<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Amendment #1 to 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 June 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.
---------------------------------------------------------------------
(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
--------------------------------------------------
(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 August 5, 1997:
22,519,236
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE> 2
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,000,580 $ 2,801,359
Restricted cash 100,000 100,000
Accounts receivable 5,293,534 2,143,596
Prepaid expenses and deposits 544,387 217,198
Production inventory 3,339,721 1,772,127
----------- -----------
Total current assets 10,278,222 7,034,280
----------- -----------
Fixed assets, net 6,223,000 1,696,071
----------- -----------
Notes receivable 111,631 214,273
Deferred financing costs 1,494,525 0
Intangible assets 4,786,567 5,340,411
Other assets 361,944 194,507
----------- -----------
$23,255,889 $14,479,542
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,159,237 $ 2,340,769
Other current liabilities 1,427,744 879,808
Deferred revenue 136,362 146,968
Notes payable 721,191 198,555
Capital lease obligation due within one year 82,122 89,810
----------- -----------
Total current liabilities 6,526,656 3,655,910
----------- -----------
Warranty reserves 1,158,193 0
Long term debt 9,376,295 230,795
Minority interest 268,977 456,841
----------- -----------
10,803,465 687,636
----------- -----------
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares
authorized, 22,387,097 shares issued and outstanding
at June 30, 1997, 20,854,157 at December 31, 1996 223,871 208,542
Additional paid-in capital 51,218,753 44,424,646
Cumulative translation adjustment 32,586 32,586
Accumulated deficit (45,332,705) (34,335,313)
Less treasury stock, 37,956 shares at June 30, 1997,
and 31,812 shares at December 31, 1996, respectively (216,737) (194,465)
----------- -----------
Total stockholders' equity 5,925,768 10,135,996
----------- -----------
$23,255,889 $14,479,542
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
- 1 -
<PAGE> 3
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
----------------------------- -------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 9,243,302 $ 2,312,094 $ 6,193,888 $ 1,124,393
Less cost of sales (5,573,855) (1,465,457) (4,082,255) (870,247)
----------- ----------- ----------- ------------
Gross profit (loss) 3,669,447 846,637 2,111,633 254,146
----------- ----------- ----------- ------------
Operating expenses:
General and administrative 4,446,983 1,791,534 2,586,988 877,477
Research and development 2,299,275 4,789,412 1,145,491 714,626
Goodwill writeoff 3,582,068 0 0 0
Sales and marketing 2,090,423 841,565 1,115,206 448,388
----------- ----------- ----------- ------------
Total operating expenses 12,418,749 7,422,511 4,847,685 2,040,491
----------- ----------- ----------- ------------
Operating income (loss) (8,749,302) (6,575,874) (2,736,052) (1,786,345)
----------- ----------- ----------- ------------
Other income (expense):
Interest income 11,967 11,460 369 5,623
Interest expense (2,488,042) (437,986) (2,288,144) (111,155)
Other income (expense), net 40,769 2,544,513 40,339 82,261
Minority interest 187,216 0 149,493 0
----------- ----------- ----------- ------------
Total other income (expense) (2,248,090) 2,117,987 (2,097,993) (23,271)
----------- ----------- ----------- ------------
Loss before income taxes (10,997,392) (4,457,887) (4,833,995) (1,809,616)
Income tax expense 0 850 0 0
----------- ----------- ----------- ------------
Net loss $(10,997,392) $(4,458,737) $(4,833,995) $ (1,809,616)
=========== =========== =========== ============
Net loss per share $ (0.52) $ (0.27) $ (0.22) $ (0.11)
=========== =========== =========== ============
Weighted average common shares outstanding 21,323,771 16,319,105 22,076,818 16,843,050
=========== =========== =========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
- 2 -
<PAGE> 4
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, Ended June 30,
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(9,070,552) $(4,458,737)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,235,592 704,465
Write-off of in-process research and development 0 3,499,727
Write-off of impaired goodwill 3,582,068 0
Minority interest (187,216) 0
Expenses paid with issuance of stock and warrants 0 1,285,484
Non-cash gain on settlement (22,272) (159,957)
Loss on disposal of assets 0 74,706
Changes in assets and liabilities:
Decrease in restricted cash 0 363,000
(Increase) in accounts receivable (939,273) (531,403)
(Increase) in prepaid expenses and deposits (327,189) (106,358)
(Increase) in production inventory (556,818) (371,877)
Decrease (Increase) in other and intangible assets 150,988 (57,584)
Increase in accounts payable 1,846,948 237,548
(Increase) in deferred financing costs (784,625) 0
Increase (Decrease) in other current liabilities 249,973 (94,588)
(Decrease) in warranty reserves (341,807) 0
(Decrease) in deferred revenue (10,606) (1,419,092)
----------- -----------
Net cash used in operating activities (5,174,789) (1,034,666)
----------- -----------
Cash used in investing activities:
Purchase of fixed assets (624,926) (202,010)
Acquisition of business, net (6,000,000) 0
----------- -----------
Net cash used in investment activities (6,624,926) (202,010)
----------- -----------
Cash flows from financing activities:
Proceeds from issuances of common stock, net 261,028 2,338,711
Notes receivable (issued) collected (55,767) 0
Payment of capital lease obligation (32,870) (46,770)
Proceeds from issuance of notes payable 10,015,000 250,000
Proceeds from bridge loan 6,000,000 0
Payment of notes payable and bridge loan (6,188,455) (889,017)
----------- -----------
Net cash provided by financing activities 9,998,936 1,652,924
----------- -----------
Effect of exchange rates on cash 0 (1,491)
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,800,779) 414,757
Cash and cash equivalents at beginning of period 2,801,359 180,508
----------- -----------
Cash and cash equivalents at end of period $ 1,000,580 $ 595,265
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE> 5
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 June 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 proceeds of $1,250,000 in the
second quarter under two installment loan agreements. Terms of the loans
call for 24 equal monthly principal payments plus interest at 11.5%
commencing in August 1997, and are secured by equipment and receivables
under certain rental agreements with customers.
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, par
value $0.01 per share (the "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.
Commencing three months following the date of issuance, and subject to
shareholder approval of an amendment to the Certificate of Incorporation
(the "Charter Amendment") to increase the authorized shares of Common
Stock by an amount sufficient to permit the Company to reserve for
issuance a sufficient number of shares to allow for the conversion of the
Notes, the Notes will become convertible at the option of the holder into
shares of Common Stock at a conversion price price equal to $3.125 (the
"Conversion Price"). If the Company does not have sufficient authorized
shares to accommodate conversion of the Notes by May 31, 1997, (i) the
Notes will become due and payable 30 days thereafter at an amount equal to
150% of the outstanding principal amount, and (ii) the Conversion Price
will be reduced by 20%. At the Company's annual stockholders meeting on
May 23, 1997 the stockholders approved an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock to 50,000,000 shares. This increase provides sufficient
shares to accomodate conversion of the notes.
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 with an offset in deferred financing costs in the
consolidated balance sheet as of March 31, 1997. The deferred financing
costs were written off in the current 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 are immediately exercisable for a period of six months following
March 14, 1997, and 1,177 Warrants will become immediately exercisable
upon effectiveness of the Charter Amendment and will remain exercisable
for six months thereafter.
The Company has agreed to register the resale of the Common Stock
underlying the Notes and the Warrants under the Securities Act of 1933, as
amended. If the company fails to file with the Securities and Exchange
Commission a registration statement covering such underlying Common Stock
on or prior to May 31, 1997, (i) the interest reate on the Notes will
increase to 16% per annum until such registration statement is filed, and
(ii) the Conversion Price will be reduced by 20%. The Company filed the
required registration statement on May 30, 1997
The total proceeds received of $8,500,000 were allocated to the notes
payable 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 payable has been recorded in Deferred Finance Costs on the
March 31, 1997 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 offering and
five year warrants to purchase 200,000 shares of the Company's Common
Stock with a fair value of $310,000. Of the loan 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 acquisiton on March
3, 1997 (see 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 these 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 current 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: 850,000 warrants - risk free rate 7%,
expected life 6 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.
4
<PAGE> 6
5. Acquisition: On March 3, 1997, the Company acquired certain assets and
liabilities (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 Difco as if it had occurred as of January 1, 1996 follows:
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Sales $ 11,882,424 $ 11,028,591
Net loss $ (12,139,925) $ (9,214,565)
Net loss per share ($0.57) ($0.55)
</TABLE>
6. 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 twelve months.
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 six months ended June 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.
Revenues from sales for the quarter ended June 30, 1997 increased to
$6,194,000 compared to $1,124,000 for the quarter ended June 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 $870,000 in the second quarter of 1996 to
$4,082,000 in the second quarter of 1997, reflecting the increased sales volume
in the microbiology product line and the addition of the ESP product line.
5
<PAGE> 7
General and administrative expenses increased from $877,000 in the second
quarter of 1996 to $2,587,000 in the comparable 1997 quarter primarily due to
increases in staffing, office, professional fees, and investor relations
efforts.
Interest expense of $2,288,000 in the second quarter of 1997 reflected
amounts accrued on the three year notes issued in March of 1997 and a write-off
of $1.9 million related to the "in the money" conversion feature of these
notes. The write-off was recorded in the second quarter of 1997 because that
is the period in which the notes became convertible. The interest expense for
the second quarter of 1996 of $111,000 reflected non-cash interest incurred
for issuance of warrants connected with notes payable repaid in 1996.
Research and development expenses increased from $715,000 in the second
quarter of 1996 to $1,145,000 in the second quarter of 1997 due primarily to
increased spending in the cytopathology area.
Sales and marketing expenses increased from $448,000 in the second quarter
of 1996 to $1,115,000 in the second quarter of 1997 due to increased marketing
efforts for the cytopathology product line.
Net loss increased from $1,810,000 for the second quarter of 1996 to
$4,834,000 for the second quarter of 1997 due to increased sales volume and
related gross margins offset by increases in all operating expense categories.
In addition, a write-off of $1.9 million related to the "in the money"
conversion feature of notes issued in March 1997 increased interest expense as
compared to 1996. Net loss per share for the quarter ended June 30, 1997 was
$0.22 compared to $0.11 for the quarter ending June 30, 1996. Weighted average
shares outstanding for the periods 1997 and 1996 were 22,077,000 and
16,843,000, respectively.
For the six month period ended June 30, 1997, net loss was $10,997,000
and $4,459,000 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, as discussed above, for the six months ending June
30, 1997 also contributed to the increased loss as compared to the first six
months of 1996. The net loss per share for the first six months of 1997 was
$0.52 compared to $0.27 for the 1996 period. The loss per share for the
current six month period was about $0.10 per share less due to the increase in
the weighted average shares outstanding for 1997.
The Company's increase in net current assets of $374,000 as of June 30,
1997 as compared to December 31, 1996 is due primarily to the Company's
acquisition at March 3, 1997 of the ESP Product Line, offset by an decrease in
net current assets of the cytopathology 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 June 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. Of this total, 750,000 warrants expire September 15, 1997 and 100,000
warrants expire November 23, 1997. If all of these warrants were exercised, of
which there can be no assurance, the Company would receive about $2,656,000 in
gross proceeds.
During the second quarter of 1997, the Company received
6
<PAGE> 8
an aggregate of $223,000 upon the exercise of certain stock options and
warrants. In addition, the Company received $1,250,000 in June 1997 from
installment debt to be repaid in 24 monthly-payments, including interest at
11.5%, beginning in August 1997.
During the six months ended June 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 may not be sufficient to finance the Company's projected
operations through at least the next 12 months. In order to obtain the
additional financing needed, management is seeking to raise additional funds
through various means, including private financings, collaborative
relationships and other arrangements. 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 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 Company's business, financial
condition and results of operations.
7
<PAGE> 9
PART II.
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
A combined Annual and Special Meeting of Stockholders was held on May 23,
1997. At such meeting the following maters were approved. The persons named
below were elected to serve one year terms as directors:
<TABLE>
<CAPTION>
Voting Results (No. of Shares)
-------------------------------------------
Director For Against Withheld
-------------------- ----------- --------------- ---------------
<S> <C> <C> <C>
J. Donald Gaines 18,051,794 - 0 - 23,462
Peter P. Gombrich 18,051,794 - 0 - 23,462
Jack H. Halperin 18,051,794 - 0 - 23,462
Paul F. Lavallee 18,051,794 - 0 - 23,462
Joseph W. Plandowski 18,051,794 - 0 - 23,462
Robert L. Priddy 18,050,644 - 0 - 24,612
Leonard M. Schiller 18,051,794 - 0 - 23,462
</TABLE>
Stockholders also approved a proposal to amend the Company's Certificate
of Incorporation to increase the authorized Common Stock from 30,000,000 shares
to 50,000,000 shares. The vote was as follows: 17,678,077 for, 385,219
against, 11,960 abstain and zero broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith:
4.1 Certificate of Amendment to Registrant's Certificate of
Incorporation (incorporated by reference to the
Registrant's Registration Statement on Form S-3 (Regis. No.
333-28125) filed with the Commission on May 30, 1997).
10.1 Employment Agreement between the Registrant and
Michael D. Burke dated as of May 23, 1997.
10.2 O.E.M. Supply Agreement between the Registrant and Leica
Microscopie und Systems GmbH dated as of May 26, 1997.
10.3 Manufacturing and Supply Agreement between the Registrant
and RELA, Inc. dated as of May 22 , 1997.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. The following Current Report on Form 8-K was
filed by the Company with the Securities and Exchange Commission during the
quarter ended June 30, 1997:
8
<PAGE> 10
On May 15, 1997, Amendment No. 1 to Current Report on Form 8-K dated
March 18, 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.
9
<PAGE> 11
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: September 12, 1997
10
<PAGE> 12
Index to Exhibits
Exhibit No. Description of Exhibit
4.1 Certificate of Amendment to Registrant's Certificate of
Incorporation (incorporated by reference to the Registrant's
Registration Statement on Form S-3 (Regis. No. 333-28125) filed
with the Commission on May 30, 1997).
10.1 Employment Agreement between the Registrant and Michael D. Burke
dated as of May 23, 1997.
10.2 O.E.M. Supply agreement between the Registrant and Leica
Microscopie and Systems GmbH dated as of May 26, 1997.
10.3 Manufacturing and Supply Agreement between the registrant and
RELA, Inc. dated as of May 22, 1997.
11
<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made this 23rd day of May 1997,
by and between AccuMed International, Inc., a Delaware corporation (the
"Employer"), and Michael D. Burke (the "Executive").
