by each Selling Stockholder;
g. to make, acknowledge, verify, and file on behalf of the
undersigned applications, consents to service of process and such other
undertakings or reports as may be required by law with state commissioners
or officers administering state securities laws;
4
<PAGE>
h. if necessary, to endorse (in blank or otherwise) on behalf of the
undersigned the Certificate(s) to be sold by the undersigned, or a stock
power or powers attached to such Certificate(s);
i. to certify to the Underwriters on behalf of the undersigned the
accuracy of the matters set forth in Paragraph 2 of this Irrevocable Power
of Attorney; and
j. to make, exchange, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
letters and other writings, including requests for the acceleration of the
effectiveness of the Registration Statement, and other communications to
the Commission and amendments to the Underwriting Agreement and the Custody
Agreement, and in general to do all things and to take all actions, which
the Attorneys, or either of them, in their sole discretion, may consider
necessary or proper in connection with or to carry out the aforesaid sale
of shares to the Underwriters and the Public Offering;
as fully as could the undersigned if personally present and acting.
2. The undersigned agrees to deliver to the Attorneys such documentation
as the Attorneys, the Company, the Selling Stockholders or the Underwriters or
any of their respective counsel may reasonably request in order to effectuate
any of the provisions hereof or of the Underwriting Agreement, all of the
foregoing to be in form and substance satisfactory in all respects to the
Attorneys, the Company or the Underwriters or their respective counsel.
3. Upon execution and delivery of the Underwriting Agreement by the
Attorneys on behalf of the undersigned, the undersigned agrees to be bound by
and to perform each of the covenants and agreements of the undersigned as a
Selling Stockholder in the Underwriting Agreement.
4. Upon execution and delivery of the Underwriting Agreement by the
Attorneys on behalf of the undersigned, the undersigned agrees to indemnify and
hold harmless the Underwriters, the Company, each of its directors and each of
its officers who sign the Registration Statement, and each other person
specified in Section 9 of the Underwriting Agreement, to the full extent
provided in Section 9 of the Underwriting Agreement.
5
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5. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and
warrants that each of the representations and warranties of the undersigned
contained in the Custody Agreement and [attached hereto and intended to be
included in the Underwriting Agreement] is true as of the date of this
Irrevocable Power of Attorney and will remain true through the Closing Date (as
defined in the Underwriting Agreement) and that the undersigned has complied
with all agreements and satisfied all conditions to be performed or satisfied
by, on or through such Closing Date. Such representations and warranties are
made by the undersigned for the benefit of, and may be relied upon by, the other
Selling Stockholders, the Attorneys, or any of them, the Company, the
Underwriters and their Representatives, agents and counsel (including Skadden,
Arps, Slate, Meagher & Flom), the Custodian and Graham & James LLP, counsel to
the Company.
6. LIABILITY OF ATTORNEYS. The undersigned agrees that the Attorneys, or
either of them, will not be liable, responsible or accountable in damages or
otherwise to the undersigned for any acts performed or failed to be performed by
the Attorneys, or either of them, in good faith and within the scope of this
Agreement; PROVIDED, HOWEVER, that an Attorney may be liable to the undersigned
for any act performed or failed to be performed to the extent and only to the
extent attributable to gross negligence, willful misconduct or fraud by such
Attorney.
7. IRREVOCABILITY OF THIS POWER OF ATTORNEY. This Irrevocable Power of
Attorney and all authority conferred by it are granted and conferred subject to
the interests of the Attorneys, the Underwriters, the Company and the other
Selling Stockholders who may become parties to the Underwriting Agreement and in
consideration of those interests, and for the purpose of completing the
transactions contemplated by the Underwriting Agreement and this Irrevocable
Power of Attorney. As a result, this Irrevocable Power of Attorney and all
authority conferred by it is an agency coupled with an interest and therefore
shall be irrevocable and shall not be terminated by the undersigned or by
operation of law, whether by the death or incapacity of the undersigned, the
termination of any trust or estate, the dissolution or liquidation of any
corporation or partnership or the occurrence of any other event. If the
undersigned should die or become incapacitated, if any trust or estate should be
terminated, if any corporation or partnership should be dissolved or liquidated
or if any other such event shall occur before the delivery of the Shares to be
sold by the undersigned under the Underwriting Agreement and this Irrevocable
Power of Attorney, Certificates (and an exercise notice, if applicable) for such
Shares will be delivered by or on
6
<PAGE>
behalf of the undersigned in accordance with the terms and conditions of the
Underwriting Agreement and the Custody Agreement executed by the undersigned,
and any action taken by the Attorneys, or either of them, pursuant to this
Irrevocable Power of Attorney shall be as valid as if such death, incapacity,
termination, dissolution, liquidation or other event had not occurred,
regardless of whether or not the Custodian, the Attorneys, or either of them,
shall have received notice of such death, incapacity, termination, dissolution,
liquidation or other event. Notwithstanding the foregoing, if the Underwriting
Agreement is not entered into prior to September 30, 1996, then from and after
such date the undersigned will have the power to revoke all authority conferred
by this Irrevocable Power of Attorney by giving written notice to each of the
Attorneys, in care of the Custodian, that this Irrevocable Power of Attorney has
been terminated; subject, however, to all lawful action done or performed by the
Attorneys, or either of them, pursuant to this Irrevocable Power of Attorney
prior to the actual receipt of such notice.
8. SUBSTITUTION OF ATTORNEYS. Each of the Attorneys shall have the full
power to make and substitute any attorney-in-fact in his or her place and stead,
and the undersigned hereby ratifies and confirms all that each of said Attorneys
or substitutes shall do by virtue of these presents. All actions hereunder may
be taken by any one of said Attorneys, or his or her respective substitute or
substitutes.
9. The undersigned ratifies all that the Attorneys or either of them
shall do pursuant to paragraphs 1 and 2 of this Irrevocable Power of Attorney.
10. INDEMNIFICATION OF ATTORNEYS. The undersigned indemnifies and holds
each Attorney, jointly and severally, free and harmless from and against any and
all losses, damages, attorneys' fees, expenses or liabilities of any nature
which such Attorney may sustain as a result of any action taken or omitted to be
taken in good faith hereunder by such Attorney, except to the extent
attributable to gross negligence, willful misconduct or fraud by such Attorney.
11. GOVERNING LAW. This Irrevocable Power of Attorney will be governed by
the laws of the State of Illinois as applied to transactions taking place wholly
within Illinois between Illinois residents.
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12. ACTION WITH RESPECT TO OTHER SELLING STOCKHOLDERS. It is understood
and agreed that any Attorney may, without breaching any express or implied
obligation to the undersigned hereunder, release, amend or modify any other
power of attorney granted by any other Selling Stockholder.
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IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Power of
Attorney of Selling Stockholder this __________, 1996.
Number of Firm Shares of Common Stock
to be Sold to the Underwriters
(subject to adjustment by the Attorneys
in accordance with Paragraph 1(a) hereof):
__________ Firm Shares Selling Stockholder(s):
--------------------------------------------
Printed Name(s)
--------------------------------------------
--------------------------------------------
Signature(s)
To be signed EXACTLY as name appears on
deposited Certificate(s) (or, if only an
Option exercise notice is deposited, as name
appears on such exercise notice).
Signature guaranteed by:
By:
------------------------------------------
(NOTE: The signature(s) must be MEDALLION
GUARANTEED by a national or state bank or
trust company, or by a member firm of the
National Association of Securities Dealers,
Inc., or by a financial institution that is
a participant in the Security Transfer
Agents Medallion Program or the New York
Stock Exchange Medallion Signature Guarantee
Program. NOTARIZATION BY A NOTARY PUBLIC
IS NOT ACCEPTABLE.)
Witnessed by:
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Exhibit 10.31
O.E.M. SUPPLY AGREEMENT
BETWEEN
OLYMPUS AMERICA INC.,
PRECISION INSTRUMENT DIVISION
AND
ACCUMED INTERNATIONAL, INC.
May 31, 1996
<PAGE>
O.E.M. SUPPLY AGREEMENT
AGREEMENT made as of the 31st day of May, 1996, by and between ACCUMED
INTERNATIONAL, INC., a company organized and existing under the laws of Delaware
and having its principal office at 920 N. Franklin Street, Suite 402, Chicago,
Illinois 60610 ("VENDOR"), and OLYMPUS AMERICA INC.-Precision Instrument
Division, a company organized and existing under the laws of New York and having
its principal office at Two Corporate Center Drive, Melville, New York 11747-
3157. ("OLYMPUS")
W I T N E S S E T H:
WHEREAS, VENDOR designs and manufactures IN VITRO diagnostic products for
hospitals, physicians, and clinical laboratories; and
WHEREAS, OLYMPUS is a recognized distributor and supplier of medical and
scientific equipment within the Territory (as defined in Section 1.16); and
WHEREAS, OLYMPUS desires to engage in the purchase of the Products (as
defined in Section 1.11) from VENDOR for the purpose of resale within the
Territory; and
WHEREAS, VENDOR IS willing to sell the products to OLYMPUS on an exclusive
basis within and for resale in the territory and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, the parties agree as follows:
ARTICLE 1. DEFINITIONS.
1.1 "Accessories" shall mean the accessories to the systems, a list and
description of which is contained in SCHEDULE 1.11 attached hereto (which
Schedule may be amended from time to time and at any time upon mutual written
agreement) .
1.2 "Affiliate" shall mean a corporation or, other entity that controls,
is controlled by or is under common control with, the designated party.
"Control" shall mean the ownership, directly or indirectly, through one or more
intermediaries, of at least 49% of the shares of stock entitled to vote for the
election of directors in the case of a corporation (or comparable officers or
representatives of the particular entity), or at least 49% of the interest in
profits in the case of a business entity other than a corporation, except that
in any country of incorporation or registration where the maximum permitted by
law is less than 49%, such lower maximum permitted percent shall be substituted.
<PAGE>
1.3 "Agreement" shall mean this O.E.M. Supply Agreement, including the
Recitals, Schedules, and Exhibits hereto, as it may be amended or supplemented
from time to time in accordance with its terms.
1.4 "Agreement Term" shall have the meaning set forth in Section 7.1.
1.5 "Business Day" shall mean any day which is not a Saturday, Sunday, or
bank holiday in the State of New York.
1.6 "Consumables" shall mean the consumables of the Systems, a list and
description of which is contained in SCHEDULE 1.1 attached hereto (which
Schedule may be amended from time to time and at any time upon mutual written
agreement).
1.7 "Effective Date" shall mean the date first above written.
1.8 "FCC" shall mean the United States Federal Communications Commission.
1.9 "FDA" shall mean the United States Food and Drug Administration.
1.10 "Intellectual Property" shall have the meaning set forth in Section
5.6.
1.11 "Products" shall mean, collectively, the Systems, the Accessories
thereto and Consumables thereof; the user and calibration instruction manuals,
user and field service guides and the like; and any Product Changes.
1.12 "Product Changes" shall mean any material changes, improvements,
alterations, modifications, upgrades, new generations, and substitutions to or
of the Products or the Products' labelling, relating to the form, fit, function,
or appearance of the Products.
1.13 "Quarterly Minimum(s)" shall have the meaning set forth in Section
4.1.
1.14 "Recall" shall have the meaning set forth in Section 3.9.
1.15 "Systems" shall mean the AcCell-TM- systems, a list and description of
which is contained in SCHEDULE 1.11 attached hereto (which Schedule may be
amended from time to time and at any time upon mutual written agreement).
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1.16 "Territory" shall mean the Western Hemisphere and Alaska and Hawaii.
1.17 "UL" shall mean Underwriters' Laboratories.
1.18 "Yearly Forecast(s)" shall have the meaning set forth in Section 4.1.
1.19 THE TERM "SALE" OR "RESALE" (IN ANY TENSE OR FORM), WHENEVER USED IN
THIS AGREEMENT, SHALL MEAN LICENSE IN THE CASE OF SOFTWARE PRODUCTS.
ARTICLE 2. PURCHASE AND SALE.
2.1 GENERAL. (a) During the Agreement Term, VENDOR agrees to sell the
Products exclusively to OLYMPUS and OLYMPUS may purchase the Products from
VENDOR (only if OLYMPUS submits a purchase order therefor) in accordance with
and subject to the terms and conditions of this Agreement. Notwithstanding
the foregoing, VENDOR may solicit purchases of the Systems within the
Territory in accordance with the following guidelines:
(i) VENDOR shall inform OLYMPUS prior to each solicitation
effort and will fully involve OLYMPUS, the pertinent OLYMPUS
dealer, or other OLYMPUS representative in all such
solicitation and related ensuing activities.
(ii) All quotations and purchase orders shall be generated by and
submitted to (as the case may be) OLYMPUS.
(iii) All sales generated as a result of VENDOR'S solicitation
efforts will be treated as OLYMPUS sales for all purposes,
including but not limited to satisfaction of Yearly
Forecasts and Quarterly Minimums.
(iv) Within the Territory, VENDOR shall promote only OLYMPUS
microscopes in conjunction with all Systems to be sold with
an integrated microscope.
