<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____ to _____.
Commission file number 0-20652
ACCUMED INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-4054899
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
900 N. Franklin St., Suite 401, Chicago, IL 60610
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(Address of principal executive offices)
(312) 642-9200
-------------------------------------------------
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock outstanding as of November 10, 1997:
22,683,023 Transitional Small Business Disclosure Format (check one):
Yes [X] No [ ]
<PAGE> 2
ACCUMED INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. Financial Information
1. Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996...................... 1
Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 and 1996 and
Three Months Ended September 30, 1997 and 1996................ 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996................. 3
Notes to Consolidated Financial Statements........................ 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
PART II. Other Information
6. Exhibits and Reports on Form 8-K.................................. 11
SIGNATURES.......................................................................... 17
</TABLE>
<PAGE> 3
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
------------------
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,549,914 $ 2,801,359
Restricted cash - 100,000
Accounts receivable 5,033,413 2,143,596
Prepaid expenses and deposits 653,693 217,198
Production inventory 3,240,081 1,772,127
------------ ------------
Total current assets 10,477,101 7,034,280
------------ ------------
Fixed assets, net 5,901,605 1,696,071
------------ ------------
Notes receivable 225,700 214,273
Deferred financing costs 1,635,424 -
Intangible assets 5,122,400 5,340,411
Other assets 600,762 194,507
------------ ------------
$ 23,962,992 $ 14,479,542
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,700,210 $ 2,340,769
Other current liabilities 1,138,590 879,808
Deferred revenue 139,305 146,968
Notes payable 1,150,100 198,555
Capital lease obligation due within one year 67,122 89,810
------------ ------------
Total current liabilities 7,195,327 3,655,910
------------ ------------
Warranty reserves 1,064,092 -
Long term debt 12,090,795 230,795
Minority interest 152,408 456,841
------------ ------------
13,307,295 687,636
------------ ------------
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares
authorized, 22,658,324 shares issued and outstanding
at September 30, 1997, 20,854,157 at December 31, 1996 226,583 208,542
Additional paid-in capital 51,838,319 44,424,646
Cumulative translation adjustment 32,586 32,586
Accumulated deficit (48,420,381) (34,335,313)
Less treasury stock, 37,956 shares at Sept. 30, 1997,
and 31,812 shares at December 31, 1996, respectively (216,737) (194,465)
------------ ------------
Total stockholders' equity 3,460,370 10,135,996
------------ ------------
$ 23,962,992 $ 14,479,542
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE> 4
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 14,157,306 $ 3,668,150 $ 4,914,004 $ 1,356,056
Less cost of sales (8,905,595) (2,054,122) (3,331,740) (588,665)
------------ ------------ ------------ ------------
Gross profit (loss) 5,251,711 1,614,028 1,582,264 767,391
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 6,280,715 2,874,079 1,833,732 1,082,545
Research and development 3,639,509 1,798,289 1,340,234 508,604
Acquired research and development - 3,499,727 - -
Goodwill writeoff 3,582,068 - - -
Sales and marketing 3,215,636 1,465,047 1,125,213 623,481
------------ ------------ ------------ ------------
Total operating expenses 16,717,928 9,637,142 4,299,179 2,214,630
------------ ------------ ------------ ------------
Operating income (loss) (11,466,217) (8,023,114) (2,716,915) (1,447,239)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 19,808 15,796 7,841 4,336
Interest expense (2,960,893) (450,628) (472,851) (12,643)
Other income (expense), net 18,449 3,588,623 (22,320) 58,818
Minority interest 303,785 (1,004,082) 116,569 (18,790)
------------ ------------ ------------ ------------
Total other income (expense) (2,618,851) 2,149,709 (370,761) 31,721
------------ ------------ ------------ ------------
Loss before income taxes (14,085,068) (5,873,405) (3,087,676) (1,415,518)
Income tax expense - 850 - -
------------ ------------ ------------ ------------
Net loss $(14,085,068) $ (5,874,255) $ (3,087,676) $ (1,415,518)
============ ============ ============ ============
Net loss per share $ (0.65) $ (0.36) $ (0.14) $ (0.08)
============ ============ ============ ============
Weighted average common shares outstanding 21,574,098 16,502,973 22,482,305 17,722,514
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 5
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(14,085,068) $ (5,874,255)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,161,617 866,733
Write-off of debt discount 1,966,340 -
Write-off of in-process research and development - 3,499,727
Write-off of impaired goodwill 3,582,068 -
Minority interest (303,785) -
Expenses paid with issuance of stock and warrants - 1,441,484
Non-cash gain on settlement (22,272) (159,957)
Loss on disposal of assets - 74,706
Changes in assets and liabilities:
Decrease in restricted cash 100,000 63,000
(Increase) in accounts receivable (679,152) (553,069)
(Increase) in prepaid expenses and deposits (436,495) (113,545)
(Increase) in production inventory (457,178) (423,419)
Decrease (Increase) in other and intangible assets (571,147) (736,422)
Increase in accounts payable 2,387,921 888,343
(Increase) in deferred financing costs (821,884) -
Increase (Decrease) in other current liabilities (54,181) 26,056
(Decrease) in warranty reserves (435,908) -
(Decrease) in deferred revenue (7,663) (1,408,806)
------------ ------------
Net cash used in operating activities (7,676,787) (2,409,424)
------------ ------------
Cash used in investing activities:
Purchase of fixed assets (898,372) (938,123)
Acquisition of business, net (6,000,000) -
------------ ------------
Net cash used in investment activities (6,898,372) (938,123)
------------ ------------
Cash flows from financing activities:
Proceeds from issuances of common stock, net 556,466 2,841,885
Notes receivable (issued) collected (11,427) -
Payment of capital lease obligation (32,870) (63,527)
Proceeds from issuance of notes payable and warrants 14,750,000 1,500,000
Proceeds from bridge loan 6,000,000 -
Payment of notes payable and bridge loan (7,938,455) (964,017)
------------ ------------
Net cash provided by financing activities 13,323,714 3,314,341
------------ ------------
Effect of exchange rates on cash - (1,491)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,251,445) (34,697)
Cash and cash equivalents at beginning of period 2,801,359 180,508
------------ ------------
Cash and cash equivalents at end of period $ 1,549,914 $ 145,811
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACCUMED INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Preparation of Interim Financial Statements: The accompanying consolidated
financial statements have been prepared in accordance with the instructions
to Form 10-QSB and, therefore, do not include all information and footnotes
necessary for a presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles.
In the opinion of management, such consolidated financial statements
reflect all normal and recurring adjustments necessary for a fair
presentation of the results of operations and financial position for the
interim periods presented. Operating results for the three month period
ended September 30, 1997 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997.
2. Basis of Presentation: The condensed consolidated financial statements
include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All significant intercompany balances, transactions and
stockholdings have been eliminated.
3. Merger Transaction: On December 29, 1995, the Company acquired all of the
common stock of AccuMed, Inc. 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, Inc. stockholders and
warrantholders, respectively, 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
63,473 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 is being amortized over the expected period
to be benefited of ten years, with the in-process research and development
charged to operations during the three months ended March 31, 1996.
The contingency associated with the remaining 940,955 shares of Common
Stock and 63,472 warrants was resolved (performance goal achieved) in March
1997 resulting in contingent consideration of $3,582,068. Such amount has
been recorded as goodwill associated with the merger and charged off in its
entirety to operations during the three months ended March 31, 1997 as an
impaired asset.
