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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1943
Commission file number 0-20652
AccuMed International, Inc.
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(Name of small business issuer in its charter)
Delaware 36-4054899
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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900 N. Franklin Street, Suite 401, Chicago, IL 60610 Issuer's telephone number: (312) 642-9200
(Address of principal (Zip Code)
executive offices)
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
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(Title of Class)
Common Stock purchase warrants
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended December 31, 1996: $6,222,000
Aggregate market value of the voting stock held by non-affiliates as
of March 26, 1997: $70,561,000
Number of shares of Common Stock outstanding as of March 26, 1997: 22,073,939
Transitional Small Business Disclosure Format (check one): Yes No X
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ITEM 1 OF THIS FORM 10-KSB ENTITLED "BUSINESS" AND ITEM 6 OF THIS FORM 10-KSB
ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27a OF THE SECURITIES ACT OF 1933 AND SECTION 21e OF THE SECURITIES
EXCHANGE ACT OF 1934. FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AND
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY
THE FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE BUSINESS
BACKGROUND
AccuMed International, Inc. ("AccuMed" or the "Company") was
incorporated in California in June 1988 under the name Alamar Biosciences, Inc.
Prior to December 29, 1995, the Company was engaged in developing,
manufacturing and marketing microbiology products, including alamarBlue(TM) and
certain diagnostic test kits under the name Alamar. AccuMed, Inc., an Illinois
corporation, was formed in February 1994 and was engaged in researching and
developing cytopathology products. Effective January 1995, AccuMed, Inc.
acquired the Sensititre microbiology business by purchasing certain assets of a
division of Radiometer America, Inc. and purchasing from Radiometer (UK)
Limited all of the shares of Sensititre Limited, an English registry company
(renamed AccuMed International Limited, "Sensititre," and collectively, such
businesses are referred to as "AccuMed, Inc."). On December 29, 1995, AccuMed,
Inc. merged with and into the Company (the "Merger"). The Company then changed
its name to AccuMed International, Inc., reincorporated under Delaware law and
changed its fiscal year end from September 30 to December 31.
On October 15, 1996, the Company acquired a two-thirds interest in
Oncometrics Imaging Corp., a company continuing under the laws of the Yukon
Territory, Canada ("Oncometrics") for aggregate consideration of $4.0 million
in cash. Of such consideration, $2.0 million was paid to Oncometrics' parent
company, Xillix Technologies Corp. ("Xillix"), for outstanding Oncometrics
stock and $2.0 million was paid to Oncometrics for newly issued Oncometrics
stock. Oncometrics was formed in 1995 as a wholly-owned subsidiary of Xillix
to complete the development of an automated instrument designed to be used in
the detection, diagnosis and prognosis of early-stage cancer by measuring the
DNA in cells on microscope slides.
On October 15, 1996, the Company also acquired all the outstanding shares
of common stock (the "RADCO Stock") not already owned by the Company of RADCO
Ventures, Inc., a Delaware corporation ("RADCO"), and retired approximately
$1.2 million in aggregate principal amount of certain promissory notes sold by
RADCO to its initial investors (the "RADCO Notes") at an aggregate cost to the
Company of approximately $1.4 million in cash (the "RADCO Acquisition"). RADCO
was formed in March 1996, for the purpose of developing a diagnostic
microbiology test panel and automated reading instrument known as the
FluoreTone(TM). RADCO was initially capitalized through private placements of
units consisting of an aggregate of 400,000 shares of RADCO Stock, the RADCO
Notes and warrants to purchase an aggregate of 687,500 shares of the Company's
Common Stock, with a weighted average exercise price of $3.73 per share. In
consideration for issuance of such warrants,
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the Company received 10% of the outstanding RADCO Stock.
Effective on November 15, 1996, RADCO, which became a wholly-owned
subsidiary of the Company upon consummation of the RADCO Acquisition, was
merged with and into the Company pursuant to a Merger Agreement between the
Company and RADCO. At the effective time of the Merger, the Company assumed
all the assets, rights and liabilities of RADCO which ceased to exist as a
separate corporate entity.
The Company designs, manufactures and markets diagnostic screening
products for clinical diagnostic laboratories serving the cytopathology and
microbiology markets. The Company's primary focus is on the development of
cytopathology products that support the review and analysis of Pap smears in
order to improve the quality of cell analysis and increase accuracy and
productivity in the laboratory. The Company commenced sales of its initial
cytopathology product, the AcCell(TM) 2000 automated slide handling and
microscopy workstation, at the end of the first quarter of 1996. The
TracCell(TM) 2000 is a specimen mapping workstation, which automatically
pre-screens Pap smear slides to identify and create a computerized map of empty
space and certain non-clinically relevant portions of the specimen to permit a
more efficient analysis of the test slide. The Company has completed clinical
trials of the TracCell 2000 and in November 1996 filed a pre-market
notification under Section 510(k) (a "510(k) Notification") under the United
States Food, Drug and Cosmetic Act (the "FD&C Act") with the Food and Drug
Administration ("FDA") with respect to the TracCell 2000. In May 1996, the
Company entered into an agreement with Olympus America, a leading supplier of
microscopes to the cytopathology market, pursuant to which Olympus America has
exclusive third party distribution rights to the AcCell 2000 and, if cleared
for marketing by the FDA and other applicable regulatory authorities, the
TracCell 2000 in North, Central and South America (the "Olympus Territory").
The Company also develops, manufactures and markets in vitro diagnostic
human clinical microbiology products for the clinical laboratory, veterinary
and pharmaceutical markets. In March 1997, the Company acquired certain assets
relating to the ESP Culture System II product line (the "ESP Product Line")
from Difco Microbiology Systems, Inc., a Michigan corporation ("Difco"),
consisting of disposables, software and instruments for the growth and
detection of microorganisms in blood cultures, sterile body fluids and
mycobacteria samples. The Company offers the microbiology laboratory a variety
of FDA-cleared products, under the trade name Sensititre, for the minimum
inhibitory concentration and identification ("MIC/ID") testing of bacteria
suspected of causing infections and for measuring the susceptibility of such
bacteria to different types and concentrations of antibiotics. AccuMed's
microbiology products include disposable test kits and a range of automated
instruments. In September 1996, the Company entered into an agreement with
CMS, division of Fisher Scientific Company ("Fisher"), a leading distributor of
clinical laboratory products, pursuant to which Fisher has been granted
exclusive rights to distribute the Company's Sensititre human clinical
microbiology products in the United States. The Company also markets
alamarBlue(TM), a proprietary, non-toxic indicator reagent that measures cell
growth for in vitro testing. The Company is developing the KB Reader, an
automated instrument designed to read the results of a Kirby-Bauer method
susceptibility test. The Company is also developing the Fluoretone, a
diagnostic microbiology test panel and an automated reading instrument. There
can be no assurance that any such products will be successfully developed or
marketed.
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CYTOPATHOLOGY
CYTOPATHOLOGY PRODUCTS
AccuMed's primary focus is on the development and marketing of
cytopathology products that support the review and analysis of cervical Pap
smears, including slide management and mapping and critical data management
functions. The Company's products are designed to automate multiple aspects of
the Pap smear screening process without significantly modifying existing
laboratory practices. The Company's current cytopathology products are the
AcCell 2000 workstations. The Company has completed clinical testing of the
TracCell 2000 slide mapping workstation, and in November 1996 filed a 510(k)
Notification with the FDA with respect to the TracCell 2000. The Company is
developing software and hardware for a second generation, fully automated, high
volume, mapping product, the TracCell 2500, to augment its workstation product
offering. The Company is also developing a series of educational and testing
products.
THE ACCELL 2000. The AcCell 2000 workstations consist of the AcCell
2000 and the AcCell 2001. The AcCell 2000 is an interactive
computer-controlled slide handling and precision microscopy workstation that is
supported with comprehensive data management capabilities. The workstation
consists of a high quality precision microscope (supplied by the Company or the
customer), a computer-controlled moveable stage, a bar code reader, a
proprietary slide marking mechanism (the "dotter"), an optional personal
computer for the data management system and a stage-control mouse developed by
the Company. The system operates in a Microsoft Windows(R) environment using
the Company's proprietary software. The AcCell 2001 contains all the features
of the AcCell 2000 in addition to an automated cassette slide loading and
unloading system which handles up to 30 slides per cassette. The AcCell 2001 is
designed to be used in conjunction with a TracCell 2000.
The AcCell 2000 can be linked to the gynecologist's office and to the
laboratory's internal information system in order to provide computerized
support, from the time of entering patient information when the specimen is
taken through the time of generating reports at the laboratory and doctor's
office and finally to billing of the patient or payor. After specimen
collection by the gynecologist, the gynecologist's staff, using software
provided by the Company through the laboratory either on a network or on a
disk, enters the patient's relevant medical history into the system and
generates a bar code that is placed on the slide and the hard copy of the work
order sent with the slide to the laboratory. The bar code contains basic
patient information such as the patient's name and date of specimen collection.
The slides and patient data, either in electronic format or hard copy, are then
transferred from the gynecologist to the clinical laboratory for review.
At the laboratory, the slide is assigned by the laboratory administrator
to the cytotechnologist for review. The slide is placed, either manually or
automatically, on the AcCell stage and is read by the bar code reader to ensure
that proper patient data is displayed on the computer monitor for
cytotechnologist review. The slide is then automatically moved under the
microscope, and the microscope is power-focused by the cytotechnologist. The
AcCell 2000 automatically moves the stage under the microscope in a pattern and
at a speed selected by the cytotechnologist that the cytotechnologist can
override at any time. As the slide is moved under the microscope, the
cytotechnologist records into the
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system's memory the exact coordinates of abnormal cells by clicking a button on
the stage-control mouse. At the conclusion of the review, selected abnormal
cells are automatically marked by the dotter with a small physical dot on the
slide so that they may be relocated easily for further manual review. The
AcCell 2000 will record a complete analysis only after 100% of the slide has
been scanned or a sufficient number of abnormal cells have been located to
designate the slide as potentially positive. Typically, review of a single
slide takes five to seven minutes using the AcCell 2000.
After completing review of the slide, the cytotechnologist selects the
appropriate diagnosis from a table in the data management system. The data
management system records all aspects of the Pap smear screening and saves the
information for future review. The AcCell 2000 generates management reports,
records the exact location of marked cells for a given specimen, digitally
stores relevant information and provides full documentation for laboratory
quality control and regulatory compliance. The Company believes that by
providing a variety of automated features and a comprehensive data management
system, the AcCell 2000 has the potential to reduce the risk of human slide
reading and administrative error.
To extend the functionality of the AcCell 2000, several system
configuration options are available, and multiple workstations can be networked
together within a laboratory. The MacroVision(TM), a proprietary image
enhancement system, can be attached to the AcCell platform in order to allow a
cytotechnologist to view on a monitor the specimen being reviewed under the
microscope. The Company is currently developing proprietary telepathology
software which, if developed, would enable the AcCell workstation to be
operated remotely using the Company's MacroVision product.
Although the Pap smear test is the largest volume cytology test, the
cytopathology laboratory routinely conducts other tests based on samples from
numerous organs and areas of the body, all of which require precision
microscopy and careful management of data to be effectively implemented. The
Company is currently developing products for these applications by combining
its AcCell technology with proprietary technology licensed from Oncometrics for
use in connection with the analysis of these tests in a manner similar to that
of Pap smear tests.
THE TRACCELL 2000. The TracCell 2000 is a pre-screening, mapping and
slide handling product designed to identify and create a computerized map of
empty space and certain non-clinically relevant areas on the slide and thereby
reduce the amount of matter on the specimen that must be reviewed by the
cytotechnologist using the AcCell 2000. Much of the material contained in a Pap
smear specimen is not clinically relevant to cervical cancer screening. In
addition to human cells, a typical Pap smear slide contains a certain amount of
vacant space, blood, mucus and other non-clinically relevant material.
Currently, the cytotechnologist is required to review all portions of the
slide, including those portions that are not relevant to diagnosis, because
there is no basis upon which to distinguish such material until it is reviewed
manually under the microscope.
The TracCell 2000 is designed to first evaluate whether a sample is
properly stained and has sufficient material to be statistically significant.
The TracCell 2000 then automatically pre-screens the slide to locate and create
a computerized map of empty space and certain non-clinically relevant material.
In tests conducted by the Company, it has been demonstrated that the TracCell
2000 can eliminate from 15% to 50% of the slide area to be reviewed. As a
result, the Company believes that the
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TracCell 2000 has the potential to reduce the time needed to evaluate specimens
and allow the cytotechnologist to focus on more thoroughly evaluating potential
abnormalities.
The TracCell 2000 is designed to be used before the slide is reviewed
using the AcCell 2001. A single TracCell 2000 is designed to support up to
five AcCell 2001 instruments based on normal laboratory usage. The TracCell
2000 creates a pre-screening pattern for the slide based on the computerized
map, which is used by the AcCell 2001 to automatically move the slide to the
relevant area and automatically focus the microscope during the
cytotechnologist's review. If the cytotechnologist wants to alter the
pre-screened sequence, he or she can override the system for a particular
slide. Regardless of whether the cytotechnologist chooses to override the
prescribed sequence, the system is designed to facilitate and document 100%
review of the slide. The TracCell 2000, if cleared by the FDA or other
applicable regulatory authorities for marketing, will be marketed with software
for which the laboratory will pay a software license fee to review a
predetermined number of slides. There can be no assurance that the FDA or
other applicable regulatory authorities will clear the TracCell 2000 or that
the TracCell 2000 will be successfully marketed.
THE TRACCELL 2500. The Company is developing a second generation
specimen pre-screening and slide mapping product, the TracCell 2500, to further
automate the mapping process. The TracCell 2500, if successfully developed,
will eliminate not only empty space, debris and other material eliminated by
the TracCell 2000, but will also eliminate certain normal cellular material.
The Company believes, based on preliminary studies it has conducted, that the
technology embodied in the TracCell 2500 may be capable of further reducing the
portion of the specimen required to be reviewed by the cytotechnologist.
Further testing and development and additional resources are necessary to
determine whether a commercially viable TracCell 2500 instrument can be
developed. Development of the TracCell 2500 is subject to all of the risks
associated with the development of new products based on innovative
technologies and new software, including unanticipated technical or other
problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a change in the design,
delay in the development, or abandonment of such products. There can be no
assurance that the Company will successfully develop the TracCell 2500, that
the TracCell 2500 will be cleared or approved for marketing by the FDA or other
applicable regulatory authorities, or that the TracCell 2500 will be
successfully marketed.
CYTOPATHOLOGY EDUCATIONAL AND TRAINING PRODUCTS. The Company has
recently developed the MacroVision feature, a specially modified AcCell product
for on-screen specimen review. This system can also be used by teaching
institutions and laboratories to provide hands-on cytotechnology training
through a single microscope. Cytotechnologists are required by the Clinical
Laboratory Improvement Amendments of 1988 ("CLIA") to attain and maintain
minimum standards of competence, and cytology laboratories are charged with
ensuring that their cytology professionals meet such competency standards
through continuing training and testing. Current training and testing involve
the use of multiple microscopes or specialized microscopes equipped with
multiple eyepieces which are difficult to use. Using the MacroVision feature,
the teacher or trainer can display the specimen being reviewed on one or more
computer monitors. The monitor can be viewed directly by the students or can
be linked with other computers and monitors to provide remote or even off-site
viewing. For testing purposes, AccuMed is also developing a glass slide
Proficiency Testing Station that provides automated scoring of the screener's
locator and identification skills on user defined test slide sets.
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In addition, the Company is developing the Relational Cytopathology
Reference Guide (the "Reference Guide"), a library of electronically stored,
digitized cell images. The Reference Guide may be used in training to allow
students to analyze typical and atypical specimens as slides are being
reviewed. In the clinical laboratory, the Reference Guide is being designed to
provide a reference database to assist the cytotechnologist and cytopathologist
in Pap smear analysis. Each of the Company's educational products is being
designed to record and document continuing education activity to assist in
compliance with CLIA requirements.
BUSINESS OF ONCOMETRICS
Oncometrics is developing a proprietary high resolution image
cytometer that uses a solid state microscope, a high resolution digital camera,
proprietary image analysis software and high speed computer processors to
capture and analyze cell images from a microscope slide that has been stained
using Oncometrics' proprietary staining method. Prototypes of the Oncometrics
instrument have been developed that are capable of isolating small variations
in cell nucleus DNA, which assists the cytotechnologist in detecting lung
cancer in an early stage of development. Because the presence of cancer cells
can cause changes in the nuclear DNA of normal cells, in some cases the
Oncometrics instrument can detect cancer even in the absence of cells with
visibly detectable disease.
Oncometrics has demonstrated the feasibility of its technology as it
applies to the detection of early cancer in lung mucus. Oncometrics believes
that its technology may be potentially applied to other types of cancer, such
as cervical cancer.
Oncometrics is currently testing several prototypes of its instrument
with scientists and cancer research institutions. There can be no assurance
that Oncometrics or the Company will successfully develop this instrument for
lung or cervical or other cancer applications or, if developed, that this
instrument will be approved for marketing by the FDA or other applicable
regulatory authorities or that it will be successfully marketed.
CYTOPATHOLOGY SALES AND MARKETING
Pap smear screening is performed in approximately 4,500 laboratories in
the United States. The Company is currently marketing the AcCell 2000
workstations to the clinical laboratory market, primarily in the United States.
In order to expand its markets, the Company is implementing a dual-track
marketing strategy pursuant to which it intends to enter into distribution
arrangements with major market participants, as well as establish a direct
marketing group to support the marketing activities of its distribution
partners. The Company intends to tailor its marketing strategy by region and
country as appropriate to address significant differences among such markets.
The AcCell 2000 is distributed in the Olympus Territory by Olympus
America pursuant to an exclusive agreement entered into in May 1996. The
Company currently has ten personnel dedicated to sales, marketing and client
services relating to the Company's cytopathology products.
Olympus America is a leading supplier of precision microscopes to the
cytology market in the United States and throughout the Olympus Territory. The
Olympus Agreement grants to Olympus
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America exclusive third party distribution rights to the AcCell 2000 and the
TracCell 2000, if cleared for marketing by the FDA and other applicable
regulatory authorities, in the Olympus Territory through May 1999. The AcCell
2000 products have been incorporated with the Olympus microscope and are
marketed under and labeled with the Olympus America and AcCell names. The
TracCell 2000, if cleared for marketing by the FDA and other applicable
regulatory authorities, is also expected to be incorporated with the Olympus
microscope and to be similarly marketed and labeled. The Olympus Agreement
permits the Company to conduct direct sales efforts in the Olympus Territory
and direct or indirect sales efforts throughout the world. Olympus America is
required to purchase specified minimum units of AcCell workstations in each
year of the term, although direct sales by the Company in the Olympus Territory
can be used to satisfy the minimum purchase obligation. Olympus America has a
right of first refusal to distribute in the Olympus Territory certain
additional cytopathology products that may be developed by AccuMed. The
Company's direct sales staff has worked in concert to train the Olympus America
sales team and to support their efforts at industry trade shows and
conventions, and are compensated directly by Olympus America for providing
training and installation support for the distributed products.
On January 9, 1997, the Company entered into a letter of intent with
Leica Mikroskopie System GmbH of Germany ("Leica") whereby Leica and the
Company agreed to enter into a definitive agreement on or prior to March 31,
1997 (which has been mutually extended to April 30, 1997), whereby upon
execution, Leica will distribute, if cleared for manufacturing by the FDA and
all applicable regulatory authorities, the Company's AcCell and TracCell
product line in all of Europe, Asia and other significant world markets.
Pursuant to the letter of intent, the Company and Leica began planning joint
marketing distribution efforts in January 1997 to develop a sales and marketing
plan. Leica and the Company will also attempt to develop products that combine
proprietary technology from both companies relating to cytopathology. The
definitive agreement between the Company and Leica is expected to be for a five
year term and establish minimum annual quantities of products to be purchased
from the Company by Leica. Consummation of the proposed transactions with
Leica are conditioned on negotiation and execution of a definitive agreement by
April 30, 1997 and there can be no assurance that a definitive agreement will
be executed.
MICROBIOLOGY
The Company develops, manufactures and markets in vitro diagnostic manual
and automated tests for the clinical laboratory, veterinary and pharmaceutical
markets. In March 1997, the Company acquired and began offering the ESP
Culture System II product line consisting of disposables, software and
instruments for the growth and detection of microorganisms in blood cultures,
sterile body fluids and mycobacteria samples. The Company also offers the
microbiology laboratory a variety of FDA-cleared products, under the trade name
Sensititre, for identifying bacteria suspected of causing infections and
measuring the susceptibility of such bacteria to different types and
concentrations of antibiotics. In September 1996, the Company entered into an
agreement (the "Fisher Agreement") with Fisher whereby Fisher has been granted
exclusive rights to distribute the Company's Sensititre product line in the
United States.
AccuMed's microbiology products include a series of disposable test kits
and a range of automated instruments. The Company also markets alamarBlue, a
proprietary, non-toxic indicator reagent that
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measures cell growth for in vitro testing. The Company is conducting research
and development of the KB Reader, an automated instrument designed to read the
results of a Kirby-Bauer method susceptibility test. The Company is also
conducting research and development of the FluoreTone, a diagnostic
microbiology test panel and an automated reading instrument. There can be no
assurance that any such products will be successfully developed, that such
products will be cleared or approved for marketing by the FDA or other
applicable regulatory authorities, or that such products will be successfully
marketed.
MICROBIOLOGY PRODUCTS
ESP PRODUCT LINE. On March 3, 1997, AccuMed acquired from Difco, certain
assets (the "ESP Assets") and liabilities related to the ESP Culture System II
product line (the "ESP Product Line") including certain agreements with
customers, purchase orders, and patents, trademarks, trade secrets and other
intellectual property relating to the ESP Product Line (together with the ESP
Product Line, the "ESP Business") for an aggregate purchase price of $6.0
million in cash pursuant to the terms of the Asset Purchase Agreement dated as
of March 3, 1997 (the "ESP Asset Purchase Agreement"). The ESP Product Line
consists of disposables, software and instruments for the growth and detection
of microorganisms in blood cultures, sterile body fluids and mycobacteria
samples.
The ESP Culture System II is an instrument that automates the process of
detecting the growth of microorganisms in blood, sterile body fluids, and
mycobacteria samples. Bottles containing proprietary media are injected with
patient specimens, such as blood. The bottles are then loaded into the
instrument. The ESP Culture System II is available in three configurations
containing 128, 256 or 384 sensors per unit. Each sensor monitors one sample.
Bottles containing samples are monitored by the instrument every 12 to 24
minutes and data points are collected for each test location within the system.
The sensors or pressure transducers that continuously monitor gas changes
caused by microorganisms growing in the sterile testing bottles. Detection is
based on a direct measurement of organism metabolism or pressure change. An
internal algorithm then analyzes this change and determines when growth occurs
in the sample. The majority of microorganisms are detected within 30 minutes
to five days. Samples testing for the growth of mycobacteria are monitored for
six to eight weeks.
SENSITITRE. Sensititre, which was acquired by the Company in 1995,
first began offering MIC/ID products over 15 years ago. Sensititre was one of
the first companies to introduce a range of systems for MIC/ID testing
utilizing microwell panel technology. The Sensititre products incorporate a
range of accessories including substrate strips, dosing heads, broths, and test
panels for both susceptibility and identification applications. The Sensititre
panels have significant advantages over competitors, including a two-year shelf
life and the ability to be stored at room temperature. The Sensititre product
line also includes four automated instruments, each of which uses compatible
technologies, and allows customers to upgrade without replacing the entire
system. The AutoReader(TM) is a microprocessor-based fluorimeter designed to
automatically and rapidly measure intensity levels of fluorescence from MIC/ID
testing panels. ARIS(TM) is a fully automated panel handling, incubating and
reading instrument that offers robotic processing of testing plates.
SensiTouch(TM) is a device that guides the user through the manual reading of
Sensititre susceptibility test panels and transmits the data to a host
computer. The AutoInoculator(TM) is a rapid microprocessor-controlled
dispensing instrument designed to automatically deliver the proper amount of
the patient's specimen to a Sensititre test panel. The Company also offers
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the Sensititre Automated Microbiology System, which is a sophisticated data
management system that provides a wide range of data tracking and reporting
capabilities.