(v) VENDOR shall receive a fee of (x) [ * ] of the sale
price to the end-user for each Model 2000 System, bar code
reader, and automated dotter sale, and (y) [ * ] of
the sale price to the end-user for each Model 2001 System,
bar code reader, and automated dotter sale; generated
substantially as a result of VENDOR'S
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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solicitation efforts and related ensuing activities,
including but not limited to demonstration, installation,
and initial end-user training, each as requested by OLYMPUS
in OLYMPUS'S sole and absolute discretion.
Except as set forth in this Section, VENDOR shall not promote, market, sell,
license, or distribute (directly or indirectly) the Products or products
substantially similar to or competitive with the Products within the Territory.
(B) OLYMPUS shall not (by itself or with others) market, sell, or
distribute products within the Territory that are competitive with the Products
("Competitive Products"), PROVIDED that (i) the Products are competitive with
respect to price, design, features, and quality to the Competitive Products, and
(ii) VENDOR is not in default under this Agreement.
2.2 LICENSE. VENDOR hereby unconditionally and irrevocably grants to
OLYMPUS and its Affiliates a royalty-free, fully paid-up exclusive right and
license under VENDOR's Intellectual Property, to use, market, sell, rent, lease,
grant sublicenses to end-users, and/or otherwise dispose of (or have others do
any of the foregoing on OLYMPUS's behalf) the Products within the Territory.
OLYMPUS shall determine all terms and conditions of sale to its end-users and
dealers (including but not limited to Government Services Administration and
other private, governmental, and commercial entities), including but not limited
to prices. OLYMPUS shall not (i) transfer the Products to an Affiliate or (ii)
sell the Products outside of the Territory or authorize its (sub)distributors or
(sub)dealers; to sell the Products outside of the Territory. In the event a
(sub)distributor or (sub)dealer has sold the Products outside of the Territory
and refuses to cease such activity, OLYMPUS must, if legally permitted,
terminate such (sub)distributor's or (sub) dealer's right to sell the Products.
2.3 PRODUCT DELIVERY. All OLYMPUS purchase orders shall be for delivery in
45 days and shall be deemed accepted by VENDOR unless OLYMPUS is notified to the
contrary in writing by VENDOR within ten Business Days of VENDOR'S receipt of a
written purchase order from OLYMPUS. Delivery shall be "F.O.B. destination" and
shall be made by VENDOR to OLYMPUS's facility in Woodbury, New York, or other
OLYMPUS, OLYMPUS dealer, or OLYMPUS distributor facility in the Territory, as
designated by OLYMPUS. OLYMPUS may cancel any purchase order provided that such
cancellation is made in writing no later than 15 days after VENDOR's receipt of
such purchase order. In addition, OLYMPUS may cancel a purchase order if
delivery of such purchase order is more than 30 days past due.
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<PAGE>
2.4 CONDITIONS OF SALE. The order terms and conditions set forth in this
Agreement shall govern all orders made under this Agreement, and any standard
printed forms or other documents of either party (such as those contained on a
quotation, proposal, purchase order, or invoice) shall have no force or effect
with respect to such orders unless such form or document specifically states
that it is an amendment to this Agreement and is signed by an authorized
signatory of each party. Title to and risk of loss for the Products sold to
OLYMPUS shall pass upon the receipt of the Products by OLYMPUS (or the OLYMPUS
dealer or OLYMPUS distributor, as the case may be). Notwithstanding anything
contained in this Agreement to the contrary, (i) OLYMPUS's purchase order shall
fix Product quantities, reference applicable pricing, and set destinations and
delivery schedules, and (ii) OLYMPUS shall have no obligation to purchase until
it submits a purchase order to VENDOR.
2.5 INSPECTION RIGHTS.
(a) PROCEDURE. OLYMPUS and/or its designees shall have the right, at
its expense, to count and conduct an inspection and test of the shipped Products
for a period of 30 days following receipt of such Products at the designated
incoming delivery point or facility. Within 30 days of the Effective Date,
VENDOR and OLYMPUS shall develop mutually agreed upon inspection and test
procedures to be used hereunder. Upon completion, such inspection and test
procedures shall become a part of this Agreement as EXHIBIT A hereof. If any
Product fails such inspection and testing, VENDOR agrees to accept and pay the
shipping costs for (i) the return of such defective Product to VENDOR and (ii)
the delivery of the repaired or replacement Product to OLYMPUS or its designee,
PROVIDED that the defect is not the result of OLYMPUS negligence or misuse such
as the failure to properly store the Product while in OLYMPUS's possession.
VENDOR shall, at OLYMPUS'S option, promptly, replace any such defective Product
without charge or refund the purchase price thereof in full. If OLYMPUS fails
to reject received Products within the aforementioned 30-day inspection period,
such Products shall be deemed accepted. Inspection, testing, acceptance, or use
of the Products, or failure to do the same, on any occasion shall not affect
VENDOR's obligation under any warranty contained herein or any other rights or
remedies available to OLYMPUS whether at law or in equity, and such warranties,
rights, and remedies shall survive such inspection, testing, acceptance, and
use.
(b) QUANTITY DEFICIENCY. If OLYMPUS (or the OLYMPUS dealer or OLYMPUS
distributor, as the case may be) finds any quantity deficiency in the Product
units received, OLYMPUS may, at its option, (i) require VENDOR to immediately
deliver the difference by air freight at VENDOR's expense, or (ii) reduce the
purchase amount specified in the related purchase order accordingly.
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<PAGE>
(c) OVERSHIPMENT. If OLYMPUS (or the OLYMPUS dealer or OLYMPUS
distributor, as the case may be) finds an overshipment of Product units, it/they
may store or return the excess Product units to VENDOR, both at VENDOR's risk
and expense.
2.6 PRICE.
(a) PRICING. For the duration of the Agreement Term, the Products'
prices shall be as set forth in SCHEDULE 1.11 attached hereto. Notwithstanding
the foregoing, if OLYMPUS accepts a Product Change in accordance with Section
3.3 and such Product Change generates an increase in the cost of the relevant
Product, such increase may generate an increase in the price of the Product to
OLYMPUS, PROVIDED that such price increase is acceptable to OLYMPUS in its sole
and absolute discretion. Failure by OLYMPUS and VENDOR to agree upon a price
increase due to a Product Change shall constitute rejection of such Product
Change regardless of any earlier acceptance by OLYMPUS. In the event VENDOR is
30 days past due in delivering the Products (in accordance with Section 2.3) the
purchase price for such "late" Products shall be reduced by [ * ]
for each additional month that such delivery is overdue. Instruction manuals,
user guides, and the like shall be included in the prices reflected in SCHEDULE
1.11.
(b) PAYMENT. OLYMPUS shall pay for all Products accepted by it no
later than 30 days from the date of receipt by OLYMPUS of VENDOR'S invoice
corresponding to the Products received. Notwithstanding the foregoing, if
OLYMPUS pays for Product within 15 days of receipt by OLYMPUS of VENDOR's
corresponding invoice, OLYMPUS shall receive a [ * ] discount off of such
invoice amount.
ARTICLE 3. OBLIGATIONS OF VENDOR
3.1 APPROVALS AND CLEARANCES. VENDOR shall ensure that no Product is sold
to OLYMPUS or end-users before all required governmental or private approvals
and clearances have been obtained, including without limitation (i) all FDA and
FCC approvals and clearances and (ii) UL standards applicable to laboratory
equipment and power supplies; EXCEPT, that the initial 25 System units to be
purchased on the Effective Date will be so approved and marked (at VENDOR'S
expense) within 60 days of the Effective Date.
3.2 PACKING AND MARKING: TRADEMARKS. (a) VENDOR shall pack and mark the
Products in accordance with OLYMPUS's instructions. VENDOR shall permanently
affix OLYMPUS's serial number, trade name, trademark, colors, and logo (the
"Authorized Trademarks") on all Product packaging, printed materials, labels,
and tags in accordance with OLYMPUS's instructions, which instructions shall be
provided to VENDOR within 45 days after the Effective Date.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
6
<PAGE>
Upon termination or expiration of this Agreement, VENDOR shall (i) not sell any
Product which is packaged in materials containing the Authorized Trademarks and
(ii) immediately cease any use of the Authorized Trademarks. Except as
expressly set forth herein, VENDOR shall not have any right to use nor shall
VENDOR acquire any right, title, license, or other interest in the OLYMPUS name,
or any trade name, trademark, or logo belonging to OLYMPUS.
(b) Any use by VENDOR of the Authorized Trademarks or any trade,
name, trademark, or logo which is similar to an Authorized Trademark, and the
goodwill of any business associated with such trade names, trademarks, or logos,
shall inure to the benefit of OLYMPUS.
(c) During the Agreement Term, VENDOR shall not apply VENDOR's or any
third party's name, trademark, or logo to the Products or to any packaging,
printed materials, labels, tags, or nameplates provided with the Products,
EXCEPT (i) to the extent to which VENDOR may by law be required to identify
itself as the manufacturer or supplier thereof and (ii) VENDOR'S trademark
AcCell-TM- will appear on the Systems on the facing front plate of the stage.
3.3 PRODUCT CHANGES. VENDOR shall give OLYMPUS 60 days' prior written
notice of any proposed Product Changes, which OLYMPUS may accept or reject, but
acceptance may not be unreasonably withheld (see also Section 2.6(a)). Examples
of issues that would be a reasonable basis for non-acceptance or rejection shall
include, without limitation, Product marketability, performance, function, and
pricing. If OLYMPUS chooses to reject a Product Change and VENDOR nevertheless
proceeds to implement such Product Change, OLYMPUS may, in addition to all other
rights and remedies at law or in equity or otherwise, terminate this Agreement
and all pending purchase orders pursuant to Section 7.2(c). If OLYMPUS accepts a
Product Change, VENDOR shall, prior to implementation, promptly (i) obtain all
approvals and clearances required to manufacture the Product and sell the
Product (as changed, modified, or added) within the Territory and (ii) document
and validate such accepted Product Changes to the complete satisfaction of
OLYMPUS. No Product Change shall be effective unless and until it is accepted
for sale by OLYMPUS.
3.4 TECHNICAL ASSISTANCE & SUPPORT. VENDOR shall furnish to OLYMPUS,
without additional charge, beginning on the effective Date and for the duration
of the Agreement Term and for a period of three years thereafter, the following
technical assistance and support:
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(a) DOCUMENTATION. All technical information, manuals, schematics,
parts lists, flow diagrams, and other documentation and data (in both printed
and electronic media formats) necessary to inventory, market, sell, and provide
field service for the Products within the Territory. Such materials shall be
consistent with similar information furnished to other distributors and
resellers of the Products and/or similar products manufactured by VENDOR.
VENDOR hereby grants to OLYMPUS a fully-paid license for the Agreement Term to
copy or otherwise reproduce all or portions of VENDOR's brochures, or to
incorporate portions of VENDOR-copyrighted material in Product brochures or
advertising material composed by OLYMPUS, PROVIDED that OLYMPUS shall submit
such materials composed by OLYMPUS which incorporate such VENDOR-copyrighted
material to VENDOR for prior approval, which approval shall not be unreasonably
withheld or delayed. Such reproduction will be subject to all applicable
copyright laws. In addition to the foregoing, VENDOR shall furnish to OLYMPUS
master copies (in both printed and electronic media formats) of field service
manuals and troubleshooting guides with respect to the Products which OLYMPUS
may print and use, and furnish to VENDOR for VENDOR's use in accordance with
this Agreement. Alternatively, at OLYMPUS's option, VENDOR may print such
Product manuals and guides and sell them to OLYMPUS, at VENDOR's cost, for
OLYMPUS's use.
(b) TELEPHONE SUPPORT. On-going telephone support to OLYMPUS on
Business Days, via a toll-free telephone number, between 8 a.m. and 6 p.m.
(Central). Such telephone support shall respond to all requests for information
or other technical support regarding Product use, maintenance, repair, storage,
handling, and shipping.
3.5 INSURANCE. Commencing on the first date of Product delivery until the
expiration of the most remote statute of limitations, VENDOR shall maintain
general liability insurance with an insurance company in the amount of
[ * ] naming OLYMPUS as an additional insured, for any death or bodily
injury or property damage resulting from the manufacture, design, testing, sale,
or use of the Products. Copies of all such policies and any certificates or
notices thereunder shall be forwarded to OLYMPUS along with prior notice of
termination or cancellation of such policies.
3.6 AUDITS. OLYMPUS shall have the right to perform a complete audit of
the development, manufacture, and packaging of the Products (including but not
limited to the pertinent facilities and Quality Assurance System(s)) during
normal business hours and upon seven days prior notice to VENDOR. The parties
will cooperate with each other to arrange such visits at mutually convenient
times.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
8
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3.7 COMPLAINTS. In the event OLYMPUS cannot resolve end-user complaints
regarding the Products, OLYMPUS shall forward such complaints to VENDOR and
VENDOR shall conduct a complete and documented investigation and shall fully
resolve such complaints to OLYMPUS's complete satisfaction. All such complaint
investigations shall be performed and completed promptly but in no event later
than 30 days from receipt of the complaint by VENDOR. If as a result of
VENDOR's investigation a Product Change is necessary, VENDOR will perform,
document, and validate such Product Change in accordance with this Agreement, to
OLYMPUS's complete satisfaction and at no charge to OLYMPUS. OLYMPUS shall
have the right to review and approve all changes or corrective actions resulting
from a complaint investigation prior to implementation. VENDOR shall notify
OLYMPUS immediately of any claims that it receives of Product defects.