4. Notes Payable: The Company received $4,500,000 in loan proceeds on
September 30, 1997. The loan bears interest at 14.5% and is secured by all
assets of the Company except for certain royalties and certain stock in the
Company's foreign subsidiaries. Terms of the loan call for 48 monthly
payments of $113,300 and a balloon payment of $696,700 in October
4
<PAGE> 7
2001. The Company also issued 245,783 warrants to purchase Common Stock of
the Company to the lender at an exercise price of $2.60. The warrants were
valued at $201,500, and were recorded as deferred financing costs in the
third quarter. This amount will be written off over four years, the term of
the loan. The Company used an aggregate of $1,250,000 of such loan proceeds
to repay interim financing received in the third quarter under two
installment loan agreements.
The Company utilized the Black-Scholes pricing model to determine the fair
value of the warrants issued. The following assumptions were incorporated
into the model: 245,783 warrants - risk free rate 6%, expected life 5
years, expected volatility 20%, and expected dividend zero.
5. Private Placement. On March 14, 1997, the Company consummated a private
placement (the "Private Placement") of 85 Units each consisting of $100,000
in principal amount of 12% Convertible Promissory Notes (the "Notes") and
Warrants (the "Warrants") to purchase 10,000 shares of the Company's Common
Stock. The Company received net proceeds of approximately $7.8 million from
the Private Placement after deducting commissions and related expenses.
The Notes bear interest at the rate of 12% per annum, payable semi-annually
in arrears on August 15 and February 15 of each year during the term of the
Notes. Principal under the Notes is due March 14, 2000. The Notes are
convertible at the option of the holder into shares of Common Stock at a
conversion price equal to $3.125 (the "Conversion Price").
At the date of issuance the conversion feature of the Notes was "in the
money", with the intrinsic value of such feature calculated as
approximately $1,900,000. Such amount has been reflected as additional
paid-in capital, and was written off as deferred financing costs in the
second quarter, the period in which the notes became convertible.
The Warrants are exercisable to purchase Common Stock at an exercise price
of $3.125 per share. Of the 10,000 Warrants included in each Unit, 8,823
became exercisable for a period six months following March 14, 1997, and
1,177 Warrants became exercisable upon issuance for a six-month period
beginning May 23, 1997. The Company has extended the expiration dates of
all 850,000 Warrants sold in the Private Placement to December 31, 1997.
The total proceeds received of $8,500,000 were allocated to the Notes and
Warrants based on the estimated fair value of $7,934,500 and $565,500,
respectively. The original issue discount of $565,500 relating to the Notes
has been recorded in Deferred Financing Costs on the balance sheet, and
will be amortized over the term of the Notes. The placement agent, a
shareholder of the Company, received fees estimated at $961,500,
representing out of pocket expenses of $56,500, a placement fee equal to
$595,000, or 7% of the proceeds of the Private Placement and five year
warrants to purchase 200,000 shares of the Company's Common Stock with a
fair value of $310,000. Of the Private Placement proceeds, $6,130,000
(including $130,000 of interest) was used to repay a $6,000,000 bridge loan
used for the ESP Culture System II product line (the "ESP Product Line")
acquisition on March 3, 1997 (see
5
<PAGE> 8
Note 5), $651,500 was used for issuance costs, and the remaining $1,718,500
was retained to cover transition costs of the acquired business. Of the
total of $3,517,000 of costs associated with the issuance of the Notes,
$1,617,000 will be amortized over the three year term of the Notes and
$1,900,000 related to the "in the money" conversion feature was written off
in the second quarter.
The Company utilized the Black-Scholes pricing model to determine the fair
value of the Warrants issued. The following assumptions were incorporated
into the model: 850,000 warrants - risk free rate 7%, expected life six
months, expected volatility 20%, and expected dividend zero; 200,000
warrants - risk free rate 7%, expected life 5 years, expected volatility
20%, and expected dividend zero.
6. Acquisition: On March 3, 1997, the Company acquired the ESP Product Line
from Difco Microbiology Systems, Inc. ("Difco") for a total purchase price
of $6,000,000 in cash. The acquisition was accounted for using the purchase
method of accounting with the purchase price allocated to the net assets
acquired based on their estimated fair values. This treatment resulted in
no excess purchase price over the fair value of tangible assets acquired.
The operations associated with this acquisition have been included in the
consolidated statement of operations since the date of acquisition.
The pro-forma consolidated results of operations giving effect to the
acquisition of the ESP Product Line as if it had occurred as of January 1,
1996 follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Sales $ 16,796,428 $ 16,542,887
Net Loss $(15,188,121) $(13,821,847)
Net Loss per Share $(0.70) $(0.82)
</TABLE>
7. Warranty reserve: The warranty reserve has been classified as a non-current
liability because, in management's estimation, no materially significant
claims will be paid in the next 12 months.
8. Related Party Loan: During the third quarter, the Company received a
$500,000 bridge loan from a director and shareholder of the Company. The
loan was repaid in full from the loan proceeds received on September 30,
1997 (see Note 4), together with interest and prepayment premium of an
aggregate of $10,000. In addition, the Company issued 50,000 warrants to
purchase Common Stock of the Company at an exercise price of $2.50. The
warrants were valued at $39,500 and recorded as interest expense in the
third quarter.
The Company utilized the Black-Scholes pricing model to determine the fair
value of the warrants granted. The following assumptions were incorporated
into the model: 50,000
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<PAGE> 9
warrants - risk free rate 6%, expected life five years, expected volatility
20%, and expected dividend zero.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company is engaged in the development and manufacturing of cost
effective screening instruments and systems for clinical diagnostic
laboratories. The Company markets products in two laboratory market segments: 1)
Microbiology - proprietary disposable products and automated instruments used to
identify infectious organisms and determine susceptibility to antimicrobial
agents, and 2) Cytopathology - systems made up of multiple instruments networked
via proprietary software that support the review and analysis of Pap smears.
Effective March 3, 1997, the Company acquired certain assets and
liabilities of Difco Microbiology Systems, Inc. relating to the ESP Culture
System II product line (the "ESP Product Line"). The results of operations
reflected in the Company's consolidated statement of operations for the quarter
and nine months ended September 30, 1997 include the results of operations of
the ESP Product Line from the date of the acquisition, whereas results of
operations from prior periods reflect the operations of the Company's
microbiology and cytopathology product lines only.
Sales revenues for the quarter ended September 30, 1997 increased to
$4,914,000 compared to $1,356,000 for the quarter ended September 30, 1996, due
primarily to the increase in sales in the microbiology product line and the
addition of the ESP product line.
Cost of sales increased from $589,000 in the third quarter of 1996 to
$3,332,000 in the third quarter of 1997, reflecting the increased sales volume
in the microbiology product line and the addition of the ESP product line.
General and administrative expenses increased from $1,083,000 in the third
quarter of 1996 to $1,834,000 in the comparable 1997 quarter primarily due to
increases in staffing, office, professional fees, and investor relations
efforts.
Interest expense of $473,000 in the third quarter of 1997 reflected
amounts accrued on the three year notes issued in March of 1997 and installment
and bridge financing received in the third quarter. The interest expense for the
third quarter of 1996 of $13,000 reflected non-cash interest incurred for
issuance of warrants connected with notes payable repaid in 1996.
Research and development expenses increased from $509,000 in the third
quarter of 1996 to $1,340,000 in the third quarter of 1997 due primarily to
increased spending in the cytopathology area.
Sales and marketing expenses increased from $623,000 in the third
quarter of 1996 to $1,125,000 in the third quarter of 1997 due to increased
marketing efforts for the cytopathology product line.
7
<PAGE> 10
Net loss increased from $1,416,000 for the third quarter of 1996 to
$3,088,000 for the third quarter of 1997 due to increased sales volume and
related gross margins offset by increases in all operating expense categories.