ALAMARBLUE. The Company manufactures and markets alamarBlue, a
proprietary, non-toxic, water-soluble indicator reagent that measures cell
growth for in vitro testing. alamarBlue has applications in biological
research, bacteria testing, toxicity testing for consumer products, and
pharmaceutical and therapeutic research. For example, companies that produce
consumer products such as soaps, shampoos, lotions or cosmetics can conduct in
vitro cell culture toxicity tests in lieu of live animal testing. The Company
has marketed a series of MIC/ID panel tests using alamarBlue under the trade
name Alamar.
In December 1996, the Company entered into a Manufacturing and License
Agreement with Salcom S.r.l. ("Salcom") pursuant to which Salcom has been
granted certain exclusive rights in and to technology and related trade
secrets, know-how and patent rights relating to alamarBlue (the "Licensed
Technology") to manufacture and distribute the Company's alamarBlue
microbiology products in parts of Europe and Japan. In Japan, however, Salcom
is only granted the right to sell these products to AMCO Incorporated ("AMCO"),
the Company's distributor in Japan. Pursuant to the agreement, Salcom is
obligated to pay the Company $150,000 in two equal payments, the first of which
is due on February 1, 1998 and the second of which is due on February 1, 1999.
The agreement permits the Company to continue to use the Licensed Technology
and to sublicense the Licensed Technology. Salcom is obligated to pay
royalties to the Company on net sales of any product which encompasses or
incorporates the Licensed Technology until September 30, 1999, subject to
certain conditions and restrictions.
In October 1995, the Company entered into the Becton Agreement pursuant
to which Becton has rights in and to the Licensed Technology for the production
and sale of disposable anti-microbial testing panels. The worldwide license is
exclusive to Becton for certain applications in the microbiology market;
however, the license permits the Company to continue to exploit the Licensed
Technology, subject to certain restrictions on the Company's ability to
sublicense the Licensed Technology or to engage in significant transactions
with substantial competitors of Becton. Becton is obligated to pay royalties
on net sales of any product which encompasses or incorporates the Licensed
Technology for five years following the first commercial use of the Licensed
Technology, subject to certain conditions and restrictions, and Becton has paid
the Company a total of $3.5 million, which includes $500,000 creditable against
future royalties. To the Company's knowledge, as of the date of this Report,
Becton has not produced or sold any products incorporating the Licensed
Technology.
KB READER. In February 1996, the Company entered into a license and
distribution agreement with Biokit, S.A., Barcelona, Spain, to develop a low
cost KB Reader designed to read automatically the results of a Kirby-Bauer
method susceptibility test. Currently, most laboratories interpret the results
of a disk diffusion test visually and manually enter the test result. The
Company has licensed from Biokit, S.A. certain software algorithms that are
intended to be integrated into the hardware being developed by the Company. The
Company has developed a prototype KB Reader and expects to begin clinical
trials some time during 1997. The Company has an exclusive worldwide license to
manufacture and market the KB Reader, except that Biokit, S.A. has exclusive
rights to market the KB Reader in Italy and may also market the KB Reader in
any country in which the Company does not at such time
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<PAGE> 11
directly or indirectly market the KB Reader. Development of the KB Reader is
subject to all of the risks associated with the development of new products
based on innovative technologies and new software, including unanticipated
technical or other problems and the possible insufficiency of the funds
allocated for the completion of such development, which could result in a
change in the design, delay in the development, or abandonment of such
products. Consequently, there can be no assurance that the KB Reader will be
successfully developed, that the KB Reader will be cleared for marketing by the
FDA or other applicable regulatory authorities or that the KB Reader will be
successfully marketed.
FLUORETONE. The Company is conducting research and development of the
FluoreTone, a diagnostic microbiology test panel and an automated reading
instrument. Development of the FluoreTone is subject to all of the risks
associated with the development of new products based on innovative
technologies and new software, including unanticipated technical or other
problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a change in the design,
delay in the development, or abandonment of such products. Consequently, there
can be no assurance that the FluoreTone will be successfully developed, that
the FluoreTone will be cleared or approved for marketing by the FDA or other
applicable regulatory authorities or that the FluoreTone will be successfully
marketed.
MICROBIOLOGY SALES AND MARKETING
The Company's Sensititre products are marketed in the pharmaceutical,
veterinary laboratory and clinical/hospital reference laboratory markets. The
Company's Sensititre human clinical microbiology products are distributed in
the United States pursuant to the Fisher Agreement entered into with Fisher in
September 1996. The Fisher Agreement grants to Fisher exclusive rights to
distribute the Company's Sensititre human clinical microbiology products in the
United States. The Fisher Agreement contains no minimum purchase obligation.
The Company provides training and technical support to the sales personnel and
customers of Fisher. The Fisher Agreement expires on December 31, 2000;
however, it may be terminated without cause by either party upon six months'
prior written notice. The Company markets alamarBlue directly to industrial and
research customers, including the biotechnology industry. Prior to execution of
the Fisher Agreement, the Company marketed its microbiology products in the
United States through a seven-person direct sales staff and in certain foreign
countries through exclusive diagnostic manufacturers and distributors; such
direct sales staff is currently 14 persons. Most sales to the veterinary
market are through direct sales. alamarBlue is being marketed by the Company,
primarily to industrial and research customers, directly through advertising
and trade shows.
COMPETITION
The Company believes that the principal competitive factors in the market
for both cytopathology and microbiology products include functionality and
product features, effectiveness of the product in standard medical practice,
the cost of the product to the laboratory and the demonstrated cost/benefit
justification for purchasing new products. The Company believes that it is also
important to provide products that enhance and assist standard practice rather
than products that require completely new practices.
The Company's AcCell 2000 currently faces and the TracCell 2000, if
successfully developed and
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<PAGE> 12
cleared for marketing by the FDA and other applicable regulatory authorities,
will face competition from companies that have developed or may be developing
competing systems. The Company believes that many of the Company's existing and
potential competitors possess substantially greater financial, marketing,
sales, distribution and technical resources than the Company, and more
experience in research and development, clinical trials, regulatory matters,
manufacturing and marketing. The Company is aware of two companies that
currently market imaging systems to re-examine or rescreen conventional Pap
smear specimens previously diagnosed as negative as well as two companies that
are developing devices for the preparation and analysis of Pap smear slides.
The Company is aware that at least one such company has submitted an imaging
system for use as a primary means of screening Pap smear slides under a
pre-market approval application (a "PMA"). Another company markets a manual
rescreening test claimed to detect the presence of cervical cancer using
reagents to detect certain RNA/DNA hybrid cells. If any company currently
marketing rescreening products receives FDA clearance or approval for use of
its product as a primary screening system to replace or work in conjunction
with conventional Pap smear screening or if automated analysis systems are
developed and receive FDA clearance or approval, the use of conventional Pap
smear screening could be substantially affected and the Company's business,
financial condition and results of operations would be materially adversely
affected.
The market for the Company's current and, if developed, proposed
microbiology products is highly competitive, and the Company competes with
numerous well-established foreign and domestic companies, many of which possess
substantially greater financial, technical, marketing, personnel and other
resources than the Company and have established reputations for success in the
development, sale and service of manual and/or automated in vitro diagnostic
testing products. A significant portion of the MIC/ID testing market in the
United States is controlled by Dade MicroScan and bioMerieux Vitek. These
companies market a range of medically related products and have resources far
greater than those of the Company. Difco Laboratories Incorporated has been
issued a U.S. patent covering technology related to the alamarBlue technology
covered in one of the Company's patents. There can be no assurance that Difco,
which has substantially greater resources and experience in research,
development, manufacturing and marketing than the Company, will not use its
patented technology to develop products that will compete directly with the
Company's microbiology products.
The medical diagnostics industry is characterized by rapid product
development and technological advances. The Company expects its competitors to
continue to attempt to improve the design and performance of their current
products and to introduce new systems and processes with improved
price/performance characteristics. There can be no assurance that other
technologies or products that are functionally similar to those of the Company
are not currently available or under development, or that other companies with
expertise and resources that would encourage them to attempt to develop and
market competitive products will not develop new products that compete directly
with the Company's products. The Company's products could be rendered obsolete
or uneconomical by the introduction and market acceptance of competing
products, technological advances of the Company's current or potential
competitors, or by other approaches. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competition, including the development and commercialization of new
products and technology, will not have a material adverse effect on the
Company's business, financial condition and results of operations.
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<PAGE> 13
MANUFACTURING
The Company assembles and tests its cytopathology products at its Chicago
manufacturing facility. The Company's microbiology products are manufactured at
the Company's FDA Good Manufacturing Practice ("GMP") approved manufacturing
facility in England. The Company has entered into an agreement with Salcom
pursuant to which Salcom will manufacture the Company's Alamar microbiology
products, other than alamarBlue. The Company has purchased and modified the
stage-control mouse for use with the AcCell 2000 but is currently developing a
proprietary stage-control mouse which it expects to manufacture along with the
AcCell 2000. The Company has only recently begun to scale up its manufacturing
capacity for the AcCell 2000. The Company is currently developing the
manufacturing processes for the TracCell 2000. There can be no assurance that
the Company will be able to sell sufficient numbers of systems or develop
volume manufacturing processes that will lead to the cost-effective manufacture
of the AcCell 2000 or the TracCell 2000.
Among the ESP Assets acquired from Difco are certain pieces of
manufacturing equipment which had been used by affiliates of Difco to
manufacture the disposable bottles which comprise part of the ESP Product Line.
The Company intends to continue to use such equipment to manufacture, directly
or through a third-party manufacturer, such disposable bottles. (Concurrent
with entering into the ESP Asset Purchase Agreement, the Company entered into a
Manufacturing Agreement with affiliates of Difco pursuant to which such
affiliates will manufacture such disposable bottles, using such equipment, for
the Company for a period of two years.) Other of the ESP Assets include molds,
robotics and conveyor equipment used to manufacture a component for the
instruments which comprise part of the ESP Product Line. Such assets are
located at the facilities of a third party manufacturer. The Company intends
that such assets will continued to be used to manufacture such component,
either directly by the Company or through a third party.
Certain key components and raw materials used in the manufacturing of the
Company's products are currently provided by single-source vendors. Although
the Company believes that alternative sources for such components and raw
materials are available, any supply interruption in a single-sourced component
or raw material would have a material adverse effect on the Company's ability
to manufacture products until a new source of supply were qualified. There can
be no assurance that the Company would be successful in qualifying additional
sources on a timely basis, if ever, which would have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, an uncorrected impurity or a supplier's variation in a raw material,
either unknown to the Company or incompatible with the Company's manufacturing
process, could have a material adverse effect on the Company's ability to
manufacture products.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on introducing
new products as well as enhancement of its existing products. The Company
believes that a commitment to research and development is critical to its
ability to achieve its strategic plan. During the fiscal year ended September
30, 1995, the three month transition period ended December 31, 1995 and the
fiscal year ended December 31, 1996, the amounts recorded for research and
development were approximately $387,000, $32,000 and $3.1 million, respectively.
Additional amounts recorded for the three month transition
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<PAGE> 14
period ended December 31, 1995 and the fiscal year ended December 31, 1996, of
approximately $4.0 million and $6.0 million, respectively, reflect certain
significant non-cash charges against operations representing the write-off of
in-process research and development acquired in connection with the Merger, the
acquisition of RADCO, and the acquisition of the two-thirds equity interest in
Oncometrics.
INTELLECTUAL PROPERTY
The Company relies on a combination of patents, licensing arrangements,
trade names, trademarks, trade secrets, know-how and proprietary technology and
policies and procedures for maintaining the secrecy of trade secrets, know-how
and proprietary technology in order to secure and protect its intellectual
property rights. The Company has been issued a Great Britain patent and has
filed or been assigned ten U.S. patent applications (one of which has been
abandoned) and eight foreign patent applications covering certain aspects of
its cytopathology products. The Company has been issued two U.S. patents and
has filed or been assigned two U.S. patent applications, one Japanese patent
application and one Canadian patent application related to its microbiology
products. Additional U.S. and foreign patent applications covering the
Company's cytopathology products are being prepared. The Company has been
assigned one U.S. patent related to the ESP Product Line and one U.S. and two
European patent applications related to such issued patent, as well as an
additional U.S. patent application relating to the ESP Product Line. The
Company holds certain licenses on several U.S. and foreign patents and other
intellectual property rights regarding aspects of the technology embodied in
the Sensititre product line and is the licensee of certain automated cell
analysis technology. The Company holds a U.S. patent and has received a notice
of intent to grant a related European patent with respect to a portion of the
alamarBlue microbiology technology.
None of the Company's pending patent applications have been granted as of
the date of this Report, and there can be no assurance that any such patent
application will result in an issued patent. The Company may, in the future,
file additional patent applications; however, there can be no assurance that
the Company will be successful in obtaining approval of any future patent
applications it files with respect to its technologies. In addition, since
patent applications in the United States are maintained in secrecy until
patents issue, and since publications of discoveries in the scientific or
patent literature tend to lag behind actual discoveries by several months, the
Company cannot be certain that the Company or other relevant patent application
filer was the first creator of inventions covered by pending patent
applications or that such persons were the first to file patent applications
for such inventions.
There also can be no assurance that any patents, patent applications and
patent licenses will adequately cover the Company's technologies. Protections
relating to portions of such technologies may be challenged or circumvented by
competitors, and other portions may be in the public domain or protectable only
under state trade secret laws.
The Company owns two U.S. trademark registrations for the trademark
"Sensititre," and owns "ESP," "EZ DRAW," and "EZ VIEW," and has filed U.S.
trademark applications for the trademarks "AcCell," "MacCell," "FluoreTone,"
"INSIGHT," "SpeciFind," "Relational Cytopathology Review Guide," "MacroVision"
and "TracCell" and is currently preparing one more trademark application for
filing. The Company may file additional U.S. and foreign trademark
applications in the future. However, no trademark registrations have yet been
granted to the Company, and there can be no
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<PAGE> 15
assurance that any such registrations will be granted. In addition, there can
be no assurance that third parties have not or will not adopt or register marks
that are the same or substantially similar to those of the Company, or that
such third parties will not be entitled to use such marks to the exclusion of
the Company. Selecting new trademarks to resolve such situations could involve
significant costs, including the loss of goodwill already gained by the marks
previously used.
The Company relies for protection of its trade secrets, know-how and
proprietary technology on nondisclosure and confidentiality agreements with its
employees, consultants, distributors, suppliers, researchers and advisors.
There can be no assurance that such agreements will provide meaningful
protection for the Company's trade secrets, know-how or proprietary technology
in the event of any unauthorized use or disclosure of such information. In
addition, others may obtain access to, or independently develop, technologies
or know-how similar to that of the Company.
There can be no assurance that the Company's patents, patent
applications, patent licenses, trademarks and trade secret protections will
adequately protect the Company from potential infringement or misappropriation
by third parties. Historically, the Company has been required to undertake
costly litigation to enforce its intellectual property rights. Although the
Company is not currently aware of any potential infringement, future litigation
by the Company may be necessary to enforce its patent rights, as well as to
protect its trade secrets, know-how and proprietary technology, or to determine
the scope and validity of the proprietary rights of others. Any such litigation
could result in substantial cost to and diversion of effort by the Company.
The Company's success will also depend on its ability to avoid
infringement of patent or other proprietary rights of others. The Company is
not aware that it is infringing any such rights of a third party, nor is it
aware of proprietary rights of others for which it will be required to obtain a
license in order to develop its products. However, there can be no assurance
that the Company is not infringing the proprietary rights of others, or that
the Company will not be required to defend itself against claimed infringement
of the rights of others. Adverse determinations in any such litigation could
subject the Company to significant liability to third parties, could require
the Company to seek licenses from third parties and could prevent the Company
from manufacturing, selling or using certain of its products or technologies,
any of which could have a material adverse effect on the Company.
GOVERNMENT REGULATION
The Company's products and manufacturing processes are regulated by state
and federal authorities, including the FDA and comparable authorities in
certain states and other countries. Failure to comply with the FD&C Act and any
applicable regulatory requirements can result in, among other things, civil and
criminal fines, product recalls, detentions, seizures, injunctions and criminal
prosecutions.
United States regulatory requirements promulgated under the FD&C Act
provide that many of the Company's products may not be shipped in interstate
commerce without prior authorization from the FDA. Such authorization is based
on a review by the FDA of the product's safety and effectiveness for its
intended uses. Medical devices may be authorized by the FDA for marketing in
the United States either pursuant to a 510(k) Notification or a PMA. The
process of obtaining marketing clearance from the FDA and other applicable
regulatory authorities can be expensive, uncertain and time consuming,
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<PAGE> 16
frequently requiring several years from the commencement of clinical trials or
submission of data to the receipt of regulatory approval.
A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to existing products that are currently permitted to be marketed.
An applicant is permitted to begin marketing a product as to which it has
submitted a 510(k) Notification at such time as the FDA issues a written
finding of substantial equivalence. Requests for additional information may
delay the market introduction of certain of an applicant's products and, in
practice, initial clearance of products often takes substantially longer than
the FDA pre-market notification review period of 90 days. The Company has
completed clinical trials of the TracCell 2000 and in November 1996 filed a
510(k) Notification with the FDA with respect to the TracCell 2000.
A PMA consists of the submission to the FDA of information sufficient to
establish independently that a device is safe and effective for its intended
use. A PMA must be supported by extensive data, including preclinical and
clinical trial data, as well as extensive literature to prove the safety and
effectiveness of the device. By statute, the FDA is required to respond to a
PMA within 180 days from the date of its submission; however, the approval
process usually takes substantially longer, often as long as several years.
During the review period, the FDA may conduct extensive reviews of the
Company's facilities, deliver multiple requests for additional information and
clarifications and convene advisory panels to assist in its determination.
FDA marketing clearances, if granted, may include significant limitations
on the intended uses for which a product may be marketed. FDA enforcement
policy strictly prohibits the promotion of cleared or approved medical devices
for non-approved or "off-label" uses. In addition, product clearances or
approvals may be withdrawn for failure to comply with regulatory standards or
the occurrence of unforeseen problems following initial marketing.
Under current interpretation of FDA regulations, marketing of the AcCell
2000 in the United States does not require FDA marketing clearance. Marketing
of the TracCell 2000 in the United States, however, does require pre-marketing
clearance by the FDA. The Company has completed clinical trials of the
TracCell 2000 and in November 1996 filed a 510(k) Notification with the FDA
with respect to the TracCell 2000. There can be no assurance that FDA will
clear the TracCell 2000 for marketing in the United States on a timely basis,
if ever.
Under current interpretation of FDA regulations, marketing of the
Company's MIC/ID microbiology products in the United States requires FDA
marketing clearance through the 510(k) Notification process. With respect to
the Company's MIC/ID testing products, 510(k) Notifications must be filed and
cleared with respect to each antibiotic used. The Company may submit
applications to add individual antibiotics to those previously cleared as the
market warrants. However, there can be no assurance that clearances will
continue to be obtained or that obtained clearances will not be withdrawn.
At the current time, alamarBlue is marketed for use in the industrial and
research markets and therefore does not require FDA marketing clearance. The
FDA could change its interpretation of the regulations and require a 510(k)
Notification or PMA submission which, if pursued, may not be cleared,
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<PAGE> 17
and may contain certain significant limitations on the intended uses for which
the product is marketed.
Marketing in the United States of the Company's products under
development may require additional FDA clearances. For example, the Company's
proposed automated pre-screening, specimen mapping workstation, the TracCell
2500, if developed, may not be sold in the United States unless and until the
Company has obtained FDA marketing clearance, either through a 510(k)
Notification or a PMA. In addition, marketing of the Company's proposed KB
Reader and other proposed microbiology products, if developed, is likely to
require FDA clearance through 510(k) Notifications. The Company is currently
conducting research and development with respect to such products and has not
yet begun clinical trials. There can be no assurance that any such products
will be developed or, if developed, that such products will be cleared for
marketing by the FDA or other applicable regulatory authorities or, if such
clearance is received, that such marketing clearance will not be withdrawn.
Sales of medical devices outside of the United States are subject to
foreign regulatory requirements that vary from country to country. The time
required to obtain clearance by a foreign country may be longer or shorter than
that required for FDA clearance, and the requirements may differ. Export sales
of certain devices that have not received FDA marketing clearance generally are
subject to both FDA certificate for product for export regulations and, in some
cases, general U.S. export regulations. In order to obtain a FDA export permit,
the Company may be required to provide the FDA with documentation from the
medical device regulatory authority of the country in which the purchaser is
located. No assurance can be given that foreign regulatory clearances will be
granted on a timely basis, if ever, or that the Company will not be required to
incur significant costs in obtaining or maintaining its foreign regulatory
clearances.
The Company intends to seek ISO 9001 qualification, an international
manufacturing quality standard, and is seeking the "CE" mark for the AcCell
2000 and proposed products. The CE mark is recognized by countries that are
members of the European Union and the European Free Trade Association and will
be required to be affixed to all medical devices sold in the European Union.
The AcCell 2000 is expected to be certified as complying with CE mark
requirements upon completion of the CE mark qualification process which is
underway; however, no assurance can be given that the Company will obtain the
CE mark for the AcCell 2000 or any proposed products or satisfy ISO 9001
standards, or that any product that the Company may develop or commercialize
will obtain the CE mark or will obtain any other required regulatory clearance
or approval on a timely basis, if ever.
The Company is subject to certain FDA registration, record-keeping and
reporting requirements, and certain of the Company's manufacturing facilities
are obligated to follow FDA GMP Quality System Regulation and are subject to
periodic FDA inspection. Any failure to comply with GMP Quality System
Regulation or any other FDA or other government regulations could have a
material adverse effect on the Company's business, financial condition and
results of operations.
In July 1996, the Company received from the FDA a warning letter
regarding certain procedures used in connection with the manufacture of its
microbiology products at the Sensititre facility in the United Kingdom. In such
letter, the FDA stated that the Company manufactured sterile products at such
facility and was not in compliance with GMP regulations relating to the
manufacture of sterile products. On August 7, 1996, the Company submitted a
written response to the FDA asserting that the products
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manufactured at the Sensititre facility are not sterile. The FDA has
acknowledged in writing that the products are not represented as sterile and
accepted the Company's GMP Quality System Regulation responses as adequate. The
FDA has indicated that it will verify the Company's implementation during its
next inspection and that import of the Company's devices will be permitted to
continue.
Federal, state and foreign regulations regarding the manufacture and sale
of healthcare products and diagnostic devices are subject to future change.
The Company cannot predict what material impact, if any, such changes might
have on its business. Future changes in regulations or enforcement policies
could impose more stringent requirements on the Company, compliance with which
could adversely affect the Company's business. Such changes may relax certain
requirements, which could prove beneficial to the Company's competitors and
thus adversely affect the Company's business. In addition, regulations of the
FDA, including GMP Quality System Regulation, and state and foreign laws and
regulations, depend heavily on administrative interpretations, and there can be
no assurance that future interpretations made by the FDA, or other regulatory
authorities, with possible retroactive effect, will not adversely affect the
Company.
In addition to the regulations directly pertaining to the Company and its
products, many of the Company's existing and potential customers are subject to
extensive regulation and governmental oversight. Regulatory changes in the
healthcare industry that adversely affect the business of the Company's
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
There can be no assurance that the Company will be able to obtain
necessary regulatory clearances in the United States or internationally on a
timely basis, if ever. Delays in the receipt of, or failure to receive, such
clearances, the loss of previously received listings or clearances, or failure
to comply with existing or future regulatory requirements would have a material
adverse effect on the Company's business, financial condition and results of
operations.
EMPLOYEES
As of March 26, 1997, the Company had a total of 170 full-time employees.
The Company considers its relations with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently leases (i) a 5,088 square foot facility at 900
North Franklin Street, Chicago, Illinois, pursuant to a lease expiring
September 30, 2004, and (ii) an additional 3,110 square foot facility located
at 920 North Franklin Street, Chicago, Illinois, pursuant to a lease expiring
September 30, 2004, each subject to renewal by the Company. The Company's
executive offices were relocated to the 900 North Franklin Street facility in
July 1996. Collectively, the Company's Chicago, Illinois facilities also house
its research and development facilities, an engineering laboratory and
cytopathology product assembly facilities.