WHEREAS, Executive has served as Senior Vice President of Employer and
President, Microbiology Division of Employer since December 29, 1995 pursuant
to the offer of Employment letter dated April 21, 1995 between Employee and
AccuMed, Inc. (which was merged with and into the Company on December 29, 1995)
(the "Original Employment Letter"); and
WHEREAS , Employer desires to reorganize its corporate structure and revise
Executive's duties, responsibilities and position and Executive is willing to
accept such employment, and this Agreement contains the parties' entire
agreement and understanding as to the matters contemplated herein, and
supersedes any and all prior oral or written agreements, including the Original
Employment Letter.
WHEREAS, Employer desires to employ Executive and Executive is willing to
accept such employment, all upon the terms and conditions hereinafter set forth
and those terms and conditions set forth in the Employer's letter Offer to the
Executive which is superseded by the terms and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto agree as follows:
1. Employment and Duties. Employer hereby employs Executive and Executive
accepts employment with Employer as Corporate Vice President and Group
President, reporting to the Chairman/CEO of the Employer, and Executive shall
perform those duties as usual and customary as a Corporate Vice President
(i.e., to include but not be limited to Financial and Administrative duties).
Executive shall perform such other or additional duties as shall be assigned to
Executive from time to time by the Chairman/CEO consistent with his position.
2. Compensation and Benefits. During the term of this Agreement, Employer
shall pay Executive the following compensation:
a. Salary Executive shall receive an annual salary which shall be no less
than $175,000.00 payable semi-monthly in accordance with Employer's regular
payroll procedures. Executive shall also receive annual performance and
compensation reviews which will be conducted by the Chairman/CEO and the
Compensation Committee of the Board of Directors, or its designee.
b. Bonus Executive shall be eligible to receive bonuses which shall be
up to twenty-five percent (25%) of Executive's annual salary, based upon
performance of mutually agreed upon goals/objectives. Two thirds (2/3) of
said bonus shall be based on quarterly objectives and shall be paid quarterly.
One third (1/3) of said bonus shall be based upon annual objectives and shall
be paid annually. The bonus year shall be the calendar year. The Employer, at
its sole and absolute discretion may pay Executive a bonus in excess of
twenty-five percent (25%) of his annual salary.
c. Stock Options
<PAGE> 2
(1) Subject to approval of the Compensation Committee of the Board,
Executive will be granted, options to purchase 100,000 shares of the Employer's
Common Stock, pursuant to the terms of the Employer's 1997 Stock Option Plan
which options, subject to Compensation Committee approval and approval of the
Plan by stockholders, shall be exercisable in accordance with the following
schedule:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
Date of stockholder approval of Plan 20,000 shares
7/5/98 20,000 shares
7/5/99 20,000 shares
7/5/00 20,000 shares
7/5/01 20,000 shares
</TABLE>
The price of the options will be set at Fair Market Value (as defined in the
Plan) on the grant date. If there is a change of control of the Company (as
described in the Plan), or if Peter P. Gombrich cease to hold the office of
Chairman and CEO, the right to acquire shares pursuant to any of such 100,000
options outstanding on the date on which such Change of Control occurs shall
accelerate and become fully vested and immediately exercisable.
(2) Subject to Compensation Committee approval, Executive shall also be
granted options to purchase an aggregate of 50,000 shares of Common Stock,
which the Compensation Committee intended to have granted to Executive in 1996
but for the lack of available options. The exercise price shall be the Fair
Market Value on the Date of Grant. Such Options shall be exercisable in
accordance with the following schedule:
<TABLE>
Date Amount
---- ------
<S> <C>
Date of stockholder approval of Plan 10,000 shares
7/5/98 10,000 shares
7/5/99 10,000 shares
5/5/00 10,000 shares
7/5/01 10,000 shares
</TABLE>
The right to acquire shares pursuant to any such 50,000 options that are
outstanding on the date on which a Change of Control occurs shall be
accelerated and become fully vested and immediately exercisable.
d. Benefits The Executive shall be eligible for such Employer benefits as
exist for senior executives of Employer and subject to the terms and conditions
of third party policies. Should Executive not be eligible to receive any of
the Employer's benefits or should any carrier decline to cover Executive,
Employer will use commercially reasonable efforts to obtain pay for and retain
a comparable replacement policy on an
2
<PAGE> 3
individual basis.
(1) Medical Insurance with $15,000 Life/AD&D fully paid by Employer.
Dependent medical insurance at the option of the employee.
(2) Excess Life and AD&D Benefit 1 1/2 times base salary (less
$15,000) up to $150,000 cap, fully paid by Employer
(3) Short Term Disability $500/wk benefit for 26 weeks fully paid by
Employer
(4) Long Term Disability 60% of monthly salary ($6000/mo. cap) to
age 65
(5) Dental Insurance for Employee and Dependents at own expense
c. Expenses Reimbursement of normal business expenses with
submission of expense reports and receipts. The Company will reimburse up
to $4,000 a year of reasonable travel expenses for Executive's daughter to
visit Executive.
d. Auto The Company will maintain the Executive's current company
auto and pay or reimburse to Executive related expenses, and will upgrade the
auto when reasonable permitted under the lease terms.
e. Relocation Expenses Other compensation shall be provided as set
forth in Exhibit A, hereto.
g. Other Compensation Nothing herein shall preclude Executive from
receiving any additional compensation or from participating in the present or
future life, major medical, hospitalization, profit sharing, pension or
retirement, sickness or disability or other plan for the benefit of the
employees of Employer. In each case, Executive will participate to the extent
and in the manner approved or determined by the Board of Directors or otherwise
determined.
3. Extent of Services. Executive shall devote his entire attention and
energy to the business and affairs of Employer on a full-time basis and shall
not be engaged in any other business activity, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage, unless
Employer otherwise consents prior thereto; Executive shall not be prohibited
from investing Executive's assets in such form part of the Executive in the
operation of the affairs of the companies in which such investments are made,
4. Term. The term of this Agreement shall be five years, commencing
May 23, 1997, subject to the following:
a. Illness or Disability If Executive is absent from employment by
reason of illness or other incapacity for more than 180 consecutive days',
Employer may, after such 180 days but only if Executive has not returned to
active employment with Employer, terminate Executive's employment by furnishing
him with at least 30 days written notice of such intention to termination.
Employer shall be obligated to pay Executive's salary to the date of
termination , less that amount equal to the weekly Short Term Disability
Benefit, which date shall be for all purposes of this Agreement, the date of
termination of his employment.
b. Death. If Executive shall die, thereupon his employment shall
terminate, and Employer shall be only obligated to pay Executive's salary to
the end of the month during which Executive dies.
c. Termination by Employer. Upon written notice, Employer may terminate
this Agreement at any time:
3
<PAGE> 4
(i) For Cause. As used herein, "Cause" is defined to mean (1) any act of
fraud, misappropriation, embezzlement, or like act of dishonesty; (2)
conviction of a felony; (3) other behavior which adversely reflects on the
reputation of Employer including without limitation, substance abuse, public
intoxication, etc.; or (4) material failure to perform the services and duties
described herein, (5) material violation of any other provisions set forth
herein, or material breach of any fiduciary duty to Employer, if the material
failure, violation, or breach unreasonably continues after written notice
thereof is given to the Executive by the Employer and further provided that
Executive is given a fair and reasonable opportunity to cure.
If Employer shall terminate Executive's employment without Cause,
Employer shall pay Executive's salary up to the date of the delivery of such
notice of termination, which date shall be for all purposes of this Agreement,
the date of termination of his employment. (ii) Without Cause, to terminate
the Executive without cause, the Executive is to be terminated without cause
he shall be given six (6) months notice in writing.
d. Termination by Executive Executive may terminate this Agreement for any
reason after providing six (6) months written notice. If Employer is in
breach of this Agreement, Executive may, in addition and without prejudice to
any other remedies for a breach hereof, terminate this Agreement, after
providing written notice to the Employer and providing Employer with a
reasonable opportunity to cure. If the Employer thereafter fails to cure, all
of Executive's further obligations hereunder shall terminate, except for the
requirements of Sections 8 and 10 hereof.
5. Severance.
a. If Executive terminates this Agreement within eighteen months of
its execution, except if Employer is in breach of this Agreement, as
provided in Section 4(d) above housing and moving related
expenditures incurred by Employer on Executive's behalf shall be
reimbursed and returned by Executive to Employer.
b. If Employer terminates this Agreement without Cause within sixty
(60) months of its execution, in addition to the notice requirement
provided in Section 4(c)(ii) above, Employer will pay Executive his
then current annual salary for twelve (12) months, semi-monthly, in
accordance with Employer's regular payroll procedures. If Employer
terminates this Agreement, without Cause, after sixty (60) months of
its execution, Employer will have no severance obligation.
6. Vacation. During the first, second and third calendar years of this
Agreement, Executive shall be entitled to four weeks of vacation with pay.
During the fourth and fifth calendar years of continuous service and during
each subsequent calendar year of continuous service thereafter, the Executive
shall be entitled to six weeks vacation with pay. In the event that the full
vacation is not taken by Executive within 60 days of the end of any calendar
year, no vacation time shall accrue for use in future years, without mutual
agreement between Executive and Employer.
7. Restrictive Covenant. Executive shall not in any manner engage in any
business directly competitive with Employer, for a period of one year from the
date of the termination of this Agreement under the following circumstances:
a. If this Agreement is terminated for "Cause" by the Employer, pursuant
to Section 4(c)(i) above; or
b. If this Agreement is terminated by Executive, pursuant to Section 4(d)
above, for reasons other
4
<PAGE> 5
than a breach by Employer.
8. Confidential Information and Discoveries. Executive agrees that all
information of a technical or business nature such as know-how, trade secrets,
secret business information, plans, data, processes, techniques, customer
information, inventions, discoveries, formulae, patterns, devices, etc. (the
"Confidential Information"), acquired by Executive in the course of his
employment under this Agreement, is a valuable business property right of the
Employer. Executive agrees that such Confidential Information, whether in
written, verbal or model form, shall not be disclosed to anyone outside the
employment of Employer without the express written authorization of Employer,
unless said individual is subject to the Employer's non-disclosure agreement or
other appropriate contractual arrangement. This disclosure restriction shall
be limited to (a) disclosures for use in any market in which the Employer may
then be doing business or may have taken any steps toward entering, and (b) for
that period of time until the Confidential Information is generally available
to the trade.
Any and all improvements, inventions, discoveries, formulae or processes
in any way related to Employer's business which Executive may conceive or make
during his regular working hours or otherwise shall be the sole and exclusive
property of Employer and Executive will disclose the same to Employer and will,
whenever requested by Employer to do so (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which Employer may deem
necessary or appropriate in order to apply for, obtain, maintain, enforce and
defend patents, copyrights, trademarks or other forms or protection, or in
order to assign and convey or otherwise make available to Employer the sole and
exclusive right, title and interest in and to said improvements, inventions,
discoveries, formulae, processes, applications or patents. After the
termination of this Agreement, Employer will compensate Employee for his time
and effort to comply with the terms of this paragraph 7 and the Employee may
not decline to comply with any reasonable request.
No provision in this Agreement is intended to require assignment of any
of Executive's rights in an invention if no equipment, supplies, facilities, or
trade secret information of Employer was used, and the invention was developed
entirely on Executive's own time; and the invention does not relate to the
business of Employer or to Employer's actual or demonstrably anticipated
research or development; and does not result from any work performed by
Executive for Employer.
9. Enforcement. Both parties recognize that the services to be rendered
under this Agreement by Executive are special, unique and of extraordinary
character and that in the event of the breach by Executive of any of the terms
and conditions of this Agreement to be performed by Executive, then Employer
shall be entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach hereof, or to enforce the specific performance hereof by
Executive or to enjoin Executive from performing acts prohibited above during
the period herein covered, but nothing herein contained shall be construed to
prevent such other remedy in the courts as Employer may elect to invoke.
10. Return of Documents. Upon the termination of this Agreement for any
reason, Executive shall forthwith return and deliver to Employer and shall not
retain any original or copies of any books, papers, price lists or customer
contacts, bids or customer lists, files, books of account, notebooks and other
documents and data relating to the performance of services rendered by
Executive hereunder, which were provided to or made available to Executive by
Employer, all of which materials are hereby agreed to be the property of
Employer.
11. Miscellaneous.
a. Notices Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to Executive or Employer at the address set forth
5
<PAGE> 6
below their signatures at the end of this Agreement or to such other
address as they shall notify each other in writing.
b. Assignment This Agreement shall be binding upon and inure to
the benefit of Employer and its successors and assigns and Executive
and his personal representatives, heirs, legatees and beneficiaries,
but shall not be assignable by Executive.
c. Applicable Law This Agreement shall be deemed to have been
made in Illinois, regardless of the order in which the signatures of
the parties shall be affixed hereto, and shall be interpreted, and the
rights and liabilities of the parties determined, in accordance with
the laws of the State of Illinois. As part of the consideration for
the execution of this Agreement, it is hereby agreed that all actions
or proceedings arising directly or indirectly from this Agreement
shall be litigated only in the courts of the State of Illinois or
United States courts located therein, and all parties to this Agreement
hereby consent to the jurisdiction of any local, state or federal court
located within the State of Illinois.
d. Headings Sections headings and numbers herein are included for
convenience of reference only and this Agreement is not to be construed
with reference thereto. If there be any conflict between such numbers
and headings and the text hereof, the text shall control.
e. Severability If for any reason any portion of this Agreement
shall be held invalid or unenforceable, it is agreed that the same
shall not affect the validity or enforceability of the remainder hereof.
f. Entire Agreement This Agreement, and its attachments, contains
the entire agreement of the parties with respect to its subject matter
and supersedes all previous agreements between the parties pertaining
to the subject. No officer, employee or representative of Employer
has any authority to make any representation or promise in connection
with this Agreement or the subject matter hereof that is not contained
herein, and Employer represents and warrants he has not executed this
Agreement in reliance upon any such representation or promise. No
modification of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
g. Waiver of Breach The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
h. Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, The parties have caused this Agreement to be duly executed
on the date first above written.
ACCUMED INTERNATIONAL, INC. EXECUTIVE:
By: \s\ Peter P. Gombrich By: \s\ Michael D. Burke
----------------------------------- ----------------------------------
Peter P. Gombrich Michael D. Burke
CHAIRMAN & CEO
Address: 900 N. Franklin, Suite 401 Address: 225 Manor Brook Road
Chicago, IL 60610 South Russell, OH 44022
7
<PAGE> 1
Exhibit 10.2
O.E.M. SUPPLY AGREEMENT
BETWEEN
LEICA MIKROSKOPIE UND SYSTEME GMBH
AND
ACCUMED INTERNATIONAL, INC.