3.8 SPECIAL INVESTIGATIONS; INQUIRIES. If any government or other
regulatory authorities or private standards board in the Territory require any
investigations to be performed on or with respect to the Products, and VENDOR
has not performed such investigations or if, for any reason, such authorities
will not accept the results of VENDOR's investigations, then VENDOR shall use
its best efforts in promptly undertaking and completing such investigations.
VENDOR agrees to notify OLYMPUS of any formal or informal inquiries relating to
the Products by the FCC or any other regulatory agency, or any state, province,
region, district, and/or Federal government.
3.9 RECALLS. In the event that any Product defect or regulatory or
governmental action requires a Product's recall, destruction, withholding from
the market, or other action (a "Recall"), VENDOR shall bear all costs and
expenses of such Recall. OLYMPUS shall reasonably assist VENDOR, at VENDOR's
cost and expense, in carrying out any such Recall. OLYMPUS shall bear the costs
and expenses of a Recall if such Recall is the direct result of any act or
omission to act attributable solely to OLYMPUS. If a Recall is the direct
result of acts or omissions to act attributable to both VENDOR and OLYMPUS, or
should it prove impossible to assign fault for such Recall, VENDOR and OLYMPUS
shall share the costs and expenses of such Recall equally.
3.10 REPLACEMENT & REPAIR PARTS: ACCESSORIES & CONSUMABLES.
(a) During the Agreement Term and for a period of five years
thereafter, VENDOR agrees to offer for sale to OLYMPUS all replacement and
repair parts for the Systems, and all Accessories and Consumables.
(b) VENDOR agrees that its Accessories and Consumables pricing for
the five-year period following the Agreement Term shall be, in the aggregate,
no more than 1.3 times the value of the applicable System at the end of the
Agreement Term. VENDOR
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agrees that its replacement and repair parts pricing (during and after the
Agreement Term) shall be, in the aggregate, no more than 1.3 times the value of
the applicable System at the relevant point of the Agreement Term or at the end
of the Agreement Term (as the case may be).
(c) In the event VENDOR is unable to supply such Accessories, Consumables,
and replacement and repair parts and VENDOR is unable to obtain another source
of supply for OLYMPUS, then such inability shall be considered noncompliance
with this Section and VENDOR shall, with neither obligation nor charge to
OLYMPUS, provide OLYMPUS with drawings and other documents required to either
manufacture or buy such Accessories, Consumables, and parts and the technical
information or any other rights necessary for OLYMPUS to manufacture or obtain
such Accessories, Consumables, and parts from other sources, together with an
exclusive license to make or have made such Accessories, Consumables, and parts
for the purpose of supporting OLYMPUS's customer base. The technical
information includes, by example and not by way of limitation (i) manufacturing
drawings and specifications of materials and parts comprising the Accessories,
Consumables, and replacement and repair parts and components; (ii) manufacturing
drawings and specifications covering special tooling and operation thereof;
(iii) a detailed list of all commercially available parts and components
purchased by VENDOR on the open market, disclosing the part number, name and
location of the supplier and price lists for the purchase thereof and (iv) one
complete copy of the source code used in the preparation of any software
licensed or otherwise acquired by OLYMPUS from VENDOR, PROVIDED, HOWEVER, that
such source code may not be changed by OLYMPUS (except to fix software bugs and
deficiencies in the event VENDOR is unable to so fix) and shall remain the
property of VENDOR and shall be separately licensed to OLYMPUS for OLYMPUS's
possession and use exclusively for maintenance of OLYMPUS's end-users.
3.11 UPDATES AND MINOR UPGRADES. During the Agreement Term and thereafter
(with respect to Products still under warranty) VENDOR shall provide OLYMPUS
with Product software fixes, updates, and minor upgrades at no charge to
OLYMPUS. Upon expiration of the relevant warranty periods, OLYMPUS will pay
a software maintenance fee of [ * ] per annum per each System unit for
which the end-user elects to purchase software updates and minor upgrades
(the "Maintenance Fee"). Upon expiration or earlier termination of the
Agreement Term AND upon expiration of the relevant warranty period, VENDOR
shall, for a period of five years, provide OLYMPUS with Product software
updates and upgrades at reasonable mutually agreed-upon prices, EXCEPT that
if OLYMPUS has paid the Maintenance Fee prior to the and of the Agreement
Term, VENDOR shall honor such Maintenance Fee for the duration of that year.
All updates and upgrades shall be validated to OLYMPUS's complete
satisfaction.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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3.12 VENDOR DELIVERABLES. (a) VENDOR shall furnish to OLYMPUS the following
deliverables (which must be ready for delivery to end-users) within the time
frames corresponding thereto:
(i) AccuMap-TM- 2000 automated screener (hardware only; related
software will be licensed to end-users directly by
VENDOR).....[ * ] from the Effective Date (including
software availability from VENDOR);
(ii) generic archiver with image capture.....VENDOR's best
efforts to furnish within [ * ] from the date of mutual
agreement on detailed specifications
(iii) deliverable networking software and hardware for the
Systems.....[ * ] from the Effective Date; and
(iv) deliverable interface software for specified Laboratory
Information Systems.....[ * ] after OLYMPUS places an
order for same with VENDOR.
Once available, the parties shall negotiate a reasonable price for such
deliverables in good faith and the deliverables will be deemed "Products"
hereunder, subject in all respects to this Agreement and added to SCHEDULE 1.11
accordingly, EXCEPT for the AccuMap-TM- 2000 software to be licensed directly by
VENDOR to end-users, which software will only be deemed a "Product" for purposes
of Sections 3.1, 3.5, 3.7, 3.8, 3.9, 3.11, 3.14, 5.5, 5.6, 5.7, 5.8, 5.10, and
Article 8. Notwithstanding anything contained herein to the contrary, if the
parties fail to agree upon prices for the deliverables, then the Quarterly
Minimums and Yearly Forecasts shall no longer be applicable.
(b) VENDOR shall use its best efforts so that, within 30 months from the
Effective Date, the AccuMap-TM- 3000 automated screener will be FDA-approved and
ready for end-user delivery, directly or indirectly, by VENDOR. Unless
otherwise decided by VENDOR, OLYMPUS will not be reselling this particular
product.
(c) In the event any one or more of the aforementioned deliverables is not
furnished by VENDOR to OLYMPUS within their corresponding time frames, (i) the
Yearly Forecasts and Quarterly Minimums shall no longer apply and OLYMPUS will
have no further obligations with respect thereto and (ii) the parties shall
endeavor to arrive at a mutually-acceptable solution to resolve the consequences
of such failure to so timely furnish the deliverables.
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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(d) Time is of the essence of the performance of VENDOR's obligations
pursuant to this Section 3.12.
3.13 LOANER SYSTEMS. VENDOR shall maintain a reserve of Systems as a loaner
pool in the following amounts: (a) By end of Year One - [ * ]; (b) By end of
Year Two - [ * ]; (c) By end of Year Three - [ * ]. Loaner Systems shall
be available [ * ] with respect to Products that are within the
warranty period set forth in Section 5.9(b), and at a [ * ] charge
thereafter.
3.14 TRAINING. During the first eight months of the Agreement Term, VENDOR
shall, upon reasonable prior request, provide OLYMPUS and OLYMPUS's dealers with
full maintenance, service, installation, and application training with respect
to the Products. In addition, for the duration of the Agreement Term, when
Product Changes are implemented or when Product software updates and upgrades
are provided, the aforementioned training shall be provided to OLYMPUS and
OLYMPUS's dealers therefor.
ARTICLE 4. OBLIGATIONS OF OLYMPUS.
4.1 YEARLY FORECASTS & QUARTERLY MINIMUMS. During the first, second, and
third years of the Agreement Term, OLYMPUS forecasts that it will purchase an
aggregate of [ * ] System units, respectively ("Yearly
Forecast(s)"). During the Agreement Term, OLYMPUS shall purchase, at a minimum,
the quarterly quantity of System units ("Quarterly Minimum(s)") in accordance
with SCHEDULE 4.1 attached hereto. Sales generated as a result of VENDOR's
solicitation efforts shall be included when calculating the OLYMPUS purchases in
any given year or quarter. In particular, with respect to the first year of the
Agreement Term, VENDOR guarantees that it will generate sales of at least [*]
System units through its own solicitation efforts in accordance with Section
2.1(a). If OLYMPUS exceeds the Yearly Forecast in either or both of years one
and two of the Agreement Term, such excess amount shall be deducted from the
ensuing Agreement Term year's Yearly Forecast. Similarly, if OLYMPUS exceeds
the Quarterly Minimum in any or all Agreement Term quarters, such excess amount
shall be deducted from the ensuing quarter(s)' Quarterly Minimum(s). If, at the
end of either the first or second year of the Agreement Term, it is determined
that such year's Yearly Forecast has not been met, the parties shall have 60
days to mutually agree to either (i) amend the Yearly Forecast for the ensuing
Agreement Term year with OLYMPUS retaining its exclusivity hereunder or (ii)
removing the concept of Yearly Forecasts and Quarterly Minimums for the balance
of the Agreement Term and permitting OLYMPUS to market and sell the Products but
on a non-exclusive basis. Should the parties fail to agree, during such 60-day
period, on either one of the
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
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foregoing solutions or a different mutually-acceptable solution, either party
may terminate this Agreement upon 30 days' written notice. Failure by VENDOR to
send such a notice of termination within 10 days of the end of such 60-day
period shall mean OLYMPUS's rights under Section 2.2 shall continue on an
exclusive basis for at least the ensuing year of the Agreement Term.
Notwithstanding anything contained herein to the contrary, the Yearly Forecasts
shall not constitute a commitment by OLYMPUS to purchase such Yearly Forecasts
and OLYMPUS shall not have any liability whatsoever to VENDOR in the event such
Yearly Forecasts are not satisfied.
4.2 SCOPE OF RESPONSIBILITY. During the Agreement Term, OLYMPUS shall, at
its own cost and expense, use commercially reasonable efforts to sell, install,
and provide field service for the Products within the Territory.
4.3 BI-MONTHLY SALES REPORT. During the Agreement Term, OLYMPUS shall
submit to VENDOR once every two months a written sales report summarizing sales
activity of the Products for the prior two months.
4.4 OLYMPUS PRODUCTS. During the Agreement Term, OLYMPUS shall provide
VENDOR (at no charge to VENDOR) with reasonable technical support (at OLYMPUS's
sole and absolute discretion) with respect to OLYMPUS's microscope products used
by VENDOR in connection with the development of future products not competitive
with OLYMPUS products, PROVIDED OLYMPUS shall have a right of first negotiation
and refusal with respect to such future products.
4.5 AcCELL-TM-; COPYRIGHT & TRADEMARK NOTICES. OLYMPUS will use
reasonable efforts to inform VENDOR upon receipt of information regarding (i)
third-party infringement of VENDOR's AcCell-TM- trademark or (ii) VENDOR
infringement of a third party's trademark. In addition, OLYMPUS shall
incorporate into relevant Product documentation and materials, the appropriate
and reasonable copyright and trademark notices provided to OLYMPUS by VENDOR.
ARTICLE 5. REPRESENTATIONS, COVENANTS, & WARRANTIES OF VENDOR.
VENDOR hereby represents, covenants, and warrants to OLYMPUS, its successors and
permitted assigns that:
5.1 DUE ORGANIZATION. VENDOR is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and has
the full power and authority to conduct all activities conducted by it under
this Agreement.
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5.2 AUTHORIZATION TO EXECUTE. The person executing this Agreement on
behalf of VENDOR has been duly authorized to do so by all requisite corporate
and other action of VENDOR, and this Agreement has been duly executed and
delivered to OLYMPUS by such person.
5.3 VALIDITY OF AGREEMENT. This Agreement is the legal, valid and binding
obligation of VENDOR, enforceable in accordance with its terms.
5.4 NO CONFLICT. To the knowledge of VENDOR, the execution, delivery and
performance of this Agreement by VENDOR does not and will not conflict with or
result in a breach of any agreement, instrument or understanding, oral or
written, to which VENDOR is a party. There is no litigation, arbitration or
administrative proceeding pending or threatened which would, in any event,
conflict with or result in a breach of this Agreement or interfere with VENDOR's
obligations hereunder.
5.5 RIGHT TO USE TECHNOLOGY. VENDOR has the legally enforceable right to
use all technology contained within or related to the Products, whether patented
or not patented, copyrighted or not copyrighted, and the use of such technology
does not violate any agreement, instrument or understanding, oral or written, to
which VENDOR is a party.