Net loss per share for the quarter ended September 30, 1997 was $0.14 compared
to $0.08 for the quarter ending September 30, 1996. Weighted average shares
outstanding for the periods 1997 and 1996 were 22,482,000 and 17,723,000,
respectively.
For the nine month period ended September 30, 1997, net loss was
$14,085,000 and $5,874,000 for the comparable 1996 period. The increase in the
loss for 1997 as compared to 1996 was primarily attributed to higher spending in
the administrative area and increased sales and marketing efforts. Also, the
Company received no other income from licensing agreements in 1997, while
$3,500,000 of such other income was received in 1996. The "in the money"
write-off of $1.9 million in the second quarter of 1997, related to the
conversion feature of notes issued in March 1997, also contributed to the
increased loss as compared to the first nine months of 1996. The net loss per
share for the first nine months of 1997 was $0.65 compared to $0.36 for the 1996
period. The loss per share for the 1997 nine-month period was about $0.20 per
share less due to the increase in the weighted average shares outstanding for
1997.
The decrease in net current assets of $97,000 as of September 30, 1997
as compared to December 31, 1996 is due primarily to a decrease in net current
assets of the cytopathology product line, partially offset by an increase in net
current assets relating to the Company's acquisition at March 3, 1997 of the ESP
Product Line.
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 public offerings of
securities to fund its cash requirements. From the initial public offering in
October 1992 through September 30, 1997, the Company has raised approximately
$43,000,000 in aggregate net proceeds from public offerings and private
placements of securities.
The Company's most recent private placement was closed in March 1997,
resulting in the issuance of $8,500,000 of three year convertible notes bearing
interest at a rate of 12% per annum. Investors also received 850,000 warrants to
purchase shares of the Company's Common Stock at a price of $3.125 per share.
Approximately 750,000 of such Warrants would have expired on October 14, 1997
and the balance would have expired on November 23, 1997. However, the Company
extended the expiration date of all 850,000 Warrants to December 31, 1997. Of
such Warrants, 25,000 have been exercised; if the balance of the Warrants are
exercised, of which there can be no assurance, the Company would receive
approximately $2,581,000 in gross proceeds.
In September 1997, the Company incurred indebtedness of $4,500,000
secured by a lien against virtually all of the Company's assets, repayable in 48
monthly installments of $113,300 starting November 1997. A balloon payment for
the balance of $696,700 is due October 2001. The loan bears interest at a rate
of 14.5% per annum. The lender also received 245,783 warrants
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<PAGE> 11
to purchase shares of the Company's Common Stock at an exercise price of $2.60
per share. The warrants expire September 30, 2002. If all of these warrants are
exercised, of which there can be no assurance, the Company would receive
approximately $639,000 in gross proceeds. In October 1997, the Company entered
into a one-year revolving credit facility with the same lender. Pursuant to such
facility, the Company may borrow up to $4,000,000 from time to time based on the
amount of eligible accounts receivable. Indebtedness under such revolving
facility is secured by a lien on virtually all the Company's assets and bears
interest at an annual rate of prime plus 3%. On October 28, 1997, the Company
received $1,500,000 under such revolving facility.
During the third quarter of 1997, the Company received an aggregate of
$207,000 upon the exercise of certain stock options and warrants and a $100,000
abatement of investment banking fees. In addition, the Company received and
repaid $1,750,000 in loans. One of the lenders received warrants to purchase
50,000 shares of the Company's Common Stock at an exercise price of $2.50 per
share, expiring in August 2002. If all of these warrants are exercised, of which
there can be no assurance, the Company would receive approximately $125,000 in
gross proceeds.
During the nine months ended September 30, 1997, the Company has
expended substantial funds for research and product development, scale-up of
manufacturing capacity, sales and marketing efforts and other general corporate
purposes. Management believes that existing cash balances and internally
generated funds will be sufficient to finance the Company's projected operations
through at least the next 12 months. 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 acceptance of the
Company's products, 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 other factors.
The Company currently has no commitments with respect to sources of
additional financing, and there can be no assurance that any such financing
sources will 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 management.
The failure to obtain adequate additional financing may require management to
delay, curtail or scale back some or all of its studies and regulatory
activities and, potentially, to cease all operations. Any additional equity
financing may involve substantial dilution to the Company's then-existing
stockholders.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Management expects that the Company's operating results will fluctuate
significantly from quarter to quarter and will depend on various factors, many
of which are outside of
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<PAGE> 12
management's control. These factors include the success of the marketing efforts
for the Company's products, obtaining necessary regulatory clearances or
approvals for the Company's products, 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 changes in government regulation and other
factors, the timing of significant orders from and shipments to customers, and
general economic conditions. These or other factors could have a material
adverse effect on the Company's business, financial condition and results of
operations.
-10-
<PAGE> 13
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith:
10.1 Equipment Loan and Security Agreement dated as of
September 23, 1997 between Registrant and Transamerica
Business Credit Corporation.
10.2 Promissory Note No. 1 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000.
10.3 Promissory Note No. 2 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000.
10.4 Promissory Note No. 3 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. The following Current Reports on Form 8-K were
filed by the Company with the Securities and Exchange Commission during the
quarter ended September 30, 1997: On July 17, 1997, Amendment No. 2 to Current
Report on Form 8-K/A dated March 3, 1997: Item 2 - Acquisition or Disposal of
Assets - reporting the acquisition of the ESP Culture System II product line,
and Item 7 - Financial Statements and Exhibits, including the following
financial statements:
(a) Financial Statements of Business Acquired:
Net Assets Sold of Difco Microbiology Systems, Inc.
1. Independent Auditors' Report
2. Statement of Net Assets Sold as of December 31, 1996 and December
31, 1995.
3. Statement of Revenues and Expenses for the 12 months ended December
31, 1996 and December 31, 1995.
4. Notes to Financial Statements
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
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<PAGE> 14
1. Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1996.
2. Pro Forma Condensed Consolidated Statement of Operations for the 12
months ended December 31, 1996.
3. Notes to the Pro Forma Condensed Consolidated Financial Statements.
On August 15, 1997, Amendment No. 3 to Current Report on Form 8-K/A dated
March 3, 1997: Item 2 - Acquisition or Disposal of Assets - reporting the
acquisition of the ESP Culture System II product line, and Item 7 - Financial
Statements and Exhibits, including the following financial statements:
(a) Financial Statements of Business Acquired:
Net Assets Sold of Difco Microbiology Systems, Inc.
1. Independent Auditors' Report
2. Statement of Net Assets Sold as of December 31, 1996 and December
31, 1995.
3. Statement of Revenues and Expenses for the 12 months ended December
31, 1996 and December 31, 1995.
4. Notes to Financial Statements
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
1. Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1996.
2. Pro Forma Condensed Consolidated Statement of Operations for the 12
months ended December 31, 1996.
3. Notes to the Pro Forma Condensed Consolidated Financial Statements.
On September 12, 1997, Amendment No. 4 to Current Report on Form 8-K/A
dated March 3, 1997: Item 2 - Acquisition or Disposal of Assets - reporting the
acquisition of the ESP Culture System II product line, and Item 7 - Financial
Statements and Exhibits, including the following financial statements:
(a) Financial Statements of Business Acquired:
Net Assets Sold of Difco Microbiology Systems, Inc.
1. Independent Auditors' Report
2. Statement of Net Assets Sold as of December 31, 1996 and December
31, 1995.
3. Statement of Revenues and Expenses for the 12 months ended December
31, 1996 and December 31, 1995.