MAY 26, 1997
<PAGE> 2
O.E.M. SUPPLY AGREEMENT
THIS O.E.M. SUPPLY AGREEMENT is made as of the 26th day of May
1997, by and between ACCUMED INTERNATIONAL, INC., a company organized and
existing under the laws of Delaware and having its principal office at 900 N.
Franklin Street, Suite 401, Chicago, Illinois 60610, U.S.A. ("VENDOR"), and
LEICA MIKROSKOPIE und SYSTEME GmbH, a company organized and existing under the
laws of Germany and having its principal office at Ernst-Leitz Strasse, D-
35578, Wetzlar, Germany ("LEICA").
ARTICLE 1
DEFINITIONS
1.1 "Accessories" shall mean the accessories to the Systems, a
list and description of which is contained in Schedule 1.19 attached hereto
(which Schedule may be amended from time to time and at any time upon mutual
written agreement).
1.2 "Affiliate" shall mean a corporation or other entity that
controls, is controlled by, or is under common control with, the designated
party. "Control" shall mean the ownership, directly or indirectly, through one
or more intermediaries, of at least 49% of the shares of stock entitled to vote
for the election of directors in the case of a corporation (or comparable
officers or representatives of the particular entity), or at least 49% of the
interest in profits in the case of a business entity other than a corporation.
Notwithstanding the foregoing, if laws of the country of incorporation,
registration, or organization of the designated entity limit one or both of the
percentages set forth in the foregoing sentence to a percentage less than 49%,
such lower maximum permitted percentage shall be substituted for the applicable
49% in the foregoing sentence.
1.3 "Agreement" shall mean this O.E.M. Supply Agreement, including
the Schedules and Exhibits hereto, as it may be amended or supplemented from
time to time in accordance with its terms.
1.4 "Agreement Term" shall have the meaning set forth in
Section 7.1.
1.5 "Annual Sales Target" shall mean a specified number of Systems
targeted to be sold in the Territory by LEICA and VENDOR collectively, during a
specified 12-month period during the Agreement Term: (i) there shall be no
Annual Sales Target initial for the initial 12-month period of the Agreement
Term, and (ii) with respect to each subsequent 12-month period of the Agreement
Term, the Annual Sales Target shall be such number of Systems to be mutually
agreed upon by the parties at least 90 days prior to the beginning of the
immediately following 12-month period.
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<PAGE> 3
1.6 "Authorized Trademarks" shall have the meaning set forth in
Section 3.2.1.
1.7 "Breaching Party" shall have the meaning set forth in
Section 7.2.1.
1.8 "Business Day" shall mean any day that is not a Saturday,
Sunday, or bank holiday in the State of Illinois.
1.9 "Confidential Information" shall have the meaning set forth
in Section 9.1.
1.10 "Consequential Damages" shall have the meaning set forth in
Section 10.13.
1.11 "Consumables" shall mean the consumables of the Systems, a
list and description of which are contained in Schedule 1.19 attached hereto
(which Schedule may be amended from time to time and at any time upon mutual
written agreement).
1.12 "Effective Date" shall mean the date first above written.
1.13 "Effective Date PO" shall have the meaning set forth in
Section 2.3.2.
1.14 "Intellectual Property" shall have the meaning set forth in
Section 5.1.5.
1.15 "Maintenance Fee" shall have the meaning set forth in
Section 3.11.
1.16 "Products" shall mean, collectively, the Systems, the
Accessories, and the Consumables; the user and calibration instruction manuals,
user and field service guides and the like; and any Product Changes.
1.17 "Product Changes" shall mean any material changes,
improvements, alterations, modifications, upgrades, new generations, and
substitutions to or of the Products or the Products' labeling relating to the
form, fit, function, or appearance of the Products. Product Changes shall be
deemed to (a) include Product software fixes, updates, and upgrades which, when
incorporated, result in variations from the original operational specifications
and designs; and (b) exclude Product software fixes, updates, and minor
upgrades (as set forth in Section 3.9) that merely affect the speed or
efficiency of the Products or constitute minor error or "bug" fixes.
1.18 "Product Enhancements" shall have the meaning set forth in
Section 3.4.
1.19 "Quarterly Minimums" shall have the meaning set forth in
Section 4.1.1.
1.20 "Systems" shall mean the AcCell(TM) systems, a list and
description of which is contained in Schedule 1.19 attached hereto (which
Schedule may be amended from time to time and at any time upon mutual written
agreement).
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<PAGE> 4
1.21 "TAB" shall have the meaning set forth in Section 3.13.
1.22 "Terminating Party" shall have the meaning set forth in
Section 7.2.1.
1.23 "Territory" shall mean world-wide except the United States of
America, Canada, Mexico, the Caribbean, the Commonwealth of Puerto Rico, the
countries in Central America and the countries in South America.
1.24 "Test Period" shall have the meaning set forth in Section 2.4.
1.25 The term "sale" or "resale" (in any tense or form), in
reference to software that is a Product shall not be construed to transfer or
convey ownership of such software but merely a license to use such software.
ARTICLE 2
PURCHASE AND SALE
2.1 Exclusivity. During the Agreement Term, VENDOR shall sell the
Products exclusively to LEICA, and LEICA may purchase the Products from VENDOR
in accordance with and subject to the terms and conditions of this Agreement by
submitting to VENDOR a purchase order therefor, for LEICA's use, marketing,
sales, rental, leasing, or other disposal or distribution in the Territory,
provided that VENDOR reserves the right to (a) use, market, sell, rent, lease,
or otherwise dispose of or distribute the Products on its own directly to
customers within the Territory, and/or (b) cooperate with LEICA to do the same.
The parties shall cooperate with and notify each other (in accordance with the
reporting procedures set forth in Sections 4.3.4 and 4.5) regarding their
respective direct sales activities in the Territory. LEICA shall not directly
(by itself or with any third party) use, market, sell, rent, lease, or
otherwise dispose of or distribute products in the Territory that are
competitive in functionality with the Products.
2.2 License. VENDOR hereby grants to LEICA and its Affiliates a
nonexclusive license to access and use VENDOR's Intellectual Property as
necessary to enable LEICA to use, market, sell, rent, lease, and/or otherwise
dispose of or distribute (or have others do any of the foregoing on LEICA's
behalf in accordance with the terms of this Agreement) the Products within the
Territory; provided that VENDOR shall not grant to any other distributor or
dealer any similar license to access and use VENDOR's Intellectual Property in
the Territory. LEICA shall determine (in its sole discretion) all terms and
conditions of sale to its end-users, distributors, and dealers, including but
not limited to prices. LEICA and its Affiliates shall not sell the Products
outside of the Territory or authorize any of their respective distributors or
dealers to sell the Products outside of the Territory. Notwithstanding
anything to the contrary contained in this Agreement, if any of LEICA's
distributors or dealers sells the Products outside of the Territory and refuses
to cease such activity, LEICA shall (a) if legally permitted, terminate any and
all agreements as necessary to terminate such distributor's or
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<PAGE> 5
dealer's right to sell the Products, and (b) defend, indemnify, and hold
harmless VENDOR from and against any claims against VENDOR arising in
connection with any distributor's or dealer's activities outside the Territory.
2.3 Product Delivery.
2.3.1 The parties acknowledge that a completed purchase
order substantially in the form of Exhibit E was submitted by LEICA to VENDOR
and accepted by VENDOR for Systems shipped to LEICA prior to the Effective
Date. LEICA shall pay to VENDOR the amounts due under invoices for such
Products upon execution hereof. Systems purchased by LEICA pursuant to such
completed purchase order shall be credited toward the Annual Sales Target for
the initial 12-month period.
2.3.2 On the Effective Date, LEICA shall submit to VENDOR a
complete purchase order substantially in the form of Exhibit E for 50 Systems
to be shipped to LEICA on or before June 30, 1997 (the "Effective Date PO").
LEICA shall pay to VENDOR the amounts due under the Effective Date PO in
accordance with Section 2.5.2. If an agreement from Cerba Laboratories and
LEICA for the purchase of 20 Systems and one TracCell is not executed and
received by LEICA and VENDOR within 90 days from June 30, 1997, LEICA shall
have the right to require VENDOR to repurchase (at the price paid by LEICA) 20
Systems ordered under the Effective Date PO. LEICA shall use its best efforts
to execute and deliver the agreement with Cerba Laboratories within such 90-day
period. Laboratories.
2.3.3 Except for the initial purchase order described in
Section 2.3.1, at least 60 days prior to issuing a purchase order, LEICA shall
provide written notice to VENDOR of LEICA's intent to issue a purchase order
and shall specify the models and quantities to be set forth in such purchase
order. Within ten Business Days after VENDOR's receipt of any purchase order,
VENDOR shall provide written notice to LEICA of VENDOR's acceptance or
rejection of such purchase order. If VENDOR fails to provide such
notification, the purchase order shall be deemed accepted. Within 45 days
after VENDOR's receipt of an accepted purchase order, VENDOR shall deliver the
Products specified in such purchase order. VENDOR shall ship any Products to
LEICA's facility in Wetzlar, Germany. Title and risk of loss for any Products
shipped to LEICA shall pass to LEICA upon VENDOR's dispatch of such Products
for shipment. Notwithstanding the foregoing, VENDOR shall deliver to a
facility in the Territory (or another mutually agreeable location) complete
Systems (excluding the microscope) in the form of an auto-focus kit and an
AcCell unit, where applicable. At such facility, VENDOR shall incorporate each
auto-focus kit into a LEICA microscope and mount such microscope onto an AcCell
unit. LEICA may cancel a purchase order upon written notice to VENDOR if
delivery of the applicable Products is more than 30 days past due.
2.3.4 Resolution of Technical Problems. Set forth on
Schedule 2.3.4 is a description of technical problems with the Products
identified by LEICA prior to the Effective
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<PAGE> 6
Date and the actions that were taken to correct such problems. The parties
agree that each such problem has been successfully resolved prior to the
Effective Date.
2.4 Inspection and Testing. Within 30 days after the Effective
Date, VENDOR and LEICA shall agree upon Product inspection and testing
procedures to be performed by LEICA, and such inspection and testing procedures
shall become a part of this Agreement as Exhibit A. For 30 days following
receipt by LEICA of any Products from VENDOR (the "Test Period"), LEICA shall
have the right, solely at LEICA's expense, to count, inspect, and test such
Products in accordance with such agreed-upon inspection and testing procedures.
If any Product fails such inspection and testing, and such failure is not, in
whole or in part, the direct or indirect result of LEICA's negligence or misuse
(including, without limitation, LEICA's failure to properly store the Product
while in LEICA's possession), then LEICA shall immediately notify VENDOR of
such failure, and VENDOR shall, at VENDOR's option after confirming such
failure, either (a) promptly repair or replace any such Product without
additional charge, or (b) refund the purchase price of such Product. In such
event, VENDOR shall accept the return of such Product and pay the shipping
costs for (i) the return to VENDOR of such Product, and (ii) the delivery to
LEICA of the repaired or replacement Product, if any. If LEICA fails to notify
VENDOR during the Test Period for any Product of a failure of such inspection
and testing, such Product shall be deemed accepted by LEICA. Inspection,
testing, acceptance, or use of the Products, or failure to do the same, on any
occasion shall not affect VENDOR's obligation under any warranty contained
herein or any other rights or remedies available to LEICA whether at law or in
equity, and such warranties, rights, and remedies shall survive such
inspection, testing, acceptance, and use.
2.5 Pricing and Payment.
2.5.1 Pricing. LEICA shall pay to VENDOR $8,500 and $9,100
(subject to adjustment as provided in this Section 2.5.1 for each AcCell 2000
and AcCell 2001, respectively, purchased by LEICA during the initial 12-month
period of the Agreement Term. At the end of such initial 12-month period, an
additional purchase price shall be calculated as follows: (i) if LEICA has
purchased 200 or more Systems, no additional purchase price shall be paid, (ii)
if LEICA has purchased between 151 and 199 Systems, $250 per System additional
purchase price shall be paid, (iii) if LEICA has purchased between 101 and 150
Systems, $350 per System additional purchase price shall be paid, (iv) if LEICA
has purchased between 51 and 100 Systems, $400 per System additional purchase
price shall be paid, (v) if LEICA has purchased 50 or fewer Systems, $500 per
System additional purchase price shall be paid. LEICA shall pay to VENDOR the
applicable additional purchase price for each System purchased by LEICA during
such initial 12-month period within 30 days following the last day of such
period. No less frequently than once per 12-month period of the Agreement Term
beginning during the second 12-month period of the Agreement Term, the parties
shall jointly review such purchase prices and mutually agree upon any changes
in such purchase prices not later than 90 days prior to the beginning of the
immediately following 12-month period. Such price changes shall become
effective the first day of the immediately following 12-month
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<PAGE> 7
period. If the parties are unable to reach agreement with respect to pricing
changes, either party may terminate this Agreement in accordance Section 7.2.4.
During the second and subsequent 12-month periods of the Agreement Term, LEICA
shall pay the lower of the purchase prices for Systems and if at the end of the
respective period, the applicable Annual Sales Target shall not have been met,
LEICA shall pay to VENDOR the price difference for each System purchased during
such 12-month period within 30 days following the last day of such period.
2.5.2 Payment. VENDOR shall bill LEICA for all Products
shipped to LEICA and for any additional amounts due hereunder. VENDOR shall
not submit invoices for Products to LEICA until such Products have been
shipped. LEICA's payment shall be due on or before 30 days after the date of
VENDOR's invoice for such Products and additional amounts. If LEICA's payment
is made on or before 30 days after the date of VENDOR's invoice, LEICA shall be
entitled to a 2% discount therefor. LEICA shall pay such invoice via bank wire
funds transfer in United States Dollars (US$) for immediate deposit to AccuMed
International, Inc., Account No. 301-59838, Northern Trust Chicago (ABA No.
07100152), or such other account of VENDOR as specified by VENDOR in a written
notice to LEICA. LEICA shall pay interest on late payments at a rate of 1-1/2%
per month.