5.6 WARRANTY OF NON-INFRINGEMENT. Except for OLYMPUS's rights and
licenses received hereunder, VENDOR is, and for the Agreement Term VENDOR will
be, the sole and exclusive owner of all right, title and interest in and to the
Products. To the best of VENDOR's knowledge, the Products do not incorporate or
infringe upon any copyright, patent, trademark, service mark, trade mark, trade
secret, idea, process, know-how, development, invention, technology, or other
form of intellectual property (collectively "Intellectual Property") not owned
by or licensed to VENDOR. VENDOR will promptly notify OLYMPUS of any alleged or
actual infringement by VENDOR of any Intellectual Property relating to the
Products or their manufacture.
5.7 RIGHT TO SELL FOR RESALE: OBLIGATION TO DELIVER. VENDOR has the right
to sell the Products to OLYMPUS for resale by OLYMPUS in the Territory. VENDOR
has and will have the ability to timely deliver all of the Products ordered by
OLYMPUS during the Agreement Term.
5.8 PRODUCT QUALITY. The Products to be sold and delivered to OLYMPUS and
end-users hereunder shall (i) be merchantable and fit for their particular
purpose, (ii) be new and free from defects in design, materials and workmanship,
and (iii) meet the specifications attached hereto as EXHIBIT B. VENDOR shall
possess a Quality Assurance System that adheres to all applicable laws, rules,
and regulations.
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5.9 REPAIR, REPLACE OR REFUND WARRANTY. (a) With respect to each Product
unit sold and delivered to OLYMPUS, VENDOR shall, at OLYMPUS's option and at no
charge, replace or repair and render fully operational or fully refund the
purchase price of any defective, damaged, or non-conforming Product unit by
reason of breach of any warranty by VENDOR hereunder, within seven Business Days
after receipt by VENDOR of the defective, damaged, or non-conforming Product
unit.
(b) The warranty period for repair, replacement, or refund shall be
twelve months commencing on the date the Product is received by the end-users.
Written notice of a defect in material or workmanship must be received by VENDOR
within 15 months from the date the Product is received by OLYMPUS's end-users.
(c) Notwithstanding the foregoing, in the event of failure by VENDOR
to repair, replace, or refund defective, damaged, or non-conforming Product
units within the seven-day period set forth in subsection 5.9(a), (i) OLYMPUS
may, at its sole and absolute discretion, make such corrections or replace such
Product units and charge VENDOR for the cost incurred by OLYMPUS in doing so and
(ii) VENDOR shall reimburse OLYMPUS for any and all additional costs and
expenses incurred by OLYMPUS as a result of such failure to repair, replace, or
refund, which costs and expenses would not have been incurred if not for such
failure to repair, replace or refund. The foregoing reimbursement plan shall
continue until the non-conforming Product unit is repaired, replaced or
refunded. OLYMPUS shall have the right to offset the amounts due VENDOR
hereunder against any and all refund amounts owed to OLYMPUS pursuant to this
Section 5.9 or any other amounts owed to OLYMPUS by VENDOR arising under this
Agreement.
(d) Shipping costs incurred by OLYMPUS and risk of loss upon return
of Product units to VENDOR for in-warranty repair, replacement, or refund shall
be borne by VENDOR. Shipping costs incurred by VENDOR and risk of loss upon
delivery of the in-warranty repaired or replacement Product unit to OLYMPUS or
OLYMPUS's designees shall be borne by VENDOR.
5.10 COMPLIANCE. VENDOR has ensured and shall continue to ensure that, in
manufacturing and selling the Products, it shall (i) comply with all applicable
laws and regulations, (ii) not engage in any deceptive or misleading practices,
and (iii) obtain and maintain all required governmental and private approvals
and clearances (including without limitation compliance with UL and the FCC).
5.11 PRICE WARRANTY. VENDOR warrants that the prices listed in SCHEDULE
1.11 shall be complete and no additional charges of any kind shall be added
without OLYMPUS's prior
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written consent. Examples of additional charges include, but shall not be
limited to, packaging, labeling, taxes, storage, insurance, boxing, or crating.
5.12 RIGHT OF FIRST NEGOTIATION AND REFUSAL. VENDOR hereby grants to
OLYMPUS a right of first negotiation and refusal to be the exclusive OEM
purchaser of new VENDOR microscopy products (including but not limited to
telemedicine and telepathology workstations) in the Territory, PROVIDED OLYMPUS
has achieved, to such date, (i) the Quarterly Minimums, with respect to the
first year of the Agreement Term, or (ii) 75% of the PRO RATA amount of the
relevant Yearly Forecast, with respect to each of the second and third years
of the Agreement Term.
5.13 POST-WARRANTY REPAIR SERVICE. During the Agreement Term and for a
period of three years thereafter, VENDOR shall provide all post-warranty repair
service for the Products at the hourly rates set forth on SCHEDULE 5.13 attached
hereto.
5.14 OLYMPUS ENHANCEMENTS. VENDOR agrees to evaluate and use its best
efforts to incorporate OLYMPUS's recommended design changes and/or enhancements
to the Products ("OLYMPUS Enhancements"). Any increase or reduction in
VENDOR's manufacturing costs (labor and/or materials) resulting from OLYMPUS
Enhancements shall be reflected in reasonable price adjustments to the affected
Products. Any engineering/design costs and delivery dates for OLYMPUS
Enhancements shall be quoted to OLYMPUS for its approval and payment. OLYMPUS
shall pay such engineering/design costs plus burdened overhead. Any and all
Intellectual Property relating to (i) OLYMPUS Enhancements shall be owned by
OLYMPUS and (ii) Product design changes and/or enhancements conceived jointly
by OLYMPUS and VENDOR shall be owned by OLYMPUS and VENDOR jointly. VENDOR
shall not use the OLYMPUS Enhancements for itself or for any other party for
any purpose other than the performance of its obligations hereunder.
ARTICLE 6. REPRESENTATIONS, COVENANTS, & WARRANTIES OF OLYMPUS. OLYMPUS hereby
represents, covenants, and warrants to VENDOR, its successors and permitted
assigns that:
6.1 DUE ORGANIZATION. OLYMPUS is a corporation organized and validly
existing under the laws of the State of New York, and has the full power and
authority to conduct all activities conducted by it under this Agreement.
6.2 AUTHORIZATION TO EXECUTE. The person executing this Agreement on
behalf of OLYMPUS has been duly authorized to do so by all requisite
corporate and other action of OLYMPUS, and this Agreement has been duly executed
and delivered to VENDOR by such person.
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6.3 VALIDITY OF AGREEMENT. This Agreement is the legal, valid and binding
obligation of OLYMPUS, enforceable in accordance with its terms.
6.4 NO CONFLICT. To the knowledge of OLYMPUS, the execution, delivery and
performance of this Agreement by OLYMPUS does not and will not conflict with or
result in a breach of any agreement, instrument or understanding, oral or
written, to which OLYMPUS is a party.
ARTICLE 7. TERMS AND TERMINATION.
7.1 TERM. This Agreement shall remain in full force and effect commencing
on the Effective Date and expiring on the third anniversary of such date (the
"Agreement Term") unless earlier terminated pursuant to Section 7.2.
Notwithstanding the foregoing, the Agreement Term may be suspended pursuant to
the provisions of Section 10.1 of this Agreement.
7.2 EVENTS OF TERMINATION. This Agreement may be terminated, without
limiting any party's rights to any other remedies:
(a) Immediately upon written notice by either party (the "Terminating
Party") to the other party (the "Breaching Party") if:
(i) the Breaching Party has not performed or has otherwise
breached its obligations (whether material or
otherwise) hereunder and if such nonperformance or
breach is incapable of cure; or
(ii) any proceeding in bankruptcy, reorganization or
arrangement for the appointment of a receiver or a
trustee to take possession of the Breaching Party's
assets or any similar proceeding under the law for
relief of creditors shall be instituted by or against
the Breaching Party; or
(iii) the Breaching Party shall make an assignment for the
benefit of its creditors.
The Breaching Party immediately shall notify the Terminating Party in
writing of the occurrence of any event of the type described in
subsections 7.2,(a)(ii) and (iii).
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(b) By the Terminating Party upon the expiration of 30 days (or such
additional period as the Terminating Party may authorize) after the
Breaching Party's receipt of written notice of its breach or
nonperformance of its obligations (whether material or otherwise)
hereunder and if such breach or nonperformance is capable of cure and
has not been cured during such 30-day period.
(c) By OLYMPUS upon 30 days' prior written notice to VENDOR of the
rejection of a Product Change which VENDOR nevertheless proceeds to
implement. See Section 3.3.
(d) By either party in accordance with the provisions of Section 4.1.
7.3 PURCHASE ORDERS. Unless OLYMPUS decides that it does not wish to
have a purchase order filled, any purchase order placed by OLYMPUS but not
shipped by VENDOR prior to the date that notice of termination is delivered
hereunder or the date that this Agreement otherwise expires, shall be timely
delivered to the destination points designated by OLYMPUS, PROVIDED that such
termination did not arise from OLYMPUS's default.
7.4 RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon expiration or earlier
termination of this Agreement, OLYMPUS shall have the right to (i) sell all
Products ordered or in inventory and (ii) provide on-going support and service
to its end-users. Notwithstanding anything contained herein to the contrary and
without limiting OLYMPUS's other remedies. In the event this Agreement is
terminated, OLYMPUS shall have the right to require VENDOR to repurchase (at the
price paid by OLYMPUS) any portion of or all ordered Products and OLYMPUS's
inventory of Products, PROVIDED (i) OLYMPUS furnishes VENDOR with the relevant
open purchase orders (with respect to ordered Products not yet in OLYMPUS
inventory), (ii) the Products in OLYMPUS inventory are in new condition and have
not been used, and (iii) the Products in OLYMPUS inventory are in their original
packaging with all manuals and other materials.
7.5 RIGHT TO MANUFACTURE. In the event of termination by OLYMPUS pursuant
to Section 7.2 (a) (ii) or (iii), OLYMPUS shall have the right to manufacture or
to sublicense a third party to manufacture the Products. In order to secure the
rights of OLYMPUS upon the happening of such an event and to secure the
indemnity obligations of VENDOR pursuant to Article 8 hereof, VENDOR hereby
grants to Data Securities International, Inc. (Westmont, Illinois), as escrow
agent (the "Escrow Agent"), as security for the obligations described herein, a
security interest in all of its common law proprietary rights relating to the
Products, the molds used to manufacture the Product, the
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<PAGE>
software source code and related documentation, and the rights of VENDOR in and
to all contracts and agreements relating to the manufacture of the Products.
OLYMPUS shall have the right to independently ascertain that the complete and
correct materials and information have been submitted to the Escrow Agent.
OLYMPUS shall have the right to terminate any purchase orders for the Products
outstanding at the time the aforementioned manufacturing or sublicensing rights
are utilized. VENDOR shall cooperate with OLYMPUS by providing OLYMPUS with
technical information and know-how as to the manufacture of the Products. The
parties agree that the rights granted in this Section shall be deemed a license
of intellectual property rights within the meaning of Section 365(n) of Title 11
of the United States Code.
7.6 SURVIVAL. Sections 2.2, 2.3, 2.4, 2.5, 2.6, 3.1, 3.2(a), 3.2(b), 3.3,
3.4, 3.5, 3.7, 3.8, 3.9, 3.10, 3.11, 3.13, 5.4, 5.5, 5.6, 5.7 (first sentence
only), 5.8, 5.9, 5.10, 5.11, 5.13, 5.14, 6.4, 7.3, 7.4, and 7.5, and Articles 8,
9, and 10 (except Section 10.6), shall survive the execution, and termination or
expiration of this Agreement.
ARTICLE 8. INDEMNIFICATION.
8.1 INFRINGEMENT INDEMNITY. (a) Should any aspect of any Product become
the subject of any third party Intellectual Property infringement claim, action,
or proceeding, VENDOR shall, at OLYMPUS's option and within 60 days, (i) obtain
a license that would permit OLYMPUS to exercise all rights granted to it under
this Agreement or (ii) modify the Product to render it non-infringing. VENDOR
shall bear the cost of such license or modification. In addition, OLYMPUS may,
without limiting its remedies, without any liability whatsoever, and at its sole
and absolute discretion, suspend purchases of the Products from VENDOR
immediately. Notwithstanding the foregoing, should VENDOR fail to accomplish
either one of the foregoing solutions (set forth in clauses (i) and (ii) above)
within such 60-day period with respect to any such Intellectual Property
infringement claim, action, or proceeding, OLYMPUS may terminate this Agreement
without limiting its remedies, without any liability whatsoever, and at its sole
and absolute discretion. In addition, OLYMPUS shall have the right to require
VENDOR to repurchase (at the price paid by OLYMPUS) any portion of or all
ordered Products and OLYMPUS's inventory of Products, PROVIDED (i) OLYMPUS
furnishes VENDOR with the relevant open purchase orders (with respect to ordered
Products not yet in OLYMPUS inventory), (ii) the Products in OLYMPUS inventory
are in new condition and have not been used, and (iii) the Products in OLYMPUS
inventory are in their original packaging with ail manuals and other materials.