4. Notes to Financial Statements
-12-
<PAGE> 15
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
1. Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1996.
2. Pro Forma Condensed Consolidated Statement of Operations for the 12
months ended December 31, 1996.
3. Notes to the Pro Forma Condensed Consolidated Financial Statements.
On July 17, 1997, Amendment No. 2 to Current Report on Form 8-K/A dated
October 15, 1996: Item 2 - Acquisition or Disposal of Assets - reporting the
acquisition of Oncometrics Imaging Corp. and Radco Ventures, Inc., and Item 7 -
Financial Statements and Exhibits, including the following financial statements:
(a) Financial Statements of Business Acquired:
Oncometrics Imaging Corp.:
1. Independent Auditors' Report
2. Balance Sheets as of August 31, 1995, December 31, 1995, May 31,
1996 and September 30, 1996 (unaudited)
3. Statement of Operations and Deficit for the 12 months ended August
31, 1995; four months ended December 31, 1995; five months ended
May 31, 1996 and the four months ended September 30, 1996
(unaudited)
4. Statement of Changes in Financial Position for the 12 months ended
August 31, 1995; the four months ended December 31, 1995; the five
months ended May 31, 1996 and the four months ended September 30,
1996 (unaudited)
5. Notes to Financial Statements
Radco Ventures, Inc.:
1. Independent Auditors' Report
2. Balance Sheet as of September 30, 1996
3. Statement of Operations for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
4. Statement of Stockholders' Equity (Deficit) for the period form
March 6, 1996 (date of incorporation) through September 30, 1996
5. Statement of Cash flows for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
6. Notes to Financial Statements
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
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<PAGE> 16
1 Pro Forma Condensed Combining Balance Sheet as of September 30,
1996.
2. Pro Forma Condensed Combining Statement of Operations for the 9
months ended September 30, 1996.
3. Pro Forma Condensed Combining Statement of Operations for the 3
months ended December 31, 1995.
4 Notes to the Pro Forma Condensed Consolidated Financial Statements.
On August 15, 1997, Amendment No. 3 to Current Report on Form 8-K/A dated
October 15, 1996: Item 2 - Acquisition or Disposal of Assets - reporting the
acquisition of Oncometrics Imaging Corp. and Radco Ventures, Inc., and Item 7 -
Financial Statements and Exhibits, including the following financial statements:
(a) Financial Statements of Business Acquired:
Oncometrics Imaging Corp.:
1. Independent Auditors' Report
2. Balance Sheets as of August 31, 1995, December 31, 1995, May 31,
1996 and September 30, 1996 (unaudited)
3. Statement of Operations and Deficit for the 12 months ended August
31, 1995; four months ended December 31, 1995; five months ended
May 31, 1996 and the four months ended September 30, 1996
(unaudited)
4. Statement of Changes in Financial Position for the 12 months ended
August 31, 1995; the four months ended December 31, 1995; the five
months ended May 31, 1996 and the four months ended September 30,
1996 (unaudited)
5. Notes to Financial Statements
Radco Ventures, Inc.:
1. Independent Auditors' Report
2. Balance Sheet as of September 30, 1996
3. Statement of Operations for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
4. Statement of Stockholders' Equity (Deficit) for the period March 6,
1996 (date of incorporation) through September 30, 1996
5. Statement of Cash flows for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
6. Notes to Financial Statements
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
1 Pro Forma Condensed Combining Balance Sheet as of September 30,
1996.
-14-
<PAGE> 17
2. Pro Forma Condensed Combining Statement of Operations for the 9
months ended September 30, 1996.
3. Pro Forma Condensed Combining Statement of Operations for the 3
months ended December 31, 1995.
4 Notes to the Pro Forma Condensed Consolidated Financial Statements.
On September 12, 1997, Amendment No. 4 to Current Report on Form 8-K/A
dated October 15, 1996: Item 2 - Acquisition or Disposal of Assets - reporting
the acquisition of Oncometrics Imaging Corp. and Radco Ventures, Inc., and Item
7 - Financial Statements and Exhibits, including the following financial
statements:
(a) Financial Statements of Business Acquired:
Oncometrics Imaging Corp.:
1. Independent Auditors' Report
2. Balance Sheets as of August 31, 1995, December 31, 1995, May 31,
1996 and September 30, 1996 (unaudited)
3. Statement of Operations and Deficit for the 12 months ended August
31, 1995; four months ended December 31, 1995; five months ended
May 31, 1996 and the four months ended September 30, 1996
(unaudited)
4. Statement of Changes in Financial Position for the 12 months ended
August 31, 1995; the four months ended December 31, 1995; the five
months ended May 31, 1996 and the four months ended September 30,
1996 (unaudited)
5. Notes to Financial Statements
Radco Ventures, Inc.:
1. Independent Auditors' Report
2. Balance Sheet as of September 30, 1996
3. Statement of Operations for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
4. Statement of Stockholders' Equity (Deficit) for the period March 6,
1996 (date of incorporation) through September 30, 1996
5. Statement of Cash flows for the period from March 6, 1996 (date of
incorporation) through September 30, 1996
6. Notes to Financial Statements
(b) Pro Forma Financial Information:
AccuMed International, Inc.:
1 Pro Forma Condensed Combining Balance Sheet as of September 30,
1996.
2. Pro Forma Condensed Combining Statement of Operations for the 9
months ended September 30, 1996.
-15-
<PAGE> 18
3. Pro Forma Condensed Combining Statement of Operations for the 3
months ended December 31, 1995.
4 Notes to the Pro Forma Condensed Consolidated Financial Statements.
-16-
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
ACCUMED INTERNATIONAL, INC.
/s/ LEONARD R. PRANGE
-----------------------------------------
Leonard R. Prange
Chief Financial Officer and
Chief Operating Officer
Date: November 13, 1997
-17-
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ------------ ----------------------
<S> <C>
10.1 Equipment Loan and Security Agreement dated as of September
23, 1997 between Registrant and Transamerica Business Credit
Corporation.
10.2 Promissory Note No. 1 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
10.3 Promissory Note No. 2 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
10.4 Promissory Note No. 3 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
27.1 Financial Data Schedule
</TABLE>
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<PAGE> 1
EXHIBIT 10.1
CUSTOMER NUMBER 1074
EQUIPMENT LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of September 23, 1997, is made by AccuMed
International, Inc. (the "Borrower"), a Delaware corporation having its
principal place of business and chief executive office at 900 N. Franklin,
Chicago, IL, 60610 in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway II,
West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make a Loan
to it; and
WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to extend credit, the Borrower hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following
meanings, and shall be equally applicable to both the singular and plural forms
of the terms defined:
Agreement shall mean this Equipment Loan and Security Agreement together with
all schedules and exhibits hereto, as amended, supplemented, or otherwise
modified from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public holiday
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.
<PAGE> 2
Loan shall mean the loan and financial accommodations made by the Lender to the
Borrower in accordance with the terms of this Agreement and the Note.
Loan Documents shall mean, collectively, this Agreement, the Note, and all other
documents, agreements, certificates, instruments, and opinions executed and
delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
adverse change in the business, operations, results of operations, assets,
liabilities, or condition (financial or otherwise) of such Person taken as a
whole.
Material Adverse Effect shall mean, with respect to any Person, a material
adverse effect on the business, operations, results of operations, assets,
liabilities, or condition (financial or otherwise) of such Person taken as a
whole.