2.6 Right of First Negotiation and Refusal. LEICA shall have a
right of first negotiation and refusal to be the exclusive OEM purchaser in the
Territory for all new cytopathology products developed by VENDOR during the
Agreement Term. Upon notice from VENDOR to LEICA of VENDOR's development of
any such products, the parties shall commence negotiating in good faith
regarding the terms and conditions upon which LEICA shall become the exclusive
OEM purchaser in the Territory for such products. If the parties cannot agree
upon the terms and conditions for such a relationship within 45 days after
VENDOR's notice, VENDOR shall have the right to seek a third-party distributor
for such Products in the Territory subject to no less favorable terms and
conditions than those offered to LEICA.
2.7 Separate Agreement for TracCell(TM). Within three weeks after
VENDOR receives from the United States Food and Drug Administration clearance
for marketing of the TracCell system, the parties shall enter into an agreement
for the distribution of TracCell systems in the Territory upon similar terms
and conditions to those provided herein for AcCell, except that the prices and
quotas will be specific to the TracCell system.
ARTICLE 3
OBLIGATIONS OF VENDOR
3.1 Approvals and Clearances. VENDOR shall ensure that no Product
is sold to LEICA or its end-users before all required governmental or private
approvals and clearances have been obtained, including without limitation all
EC (CE) and CB documents (through
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Underwriters Laboratories - UL). LEICA shall provide reasonable support and
cooperation in connection therewith. LEICA shall cooperate with and assist
VENDOR in determining which approvals and clearances are otherwise required in
the Territory and shall assist in obtaining same.
3.2 Packaging and Labeling.
3.2.1 Within 45 days after the Effective Date, the parties
shall agree upon the packaging and labeling for the Products. Except for
Products shipped during the first 90-day period of the Agreement Term, all
Products shipped to LEICA shall include such agreed-upon packaging and
labeling. In connection therewith, VENDOR shall permanently affix LEICA's
serial number, trade name, trademark, colors, and logo (the "Authorized
Trademarks") on all Product packaging, printed materials, labels, and tags.
Notwithstanding the foregoing, if LEICA requests nonstandard packaging or
labeling, VENDOR shall accommodate such request (in VENDOR's reasonable
discretion), provided that VENDOR may charge LEICA additional fees in
connection with any such nonstandard packaging or labeling.
3.2.2 Upon termination or expiration of this Agreement,
VENDOR shall (a) not sell any Product that is labeled with the Authorized
Trademarks or otherwise packaged in materials containing the Authorized
Trademarks and (b) immediately cease any use of the Authorized Trademarks.
Except as expressly set forth herein, VENDOR shall not have any right to use
nor shall VENDOR acquire any right, title, or license, or other interest in the
Authorized Trademarks. Any use by VENDOR of the Authorized Trademarks shall
inure to the benefit of LEICA.
3.3 Product Changes. VENDOR shall give LEICA 90 days' prior
written notice of any proposed Product Changes, which LEICA may accept or
reject, but acceptance may not be unreasonably withheld. Examples of issues
that would be a reasonable basis for nonacceptance or rejection shall include,
without limitation, Product marketability, performance, function, and pricing.
If LEICA chooses to reject a Product Change and VENDOR nevertheless proceeds to
implement such Product Change, LEICA may, in addition to all other rights and
remedies at law or in equity or otherwise, with respect to the Product (as
changed, modified, or added) pursuant to Section 7.2.3, terminate this
Agreement with respect to such Product and all pending purchase orders
therefor. If LEICA accepts a Product Change, VENDOR shall, prior to
implementation, promptly (i) obtain all approvals and clearances required to
manufacture the Product and sell the Product (as changed, modified, or added)
in the Territory and (ii) document and validate such accepted Product Changes
to the reasonable satisfaction of LEICA. No Product Change shall be effective
unless and until it is accepted by LEICA pursuant to this Section 3.3. Upon
request by LEICA, VENDOR shall, if possible, incorporate such accepted Product
Change in any Systems in LEICA's inventory, and LEICA shall pay to VENDOR a
reasonable fee for same including a handling and processing fee.
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3.4 Product Enhancements. VENDOR shall evaluate and use
commercially reasonable efforts to incorporate LEICA's recommended design
changes and/or enhancements to the Products ("Product Enhancements"); provided
that if LEICA develops, by itself or in cooperation with VENDOR, any new
products, subassembly or other separately patentable invention related to the
Products, such product, subassembly or invention shall be subject to a separate
agreement to be negotiated between the parties. Any increase or reduction in
VENDOR's manufacturing costs (direct labor and/or materials) resulting from
Product Enhancements shall be reflected in proportional adjustments to the
affected Products' prices using substantially similar profit margin percentages
to those in effect prior to such adjustment. Any engineering/design costs and
delivery dates for Product Enhancements shall be quoted to LEICA for its
approval and payment. LEICA shall pay such engineering/design costs plus
fully-burdened overhead. Any and all Intellectual Property relating to Product
Enhancements shall be owned by VENDOR.
3.5 Sales Support.
3.5.1 During the first two years of the Agreement Term,
VENDOR shall engage in cooperative sales efforts with LEICA in the Territory.
Specifically, VENDOR shall provide two people in Europe and one person in Japan
primarily dedicated to the provision to LEICA of sales support and to assist
LEICA in its sales efforts provided that commencing after the end of the second
year of the Agreement Term and continuing through the Agreement Term, VENDOR
shall continue to provide such personnel in the Territory, but such personnel
may engage to a greater extent in efforts for direct sales of the Products on
VENDOR's behalf.
3.5.2 Within ten Business Days following the end of each
month during the Agreement Term, VENDOR shall submit to LEICA a written report
summarizing; (i) VENDOR's direct sales activity in the Territory with respect
to the Products, and (ii) deliveries by VENDOR of Products in the Territory
during the immediately preceding month.
3.6 Audits. LEICA shall have the right to perform a complete
audit of the development, manufacture, and packaging of the Products (including
but not limited to the pertinent facilities and Quality Assurance System(s))
during normal business hours and upon seven days' prior notice to VENDOR. The
parties will cooperate with each other to arrange such visits at mutually
convenient times.
3.7 Complaints. If LEICA receives a complaint asserting that a
Product does not comply with the specifications for such Product set forth on
Schedule 5.1.7 (a) LEICA shall undertake commercially reasonable efforts to
determine the validity of such complaint; (b) if LEICA validates such complaint
and cannot solve it through commercially reasonable efforts, LEICA shall
forward the complaint information to VENDOR; (c) with respect to each validated
complaint received by VENDOR, VENDOR shall promptly take such action as it
determines in its reasonable judgment and as required by applicable
governmental regulations and guidelines, if any. VENDOR shall use commercially
reasonable efforts, at its own
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expense, to determine the cause of any valid claims of noncompliance
with the specifications, and LEICA shall have the right to participate as
appropriate in any investigation to resolve such noncompliance. VENDOR
reserves the right to remedy any claimed defect in the Products or to
substitute other products therefor. If not replaced by VENDOR, VENDOR's sole
and exclusive liability shall be limited to the price paid by LEICA to VENDOR
for the defective Product. VENDOR shall in no way be liable for LEICA's lost
profits or goodwill or any other special, incidental, or consequential damages.
3.8 Technical Assistance and Support.
3.8.1 Documentation. Without additional charge, beginning
on the Effective Date and for the duration of the Agreement Term and for a
period of three years thereafter (except as otherwise specified), VENDOR shall
furnish to LEICA all technical information, manuals, schematics, parts lists,
flow diagrams, and other documentation and data (in both printed and electronic
media formats in the English language) that are (a) necessary to inventory,
market, sell, and provide field service for the Products within the Territory
and (b) furnished by VENDOR without additional charge to other distributors and
dealers of the Products. Notwithstanding the foregoing, within 45 days after
the Effective Date, VENDOR shall provide to LEICA a spare parts list (and
pricing therefor) and any required service manuals. VENDOR hereby grants to
LEICA a fully-paid license for the Agreement Term to translate, copy, or
otherwise reproduce all or portions of VENDOR's brochures, or to incorporate
portions of VENDOR's copyrighted material in Product brochures or advertising
material composed by LEICA, provided that LEICA shall submit such materials
composed by LEICA which incorporate such VENDOR material to VENDOR for prior
approval in each instance, which approval shall not be unreasonably withheld or
delayed. In addition to the foregoing, VENDOR shall furnish to LEICA master
copies (in both printed and electronic media formats in the English language)
of field service manuals and troubleshooting guides with respect to the
Products which LEICA may print and use, and furnish to VENDOR for VENDOR's use
in accordance with this Agreement. Alternatively, at LEICA's option, VENDOR may
print such Product manuals and guides and sell them to LEICA, at VENDOR's cost,
for LEICA's use.
3.8.2 Telephone Support. Without additional charge,
beginning on or before July 1, 1997, and continuing through the Agreement Term,
VENDOR shall furnish telephone support to LEICA via a toll-free telephone
number on Business Days between 8 a.m. and 6 p.m. (local time in the United
Kingdom). Such telephone support shall respond to all requests for information
or other technical support regarding Product use, maintenance, repair, storage,
handling, and shipping.
3.9 Special Investigations; Inquiries. If any government or other
regulatory authority or private standards board in the Territory requires any
investigations to be performed on or with respect to the Products, the parties
shall cooperate with and assist each other in performing such investigations.
VENDOR shall notify LEICA of any formal or
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informal inquiries relating to the Products by the Federal Communications
Commission of the United States or any other regulatory agency, or any state,
provincial, regional, district, and/or Federal government.
3.10 Replacements and Repair Parts; Accessories and Consumables.
3.10.1 During the Agreement Term and for a period of three
years thereafter, VENDOR shall offer for sale to LEICA all Accessories and
Consumables and all replacement and repair parts for the Systems in accordance
with the pricing set forth in Exhibit C, subject to the terms of Section 2.5.1.
3.10.2 VENDOR shall perform all repair and warranty services
within two weeks after receipt by VENDOR of the applicable Product (excluding
any transit time). Any nonwarranty services shall be billed to LEICA at a fee
of US$85 per hour. If any Product has been out of production for more than two
years, at VENDOR's option, VENDOR may either repair the Product or provide to
LEICA discounted pricing for upgrading to a current model.
3.11 Software Updates and Minor Upgrades. During the Agreement
Term and thereafter (for System units then subject to the warranty obligations
of VENDOR set forth in Section 5.2), VENDOR shall provide LEICA with Product
software fixes, updates, and minor upgrades at no additional charge to LEICA.
During the Agreement Term and for a period of five years thereafter, upon the
expiration of the applicable warranty period for each System unit, LEICA shall
pay to VENDOR a mutually agreed-upon annual software maintenance fee (the
"Maintenance Fee") for each System unit for which the end-user elects to
purchase software maintenance. The Maintenance Fee shall entitle the end-user
to receive Product software fixes, updates, and minor upgrades. All updates
and upgrades shall be validated to LEICA's reasonable satisfaction.
3.12 Training and Consulting.
3.12.1 During the first six months of the Agreement Term,
VENDOR shall, upon reasonable prior request, provide LEICA and LEICA's
distributors and dealers with training in the areas of sales, technical
support, customer support, and implementation with respect to the Products.
3.12.2 In addition, twice per year for the remainder of the
Agreement Term, VENDOR shall provide training to LEICA and LEICA's distributors
and dealers in connection with Product Changes, Product software updates and
upgrades, and new techniques related to the Products.
3.12.3 During the first six months of the Agreement Term,
VENDOR shall, upon reasonable prior request, provide LEICA with implementation
assistance in connection with the Products, and LEICA may participate in and/or
observe VENDOR's activities. Such
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<PAGE> 12
assistance shall be provided by VENDOR at no additional charge during the
first 120 days after the Effective Date. For the remainder of the six-month
period, LEICA shall pay VENDOR's out-of-pocket expenses if such services
are required at any location that is not an end-user site.
3.12.4 LEICA shall have the right to request additional
consulting services from VENDOR in accordance with prices and terms to be
agreed upon at the time of the request.
3.13 Technical Advisory Board. VENDOR shall establish a technical
advisory board (the "TAB") to assess the technology being developed, acquired,
or licensed by VENDOR and the applications thereof to the markets in the
Territory. LEICA shall designate either one or two representatives to be
members of the TAB. The TAB shall meet at least once per year during the
Agreement Term.
ARTICLE 4
OBLIGATIONS OF LEICA
4.1 Forecasts.
4.1.1 It is LEICA's intention to purchase 200 Systems
during the initial 12-month period of the Agreement Term. Prior to the
establishment of Quarterly Minimums, LEICA shall submit to VENDOR within 30
days prior to the first day of a quarter, a forecast of the quantity of
Products LEICA shall purchase from VENDOR during such quarter. LEICA shall
purchase at least the quantity of Products specified in such forecasts.
4.2 Quarterly Minimums
4.2.1 During the 90 days prior to the first day of the
immediately following 12-month period of the Agreement Term, the parties shall
agree upon a minimum quantity ("Quarterly Minimums") of Products to be
purchased by LEICA from VENDOR during each full and partial calendar quarter of
the subsequent 12-month period of the Agreement Term. If the parties are
unable to agree to Quarterly Minimums within the 90-day period prior to the
first day of the immediately following 12-month period, either party may
terminate this Agreement in accordance with Section 7.2.4.
4.2.2 Upon the establishment of Quarterly Minimums, any
rights granted exclusively hereunder to LEICA for a given 12-month period shall
become nonexclusive during the 12-month period immediately following such
12-month if LEICA fails to purchase Products in quantities equal to or
exceeding the applicable aggregate of the Quarterly Minimums in such year.
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4.2.3 4.2.4 Upon the establishment of Quarterly
Minimums, direct sales of System units by VENDOR in the Territory shall be
included in the calculation of the Quarterly Minimums.
4.3 Sales and Assistance By VENDOR.
4.3.1 On or prior to the 30th day following the Effective
Date, VENDOR and LEICA shall mutually agree to a list of potential target
customers in the Territory. Such list shall be attached to this Agreement as
Schedule 4.3.1 and shall become a part hereof.
4.3.2 During the 120-day period beginning on the Effective
Date, VENDOR shall provide LEICA with training and support in connection with
potential sales of Products, at no cost to LEICA. During such period, VENDOR
shall provide sales support and assistance in a joint sales effort to any
customer specified by LEICA upon LEICA's request. No fees shall be paid by
LEICA to VENDOR or by VENDOR to LEICA with respect to any Products sold during
such period as a result of joint sales activity.