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(b) In addition to its obligations under subsection 8.1(a) above and
provided that VENDOR receives prompt written notice of any Intellectual Property
infringement claim, action, or proceeding covered by this Section 8.1, VENDOR
shall ai all times indemnify and hold harmless OLYMPUS, its successors, and
permitted assigns, and any of its officers, directors, employees,
representatives, and/or agents, and each of them, from and against any and all
claims, liabilities, losses, costs, damages, and expenses, including but not
limited to (i) the damages, losses, costs, and expenses payable to the third
party claiming Intellectual Property infringement, (ii) all of OLYMPUS's
reasonable attorneys' fees and disbursements, settlement costs, judgments, court
costs and expenses, incurred by OLYMPUS in any action or proceeding between
VENDOR and OLYMPUS and/or between OLYMPUS and any third party or otherwise,
(iii) reimbursement for the cost of Products that can no longer be sold, and
(iv) any other losses, costs, expenses, and damages incurred by OLYMPUS, arising
out of or resulting from any Intellectual Property infringement claim, action or
proceeding between VENDOR And OLYMPUS and/or between OLYMPUS and any third party
or otherwise. The failure of OLYMPUS to give prompt notice shall not result in
the loss of indemnification unless VENDOR shall have been materially prejudiced
thereby.
(c) OLYMPUS shall not be entitled to the foregoing Intellectual
Property infringement indemnity from VENDOR to the extent that the Intellectual
Property infringement claim, action, or proceeding arises or results solely from
changes to the Products made by OLYMPUS without VENDOR's authorization, PROVIDED
the Products have not been modified by VENDOR without OLYMPUS's knowledge and
prior written consent.
8.2 VENDOR PRODUCT LIABILITY AND OTHER DAMAGE INDEMNITY.
(a) VENDOR shall at all times indemnify and hold harmless OLYMPUS,
its successors and permitted assigns, and any of its officers, directors,
employees, representatives, and/or agents, and each of them, from and against
any and all claims, liabilities, losses, costs, damages, and expenses,
including but not limited to all of OLYMPUS's reasonable attorneys' fees and
disbursements, court costs and expenses, incurred by OLYMPUS in any action or
proceeding between VENDOR and OLYMPUS (if OLYMPUS is the prevailing party)
and/or between OLYMPUS and any third party or otherwise arising out of or
resulting from (i) a defect or alleged defect in a Product, including without
limitation defects relating to manufacturing, improper testing, or design, or
any breach of warranty regarding such Product or any component thereof, (ii)
misrepresentations made in connection with the promotion, marketing, sale,
distribution, use, safety, or efficacy of such Product based upon information
supplied to OLYMPUS by VENDOR, (iii) the contents of any labelling, inserts,
instruction manuals, or related documentation prepared by VENDOR or based
upon information supplied to OLYMPUS by VENDOR, or (iv)
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a Product Recall. OLYMPUS Shall provide VENDOR with, at VENDOR's expense for
all of OLYMPUS's out-of-pocket costs, reasonable assistance in connection with a
third party action or proceeding of the kind described in this Section 8.2 (a).
(b) OLYMPUS shall not be entitled to the foregoing indemnity from
VENDOR to the extent that the claim, action, or proceeding arises or results
solely from (i) unauthorized representations made by OLYMPUS regarding the
Product which are different than or in addition to the representations made by
VENDOR to OLYMPUS, or (ii) unauthorized changes to the Product made by OLYMPUS,
PROVIDED the Product in not defective and has not been modified by VENDOR
without OLYMPUS's knowledge and prior written consent.
8.3 OLYMPUS PRODUCT LIABILITY AND OTHER DAMAGE INDEMNITY.
(a) OLYMPUS shall at all times, indemnify and hold harmless VENDOR,
its successors and permitted assigns and any of its officers, directors,
employees, representatives, and/or agents, and each of them, from and against
any and all claims, liabilities, losses, costs, damage, and expenses, including
but not limited to all of VENDOR's reasonable attorneys' fees and disbursements,
court costs and expenses, incurred by VENDOR in any action or proceeding between
VENDOR and OLYMPUS (if VENDOR is the prevailing party) and/or between VENDOR and
any third party (attorneys', fees and disbursements only in the event OLYMPUS
fails to defend) arising out of or resulting from (i) unauthorized
representations made by OLYMPUS regarding a Product which are different than or
in addition to the representations made by VENDOR to OLYMPUS or (ii)
unauthorized changes to a Product made by OLYMPUS, PROVIDED the Product is not
defective and has not been modified by VENDOR without OLYMPUS's knowledge and
prior written consent. OLYMPUS shall have the right to control the defense and
settlement of a third party claim, action or proceeding. VENDOR shall provide
OLYMPUS with, at OLYMPUS's expense for all of VENDOR's out-of-pocket costs,
reasonable assistance in connection with a third party action or proceeding
of the kind described in this Section 8.3(a).
(b) VENDOR shall not be entitled to the foregoing indemnity from
OLYMPUS to the extent that the claim, action, or proceeding arises or results
solely from (i) a defect or alleged defect in a Product, including without
limitation defects relating to manufacturing, improper testing, or design, or
any breach of warranty regarding such Product or any component thereof, (ii)
misrepresentations made in connection with the promotion, marketing, sale,
distribution, use, safety , or efficacy of such Product based upon information
supplied to OLYMPUS by VENDOR, (iii) the contents of any labelling, inserts,
instruction manuals, or related documentation prepared by VENDOR or based upon
information supplied to OLYMPUS by VENDOR, or (iv) a Product Recall.
21
<PAGE>
ARTICLE 9. CONFIDENTIALITY.
For purposes of this Agreement, the term "Confidential Information" shall
mean all documents, clearly marked as "PROPRIETARY" or "CONFIDENTIAL",
relating to the respective products and business of the parties which (i) is
disclosed, upon request, by one party hereto to the other and (ii) is claimed
by the disclosing party to be secret, confidential and proprietary to the
disclosing party.
During the Agreement Term and for a period of two years thereafter, each party
(except as is explicitly otherwise required hereby) shall keep confidential,
shall not use for the benefit of others, and shall not copy or allow to be
copied, in whole or in part, any Confidential Information disclosed to such
party by the other.
The obligations of confidentiality imposed upon the parties by the foregoing
paragraph shall not apply with respect to any alleged Confidential Information
which:
(a) is known to the recipient thereof prior to receipt thereof from the
other party hereto;
(b) is disclosed to said recipient by a third party who has the right to
make such disclosure;
(c) is or becomes a part of the public domain or public knowledge through
no fault of said recipients;
(d) is independently developed by the recipient; and
(e) is required to be disclosed under operation of law.
ARTICLE 10. MISCELLANEOUS.
10.1 FORCE MAJEURE. Each party hereto shall be excused from the
performance of its obligations hereunder in the event such performance is
prevented by FORCE MAJEURE, and such excuse shall continue for so long as the
condition constituting such FORCE MAJEURE and any consequences resulting from
such condition continues. In addition, in the event the condition constituting
the FORCE MAJEURE causes a substantial inability by either party hereto to
manufacture, deliver, sell, or otherwise distribute, as the case may be, the
Products, the term of this Agreement may be suspended for the period of such
inability, but not to exceed six months. For the purposes of this Agreement,
FORCE MAJEURE shall mean causes beyond either party's control including, without
limitation, acts of God; war, riot or civil commotion; damage to or destruction
of production facilities or materials by fire,
22
<PAGE>
earthquake, storm or other disaster; strikes or other labor disturbances;
epidemic; failure or default of public utilities or common carriers; and other
similar acts. (Non)Compliance with laws or government regulations shall not
constitute a FORCE MAJEURE event.
10.2 RELATIONSHIP. The relationship created between VENDOR and OLYMPUS by
this Agreement shall be that of independent contractors. Neither OLYMPUS nor
VENDOR shall be deemed an agent, representative, partner, joint venturer, or
employee of the other party. Neither VENDOR nor OLYMPUS shall have the right to
enter into any contracts or commitments or to make any representations or
warranties, whether express or implied, in the name of or on behalf of the other
party, or to bind the other party in any respect whatsoever, unless agreed to in
writing or expressly permitted in this Agreement.
10.3 ASSIGNMENT; BINDING EFFECT. (a) Neither party to this Agreement may
assign all or any part of its rights and obligations under this Agreement,
except to an Affiliate, without the prior written consent of the other party.
No permitted assignment by any party pursuant to this subsection (a) shall
result in any additional expense to the other party. Any purported
assignment in contravention of this subsection (a) shall, at the option of
the non-assigning party, be null and void and of no effect.
(b) Except as otherwise provided above, this Agreement will be binding
upon and inure to the benefit of the successors and assigns of the parties. The
parties to this Agreement are VENDOR and OLYMPUS, exclusively. Therefore,
except as expressly set forth herein, the respective obligations, covenants,
representations, and warranties undertaken and made by VENDOR and/or OLYMPUS in
this Agreement, shall not be deemed the obligations, covenants, representations,
and warranties of VENDOR's and OLYMPUS's respective Affiliates.
10.4 NOTICES. Any notice or other communication required or permitted to
be given to either party under this Agreement shall be given in writing and
shall be delivered (i) by hand, or (ii) by registered or certified mail, postage
prepaid and return receipt requested, or (iii) by confirmed facsimile
transmission; addressed to each party at the following address or such other
address as may be designated by such party by notice pursuant to this Section:
To VENDOR: AccuMed International, Inc.
920 N. Franklin Street, Suite 402
Chicago, Illinois 60610
Fax: 312-642-8694
ATTENTION: Peter Gombrich, Chairman & CEO
23
<PAGE>
To OLYMPUS: Olympus America Inc.
Precision Instrument Division
Two Corporate Center Drive
Melville, New York 11747-3157
Fax: 516-844-5111
ATTENTION: Division Manager
with and copy to OLYMPUS'S General Counsel at the same address
(FAX: 516-844-5296).
Any notice, consent, or other communication given in conformity with this
Section shall be deemed effective when received by the addressee, if delivered
by hand or facsimile transmission, and seven days after mailing, if mailed.
10.5 GOVERNING LAW: SUBMISSION TO JURISDICTION. This Agreement and any
other documents or instruments related hereto and all transactions hereunder
shall be deemed to have been made within and under the laws of the State of
New York, including the Uniform Commercial Code of the State of New York, and
for all purposes shall be governed by and construed in accordance with the
laws of the State of New York without regard to the conflict of laws rules
thereof. The parties expressly agree that any controversy, dispute or claim
with respect to any provision of this Agreement shall be adjudicated
exclusively by a court of competent jurisdiction within Suffolk County, the
State of New York, or the Federal District Court for the Eastern District of
New York, applying New York law without regard to the rules of conflicts of
law and VENDOR and OLYMPUS irrevocably waive any objections either may have
and consent to the personal jurisdiction or the designation of a forum or
venue of the courts set forth herein, including without limitation waiving a
motion to change or transfer venue or that the forum is not convenient.
Notwithstanding the foregoing, either party may, in any jurisdiction, seek to
enforce, collect, or take any other action to effectuate a judgment, order, or
decree obtained from a court in Suffolk County, State of New York or the
Federal District Court for the Eastern District of New York.
10.6 EXECUTION OF ADDITIONAL DOCUMENTS. Each party hereto agrees to execute
and deliver such documents as may be necessary or desirable to carry out the
provisions of this Agreement.
10.7 ENTIRE AGREEMENT. Except for OLYMPUS purchase orders pending as of the
Effective Date, this Agreement constitutes the entire agreement between VENDOR
and OLYMPUS with respect to the subject matter hereof. All prior or
contemporaneous agreements, proposals, understandings, representations, and
communications with respect to the subject matter hereof, whether written or
oral, between or involving VENDOR and OLYMPUS hereby are cancelled and
superseded. This Agreement may be amended or
24
<PAGE>
modified only in and writing executed by both parties, which states that it is
an amendment or modification to this Agreement.
10.8 SEVERABILITY. If any provision or part thereof of this Agreement is
held to be invalid, void or unenforceable, the remaining provisions or parts
thereof of this Agreement shall continue in full force without being impaired or
invalidated in any way, to the maximum extent possible consistent with the
intent of the parties in entering into this Agreement.
10.9 TAXES. Each party shall be responsible for payment of its own taxes.
10.10 COUNTERPARTS. This Agreement may be executed in duplicate
counterparts, each of which when so executed shall be deemed to be an original
and both of which when taken together shall constitute one and the same
instrument.
10.11 NO WAIVER. No WAIVER of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged with
such waiver and specifically stating that it waives a provision of this
Agreement, and no waiver of any breach or failure to perform shall be deemed
to be a waiver of any future breach or failure to perform or of any other
provisions of this Agreement.
10.12 HEADINGS. The headings contained herein are for reference only and
are not and part of this Agreement and shall not be used in connection with the
interpretation of this Agreement.