The Company also leases a 10,980 square foot facility in Westlake, Ohio,
pursuant to a five year lease expiring April 1, 2000 which is renewable by the
Company. The Company also leases a portion
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of a certain research and development facility from an affiliate of Difco
located in Ann Arbor, Michigan for a minimum of a six month period beginning
March 3, 1997 for microbiology research and development pursuant to the
Transition Services and Facilities Agreement between the Company and such Difco
affiliate. Sensititre leases an 18,000 square foot microbiology manufacturing
facility in East Grinstead, West Sussex, England, pursuant to a lease expiring
in 2009.
The Company is currently seeking additional leased facilities to expand
its manufacturing operations and executive offices, and believes that
additional suitable space is likely to be available as required.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently a party to any material litigation and is
not aware of any pending or threatened litigation against the Company that
could have a material adverse effect upon the Company's business, operating
results or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information. The Company's Common Stock is quoted on the
Nasdaq National Market under the symbol "ACMI." On March 26, 1997, the last
reported sale price of the Common Stock on the Nasdaq National Market was $3.88
per share. The table below sets forth, for the periods indicated, the range of
high and low sales prices for the Common Stock on the Nasdaq National Market.
At March 26, 1997, the Company had approximately 286 stockholders of record.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995 FISCAL YEAR
First Quarter $1.75 $0.31
Second Quarter 1.75 0.50
Third Quarter 1.50 0.81
Fourth Quarter 1.50 0.75
TRANSITION PERIOD (1)
October 1, 1995 through December 31, 1995 $1.69 $1.00
1996 FISCAL YEAR (1)
First Quarter $6.25 $1.06
Second Quarter 9.38 4.88
Third Quarter 7.00 4.16
Fourth Quarter 5.06 2.25
1997 FISCAL YEAR
First Quarter (through March 26, 1997) 4.44 2.62
- --------------------
</TABLE>
(1) On December 31, 1995, the Company changed its fiscal year end from
September 30 to December 31.
(b) Holders. As of March 26, 1997, the Company had approximately 286
record holders and estimates that there were approximately 1,250 beneficial
owners of Common Stock.
(c) Dividends. The Company has never paid dividends on its Common
Stock and does not intend to pay cash dividends for the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Effective December 29, 1995, AccuMed, Inc. was merged with and into the
Company. The
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results of operations reflected in the Company's consolidated statement of
operations for 1996 include the operations of the two merged businesses,
whereas results of operations from prior periods and years reflect the
operations and sales of the Alamar microbiology product line only. The
historical results of operations of the Company presented herein are not
necessarily indicative of future results of operations of the Company.
The Merger has been accounted for as a purchase, which resulted in
certain charges. The value of the securities not subject to contingencies
issued by the Company upon consummation of the Merger exceeded the value of the
assets acquired by $6.6 million. At December 31, 1995, $4.0 million of such
amount was allocated to acquired in-process research and development and
written off immediately as a non-cash charge against operations. The remaining
$2.6 million was recorded as purchased technology and is being amortized over
ten years beginning December 31, 1995. Certain of the securities issued by the
Company upon consummation of the Merger were subject to forfeiture if specified
earnings per share or stock price performance goals were not met following the
Merger. During the quarter ended March 31, 1996, the contingencies were
satisfied with respect to a portion of such securities having a then current
fair market value of $5.4 million. Of such amount, $3.5 million was allocated
to acquired in-process research and development and written off immediately as
a non-cash charge against operations. The remaining $1.9 million was recorded
as purchased technology and is being amortized over ten years beginning March
31, 1996. During the quarter ended March 31, 1997, specified contingencies
applicable to the remaining 940,955 shares of Common Stock and warrants to
purchase up to 63,472 shares of Common Stock issued in the Merger were met.
Therefore, in accordance with the accounting treatment required with respect to
the Merger transaction, an amount equal to the fair market value of such
securities at the time such contingencies were satisfied was recorded as
goodwill. Management believes that the profitability and cash flow generated
by products being manufactured by the Company at the time of the Merger are not
sufficient to provide adequate recoverability of this recorded higher level of
goodwill as prescribed by the Company's accounting policies and, therefore, an
impairment of said goodwill exists. As a result of this impairment the Company
has written-off the recorded goodwill as a charge against operations during the
first quarter of 1997.
Pending consummation of the Merger, the Company took various actions to
streamline and relocate its operations. The Company's manufacturing facility in
Sacramento, California was closed in August 1995, and all obligations under its
lease were satisfied during the second quarter of 1996. During the summer and
fall of 1995, the Company terminated the employment of all its employees, other
than two officers. From July 1, 1995 until consummation of the Merger, the
Company's manufacturing, marketing, sales, distribution and research and
development functions were performed by AccuMed, Inc. under contracts. After
consummation of the Merger, the Company resumed research and development,
manufacturing and marketing and sales activities, and hired a significant
number of employees.
On October 15, 1996, the Company acquired a two-thirds interest in
Oncometrics for aggregate consideration of $4.0 million in cash. Of such
consideration, $2.0 million was paid to Oncometrics' parent company, Xillix for
outstanding Oncometrics stock and $2.0 million was paid to Oncometrics for
newly issued Oncometrics stock.
On October 15, 1996, the Company also acquired all the outstanding RADCO Stock
not already
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owned by the Company of RADCO and retired approximately $1.2 million in
aggregate principal amount of RADCO Notes sold by RADCO to its initial
investors at an aggregate cost to the Company of approximately $1.4 million in
cash.
Effective on November 15, 1996, RADCO, which became a wholly-owned
subsidiary of the Company upon consummation of the RADCO Acquisition, was
merged with and into the Company pursuant to a Merger Agreement between the
Company and RADCO. At the effective time of the Merger, the Company assumed
all the assets, rights and liabilities of RADCO which ceased to exist as a
separate corporate entity.
At December 31, 1996, the Company had an accumulated deficit of $27.2
million.
On December 31, 1995, the Company changed its fiscal year end from
September 30 to December 31.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 as Compared to the Year Ended September 30, 1995.
Revenues. The Company's revenues for the year ended December 31, 1996
were $6.2 million compared to $515,000 for the year ended September 30, 1995.
The increase in 1996 revenues is the result of sales of Microbiology Division
products acquired by the Company as a result of the Merger, expansion of the
microbiology sales base, and the initial commercial shipments of newly
developed products of the Company's Cytopathology Division. These increases
were offset somewhat by a decline in the sales of original Alamar microbiology
products.
Cost of Sales. Cost of sales increased to $4.0 million for the year
ended December 31, 1996 from $1.4 million in the year ended September 30, 1995.
The primary reason for the 1996 increase was the expansion in volume and type
of products sold by the Company. In addition, the 1996 amount reflects costs
related to the ramp-up of cytopathology instrument manufacturing and costs
related to the transfer of manufacturing for certain Alamar microbiology
products to a third party. Costs reflecting manufacturing capacity problems
were reduced from 1995 levels.
Operating Expenses. General and administrative expenses were $4.9
million for the year ended December 31, 1996 compared to $2.0 million for the
year ended September 30, 1995. The current year increase is the result of an
increase in administrative staff needed to manage a larger business, costs of
consolidating staff and relocating operations, recognition of a non-cash charge
related to the issuance of warrants to purchase Common Stock, and increased
investor relations efforts.
Research and development expenses increased to $3.1 million for the
year ended December 31, 1996 from $387,000 for the year ended September 30,
1995. The increase reflects the reinstatement of an active research and
development program which had been curtailed in 1995. Research programs
covering newly acquired AccuMed microbiology and cytopathology products, were
continued and expanded during 1996.
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<PAGE> 23
Acquired research and development expenses for the year ended December
31, 1996 were $6.0 million. These expenses represent the write off of $3.5
million of in-process research and development which arose as a result of the
Merger and an additional $2.5 million of in-process research and development
which arose as a result of the acquisition of RADCO and the acquisition of the
two-thirds interest in Oncometrics. There were no such expenses incurred in
the year ended September 30, 1995.
Sales and marketing expenses were $2.5 million for the year ended
December 31, 1996 compared to $309,000 for the year ended September 30 1995.
The primary reason for the increase was the expansion of the sales staffs for
both the microbiology and cytopathology product lines, additional support
technical support staff to service the new distribution relationships, and the
establishment of a client services organization. The amounts for 1995 reflect
the curtailment of selling efforts as the company sought to focus its resources
in pursuing a patent infringement litigation.
Other Income. The Company realized net other income in the amount of
$2.7 million for the year ended December 31, 1996 compared to net other
expenses of $52,000 for the year ended September 30, 1995. The primary reason
for the increase was the full recognition of a licensing fee amounting to $3.5
million of which $1.5 million was received in 1995 subject to certain
contingencies which were satisfied in 1996. The 1996 year amounts also reflect
the $124,000 one-third minority interest share in the net operating loss of
Oncometrics. The 1996 amounts were somewhat offset by an increase of $412,000
in interest expense for the period.
Net Loss. The net loss for the year ended December 31, 1996 was $11.6
million or $0.68 per share on 16,975,000 weighted average shares outstanding,
compared to a net loss for the year ended September 30,1995 of $3.8 million or
$0.59 per share on 6,376,000 weighted average shares outstanding. The primary
reason for the increase in the net loss was the write off of $6.0 million in
acquired research and development costs and the increase in expenses related to
the expansion of administration, sales and marketing and research and
development necessary to support a larger growing business. These increased
expenses were offset in part by the licensing fees received during the year.
Three Months Ended December 31, 1994 and 1995
The three months ended December 31, 1995 represent the transition
period resulting from the change in the Company's fiscal year end from
September 30 to December 31. While revenues remained virtually unchanged, cost
of sales increased from $227,000 in the 1994 quarter to $339,000 in the 1995
period. General and administrative costs increased substantially from $384,000
in the 1994 quarter to $1.4 million in the 1995 period, primarily due to (i)
legal expenses related to subsequently resolved litigation, (ii) expenses of
relocating the Company's operations, and (iii) payments to AccuMed, Inc. for
its services pursuant to manufacturing, distribution and research and
development agreements pending consummation of the Merger. Research and
development expenses decreased from $151,000 in the 1994 quarter to $32,000
reflecting the continued curtailment of programs. Acquired research and
development expenses for the 1995 period were $4.0 million which represented
the write off of the on-process research and development arising from the
Merger of AccuMed, Inc. into the Company in December 1995. Sales and marketing
expenses decreased from $171,000 in the 1994 period to $7,000 in the 1995
period, as the sales and marketing activities were performed by AccuMed, Inc.
prior to the Merger pursuant to a distribution agreement.
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<PAGE> 24
The net loss increased from $846,000 for the 1994 period to $5.7
million for the 1995 period. The increase resulted primarily from a non-cash
charge against operations relating to the write-off of in-process research and
development acquired in connection with the Merger, and increased
administrative expense. The net loss per share for the 1994 period was $0.17
compared to $0.49 for the 1995 period.
Fiscal Years Ended September 30, 1994 and 1995
Revenues for the fiscal years ended September 30, 1994 and 1995 were
$1.2 million and $515,000, respectively. Revenues in fiscal 1994 included
approximately $473,000 of international instrument shipments and $92,000 of
contract research, both of which were absent from the fiscal 1995 year and
account for the decrease in revenues from fiscal 1994 to fiscal 1995. Cost of
sales decreased from $1.5 million in fiscal 1994 and to $1.4 million in fiscal
1995. The cost of sales relative to revenues was higher in 1995 as compared to
1994 due to increased sales of instruments in 1994 which carry a higher margin
as compared to the test panels to which the 1995 revenues related. General and
administrative expenses increased from $1.2 million in fiscal 1994 to $2.1
million in fiscal 1995. The increase from fiscal 1994 to fiscal 1995 was
primarily due to legal and accounting expenses related to the Merger and
subsequently resolved litigation. Research and development expenses decreased
from $580,000 in fiscal 1994 to $387,000 in fiscal 1995, primarily due to the
suspension of virtually all research and development activities during the 1995
fiscal year. Sales and marketing expenses decreased from $960,000 in fiscal
1994 to $309,000 in fiscal 1995, due to suspension of virtually all of the
Company's domestic sales and marketing efforts beginning in November 1994.
The net loss increased from $3.1 million for fiscal 1994 to $3.8
million for fiscal 1995, primarily due to increased legal and administrative
expenses associated with subsequently resolved litigation. The net loss per
share decreased from $0.65 in 1994 to $0.59 in 1995, primarily due to increases
in the weighted average shares outstanding offset in part by a lower net loss
in fiscal 1994 compared to fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been substantially dependent on the private placements
of its debt and equity securities and the proceeds of its initial public
offering of securities consummated in October 1992 to fund its cash
requirements through September 1996. Pursuant to the Becton Agreement, Becton
paid to the Company $3.5 million in cash for use of the Licensed Technology, of
which $1.5 million was received during 1995 and $2.0 million was received
during the first quarter of 1996. Of such amount, $500,000 will be creditable
against future royalty payments, if any, resulting from sales of products
incorporating the Licensed Technology. To the Company's knowledge, as of the
date of this Report, Becton has not produced or sold any products incorporating
the Licensed Technology.
In October 1996, the Company consummated an underwritten public
offering of 3,000,000 shares of Common Stock for net proceeds of approximately
$11.7 million (the "Underwritten Offering"). Of such proceeds, $4.0 million
was used to fund the acquisition of the two-thirds interest in Oncometrics and
$1.4 million was used to fund the RADCO Acquisition, including repayment of the
RADCO Notes. Additional proceeds were expended to reduce past due payable
balances, and to fund
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<PAGE> 25
the initial expansion of the Company's cytopathology manufacturing facilities.
The balance of such proceeds will be used for working capital and to fund
on-going research and development programs.
In March 1997, AccuMed acquired from Difco the ESP Assets relating to
the ESP Product Line, consisting of accounts receivable, finished product
inventories, production equipment, and a portfolio of rental instruments. The
Company also assumed certain liabilities related to instrument warranties,
contracted product studies, and vacation and incentive accrued liabilities for
former Difco employees who were offered positions with the Company. The
aggregate purchase price of $6.0 million in cash was funded from the proceeds
of a loan (the "Bridge Loan") in the principal amount of $6.0 million made
pursuant to a Loan Agreement dated as of February 19, 1997 among the Company
and Robert L. Priddy and Edmund H. Shea, Jr. (collectively, the "Lender"),
evidenced by a Convertible Promissory Note dated as of February 19, 1997 made
by the Company in favor of the Lender. Interest on the indebtedness under the
Bridge Loan accrued at a rate of 12% per annum payable at maturity. All
amounts owed to the Lender by the Company pursuant to the Bridge Loan,
including an aggregate of $130,000 representing the loan origination fee,
interest and the prepayment premium were paid in full as of March 14, 1997 with
a portion of the proceeds of a private placement of the Company's securities.
On March 14, 1997, the Company consummated a private placement (the
"Private Placement") an aggregate original principal amount $8.5 million of 12%
Convertible Promissory Notes (the "Notes") and Warrants (the "Warrants") to
purchase an aggregate of 850,000 shares of 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 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 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%. If the Company defaults on
its obligations to pay interest or principal under the Notes, (i) the interest
rate thereunder will increase to 16% per annum during the continuance of such
default, (ii) the Conversion Price will be reduced by 20%, and (iii) the
holders will have the right to accelerate the Notes. During the three months
beginning March 14, 1997, the Company may redeem the Notes at an amount equal
to 110% of the outstanding principal amount; if the Company so redeems the
Notes, the term of the Warrants will be extended from six months to five years
following March 14, 1997. Thereafter, the Company may redeem the Notes at the
amount of outstanding principal if the Common Stock has traded for a minimum of
20 consecutive days trading days at a minimum price of 175% of the Conversion
Price, if the Notes are then convertible. The Warrants are exercisable to
purchase Common Stock at an exercise price of $3.125 per share.
In connection with the Company's initial public offering and certain
private placements, the Company issued warrants to purchase an aggregate of
2,702,905 shares of Common Stock (the
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<PAGE> 26
"Redeemable Warrants"). As of April 1, 1997, 200 shares of Common Stock had
been issued as a result of the exercise of Redeemable Warrants. If the closing
price per share of Common Stock exceeds $7.50 per share (subject to adjustment)
for a minimum of 20 consecutive trading days, the Company would have the right
to redeem the Redeemable Warrants, upon notice of not less than 60 days given
to holders within three days following any such 20 day period, at a redemption
price of $0.25 per underlying share. The exercise price of the Redeemable
Warrants, which expire October 1, 1997, is $5.00 per share. If all Redeemable
Warrants were exercised, of which there can be no assurance, the Company would
receive approximately $13.5 million in gross proceeds. The Company has agreed
not to redeem the Redeemable Warrants without the consent of the
representatives of the several underwriters in the public offering consummated
in October 1996 prior to October 3, 1997.
The Company's future liquidity and capital requirements will depend
upon numerous factors, including the costs and timing of expansion of
manufacturing capacity, the costs, timing and success of the Company's product
development efforts, the costs and timing of potential acquisitions, the extent
to which the Company's existing and new products gain market acceptance,
competing technological and market developments, the progress of
commercialization efforts of the Company and its distributors, the costs
involved in preparing, filing, prosecuting, maintaining, enforcing and
defending patent claims and other intellectual property rights, developments
related to regulatory and third party reimbursement matters, including CLIA,
and other factors. The Company believes that through its expanded direct sales
efforts, relationships with new distribution partners, and new products
introduced into the market by both the microbiology and cytopathology
divisions, its on-going operations will be able to generate sufficient cash to
fund its business in the future.
ITEM 7. FINANCIAL STATEMENTS.
Consolidated Balance Sheets dated December 31, 1996, December 31, 1995
and September 30, 1995.
Consolidated Statements of Operations for the year ended December 31,
1996, the three months ended December 31, 1995 and the year ended September 30,
1995.
Consolidated Statements of Shareholders Equity (Deficit) for the year
ended December 31, 1996, the three months ended December 31, 1995 and the year
ended September 30, 1995.
Consolidated Statements of Cash Flows for the year ended December 431,
1996, the three months ended December 31, 1995 and the year ended September 30,
1995.
Notes to the Consolidated Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Prior to January 15, 1996, Coopers & Lybrand LLP ("C&L") were the
principal accountants for the Company. On such date, C&L's appointment as
principal accountants was terminated and the Company engaged KPMG Peat Marwick
LLP as the Company's principal accountants. The Company's Board of Directors
approved the decision to change accountants. The opinions of C&L on the
balance
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<PAGE> 27
sheet of AccuMed, Inc. as of December 31, 1994, and the statement of
operations, stockholders' deficit, and cash flows for the period from February
7, 1994 (inception) through December 31, 1994, the balance sheets of Alamar
Biosciences, Inc. as of September 30, 1995 and 1994, and the statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended September 30, 1995, and the balance sheet of
Sensititre/Alamar, the Microbiology Division of AccuMed, Inc., as of December
31, 1994 and the statements of net sales, cost of sales, and selling expenses
for the eight months ended December 31, 1994 and for each of the two years in
the period ended April 30, 1994 did not contain any adverse opinions or
disclaimers of opinions, or modifications as to uncertainty, audit scope or
accounting principles, except that for the opinions related to AccuMed, Inc.
and Alamar Biosciences, Inc., C&L modified its reports to include an
uncertainty explanatory paragraph which expressed substantial doubt as to
AccuMed, Inc.'s and Alamar Biosciences, Inc.'s ability to continue as a going
concern. There were no disagreements between the Company and C&L on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of C&L, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICER, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS, KEY EMPLOYEE AND DIRECTOR NOMINEES
The executive officers, key employee and director nominees of the
Company and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter P. Gombrich . . . . . . . . . . . 59 Chairman of the Board, Chief Executive Officer and
President
Norman J. Pressman, Ph.D. . . . . . . . 48 Senior Vice President of AccuMed and President,
Cytopathology Division
Michael D. Burke . . . . . . . . . . . 46 Senior Vice President of AccuMed and President,
Microbiology Division
Leonard R. Prange . . . . . . . . . . . 51 Chief Operating Officer, Chief Financial Officer,
Corporate Vice President
Joyce L. Wallach, Esq. . . . . . . . . 36 General Counsel and Secretary
Richard A. Domanik, Ph.D. . . . . . . . 49 Senior Vice President
John H. Abeles, M.D. . . . . . . . . . 52 Director
Jack H. Halperin, Esq. (1) . . . . . . 50 Director
Paul F. Lavallee . . . . . . . . . . . 57 Director
Joseph W. Plandowski (1) . . . . . . . 56 Director
Robert L. Priddy . . . . . . . . . . . 50 Director nominee
Leonard M. Schiller, Esq. (1) . . . . . 55 Director
- -----------
</TABLE>
(1) Member of the Audit Committee and Compensation Committee.
Set forth below is certain information regarding the business
experience of the director nominees, executive officers and a key employee of
the Company.
DIRECTOR NOMINEES
PETER P. GOMBRICH. Mr. Gombrich served as Acting Chief Executive
Officer and a director of the Company from April 21, 1995 until December 29,
1995 (the "Merger Date"), at which time he became Chairman of the Board of
Directors, Chief Executive Officer and President. Mr. Gombrich founded
AccuMed, Inc. in February 1994, and, from then until the Merger Date (as of
which AccuMed, Inc. was merged into the Company (the "Merger")), Mr. Gombrich
served as Chairman, President and Chief Executive Officer of AccuMed, Inc. Mr.
Gombrich was a consultant in the cytology and microbiology industries from
August 1990 until forming AccuMed, Inc., serving companies including Accuron
Corporation, a designer of automated Pap smear screening systems. From July
1985 until September 1989, Mr. Gombrich was the President and Chief Executive
Officer, and from July 1985 until November 1990 was Chairman of the Board, of
CliniCom Incorporated, a bedside clinical
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<PAGE> 29
information systems company which he founded. From 1982 until 1985, Mr.
Gombrich was Executive Vice President of the ventures group of ADC
Telecommunications. From January 1980 until February 1982, Mr. Gombrich was
President of the pacemaker division of St. Jude Medical, Inc., a company that
he co-founded in 1976 and of which he served as Executive Vice President from
July 1976 to January 1980. Mr. Gombrich has more than 27 years of experience in
the healthcare industry. Mr. Gombrich has a B.S. degree in electrical
engineering and a M.B.A. degree from the University of Denver.
JOHN H. ABELES, M.D. Dr. Abeles has been a director of the Company
since October 1988. Since March 1996, Dr. Abeles has been the President and a
director of Health Care Acquisition Corp., a special purpose acquisition
company. Since 1992, Dr. Abeles has also been a general partner of Northlea
Partners, Ltd., an investment and venture capital partnership. Since 1980, Dr.
Abeles has also been the President of MedVest, Inc., a medical consulting
company. Dr. Abeles has a M.D. from the University of Birmingham, England.
Dr. Abeles is a member of the boards of directors of I-Flow Corporation,
HealthCare Acquisition Inc., PharmaPoint Corporation, and DUSA Pharmaceuticals,
Inc.
JACK H. HALPERIN, ESQ. Mr. Halperin has been a director of the
Company since June 1991 and served as Chairman of the Board of Directors from
April until the Merger Date, December 29, 1995. He also served as Secretary of
the Company from August until December 1996. Mr. Halperin is a corporate
attorney with expertise in venture capital financing and has been practicing
law independently since 1987. Mr. Halperin has a B.A. degree in english from
Columbia University and a law degree from New York University School of Law.
Mr. Halperin is also a member of the boards of directors of Xytronyx, Inc.,
I-Flow Corporation and Memry Corporation.
PAUL F. LAVALLEE. Mr. Lavallee has been a director of the Company
since December 1995. Since January 1996, Mr. Lavallee has served as a
consultant to Sigmedics, Inc., a biomedical company. From 1989 until December
1995, Mr. Lavallee served as Chairman, President and Chief Executive Officer of
Sigmedics, Inc. Mr. Lavallee has a B.S. degree in biology from Bates College
and a M.B.A. degree from the University of Chicago.