Notes shall mean the Promissory Notes made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time,
substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations, and liabilities of the
Borrower under the Note and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, origination fees, collection fees, and all other professionals'
fees), costs, expenses, taxes, or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; (d) attachment or judgment liens that do not constitute an Event of
Default; (e) liens on assets securing and whose acquisition is financed under
capital lease obligations or purchase money loans; (f) liens on equipment leased
by Borrower pursuant to operating leases (including sale-leaseback transactions)
in the ordinary course of business incurred solely for the purpose of financing
the lease of such equipment; and (g) liens on real property securing and whose
acquisition is financed under real estate mortgages.
Person shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.
Schedule shall mean the Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender.
Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
2
<PAGE> 3
Taxes shall have the meaning specified in Section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The
Borrower hereby assigns and grants to the Lender a continuing general, first
priority lien on and security interest in, all the Borrower's right, title and
interest in and to all the following collateral (the "Collateral"), to secure
the payment and performance of all the Obligations:
(a) All equipment in all of its forms, whether owned or leased,
wherever located, now or hereafter existing (including, without limitation, all
machinery, office equipment and supplies, computers and related hardware,
central processing units, terminals, drives, memory units, printers, keyboards,
screens, peripherals and input and output devices, furniture, furnishings,
tools, tooling, jigs, dies, fixtures, manufacturing implements, fork lifts,
trucks, trailers and motor vehicles and all equipment employed in the operation
of the business of the Borrower), and all parts thereof and all accessions and
attachments thereto and substitutions, repairs or improvements thereof;
(b) All inventory in all of its forms, wherever located, now or
hereafter existing;
(c) All accounts, contract rights, chattel paper, instruments,
general intangibles and other obligations of any kind (excluding royalty
payments due to Borrower pursuant to a License Agreement dated as of October 10,
1995 between Borrower and Becton Dickinson), now or hereafter existing, whether
or not arising out of or in connection with the sale or lease of goods or the
rendering of services, and all rights now or hereafter existing in and to all
security agreements, leases, and other contracts securing or otherwise relating
to any such accounts, contract rights, chattel paper, instruments, general
intangibles or obligations;
(d) All other personal property in all of its forms, wherever
located and whether now owned or hereafter acquired; and
(e) All proceeds of any and all of the foregoing (including,
without limitation, proceeds which constitute property of the types described in
clauses (a), (b) and (c) of this Section 2) and, to the extent not otherwise
included, all payment under insurance (whether or not the Lender is a loss payee
thereof), and any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise in respect to any of the foregoing.
Notwithstanding the foregoing, the Collateral shall not include (i) 35% of the
Borrower's shares of the capital stock of AccuMed International Limited and (ii)
subject to Section 5.17, any of the Borrower's shares of the capital stock of
Oncometrics Imaging Corp.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. The Loan shall be made in a
single advance in an amount not to exceed Four Million Five Hundred Thousand
Dollars ($4,500,000.00). Lender shall not be obligated to make the Loan after
December 31, 1997. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the Loan only after the Lender, in its sole
discretion, determines that the applicable conditions for borrowing contained in
Sections 3.3 are satisfied. The Loan shall be repaid in accordance with the
Notes.
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall
not directly or indirectly use any proceeds of the Loan, or cause, assist,
suffer, or permit the use of any proceeds of the Loan, for any purposes other
than those which are strictly related to the ordinary conduct of Borrower's
business, consistent with past practice; provided, however, that Borrower shall
be permitted to repay existing indebtedness to Heller Financial, Inc., Robert L.
Priddy and Dr. Norman Pressman.
SECTION 3.3. CONDITIONS TO LOAN.
(a) The obligation of the Lender to make the Loan is subject to
the Lender's receipt of the
3
<PAGE> 4
following, each dated the date of the Loan or as of an earlier date acceptable
to the Lender, in form and substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing
statements naming the Borrower as debtor and all tax lien,
judgment, and litigation searches for the Borrower as the Lender
shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form
UCC-1) duly executed by the Borrower (naming the Lender as
secured party and the Borrower as debtor and in form acceptable
for filing in all jurisdictions that the Lender deems necessary
or desirable to perfect the security interests granted to it
hereunder) and, if applicable, termination statements or other
releases duly filed in all jurisdictions that the Lender deems
necessary or desirable to perfect and protect the priority of the
security interests granted to it hereunder;
(iii) a Note duly executed by the Borrower evidencing the
amount of the Loan;
(iv) certificates of insurance required under Section 5.4
of this Agreement together with loss payee endorsements for all
such policies naming the Lender as lender loss payee and as an
additional insured;
(v) a copy of the resolutions of the Board of Directors of
the Borrower (or a unanimous consent of directors in lieu
thereof) authorizing the execution, delivery, and performance of
this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) that the copy of the resolutions is true,
complete, and accurate, that such resolutions have not been
amended or modified since the date of such certification and are
in full force and effect and (B) the incumbency, names, and true
signatures of the officers of the Borrower authorized to sign the
Loan Documents to which it is a party;
(vi) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this
Agreement as the Lender may reasonably require;
(vii) a warrant, in form and substance satisfactory to
Lender, to purchase 245,783 shares of Borrower's common stock at
an exercise price of $2.59375 per share; and
(viii) such other agreements and instruments as the Lender
deems necessary in its sole and absolute discretion in connection
with the transactions contemplated hereby.
(b) Except as disclosed on Schedule 4.4 attached hereto and made
a part hereof, there shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry, or other action
(i) seeking an injunction or other restraining order, damages, or other relief
with respect to the transactions contemplated by this Agreement or the other
Loan Documents or thereby or (ii) which affects or could affect the business,
operations, assets, liabilities, or condition (financial or otherwise) of the
Borrower, except, in the case of clause (ii), where such litigation, proceeding,
inquiry, or other action could not be expected to have a Material Adverse Effect
in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required
to be paid by it to the Lender as of such date.
(d) The security interests granted in favor of the Lender under
this Agreement shall have been duly perfected and shall constitute first
priority liens, subject only to Permitted Liens.
(e) There shall have been no Material Adverse Change with respect
to the Borrower since
4
<PAGE> 5
December 31, 1996.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery,
and performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents, if any, of the Borrower, and do not (a) violate any
law or regulation, or any order or decree of any court or governmental
authority, (b) conflict with or result in a breach of, or constitute a default
under, any material indenture, mortgage, or deed of trust or any material lease,
agreement, or other material instrument binding on the Borrower or any of its
properties, or (c) require the consent, authorization by, or approval of or
notice to or filing or registration with any governmental authority or other
Person. This Agreement is, and each of the other Loan Documents to which the
Borrower is or will be a party, when delivered hereunder or thereunder, will be,
the legal, valid, and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent
and will be Solvent upon the completion of all transactions contemplated to
occur hereunder (including, without limitation, the Loan to be made on the
Effective Date); the security interests granted herein constitute and shall at
all times constitute the first and only liens on the Collateral other than
Permitted Liens; and the Borrower is, or will be at the time additional
Collateral is acquired by it, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer, and create a security interest
therein, free and clear of any and all claims or liens in favor of any other
Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. Except as disclosed
on Schedule 4.4 attached hereto and made a part hereof, no judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except
judgments and pending or threatened litigation, contested claims, and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default
or has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof,
each item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein or in the License Agreement between the Borrower and Becton
Dickinson & Co. dated as of October 11, 1995, none of the Collateral is subject
to contractual obligations that may restrict or inhibit the Lender's rights or
abilities to sell or dispose of the Collateral or any part thereof after the
occurrence of an Event of Default.
5
<PAGE> 6
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority and exclusive (subject only to
Permitted Liens) security interest in the Collateral, securing the payment of
all the Obligations.
SECTION 4.10. ACCURACY AND COMPLETENESS OF INFORMATION.