10.13 RIGHTS AND REMEDIES CUMULATIVE; DAMAGES. All rights and remedies
hereunder are cumulative and may be enforced separately or concurrently and from
time to time, unless otherwise specifically stated herein. The enforcement of
any particular remedy shall not constitute an election of remedies, and no
remedy is exclusive unless specifically stated herein. Each party's sole
remedies for the breach by the other party of any obligations contained in this
Agreement shall be recovery of direct damages, if any, and/or termination of
this Agreement in accordance with Section 7.2. In no event shall either party be
liable to the other party under this Agreement for indirect, special,
incidental, or consequential damages of any kind, including but not limited to
damages for lost profits, lost investments, or lost business opportunities
(collectively, "Consequential Damages") OLYMPUS and VENDOR hereby agree that
direct damages shall not include or contain Consequential Damages.
10.14. CONTRACT INTERPRETATION. Each party hereto acknowledges that it has
had ample opportunity to review and comment on this Agreement. This Agreement
shall be read and interpreted according to its plain meaning and an ambiguity
shall
25
<PAGE>
not be construed against either party. It is expressly agreed by the parties
that the judicial rule of construction that a document should be more strictly
construed against the draftsperson thereof shall NOT apply to any provision of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives of the date first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ Peter Gombrich
---------------------------
Name: Peter Gombrich
Title: Chairman & CEO
OLYMPUS AMERICA INC.-Precision Instrument Division
By: /s/ Sidney Braginsky
---------------------------
Name: Sidney Braginsky
Title: President
26
<PAGE>
SCHEDULE 1.11
PRODUCTS & PRICING
SYSTEMS PRICE
------- -----
AcCell-TM- 2000 [ * ]
AcCell-TM- 2000C with Data
Management System [ * ]
AcCell-TM- 2001 slide handling system
with two cassettes [ * ]
AcCell-TM- 2001C with Data Management
System and two cassettes [ * ]
ACCESSORIES
-----------
Bar code reader [ * ]
Automated dotter [ * ]
Calibration tool for Model 2001
System [ * ]
15001 calibration slide [ * ]
Data Management Software
(as upgrades to Systems) [ * ]
AcCell-TM- Data Management System to
Laboratory information System
software link [ * ]
per installation (estimated, to be
quoted on and case-by-case basis
per end-user specifications)
CONSUMABLES
-----------
Box of four dotter cartridges
(2,000 dots per cartridge) [ * ]
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
SCHEDULE 4.1
QUARTERLY MINIMUMS
Quarter Minimum System Units
- ------- --------------------
Effective Date [+]
2 [+]
3 [+]
4 [+]
5 [+]
6 [+]
7 [+]
8 [+]
9 [+]
10 [+]
11 [+]
12 [+]
* The [+] System units ordered on the Effective Date shall only be delivered
by VENDOR to OLYMPUS when complete and ready for delivery, including but
not limited to (i) inclusion of the System, Accessories, Consumables, and
System firmware, and (ii) full compliance with the requirements set forth
in Sections 2.5(a), 3.1(i), 3.2(a), and 3.5 of this Agreement.
+PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
SCHEDULE 5.13
POST-WARRANTY REPAIR SERVICE RATES
[ * ] per labor hour
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
EXHIBIT A
INSPECTION & TEST PROCEDURES
TO BE COMPLETED AND ATTACHED WITHIN 30 DAYS FROM THE EFFECTIVE
DATE.
<PAGE>
EXHIBIT B
SPECIFICATIONS
SEE ATTACHED
<PAGE>
AcCell-TM- Cytopathology System Model 2000 Specifications
[ * ]
2KSPECS 8/31/95 5/16/96 UPDATE
1
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
[ * ]
2KSECS 8/31/95 5/16/96 UPDATE
2
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
[ * ]
2KSPECS 8/31/95 5/16/96 UPDATE
3
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
[ * ]
2KSPECS 8/31/95 5/16/95 UPDATE
4
*PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
<PAGE>
EXHIBIT 10.33
ACCUMED INTERNATIONAL, INC.
(A DELAWARE CORPORATION)
------------------------
PROMISSORY NOTE
------------------------
Chicago, Illinois
$61,000.00 May 22, 1996
Peter P. Gombrich (the "Payor"), for value received, promises to pay to
AccuMed International, Inc., a Delaware corporation, with its principal place of
business located at 920 N. Franklin Street, Suite 402, Chicago, Illinois 60610
(the "Payee") on or before ten (10) days from and after the date of this
Promissory Note (the "Maturity Date") at the Payee's address set forth
hereinabove or, at such other place as the Payee shall hereafter specify in
writing, the principal sum of Sixty One Thousand Dollars ($61,000.00), in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
The following is a statement of the rights of the Payee and the conditions
to which this Note is subject, to which the Payee, by the acceptance of this
Note, agrees:
1. INTEREST AND PAYMENT.
1.1 The unpaid principal amount hereof shall bear simple interest from the
date hereof at the rate of 10% per annum until the Maturity Date (or until any
such earlier date of payment if this Note is prepaid as hereinafter provided).
1.2 Interest shall be payable in arrears, on the last day of each month
until paid in full.
1.3 If payment of the principal amount hereof and interest accrued thereon
is not made on or prior to the Maturity Date, then interest shall accrue on such
unpaid principal amount from the date of nonpayment to the date of payment at
the interest rate of 17% per annum or the maximum interest rate permitted by
applicable law, if lower than 17%.
1.4 In no event shall the Payee be entitled to receive interest, however
characterized and including other consideration received in connection with this
Note, at an effective rate in excess of the maximum rate permitted by law. In
the event that a court of competent jurisdiction shall determine that such
amounts paid or agreed to be paid by the Payor in connection with this Note
cause the effective interest rate under this Note to exceed the maximum rate
permitted by law, such interest shall automatically be reduced to the maximum
rate permitted by law over the term hereof, and, in such event, the Payee shall
either apply to the reduction of the unpaid principal balance of this Note any
amounts received by it deemed to constitute excessive interest or refund such
excess to the Payor.
The Payor may prepay all or any portion of the principal amount outstanding
and accrued interest under this Note without penalty at any time. In the event
of prepayment of any principal, interest will thereafter cease to accrue as to
the portion prepaid.
2. EVENTS OF DEFAULT. If any of the following events shall occur (herein
individually referred to as an "Event of Default"), the Payee may declare the
entire unpaid principal and accrued interest on this Note immediately due and
payable, by a notice in writing to the Payor:
2.1 Any default by the Payor under any provision of this Note (provided
such default is not cured by the Payor within ten (10) days after receipt of
written notice of such default from Payee) or if any material representation
or warranty of the Payor herein is untrue; or
2.2 The institution by the Payor of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by him to institution of bankruptcy or
insolvency proceedings against him or the filing by him of a petition or
answer or consent seeking reorganization or release under the Federal
bankruptcy laws, or any other applicable Federal or state law, or the
consent by him to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, or other similar official, of the
Payor, or of any substantial part of his property, or the making by him of
an
<PAGE>
assignment for the benefit of creditors, or the admission by him in writing
of his inability to pay his debt generally as they become due or the taking
of corporate action by the Payor in furtherance of any such action; or
2.3 If, within 30 days after the commencement of an action against the
Payor seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the Payor
stayed, or if the stay of any such order or proceeding shall thereafter be
set aside, or if, within 30 days after the appointment without the consent
or acquiescence of the Payor of any trustee, receiver or liquidator of all
or any substantial part of the properties of the Payor, such appointment
shall not have been vacated.
2.4 If the Payor shall have failed to pay in full the outstanding
principal balance and accrued interest thereon on or prior to the Maturity
Date.
3. OWNERSHIP REGISTRATION; NO TRANSFERS OR ASSIGNMENTS. The Payor may deem
and treat the person in whose name this Note shall be registered as the absolute
owner of such Note for the purpose of receiving payment of principal and
interest and for all other purposes. The Payee may not transfer or assign this
Note or any of the rights hereunder without the prior written consent of the
Company at its sole discretion.
4. WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived
or modified only upon the written consent of the Payor and the Payee.
5. ATTORNEYS' FEES. In the event of any action by the Payee to enforce the
terms hereof the Payee shall be obligated to pay all Payor's reasonable
attorneys' fees and costs in connection therewith in the event Payor prevails.
6. GOVERNING LAW. The provisions of this Note shall be governed by and
construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the Payor has caused this Note to be signed in its name
this 22nd day of May, 1996.
ACCUMED INTERNATIONAL, INC.
By: /s/ Peter P. Gombrich
------------------------------------------------------------------------------
Peter P. Gombrich
<PAGE>
EXHIBIT 10.34
[LETTERHEAD]
Non-Negotiable Promissory Note
$ 775,000.00
Chicago, Illinois July 22, 1996
FOR VALUE RECEIVED, AccuMed International, Inc. ("AccuMed") having an
office at 900 North Franklin, Chicago, Illinois 60610 hereby promises to pay
Radco Ventures, Inc. ("Radco") the principal sum of $775,000.00 without
interest. This note shall be payable on July 21, 1997 unless earlier satisfied
in accordance with the terms hereof.
This note shall be deemed satisfied and shall be cancelled upon the
closing of the purchase by AccuMed from the holders thereof ("Holders") of the
Radco common stock and the Radco promissory notes sold to investors in 1996
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended, for a purchase price equal to $1,105 per unit.
If any provision of this note is held for any reason to be
unenforceable, the remainder of this note shall nevertheless remain in full
force and effect.
This note supersedes all prior agreements, arrangements or
understandings of the parties with respect to its subject matter.
This note shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns, and may not be changed
orally.
IN WITNESS WHEREOF, Accumed International, Inc. has caused this note
to be duly executed on its behalf on the date first above stated.
ACCUMED INTERNATIONAL, INC.
BY /s/ Peter P. Gombrich
-------------------------------
WITNESS:
/s/ Mark L. Santor
- ------------------------------
<PAGE>
Exhibit 10.35
EMPLOYMENT SEPARATION AGREEMENT AND RELEASE
This Employment Separation Agreement and Release is made and entered into
as of this 24th day of June, 1996 by and between Kenneth D. Miller, an
individual ("Employee") and AccuMed International, Inc. (which, together with
its predecessor Alamar Biosciences Laboratory, Inc., its parent, current and
former subsidiaries, affiliates, predecessors, successors, assigns, insurers,
agents and employees shall hereinafter be collectively referred to as
"Employer"), and the parties hereby agree as follows:
1. Employee has voluntarily resigned from his employment with Employer
effective June 30, 1996. During his employment with Employer, Employee will
retain the title of corporate Senior Vice President and acting President of
RADCO, and will report to Employer's CEO Peter P. Gombrich. In addition, during
his employment with Employer, Employee will be on special assignment for the
Microbiology Division. Employee acknowledges that he resigned as a corporate
officer effective May 7, 1996. Employee will be paid his regular salary and
benefits through his last day of employment. It is understood and agreed that
Employee may seek other employment opportunities and may, upon reasonable notice
to Employer, change the date of his resignation to an earlier date.
2. Employer has requested, and Employee has agreed that during the months
of July, August, September and October, 1996 Employee will spend 70% of his time
during the course of normal work week, discharging the responsibilities of RADCO
as
<PAGE>
its acting President, and as a consultant to the Employer. For these services
Employee will receive compensation, at the rate of:
a. RADCO compensation $4,250.00 per month
b. Employer compensation $1,875.00 per month
3. Employer acknowledges that as of this date, Employee has vested
options to purchase 140,000 shares (25,000 shares at $1.13 per share and 115,000
shares at $1.39 per share) of AccuMed stock pursuant to his Incentive Stock
Option Agreements with Alamar Biosciences, Inc. These options will continue to
be governed by the Incentive Stock Option Agreements dated June 21, 1991 and May
22, 1992 and correspondence relating thereto, and Employee shall have no greater
rights pursuant to this Agreement than he had under those Agreements. Provided,
however, that notwithstanding the terms of the Incentive Stock Option Agreements
Employee's options must be exercised on or before September 30, 1996, or they
will be forfeited, canceled, terminated, and of no further effect, and they may
not be exercised thereafter. Employee has reserved the right to discuss with
his tax accountant and attorney regarding potential tax liability that may be
incurred by exercising his options that could affect his accord with the
Agreement, and further, reserves the right to have Section 3. in the Agreement
modified, mutually agreeable to Employer and Employee, at a date future (but not
later than June 30th, 1996) to reasonably reduce potentially excessive tax
liability. The Employer agrees to this reservation so long as it is
acknowledged by Employee that the Employer is not offering any further monetary
compensation.