JOSEPH W. PLANDOWSKI. Mr. Plandowski has been a director of the
Company since December 1995. He has been President of The Lakewood Group, a
healthcare consulting firm, since February 1995. From May 1993 until February
1995, Mr. Plandowski was Vice President - Acquisitions of National Health
Laboratories Inc., which owns clinical and anatomic laboratories nationwide.
From October 1992 through May 1993, he was Chief Operating Officer of Nichols
Institute, a clinical reference laboratory. From February 1991 through October
1992, Mr. Plandowski was President, Chief Executive Officer and a director of
Genetrix, Inc. Mr. Plandowski has a B.S. degree in mechanical engineering and a
M.B.A. degree from the State University of New York.
ROBERT L. PRIDDY. Mr. Priddy has not served previously on the
Company's Board of Directors. Mr. Priddy has been Chairman of the Board and
Chief Executive Officer of ValuJet, Inc., since its inception in October 1995.
He was one of the founding partners of ValuJet Airlines, a wholly-owned
subsidiary of ValuJet, Inc., and served as Chairman of its Board and its Chief
Executive Officer from July 1992 until November 1996. From July 1991 until
January 1993, Mr Priddy served as President of Florida Gulf Airlines. From
January 1988 to November 1991, he served as President and Chief Executive
Officer of Air Midwest, Inc., for which he also served as a director from
November 1987 to November 1991. From 1979 to 1987, Mr. Priddy served as Vice
President and Chief Financial Officer
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<PAGE> 30
of Atlantic Southeast Airlines, Inc., which he also served as a director from
1981 to 1987. Mr. Priddy has a B.A. degree in economics from Tulane
University. Mr. Priddy is also a member of the Board of Directors of Lukens
Medical Corporation.
LEONARD M. SCHILLER, ESQ. Mr. Schiller has been a director of the
Company since April 1995. Since 1970, Mr. Schiller has been practicing real
estate law, specializing in contesting real estate taxes in the State of
Illinois. Since 1972, Mr. Schiller has been a partner in the law firm
Schiller, Klein & McElroy, P.C. Since 1980, he has also been President of The
Dearborn Group, a residential property management and real estate acquisition
company. Mr. Schiller has a B.A. degree in liberal arts from the University of
Iowa and a law degree from the ITT Kent College Law School.
EXECUTIVE OFFICERS
NORMAN J. PRESSMAN, PH.D. Dr. Pressman has been a Senior Vice
President of the Company and President of the Company's Cytopathology Division
since July 1996. From July 1993 until joining the Company, Dr. Pressman was
Manager for Biotechnology Development, Strategic Business Development Group of
Olympus America, the exclusive distributor of certain of the Company's
cytopathology products in the Western Hemisphere. Between July and September
1989, Dr. Pressman was engaged in the formation of Cell Systems International,
Inc., a consulting firm in biomedical specimen collection, processing and
analysis, of which he served as President from September 1989 until July 1993.
Dr. Pressman was the lead research scientist in the Cytometry and Histometry
program of the Central Research and Development Department at E.I. du Pont de
Nemours & Company from December 1986 until July 1989. From September 1976
until December 1986, he was an Assistant Professor (Pathology and Engineering)
at The Johns Hopkins University School of Medicine and Head of the Quantitative
Cytopathology Laboratories at The Johns Hopkins Medical Institutions. Dr.
Pressman has a B.S. degree in electrical engineering from Columbia University,
a M.S. degree in systems engineering and a Ph.D. in biomedical engineering from
the University of Pennsylvania.
MICHAEL D. BURKE. Mr. Burke has been a Senior Vice President of the
Company and President of the Company's Microbiology Division since the Merger
Date. From May 1995 until the Merger Date, Mr. Burke was a Senior Vice
President and President of the Microbiology Division of AccuMed, Inc. From
April 1992 until joining AccuMed, Inc., Mr. Burke was Vice President - Sales
and Distribution, and from November 1982 until April 1992 was Vice President -
Operations, for Picker International, Inc., a diagnostic imaging manufacturer
and supplier. Mr. Burke has a B.A. degree in political science from Knox
College.
LEONARD R. PRANGE. Mr. Prange has been Chief Financial Officer and
Corporate Vice President of the Company since September 1996, and has been
Chief Operating Officer since March 1997. Mr. Prange also serves as a
consultant to Richardson Electronics, Ltd., a global distributor and
manufacturer of electronic components. From July 1995 until September 1996,
Mr. Prange served as a managing director of Lovett International, Inc., an
international trading and consulting firm. Mr. Prange served Richardson
Electronics, Ltd. as Group Vice President from June 1994 until July 1995, as
Chief Financial Officer and Vice President from December 1984 until July 1995
and as Treasurer from December 1981 to December 1984. From March 1976 until
December 1981, Mr. Prange served as Treasurer of Cetron Electronic Corporation,
a manufacturer of electronic components, and as Controller from March 1972
until March 1976. Mr. Prange has a B.S. degree in accounting from DePaul
29
<PAGE> 31
University and is a Certified Public Accountant.
JOYCE L. WALLACH, ESQ. Ms. Wallach has been General Counsel and
Secretary of the Company since December 1996. From February 1994 until joining
the Company, she was an associate in the Corporate Group of the Sacramento,
California office of Graham & James LLP. From December 1989 until January
1994, Ms. Wallach was an associate in the Corporate Securities Group in the Los
Angeles office of Sidley & Austin. Ms. Wallach has an A.B. degree in history
from the University of California, Berkeley and a law degree from Boalt Hall
School of Law, University of California, Berkeley.
KEY EMPLOYEE
RICHARD A. DOMANIK, PH.D. Dr. Domanik has been Senior Vice President
of Technology of the Company since May 1996 and was Vice President of
Technology from December 1995 until May 1996. From August 1994 until the
Merger Date, Dr. Domanik was Vice President of Engineering of AccuMed, Inc.
From June 1979 until joining AccuMed, Inc., Dr. Domanik served Abbott
Laboratories in several positions relating to research and development of
healthcare products, including Laboratory Manager and Research and Development
Manager. Dr. Domanik has a B.S. degree in chemistry from Ripon College and a
Ph.D. in biochemistry from Northwestern University.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of the Company's records, the Company is aware
that the following officers or directors of the Company failed to timely file
one or more reports disclosing beneficial ownership of securities of the
Company as required under Section 16(a) of the Securities Exchange Act of 1934,
as amended, during the fiscal year ended December 31, 1996: John H. Abeles
failed to timely file Forms 4 reporting the following transactions which were
subsequently reported on a timely filed Form 5 (i) the acquisition of options
to purchase 20,000 shares of Common Stock granted on January 18, 1996, (ii) the
acquisition of 250 shares of Common Stock upon exercise of a stock option on
June 5, 1996, and (iii) the acquisition of 5,624 shares of Common Stock upon
exercise of a stock option on June 5, 1996; Jack H. Halperin failed to timely
file Forms 4 reporting the following transactions which were subsequently
reported on a timely filed Form 5 (i) acquisition of options to purchase 20,000
shares of Common Stock granted on January 18, 1996, and (ii) acquisition of
1,000 shares of Common Stock upon exercise of a stock option on May 30, 1996;
Paul F. Lavallee failed to timely file Forms 4 reporting the following
transactions which were subsequently reported on a timely filed Form 5 (i)
acquisition of options to purchase 20,000 shares of Common Stock granted on
January 18, 1996, and (ii) acquisition of 1,000 shares of Common Stock upon
exercise of a stock option on May 30, 1996; Joseph W. Plandowski failed to
timely file a Form 4 reporting the following transaction which was subsequently
reported on a timely filed Form 5, acquisition of options to purchase 20,000
shares of Common Stock granted on January 18, 1996; Leonard M. Schiller failed
to timely file a Form 4 reporting the following transaction which was
subsequently reported on a timely filed Form 5, acquisition of options to
purchase 20,000 shares of Common Stock granted on January 18, 1996; and Mark L.
Santor (who is no longer an officer of the Company) failed to timely file a
Form 4 reporting the acquisition of 16,179 shares of Common Stock upon exercise
of a stock option.
ITEM 10. EXECUTIVE COMPENSATION.
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<PAGE> 32
DIRECTOR COMPENSATION
Pursuant to the Board of Directors Compensation Plan adopted by the
Board of Directors on January 18, 1996, each non-employee director is entitled
to the following compensation for services as a director: (i) an immediately
exercisable, nonqualified stock option to purchase 20,000 shares of Common
Stock to be granted upon election to the Board of Directors, and (ii) an
immediately exercisable, nonqualified stock option to purchase 20,000 shares of
Common Stock to be granted on the first trading day of each January thereafter
during which such non-employee director continues to serve on the Board of
Directors. Such options are to be granted under the Company's 1995 Stock
Option Plan or subsequent option plans. The exercise price per share shall be
the fair market value of a share of Common Stock on the date of grant.
Directors are reimbursed for reasonable expenses incurred in attending meetings
of the Board of Directors and committees thereof.
31
<PAGE> 33
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION. The following tables set forth
information concerning compensation paid or accrued for the fiscal year ended
December 31, 1996, the twelve months ended December 31, 1995 and the fiscal
year ended September 30, 1995 by the Company to or on behalf of the Chief
Executive Officer and other executive officers of the Company whose total
salary and bonus exceeded $100,000 for the 1996 fiscal year (collectively, the
"Named Executives"). None of the Named Executives was an employee of the
Company during the fiscal year ended September 30, 1994; thus, no information
is provided with respect to such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Securities
Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Stock Options Compensation
--------------------------- ---- ------ ----- ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Peter P. Gombrich(1)(2) 1996 $175,000 $87,154 -- -- --
Chairman and Chief 1995(3) 103,125 -- -- -- --
Executive Officer 1995 65,625 -- -- -- --
Michael D. Burke(4) 1996 125,734 24,000 -- 10,000 --
Senior Vice President,
President Microbiology
Division
Norman J. Pressman, Ph.D.(5) 1996 74,289 18,000 $156,250 250,000 $51,593
Senior Vice President,
President Cytopathology
Division
--------------------
</TABLE>
(1) Mr. Gombrich became Acting Chief Executive Officer of the Company on
April 21, 1995 and became Chairman of the Board of Directors, Chief
Executive Officer and President on December 29, 1995.
(2) Amounts shown as bonus represent $52,600 paid or accrued for 1996 in
accordance with Mr. Gombrich's Employment Agreement. The balance of
$34,654 represents amount paid in 1995 for prior periods.
(3) On December 29, 1995, the Company changed its fiscal year end from
September 30 to December 31. The amount shown as salary represents
the twelve calendar months ended December 31, 1995.
(4) Mr. Burke joined the Company on December 29, 1995 as a result of the
Merger. He had previously been employed in a similar capacity with
AccuMed, Inc.
(5) Dr. Pressman joined the Company in July 1996. Amounts shown as Other
Compensation represent relocation costs and related taxes reimbursed
to Dr. Pressman under the terms of his Employment Agreement.
32
<PAGE> 34
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
% of Total
Number of Shares Under-
Shares lying Options
Underlying Granted to
Options Employees in Exercise Price Expiration
Name Granted Year(1) ($/Share) Date
-------------------------------- ------------ -------------- ------------- ----------
<S> <C> <C> <C> <C>
Peter P. Gombrich -- -- -- --
Michael D. Burke 10,000 1.4% $8.38 05/23/01
Norman J. Pressman, Ph.D. 250,000 35.5 6.25 07/08/06
-----------------
</TABLE>
(1) During the 1996 fiscal year, the Company granted to employees options
to purchase an aggregate of 704,000 shares of Common Stock. Each such
option was granted under the Company's 1995 Stock Option Plan at an
exercise price equal to the last reported sale price of the Common
Stock on the Nasdaq National Market on the date of the grant.
AGGREGATE OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1996
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying
Unexercised Options Value of Unexercised in-the-Money
at December 31, 1996 Options at December 31, 1996
---------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter P. Gombrich 133,333 66,667 $182,666 $91,334
Michael D. Burke 53,333 31,667 68,500 34,250
Norman J. Pressman, Ph.D.(1) 50,000 200,000 -- --
-----------------
</TABLE>
(1) The exercise price of Dr. Pressman's options ($6.25 per share)
exceeded the fair market value of the Common Stock at December 31,
1996 ($2.50 per share); thus, none of such options were "in-the-money"
GOMBRICH EMPLOYMENT AND SEVERANCE AGREEMENT. Pursuant to an
Employment Agreement dated August 1, 1994 between Peter P. Gombrich and
AccuMed, Inc. which was assumed by the Company as a result of the merger of
AccuMed, Inc. into the Company (the "Gombrich Employment Agreement"), Mr.
Gombrich serves as Chairman of the Board of Directors, Chief Executive Officer
and President of the Company. Pursuant to the Gombrich Employment Agreement,
Mr. Gombrich is entitled to receive (i) initial annual compensation of $175,000
(in March 1997, the Compensation Committee increased Mr. Gombrich's annual base
salary to $225,000) and (ii) a minimum annual cash bonus equal to 30% of base
salary for the relevant year, and additional bonuses as determined by the Board
of Directors, at its discretion. If the Company terminates Mr. Gombrich's
employment without cause or Mr. Gombrich terminates his employment for good
reason or at any time after 180 days following the date on which a Change of
Control (as defined below) occurs, Mr. Gombrich would be entitled to a lump-sum
severance payment equal to three times his annual salary. In addition, upon
the occurrence of a Change of Control, any stock options held by Mr. Gombrich
would immediately vest and be fully exercisable. For purposes of the Gombrich
Employment Agreement, a Change of Control shall be deemed to occur if: (i) any
third party directly or indirectly acquires 20% or more of the
33
<PAGE> 35
outstanding Common Stock, (ii) the Company engages in a merger, consolidation
or reorganization that results in holders of Common Stock immediately prior to
such transaction holding less than a majority of the voting power of the
resulting entity, (iii) the Company sells all or substantially all of its
assets or (iv) Mr. Gombrich's employment is terminated by the Company on a date
within 90 days prior to the date on which a Change of Control occurs.
The employment term continues until August 1, 1999. Thereafter, the
term will be automatically extended for additional one-year periods unless
either party delivers notice of election not to extend the employment at least
60 days prior to the end of the then current term.
PRESSMAN EMPLOYMENT AGREEMENT. Pursuant to the Employment Agreement
dated June 13, 1996 as amended July 16, 1996, between the Company and Dr.
Pressman (the "Pressman Employment Agreement"), Dr. Pressman will serve as
President of the Cytopathology Division and Senior Vice President of the
Company for five years beginning July 5, 1996. Dr. Pressman's annual salary is
$157,500 and he is eligible to receive annually (i) cash bonuses of up to 30%
of such annual salary, and (ii) incentive stock options to purchase up to
50,000 shares of Common Stock based on the achievement of mutually agreed upon
goals and objectives. On July 8, 1996, Dr. Pressman was granted an option to
purchase an aggregate of 250,000 shares of Common Stock at an exercise price
of $6.25 per share (the last reported sale price of the Common Stock on the
Nasdaq Market on the date on which Dr. Pressman's employment commenced) which
is immediately exercisable with respect to 50,000 shares and will become
exercisable with respect to 50,000 additional shares on each of the first
through fourth anniversaries of the grant date. Dr. Pressman was granted 25,000
shares of Common Stock on the date on which Dr. Pressman's employment
commenced. Such shares may not be transferred during the 18-month period
following the date of issuance and would be forfeited to the Company if Dr.
Pressman terminates the Pressman Employment Agreement during such period, other
than due to a breach by the Company. Dr. Pressman is entitled to borrow up to
$85,200 from the Company for the purpose of paying taxes due in connection with
the grant of such shares. Such loan shall be repaid without interest in
installments to be mutually agreed upon by Dr. Pressman and the Company. The
Company may terminate Dr. Pressman's employment for cause at any time upon
written notice. The Company may terminate his employment without cause upon
six months' written notice, in which case Mr. Pressman would be entitled to an
amount equal to 12 months' salary as severance, paid over 12 months. Dr.
Pressman may terminate the Pressman Employment Agreement for any reason upon
six months' written notice.
BURKE EMPLOYMENT TERMS. Pursuant to the Employment Letter dated as of
April 21, 1995 between Mr. Burke and the Company, Mr. Burke serves as Senior
Vice President of the Company and President of the Microbiology Division. His
initial annual base salary was $120,000, and he was initially eligible to
receive (i) quarterly bonuses of $7,500 based on achievement of mutually agreed
goals and (ii) certain sales incentive bonuses. Upon consummation of the
Merger, Mr. Burke received 25,000 shares of Common Stock and nonqualified stock
options to purchase an aggregate of 75,000 shares at an exercise price of $1.13
per share (the exercise price established in the agreement providing for the
Merger). In January 1997, the Compensation Committee modified the terms of Mr.
Burke's employment to (i) increase his annual base salary to $140,000, (ii)
provide that Mr. Burke is eligible to receive annual cash bonuses of up to 25%
of his annual base salary based upon achievement of mutually agreed goals (in
lieu of the fixed bonus and sales incentives), and (iii) provide that, if his
34
<PAGE> 36
employment is terminated without cause, he shall be entitled to receive
severance pay equal to 12 months' salary.
PRANGE EMPLOYMENT AGREEMENT. Pursuant to the Employment Agreement
dated as of September 9, 1996 between the Company and Mr. Prange (the "Prange
Employment Agreement"), Mr. Prange serves as Chief Financial Officer and
Corporate Vice President of the Company at an initial annual salary of
$125,000. In March 1997, Mr. Prange was appoint Chief Operating Officer and
the Compensation Committee increased his annual base salary to $160,000. He is
eligible to receive annual cash bonuses of up to 25% of such annual salary.
Upon joining the Company, Mr. Prange was granted options to purchase an
aggregate of 150,000 shares of Common Stock at an exercise price of $5.38 per
share (the fair market value of the Common Stock on the grant date), which is
immediately exercisable with respect to 25,000, shares and will become
exercisable with respect to 25,000 additional shares on each of the first
through fifth anniversaries of the grant date. In the event of a change of
control of the Company or if Peter P. Gombrich ceases to be Chairman of the
Board and Chief Executive Officer, the options shall become fully vested and
immediately exercisable. The Company may terminate Mr. Prange's employment for
Cause (as defined in the Prange Employment Agreement) at any time upon written
notice. The Company may terminate his employment without Cause upon written
notice, in which case Mr. Prange would be entitled to an amount of cash equal
to 12 months' salary as severance, paid semi-monthly over 12 months, and his
options shall become fully vested and immediately exercisable. Mr. Prange's
employment shall be extended for additional one year terms unless either party
delivers written notice of termination at least 60 days prior to the end of the
then current period.
35
<PAGE> 37
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below sets forth certain information as of March 26, 1996
(the "Reference Date") with respect to the beneficial ownership of Common Stock
by (i) each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock; (ii) each director and nominee;
(iii) the Named Executive Officers (as hereinafter defined) and (iv) executive
officers and directors as a group. On the Reference Date, there were 22,073,939
shares of Common Stock outstanding of which (i) 69,308 shares are subject to
forfeiture if the Company is unable through August 1997 to perfect and maintain
rights free of liens in certain recently acquired patents; and (ii) 116,000
shares are subject to forfeiture if certain milestones pursuant to a
microbiology product development agreement are not achieved.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF SHARES
OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED (2) BENEFICIALLY OWNED (2)
----------------------- ---------------------- ----------------------
<S> <C> <C>
Peter P. Gombrich . . . . . . . . . . . . . . . . . . . . 3,552,884(3) 16.0%
Michael Falk . . . . . . . . . . . . . . . . . . . . . . 2,796,931(4) 11.7
c/o Commonwealth Associates, Inc.
("Commonwealth Associates")
733 Third Avenue
New York, NY 10017
Commonwealth Associates, Inc. . . . . . . . . . . . . . . 1,889,300(5) 8.0
733 Third Avenue
New York, NY 10017
Kingdon Capital Management Corporation . . . . . . . . . 1,143,000(6) 5.2
152 West 57th Street
New York, NY 10019
Robert L. Priddy . . . . . . . . . . . . . . . . . . . . 1,032,345(7) 4.6
John H. Abeles . . . . . . . . . . . . . . . . . . . . . 326,657(8) 1.5
Leonard M. Schiller . . . . . . . . . . . . . . . . . . . 172,159(9) *
Michael D. Burke . . . . . . . . . . . . . . . . . . . . 113,130(10) *
Jack H. Halperin . . . . . . . . . . . . . . . . . . . . 80,388(11) *
Norman J. Pressman . . . . . . . . . . . . . . . . . . . 25,000 *
Paul F. Lavallee . . . . . . . . . . . . . . . . . . . . 25,000(12) *
Joseph W. Plandowski . . . . . . . . . . . . . . . . . . 25,000(13) *
Harold S. Blue . . . . . . . . . . . . . . . . . . . . . 20,000(14) *
Leonard R. Prange . . . . . . . . . . . . . . . . . . . 12,495 *
All directors and executive officers as a group
(11 persons) . . . . . . . . . . . . . . . . . . . . . 4,354,223(15) 19.3%
- ---------------------
</TABLE>
* Represents less than 1%.
36
<PAGE> 38
(1) Except as otherwise noted, the address for each person is c/o AccuMed
International, Inc., 900 North Franklin Street, Suite 401, Chicago,
Illinois 60610.
(2) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock listed as beneficially owned by them. A person
is deemed to be the beneficial holder of securities that can be
acquired by such person within 60 days from the Reference Date upon
the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by including shares, underlying
options or warrants which are exercisable by such person currently, or
within 60 days following the Reference Date, and excluding shares
underlying options and warrants held by any other person.
(3) Includes 133,333 shares underlying stock options held by Mr. Gombrich
that are exercisable currently or within 60 days following the
Reference Date. Includes 453,085 shares held of record by Gwenda
Gombrich, Mr. Gombrich's wife, directly or as custodian for minor
children, as to which Mr. Gombrich disclaims beneficial ownership.
(4) Mr. Falk directly owns 222,222 shares of Common Stock and warrants to
purchase up to 585,409 shares of Common Stock. The number shown
includes an additional 222,222 shares, and 1,667,078 shares underlying
warrants that are exercisable currently or within 60 days following
the Reference Date, held by Commonwealth Associates (excluding
securities held in Commonwealth Associates' trading account). Mr.
Falk is a control person of the corporate general partner of
Commonwealth Associates and may be deemed to be beneficial owner of
securities held by Commonwealth Associates. The number of shares also
includes an additional 100,000 shares underlying warrants that are
exercisable currently or within 60 days following the Reference Date
held by Anne Falk, Mr. Falk's spouse. Mr. Falk disclaims beneficial
ownership of the securities held by Commonwealth Associates except to
the extent of his percentage ownership interests in Commonwealth
Associates. Shares and warrants held directly by Mr. Falk were
transferred to him by Commonwealth Associates. Information in regard
to the holdings of Mr. Falk and Commonwealth Associates has been
derived solely from a Schedule 13D as filed with the Securities and
Exchange Commission.
(5) Includes 1,667,078 shares underlying warrants held by Commonwealth
Associates that are exercisable currently or within 60 days following
the Reference Date. Excludes securities held in Commonwealth
Associates' trading account. Information in regard to the holdings of
Commonwealth Associates has been derived solely from a Schedule 13D as
filed with the Securities and Exchange Commission.
(6) Information in regard tot he holdings of Kingdon Capital Management
Corporation has been derived solely from a Schedule 13D as filed with
the Securities and Exchange Commission.
(7) Includes 232,345 shares underlying warrants held by Mr. Priddy that
are exercisable currently or within 60 days following the Reference
Date.
(8) Includes 34,895 shares underlying stock options held by Dr. Abeles
that are exercisable currently or within 60 days following the
Reference Date. Includes 253,713 shares of Common Stock held of
record, and 38,049 shares underlying warrants exercisable currently or
within 60 days following the Reference Date, by Northlea Partners
Limited, as to which Dr. Abeles disclaims beneficial ownership except
with respect to his 1% general partner ownership.
(9) Includes 100,000 shares underlying stock options and warrants held by
Mr. Schiller that are exercisable currently or within 60 days
following the Reference Date.
(10) Includes 52,333 shares underlying stock options held by Mr. Burke that
are exercisable currently or within 60 days following the Reference
Date.