All data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
misleading at such time. There are no facts now known to the Borrower which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect and which have not been specified herein, in the Financial
Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender. With respect to projections
and other forward-looking information, such information represents the best
judgment of management of the Borrower as of the date the information was
prepared, and whether or not such projections are in fact achieved may depend
upon events that are not within control of the Borrower. Accordingly, actual
results may vary from the projections and other forward-looking information, and
such variations may be material. Projections provided to the Lender should not
be regarded as a representation by the Borrower that the projected results will
be achieved.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a)
retain its existence and its current yearly accounting cycle, (b) maintain in
full force and effect all licenses, bonds, franchises, leases, trademarks,
patents, contracts, and other rights necessary or desirable to the profitable
conduct of its business unless the failure to do so could not reasonably be
expected to have a Material Adverse Effect on the Borrower, (c) continue in, and
limit its operations to, the same general lines of business as those presently
conducted by it, and (d) comply with all applicable laws and regulations of any
federal, state, or local governmental authority, except for such laws and
regulations the violations of which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible,
and in any event within five Business Days after the Borrower learns of the
following, the Borrower will give written notice to the Lender of (a) any
proceeding instituted or threatened to be instituted by or against the Borrower
in any federal, state, local, or foreign court or before any commission or other
regulatory body (federal, state, local, or foreign) involving a sum in excess of
$100,000, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the Borrower,
and (d) the occurrence of any Event of Default or event or condition which, with
notice or lapse of time or both, would constitute an Event of Default, together
with a statement of the action which the Borrower has taken or proposes to take
with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The
Borrower will maintain books and records pertaining to the Collateral in such
detail, form, and scope as the Lender shall require in its commercially
reasonable judgment. The Borrower agrees that the Lender or its agents may enter
upon the Borrower's premises at any time and from time to time during normal
business hours, and at any time upon the occurrence and continuance of an Event
of Default, for the purpose of inspecting the Collateral and any and all records
pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain
insurance on the Collateral under such policies of insurance, with such
insurance companies, in such amounts, and covering such risks as are at all
times satisfactory to the Lender. All such policies shall be made payable to the
Lender, in case of loss, under a standard non-contributory "lender" or "secured
party" clause and are to contain such other provisions as the
6
<PAGE> 7
Lender may reasonably require to protect the Lender's interests in the
Collateral and to any payments to be made under such policies. Certificates of
insurance policies are to be delivered to the Lender, premium prepaid, with the
loss payable endorsement in the Lender's favor, and shall provide for not less
than thirty days' prior written notice to the Lender, of any alteration or
cancellation of coverage. If the Borrower fails to maintain such insurance, the
Lender may arrange for (at the Borrower's expense and without any responsibility
on the Lender's part for) obtaining the insurance. Unless the Lender shall
otherwise agree with the Borrower in writing, the Lender shall have the sole
right, in the name of the Lender or the Borrower, to file claims under any
insurance policies, to receive and give acquittance for any payments that may be
payable thereunder, and to execute any endorsements, receipts, releases,
assignments, reassignments, or other documents that may be necessary to effect
the collection, compromise, or settlement of any claims under any such insurance
policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest therein
(other than Permitted Liens). The Borrower will not permit any notice creating
or otherwise relating to liens on the Collateral or any portion thereof to exist
or be on file in any public office other than Permitted Liens. The Borrower
shall promptly pay, when payable, all transportation, storage, and warehousing
charges and license fees, registration fees, assessments, charges, permit fees,
and taxes (municipal, state, and federal) which may now or hereafter be imposed
upon the ownership, leasing, renting, possession, sale, or use of the
Collateral, other than taxes on or measured by the Lender's income and fees,
assessments, charges, and taxes which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves are maintained to the extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR
IDENTITY. The Borrower will not (a) change the location of its chief executive
office or establish any place of business other than those specified herein or
(b) move or permit the movement of any item of Collateral from the location
specified in the applicable Schedule, except that the Borrower may change its
chief executive office and keep Collateral at other locations within the United
States provided that the Borrower has delivered to the Lender (i) prior written
notice thereof and (ii) duly executed financing statements and other agreements
and instruments (all in form and substance satisfactory to the Lender) necessary
or, in the opinion of the Lender, desirable to perfect and maintain in favor of
the Lender a first priority security interest in the Collateral. Notwithstanding
anything to the contrary in the immediately preceding sentence, the Borrower may
keep any Collateral consisting of motor vehicles or rolling stock at any
location in the United States provided that the Lender's security interest in
any such Collateral is conspicuously marked on the certificate of title thereof
and the Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the Collateral
was designed and in accordance with material applicable operating instructions,
laws, and government regulations, and the Borrower shall use every reasonable
precaution to prevent loss or damage to the Collateral from fire and other
hazards. Except for automobiles leased for use by Borrower's personnel, the
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all material orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the
Collateral. The Borrower shall keep all of the Equipment in a satisfactory state
of repair and satisfactory operating condition in accordance with industry
standards, and will make all repairs and replacements when and where necessary
and practical. The Borrower will not waste or destroy the Equipment
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or any part thereof, and will not be negligent in the care or use thereof. With
the exception of certain equipment purchased by the Borrower from Difco [name],
the Equipment shall not be annexed or affixed to or become part of any realty
without the Lender's prior written consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will,
promptly upon request by the Lender, execute and deliver or use its commercially
reasonable efforts to obtain any document required by the Lender (including,
without limitation, warehouseman or processor disclaimers, mortgagee waivers,
landlord disclaimers, or subordination agreements with respect to the
Obligations and the Collateral), give any notices, execute and file any
financing statements, mortgages, or other documents (all in form and substance
satisfactory to the Lender), mark any chattel paper, deliver any chattel paper
or instruments to the Lender, and take any other actions that are necessary or,
in the opinion of the Lender, desirable to perfect or continue the perfection
and the first priority of the Lender's security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of any Persons,
or to effect the purposes of this Agreement. The Borrower hereby authorizes the
Lender to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. To the extent required under this Agreement, the
Borrower will pay all costs incurred in connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower
will not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens
which are junior to the lien and security interest of the Lender, and the
Borrower will not sell, transfer, assign, pledge, collaterally assign, exchange,
or otherwise dispose of any of the Collateral. Notwithstanding the foregoing,
Borrower may dispose of items of (i) inventory in the ordinary course of
business consistent with past practice and (ii) Collateral in the ordinary
course of business consistent with past practice, so long as such dispositions
do not exceed $50,000 in the aggregate in any twelve month period. In the event
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of these provisions, the security interest
of the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The
Borrower will not enter into any contractual obligations which may restrict or
inhibit the Lender's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien (other than Permitted Liens) which, in the reasonable judgment of the
Lender, appears to be prior to or superior to the security interests granted
hereunder, and appear in, and defend any action or proceeding purporting to
affect its security interests in, or the value of, any of the Collateral. The
Borrower hereby agrees to reimburse the Lender for all payments made and
expenses incurred under this Agreement including reasonable fees, expenses, and
disbursements of attorneys and paralegals (including the allocated costs of
in-house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a)
promptly (but in no event later than one Business Day) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or
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instruments related to or otherwise in connection with any property included in
the Collateral, which in any such case come into the possession of the Borrower,
or shall cause the issuer thereof to deliver any of the same directly to the
Lender, in each case with any necessary endorsements in favor of the Lender and
(b) deliver to the Lender as soon as available copies of any and all press
releases and other similar communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not
(a) amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall
take all such further actions and execute all such further documents and
instruments as the Lender may reasonably request.