4.3.3 During the 120-day period beginning on the Effective
Date, VENDOR shall be entitled to pursue a customer contact independently if
VENDOR has previously identified such potential customer to LEICA in writing
and LEICA shall not have notified VENDOR of LEICA's desire to pursue such
customer jointly with VENDOR or independently. With respect to any Systems
sold as a result of independent efforts of AccuMed, the first System sold shall
be shipped directly by VENDOR from its inventory and the second System sold
shall be shipped from LEICA's inventory, and so on so that 50% of such sales
shall be from VENDOR's inventory and 50% from LEICA's inventory. Neither party
shall be required to pay the other party a fee in connection with any such
sales.
4.3.4 On and after the 121st day of the Agreement Term, if
VENDOR receives an unsolicited request from a potential customer to demonstrate
a Product, VENDOR shall identify such potential customer to LEICA in writing.
LEICA shall notify VENDOR in writing with four Business Days following the date
on which such notice was made whether LEICA elects to pursue such customer
independently or to allow VENDOR to pursue such customer independently. If
LEICA elects to pursue such customer, LEICA shall make contact with such
customer within 15 days following the date on which VENDOR's initial notice was
given and shall deliver to VENDOR (within such 15-day period) a completed
Laboratory Qualification Survey in the form attached hereto as Schedule 4.3.4.
If LEICA reasonably requires more time to make an initial contact, LEICA may
request an extension from VENDOR and VENDOR shall not unreasonably withhold its
consent. With respect to any sales made directly by VENDOR as a result of its
independent action during such period, VENDOR shall pay LEICA $4,500 with
respect to each AcCell 20001 and $3,000 with respect to each AcCell 2001.
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4.3.5 LEICA and VENDOR shall use the same list prices for
the Systems in the Territory, but shall each have the right, in its sole
discretion, to provide other discounts, incentives, and services in connection
with its sales.
4.4 Scope of Responsibility.
4.4.1 During the Agreement Term, LEICA shall, at its own
cost and expense, use a high level of commercially reasonable efforts to sell,
install, train on the use of, and provide field service for the Products within
the Territory. Except as otherwise provided herein, LEICA shall be the sole
contact with LEICA's end-users of the Products in the Territory. In connection
therewith, LEICA shall be responsible for all marketing and advertising
materials and activities including, without limitation, provision of brochures
and appropriate advertising; participation as an exhibitor at conferences and
trade shows; and qualification of potential customers and surveys of same
regarding product needs and satisfaction and related market research. Without
limiting the foregoing, LEICA shall be solely responsible for translation of
all documentation provided by VENDOR hereunder and shall promptly undertake to
perform such translation. LEICA shall be solely responsible for the expense
and accuracy of all such translations hereunder. LEICA shall reproduce any
applicable proprietary rights notices in all such materials. LEICA shall also
be solely responsible for providing foreign language translations in hardcopy
format of the software related to the Products; provided that VENDOR shall use
such hardcopy translations to reprogram the software into its translated form.
4.4.2 The parties shall mutually develop and agree upon
the list prices and the sales and marketing plans on a country-by-country
basis. Within 90 days after the Effective Date, LEICA, at a minimum, shall
commence sales and marketing of the Products in the following countries in the
Territory; Germany, France, Italy, the United Kingdom, and Japan. LEICA shall
emphasize its sales and marketing efforts particularly in Europe and Japan.
4.5 Monthly Laboratory Qualification Surveys and Reports. Within
ten Business Days following the end of each month during the Agreement Term,
LEICA shall submit to VENDOR (i) completed Laboratory Qualification Survey
Reports in the form attached hereto as Schedule 4.3.4 with respect to each
potential customer contacted by LEICA (other than potential customers with
respect to whom LEICA has previously submitted a Survey pursuant to Section
4.3.4) during the immediately preceding month, and (ii) a written report of the
number of Systems delivered to end-users by LEICA during the immediately
preceding month.
4.6 LEICA Products.
4.6.1 During the Agreement Term, LEICA shall provide to
VENDOR (at no additional charge to VENDOR) a reasonable amount of technical
support with respect to LEICA's existing microscope products used in the
Products.
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4.6.2 LEICA shall, within 45 days after the date of this
Agreement and from time to time thereafter, provide to VENDOR a list of all of
LEICA's microscope products by model and engineering specifications and
dimensions. With respect to the use of such models in the Systems, VENDOR
shall have the right to reject any such model for technical reasons.
4.7 AcCell(TM); Copyright and Trademark Notices. Promptly upon
receipt by LEICA of relevant information, LEICA shall notify VENDOR of such
information related to (a) any possible infringement of VENDOR's Intellectual
Property, or (b) VENDOR's alleged infringement of a third party's Intellectual
Property. In addition, LEICA shall incorporate into relevant Product
documentation and materials, the appropriate and reasonable copyright and
trademark notices provided to LEICA by VENDOR.
ARTICLE 5
REPRESENTATIONS, COVENANTS, & WARRANTIES OF VENDOR
5.1 General. VENDOR hereby represents, covenants, and warrants to
LEICA, its successors, and permitted assigns that:
5.1.1 Due Organization. VENDOR is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware and has the full power and authority to perform its obligations
under this Agreement.
5.1.2 Authorization to Execute. The person executing this
Agreement on behalf of VENDOR has been duly authorized to do so by all
requisite corporate and other action of VENDOR, and this Agreement has been
duly executed by such person and delivered to LEICA.
5.1.3 Validity of Agreement. This Agreement is the legal,
valid, and binding obligation of VENDOR and is enforceable against VENDOR in
accordance with its terms.
5.1.4 No Conflict. To VENDOR's knowledge: (a) VENDOR's
execution, delivery and performance of this Agreement does not and will not
conflict with or result in a breach of any agreement or instrument to which
VENDOR is a party as in effect on the Effective Date; and (b) no litigation,
arbitration, or administrative proceeding is pending or threatened seeking to
prohibit the execution and delivery of this Agreement.
5.1.5 Warranty of Noninfringement. To VENDOR's knowledge,
the Products do not incorporate or infringe upon any copyright, patent,
trademark, service mark, trade name, trade secret, idea, process, know-how,
development, invention, technology, or other form of intellectual property
(collectively "Intellectual Property") not owned by or licensed to VENDOR. If
VENDOR becomes aware of any alleged or actual infringement by VENDOR of any
Intellectual Property relating to the Products or their manufacture, VENDOR
will promptly notify LEICA thereof.
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5.1.6 Right to Sell for Resale; Obligation to Deliver.
VENDOR has the right to sell the Products to LEICA for resale by LEICA in the
Territory. VENDOR has and will have the ability to timely deliver all of the
Products ordered by LEICA to meet the Quarterly Minimums and shall use
commercially reasonable efforts to timely deliver all of the Products ordered
by LEICA in excess of same.
5.1.7 Product Quality. The Products to be sold and
delivered to LEICA and end-users hereunder shall (i) be merchantable and fit
for their particular purpose, (ii) be new and free from defects in design,
materials and workmanship, and (iii) meet the specifications attached hereto as
Schedule 5.1.7, subject to Product Changes.
5.2 Product Warranty.
5.2.1 For a period of 12 months following the date that an
end-user receives a Product from LEICA, if such Product does not substantially
conform to the specifications set forth in Schedule 5.1.7, then, within two
weeks after receipt by VENDOR of the applicable Product (excluding any transit
time), VENDOR shall, at VENDOR's option and at no additional charge to LEICA,
either (a) replace or repair such Product unit, or (b) fully refund to LEICA
the purchase price paid to VENDOR by LEICA for such Product. Written notice of
such nonconformance must be received by VENDOR within 12 months from the date
the Product unit is received by LEICA's end-user.
5.2.2 Notwithstanding the foregoing, in the event of
failure by VENDOR to meet its obligations set forth in Section 5.2.1, LEICA
may, at its sole and absolute discretion, make such corrections or replace such
Product units and charge VENDOR for the cost incurred by LEICA in doing so and
VENDOR shall reimburse LEICA for any such costs.
5.2.3 Shipping costs incurred by LEICA and risk of loss
upon return of Product units to VENDOR for in-warranty repair, replacement, or
refund shall be borne by VENDOR. Shipping costs incurred by VENDOR and risk of
loss upon delivery of the in-warranty repaired or replacement Product unit to
LEICA or LEICA's designees shall be borne by VENDOR.
5.2.4 During the Agreement Term and for a period of three
years thereafter, VENDOR shall provide all post-warranty repair service for the
Products at the hourly rates set forth in Schedule 5.2.3.
5.3 Compliance. VENDOR shall use commercially reasonable efforts
to ensure that, in manufacturing and selling the Products, it shall (i) comply
with all applicable laws and regulations, (ii) not knowingly engage in any
deceptive or misleading practices, and (iii) obtain and maintain all required
governmental and private approvals and clearances (including without limitation
compliance with CE marking regulations).
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ARTICLE 6
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF LEICA
6.1 General. LEICA hereby represents, covenants, and warrants to
VENDOR, its successors and permitted assigns that:
6.1.1 Due Organization. LEICA is a corporation duly
organized and validly existing under the laws of Germany and has the full power
and authority to perform its obligations under this Agreement.
6.1.2 Authorization to Execute. The person executing this
Agreement on behalf of LEICA has been duly authorized to do so by all requisite
corporate and other action of LEICA, and this Agreement has been duly executed
by such person and delivered to VENDOR.
6.1.3 Validity of Agreement. This Agreement is the legal,
valid, and binding obligation of LEICA and is enforceable against LEICA in
accordance with its terms.
6.1.4 No Conflict. To LEICA's knowledge, LEICA's
execution, delivery, and performance of this Agreement does not and will not
conflict with or result in a breach of any agreement or instrument to which
LEICA is a party as in effect on the Effective Date.
6.2 Compliance. In connection with its activities hereunder,
LEICA shall use commercially reasonable efforts to ensure that LEICA complies
with all applicable laws and regulations that are customarily the
responsibility of the importer, distributor, or dealer in the countries in the
Territory.
ARTICLE 7
TERM AND TERMINATION
7.1 Term. Unless earlier terminated pursuant to Section 7.2, this
Agreement shall remain in full force and effect for five years commencing on
the Effective Date and shall automatically renew for additional one-year
periods thereafter (collectively, the "Agreement Term") unless either party
provides at least 60 days' prior written notice to the other party prior to the
expiration of the then current term. Notwithstanding the foregoing, the
Agreement Term may be suspended pursuant to the provisions of Section 10.1 of
this Agreement.
7.2 Events of Termination. This Agreement may be terminated,
without limiting any party's rights to any other remedies:
7.2.1 Immediately upon written notice by either party (the
"Terminating Party") to the other party (the "Breaching Party") if:
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7.2.1.1 the Breaching Party has not performed or has
otherwise breached a material obligation hereunder and such nonperformance or
breach is incapable of cure;
7.2.1.2 any proceeding in bankruptcy, reorganization,
or arrangement for the appointment of a receiver or a trustee to take
possession of the Breaching Party's assets or any similar proceeding under the
law for relief of creditors shall be instituted by or against the Breaching
Party including an assignment for the benefit of its creditors.
The Breaching Party immediately shall notify the Terminating Party in writing
of the occurrence of any event of the type described in Section 7.2.1.2.
7.2.2 By the Terminating Party upon the expiration of 60
days (or such additional period as the Terminating Party may authorize) after
the Breaching Party's receipt of written notice of its breach or nonperformance
of a material obligation hereunder provided that such breach or nonperformance
is capable of cure and has not been cured during such 60-day period.
7.2.3 By LEICA with respect to the specific Product (as
changed, modified, or added) upon 60 days' prior written notice to VENDOR of
the rejection of a Product Change which VENDOR nevertheless proceeds to
implement.
7.2.4 By either party as of the last day of the current
12-month period if the parties are unable to agree to (i) Quarterly Minimums
pursuant to Section 4.1.1, (ii) pricing changes pursuant to Section 2.5.1, or
(iii) the Annual Sales target pursuant to Section 1.5, within the 90-day period
prior to the beginning of the following 12-month period.
7.3 Purchase Orders. Provided that LEICA is not the Breaching
Party, any purchase order accepted by VENDOR but not shipped by VENDOR prior to
the date that notice of termination is delivered hereunder (or in the case of
expiration, the date that this Agreement expires) shall be filled by VENDOR in
accordance with the terms hereof.
7.4 Rights and Obligations upon Termination or Expiration. Upon
expiration or earlier termination of this Agreement, LEICA shall have the right
to (i) sell all Products ordered or in inventory and (ii) provide ongoing
support and service to its end-users. Notwithstanding anything herein to the
contrary and without limiting LEICA's other remedies, if this Agreement is
terminated within the initial 12-month period, LEICA shall have the right to
require VENDOR to repurchase (at the price paid by LEICA) any or all Products
ordered by LEICA hereunder, provided (i) LEICA furnishes VENDOR with the
relevant open purchase orders (with respect to ordered Products not yet in
LEICA inventory), (ii) the Products are in new condition and have not been
used, and (iii) the Products are in their original packaging with all manuals
and other materials.
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<PAGE> 19
7.5 Survival. Sections 2.2, 2.3, 2.5, 3.8, 3.9, 4.5, 5.2, 7.3,
7.4, 7.5, and 10.13, and Articles 8 and 9 shall survive the termination or
expiration of this Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Infringement Indemnity.
8.1.1 If any aspect of any Product becomes the subject of
any claim, action, or proceeding by a third party alleging Intellectual
Property infringement, VENDOR shall, within 90 days, at VENDOR's option and
expense (a) obtain a license permitting LEICA to exercise all rights granted to
it under this Agreement or (b) modify the Product to render it noninfringing.
In addition, LEICA may, without limiting its remedies, and without any
liability to VENDOR whatsoever, and at its sole and absolute discretion,
suspend purchases of the Products from VENDOR immediately. Notwithstanding the
foregoing, should VENDOR fail to accomplish either one of the foregoing
solutions (set forth in clauses (a) and (b) above) within such 90-day period
with respect to any such Intellectual Property infringement claim, action, or
proceeding, LEICA may terminate this Agreement without limiting its remedies,
without any liability whatsoever, and in its sole and absolute discretion. In
addition, LEICA shall have the right to require VENDOR to repurchase (at the
price paid by LEICA) any or all Products ordered by LEICA hereunder, provided
(i) LEICA furnishes VENDOR with the relevant open purchase orders (with respect
to ordered Products not yet in LEICA inventory), (ii) the Products are in new
condition and have not been used, and (iii) the Products are in their original
packaging with all manuals and other materials.