(11) Includes 34,550 shares underlying stock options held by Mr. Halperin
that are exercisable currently or within 60 days following the
Reference Date.
(12) Includes 25,000 shares underlying stock options held by Mr. Lavallee
that are exercisable currently or within 60 days following the
Reference Date.
(13) Includes 25,000 shares underlying stock options or warrants held by
Mr. Plandowski that are exercisable currently or within 60 days
following the Reference Date.
(14) Includes 20,000 shares underlying stock options held by Mr. Blue that
are exercisable currently or within 60 days following
37
<PAGE> 39
the Reference Date.
(15) Includes 463,160 shares underlying warrants or options held by
officers and directors that are exercisable currently or within 60
days of the Reference Date.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Commonwealth Associates, Inc.("Commonwealth Associates") is a
principal stockholder. On March 14, 1997, the Company consummated 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 Common Stock, for which Commonwealth Associates acted
as placement agent and received from the Company (i) cash commissions equal to
7% of the gross proceeds, (ii) five-year warrants to purchase 200,000 shares of
Common Stock at an exercise price of $3.125 per share, subject to stockholder
approval of the Charter Amendment, and (iii) an accountable expense
reimbursement of $56,500 in cash.
Pursuant to a letter agreement dated as of February 14, 1995 among the
Company, AccuMed, Inc. and Commonwealth Associates, Commonwealth Associates was
paid a fee for acting as a "finder" in connection with the merger of AccuMed,
Inc. into the Company. The fee was paid in the form of $50,000 in cash,
444,444 shares of Common Stock, and a five-year warrant to purchase up to
750,000 shares of Common Stock at an exercise price of $1.25 per share. During
1995, Commonwealth Associates acted as placement agent for the Company in
certain private placements of Common Stock for which Commonwealth Associates
received an aggregate of (i) $353,000 in cash commissions, (ii) a
non-accountable expense allowance of $106,000, (iii) approximately $10,600 in
reimbursement for the fees and expenses of counsel, and (iv) a warrant to
purchase an aggregate of 564,840 shares of the Common Stock at an exercise
price of $0.625 per share. During 1995, the Company paid Commonwealth
Associates an aggregate of $59,000 in cash pursuant to a Consulting Agreement
in effect from January 1, 1995 through December 31, 1995. As reimbursement for
certain expenses incurred by Commonwealth Associates in connection with a
terminated private placement of securities for which Commonwealth Associates
was to act as placement agent, the Company (i) issued to Commonwealth
Associates on December 31, 1994 a five-year warrant to purchase an aggregate of
420,000 shares of Common Stock at an exercise price of $0.25 per share and (ii)
issued to designees of Commonwealth Associates on December 29, 1995 five-year
warrants to purchase an aggregate of 104,000 shares of Common Stock at an
exercise price of $2.125 per share, which warrants expire on October 31, 1997.
The Company has agreed, with respect to the exercise of warrants to
purchase an aggregate of 2,702,905 shares of Common Stock (the "Redeemable
Warrants") issued in connection with the Company's initial public offering and
certain private placements, to pay to Commonwealth Associates a fee of 5% of
the exercise price of each Redeemable Warrant exercised; provided, however,
that Commonwealth Associates will not be entitled to receive such compensation
for Redeemable Warrant exercise transactions in which: (i) the market price of
the Common Stock at the time of the exercise is lower than the exercise price
of the Redeemable Warrants; (ii) the Redeemable Warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made in documents provided
38
<PAGE> 40
to holders of Redeemable Warrants at the time of exercise; (iv) the exercise of
the Redeemable Warrants is unsolicited; and (v) the transaction was in
violation of Rule 10b-6 promulgated under the Exchange Act. As of April 1,
1997, Redeemable Warrants had been exercised to purchase 200 shares of Common
Stock. If the closing price per share of Common Stock exceeds $7.50 per share
(subject to adjustment) for a minimum of 20 consecutive trading days, the
Company would have the right to redeem the Redeemable Warrants, upon notice of
not less than 60 days given to holders within three days following any such 20
day period, at a redemption price of $0.25 per underlying share. The exercise
price of the Redeemable Warrants, which expire October 1, 1997, is $5.00 per
share. The Company has agreed with the underwriters of the Company's
underwritten public offering consummated in October 1996, not to redeem the
Redeemable Warrants, without the consent of the representatives of the several
underwriters, prior to October 3, 1997.
Robert L. Priddy, a director nominee, is the beneficial owner of 9.9%
of the common stock of Commonwealth Associates. Mr. Priddy loaned the Company
$3,000,000 pursuant to a loan (the "Bridge Loan") in the aggregate principal
amount of $6,000,000 made pursuant to a Loan Agreement dated as of February 19,
1997 among the Company and Mr. Priddy and Edmund H. Shea, Jr. (collectively,
the "Lender"), evidenced by a Convertible Promissory Note dated as of February
19, 1997 made by the Company in favor of the Lender. Interest on the
indebtedness under the Bridge Loan accrued at a rate of 12% per annum payable
at maturity. All amounts owed to the Lender by the Company pursuant to the
Bridge Loan, including an aggregate of $130,000 representing the loan
origination fee, interest and the prepayment premium were paid in full as of
March 14, 1997 with a portion of the proceeds of the Private Placement. Mr.
Priddy purchased 15 Units for an aggregate purchase price of $1,500,000 in the
Private Placement. See "Proposal No. 1 to Amend the Certificate of
Incorporation to Increase the Authorized Common Stock -- Recent Private
Placement."
The Company loaned to Peter P. Gombrich, Chairman of the Board of
Directors, Chief Executive Officer and President of the Company, $61,000
evidenced by a promissory note made May 22, 1996, initially bearing interest at
a rate of 10% per annum, payable monthly in arrears, with principal and accrued
interest due within ten days following the date of such promissory note. In
August 1996, Mr. Gombrich paid the loan balance in full.
The Company loaned to Norman J. Pressman, Senior Vice President of the
Company and President of the Cytopathology Division, an aggregate of
$164,409.20 pursuant to a Promissory Note in the original principal amount of
$100,000 dated as of October 25, 1996, and a Promissory Note in the original
principal amount of $64,409.20 dated as of December 30, 1996, respectively
(collectively, the "Pressman Notes"). Such loan was made in accordance with
the provisions of the Pressman Employment Agreement to cover relocation
expenses and taxes in connection with shares of Common Stock issued to Dr.
Pressman upon commencement of employment. The Pressman Notes bear no interest.
Repayment of principal under the Pressman Notes shall be made by withholding
50% of any bonus payments due to Dr. Pressman under the terms of the Pressman
Employment Agreement. Payments shall continue until the principal is repaid in
full, but in no event shall the term of the Pressman Notes extend beyond five
years from the respective dates on which they were made, at which dates any
amounts outstanding shall become immediately due and payable. Dr. Pressman has
pledged to the Company 25,000 shares of Common Stock to secure $100,000 of such
indebtedness, pursuant to a Stock Pledge Agreement dated as of October 27,
1996. See "Proposal No. 2 Election of Directors -- Executive Compensation --
Pressman Employment Agreement."
39
<PAGE> 41
On December 29, 1995, the Company issued a warrant to purchase 75,000
shares of Common Stock to Leonard M. Schiller, a director of the Company, in
consideration for services provided by Mr. Schiller to AccuMed, Inc. in
connection with the Merger. Such warrant is currently exercisable at $1.13 per
share (the closing sale price of the Common Stock on the Nasdaq Market on the
date of issuance of such warrant) and expires on December 29, 2000.
Gwenda Jay Gombrich, the wife of Peter P. Gombrich, the Company's
Chairman of the Board of Directors, Chief Executive Officer and President,
loaned to AccuMed, Inc. an aggregate of $65,000 pursuant to a letter agreement
between AccuMed, Inc. and Ms. Gombrich dated October 28, 1994, which was
assumed by the Company in connection with the Merger. Interest was payable at
the rate of 1% per month on the outstanding balance, with a minimum interest
payment of $750. In June 1996, the loan balance was paid in full.
Ms. Gombrich contributed an aggregate of $75,000 to AccuMed, Inc.
prior to the Merger, evidenced by Promissory Notes dated May 18, 1994 and
August 31, 1994 (the "Gombrich Promissory Notes") and the Interim Financing
Agreements dated May 18, 1994 and December 1994 (the "Interim Financing
Agreements"), each among AccuMed, Inc. and Ms. Gombrich as custodian for her
minor children. Pursuant to the Interim Financing Agreements, the principal
amount and the accrued and unpaid interest on the Gombrich Promissory Notes
were required to be converted into shares of common stock of AccuMed, Inc.
prior to the Merger. Such conversion did not take place. Upon consummation of
the Merger, the obligations of AccuMed, Inc. to Ms. Gombrich pursuant to the
Interim Financing Agreements and the Gombrich Promissory Notes were assumed by
the Company. In June 1996, the Company issued to Ms. Gombrich as custodian for
certain minor children an aggregate of 166,586 shares of the Company's Common
Stock in full satisfaction of the Company's obligations pursuant to the Interim
Financing Agreements and the Gombrich Promissory Notes.
40
<PAGE> 42
ITEM 13. EXHIBITS LIST AND REPORTS OF FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith.
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
3.1 Certificate of Incorporation of the Registrant. (1)
3.2 Bylaws of the Registrant. (1)
4.1 Specimen stock certificate for Common Stock. (1)
4.2 Certificate of Appointment of American Stock Transfer & Trust Company as
Transfer Agent and Registrar. (2)
10.1 Agreement and Plan of Reorganization dated as of April 21, 1995 between
the Registrant and AccuMed, Inc., as amended by Amendment No. 1 dated as
of August 1, 1995 and Amendment No. 2 dated as of October 6, 1995. (3)
10.2 The Registrant's Board of Directors Compensation Plan (the "Plan") as
amended by Minutes of Board of Directors meeting dated January 18, 1996
authorizing grants of stock options to non-employee directors. (1)(4)
10.3 Employment Agreement between the Registrant and Peter P. Gombrich dated
August 1, 1994. (1)(4)
10.4 Employment Letter between the Registrant and Donald M. Dorfman dated as
of October 14, 1996. (4)
10.5 Employment Letter between the Registrant and Joyce L. Wallach dated as
of November 25, 1996. (4)
10.6 Employment Letter between the Registrant and Michael D. Burke dated
April 21, 1995. (1)(4)
10.7 Employment Agreement between the Registrant and Norman J. Pressman dated
June 13, 1996 and Addendum to Employment Agreement between the
Registrant and Norman J. Pressman dated July 16, 1996. (4)(5)
10.8 Escrow Agreement dated as of March 22, 1994, between the Registrant and
G&G Dispensing, Inc. (3)
10.9 License Agreement between the Registrant and Becton,
Dickinson and Company effective as of October 11, 1995. (3)
</TABLE>
41
<PAGE> 43
<TABLE>
<S> <C>
10.10 License and Distribution Agreement dated February 20, 1996 between the
Registrant and BioKit, S.A. (1)
10.11 1995 Stock Option Plan. (1)(4)
10.12 Amendment No. 1 to the Registrant's 1995 Stock Option Plan. (4)(7)
10.13 Amendment No. 2 to the 1995 Stock Option Plan. (4)
10.14 Form of Non-Qualified Stock Option Agreement governing options granted
to former employees of AccuMed, Inc. pursuant to the Agreement and Plan
of Reorganization dated as of April 21, 1995, as amended. (1)(4)
10.15 Form of Non-Qualified Stock Option Agreement governing options granted
to employees and consultants under the 1995 Stock Option Plan. (1)(4)
10.16 Form of Incentive Stock Option Agreement governing options granted to
employees under the 1995 Stock Option Plan. (1)(4)
10.17 Amended and Restated 1990 Stock Option Plan. (4)(8)
10.18 Amendment No. 1 to Amended and Restated 1990 Stock Option Plan. (4)
10.19 The Registrant's Amended and Restated 1992 Stock Option Plan. (10)(4)
10.20 Amendment No. 1 to Amended and Restated 1992 Stock Option Plan. (4)
10.21 Lease between the Registrant and NCP, LTD dated February 20, 1995
pertaining to the offices located at 29299 Clemens, Suite I-K, Westlake,
Ohio 44145. (1)
10.22 Franklin Square Commercial Lease dated July 13, 1994 between the
Registrant and the Lumber Company as Agent for the Beneficiary of
LaSalle National Trust, N.A. pertaining to the premises located at Suite
401, 4th Floor North, 900 North Franklin Street, Chicago, Illinois. (1)
10.23 Rider 1 to Franklin Square Commercial Lease between the Registrant and
the Lumber Company dated May 30, 1996.(5)
10.24 Collaboration Agreement and Worldwide Exclusive License between the
Registrant and G&G Dispensing, Inc. dated March 22, 1994. (5)
10.25 Amendment No. 2 effective as of August 6, 1996 to the Collaboration
Agreement and Worldwide Exclusive License between the Registrant and G&G
Dispensing, Inc. dated March 22, 1994.
10.26 O.E.M. Supply Agreement between Olympus America, Inc., Precision
Instrument division and
</TABLE>
42
<PAGE> 44
<TABLE>
<S> <C>
the Registrant dated May 31, 1996.(11)
10.27 Securities Purchase Agreement dated May 31, 1996 among the Registrant,
Kingdon Associates, L.P., Kingdon Partners, L.P., and Kingdon Offshore
N.V. (12)
10.28 Share Purchase Agreement between the Registrant and Xillix Technologies
Corp. dated as of August 16, 1996.(10)
10.29 Subscription Agreement between the Registrant and Oncometrics Imaging
Corp. dated as of August 16, 1996.(10)
10.30 Stock Purchase Agreement by and among the Registrant, RADCO Ventures,
Inc. and the Selling Stockholders named therein dated as of August 15,
1996. (9)
10.31 Distribution Agreement by and between the Registrant and Fisher
Scientific Company, dated September 10, 1996.(11)+
10.32 Employment Agreement between the Registrant and Leonard R. Prange dated
September 9, 1996. (4)(9)
10.33 Promissory Note dated as on February 11, 1997 made by the Registrant in
favor of Oncometrics Imaging Corp. evidencing indebtedness in the
original principal amount of $500,000.
10.34 Security Agreement dated as of February 11, 1997 between the Registrant
and Oncometrics Imaging Corp.
10.35 Convertible Promissory Note made as of February 19, 1997 by the
Registrant in favor of Robert L. Priddy and Edmund H. Shea, Jr. as
Payees evidencing indebtedness in the original principal amount of $6.0
million.
10.36 Loan Agreement dated as of February 19, 1997 among the Registrant and
Robert L. Priddy and Edmund H. Shea, Jr.
10.37 Agency Agreement between the Registrant and Commonwealth Associates
dated as of March 3, 1997.
10.38 Warrant Agreement among the Registrant, Commonwealth Associates and
American Stock Transfer and Trust Company as transfer agent relating to
Warrants to purchase an aggregate of 850,000 shares of Common Stock
dated March 13, 1997.
10.39 Form of Warrant Certificate dated as of March 13, 1997 evidencing right
to acquire an aggregate of 850,000 shares of Common Stock issued to
several investors in a private placement consummated March 13, 1997.
10.40 Form of Subscription Agreement between the Registrant and several
investors in the private
</TABLE>
43
<PAGE> 45
<TABLE>
<S> <C>
placement consummated on March 13, 1997.
10.41 Form of 12% Convertible Promissory Note evidencing indebtedness in the
original aggregate principal amount of $8.5 million made by the
Registrant in favor of several investors in the private placement
consummated on March 13, 1997.
10.42 Stock Purchase Warrant between the Registrant and Commonwealth
Associates dated as of March 13, 1997 pertaining to Warrants to purchase
an aggregate of 200,000 shares of Common Stock and Form of Warrant
Certificate dated as of March 13, 1997 evidencing the right to acquire
an aggregate of 200,000 shares of Common Stock issued to Commonwealth
Associates and/or its designees, issued in connection with the private
placement consummated March 13, 1997.
10.43 Manufacturing and License Agreement dated December 30, 1996, between the
Registrant and Salcom S.r.l.
10.44 Asset Purchase Agreement dated as of March 3, 1997 between the
Registrant and Difco Microbiology Systems, Inc. (13)
10.45 Manufacturing Agreement dated as of March 3, 1997 among the Registrant,
Difco Laboratories Incorporated, a Michigan corporation, and Difco
Laboratories Incorporated, a Wisconsin corporation, as amended by
Amendment No. 1 dated as of March 10, 1997.
10.46 Transition Services and Facilities Agreement dated as of March 3, 1997
between the Registrant and Difco Laboratories Incorporated, a Michigan
corporation.
10.47 Base Media License Agreement dated as of March 3, 1997 between the
Registrant and Difco Laboratories Incorporated.
10.48 Sale and Leaseback Agreement between the Registrant and Leasetec, Inc.
(8)
10.49 License Agreement dated July 6, 1994, between the Registrant, Vanellus
AB, and Uppsala Bildbehandlings AB. (1)
10.50 Promissory Note dated December 30, 1996 made by Dr. Norman Pressman in
favor of the Registrant evidencing indebtedness in the original
principal amount of $64,409.20. (4)
</TABLE>
44
<PAGE> 46
<TABLE>
<S> <C>
10.51 Promissory Note dated December 30, 1996 made by Dr. Norman Pressman in
favor of the Registrant evidencing indebtedness in the original
principal amount of $100,000. (4)
22.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Coopers & Lybrand (U.K.)
27.1 Financial Data Schedule.
- ----------------
</TABLE>
+ Confidential treatment granted as to certain portions.
(1) Incorporated by reference to the Registrant's Transition Report on
Form 10-KSB for the transition period ended December 31, 1995.
(2) Incorporated by reference to Pre-Effective Amendment No. 4 to the
Registration Statement on Form S-1 (Reg. No. 33-48302), filed with the
Commission on October 9, 1993.
(3) Incorporated by reference to the Registrant's Registration Statement
on Form S-4 (File No. 33-99680), filed with the Commission on November
22, 1995.
(4) Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Registration Statement.
(5) Incorporated by reference to the Registrant's Registration Statement
Form S-2 (Regis. No. 333-09011) filed with the Commission on July 26,
1996.
(6) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the year ended September 30, 1994.
(7) Incorporated by reference to Pre-effective Amendment No. 1 to the
Registration Statement on Form S-2 (Regis. No. 333-09011) filed with
the Commission on August 29, 1996.
(8) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Reg. No. 33-48302), filed with the Commission on June 3,
1992.
(9) Incorporated by reference to Pre-effective Amendment No. 4 to the
Registration Statement of Form S-2 (Regis. No. 333-09011) filed with
the Commission on October 3, 1996.
(10) Incorporated by reference to Pre-Effective Amendment No. 1 to Form
SB-2, filed with the Commission on November 8, 1993).
(11) Incorporated by Reference to Pre-effective Amendment No. 2 to the
Registration Statement on
45
<PAGE> 47
Form S-2 (Regis. No. 333-09011) filed with the Commission on September
23, 1996.
(12) Incorporated by reference to the Registrant's Registration Statement
on Form S-3 (Reg. No. 333-07681), filed with the Commission on July 3,
1996.
(13) Incorporated by reference to the Registrant's Current Report on Form
8-K dated March 3, 1997.
(b) Reports on Form 8-K. During the fourth quarter of 1996, the
Company filed with the Securities and Exchange Commission the following Current
Reports on Form 8-K.
1. On October 30, 1996, a Current Report on Form 8-K dated October
15, 1996: Item 2- Acquisition or Disposition of Assets - reporting the
acquisition of (i) a two-thirds equity interest in Oncometrics Imaging Corp.
and (ii) of all of the outstanding shares of common stock of RADCO Ventures,
Inc. and Item 7 - Financial Statements and Exhibits.
2. On December 24, 1996, a Current Report on Form 8-K/A dated October
15, 1996, amending Item 7 - Financial Statements and Exhibits of the above
mentioned Current Report on Form 8-K to include the following financial
statements:
Oncometrics Imaging Corp.:
1. Auditors' Report.
2. Balance Sheets as of August 31, 1995, December 31,
1995, May 31, 1996 and September 30, 1996
(unaudited).
3. Statements of Operations and Deficit for the 12
months ended September 30, 1996 (unaudited).
4. Statement of Changes in Financial Position for the 12
months ended August 31, 1995, the four months ended
December 31, 1995, the five months ended May 31, 1996
and the four months ended September 30, 1996
(unaudited).
5. Notes to financial statements.
46
<PAGE> 48
RADCO Ventures, Inc.:
1. Independent Auditors' Report.
2. Balance Sheet as of September 30, 1996.
3. Statement of Operations for the period from March 6,
1996 (date of incorporation) thorough September 30,
1996.
4. Statement of Stockholders' Equity (Deficit) for the
period from March 6, 1996 (date of incorporation)
through September 30, 1996.
5. Statement of Cash Flows for the period form March 6,
1996 (date of incorporation) through September 30,
1996.
6. Notes to financial statements.
AccuMed International, Inc. and its subsidiaries:
1. Pro forma Condensed Combing Balance Sheet as of
September 30, 1996.
2. Pro Forma Condensed Combing Statements of Operations
for the nine months ended September 30, 1996.
3. Pro Forma Condensed Combing Statements of Operations
forth the three months ended December 31, 1995.
47
<PAGE> 49
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACCUMED INTERNATIONAL, INC.
By: /s/ Peter P. Gombrich
------------------------------
Peter P. Gombrich
Chief Executive Officer
(principal executive officer)
Date: April 4, 1997
In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
Date: April 4, 1997 /s/ Peter P. Gombrich
--------------------------------------------
Peter P. Gombrich
Chairman of the Board, President and
Chief Executive Officer
Date: April 4, 1997 /s/ Leonard R. Prange
--------------------------------------------
Leonard R. Prange
Chief Operating Officer and Chief Financial
Officer (principal financial officer
and principal accounting officer)
Date: April 4, 1997 /s/ John H. Abeles, M.D.
--------------------------------------------
John H. Abeles, M.D., Director
Date: April 4, 1997 /s/ Harold S. Blue
--------------------------------------------
Harold S. Blue, Director
Date: April 4, 1997 /s/ Jack H. Halperin
--------------------------------------------
Jack H. Halperin, Director
Date: April 4, 1997 /s/ Paul F. Lavallee
--------------------------------------------
Paul F. Lavallee, Director
Date: April 4, 1997 /s/ Joseph W. Plandowski
--------------------------------------------
Joseph W. Plandowski, Director
Date: April 4, 1997 /s/ Leonard M. Schiller
--------------------------------------------
Leonard M. Schiller, Director
</TABLE>
48
<PAGE> 50
Independent Auditors' Report
The Board of Directors and Shareholders
AccuMed International, Inc.
We have audited the accompanying consolidated balance sheet of AccuMed
International, Inc. as of December 31, 1996 and December 31, 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year ended December 31, 1996 and the three months ended December
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AccuMed
International, Inc. as of December 31, 1996, and December 31, 1995, and the
results of their operations and their cash flows for the year ended December 31,
1996, and the three months ended December 31, 1995 in conformity with generally
accepted accounting principles.