SECTION 5.17. ONCOMETRICS IMAGING CORP. The Borrower shall
not transfer any assets or make any loans or other financial accommodations to
Oncometrics Imaging Corp. ("Oncometrics"). In the event the Borrower obtains
ownership of 100% of the capital stock of Oncometrics, Borrower shall pledge 66%
of such shares to Lender.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and
satisfaction in full of all Obligations, the Borrower shall deliver to the
Lender the following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of
when due any amount required to be paid by the Borrower under or in connection
with the Note and this Agreement;
(b) any representation or warranty made or deemed made by
the Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any
of the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10,
5.14, or 5.15 hereof or (ii) any other term, covenant, or agreement contained in
any Loan Document (other than the other Events of Default specified in this
Section 7) and such failure remains unremedied for the earlier of fifteen
Business Days from (A) the date on which the Lender has given the Borrower
written notice of such failure and (B) the date on which the Borrower knew or
should have known of such failure;
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(d) any provision of any Loan Document to which the
Borrower is a party shall for any reason cease to be valid and binding on the
Borrower (so long as no action of the Lender caused such cessation), or the
Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of
the Borrower's business, failure of the Borrower generally to pay its debts as
they mature, admission in writing by the Borrower of its inability generally to
pay its debts as they mature, or calling of a meeting of the Borrower's
creditors generally for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of
principal or interest on any indebtedness in excess of $200,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such indebtedness
to become due prior to its stated maturity;
(i) the Borrower suffers or sustains a Material Adverse
Change which is continuing;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within five Business
Days;
(k) any judgment which has had or could reasonably be
expected to have a Material Adverse Effect on the Borrower and such judgment
shall not be stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement; or
(m) there is a change, which change results from a single
transaction or a series of related transactions, in more than 70% of the
ownership of the equity interests of the Borrower on the date hereof.
SECTION 8. REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
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(b) The Lender may take possession of the Collateral and,
for that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or may be
placed, and remove the same.
(c) The obligation of the Lender, if any, to make
additional Loans or financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices, approvals, consents, correspondence, or other communications
required or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, telecopy or certified or
registered mail, postage prepaid, if to the Lender, then to Transamerica
Technology Finance Division, 76 Batterson Park Road, Farmington, Connecticut
06032, Attention: Assistant Vice President, Lease Administration, with a copy to
the Lender at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont,
Illinois 60018, Attention: Legal Department, and if to the Borrower, then to
AccuMed International, Inc., 900 N. Franklin, Suite 401, Chicago, IL 60610,
Attention: Chief Financial Officer with a copy to AccuMed International, Inc.,
1500 7th Ave., Sacramento, California, 95818, Attn: General Counsel, or such
other address as shall be designated by the Borrower or the Lender to the other
party in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are
for purposes of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights, but shall remain obligated under any Note or this Agreement.
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SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any
amendment or waiver of any provision of this Agreement and any consent to any
departure by the Borrower from any provision of this Agreement shall be
effective only by a writing signed by the Lender and shall bind and benefit the
Borrower and the Lender and their respective successors and assigns, subject, in
the case of the Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) inure, together with the rights and remedies of the Lender hereunder,
to the benefit of the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by
law, this Agreement and the rights and powers granted to the Lender hereunder
and under the Loan Documents shall continue to be effective or be reinstated if
at any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees, and counsel from and against any and all costs, expenses, claims, or
liability incurred by the Lender or such Person hereunder and under any other
Loan Document or in connection herewith or therewith, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No
delay or omission of the Lender to exercise any right or remedy hereunder,
whether before or after the happening of any Event of Default,
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shall impair any such right or shall operate as a waiver thereof or as a waiver
of any such Event of Default. No single or partial exercise by the Lender of any
right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the
Lender agree that this Agreement and the Note are the complete and exclusive
statement and agreement between the parties with respect to the subject matter
hereof, superseding all proposals and prior agreements, oral or written, and all
other communications between the parties with respect to the subject matter
hereof.
SECTION 9.14. SETOFF. In addition to and not in limitation
of all rights of offset that the Lender may have under Applicable Law, and
whether or not the Lender has made any demand or the Obligations of the Borrower
have matured, the Lender shall have the right to appropriate and apply to the
payment of the Obligations of the Borrower all deposits and other obligations
then or thereafter owing by the Lender to or for the credit or the account of
the Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION,
AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
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IN WITNESS WHEREOF, the undersigned Borrower has caused
this Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date first set forth above.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Name: Peter P. Gombrich
Title: CEO
Federal Tax ID: 36-4054899
Accepted as of the
____ day of ________, 1997
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ GARY P. MORO
----------------------------------------
Name: Gary P. Moro
Title: Vice President
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EXHIBIT 10.2
PROMISSORY NOTE NO. 1
Date: September 30, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) received by the undersigned, plus
interest, in lawful money of the United States and in immediately available
funds. This Note shall be payable commencing with a first installment of
Seventy-Six Thousand Seven Hundred Ninety-Five and 95/100 Dollars ($76,795.95)
payable on the date hereof and thereafter in 46 consecutive equal monthly
installments of Thirty-Seven Thousand Seven Hundred Sixty-Eight and 50/100
Dollars ($37,768.50) commencing November 1, 1997 and a final installment payable
on September 30, 2001 of Two Hundred Twenty-Five Thousand Dollars ($225,000.00)
together with the unpaid balance of the Note, if any. No amount of principal
paid or prepaid hereunder may be reborrowed.
This Note is issued pursuant to an Equipment Loan and Security
Agreement dated as of September 26, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Agreement"), between the undersigned and the
Payee and is subject and entitled to all provisions and benefits thereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
If any installment of this Note is not paid within five days
after its due date, the undersigned agrees to pay on demand, in addition to the
amount of such installment, an amount equal to 5% of such installment, but only
to the extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note at any
time on or after January 1, 1999, on thirty days' prior written notice to the
Payee. On the date of any such prepayment, the undersigned shall pay an amount
equal to the present value of the remaining payments (principal and interest)
due hereunder discounted at 6% simple interest per annum, together with all fees
and other amounts payable on the amount so prepaid or in connection therewith to
the date of such prepayment. Any prepayments shall be applied to the
installments hereof in the inverse order of maturity.
Upon the maturity of this Note or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at a
rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day.
The undersigned hereby waives diligence, demand, presentment,
protest and notice of any kind, and assents to extensions of the time of
payment, release, surrender or substitution of security, or forbearance or
<PAGE> 2
other indulgence, without notice. The undersigned agrees to pay all amounts
under this Note without offset, deduction, claim, counterclaim, defense or
recoupment, all of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan
Documents intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such Persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under Applicable Law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) the Payee or any other holder of any or all of the Obligations
shall otherwise collect amounts which are determined to constitute interest
which would otherwise increase the interest on any or all of the Obligations to
an amount in excess of that permitted to be charged by Applicable Law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at the Payee's or such holder's option,
promptly returned to the undersigned upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under Applicable Law, the Payee and the
undersigned (and any other payors thereof) shall to the greatest extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest through the entire contemplated term of this
Note in accordance with the amount outstanding from time to time thereunder and
the maximum legal rate of interest from time to time in effect under Applicable
Law in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally, but
only by an agreement in writing signed by the undersigned and the Payee or any
holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs
and expenses incurred by the Payee (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution and delivery of this Note and all other Loan Documents,
and in connection with the administration, modification and amendment of the
Loan Documents, and pay to the Payee all costs and expenses (including the fees
and disbursements of counsel and other professionals) paid or incurred by the
Payee in (A) enforcing or defending its rights under or in respect of this Note
or any of the other Loan Documents, (B) collecting any of the liabilities by the
undersigned to the Payee or otherwise administering the Loan Documents, (C)
foreclosing or otherwise collecting upon any collateral and (D) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
-2-
<PAGE> 3
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Name: Peter P. Gombrich
Title: Chief Executive Officer
-3-
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE NO. 2
Date: September 30, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) received by the undersigned, plus
interest, in lawful money of the United States and in immediately available
funds. This Note shall be payable commencing with a first installment of
Seventy-Six Thousand Seven Hundred Ninety-Five and 95/100 Dollars ($76,795.95)
payable on the date hereof and thereafter in 46 consecutive equal monthly
installments of Thirty-Seven Thousand Seven Hundred Sixty-Eight and 50/100
Dollars ($37,768.50) commencing November 1, 1997 and a final installment payable
on September 30, 2001 of Two Hundred Twenty-Five Thousand Dollars ($225,000.00)
together with the unpaid balance of the Note, if any. No amount of principal
paid or prepaid hereunder may be reborrowed.