8.1.2 Provided that VENDOR receives prompt written notice
of any Intellectual Property infringement claim, action, or proceeding, VENDOR
shall indemnify and hold harmless LEICA, its successors, and permitted assigns,
and any of its officers, directors, employees, representatives, and/or agents,
and each of them, from and against any and all claims, liabilities, losses,
costs, damages, and expenses including, but not limited to (a) any damages,
losses, costs, and expenses payable to the third party claiming Intellectual
Property infringement, (b) all of LEICA's reasonable attorneys' fees and
disbursements, settlement costs (provided that VENDOR has approved of such
settlement in advance), judgments, court costs, and expenses incurred by LEICA
in any action or proceeding between VENDOR and LEICA and/or between LEICA and
any third party or otherwise, (c) reimbursement for the cost of Products that
can no longer be sold, and (d) any other losses, costs, expenses, and damages
incurred by LEICA arising out of or resulting from any Intellectual Property
infringement claim, action, or proceeding between VENDOR and LEICA and/or
between LEICA and any third party or otherwise. The failure of LEICA to give
prompt notice shall not result in the loss of indemnification unless VENDOR
shall have been materially prejudiced thereby.
8.1.3 LEICA shall not be entitled to the foregoing
Intellectual Property infringement indemnity from VENDOR to the extent that the
Intellectual Property infringement
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<PAGE> 20
claim, action, or proceeding arises or results in whole or in part from changes
to the Products made by LEICA or any third party without VENDOR's authorization.
8.2 VENDOR Product Liability and Other Damage Indemnity.
8.2.1 VENDOR shall at all times indemnify and hold harmless
LEICA, its successors and permitted assigns, and any of its officers,
directors, employees, representatives, and/or agents, and each of them, from
and against any and all claims, liabilities, losses, costs, damages, and
expenses, including but not limited to all of LEICA's reasonable attorneys'
fees and disbursements court costs and expenses, incurred by LEICA in any
action or proceeding between VENDOR and LEICA (if LEICA is the prevailing
party) and/or between LEICA and any third party (attorneys' fees and
disbursements only if LEICA fails to defend) or otherwise arising out of or
resulting from (a) a defect or alleged defect in a Product, including without
limitation defects relating to manufacturing, improper testing, or design, or
any breach of warranty regarding such Product or any component thereof, (b)
misrepresentations made in connection with the promotion, marketing, sale,
distribution, use, safety, or efficacy of such Product based upon information
supplied to LEICA by VENDOR, (c) the contents of any labeling, inserts,
instruction manuals, or related documentation prepared by VENDOR or based upon
information supplied to LEICA by VENDOR, or (d) Product recalls. VENDOR shall
have the right to control the defense and settlement of any third-party claim,
action, or proceeding. LEICA shall provide VENDOR with, at VENDOR's expense
for all of LEICA's reasonable, documented out-of-pocket costs, reasonable
assistance in connection with a third-party action or proceeding of the kind
described in this Section 8.2.1.
8.2.2 LEICA shall not be entitled to the foregoing
indemnity from VENDOR to the extent that the claim, action, or proceeding
arises or results in whole or in part from (a) unauthorized representations
made by LEICA regarding the Product which are different than or in addition to
the representations made by VENDOR to LEICA, or (b) unauthorized changes to the
Product made by LEICA.
8.3 LEICA Product Liability and Other Damage Indemnity.
8.3.1 LEICA shall at all times indemnify and hold harmless
VENDOR, its successors and permitted assigns and any of its officers,
directors, employees, representatives, and/or agents, and each of them, from
and against any and all claims, liabilities, losses, costs, damages, and
expenses, including but not limited to all of VENDOR's reasonable attorneys'
fees and disbursements, court costs and expenses, incurred by VENDOR in any
action or proceeding between VENDOR and LEICA (if VENDOR is the prevailing
party) and/or between VENDOR and any third party (attorneys' fees and
disbursements only if LEICA fails to defend) arising out of or resulting from
(a) unauthorized representations made by LEICA regarding a Product which are
different than or in addition to the representations made by VENDOR to LEICA or
(b) unauthorized changes to a Product made by LEICA. LEICA shall have the
right to control the defense and settlement of a third party claim, action, or
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<PAGE> 21
proceeding. VENDOR shall provide LEICA with, at LEICA's expense for all of
VENDOR's reasonable, documented out-of-pocket costs, reasonable assistance
in connection with a third-party action or proceeding of the kind described in
this Section 8.3.1.
8.3.2 VENDOR shall not be entitled to the foregoing
indemnity from LEICA to the extent that the claim, action, or proceeding arises
or results solely from (i) a defect or alleged defect in a Product, including
without limitation defects relating to manufacturing, improper testing, or
design, or any breach of warranty regarding such Product or any component
thereof, (ii) misrepresentations made in connection with the promotion,
marketing, sale, distribution, use, safety, or efficacy of such Product based
upon information supplied to LEICA by VENDOR, or (iii) the contents of any
labeling, inserts, instruction manuals, or related documentation prepared by
VENDOR or based upon information supplied to LEICA by VENDOR.
ARTICLE 9
CONFIDENTIALITY
9.1 Definition. For purposes of this Agreement, the term
"Confidential Information" shall mean all documents, clearly marked as
"PROPRIETARY" or "CONFIDENTIAL," relating to the respective products and/or
business of the parties which (i) is disclosed by one party hereto to the other
and (ii) is claimed by the disclosing party to be secret, confidential, and
proprietary the disclosing party.
9.2 Obligation. During the Agreement Term and thereafter, each
party (except as is explicitly otherwise required hereby) shall keep
confidential, shall not use for the benefit of others, and shall not copy or
allow to be copied, in whole or in part, any Confidential Information disclosed
to such party by the other.
9.3 Exclusions. The obligations of confidentiality imposed upon
the parties by the foregoing paragraph shall not apply with respect to any
alleged Confidential Information that:
9.3.1 is known to the recipient thereof prior to receipt
thereof from the other party hereto;
9.3.2 is disclosed to the recipient by a third party who
has the right to make such disclosure;
9.3.3 is or becomes a part of the public domain or public
knowledge through no breach of this Agreement by the recipient;
9.3.4 is independently developed by the recipient; or
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<PAGE> 22
9.3.5 is required to be disclosed by applicable law or
regulation including, without limitation, pursuant to a subpoena or request by
a regulatory authority.
ARTICLE 10
MISCELLANEOUS
10.1 Force Majeure. Each party hereto shall be excused from the
performance of its obligations hereunder if such performance is prevented by
force majeure, and such excuse shall continue for so long as the condition
constituting such force majeure and any consequences resulting from such
condition continue. In addition, if the condition constituting the force
majeure causes a substantial inability by either party hereto to manufacture,
deliver, sell, or otherwise distribute, as the case may be, the Products, the
Agreement Term may be suspended for the period of such inability, but such
suspension shall not exceed six months. For the purposes of this Agreement,
"force majeure" shall mean causes beyond either party's control including,
without limitation, acts of God; war, riot or civil commotion; damage to or
destruction of production facilities or materials by fire, earthquake, storm or
other disaster; strikes or other labor disturbances; epidemic; failure or
default of public utilities or common carriers; and other similar acts.
Noncompliance with laws or government regulations shall not constitute a force
majeure event.
10.2 Relationship. The relationship created between VENDOR and
LEICA by this Agreement shall be that of independent contractors. Neither
LEICA nor VENDOR shall be deemed an agent, representative, partner, joint
venturer, or employee of the other party. Neither VENDOR nor LEICA shall have
the right to enter into any contracts or commitments or to make any
representations or warranties, whether express or implied, in the name of or on
behalf of the other party, or to bind the other party in any respect
whatsoever, unless agreed to in writing or expressly permitted in this
Agreement.
10.3 Assignment; Binding Effect. Neither party to this Agreement
may assign all or any part of its rights and obligations under this Agreement,
except to an Affiliate, without the prior written consent of the other party.
LEICA shall not have the right to subcontract any of its obligations hereunder
without VENDOR's prior written consent, not to be unreasonably withheld or
delayed. For purposes of this Agreement, any material change in the control
and/or ownership of LEICA (except for any such change in control occurring
during the first six months after execution of this Agreement) shall be deemed
an assignment by LEICA and shall be subject to all of the provisions of this
Section. Notwithstanding the foregoing, material changes in the control and/or
ownership of VENDOR shall not be deemed an assignment by VENDOR subject to the
provisions of this Section. No permitted assignment by any party pursuant to
this Section 10.3 shall result in any additional expense to the other party.
Any purported assignment in contravention of this Section 10.3 shall, at the
option of the nonassigning party, be null and void and of no effect. This
Agreement will be binding upon and inure to the benefit of any permitted
successors and assigns of the parties.
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<PAGE> 23
10.4 Notices. Any notice or other communication required or
permitted to be given to either party under this Agreement (including, without
limitation, purchase orders from LEICA to VENDOR hereunder) shall be given in
writing addressed to each party at the following address or such other address
as may be designated by such party by notice pursuant to this Section and shall
be delivered (a) by hand; (b) by registered or certified mail, postage prepaid
and return receipt requested; (c) by confirmed facsimile transmission, or (d)
by overnight courier guaranteeing delivery by the next Business Day.
To VENDOR: AccuMed International, Inc.
920 N. Franklin Street, Suite 402
Chicago, Illinois 60610
Fax: 312-642-3101
Confirmation: 312-642-9200
Attention: Peter P. Gombrich, Chairman & CEO
with a copy to: AccuMed International, Inc.
1500 7th Avenue
Sacramento, California 95818
Fax: 916-493-6850
Confirmation: 916-443-6800
Attention: Joyce L. Wallach, General Counsel
To LEICA: Leica Mikroskopie und Systeme GmbH
P.O. Box 2040
D - 35530 Wetzlar
Germany
Fax: 011-49-64-41-29-24-64
Confirmation: 011-49-64-41-29-24-40
Attention: Dr. Anita Rohm
with a copy to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Any notice, consent, or other communication given in conformity with this
Section shall be deemed effective (i) when received by the addressee if
delivered by hand or mail, (ii) upon confirmation of receipt if delivered by
facsimile transmission, or (iii) the next Business Day if delivered by
overnight courier.
10.5 Governing Law; Submission to Jurisdiction. This Agreement and
any other documents or instruments related hereto and all transactions
hereunder shall be deemed to have
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<PAGE> 24
been made within and under the laws of the State of Illinois, including the
Uniform Commercial Code as adopted by the State of Illinois, and for all
purposes shall be governed by and construed in accordance with the laws of the
State of Illinois without regard to choice of law rules or conflicts of law
principles. The parties expressly agree that any controversy, dispute or claim
with respect to any provision of this Agreement shall be adjudicated
exclusively by a court of competent jurisdiction within Cook County, the State
of Illinois, or the Federal District Court sitting therein, and VENDOR and
LEICA irrevocably waive any objections either may have and consent to the
personal jurisdiction or the designation of a forum or venue of the courts set
forth herein including, without limitation, waiver of any motion to change or
transfer venue or that the forum is not convenient. As an alternative method
to personal service, LEICA hereby appoints the Ambassador to the United States
of Germany and/or any consul or vice-consul of Germany as LEICA's agent for the
receipt of process hereunder. Notwithstanding the foregoing, either party may,
in any jurisdiction, seek to enforce, collect, or take any other action to
effectuate a judgment, order, or decree obtained from a court in Cook County,
State of Illinois or the Federal District Court sitting therein.
10.6 Execution of Additional Documents. Each party hereto agrees to
execute and deliver such documents as may be necessary or desirable to carry
out the provisions of this Agreement.
10.7 Entire Agreement. This Agreement constitutes the entire
agreement between VENDOR and LEICA with respect to the subject matter hereof.
All prior or contemporaneous agreements, proposals, understandings,
representations, and communications with respect to the subject matter hereof,
whether written or oral, between or involving VENDOR and LEICA hereby are
canceled and superseded. This Agreement may be amended or modified only in a
writing executed by both parties, which states that it is an amendment or
modification to this Agreement.
10.8 Severability. If any provision or part thereof of this
Agreement is held to be invalid, void or unenforceable, the remaining
provisions or parts of this Agreement shall continue in full force without
being impaired or invalidated in any way, to the maximum extent possible
consistent with the intent of the parties in entering into this Agreement
unless the result thereof would be unreasonable, in which case the parties
shall negotiate in good faith to enter into appropriate amendments hereto.
10.9 Taxes. Each party shall be responsible for payment of its own
taxes and tariffs.
10.10 Counterparts. This Agreement may be executed in duplicate
counterparts, each of which when so executed shall be deemed to be an original
and both of which when taken together shall constitute one and the same
agreement.
10.11 No Waiver. No waiver of any right under this Agreement shall
be deemed effective unless contained in a writing signed by the party charged
with such waiver and
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<PAGE> 25
specifically stating that it waives a provision of this Agreement, and no
waiver of any breach or failure to perform shall be deemed to be a waiver of
any future breach or failure to perform or of any other provisions of this
Agreement.
10.12 Headings. The headings contained herein are for reference only
and are not a part of this Agreement and shall not be used in connection with
the interpretation of this Agreement.
10.13 Rights and Remedies Cumulative; Damages. All rights and
remedies hereunder are cumulative and may be enforced separately or
concurrently and from time to time, unless otherwise specifically stated
herein. The enforcement of any particular remedy shall not constitute an
election of remedies, and no remedy is exclusive unless specifically stated
herein. Each party's sole remedies for the breach by the other party of any
obligations contained in this Agreement shall be recovery of direct damages, if
any, and/or termination of this Agreement in accordance with Section 7.2. In no
event shall either party be liable to the other party under this Agreement for
indirect, special, incidental, or consequential damages of any kind, including
but not limited to damages for lost profits, lost investments, or lost business
opportunities (collectively, "Consequential Damages"). LEICA and VENDOR hereby
agree that direct damages shall not include or contain Consequential Damages.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, ANY
LIABILITY OF VENDOR TO LEICA HEREUNDER SHALL BE LIMITED TO THE TOTAL PRICE PAID
BY LEICA FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL
COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY LEICA WITH
RESPECT TO SUCH PRODUCTS.
10.14 Contract Interpretation. Each party hereto acknowledges that
it has had ample opportunity to review and comment on this Agreement. This
Agreement shall be read and interpreted according to its plain meaning and an
ambiguity shall not be construed against either party. It is expressly agreed
by the parties that the judicial rule of construction that a document should be
more strictly construed against the draftsperson thereof shall not apply to any
provision of this Agreement.
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<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
ACCUMED INTERNATIONAL, INC.