/S/ KPMG Peat Marwick LLP
Chicago, IL
March 28, 1997
<PAGE> 51
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
-----------------------
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,801,359 $ 180,508 $ 716,211
Restricted cash 100,000 363,000 185,000
Accounts receivable 2,143,596 874,712 245,092
Prepaid expenses and deposits 217,198 124,836 73,260
Production inventory 1,772,127 1,143,120 314,006
----------- ---------- ----------
Total current assets 7,034,280 2,686,176 1,533,569
----------- ---------- ----------
Fixed assets, net 1,696,071 528,402 411,126
----------- ---------- ----------
Notes receivable 214,273 -- 700,000
Deferred merger cost -- -- 299,650
Intangible assets 5,340,411 2,644,556 --
Other assets 194,507 115,069 44,621
----------- ---------- ----------
$14,479,542 $5,974,203 $2,988,966
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,340,769 $2,005,861 $1,017,103
Other current liabilities 879,808 880,591 203,497
Deferred revenue 146,968 1,454,450 470,238
Notes payable 198,555 726,514 --
Capital lease obligation due within one year 89,810 88,270 89,406
----------- ---------- ----------
Total current liabilities 3,655,910 5,155,686 1,780,244
----------- ---------- ----------
Long term portion of capital lease obligation -- 89,810 110,806
Long term debt 230,795 -- --
Minority interest 456,841 -- --
Stockholders' equity
Common stock, $0.01 par value, 30,000,000
shares authorized, 20,854,157 shares issued
and outstanding at December 31, 1996,
15,571,184 at December 31, 1995 and
10,929,339 at September 30, 1995 208,542 155,712 109,293
Additional paid-in capital 44,424,646 23,334,495 18,008,086
Cumulative translation adjustment 32,586 -- --
Accumulated deficit (34,335,313) (22,761,500) (17,019,463)
Less treasury stock, 31,812 shares at December 31,
1996, and 0 shares at December 31, 1995, and
September 30, 1995, respectively (194,465) -- --
=========== ========== ==========
Total stockholders' equity 10,135,996 728,707 1,097,916
----------- ---------- ----------
$14,479,542 $5,974,203 $2,988,966
=========== ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 52
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
-----------------------
<TABLE>
<CAPTION>
Three Months
Year Ended Ended Year Ended
December 31, December 31, September 30,
1996 1995 1995
------------ ------------ -------------
<S> <C> <C> <C>
Sales $ 6,222,449 $ 100,130 $ 514,776
Less Cost of sales (3,991,430) (338,730) (1,431,187)
------------ ----------- -----------
Gross profit (loss) 2,231,019 (238,600) (916,411)
------------ ----------- -----------
Operating expenses:
General and administrative 4,927,657 1,418,797 2,094,890
Research and development 3,110,426 32,600 386,882
Acquired research and
development 5,957,927 3,965,000 --
Sales and marketing 2,464,668 7,197 309,208
------------ ----------- -----------
Total operating expenses 16,460,678 5,423,594 2,790,980
------------ ----------- -----------
Operating loss (14,229,659) (5,662,194) (3,707,391)
Other income (expense):
Interest income 50,604 4,748 7,949
Interest expense (458,214) (10,862) (46,657)
Other income (expense) 2,939,537 (72,929) (13,211)
Minority interest 123,919 -- --
------------ ----------- -----------
Total other income (expense) 2,655,846 (79,043) (51,919)
------------ ----------- -----------
Loss before income taxes (11,573,813) (5,741,237) (3,759,310)
Income tax expense -- 800 800
------------ ----------- -----------
Net loss $(11,573,813) $(5,742,037) $(3,760,110)
============ =========== ===========
Net loss per share $ (0.68) $ (0.49) $ (0.59)
============ =========== ===========
Weighted average common shares
outstanding 16,975,470 11,742,980 6,375,627
============ =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 53
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
--------------------- PAID-IN ACCUMULATED TRANSACTION TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT STOCK EQUITY
---------- -------- ---------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1994 4,844,294 48,443 14,555,950 (13,259,353) - - 1,345,040
---------- -------- ----------- ------------ ------- --------- ------------
Issuances of common stock 6,085,045 60,850 3,309,636 - - - 3,370,486
Issuances of warrants - - 142,500 - - - 142,500
Net loss - - - (3,760,110) - - (3,760,110)
---------- -------- ----------- ------------ ------- --------- ------------
Balances at September 30, 1995 10,929,339 109,293 18,008,086 (17,019,463) - - 1,097,916
---------- -------- ----------- ------------ ------- --------- ------------
Issuances of common stock 4,501,845 45,019 4,984,557 - - - 5,029,576
Issuances of warrants - - 308,252 - - - 308,252
Warrants exercised 140,000 1,400 33,600 - - - 35,000
Net loss - - - (5,742,037) - - (5,742,037)
---------- -------- ----------- ------------ ------- --------- ------------
Balances at December 31, 1995 15,571,184 155,712 23,334,495 (22,761,500) - - 728,707
---------- -------- ----------- ------------ ------- --------- ------------
Issuances of common stock 4,280,955 42,810 17,838,083 - - - 17,880,893
Issuances of warrants - - 1,689,464 - - - 1,689,464
Stock options exercised 578,732 5,787 744,587 - - - 750,374
Warrants exercised 256,700 2,567 741,558 - - - 744,125
Conversion of debt 166,586 1,666 76,459 - - - 78,125
Cumulative translation adjustment - - - - 32,586 - 32,586
Shares received for litigation settlement - - - - - (194,465) (194,465)
Net loss - - - (11,573,813) - - (11,573,813)
---------- -------- ----------- ------------ ------- --------- ------------
Balances at December 31, 1996 20,854,157 $208,542 $44,424,646 $(34,336,313) $32,586 $(194,465) $ 10,135,996
========== ======== =========== ============ ======= ========= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 54
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Three Months
Year Ended Ended Year Ended
December 31, December 31, September 30,
1996 1995 1995
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(11,573,813) $(5,742,037) $(3,760,110)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,026,231 38,400 235,529
Write-off of in-process research and development 5,957,927 3,965,000 --
Minority interest (123,919) -- --
Expenses paid with issuance of warrants 1,184,390 -- 142,500
Expenses paid with issuance of stock 257,094 606,750 166,000
Shares received for litigation settlement (194,465) -- --
Loss on disposal of assets 74,706 -- 63,609
Changes in assets and liabilities:
Decrease (Increase) in restricted cash 263,000 (178,000) (185,000)
Decrease (Increase) in accounts receivable (1,268,884) 107,906 271,145
Decrease (Increase) in prepaid expenses and deposits (92,362) 1,833 20,035
Decrease (Increase) in production inventory (629,007) 64,999 193,796
(Increase) in other assets and intangible assets (33,316) 80,059 (1,525)
Increase in accounts payable 334,908 168,460 766,900
(Increase) in deferred merger cost -- (750,352) (299,650)
Increase (decrease) in other current liabilities (688) 155,941 8,571
Increase (Decrease) in deferred revenue (1,307,482) 946,429 470,238
------------ ----------- -----------
Net cash used in operating activities (6,027,436) (534,612) (1,907,962)
============ =========== ===========
Cash used in investing activities:
Purchase of fixed assets (1,479,694) (62,196) (49,834)
Acquisition of business, net (3,854,737) 48,237 --
------------ ----------- -----------
Net cash used in investment activities (5,334,431) (13,959) (49,834)
============ =========== ===========
Cash flows from financing activities:
Proceeds from issuances of common stock net 13,976,390 35,000 3,204,486
Notes receivable issued (214,273) -- (700,000)
Payment of capital lease obligation (89,907) (22,132) (50,115)
Proceeds from issuance of notes payable 1,025,000 -- --
Proceeds from Bank Loan 592,551 -- --
Payment of notes payable (1,339,629) -- --
------------ ----------- -----------
Net cash provided by financing activities 13,950,132 12,868 2,454,371
============ =========== ===========
Effect of exchange rate changes on cash 32,586 -- --
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents 2,620,851 (535,703) 496,575
Cash and cash equivalents at beginning of period 180,508 716,211 219,636
------------ ----------- -----------
Cash and cash equivalents at end of period $ 2,801,359 $ 180,508 $ 716,211
============ =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 55
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
AccuMed International, Inc. develops, manufactures and markets
state-of-the-art medical devices and instruments for laboratories, hospitals and
others. The Company was founded in January 1988, incorporated in June 1988 and
reincorporated in Delaware in 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of AccuMed
International, Inc. and its majority-owned subsidiaries ("the Company")(formerly
Alamar Biosciences, Inc.). The Company's interest in Oncometrics Imaging
Corporation (Oncometrics) was 66.7%, 0%, and 0% at December 31, 1996, 1995, and
September 30, 1995. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when the products are shipped. Contract revenue
from research agreements is recorded when earned and as the related costs are
incurred. Payments received which are related to future performance are deferred
and recognized as revenue when earned over future performance periods.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and money market fund
investments with original maturities of three months or less.
Restricted Cash
Restricted cash as of December 31, 1996 consists of $100,000 as
security deposit for a letter of credit to a vendor. The letter of credit
agreement allows the vendor to draw upon the restricted cash if outstanding
invoices to the Company exceeded specified time limits. As of December 31, 1996,
no draws have been made and all invoices to the vendor are current.
The restricted cash as of December 31, 1995 consists of $310,000 of
certificates of deposit with maturities less than one year which were placed as
collateral against a loan made by a financial institution and $53,000 held in an
escrow account.
Restricted cash as of September 30, 1995 includes an escrow deposit of
$150,000 pursuant to an agreement entered into in 1995 between the Company and
an outside legal counsel to the Company. Pursuant to the agreement the Company
issued to their counsel 240,000 shares of common stock, net of issuance costs of
$19,500, in exchange for a reduction of $150,000 in accounts payable. The escrow
deposits were released in proportion to the amounts realized by the counsel from
the sale of such shares in the public market. As of December 31, 1995 $97,000
had been released from the escrow account with the remaining $53,000 released in
February 1996.
Inventories
Inventories consist primarily of raw materials and subassemblies and
are stated at the lower of cost (average cost) or market. Cost is determined by
the first-in first-out method (FIFO).
6
<PAGE> 56
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Depreciation of plant and equipment is
provided using the straight line method over the estimated useful lives of the
assets. Amortization of leasehold improvements is provided on the straight-line
method over the shorter of the estimated useful life of the improvement or the
term of the lease. Expenditures for repairs and maintenance are charged to
operations when incurred.
Intangible Assets
Intangible assets consists principally of values assigned to acquired
proprietary technology and the excess of cost over the fair value of net assets
acquired. Such amounts are being amortized on a straight-line basis over the
expected periods to be benefited, generally 10 years. The Company assesses the
recoverability of the excess of cost over the fair value of net assets acquired
by determining whether the amortization of the balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation.
Research and Development Costs
Research and development costs are charged to operations as incurred.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Net Loss Per Share
Net loss per share is computed using the weighted average number of
common shares outstanding during each period. Common equivalent shares from
stock options and warrants are excluded from the computation as their effect is
anti-dilutive.
Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
7
<PAGE> 57
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BASIS OF PRESENTATION FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995.
In November 1994, the Company filed a lawsuit in United States District
Court against Difco, a competitor, alleging misappropriation of its trade
secrets, and sought a constructive trust over a patent covering important
aspects of the Company's technology issued to Difco. The patent, which was
issued to Difco as a result of its alleged misappropriation, covers the basic
technology used in the Company's manual testing kits. A hearing on Difco's
summary judgment against the Company was held on September 8, 1995. Due to the
discovery of the alleged misappropriation, the Company declined to accept the
proceeds of a $2,500,000 financing scheduled to close on November 10, 1994 and
implemented significant cutbacks in operations pending the outcome of the
lawsuit, including the elimination of its domestic sales force and suspension of
research and development efforts and contract research. (The above referenced
litigation has been subsequently settled.)
On May 2, 1995, the Company received notice that MicroScan, Inc.,
(MicroScan), a wholly-owned subsidiary of Dade International, Inc., filed an
intervention complaint with the court against both the Company and Difco, which
alleged that one of the Company's founders misappropriated confidential
information of MicroScan while an employee of MicroScan prior to co-founding the
Company in 1988, and used such information to develop the Company's technology.
The Company filed a motion for summary judgment and, on October 17, 1995, the
Court granted the Company's summary judgment motion and dismissed the
intervention complaint with prejudice.
The fiscal year ended September 30, 1995 financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
4. CHANGE IN FISCAL YEAR
In 1995, the Company changed to a fiscal year ending December 31. The
consolidated statement of operations for the three months ended December 31,
1994 (unaudited) is presented for comparison purposes only.
8
<PAGE> 58
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1994
------------------
<S> <C>
Sales $ 100,614
Less cost of sales (227,300)
----------
(126,686)
Operating expenses
General and administrative 384,181
Research and development 150,983
Sales and marketing 171,420
----------
Total operating expenses 706,584
----------
Operating loss (833,270)
Other income (expense)
Interest income 664
Interest expense (13,267)
----------
Total other income (expense) (12,603)
----------
Loss before income taxes (845,873)
Income tax expense 200
Net loss $ (846,073)
==========
Net loss per share $ (0.17)
==========
Weighted average common shares outstanding 4,894,294
==========
</TABLE>
5. ACCOUNTS RECEIVABLE
Accounts receivable includes the following at:
<TABLE>
<CAPTION>
December 31,
--------------------- September 30,
1996 1995 1995
--------- ------- -------------
<S> <C> <C> <C>
Trade receivables $2,269,688 $842,994 $221,767
Contract refunds due -- 43,050 43,050
Other receivables -- 6,600 --
Allowance for doubtful accounts (126,092) (17,932) (19,725)
--------- ------- -------
Total $2,143,596 $874,712 $245,092
========= ======= =======
</TABLE>
9
<PAGE> 59
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. FIXED ASSETS
Fixed assets includes the following at:
<TABLE>
<CAPTION>
December 31,
Estimated useful ------------------------- September 30,
life 1996 1995 1995
---------------- -------------------------- -------------
<S> <C> <C> <C> <C>
Equipment 3 - 5 years $1,752,044 $ 871,595 $ 776,867
Leasehold improvements 5 - 13 years 544,892 60,947 --
Equipment under capital lease 5 years 299,090 299,090 299,090
---------- ---------- ----------
2,596,026 1,231,632 1,075,957
Less accumulated depreciation and amortization (899,955) (703,230) (664,831)
---------- ---------- ----------
$1,696,071 $ 528,402 $ 411,126
========== ========== ==========
</TABLE>
7. NOTES RECEIVABLE
At December 31, 1996 notes receivable consisted of two notes from
related parties in the aggregate amount of $214,273.
Pursuant to the merger agreement (note 16), the Company extended the
following loans, which bear interest at 10% per annum, to AccuMed Inc. to
provide working capital.
<TABLE>
<CAPTION>
DATE AMOUNT
- ---- ------
<S> <C>
May 9, 1995..................................................... $150,000
May 31, 1995.................................................... 125,000
June 28, 1995................................................... 125,000
August 7, 1995.................................................. 125,000
August 29, 1995................................................. 175,000
--------
$700,000
========
</TABLE>
On November 20, 1995, the Company's Board of Directors agreed to
consolidate the various notes above into a single $700,000 note. Upon
consummation of the merger on December 29, 1995, such amounts were eliminated in
consolidation at December 31, 1995.
10
<PAGE> 60
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following at:
<TABLE>
<CAPTION>
December 31,
----------------------- September 30,
1996 1995 1995
------- ------- -------------
<S> <C> <C> <C>
Payroll and related costs 95,211 286,998 84,970
Sales & use taxes -- -- 908
Customer deposits 94,333 47,169 2,169
Accrued rent -- 64,255 89,750
Other accrued expenses 690,264 482,169 25,700
------- ------- -------------
Total 879,808 880,591 203,497
------- ------- -------------
</TABLE>
9. DEFERRED REVENUE
Deferred revenue of $146,968 at December 31, 1996 consists of deposits
recorded during 1996 for research projects to be performed during 1997. The
Company will recognize revenue when performance milestones are met in future
periods.
On May 3, 1995, the Company entered into a letter of intent with Becton
Dickinson, Inc., (Becton) pursuant to which the Company agreed to grant Becton a
semi-exclusive, worldwide license of the Company's alamarBlue(TM) technology for
a specific field of use. On October 10, 1995, the license agreement (License)
between the Company and Becton was executed.
On signing the letter of intent, Becton paid the Company $100,000. On
June 28, 1995, Becton paid an additional $400,000 to the Company. In October
1995, the Company received $250,000 for executing the license agreement, and
$750,000 upon the initial favorable resolution of the MicroScan lawsuit. In
February 1996, Becton paid an additional $1,000,000 upon final favorable
resolution of the MicroScan lawsuit and $1,000,000 in March 1996 upon final
favorable resolution of the Difco lawsuit. Of this last amount, $500,000 is
creditable against future royalties.
The $1,500,000 received by the Company through December 31, 1995 was
deferred pending resolution of the above mentioned lawsuits. Due to the
settlement of the lawsuits in February and March 1996, all of the remaining
deferred revenues became income during the quarter ending March 31, 1996.
10. LONG-TERM DEBT
Long-term debt of $230,795 at December 31, 1996 consists of the
Company's portion of Oncometrics repayable contribution from the Western
Economic Diversification Program. The debt does not bear interest and is
repayable in semi-annual payments based on future sales of the Access device.
11
<PAGE> 61
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
-------- ---------
<S> <C> <C>
Notes payable consist of the following at:
Note payable to bank, guaranteed by $ -- $100,000
stockholders, interest at 11.75%
payable monthly with principal payment
due on April 30, 1996
Note payable to bank, guaranteed by -- 455,000
stockholders, interest at 10.75%
payable monthly with principal payment
due on April 30, 1996
Notes payable to stockholders, interest 25,100 90,610
at 10%, due on demand
Bank line of credit, collateralized by 173,455 80,904
substantially all assets of AccuMed
International Limited, a wholly-owned
subsidiary of the Company, due on demand
-------- --------
$198,555 $726,514
======== ========
</TABLE>
12. STOCKHOLDERS' EQUITY
The Board of Directors is authorized to issue 5,000,000 shares of
preferred stock, the terms and rights to be established upon issuance. Of these
shares, 382,500 have been designated as Series A 8% Cumulative Preferred Stock.
None of these shares have been issued.
Warrants
In March 1996, the Company granted to certain investors in a related
party warrants to purchase 687,500 shares of common stock at a price of $3.42 to
$3.87 per share. These warrants expire in March 1999. The fair market value of
these warrants of $852,390 has been recorded as issuance of common stock
warrants with an offsetting charge reflected as other expense in the
Consolidated Statements of Operations. The investors exercised 200,000 of those
warrants during 1996, 100,000 each at $3.42 and $3.87 respectively.
In March 1996, the contingency associated with the issue of warrants
was resolved resulting in the issuance of 63,472 warrants. The market value of
these warrants of $255,074 was included in consideration received from the
resolution of the contingency. (Note 16).
In January 1996, the Company granted to an individual in exchange for
consulting services rendered warrants to purchase 100,000 shares of common stock
at a price of $2.125 per share. These warrants expire in January 2001. The fair
market value of these warrants of $230,000 has been recorded as issuance of
common stock warrants with an offsetting charge reflected as administration
expense in the Consolidated Statement of Operations.
In January 1996, the Company received $250,000 cash in exchange for a
note payable bearing interest at 11% due in April 1996, and warrants to purchase
100,000 shares of common stock at $1.25 per share. The warrants have been
recorded at their estimated fair value of $352,000. This note payable was paid
in 1996, resulting in a charge of $352,000 reflected as interest expense in the
Consolidated Statement of Operations for the year ended December 31, 1996.
During 1996 56,500 warrants were exercised at $0.25 and 200 at $5.00.
12
<PAGE> 62
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1996, outstanding warrants to purchase shares of common
stock at any time through the expiration date were as follows:
<TABLE>
<CAPTION>
Shares Price Expiration Date
--------- ----- ---------------
<S> <C> <C>
2,702,705 $5.00 10/97
104,000 2.13 10/97
120,000 3.42 3/99
367,500 3.87 3/99
400,000 0.25 12/99
175,000 5.00 12/99
25,275 5.00 4/00
264,840 0.63 5/00
100,438 0.82 8/00
100,437 1.64 8/00
100,437 2.47 8/00
300,000 0.63 8/00
63,500 0.25 9/00
75,000 1.13 12/00
750,000 1.25 12/00
100,000 1.25 1/01
100,000 $2.13 3/01
---------
5,849,132
=========
</TABLE>
In February 1995, the Company granted warrants to a consulting firm for
the right to purchase 140,000 shares of the Company's common stock at a price of
$.25 per share in lieu of the Company's liability of $105,000 to the consulting
firm. These warrants were exercised in December 1995. In May 1995, the Company
granted warrants to a placement agent for the right to purchase 100,000 shares
of the Company's common stock at a price of $.25 per share as compensation for
services performed relating to the canceled $2.5 million financing in November
1994. The warrants expire in August 2000. The difference between the fair market
value of the stock and the common stock purchase price has been recorded as
issuance of common stock warrants.
Additionally, contingent upon consummation of the merger, a consulting
firm was granted a five year warrant to purchase up to 750,000 shares of common
at a price of $1.25 per share, subject to certain limitations. The fair value of
these warrants has been recorded as issuance of common stock warrants.
13
<PAGE> 63
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1995, outstanding warrants to purchase shares of common
stock at any time through the expiration date were as follows:
Stock Option Plan
The Company has in effect three stock options plans for certain
employees. On October 15, 1990, the Company adopted the 1990 Stock Option Plan
(1990 Plan). The Company's employees, directors, and consultants are eligible to
participate in the Plan. The Company has reserved shares of authorized
but unissued common stock for issuance under the 1990 Plan.
On February 4, 1992, the Company adopted the 1992 Stock Option Plan
(1992 Plan), for which the Company has reserved shares of authorized but
unissued common stock. Options issued under the 1992 Plan are issued,
exercisable, and governed by substantially the same terms as options issued
under the 1990 Plan, with the exception of provisions in the 1990 Plan
accelerating the vesting of options in instances of acquisition or liquidation,
which have been deleted from the 1992 Plan.
On November 17, 1992 the Board of Directors also approved an increase,
approved by the stockholders on March 2, 1993, of the number of shares of common
stock reserved for issuance under the 1992 Plan from 405,000 to 505,000 shares.
On December 29, 1995, the Company adopted the 1995 Stock Option Plan
(1995 Plan), for which the Company has reserved an additional 1,832,483 shares
of authorized but unissued common stock. Options issued under the 1995 Plan are
issued, exercisable, and governed by substantially the same terms as options
issued under the 1992 Plan.
Terms of the Plans include:
Exercise Price _ For the 1990 Plan, fair market value determined by the Board
of Directors and not less than 110% of the determined fair market value in
certain instances. For the 1992 Plan and the 1995 Plan fair market value as
determined by the closing price of the Common Stock on the date of issuance as
reported by NASDAQ.
14
<PAGE> 64
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Vesting Period _ A portion of the options granted to participants vested
immediately with the remaining options vesting on varying schedules not
exceeding five years from date of grant.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its Stock Option Plans. Accordingly, no compensation cost has
been recorded. Had compensation cost for the Company's Stock Option Plans been
determined consistent with FASB Statement No. 123, the Company's net loss and
loss per share would have been increased to the pro forma amounts indicated
below.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
------------ ------------ -------------
<S> <C> <C> <C> <C>
Net loss As reported $(11,573,813) $(5,742,037) $(3,760,110)
Pro forma (12,147,534) (5,775,556) (3,770,971)
Net loss per share As reported $ (0.68) $ (0.49) $ (0.59)
Pro forma (0.72) (0.49) (0.59)
</TABLE>
Pro forma net loss and loss per share reflect only options granted in
1996 and 1995. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net loss
amounts presented above because compensation cost is reflected over the options'
vesting period of up to 10 years and compensation cost for options granted prior
to January 1, 1995 is not considered.
The compensation cost of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
------------ ------------ -------------
<S> <C> <C> <C>
Dividend yield 0% 0% 0%
Volatility 136% 136% 136%
Risk free interest rate 7% 7% 7%
Expected term in years 9.13 9.57 9.57
</TABLE>
15
<PAGE> 65
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of the Company's Stock Option Plans as of
September 30, 1995 and as of December 31, 1995 and 1996 and changes during the
periods then ended is presented below:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at September 30, 1994 532,855 $ 4.96
Granted 106,020 $ 1.07
Exercised -- $ --
Expired (cancelled) (123,023) $ 1.07
---------
Outstanding at September 30, 1995 515,852 $ 1.32
Granted 1,103,910 $ 1.11
Exercised -- $ --
Expired (cancelled) (32,917) $ 1.39
---------
Outstanding at December 31, 1995 1,586,845 $ 1.23
Granted 909,000 $ 4.99
Exercised (578,732) $ 1.30
Expired (cancelled) (182,084) $ 1.13
---------
Outstanding at December 31, 1996 1,735,029 $ 3.15
=========
</TABLE>
The following table summarizes information about stock options outstanding as
of December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
-------------------------------------------- ----------------------------
Weighted avg
remaining Weighted avg Weighted avg
Number contractual exercise Number exercise
Range of exercise prices outstanding life price exercisable price
- ------------------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$0.63 to $1.13 881,779 8.26 $1.11 650,439 $1.11
$1.44 to $3.75 259,250 6.12 2.57 185,917 2.11
$5.38 to $8.38 594,000 4.56 6.41 186,335 6.54
--------- ---------
$0.63 to $8.38 1,735,029 6.67 $3.15 1,022,691 $1.34
========= =========
</TABLE>
16
<PAGE> 66
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Stock
A registration statement on Form SB-2 was declared effective by the
Securities and Exchange Commission on October 3, 1996, and net proceeds of the
offering approximating $11,700,000 were received by the Company on October 8,
1996.