This Note is issued pursuant to an Equipment Loan and Security
Agreement dated as of September 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Agreement"), between the undersigned and the
Payee and is subject and entitled to all provisions and benefits thereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
If any installment of this Note is not paid within five days
after its due date, the undersigned agrees to pay on demand, in addition to the
amount of such installment, an amount equal to 5% of such installment, but only
to the extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note at any
time on or after January 1, 1999, on thirty days' prior written notice to the
Payee. On the date of any such prepayment, the undersigned shall pay an amount
equal to the present value of the remaining payments (principal and interest)
due hereunder discounted at 6% simple interest per annum, together with all fees
and other amounts payable on the amount so prepaid or in connection therewith to
the date of such prepayment. Any prepayments shall be applied to the
installments hereof in the inverse order of maturity.
Upon the maturity of this Note or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at a
rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day.
The undersigned hereby waives diligence, demand, presentment,
protest and notice of any kind, and assents to extensions of the time of
payment, release, surrender or substitution of security, or forbearance or other
indulgence, without notice. The undersigned agrees to pay all amounts under this
Note without offset, deduction, claim, counterclaim, defense or recoupment, all
of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan
Documents intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such Persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed
<PAGE> 2
to create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged by
Applicable Law from time to time in effect. Neither the undersigned nor any
present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under Applicable Law from time to
time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) the Payee or any other holder of any or all of the Obligations
shall otherwise collect amounts which are determined to constitute interest
which would otherwise increase the interest on any or all of the Obligations to
an amount in excess of that permitted to be charged by Applicable Law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at the Payee's or such holder's option,
promptly returned to the undersigned upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under Applicable Law, the Payee and the
undersigned (and any other payors thereof) shall to the greatest extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest through the entire contemplated term of this
Note in accordance with the amount outstanding from time to time thereunder and
the maximum legal rate of interest from time to time in effect under Applicable
Law in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally, but
only by an agreement in writing signed by the undersigned and the Payee or any
holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs
and expenses incurred by the Payee (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution and delivery of this Note and all other Loan Documents,
and in connection with the administration, modification and amendment of the
Loan Documents, and pay to the Payee all costs and expenses (including the fees
and disbursements of counsel and other professionals) paid or incurred by the
Payee in (A) enforcing or defending its rights under or in respect of this Note
or any of the other Loan Documents, (B) collecting any of the liabilities by the
undersigned to the Payee or otherwise administering the Loan Documents, (C)
foreclosing or otherwise collecting upon any collateral and (D) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
-2-
<PAGE> 3
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Name: Peter P. Gombrich
Title: Chief Executive Officer
-3-
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE NO. 3
Date: September 30, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) received by the undersigned, plus
interest, in lawful money of the United States and in immediately available
funds. This Note shall be payable commencing with a first installment of
Seventy-Six Thousand Seven Hundred Ninety-Five and 95/100 Dollars ($76,795.95)
payable on the date hereof and thereafter in 46 consecutive equal monthly
installments of Thirty-Seven Thousand Seven Hundred Sixty-Eight and 50/100
Dollars ($37,768.50) commencing November 1, 1997 and a final installment payable
on September 30, 2001 of Two Hundred Twenty-Five Thousand Dollars ($225,000.00)
together with the unpaid balance of the Note, if any. No amount of principal
paid or prepaid hereunder may be reborrowed.
This Note is issued pursuant to an Equipment Loan and Security
Agreement dated as of September 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Agreement"), between the undersigned and the
Payee and is subject and entitled to all provisions and benefits thereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
If any installment of this Note is not paid within five days
after its due date, the undersigned agrees to pay on demand, in addition to the
amount of such installment, an amount equal to 5% of such installment, but only
to the extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note at any
time on or after January 1, 1999, on thirty days' prior written notice to the
Payee. On the date of any such prepayment, the undersigned shall pay an amount
equal to the present value of the remaining payments (principal and interest)
due hereunder discounted at 6% simple interest per annum, together with all fees
and other amounts payable on the amount so prepaid or in connection therewith to
the date of such prepayment. Any prepayments shall be applied to the
installments hereof in the inverse order of maturity.
Upon the maturity of this Note or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at a
rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day.
The undersigned hereby waives diligence, demand, presentment,
protest and notice of any kind, and assents to extensions of the time of
payment, release, surrender or substitution of security, or forbearance or other
indulgence, without notice. The undersigned agrees to pay all amounts under this
Note without offset, deduction, claim, counterclaim, defense or recoupment, all
of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan
Documents intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such Persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
<PAGE> 2
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under Applicable Law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) the Payee or any other holder of any or all of the Obligations
shall otherwise collect amounts which are determined to constitute interest
which would otherwise increase the interest on any or all of the Obligations to
an amount in excess of that permitted to be charged by Applicable Law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at the Payee's or such holder's option,
promptly returned to the undersigned upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under Applicable Law, the Payee and the
undersigned (and any other payors thereof) shall to the greatest extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest through the entire contemplated term of this
Note in accordance with the amount outstanding from time to time thereunder and
the maximum legal rate of interest from time to time in effect under Applicable
Law in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally, but
only by an agreement in writing signed by the undersigned and the Payee or any
holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs
and expenses incurred by the Payee (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution and delivery of this Note and all other Loan Documents,
and in connection with the administration, modification and amendment of the
Loan Documents, and pay to the Payee all costs and expenses (including the fees
and disbursements of counsel and other professionals) paid or incurred by the
Payee in (A) enforcing or defending its rights under or in respect of this Note
or any of the other Loan Documents, (B) collecting any of the liabilities by the
undersigned to the Payee or otherwise administering the Loan Documents, (C)
foreclosing or otherwise collecting upon any collateral and (D) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
-2-
<PAGE> 3
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
ACCUMED INTERNATIONAL, INC.
By: /s/ PETER P. GOMBRICH
-------------------------------------
Name: Peter P. Gombrich
Title: Chief Executive Officer
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,550
<SECURITIES> 0
<RECEIVABLES> 5,033
<ALLOWANCES> 0
<INVENTORY> 3,240
<CURRENT-ASSETS> 10,477
<PP&E> 5,902
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,963
<CURRENT-LIABILITIES> 7,195
<BONDS> 12,091
0
0
<COMMON> 227
<OTHER-SE> 3,233
<TOTAL-LIABILITY-AND-EQUITY> 23,963
<SALES> 14,157
<TOTAL-REVENUES> 14,157
<CGS> 8,906
<TOTAL-COSTS> 8,906
<OTHER-EXPENSES> 16,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,961
<INCOME-PRETAX> (14,085)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,085)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,085)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