By: \s\ PETER P. GOMBRICH
-----------------------------------------
Name: Peter P. Gombrich
Title: Chairman and Chief Executive Officer
LEICA MIKROSKOPIE und SYSTEME GmbH
By: \s\ HORST KIRSTEIN
-----------------------------------------
Name: Horst Kirstein
Title: General Manager
By: \s\ ARMIN HOPF*
-----------------------------------------
Name: Armin Hopf
Title: Finance and controlling LMG Group
* On behalf of Armin Hopf by /s/ Dr. Jorg Reinschmidt
------------------------
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<PAGE> 1
Exhibit 10.3
MANUFACTURING AND SUPPLY AGREEMENT
This Manufacturing and Supply Agreement ("Agreement") is entered into and
effective this 22nd day of May, 1997 by and between AccuMed International,
Inc., 900 North Franklin, Suite 401, Chicago, Illinois 60610, (hereinafter
AccuMed) and RELA, Inc., 6175 Longbow Drive, Boulder, Colorado 80301,
(hereinafter "RELA").
1. AccuMed owns and markets an ESP Blood Culture System (hereinafter "ESP")
which consists of Septicemia Instrument Models 128, 256 and 384 and related
components and spare parts, and has developed and acquired design data,
marketing and business information, specifications, know-how and equipment
relating to said systems and their structure, packaging, marketing and use
("AccuMed Confidential Information").
2. RELA is in the business of designing, developing, and manufacturing
electromechanical instruments, medical instruments, and electronic products and
has developed and acquired design data, know-how, and equipment relating to the
design process for electronic instruments and their manufacture and packaging
("RELA Confidential Information").
3. The parties now desire to enter into an exclusive agreement under which
RELA will manufacture and supply the ESP to AccuMed.
AGREEMENT
In consideration of the foregoing and of the mutual covenants, promises, and
conditions set forth below, the parties intending to be bound, agree as
follows:
ARTICLE I
MANUFACTURE
Section 1.1 Supply RELA shall exclusively manufacture the ESP in accordance
with the terms and conditions set forth in this Agreement and specified in the
Product Requirements for ESP (Exhibit C attached) and shall supply the ESP to
AccuMed, and AccuMed shall pay RELA upon receipt of the ESP, as provided in
Articles III through VI, inclusive. RELA will manufacture this device under
the GMP controls appropriate for the manufacture of a Class II device. Any
additional controls to be applied to the manufacture of this device will be
called out contractually. Any deviation from these
<PAGE> 2
controls will be approved in advance by AccuMed and RELA.
Section 1.2 Facility Inspection AccuMed shall have the right during
reasonable business hours to inspect all phases of the ESP manufacturing
activities at RELA in order to verify RELA's compliance with specifications and
applicable regulatory requirements. The cost of conducting such audits
shall be borne by AccuMed. RELA agrees to give AccuMed access during normal
working hours to such records as are reasonably necessary including quality
control records, test records, manufacturing records and design records, and to
permit AccuMed to review and copy such records. AccuMed right of access to
RELA Confidential Information and to inspect and copy RELA Confidential
Information shall be restricted to those matters necessary to verify RELA's
compliance with the specifications and regulatory requirements. AccuMed agrees
to preserve the confidentiality of such records in accordance with Article II.
Section 1.3 Audit Support The costs associated with product related audits
by regulatory agencies, if any, are yet to be determined. These costs will be
borne by AccuMed and negotiated with RELA when such audits are identified.
ARTICLE II
CONFIDENTIAL INFORMATION
Section 2.1 Preserving Confidential Information In order to facilitate
performance of the obligations set forth in the Agreement, it will be necessary
for AccuMed to disclose to RELA, AccuMed Confidential Information, and for RELA
to disclose to AccuMed, RELA Confidential Information. In consideration of
such mutual disclosures, the parties agree that they shall mutually negotiate
the terms of non-disclosure and that they will record those terms in a formal
Mutual Non-Disclosure Agreement document. The Mutual Non-Disclosure Agreement
document is attached as Exhibit A.
ARTICLE III
PLACEMENT OF ORDERS
Section 3.1 Production Schedules and Purchase Orders AccuMed
purchase of the ESP shall be governed by non-cancelable purchase orders issued
for a period of at least one (1) year for a minimum of one hundred (100) ESPs.
Firm releases will be authorized by AccuMed against the purchase order as
indicated in Section 3.12. The terms and conditions of this Agreement
supersede the terms and conditions contained on the AccuMed purchase order
form.
Every other week, AccuMed shall issue a Requirements Plan to RELA. It shall
contain plans to purchase instruments and components adding two weeks demand
for the subsequent six (6) months. The plan will contain two levels of order
commitment, firm
<PAGE> 3
releases and planned requirements. For the benefit of cost reductions to both
RELA and AccuMed, a committed instrument volume can be negotiated.
3.10 Firm Releases Firm releases are requirements which have a release
number assigned. These are commitments by AccuMed for both quantity and date.
RELA shall schedule manufacturing to meet the specified delivery or completion
date. Shipments will be firmed weekly.
3.11 Planned Requirements Planned requirements reflect current AccuMed
plans to purchase. They are not firm and both quantity and date may be
adjusted. They are offered for RELA's planning purposes. They should be
placed into RELA's production schedule.
3.12 First Ninety (90) Days This period contains firm releases. RELA is
authorized to produce these items, and AccuMed is committed to purchase them as
planned. AccuMed may reschedule firm delivery dates with RELA's agreement when
necessary.
3.13 Second Ninety (90) Days This period contains the current planned
requirements for the demand for products. RELA is authorized to purchase
materials needed to fill these requirements. AccuMed commits to purchase all
of the materials but bears no responsibility for conversion costs other than
inspection, materials and the direct/incremental costs of procuring necessary
materials. AccuMed will also be responsible for any non-cancelable or
non-returnable materials, including any restocking charges.
3.14 Beyond One-Hundred Eighty (180) Days This period contains the current
estimate of the demand for the product and is offered only for planning
purposes. AccuMed makes no commitment except that this is the best estimate at
the time of the Requirements Plan and commits to purchase committed minimums
per the contract minimums.
Section 3.2 Inventory RELA shall procure, receive, inspect and store
raw materials in a fashion which assures conformance to product requirements and
applicable regulatory requirements. RELA shall maintain sufficient component
inventory to assure timely delivery of all instruments which shall be scheduled
pursuant to section 3.1, Production Schedules and Purchase Orders, herein.
RELA will not maintain a finished goods inventory unless a specific Finished
Goods Inventory Agreement is negotiated between RELA and AccuMed.
Section 3.3 Accessories RELA will supply accessories (e.g., power supply,
transformer, carrying case, manuals, etc.) as required for AccuMed to support
overseas field service. However, RELA will not maintain stock of these items.
It will be AccuMed's responsibility to place orders in advance of need and to
maintain this inventory.
<PAGE> 4
Section 3.4 Delivery RELA shall ship the ESP in accordance with
AccuMed's instructions for method of shipment as designated by AccuMed in the
Purchase Order. Upon shipment, RELA must inform AccuMed of AccuMed pick
number, SKU number, product serial number, quantity shipped, product
destination, carrier, bill to and ship to address, package weight and freight
cost.
ARTICLE IV
BILLING, PAYMENT AND PRICING
Section 4.1 Price The unit price charged to AccuMed by RELA for the ESP
delivered and accepted by AccuMed under this Agreement will be per the ESP
Instrument Price List (attached as Exhibit B).
Section 4.2 Deposits Upon placement of the Purchase Order, AccuMed
will pay a $300,000 deposit to RELA. This deposit will be retained for the
purpose of covering a portion of the materials costs. Upon completion or
termination of this Agreement and the payment by AccuMed of all outstanding
invoices, RELA shall refund any remaining deposit amount, in full, to AccuMed.
A letter of credit with acceptable terms may be utilized in place of a cash
deposit. If AccuMed is in compliance with all aspects of this Agreement, the
level of deposit referred to above will be reduced to $250,000 six (6) months
from the commencement of the Agreement and $200,000 nine (9) months from the
commencement of the Agreement.
Section 4.3 Invoices RELA shall invoice AccuMed upon successful
completion of final testing criteria for the ESP. Such invoices shall state
the number of units completed, the per unit price and total price. AccuMed
shall make payment to RELA for the ESP completed within ten (10) days following
receipt of the RELA invoice. AccuMed agrees to pay RELA a late penalty of 1.5%
per month on any unpaid balance.
ARTICLE V
QUALITY STANDARDS AND INSPECTION
Section 5.1 Quality Standards The ESP manufactured and supplied by
RELA hereunder shall be made in strict compliance with AccuMed's product and
performance specifications. "Specifications" as used in this Agreement, shall
mean those manufacturing, design, inspection, governmental compliance, testing,
quality control and assurance requirements, record retention and other
requirements identified in the RELA Product Specific Quality Plan (Exhibit D
attached), and any documents and drawings incorporated thereby. It is
understood that such Specifications may be amended as reasonably necessary,
during the term of this Agreement, subject to written approval from AccuMed and
upon receipt by RELA of reasonable advance notice.
<PAGE> 5
Section 5.2 Product Inspection AccuMed shall have the right to
inspect all ESP units. "Inspection" shall mean the right of AccuMed, including
its affiliates and dealers, to inspect and analyze finished goods at any time
during normal business hours to determine compliance with the specifications
and to determine whether any manufacturing deficiency exists, and shall
include the right to reject product at any time upon discovery of any
manufacturing defect. AccuMed shall have thirty (30) days upon receipt of
product to perform the initial incoming quality assurance inspection.
AccuMed's right to reject the ESP is limited to this period unless the defect
is latent and not discovered until later.
Section 5.3 Rejected Goods RELA shall promptly repair or replace, at RELA
discretion and at no cost to AccuMed, any ESP that is defective in workmanship
or materials, or which fails to meet the Specifications and is rejected upon
inspection. AccuMed will comply with RELA's Return Material Authorization
procedures. RELA shall not be responsible for products damaged in shipment,
unless not packaged per Section 6.1 contained herein.
Section 5.4 Configuration and Process Control RELA will immediately
advise AccuMed's Quality Assurance Manager at the address set forth in
Section 13.1 of all known changes in or to the design, configuration, or
performance characteristics of the ESP, or to any component thereof supplied by
RELA regardless of whether such changes affect the specifications, or to the
materials or manufacturing processes utilized in production. No changes in
process or design will be made by RELA unless expressly agreed to in writing by
AccuMed in advance of such change. AccuMed may, at any time in its discretion
and by written order, make additional changes to designs or product
specifications. If said changes cause either an increase or decrease in the
engineering or manufacturing costs or the time required to manufacture, a
mutually agreeable adjustment shall be made in the product price or delivery
schedule or both. Where inventory and/or materials have been made obsolete or
excess as a result of said change, AccuMed shall have the right to determine
the disposition of such property, but AccuMed shall in any event be responsible
to purchase said obsolete inventory and materials at RELA's incurred cost
thereof. RELA shall use reasonable efforts to minimize the levels of obsolete
or excess materials within procurement parameters described in Section 3.2 (a)
and (b).
Section 5.5 Manufacturing Process RELA shall establish and maintain
manufacturing process documentation that assure uniform products which meet
product requirements and conform to applicable regulatory and safety
requirements. This documentation will include but not necessarily be limited
to assembly procedures, costed bills of materials, costed labor routings,
testing procedures, product quality documentation, electronic files and
configuration control. AccuMed has the right of inspection in accordance with
Section 1.2, Facility Inspection, and will receive formal revision notices to
assure currency of parallel files. The entire library of the above, and
similar documentation is considered owned by AccuMed.
<PAGE> 6
Section 5.6 Implementing Modifications The action documents for implementing
modifications to product and process are the RELA Engineering Change Order
Procedure #00000-01249, or the RELA Temporary Deviation Authorization Procedure
#00000-13776. The appropriate AccuMed designate (Mechanical Engineering
Manager) must approve the TDA or ECO before implementation. Adherence to
production schedules in Section 3.1 Production Schedules and Purchase Orders,
is contingent upon timely response to proposed changes. These assignments are
not intended to restrict routine exchanges of information between the
operations groups of RELA and AccuMed.
ARTICLE VI
ESP PACKAGING
Section 6.1 Packaging Unless otherwise specified in the Purchase
Order all items to be delivered hereunder shall be boxed, crated, or stored
without additional charge and shall be placed and packaged:
(i) To ensure safe arrival at their ultimate destination,
(ii) To secure the lowest transportation costs, and
(iii) To comply with the requirements of common carriers.
AccuMed's Purchase Order numbers must be plainly marked on all invoices,
packages, bills of lading, and shipping orders. Shipping memos or packing
lists must accompany materials. RELA shall identify items delivered to AccuMed
by Purchase Order number, revision, description, and quantity per carton.
AccuMed's count or weight shall be final and conclusive on shipments not
accompanied with a packing list. Material must be routed in accordance with
AccuMed's instructions for method of shipment. AccuMed reserves the right to
designate a specific carrier and, in such case, will advise RELA in writing.
Section 6.2 Transportation Transportation insurance for loss and damage
will not be purchased unless specifically directed. Excess transportation costs
resulting from failure to comply with the provisions in Article 6 of this
Agreement will be debited from the RELA account.
Section 6.3 Consolidation of Shipments Shipments made on the same day
and consigned to one destination via the same carrier must be consolidated on
one bill of lading. Failure to comply will result in a debit for excess cost
incurred.
Section 6.4 Costs All prices are F.O.B., Boulder, Colorado, unless
otherwise agreed to in writing. AccuMed will pay all transportation charges
from Boulder, Colorado, to destination.
Section 6.5 Risk of Loss Risk of loss or damage shall pass to AccuMed
upon delivery by RELA to the possession of the carrier unless otherwise agreed
upon in writing
<PAGE> 7
by RELA. Any claims for loss or damage after risk of loss has passed shall be
filed by AccuMed with the carrier.
ARTICLE VII
PATENTS, INVENTIONS, RIGHTS
Section 7.1 Grant of Rights Each party grants to the other a
non-exclusive license under its respective AccuMed Confidential Information and
RELA Confidential Information and its respective patent rights and patent
applications covering the ESP and components thereof as necessary in order to
carry out the intent and purpose of this Agreement and for no other purpose.
RELA reserves the right to include the name of AccuMed in its list of clients
and to show or display the ESP after the ESP has been placed in the market for
sale, for purposes of demonstrating RELA's capabilities.