In July 1996 the Company issued 25,000 shares of the Company's common
stock at a price of $6.25 per share to a related party. Administrative expense
in the amount of $156,250 has been recorded in the Consolidated Statement of
Operations.
In June 1996 the Company issued 255,000 shares of common stock in
private placements with net proceeds of $1,409,665.
In June 1996, 166,586 shares of common stock were issued to a related
party pursuant to an agreement requiring conversion of the outstanding principal
and the accrued and unpaid interest totaling $78,125 into 68,500 shares of
common stock of AccuMed, Inc. prior to the merger.
In January 1996, the Company issued 60,000 shares of common stock at a
price of $1.125 per share to related parties. Administrative expense in the
amount of $67,500 has been reflected in the Consolidated Statement of
Operations.
In November 1995, the Company issued 20,000 shares of the Company's
common stock at a price of $.625 per share to a director for consulting services
performed related to the merger. Consulting expense in the amount of $12,500 has
been reflected in the Consolidated Statements of Operations.
In October 1995, the Company issued to each non-employee director of
the Company 10,000 shares of the Company's common stock at a price of $.625 per
share as compensation for services performed. Compensation expense in the amount
of $31,250 has been reflected in the Consolidated Statements of Operations.
In August 1995, the Company issued 16,000 shares of the Company's
common stock at a price of $1 per share to a vendor as compensation for services
performed in lieu of the Company's liability of $16,000 to the vendor.
During May and August 1995, the Company completed two separate private
offerings for an aggregate of 5,648,400 shares of the Company's common stock
providing net proceeds of $2,931,486 (net of $598,764 of financing expenses).
Also, the Company's placement agent received warrants for the future purchase of
564,840 shares of the Company's common stock at an exercise price of $0.625.
Such warrants expire from May through August 2000.
In March 1995, the Company issued 80,645 shares of the Company's
common stock at a price $0.62 per share for a total of $42,500 (net of financing
costs of $7,500) to a private investor.
In March 1994, the Company finalized an agreement with one of the
Company's distributors, to purchase the Company's securities in exchange for
certain distribution, licensing and product development rights. Under the terms
of the agreement, the Company was obligated to issue 200,000 shares of common
stock for a total consideration of $500,000. At September 30, 1994, the
distributor had purchased $250,000 in common stock. In November 1994, the
distributor purchased the remaining $250,000 in common stock and was issued
warrants to purchase 166,667 additional shares of stock at an exercise price of
$3.00 per share, which warrants expired in December 1995.
In March 1996, the contingency associated with 940,955 shares of
common stock was resolved, and the shares were subsequently issued. The fair
value of these shares of $5,175,252 was included in consideration received from
the resolution of the contingency, see Note 16.
17
<PAGE> 67
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES
The net deferred tax assets and liabilities consist of the following
at:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............. $8,165,000 $ 6,520,000 $5,460,000
Research and development credits.............. 479,000 300,000 295,000
Capitalized research and development costs.... -- -- 280,000
Depreciation.................................. 420,000 162,000 175,000
Other......................................... 184,000 114,000 65,000
---------- ----------- ----------
Total $9,248,000 7,096,000 6,275,000
Valuation allowance (9,248,000) (7,096,000) (6,275,000)
---------- ----------- ----------
Net deferred tax assets and liabilities $ -- $ -- $ --
========== =========== ==========
</TABLE>
At December 31, 1996, the Company had approximately $22,931,000 and
$7,966,000 in net operating losses for federal and state tax purposes,
respectively, available to be carried forward to future periods. The
carryforwards expire from 2004 to 2012 for federal purposes and from 2011 to
2012 for state purposes. The Company also has credits for research and
development of $479,000 available to offset future federal income taxes, which
expire from 2004 to 2012.
As a result of providing a valuation allowance equal to the deferred
tax assets, there is no federal tax provision. The provision for tax for the
three months ended December 31, 1995 and the year ended September 30, 1995 is
the state minimum tax.
During the last three years, the Company has had more than a 50% change
in ownership. Section 382 of the Internal Revenue Code and comparable state
statutes impose certain annual limitations on the utilization of net operating
loss carryforwards and research and development credits that can be used to
offset income in future periods.
14. LEASES
Operating Leases
The Company leased its facilities and one automobile under operating
leases. Rental expense is recognized on a straight-line basis over the life of
the lease. Rental expense for the year ended December 31, 1996, the three months
ended December 31, 1995 and the year ended September 30, 1995 was $380,205,
$71,000, and $156,000, respectively.
18
<PAGE> 68
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Minimum future annual rent payments are as follows for years ending December 31:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997 $325,321
1998 269,125
1999 269,125
2000 205,775
2001 143,198
Thereafter 1,288,000
----------
Total $2,500,544
==========
</TABLE>
Capital Leases
In July and September 1994, the Company entered into capital leases for
production equipment in the total amount of $231,693, with principal and
interest payable monthly, interest at approximately 21%, and total residuals of
$34,754 due in July and September 1997.
In October 1994, the Company entered into a capital lease for office
equipment in the total amount of $29,000, with principle and interest payable
monthly, interest at 8.71%, and a residual of $4,350, due in October 1997.
Future minimum lease payments under capital lease obligations for the
year ending December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997 97,958
Less amount representing interest (8,148)
------
89,810
======
</TABLE>
15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing and financing activities:
During the year ended December 31, 1996, the Company issued common
stock and warrants for the payment of expenses. The value of common stock and
warrants issued was $257,094 and $1,184,390, respectively. A shareholder
returned previously issued shares to the Company as compensation for the
settlement of litigation which amounted to $194,465.
During the three month period ending December 31, 1995 and the
year ended September 30, 1995 the Company acquired assets under capital
leases in the amounts of $0 and $21,341, respectively.
During the three months ended December 31, 1995, the Company acquired
all of the outstanding shares of AccuMed, Inc. in exchange for common stock of
the Company. The fair value of net liabilities assumed was $828,476. Cash
acquired totaled $48,237.
19
<PAGE> 69
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash paid for interest and income taxes:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, 19996 DECEMBER 1, 1995 SEPTEMBER 30, 1995
------------------ ---------------- ------------------
<S> <C> <C> <C>
Cash paid during the period for:
Interest 76,350 19,122 46,657
Income taxes -- -- 800
</TABLE>
16. COMMITMENTS
Pfizer Agreement
In October 1992, the Company entered into an agreement to conduct a
research project for the purpose of developing a testing procedure for another
entity. The maximum payments the Company may receive for completion of the
agreement are $246,000. As of December 31, 1996, the Company had received
payments of $184,500 based on procedures completed to date.
17. MERGER AND RELATED TRANSACTIONS
On December 29, 1995, the Company acquired all of the common stock of
AccuMed, Inc. and its wholly owned subsidiary ("AccuMed"). AccuMed is primarily
engaged in the research and development of diagnostic screening products for the
cytopathology and microbiology clinical laboratory, pharmaceutical and
veterinary segments of the health care industry. Following the acquisition,
AccuMed ceased to exist as a legal entity and the merged entity was renamed
AccuMed International, Inc. Pursuant to the terms of the merger agreement the
Company issued 3,931,401 unconditional shares of common stock valued at
$4,422,826 and 237,840 warrants valued at $68,252 on December 29, 1995. An
additional 1,881,910 shares and 126,945 warrants were issued to AccuMed
stockholders on December 29, 1995, however, such shares and warrants are
contingent and subject to forfeiture if specified performance goals are not
achieved by the merged entity during the 24 months beginning January 1, 1996.
The contingent consideration will be recorded when the goals are achieved and
will be computed based upon the stock price on such date.
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon the fair values at the date
of acquisition. The excess of the purchase price over the fair value of the
tangible assets has been allocated to identifiable intangibles of acquired
proprietary technology ($2,644,556) and in-process research and development
($3,965,000). The acquired proprietary technology will be amortized over the
expected period to be benefited, which is estimated to be 10 years with the
in-process research and development charged to operations at the date of
acquisition.
The contingency associated with 940,955 shares and 63,472 warrants was
resolved (performance goal achieved) in March 1996 resulting in contingent
consideration of approximately $5,273,000. Such amount has been allocated to
acquired proprietary technology ($1,775,000) and in-process research and
development ($3,498,000) and recorded in March 1996.
20
<PAGE> 70
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The results of operations of AccuMed have not been included in the
Consolidated Statements of Operations for the three months ended December 31,
1995 or for the year ended September 30, 1995 because the acquisition occurred
at the end of the three month period ended December 31, 1995. The following pro
forma information has been prepared assuming that the acquisition had taken
place at the beginning of the respective periods. The pro forma information
includes adjustments for the amortization of intangibles and write-off of
in-process research and development arising from the transaction. The pro forma
financial information is not necessarily indicative of the results of operations
as they would have been had the transaction been effected on the assumed dates.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1995
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Sales............................................................. $1,109,506 $3,979,930
Net loss.......................................................... (7,016,824) (9,844,326)
Net loss per share................................................ $(0.60) $(1.00)
</TABLE>
The Company, AccuMed and AccuMed International Limited, a wholly-owned
subsidiary of AccuMed, entered into a Manufacturing and Supply Agreement
effective as of July 1, 1995, (the Manufacturing Agreement) pursuant to which
the Company purchased ID/MIC panels from Sensititre Limited. The Manufacturing
Agreement was terminated on December 29, 1995. Amounts paid to AccuMed for the
year ended September 30, 1995 under the Manufacturing Agreement were $277,172.
Additionally, the Company gave a deposit to AccuMed of $50,000 in October 1995,
for the purchase of supplies and raw materials in relation to this agreement.
Pursuant to a Distributor Agreement effective as of July 1, 1995
between AccuMed and the Company (the Distributor Agreement), the Company
appointed AccuMed as its distributor for microbiology products. AccuMed was the
exclusive distributor in the United States, Canada, Mexico, Puerto Rico, Japan,
the Far East, Australia and Europe (except Italy, Portugal, Germany, Austria,
Belgium, Cyprus, Greece, Luxembourg, The Netherlands, Switzerland and Turkey),
and a non-exclusive distributor in Central America, South America, Africa, South
Africa, Korea, East Europe, the Middle East, China and Taiwan. The Distributor
Agreement was terminated on December 29, 1995. Amounts paid to AccuMed for the
year ended September 30, 1995 under the Distributor Agreement were $35,677.
Pursuant to an oral agreement (the Oral Agreement), the Company paid
AccuMed an amount equal to 30% of AccuMed's lease payment (approximately $2,500
per month) for its manufacturing facility in Cleveland, Ohio and 30% of
AccuMed's general overhead expenses in consideration for AccuMed providing
sales, marketing and distribution services on behalf of the Company. Such
arrangement terminated on December 29, 1995. Amounts paid to AccuMed for the
year ended September 30, 1995, under this Oral Agreement were $67,508.
Pursuant to a Research and Development Agreement, effective as of July
1, 1995, (the R&D Agreement) between the Company and AccuMed the Company granted
to Sensititre Limited, a wholly-owned subsidiary of AccuMed, a non-exclusive
license to use the Company's intellectual property, including know-how, trade
secrets and technology relating to alamarBlue(TM) for the sole purpose of
conducting research and development activities using such intellectual property.
Under the R&D Agreement, the Company paid the actual hourly wage per employee
hour spent on such research and development and reimburses AccuMed for its
expenses relating thereto. The R&D Agreement terminated on December 29, 1995.
Amounts paid to AccuMed for the year-ended September 30, 1995, under this R&D
Agreement were $20,000.
At September 30, 1995, the Company had recorded an accounts receivable
of $53,499 from AccuMed which resulted from the sale of inventory to AccuMed.
Additionally, the Company had recorded approximately $123,000 of accounts
payable to AccuMed for services received pursuant to the Manufacturing,
Distributor and Oral Agreements. Upon consummation of the merger on December 29,
1995 such amounts were eliminated in consolidation.
21
<PAGE> 71
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company recorded a deferred asset at September 30, 1995, of
$299,650 relating to direct costs paid to unrelated entities for services
performed related to the merger. These deferred costs have been included in
determining the cost of AccuMed.
In February 1995, the Company and AccuMed entered into an agreement
with a consulting firm (Consulting Firm) to pay the Consulting Firm an aggregate
finders fee for assistance with the merger, of which $50,000 was paid with
proceeds from the Company's private offering in August 1995 and is
non-refundable. The remaining obligation was satisfied through the issuance of
444,444 shares of common stock on December 29, 1995 and the issuance of a
five-year warrant to purchase 750,000 shares of common stock at $1.25 per share.
The total finders fee of $790,000 has been included as direct costs of the
acquisition.
The Company entered into an agreement with Bridgemere Capital
(Bridgemere), which has been acting as special advisor to the Company, pursuant
to which the Company has paid to Bridgemere a fee of $50,000 and has agreed to
pay an additional $55,000 in cash and issued 56,000 shares of common stock on
December 29, 1995. The total finders fee of $168,000 has been included as direct
costs of the acquisition.
18. RELATED-PARTY TRANSACTIONS
In June 1996, 166,586 shares of common stock were issued to a related
party pursuant to an agreement requiring conversion of the outstanding principal
and the accrued and unpaid interest totaling $75,000 into 68,500 shares of
common stock of AccuMed prior to the merger with the Company.
In April 1996, the Company entered into a settlement agreement with
several stockholders. Under the terms of this agreement, 31,812 shares of common
stock held by these stockholders with a fair value of $194,468 were returned to
the Company and are being held as treasury stock. An additional 6,144 shares of
common stock contingent and subject to forfeiture if specified performance goals
are not achieved in 1997 were also returned to the Company.
In March 1996, the Company granted to certain investors in a related
party warrants to purchase 687,500 shares of common stock at a price of $3.42 to
$3.87 per share. These warrants expire in March 1999. The fair market value of
these warrants of $852,390 has been recorded as issuance of common stock
warrants with an offsetting charge reflected as other expense in the
Consolidated Statement of Operations for the year ended December 31, 1996.
In January 1996, the Company received $250,000 cash in exchange for a
note payable bearing interest at 11% due in April 1996, and warrants to purchase
100,000 shares of common stock at $1.25 per share. The warrants have been
recorded at their estimated fair value of $352,000. This note payable was paid
in 1996, resulting in a charge of $352,000 reflected as interest expense in the
Consolidated Statement of Operations for the year ended December 31, 1996.
In January 1996, the Company granted to an individual in exchange for
consulting services rendered warrants to purchase 100,000 shares of common stock
at a price of $2.125 per share. These warrants expire in January 2001. The fair
market value of these warrants of $230,000 has been recorded as issuance of
common stock warrants with an offsetting charge reflected as administration
expense in the Consolidated Statement of Operations for the year ended December
31, 1996.
22
<PAGE> 72
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In September 1995, the Company paid $12,500 to a director for
consulting services performed related to the private financings in May and
August 1995 and the proposed merger between the Company and AccuMed.
Additionally, in November 1995, the Company issued 20,000 shares of the
Company's common stock at a price of $.625 per share to the same director for
the consulting services described above.
In December 1994, the Company entered into a Consulting Services
Agreement, effective January 1, 1995, with a Placement Agent, also a stockholder
of the Company, pursuant to which the Placement Agent agreed to provide certain
financial consulting services to the Company for a period of 12 months with an
option to renew the agreement for an additional 12 months at the consent of both
the Placement Agent and the Company. In exchange for the consulting services,
the Company will pay the Placement Agent an aggregate sum of $58,500. At
September 30, 1995, the Company had paid the Placement Agent $42,500.
All non-employee directors have received an option to purchase 750
common shares and option to purchase 250 additional shares annually. In 1993 and
1994, all non-employee directors received an option to purchase 1,000 shares and
5,000 shares of the Company's common stock, respectively. In 1995, all
non-employee directors received options to purchase 5,000 to 9,215 shares of the
Company's common stock, contingent upon their length of service. These directors
will receive options for 5,000 additional shares annually. All such awards are
made pursuant to the 1992 Plan.
19. WARRANTY RESERVE
The company provides a warranty reserve for costs associated
with repair or replacement parts of cytopathology and microbiology products
sold. The reserve at December 31, 1996 was $30,000. No reserve was
recorded at December 31, 1995, or September 30, 1995 due to limited product
sales for these periods.
20. ACQUISITIONS
On October 15, 1996, the Company acquired a two-thirds interest in
Oncometrics for a total purchase price of $4.0 million which includes $2.0
million to be used solely as working capital for Oncometrics. The purchase price
was paid from the net proceeds of a public offering and has been reflected in
the Consolidated Balance sheet as of December 31, 1996. The acquisition has been
accounted for using the purchase method of accounting, and accordingly the
purchase price has been allocated to assets purchased and liabilities assumed
based on fair values at the date of acquisition. The excess purchase price
consists of $1,645,200 million of acquired in process research and development
and $1,096,000 million of purchased technology and reflects the 33% minority
interest holding. The Consolidated Balance sheet reflects the $1,096,000 million
of purchased technology as intangible assets. The $1,645,200 million in-process
research and development was reported as acquired research and development in
the Consolidated Statement of Operations during 1996. The financial results of
Oncometrics have been translated from Canadian dollars to U.S. dollars using an
exchange rate of 0.75 for the period October 15, 1996 through December 31, 1996
and 0.75 as of December 31, 1996. The Company's share of operations of
Oncometrics from purchase date through December 31, 1996 have been recorded in
the Consolidated Statement of Operations.
The unaudited proforma consolidated results of operations giving effect
to the acquisition of Oncometrics as if it had occured as of October 1, 1994
follows:
<TABLE>
<CAPTION>
Three Months
Year ended Ended Year Ended
December 31, 1996 December 31, 1995 September 30, 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
Sales 6,235,892 247,089 679,328
Net loss (12,066,170) (5,876,285) (5,461,065)
Net loss per share (0.71) (0.50) (0.86)
</TABLE>
23
<PAGE> 73
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On October 10, 1996, the Company acquired the remaining 90% interest in
Radco Ventures, Inc. ("Radco"), for $1.4 million in cash. Radco was formed to
develop diagnostic microbiology test panels and automated reading instruments.
The acquisition has been accounted for using the purchase method of accounting,
and, accordingly the purchase price has been allocated to the assets purchased
and liabilities assumed based on fair values at the date of acquisition. The
excess purchase price over fair value of approximately $795,000 over tangible
assets has been allocated to in-process research and development and recorded as
acquired research and development in the Consolidated Statement of Operations.
In August 1996, the Company acquired assets from Technostics Corp. in
consideration for the issuance of 69,308 shares of common stock, which shares
are being held in escrow pending resolution of a contingency regarding any
challenge or claim filed in the succeeding twelve months calling into question
the ownership rights to such patents. The assets to be acquired consist largely
of U.S. and foreign patents in the areas of image analysis and automated
cytology. The Company did not assume any liabilities of Technostics. The
contingent consideration relating to the issuance of these shares will be
recorded when the contingency is resolved and will be computed based upon the
stock price on such date.
21. SUBSEQUENT EVENTS
On March 3, 1997, the Company acquired certain assets and liabilities
of Difco Microbiology Systems, Inc. (Difco) related to the manufacture and
distribution of blood culture instruments. The acquisition will be recorded
under the purchase method of accounting. As the fair value of the assets
acquired and liabilities assumed exceeds the purchase price paid, the excess
fair value will be allocated to reduce proportionately the values assigned to
noncurrent assets with any remainder recorded as a deferred credit. The
acquisition will be recorded by the Company during the first quarter of 1997.
The Company funded the acquisition through a private placement to
investors consisting of $8,500,000 of 12% convertible notes (notes) with a three
year term. Investors also received warrants to purchase shares of the Company's
common stock equal to 10% of the note with an expiration period dependent on
conversion of the notes. The placement agent, a shareholder of the Company,
received out of pocket expenses of $56,500, a placement fee equal to 7% of the
proceeds of the offering, and warrants to purchase 200,000 shares of the
Company's common stock.
As the private placement did not close until March 14, 1997, the
Company obtained a bridge loan to finance the acquisition during the interim
period between acquisition of Difco and private placement. The two individual
lenders, who are also shareholders of the Company, agreed to loan the Company
$6,000,000 at an interest rate of 12% per annum. The Company repaid the bridge
loan on the date on which proceeds of the notes were received in escrow. The
Company incurred approximately $140,000 of origination fees and interest expense
as a result of the bridge loan, and this amount will be expensed in the first
quarter of 1997.
24
<PAGE> 1
EXHIBIT 10.4
[LETTERHEAD OF ACCUMED INTERNATIONAL, INC.]
October 14, 1996
Donald M. Dorfman
641 West Willow Street - #208
Chicago, IL 60614
Subject: Offer of Employment
-------------------
Dear Don:
AccuMed International, Inc. is pleased to make you an offer of employment. The
following information identifies the position, and gives a summary of some
compensation features:
Position: Vice President Client Services & Business Development -
Responsibilities to include, but not be limited to development
and management of the customer support organization. Some of
the activities will include: customer training, installation,
customer services and support for both major distributor and
independent contracts; General Manager responsibilities for
Oncometrics, Board reporting, monthly corporate reports and
financial controls; New Product and Services development, i.e.,
laboratory services consulting business, C.M.E. accredited
education programs, software support/upgrade(s) and maintenance
contracts, as well as third party relations, i.e., financial -
Rockford leasing.
Reports to: President, Cytopathology Division
Effective: As soon as possible, but not later than November 1, 1996
Base Salary: $4,792.00 paid on a semi-monthly basis - $115,000/year
Bonus: Effective January 1, 1997, you will be eligible to earn up to
25% of your annual base salary based upon performance of
mutually agreeable goals and objectives (MBO's)
Other: Upon development of a Laboratory Service Consulting Business, a
Profit/Loss Compensation Plan will be developed, mutually
agreeable between the parties. Such Business shall not be
developed or launched prior to the 2nd Quarter, 1997.
Options: Upon acceptance of employment, as a signing bonus 25,000 Stock
Options will be granted subject to the review and approval of
the Board of Directors. Price of the Options will be set at
$4.00 based on acceptance of employment on October 14.
<PAGE> 2
Page Two
October 14, 1996
1996. This initial 25,000 grant will be exercisable, but
restricted from sale for a period of twelve months. An
additional 75,000 Stock Options will be granted subject to the
review and approval of the Board of Directors. Price of the
Options will be set at Fair Market Value on the close of the
market on the day of the grant. Vesting will be calculated from
the date of the grant approval and in accordance with Employer's
Stock Plan (20% per year over a five year period).
In the event that Peter P. Gombrich leases the company, or
control of the company changes, all Stock Options granted in
this letter offer will vest immediately.
Benefits: Eligible for existing company insurance benefits subject to the
terms and conditions of third party policies, effective the
first day of the next month after completion of 30 day new
employee period.
Vacation: Three weeks vacation after completion of one year's service
pursuant to company policy.
The information above is a brief outline of some pertinent elements of our
offer. The attached Employment Agreement supersedes this letter and contains
the entire understanding of the matters contemplated herein; this offer is
predicated upon execution of the Employment Agreement by both parties. The
Employment Agreement will be for a term of twelve months, with a twelve month
severance provision.
Don, if you are in agreement with this offer, please execute the original and
duplicate of this Letter and the Employment Agreement. Retain the duplicate(s)
for your records, and return the original(s) to me. We look forward to your
being a permanent member of this dynamic organization and contributing to our
success.
Sincerely,
/s/ Peter P. Gombrich
Peter P. Gombrich
Chairman & CEO
/s/ Donald M. Dorfman
- ------------------------------------- -----------------------
Donald M. Dorfman Date
<PAGE> 1
Exhibit 10.5
[Letterhead of AccuMed International, Inc.]