2
<PAGE>
4. Employee will be paid all submitted business expenses on or before
June 30, 1996. Employee will be paid $8662.37 in accrued vacation time and
$7,437.00 for relocation gross-up in three equal monthly payments beginning July
15, 1996 and the last payment being made September 15,1996. If Employee signs
this Agreement after it is tendered to him, and signs the Acknowledgment
attached as Exhibit A after his employment terminates, and if Employee does not
revoke his signatures on this Agreement or the Acknowledgment to this Agreement,
Employee will be paid Two Thousand Six Hundred Twenty-Five Dollars ($2625) per
month less applicable taxes and deductions for four months on the 15th and the
last day of each month for a period of four months, beginning on July 15, 1996
and ending on October 31, 1996; and commencing November 15, 1996 and for the
next four months (November and December 1996 and January and February 1997) the
Employee will be paid the sum of Six Thousand One Hundred and Twenty-Five
Dollars ($6,125.00) per month on the 15th and the last day of each month, less
any applicable taxes and deductions. Said payments shall be made regardless of
continuance of the Employee consulting with Employer or acting as President of
RADCO. In addition, Employer will continue to pay for Employer's portion of any
health, dental and other insurance benefits that Employee now receives, and that
Employee is entitled to receive, through October 31, 1996. Employee
acknowledges that these payments greatly exceed the amount otherwise due to him,
and that they are payments made in consideration for his entering into this
Agreement. Employee acknowledges that no further amounts are due for salary,
severance, bonus, vacation pay, stock options, pursuant to contract or
otherwise. By these payments,
3
<PAGE>
Employer does not admit that it has any liability to Employee for any reason
whatsoever, and the entry into this Agreement shall not constitute any admission
of or evidence of any type of unfair, unlawful, or improper conduct by Employer.
Rather, such payment is solely for the purpose of settling forever any claims,
actual or potential, which Employee may have or believe he has, with respect to
any events involving his employment relationship with Employer or the
termination of such relationship.
5. Employee on his own behalf and on behalf of his heirs and assigns,
releases, forever discharges and covenants not to sue Employer with respect to
all claims, causes of action, suits, debts, sums of money, controversies,
agreements, promises, damages and demands whatsoever, including attorney's fees
and court costs, in law, equity or before any federal, state or local
administrative agency, for, on account of, or in relation to any contract of
employment and/or employment relationship between Employee and Employer, or the
termination of such relationship, which Employee has or may have as of the date
of this Agreement, including but not limited to claims under the Age
Discrimination in Employment Act.
6. Employee agrees that, during his employment with Employer, and for a
period of one year after his employment terminates, Employee shall not, either
alone or in association with others, directly or indirectly, whether as a
proprietor, partner, director, officer, agent, salesperson, consultant or
otherwise: (a) solicit, or employ, or authorize to be solicited for employment
any persons who were, at any time within six (6) months prior to the termination
of Employee's employment, employees of the Employer; or (b) in any other way
divert, take away or interfere with any of the custom,
4
<PAGE>
trade, business patronage of the cytopathology division and its products or
employees of the Employer.
7. Employee acknowledges that he has had access to and been involved in
strategic new product planning and development, and that the disclosure of this
information to competitors would cause irreparable harm to Employer. Thus,
Employee further agrees that, during the term of his employment, and for a
period of one year after his employment terminates he will not seek or accept
employment or engage in any business as an officer, director, employee, partner,
agent, consultant or in any other individual or representative capacity, which
competes with Employer, or which is engaged in the development of cytopathology
products involved with automated microscopy and image analysis, including but
not limited to Neopath, Neuromedical Systems, Roche Imaging Systems, Cytyc and
Compucyte or their subsidiaries or affiliates. Employee agrees that he will not
retain, use or disclose, directly or indirectly, any of Employer's confidential
information. Employee understands and agrees that confidential information
includes, without limitation, all new product information, customer lists,
customer specifications, customer contact persons, specialized business methods,
techniques, computer data, plans and knowledge relating to the business of
Employer, advertising, marketing materials and concepts, customer information,
methods for developing and maintaining business relationships with clients and
prospective clients, prospective customer lists, procedural manuals, employee
training and review programs, price lists, payroll and personnel information,
cost information and any other confidential information or trade secrets that
may have been imparted to Employee by Employer, or
5
<PAGE>
which Employee has learned of as a result of his employment with Employer.
Employee recognizes that this confidential information is a unique asset of
Employer, developed and perfected over a considerable time and at substantial
expense to Employer and the disclosure of which may cause injury, loss of
profits and loss of goodwill to Employer. Employee agrees to protect the
confidentiality and use of all confidential information during his employment
and thereafter. Employee agrees to keep all confidential documents in secure
locations and not to use or reveal any confidential information during the term
of Employee's employment except as necessary for the business purposes of
Employer. Employee agrees that he will not use, disclose, copy, discuss, or
disseminate any of Employer's confidential information.
8. Employee acknowledges that all papers, photographs and apparatus
related to the business of Employer, including those prepared or made by
Employee, including but not limited to confidential information, new product
information, customer lists, records, and marketing materials, shall be and
remain at all times the property of Employer. On or before the date his
employment terminates, Employee agrees to return to Employer any personal
property owned by Employer, including, but not limited to, samples, manuals,
schedules, equipment, reports, or files obtained by and through Employee's
employment by Employer, and all correspondence, written memoranda, diagrams,
books, computerized data and computer software, records, notebooks, films and
other documents, and all copies thereof relating in any way to any confidential
information about Employer, whether prepared by Employee or by others.
6
<PAGE>
9. Employee states that the provisions of this Agreement are not a
hardship to him, that he has employment opportunities in fields other than the
development of cytopathology products, and that this Agreement will not prevent
him from obtaining employment. Employee recognizes that Employer's market is
global, and agrees that it this Agreement is reasonable despite the absence of
any geographic restriction.
10. Employee understands that in the event of a violation or attempted
violation of the provisions of this Agreement: (a) Employer will suffer
irreparable harm to its business for which Employer would have no adequate
remedy at law; (b) Employer, in addition to any other remedies available in law
or in equity, may seek from any court of competent jurisdiction an order
enjoining Employee from any further violations or attempted violations of the
provisions of this Agreement or compelling Employee to comply with the
provisions of this Agreement; (c) Employee waives any and all rights to contest
jurisdiction and venue in the courts of the County of Cook or the Northern
District of Illinois over Employee for the purposes of enforcing this Agreement;
and (d) Employee shall be liable for all damages resulting from such violations
or attempted violations, including but not limited to the Employer's attorney's
fees and court costs incurred in seeking to enforce this Agreement.
11. Employee authorizes Employer to open any mail received by it which is
addressed to him, and is not marked "Personal," including but not limited to
mail received after the termination of Employee's employment.
12. Employee acknowledges that the provisions of the Confidential
Disclosure Agreement between Employee and Alamar Biosciences Laboratory, Inc.,
which was
7
<PAGE>
entered into on or about August 31, 1989, remains in full force and effect, and
reaffirms that he will abide by the terms of that Agreement. A copy of that
Agreement is attached hereto and made a part hereof as Exhibit B. Employee
further acknowledges that the provisions of the Trade Secrets and Patent
Agreement between Employee and AccuMed International, Inc., which was entered
into on or about April 12, 1996, remains in full force and effect, and reaffirms
that he will abide by the terms of that Agreement. A copy of that Agreement is
attached hereto and made a part hereof as Exhibit C.
13. Employee agrees not to seek to be hired or rehired by Employer and not
to seek to extend the period of his employment or relationship with Employer
beyond June 30, 1996, and waives any future employment with Employer.
Notwithstanding the foregoing, it is understood and agreed that, upon mutual
agreement of Employer and Employee, Employee may enter into a consulting
agreement with Employer that is separate from and has no bearing upon this
Separation Agreement.
14. This Agreement is confidential, and Employee will not inform any
person of its terms and conditions, except for his immediate family, attorney
and those necessary for Employee's compliance with legal requirements.
15. Employer will respond to any telephone inquiries from prospective
employers of Employee with information as to his length of service with
Employer, the type of work which he performed, and his level of compensation.
Employer will also provide a letter of reference in the form set forth in
Exhibit D upon request. Employer will not make any statements to prospective
employers which could reasonably be expected to have an adverse impact on
Employee's employment opportunities, nor will
8
<PAGE>
Employee make any statements which may reasonably be expected to adversely
affect the business or reputation of Employer. Employer agrees that its CEO
Peter Gombrich will accept telephone calls from prospective employers of
Employee and will provide a fair and balanced reference.
16. Employee understands that the Agreement fully sets forth all
separation benefits he will receive from Employer, and it supersedes any
previous offers or promises, whether oral or written.
17. Employee acknowledges that he has fully read this Agreement,
understands its terms, has been advised to consult with an attorney prior to
signing this Agreement, has been given 21 days to consider this release and its
ramifications, has been given 7 days after signing to rescind this Agreement,
and is entering into this Agreement knowingly and voluntarily.
/s/ Kenneth D. Miller
------------------------
Kenneth D. Miller
ACCUMED
INTERNATIONAL, INC.
By:/s/ Peter P. Gombrich
---------------------
Peter P. Gombrich
Its Chairman and CEO
9
<PAGE>
EXHIBIT A
ACKNOWLEDGMENT
Employee acknowledges that his resignation was effective on June 30, 1996,
and that he agrees to all of the terms of this Employment Separation Agreement
and Release.
DATE:________________ _________________________
Kenneth D. Miller
10
<PAGE>
Exhibit 10.36
EMPLOYMENT SEPARATION AGREEMENT AND RELEASE
This Employment Separation Agreement and Release is made and entered into
as of this 10th day of June, 1996, by and between Mark L. Santor, an individual
("Employee") and AccuMed International, Inc. (which, together with its
predecessor Alamar Biosciences Laboratory, Inc., its parent, current and former
subsidiaries, affiliates, predecessors, successors, assigns, insurers, agents
and employees shall hereinafter be collectively referred to as "Employer"), and
the parties hereby agree as follows:
1. Employee has voluntarily resigned from his employment with Employer
effective August 30, 1996. During his employment with Employer, Employee will
retain the title of Chief Financial Officer and will report to Employer's CEO
Peter P. Gombrich. Employee acknowledges that he has resigned as Vice President
of Operations effective June 1, 1996 and will resign as a corporate officer and
Chief Financial Officer on a date to be specified by the Employer or August 30,
1996, whichever is earlier. Employee will be paid his regular salary and
benefits through his last day of employment. It is understood and agreed that
Employee may seek other employment opportunities and may, providing Employee
keeps the search entirely confidential, upon reasonable (not to exceed thirty
days) notice to Employer, change the date of his resignation to an earlier date.
Employee will be allowed reasonable time for scheduled outside interviews
without reduction of accrued vacation. Employee further acknowledges that any
public disclosure of his job search or intention to secure other employment
before August 30, 1996, and in particular in this interim time period would be
very harmful to the Company, and will exercise every available means to see to
it that his
<PAGE>
search remains a confidential matter, notwithstanding disclosure beyond his
control from other employees of the Employer.
2. Employee has Incentive Stock Option agreements with Alamar Biosciences,
Inc. and AccuMed International, Inc. and governed by plans dated June 21, 1991,
May 22, 1992 and December 29, 1995 and correspondence relating thereto.
Notwithstanding the terms of these Incentive Stock Agreements, Employer hereby
immediately vests all of the Employee's stock options and extends the expiration
dates of all of the options, including any scheduled to expire in 1996, to
January 15, 1997. Employer acknowledges that as of this date, Employee has
vested options to purchase 106,961 shares (75,000 shares at $1.13 per share,
28,961 shares at $1.39 per share and 3,000 shares at $0.75 per share) of AccuMed
stock pursuant to his Incentive Stock Option Agreements with Alamar Biosciences,
Inc. Except as provided above, Employee shall have no greater rights pursuant
to this Agreement than he had under those Incentive Stock Option Agreements.
Provided, however, that notwithstanding the terms of the Incentive Stock Option
Agreements, Employee's options must be exercised on or before January 15, 1997,
or they will be forfeited, canceled, terminated, and of no further effect, and
they may not be exercised thereafter.
3. Employee will be reimbursed normal business expenses as incurred and
approved on expense reports. Employee will be paid $13,998.00 in accrued
vacation time, less any accrued vacation time used before August 30, 1996, in
three equal amounts; an amount equal to one of third of total ($4,666.00) being
payable August 30, 1996, September 30, 1996 and October 31, 1996. Employer
hereby immediately forgives
2
<PAGE>
and considers paid $3,300.00 of the amount due on a $6,600.00 note and any other
obligations to the Employer relating to the Employee's 1995 home purchase and/or
relocation to the Chicago area. Any other terms and conditions, and balance
outstanding, as set for in the note (attached as Exhibit A) will remain in
force. If Employee signs this Agreement after it is tendered to him, and signs
the Acknowledgment attached as Exhibit B after his employment terminates, and if
Employee does not revoke his signatures on this Agreement or the Acknowledgment
to this Agreement, Employee will be paid Eight Thousand Seven Hundred Fifty
Dollars ($8,750) per month less applicable taxes and deductions for three months
on the 15th and the last day of each month, beginning on September 15, 1996 and
ending on November 30, 1996. In addition, Employer will continue to pay for
Employer's portion of any health, dental and other insurance benefits that
Employee now receives, and that Employee is entitled to receive, through
November 30, 1996 or until Employee secures other insurance benefits, which ever
shall occur first. Employee acknowledges that these payments greatly exceed the
amount otherwise due to him, and that they are payments made in consideration
for his entering into this Agreement. Employee acknowledges that no further
amounts are due for salary, severance, bonus, vacation pay, stock options,
pursuant to contract or otherwise. By these payments, Employer does not admit
that it has any liability to Employee for any reason whatsoever, and the entry
into this Agreement shall not constitute any admission of or evidence of any
type of unfair, unlawful, or improper conduct by Employer. Rather, such payment
is solely for the purpose of settling forever any claims, actual or potential,
which Employee may have or believe he has, with respect to any events
3
<PAGE>
involving his employment relationship with Employer or the termination of such
relationship.