Section 7.2 Design Ownership The parties agree that title to goods,
inventions, and copyrights in works developed and delivered by RELA under the
DIFCO Agreement are owned by AccuMed. RELA will at AccuMed's request
transfer to AccuMed title to the following items: (1) goods, design drawings,
software, the Device Master Record and documentation that have been produced by
RELA under the DIFCO Agreement; (2) patentable inventions that are first
actually reduced to practice by RELA in work performed under the DIFCO
Agreement; and (3) copyrights in works that are created by RELA under the DIFCO
Agreement. It is understood that future know-how, techniques, and other
technology utilized by RELA under this Agreement will not become the property
of AccuMed, although AccuMed can use them as necessary to utilize and enjoy the
items for which AccuMed may obtain title as described in this paragraph. RELA
shall not be responsible for any third party patent infringement resultant of
AccuMed's patent application or ownership.
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Term The term of this Agreement shall be one (1) year unless
sooner terminated as provided hereafter or by operation of law.
Section 8.2 Renewal Unless written notice of termination is
provided by RELA or AccuMed ninety (90) days prior to the termination date of
this Agreement, the Agreement will automatically renew for an additional one
(1) year term.
<PAGE> 8
Section 8.3 Failure to Perform If RELA or AccuMed fail to perform any
material obligation hereunder, the other party may, in addition to any other
remedy it may have at law or in equity, give notice of its intent to terminate
this Agreement for material breach, specifying the act or omission upon which
such notice is based. If the specified default is not cured within sixty (60)
days of the date of such notice, the non-defaulting party shall be entitled to
terminate this Agreement forthwith upon written notice effective on the date of
such notice.
Section 8.4 Termination Upon Notice Either AccuMed or RELA may
terminate this Agreement by giving the other party at least ninety (90) days
advance notice in writing prior to the termination date.
Section 8.5 Cancellation Liability Cancellation of this Agreement
by AccuMed shall result in AccuMed's liability for all ESPs scheduled for
delivery per Section 3.1, for the cost of all materials ordered as reflected by
all open purchase orders, for component price adjustments caused by AccuMed's
purchase order cancellations, and for non-cancelable and non-returnable
materials in support of Section 3.1. RELA shall use reasonable efforts to
minimize any and all purchase order cancellation charges, bill-backs, and/or
re-stocking charges. Upon settlement of all accounts, RELA shall refund to
AccuMed the initial deposit as per Section 4.2 of this Agreement or cancel the
Letter of Credit. Cancellation of this Agreement by RELA, for other than
AccuMed breach, shall result in no material or production liability by AccuMed.
Section 8.6 Bankruptcy If either party is adjudged bankrupt, or becomes
insolvent, or makes an assignment for the benefit of creditors, or if its
business is placed in the hands of a trustee, whether by voluntary action or
otherwise, the other party may, if permitted under applicable law, terminate
this Agreement immediately upon notice effective on the date of such notice.
ARTICLE IX
WARRANTY AND LIMITATIONS
Section 9.1 Material and Workmanship RELA warrants that all products
(instruments, components and subassemblies) provided by RELA (the "Product" or
"Products") shall be free from defects in material and workmanship under normal
use and service for a period of twelve (12) months following the date the
Product is installed but in no event longer than eighteen (18) months following
the date the Product is delivered to AccuMed (the "Warranty Period").
During the Warranty Period, RELA shall reimburse AccuMed monthly for costs
incurred inclusive of labor, parts and zone charge for service calls provided
the service call was due to a failed component or subassembly manufactured and
provided by RELA during the warranty period of the instrument. Rates for
warranty charges including labor rates, zone charges, and spare parts costs
will be defined in Exhibit F, Warranty Rates.
<PAGE> 9
AccuMed will invoice RELA for warranty service on a monthly basis referencing
the service call numbers, instrument serial numbers, and charges for labor,
parts and zone charge for each incident.
A listing of parts and assemblies which RELA desires returned for failure
analysis will be maintained by AccuMed. See Exhibit G, Warranty Parts Return
Listing. This list may change from time to time since it will be reflective of
the current operating environment. All other failed warranty parts will be
disposed of by the AccuMed Field Service Engineers. Warranty parts will be
supplied to the AccuMed Field Service Engineer from AccuMed inventory. Parts
and assemblies returned to RELA can be remanufactured to meet current
specifications and made available for subsequent use.
This warranty applies to Products that, after shipment from RELA, have not been
damaged, altered, or repaired whether negligent or not, by other than
authorized representatives of RELA or AccuMed. This warranty does not extent
to equipment not produced by RELA even though such may be sold or operated with
the Product. In addition, the warranty does not cover design or component
related failures for non-RELA designed sub-assemblies.
Section 9.2 Limitation of Liability RELA MAKES NO OTHER GUARANTEES
OR WARRANTIES WHATSOEVER, AND THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL RELA BE LIABLE FOR ANY LOST
PROFITS OR INCIDENTAL OR CONSEQUENTIAL DAMAGES REGARDLESS OF WHETHER RELA HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, NOR ANY CLAIM AGAINST ACCUMED
BY ANY OTHER PARTY.
RELA'S MAXIMUM LIABILITY ARISING OUT OF ITS PERFORMANCE UNDER THIS AGREEMENT,
WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, IS LIMITED TO THE LESSER
OF $1,000,000 OR REFUND OF THE COMPENSATION RECEIVED BY RELA UNDER THIS
AGREEMENT.
ARTICLE X
TOOLING
Section 10.1 Ownership of Tooling RELA shall procure and/or produce, upon
mutual pre-approvals, all tools, dies, jigs, and fixtures required to
manufacture the ESP. RELA shall invoice AccuMed for all labor and materials
required to procure or produce all such tooling, jigs, fixtures, and the like,
and upon payment AccuMed shall obtain unrestricted ownership thereof and to the
detailed assembly drawings for such tooling.
<PAGE> 10
All replacement tools required shall also be owned by AccuMed upon payment by
AccuMed of the cost thereof. Termination of this agreement shall result in
the surrender by RELA of all tools, drawings for tools, replacement tools,
fixtures and jigs, paid for and owned by AccuMed.
Section 10.2 Tooling Maintenance At all times under this Agreement
during which RELA has possession of AccuMed tooling, RELA shall have the
responsibility of performing normal, expected maintenance and repairs. The cost
of modifying or replacing or rebuilding AccuMed owned tooling worn through
usage or in need of major repair for reasons other than lack of periodic
maintenance shall be borne by AccuMed. RELA shall be responsible for such
costs if such costs are incurred due to a failure to perform proper maintenance.
Payment for the cost of any other required tooling changes shall be negotiated
by the parties prior to any change. All modifications and major repairs to
tooling must be approved in advance by AccuMed. RELA will obtain a warranty on
all tooling purchased by RELA for AccuMed that warrants the tooling against
defect during its normal useful life and that obligates the supplier to replace
without cost any defective tooling. AccuMed shall have the right to inspect
all tooling during normal business hours. RELA agrees that it will obtain
agreement from any third parties that will be given possession of AccuMed owned
tooling that such third parties will permit AccuMed to inspect tooling during
normal business hours.
Section 10.3 Tooling Removal AccuMed shall have the right to take
possession of and remove from the RELA facility or from the facility of any
third party, all tooling owned by AccuMed and all confidential information
owned by AccuMed upon request and upon any expiration, cancellation, or
termination of this agreement. The right to take possession of such tooling
shall be subject only to AccuMed providing to RELA forty-eight (48) hours
advance notice. The cost of removing and transferring such tooling shall be
borne by AccuMed. In addition to jigs, fixtures, and tooling, AccuMed may take
possession of a detailed assembly drawing for such tooling subject to the
conditions stated. RELA assumes no patent responsibility and gives no express
warranty whatsoever on tooling and equipment removed and, other than warranty
of title, such tooling is removed "as is". Upon removal of the AccuMed owned
tooling prior to expiration, cancellation, or termination of this agreement,
RELA shall have no further obligation to supply the ESP to AccuMed other than
the ESP in inventory as set forth in Section 3.3.
Section 10.4 Tooling Inventory RELA will maintain inventory (see
Exhibit E attached) of AccuMed's tooling, fixtures, etc., and will be
available to AccuMed upon request.
ARTICLE XI
COST REDUCTIONS
Section 11.1 Sharing Cost Reductions Cost reductions will be shared
equally by
<PAGE> 11
RELA and AccuMed. Expenses will also be shared equally. AccuMed will pay for
tooling and RELA will maintain tooling purchased by AccuMed based on
Section 10.2 Tooling Maintenance. If for any reason RELA declines to
participate in a cost reduction project or if AccuMed chooses to undertake a
cost reduction project on its own or with other suppliers, AccuMed reserves the
right to implement the project, cover all investment, and reap all savings. It
is recognized that projects should not cause an adverse cost increase to RELA.
All cost savings projects and related expenditures require advance approval by
AccuMed prior to implementation.
ARTICLE XII
REGULATORY ASSURANCE MATTERS
Section 12.1 Documentation RELA shall retain a file for all RELA generated
documentation. This will include all final drawings specifications,
calculation, manuals and appropriate correspondence for a period of not less
than seven (7) years after this contract is terminated. Said data is
considered owned by AccuMed and shall be available only to AccuMed and such
regulatory agencies as AccuMed may designate, or as required by law.
Section 12.2 Documentation Inquiries Each party shall keep the other
promptly informed in writing of any inquiry by a customer, a state or a national
government regulatory agency relating to ESP or any part thereof.
Section 12.3 FDA Regulations Sale of AccuMed products including ESP
is subject to FDA regulation. Notwithstanding any other provision hereunder,
all work performed by RELA under this Agreement shall be performed in
accordance with all FDA rules, regulations and statutes including but not
limited to Good Manufacturing Practices in force at the time such work is
performed.
Section 12.4 Inspection AccuMed shall have the right during normal
business hours to inspect all phases of RELA's manufacturing activities in
order to verify RELA's compliance with specifications and applicable regulatory
requirements. The cost of such audits shall be borne by AccuMed. RELA may
designate a representative to be present during such audits. RELA agrees to
give AccuMed access during normal business hours to such records as are
reasonably necessary including quality control records, test records,
manufacturing records and design records and to permit AccuMed to review and
copy such records. AccuMed's right of access to RELA confidential information
and to inspect and copy RELA confidential information shall be restricted to
those matters necessary to verify RELA's compliance with the specifications and
regulatory requirements. AccuMed agrees to preserve the confidentiality of
such records in accordance with Section 2.1 of this Agreement. AccuMed shall
have no right to inspect areas or records which in no way pertain to RELA's
performance under this Agreement.
<PAGE> 12
ARTICLE XIII
INDEPENDENT CONTRACTOR
MISCELLANEOUS PROVISIONS
Section 13.1 Notices Any notice given under this Agreement shall be mailed by
first class registered or certified airmail, postage prepaid, and return
receipt requested, or sent by telecopy, to the receiving party at the address
set forth below, or at such other address as the party may from time to time
designate:
AccuMed , 900 North Franklin, Suite 401, Chicago, Illinois 60610
Attention: Chief Financial Officer/Corporate Vice President
RELA, Inc., 6175 Longbow Drive, Boulder, Colorado 80301
Attention: Chief Financial Officer
Notices shall be deemed given upon receipt if personally delivered or mailed,
upon acknowledgement of receipt if telecopied, the next business day, if sent
by overnight courier.
Section 13.2 Governing Law and Jurisdiction This Agreement shall be
deemed to have been executed and delivered in Boulder, Colorado, and all
questions arising out of or under this Agreement shall be governed by the laws
of the State of Colorado.
Section 13.3 Entire Agreement This Agreement together with the Mutual
Nondisclosure Agreement, in Exhibit A, between the parties of even date
herewith and understanding between the parties and supersedes and merges all
prior agreements and understandings, oral or written as to the subject matter
described herein. No modifications, representation, promise or agreement in
connection with the subject matter of this Agreement shall be binding on
AccuMed or RELA unless made in writing and signed by an officer or authorized
representative of the party to be bound, such as by the issuance of an AccuMed
"Change Order".
Section 13.4 Waiver No term, covenant, or written condition of this
Agreement shall be deemed waived except by the written agreement of the parties.
Forbearance or indulgence by either party in any regard whatsoever shall not
constitute a waiver of the term, covenant or condition to be performed by the
other to which the same may apply, and until complete performance by the other
party of such term, covenant and condition, the performing party shall be
entitled to invoke any remedy available to it under this Agreement or otherwise
available to it as law or in equity despite such forbearance or indulgence.
Section 13.5 Savings Clause If any provision of this Agreement shall be
held by a court of competent jurisdiction to be contrary to law, such provision
shall be deemed to
<PAGE> 13
be null and void, and the remainder of this Agreement shall be in full force
and effect. The parties specifically declare that they would have entered into
this Agreement if such void provision (or provisions), if any, had been
entirely omitted.
Section 13.6 Remedies No right or remedy conferred or reserved by
the Agreement shall be exclusive of any other right or remedy herein or
provided by law or in equity. To the extent any provision of this Agreement
may be inconsistent with any remedy provided by law, this Agreement shall be
controlling.
Section 13.7 Assignability Neither party shall delegate or assign its
duties under this Agreement without the other party's prior written consent,
and any purported delegation or assignment without such consent shall be void.
Subject to the foregoing, this Agreement shall be binding on the parties hereto
and their respective successors and assigns.
Section 13.8 Force Majeure Neither party shall be liable for failure to
perform or for any delay in performing any of its obligations hereunder other
than as provided for in hereof, when such failure or delay is caused, directly
or indirectly, by fire, flood, earthquake, riot, accident, explosion, strike or
other labor disturbances (regardless of the unreasonableness of the degree of
the demand of labor), war, seizure under legal process orders or acts of any
government or branch or agency thereof, or acts of God.
Section 13.9 Independent Contractors During the term thereof, the
relationship of each of the parties hereto the other is that of an independent
contractor. Nothing herein contained shall be deemed to authorize or empower
either party, its agents or employees to act as agent for the other party or
conduct business in the name, or for the account of, the other party or any of
the other party's affiliates or otherwise bind it or then in any manner.
IN WITNESS WHEREOF, AccuMed and RELA executed this Agreement on the respective
dates indicated.
AccuMed International, Inc. RELA, Inc.
<PAGE> 14
By: \s\ MICHAEL BURKE By: \s\ JOHN V. ATANASOFF
- ----------------------- -----------------------------------
Printed: Michael Burke Printed: John V. Atanasoff
- ----------------------- -----------------------------------
Title: President Title: President
- ----------------------- -----------------------------------
Date: 6/12/97 Date: 6/10/97
- ----------------------- -----------------------------------
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