4. Employee on his own behalf and on behalf of his heirs and assigns,
releases, forever discharges and covenants not to sue Employer with respect to
all claims, causes of action, suits, debts, sums of money, controversies,
agreements, promises, damages and demands whatsoever, including attorney's fees
and court costs, in law, equity or before any federal, state or local
administrative agency, for, on account of, or in relation to any contract of
employment and/or employment relationship between Employee and Employer, or the
termination of such relationship, which Employee has or may have as of the date
of this Agreement, including but not limited to claims under the Age
Discrimination in Employment Act.
5. Employee agrees that, during his employment with Employer, and for a
period of one year after his employment terminates, Employee shall not, either
alone or in association with others, directly or indirectly, whether as a
proprietor, partner, director, officer, agent, salesperson, consultant or
otherwise: (a) solicit or employ or cause or authorize to be solicited for
employment any persons who were, at any time within six (6) months prior to the
termination of Employee's employment, employees of the Employer; or (b) in any
other way divert, take away or interfere with any of the custom, trade, business
patronage or employees of the Employer.
6. Employee acknowledges that he has had access to and been involved in
strategic new product planning and development, and that the disclosure of this
information to competitors would cause irreparable harm to Employer. Thus,
employee
4
<PAGE>
further agrees that, during the term of his employment, and for a period of one
year after his employment terminates, he will not seek or accept employment or
consulting work from any company engaged in the development of either
microbiology MID/ID panels and/or associated automated reading equipment or
cytopathology products involved with automated microscopy and image analysis,
including but not limited to Neopath, Neuromedical Systems, Roche Imaging
Systems, Cytyc and Compucyte. Employee agrees that he will not retain, use or
disclose, directly or indirectly, any of Employer's confidential information.
Employee understands and agrees that confidential information includes, without
limitation, all new product information, customer lists, customer
specifications, customer contact persons, specialized business methods,
techniques, computer data, plans and knowledge relating to the business of
Employer, advertising, marketing materials and concepts, customer information,
methods for developing and maintaining business relationships with clients and
prospective clients, prospective customer lists, price lists, payroll and
personnel information, cost information and any other confidential information
or trade secrets that may have been imparted to Employee by Employer, or which
Employee has learned of as a result of his employment with Employer. Employee
recognizes that this confidential information is a unique asset of Employer,
developed and perfected over a considerable time and at substantial expense to
Employer and the disclosure of which may cause injury, loss of profits and loss
of goodwill to Employer. Employee agrees to protect the confidentiality and use
of all confidential information during his employment and thereafter. Employee
agrees to keep all confidential documents in secure locations and not to use or
reveal any confidential
5
<PAGE>
information during the term of Employee's employment except as necessary for the
business purposes of Employer. Employee agrees that he will not use, disclose,
copy, discuss, or disseminate any of Employer's confidential information.
7. Employee acknowledges that all papers, financial documents, photographs
and apparatus related to the business of Employer, including those prepared or
made by Employee, including but not limited to confidential information, new
product information, customer lists, records, and marketing materials, shall be
and remain at all times the property of Employer. On or before the date his
employment terminates, Employee agrees to return to Employer any personal
property owned by Employer, including, but not limited to, samples, manuals,
schedules, equipment, reports, or files of any kind obtained by and through
Employee's employment by Employer, and all correspondence, written memoranda,
diagrams, books, computerized data and computer software, records, notebooks,
films and other documents, and all copies thereof relating in any way to any
confidential information about Employer, whether prepared by Employee or by
others.
8. Employee acknowledges that the services to be rendered to Employer are
of a special and unique character. Employee agrees that during the term of his
employment, and for one year after his employment terminates, he shall engage in
any business as an officer, director, employee, partner, agent, consultant or in
any other individual or representative capacity which is engaged in the
development of microbiology and/or cytopathology products.
9. Employee acknowledges that he is aware that the Company will be
6
<PAGE>
hiring a Chief Financial Officer to replace Employee. Employee agrees that due
to the special and unique nature of his position of Chief Financial Officer that
he is in possession of proprietary information the location and order of which
he may be the sole source. Employee further agrees that he will actively
participate, work without reservation and put forth his (the Employee's) best
efforts to ensure a smooth and orderly transition of all job responsibilities,
knowledge, and disclosure of all files, information, documentation and pending
matters pertaining to the operation(s) and well-being of the Company. Should
the Employee fail to ensure the orderly transition of job responsibilities
without any reservation, his termination shall be immediate, with Cause and all
provisions of this Agreement shall be null and void.
10. Employee acknowledges and understands that the terms and conditions of
this Agreement are totally conditional upon the Employee conducting himself and
exercising the responsibilities of his office in a prudent manner, spending the
necessary time to fullfill the requirements of the position and refraining from
any derogatory comments or opinions of the Company or its management or any
inappropriate behavior of any kind. Should the Employee fail to fulfill these
terms and conditions as set forth in this Agreement the Company reserves the
right to immediately terminate the Employee, and all terms and conditions
contained in this Agreement will be null and void.
11. Employee states that the provisions of this Agreement are not a
hardship to him, that he has employment opportunities in fields other than the
development of microbiology and cytopathology products, and that this Agreement
will
7
<PAGE>
not prevent him from obtaining employment. Employee recognizes that Employer's
market is global, and agrees that it this Agreement is reasonable despite the
absence of any geographic restriction.
12. Employee understands that in the event of a violation or attempted
violation of the provisions of this Agreement: (a) Employer will suffer
irreparable harm to its business for which Employer would have no adequate
remedy at law; (b) Employer, in addition to any other remedies available in law
or in equity, may seek from any court of competent jurisdiction an order
enjoining Employee from any further violations or attempted violations of the
provisions of this Agreement or compelling Employee to comply with the
provisions of this Agreement; (c) Employee waives any and all rights to contest
jurisdiction and venue in the courts of the County of Cook or the Northern
District of Illinois over Employee for the purposes of enforcing this Agreement;
and (d) Employee shall be liable for all damages resulting from such violations
or attempted violations, including but not limited to the Employer's attorney's
fees and court costs incurred in seeking to enforce this Agreement.
13. Employee authorizes Employer to open any mail received by it which is
addressed to him, and is not marked "Personal," including but not limited to
mail received after the termination of Employee's employment.
14. Employee acknowledges that the provisions of the Confidential
Disclosure Agreement between Employee and Alamar Biosciences Laboratory, Inc.,
which was entered into on or about August 31, 1989, remains in full force and
effect, and reaffirms that he will abide by the terms of that Agreement. A copy
of that
8
<PAGE>
Agreement is attached hereto and made a part hereof as Exhibit C. Employee
further acknowledges that the provisions of the Trade Secrets and Patent
Agreement between Employee and AccuMed International, Inc., which was entered
into on or about April 12, 1996, remains in full force and effect, and reaffirms
that he will abide by the terms of that Agreement. A copy of that Agreement is
attached hereto and made a part hereof as Exhibit D.
15. Employee agrees not to seek to be hired or rehired by Employer and not
to seek to extend the period of his employment or relationship with Employer
beyond August 30, 1996, and waives any future employment with Employer.
Notwithstanding the foregoing, it is understood and agreed that, upon mutual
agreement of Employer and Employee, Employee may enter into a consulting
agreement with Employer that is separate from and has no bearing upon this
Separation Agreement.
16. This Agreement is confidential, and Employee will not inform any
person of its terms and conditions, except for his immediate family, attorney
and those necessary for Employee's compliance with legal requirements.
17. Employer will respond to any telephone inquiries from prospective
employers of Employee with information as to his length of service with
Employer, the type of work which he performed, and his level of compensation.
Employer will also provide a letter of reference in the form set forth in
Exhibit E upon request. Employer will not make any statements to prospective
employers which could reasonably be expected to have an adverse impact on
Employee's employment opportunities, nor will Employee make any statements which
may reasonably be expected to adversely affect the
9
<PAGE>
business or reputation of Employer. Employer agrees that its CEO Peter Gombrich
will accept telephone calls from prospective employers of Employee and will
provide a fair and balanced reference.
18. Employee understands that the Agreement fully sets forth all
separation benefits he will receive from Employer, and it supersedes any
previous offers or promises, whether oral or written.
19. Employee acknowledges that he has fully read this Agreement,
understands its terms, has been advised to consult with an attorney prior to
signing this Agreement, has been given 21 days to consider this release and its
ramifications, has been given 7 days after signing to rescind this Agreement,
and is entering into this Agreement knowingly and voluntarily.
/s/ Mark L. Santor
-----------------------
Mark L. Santor
ACCUMED
INTERNATIONAL, INC.
By:/s Peter P. Gombrich
--------------------
Peter P. Gombrich
Its Chairman and CEO
10
<PAGE>
EXHIBIT B
ACKNOWLEDGMENT
Employee acknowledges that his resignation was effective on August 30,
1996, and that he agrees to all of the terms of this Employment Separation
Agreement and Release.
DATE:
---------------- -------------------------
Mark L. Santor
11
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion or incorporation by reference in this Form S-2
(to be filed with the Commission on or about July 23, 1996) of our report dated
September 14, 1995, on our audit of the balance sheet of Sensititre/Alamar, the
Microbiology Division of AccuMed, Inc., as of December 31, 1994, and the net
sales, cost of sales and selling expenses for the eight months ended December
31, 1994, and the years ended April 30, 1994 and 1993; of our report, which
includes an explanatory paragraph related to substantial doubt about the ability
of AccuMed, Inc. to continue as a going concern, dated September 29, 1995, on
our audit of the balance sheet of AccuMed, Inc. as of December 31, 1994, and for
the period from February 7, 1994 (inception) through December 31, 1994, both
appearing in the registration statement on form S-4 (SEC File No. 33-99680) of
Alamar Biosciences, Inc. filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 as incorporated by reference in the
Current Report on Form 8-K dated December 29, 1995; and of our report, which
includes an explanatory paragraph related to substantial doubt about the ability
of Alamar Biosciences, Inc. to continue as a going concern, dated November 19,
1995, on our audits of the financial statements of Alamar Biosciences, Inc. as
of September 30, 1995 and 1994, and for the years ended September 30, 1995, 1994
and 1993, which report is included in the Annual Report on Form 10-KSB for the
year ended September 30, 1995. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Sacramento, CA
July 19, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form S-2 (to be filed
with the Securities and Exchange Commission on or about July 23, 1996) of our
report dated December 8, 1995, on our audit of the balance sheets of AccuMed
International Limited as of December 31, 1994, April 30, 1994 and 1993, and
related statements of operations and cashflows for the eight months ended
December 31, 1994, and the years ended April 30, 1994 and 1993, appearing in the
registration statement on Form S-4 (SEC File No. 33-99680) of Alamar
Biosciences, Inc. filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933 as incorporated by reference in the current Report on
Form 8-K dated December 29, 1995.
/s/ COOPERS & LYBRAND
Croydon
United Kingdom
July 19, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
AccuMed International, Inc.
We consent to the use of our report dated April 5, 1996 relating to the
consolidated balance sheet of AccuMed International, Inc. and subsidiary as of
December 31, 1995 and the related consolidated statements of operations,
stockholders' equity and cash flows for three months ended December 31, 1995,
included in this Prospectus and incorporated herein by reference from the
Company's transition report on Form 10-KSB for the three months ended December
31, 1995, and to the reference to our firm under the heading "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
July 25, 1996
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Oncometrics Imaging Corp.
We consent to the use of our report included herein and to reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG
Chartered Accountants
Vancouver, British Columbia
July 25, 1996
<PAGE>
CONSENT OF BANNER & ALLEGRETTI, LTD.
We consent to the reference to our firm under the heading "Experts" in the
Prospectus constituting part of the Registration Statement on Form S-2 and
amendments thereto.
We further consent to the incorporation by reference of this consent
pursuant to Rule 439(b) under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to any subsequent registration statement for the
same offering that may be filed pursuant to Rule 462(b) under the Securities
Act.
/s/ BANNER & ALLEGRETTI, LTD.
---------------------------------
By: /s/ Bradley J. Hulbert
10 S. Wacker Drive
Chicago, Illinois 60606
July 23, 1996
<PAGE>
CONSENT OF EXPERTS
We consent to the reference to our firm under the heading "Experts" in the
Prospectus constituting part of the Registration Statement on Form S-2 and
amendments thereto.
We further consent to the incorporation by reference of this consent
pursuant to Rule 439(b) under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to any subsequent registration statement for the
same offering that may be filed pursuant to Rule 462(b) under the Securities
Act.
/s/ James Heslin
----------------------------------
Townsend and Townsend and Crew LLP
379 Lytton Avenue
Palo Alto, California 94301
July 23, 1996