November 25, 1996
Ms. Joyce L. Wallach
1500 7th Avenue
Sacramento, CA 95818
SUBJECT: OFFER OF EMPLOYMENT
Dear Joyce:
AccuMed International, Inc. is pleased to make you an offer of employment.
Following are the details of the offer:
Position: Corporate Secretary and General Counsel
Reports To: Chief Financial Officer
Effective: As soon as possible, but no later than January 2, 1997
Base Salary: $4,375.00 - paid on a semi-monthly basis - $105,000/year.
Bonus: You will be eligible to earn up to 20% of your annual base
salary based upon performance of mutually agreeable goals
and objectives.
Options: Upon acceptance of employment, 30,000 Stock Options will be
granted subject to the review and approval of the Board of
Directors. The price of the Options will be set at the
fair market value at the date of the grant approval.
Vesting will be calculated in accordance with the Stock
Option Plan. Additional options may be granted in
accordance with the Company's policies.
<PAGE> 2
Benefits: Eligible for existing Company insurance benefits subject to
the terms and conditions of third parties policies:
effective the first day of the month following thirty days
of employment. Vacation benefit pursuant to Company
policy.
Location: Your place of employment shall be Chicago, Illinois. You
will be allowed to perform your duties from your home in
Sacramento, California (subject to travel to Chicago or
elsewhere on an as required basis) for a period of one
year. At the end of that time, the Company may request
that you relocate your place of residence to Chicago,
Illinois. If the Company requires your relocation and you
choose not to comply, the Company may terminate your
employment for cause.
Joyce, if you are in agreement with this offer, please execute the original
copy of this letter. Retain the copy for your records, and return the original
to me. We look forward to your becoming a permanent member of our dynamic
organization and contributing to our success.
Sincerely,
AccuMed International, Inc.
/s/Leonard R. Prange
Leonard R. Prange
Chief Financial Officer
and Corporate Vice President
/s/Joyce L. Wallach 11/26/96
- ---------------------------------- ----------------
Joyce L. Wallach Date
<PAGE> 1
EXHIBIT 10.13
AMENDMENT NO. 2 TO ACCUMED INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
AMENDMENT NO. 2 (this "Amendment") to the AccuMed International, Inc.
(formerly "Alamar Biosciences, Inc.," the "Company") 1995 Stock Option Plan as
amended on July 12, 1996 (the "Plan") dated February 20, 1997.
WHEREAS, the Plan currently provides for the grant of options to
purchase up to an aggregate of 2,000,000 shares of the Company's common stock,
par value of $.01 per share (the "Common Stock");
WHEREAS, on February 20, 1997, the Compensation Committee of the Board
of Directors adopted resolutions amending the Plan to decrease the number of
shares available under the Plan by 731,668 shares; thereby providing for the
grant of options to purchase an aggregate of 1,268,332 shares of the Common
Stock;
NOW, THEREFORE, in accordance with Section 11 of the Plan, the Plan is
hereby amended as follows:
1. Section 4 of the Plan is hereby deleted in its entirety and
the following is inserted in lieu thereof:
Section 4. Shares Available. Subject to adjustment as
provided in Section 16 of this Plan, 1,268,332 shares of the
common stock, par value of $.01 per share, of the Company (the
"Common Stock"), shall be available for grants of options
under this Plan. To the extent an outstanding option expires
or terminates unexercised or is canceled or forfeited, the
shares of Common Stock subject to the expired, unexercised,
canceled or forfeited portion of such option shall again be
available for grants of options under this Plan. Shares of
Common Stock to be delivered under this Plan shall be
authorized and unissued shares of Common Stock, or authorized
and issued shares of Common Stock reacquired and held as
treasury shares or otherwise or a combination thereof.
All other provisions of the Plan shall remain in full force and
effect.
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 1 TO AMENDED AND RESTATED
ACCUMED INTERNATIONAL, INC.
1990 STOCK OPTION PLAN
AMENDMENT NO. 1 (this "Amendment") to the Amended and Restated AccuMed
International, Inc. (formerly "Alamar Biosciences, Inc.", the "Company") 1990
Stock Option Plan (the "Plan") dated February 20, 1997.
WHEREAS, the Plan currently provides for the grant of options to
purchase up to an aggregate of 177,324 shares of the Company's common stock,
par value of $.01 per share (the "Common Stock");
WHEREAS, on February 20, 1997, the Compensation Committee of the Board
of Directors adopted resolutions amending the Plan to decrease the number of
shares available under the Plan by 82,179 shares; thereby providing for the
grant of options to purchase an aggregate of 95,145 shares of the Common Stock;
NOW, THEREFORE, in accordance with Article 14 of the Plan, the Plan
is hereby amended as follows:
1. Article 4 of the Plan is hereby deleted in its entirety and
the following is inserted in lieu thereof:
Article 4. Shares Reserved. The maximum number of shares
that may be issued under the Plan (the "Shares") shall be
95,145 shares of the Company's authorized but unissued Common
Stock, par value of $.01 per share, subject to adjustment as
provided in Article 12 below. In the event that any
outstanding Option for any reason expires or is terminated,
the Shares allocable to the unexercised portion of such Option
or so repurchased shall again be available for issuance under
the Plan.
All other provisions of the Plan shall remain in full force and
effect.
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 1 TO ACCUMED INTERNATIONAL, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
AMENDMENT NO. 1 (this "Amendment") to the AccuMed International, Inc.
(formerly "Alamar Biosciences, Inc.," the "Company") Amended and Restated 1992
Stock Option Plan (the "Plan") dated February 20, 1997.
WHEREAS, the Plan currently provides for the grant of options to
purchase up to an aggregate of 505,000 shares of the Company's common stock,
par value of $.01 per share (the "Common Stock");
WHEREAS, on February 20, 1997, the Compensation Committee of the Board
of Directors adopted resolutions amending the Plan to decrease the number of
shares available under the Plan by 29,447 shares; thereby providing for the
grant of options to purchase an aggregate of 475,553 shares of the Common
Stock;
NOW, THEREFORE, in accordance with Article 11 of the Plan, the Plan
is hereby amended as follows:
1. Article 4 of the Plan is hereby deleted in its entirety and
the following is inserted in lieu thereof:
Article 4. Shares Reserved. The maximum number of shares
that may be issued under the Plan (the "Shares") shall be
475,553 shares of the Company's authorized but unissued Common
Stock, par value of $.01 per share, subject to adjustment as
provided in Article 12 below. In the event that any
outstanding Option for any reason expires or is terminated,
the Shares allocable to the unexercised portion of such Option
or so repurchased shall again be available for issuance under
the Plan.
All other provisions of the Plan shall remain in full force and
effect.
<PAGE> 1
EXHIBIT 10.25
AMENDMENT NO. 2
AMENDMENT NO. 2 entered into as of October 10, 1996, with an effective
date of August 6, 1996 (the "Effective Date") to COLLABORATION AGREEMENT AND
WORLDWIDE EXCLUSIVE LICENSE dated March 22, 1994 (the "Collaboration
Agreement"), as amended by AMENDMENT NO. 1 to the Collaboration Agreement dated
April 12, 1995, by and between ACCUMED INTERNATIONAL, INC. (the successor to
Alamar Biosciences, Inc. ("Alamar")) and G&G DISPENSING, INC. ("G&G").
WHEREAS, the parties desire to amend certain of their respective
rights and obligations under the Collaboration Agreement and certain related
agreements;
NOW THEREFORE, in consideration of the premises and the mutual
promises set forth herein, the parties agree as follows:
1. For the purposes of this Amendment No. 2, Accumed
International, Inc. shall be defined as "Accumed". The parties agree that all
references to "Alamar" in the Collaboration Agreement, Amendment No. 1, the
Securities Purchase Agreement dated March 22, 1994 between G&G and Alamar (the
"Securities Purchase Agreement"), the Warrant issued by Alamar to G&G dated
March 22, 1994 (the "Warrant"), and the Escrow Agreement dated March 22, 1994
among G&G, Alamar and Hackmyer & Nordlicht (the "Escrow Agreement") are
intended to mean Accumed.
2. There will be no development, manufacture or sale of an
Actuator by the parties in connection with the Product or otherwise pursuant to
the Collaboration Agreement, and all references to an Actuator are therefore
deleted in their entirety.
3. The definition of the following term is hereby added to the
Collaboration Agreement as new Section 1.2b:
1.2b "Commercially Viable Product" shall mean a Product which
can be manufactured by or on behalf of Accumed using reasonable
production tooling and production methods, for a per unit cost of
production no greater than $.75, which cost shall be comprised
exclusively of Accumed's costs for manufacturing labor and raw
materials associated with such production.
4. Section 5.2 of the Collaboration Agreement is hereby deleted
in its entirety. In satisfaction and lieu of the monthly payments and expenses
contemplated therein, Accumed shall pay G&G, as compensation for its activities
in accordance with Section 2.2 of the Collaboration Agreement, the aggregate
sum of $26,750, representing G&G's time and out-of-pocket expenses devoted to
such activities, provided that G&G promptly submits to Accumed an invoice
itemizing time costs and expenses.
<PAGE> 2
5. Section 5.3(a) of the Collaboration Agreement is hereby
deleted in its entirety and replaced with the following:
(a) Amount. Accumed shall pay to G&G a non-refundable, except as
provided in Paragraph 14 of this Amendment No. 2, minimum annual
royalty for each twelve month period commencing August 1, 1996,
payable quarterly as described in Section 5.3(c) of the Collaboration
Agreement as follows:
i. First three twelve month periods: $25,000;
ii. Fourth twelve month period: $50,000; and
iii. Fifth twelve month period and each additional twelve
month period through the term of this Agreement as
defined in Section 12 below: $100,000.
6. Section 5.3(c) of the Collaboration Agreement is hereby
deleted and replaced with the following:
Accumed shall pay to G&G no later than the 30th day following the end
of each quarter based on a year beginning August 1, twenty five
percent (25%) of each year's minimum annual royalty. All payments
made under this Section 5.3 of this Agreement shall be made and
transmitted as described in Section 5.1 hereof. For the purpose of
clarity, payments under Section 5.3 are due no later than thirty (30)
days after each August 1, November 1, February 1 and May 1.
7. Section 5.4(a)(i) of the Collaboration Agreement is hereby
deleted in its entirety.
8. Section 5.4(a)(ii) of the Collaboration Agreement is hereby
deleted and replaced with the following:
ii. for each Disposable sold
[a] ten cents ($.10) each for the first 250,000
Disposables sold (1 - 250,000);
[b] eighteen cents ($.18) each for the next
750,000 Disposables sold (250,001 - 1,000,000)
and
[c] twenty two cents ($.22) each for Disposables
sold in excess of 1,000,000.
9. Section 5.4(b) of the Collaboration Agreement is hereby
deleted in its entirety and Section 5.4(c) of the Collaboration Agreement is
hereby renumbered as Section 5.4(b).
2
<PAGE> 3
10. Section 5.4(d)(i) of the Collaboration Agreement is hereby
amended by deleting the first sentence thereof and replacing it with the
following sentence:
i. Accumed will remit to G&G either the royalties payable under
this Section 5.4 or, if higher, twenty five percent (25%) of the
applicable minimum annual royalty specified in Section 5.3(a) hereof,
quarterly within thirty (30) days after the end of each quarter,
commencing with the quarter beginning August 1, 1996.
11. In the event Accumed breaches any of the provisions of this
Amendment No. 2, each of the foregoing terms shall be deemed null and void and
the original terms of the Collaboration Agreement replaced by this Amendment
No. 2 shall be reinstated. In such case, Accumed shall be responsible for all
payments due under the original terms of the Collaboration Agreement as though
this Amendment No. 2 had never been executed, and will immediately pay G&G all
amounts which would have been payable under the original terms of the
Collaboration Agreement (less any amounts otherwise paid by Accumed under the
terms of this Amendment No. 2).
12. (a) Accumed hereby grants G&G the unlimited right to
utilize Accumed's manufacturing facility in Westlake, Ohio and the tooling,
equipment and/or personnel located at such facility, for the production of the
Product or similar products for any and all purposes except those involving
minimum inhibitory concentration tests. Accumed will bill G&G for only (i) the
actual cost to Accumed of the labor and materials used by G&G in connection
with its use of Accumed's facility, tooling, equipment and/or personnel, plus
(ii) a surcharge of five percent (5%) on such actual labor and materials costs,
such billing to be done through a monthly detailed invoice. Notwithstanding
the foregoing, Accumed shall be under no obligation to make its facilities and
resources available to G&G to the extent that doing so would exceed Accumed's
manufacturing capacity or would result in Accumed's inability to satisfy demand
for the Product.
(b) If Accumed at any time discontinues manufacturing or
subcontracting the manufacture of the Product:
(i) Accumed shall notify G&G in writing that it
has discontinued the Product. G&G shall have the right, to be exercised within
ninety (90) days after receiving Accumed's notice, to purchase the tooling and
equipment previously utilized by Accumed in manufacturing the Product for its
fair market value, and Accumed will not unreasonably refuse to sell or deliver
the tooling and equipment to G&G.
(ii) If Accumed intends to sell the tooling and
equipment previously utilized by Accumed in manufacturing the
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<PAGE> 4
Product to a third party, it will give written notice of such intent to G&G,
specifying the terms of sale and identity of the prospective purchaser, and G&G
will have a right of first refusal to purchase the tooling and equipment on the
terms set forth in the notice, such right to be exercised within thirty (30)
days after receipt of Accumed's notice by delivery of written notice of
acceptance by G&G to Accumed. If G&G does not exercise such right, Accumed
will be free to sell the tooling and equipment to the third party identified in
its notice on the terms and conditions set forth therein.
13. The parties confirm that Phase II and a portion of Phase III,
as described in the Collaboration Agreement, has been completed. Reference is
hereby made to Section 5.5(a) of the Collaboration Agreement, Section 2.3 of
the Securities Purchase Agreement and Section 3 of the Escrow Agreement. The
parties acknowledge that 29,000 Shares have previously been released from
escrow to G&G and that the remaining 116,000 Shares are in escrow. The parties
agree that 72,500 Shares in escrow, representing the 40% holdback pending
completion of Phase II and one-half of the 20% holdback pending completion of
Phase III, will be released from escrow and delivered to G&G on the earliest
day that such Shares may be freely sold by G&G (it being understood that such
Shares are currently subject to a lock-up agreement between Accumed and G&G).
The Escrow Agent identified in the Escrow Agreement is hereby authorized to
release such 72,500 Shares upon the expiration of the lock-up period without
any further action being necessary on the part of Accumed or G&G. The
remaining 43,500 Shares will be released to G&G as follows: 14,500 Shares will
be released upon the completion of molds and when a working prototype of the
Product exists, and 29,000 Shares will be released upon completion of Phase IV,
the date of the First Commercial Sale of the Product. Accumed and G&G will
provide joint written instructions to the Escrow Agent advising that the
applicable milestone has been obtained and directing that the corresponding
number of Shares and, if Phase IV has been completed, the Warrant, be released
to G&G.
14. Section 12.2(a)(ii) of the Collaboration Agreement is hereby
deleted in its entirety and Section 12.2(a)(iii) is renumbered as Section
12.2(a)(ii). Instead, either party shall have the right to terminate the
Collaboration Agreement by notice in writing to the other party in the event
that Phase IV is not completed on or before eighteen (18) months from the date
of this Amendment No. 2 (i.e., April 10, 1998); provided, however, that no
party may exercise such right of termination if it has not in good faith and
with reasonable diligence cooperated and pursued the development of the
Product. If G&G terminates the Collaboration Agreement because of Accumed's
failure to cooperate or diligently pursue the development of the Product, G&G
will be entitled to receive (i) as liquidated damages for all liability of
Accumed to
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<PAGE> 5
G&G arising prior to the date of this Amendment No. 2, the sum of $93,684.18
(representing the amount currently owed by Accumed to G&G which G&G is
foregoing at Accumed's request in connection with this Amendment No. 2
($120,434.18), less the $26,750 to be paid to G&G pursuant to Section 3 of this
Amendment) and (ii) all out-of-pocket expenses for materials and all royalties
accrued and owing from the date of this Amendment No. 2 through the date of
such termination. If Accumed terminates the Collaboration Agreement because of
G&G's failure to cooperate or diligently pursue the development of the Product
or because a Commercially Viable Product has not been developed within the
allotted time period set forth in this Agreement through no fault of Accumed,
(i) all of the Shares and the Warrant remaining in escrow shall be forfeit by
G&G and (ii) G&G shall promptly refund to Accumed all minimum annual royalties
paid by Accumed pursuant to Section 5.3 hereof.
15. Section 12.2(a) of the Collaboration Agreement is hereby
amended by adding a new subparagraph (iv) thereto as follows:
iv. in the event that the license granted to Accumed
under this Agreement is rendered non-exclusive pursuant to Accumed's
failure to pay $200,000 in royalties from and after the ninth year of
this Agreement (beginning July 1, 2002) as specified in Section 5.3(b)
hereof.
16. Accumed agrees to pay $20,250 to attorney Eric Shellin for
costs associated with obtaining foreign patent protection for the Product. All
foreign patents applied for and/or granted are identified on Schedule A hereto
by a description of the country and date of filing, and application and/or
registration number. Except as agreed to above, Section 9 of the Collaboration
Agreement shall remain in full force and effect.
17. The payments to be made by Accumed under Sections 3 and 18
above will be made upon the earlier of (i) the closing of a public or private
offering of stock by Accumed or (ii) October 15, 1996.
18. Accumed agrees to pay G&G for its President, Jack Goodman, to
develop an assembly line method for producing the Product in accordance with
the cost estimates set forth in Mr. Goodman's letter to Accumed dated July 29,
1996, a copy of which is attached hereto as Exhibit 1. Accumed will purchase
and own all of the materials and equipment related to such development.
Accumed will pay G&G at the rate of $100.00 per hour for Mr. Goodman's services
and will reimburse all reasonable and related out-of-pocket expenses incurred
by Mr. Goodman and/or G&G in connection therewith (including but not limited to
travel expenses) within thirty (30) days after G&G's delivery of an invoice
therefor. The total cost of such development activities, including all
necessary production equipment and set-up costs (except costs relating to the
manufacture of the mold), is estimated to be approximately $119,000 plus travel
expenses. Without limiting the foregoing, Accumed
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<PAGE> 6
shall pay G&G a bonus if the production line is completed and operational prior
to specified dates as follows: (i) a bonus of $20,000 for completion within 11
months of the date of this Amendment No. 2 (by September 10, 1997); or (ii) a
bonus of $10,000 for completion within 15 months of the date of this Amendment
No. 2 (by January 10, 1997).
19. Accumed hereby agrees to pay all legal fees and disbursements
of Hackmyer & Nordlicht for legal services rendered in connection with the
negotiation and preparation of this Amendment No. 2.
20. The Collaboration Agreement, Securities Purchase Agreement and
Escrow Agreement are hereby amended to provide that all notices permitted or
required to be sent to Accumed shall be sent to Accumed International, Inc.,
900 North Franklin, Suite 401, Chicago, Illinois 60610, Attention: Peter
Gombrich, Chief Executive Officer, Facsimile No. (312) 642-8684.
21. Except as amended hereby, the Collaboration Agreement,
Securities Purchase Agreement, Escrow Agreement and Warrant shall remain in
full force and effect. The terms of the Collaboration Agreement shall apply to
this Amendment No. 2, except to the extent that any of such terms are
contradictory herewith, in which event the terms of this Amendment No. 2 shall
prevail.
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<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the date first above written, to be effective as of the Effective Date.
G&G DISPENSING, INC.
By: /s/Jack Goodman
-----------------------------------
Name: Jack Goodman
--------------------------------
Title: President
--------------------------------
ACCUMED INTERNATIONAL, INC.
By: /s/Michael Burke
----------------------------------
Name: Michael Burke
--------------------------------
Title: President
-------------------------------
WITH RESPECT TO SECTIONS 13 and
21 ONLY
HACKMYER & NORDLICHT
By: /s/Brian M. Hand
----------------------------------
7
<PAGE> 8
SCHEDULE A
FOREIGN PATENT APPLICATIONS
Country Application No.
Canada Serial No. 2,166,144
Japan Hei 7-503044
EP Based on PCT/US94/07008
<PAGE> 1
EXHIBIT 10.33
PROMISSORY NOTE
U.S. $500,000.00 February 11, 1997
1. ACCUMED INTERNATIONAL, INC., a corporation duly incorporated and
existing under the laws of the State of Delaware, United States of America,
having its principal office at 900 N. Franklin, Suite 401, Chicago, Illinois,
U.S.A., 60610 (the "Debtor"), hereby promises to pay to or to the order of
ONCOMETRICS IMAGING CORP., a corporation duly continued and existing under the
laws of the Yukon Territory (the "Lender"), having its principal office at 505
- - 601 West Broadway Street, Vancouver, British Columbia, V5Z 4C2, or such other
place as the Lender may designate in writing, in lawful money of the United
States of America, the principal sum of FIVE HUNDRED THOUSAND (U.S.$500,000.00)
U.S. DOLLARS with interest on the unpaid principal amount outstanding from
time to time on the terms and conditions herein set forth.
2. This Note shall bear interest at the U.S. Prime Rate (as hereinafter
defined), calculated and compounded monthly, not in advance, commencing from
and including the date hereof (the "Interest Rate"). "U.S. Prime Rate" means
the annual rate of interest announced from time to time by The Canadian
Imperial Bank of Commerce as a reference rate then in effect for determining
interest rates on U.S. dollar commercial loans made in Canada.
3. Principal and interest on this Note shall be paid as follows:
(a) accrued interest at the Interest Rate shall be due and payable
on the last day of each and every calendar month, commencing
the month following the date of this Note, until the entire
principal balance and all accrued interest are paid in full;
and
(b) the entire principal balance and all accrued interest shall be
due and payable in full on May 12, 1997.
4. The Debtor shall have the right to prepay this Note in full or
in part at any time and from time to time without penalty.
5. This Note shall be in default, and all principal and accrued
interest then outstanding shall be immediately due and payable, if the payment
of any principal and/or accrued interest hereunder is not made when due or upon
the occurrence of any one or more of the following events:
(a) the Debtor fails to observe or perform any covenant,
agreement, condition or obligation in favour of the Lender,
whether or not contained in this Note or in the security
agreement between the Lender and Debtor of even date herewith
(the "Security Agreement"), including a failure to pay any
amount owing hereunder when due;
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<PAGE> 2
(b) any representation, warranty or statement made by or on behalf
of the Debtor to the Lender is incorrect in any material
respect as of the date made;
(c) the Debtor is in default under, or in material breach of any
of the terms of, any agreement, instrument or document in
favour of the Lender, the Debtor's bank or any other creditor
of the Debtor, including, without limitation, the Security
Agreement;
(d) the Debtor ceases or threatens to cease to carry on the
Debtor's business, or any material part thereof, or commits or
threatens to commit an act of bankruptcy;
(e) a receiver, receiver manager, trustee or similar official of
all or any part of the property of the Debtor is appointed;
(f) the Debtor becomes insolvent or files a proposal, a notice of
intention to file a proposal, or an assignment for the benefit
of creditors under applicable bankruptcy or similar
legislation, or a petition is filed, an order is made, a
resolution is passed, or any other step is taken for the
bankruptcy, liquidation, dissolution, winding-up or
reorganization of the Debtor or for any arrangement or
composition of the debts of the Debtor;
(g) the Lender believes in good faith and upon commercially
reasonable grounds that the prospect of payment of any amount
owing hereunder, or the performance of any other obligation of
the Debtor under this Note or the Security Agreement, is or is
about to be impaired or that there has been a material adverse
change in the condition, financial or otherwise, of the
Debtor; or
(h) the occurrence of any event of default under the Security
Agreement.
6. Failure to exercise any right the Lender may have or be entitled to in
the event of any default hereunder shall not constitute a waiver of such right
or any other right in the event of any subsequent default.
7. The Debtor hereby waives presentment for payment, protest and demand,
notice of protest, demand, dishonor and nonpayment of this Note. In any action
or proceeding to recover any sum herein provided for, no defense of adequacy of
security or that resort must first be had to security or to any other person
shall be asserted.
8. The obligation of the Debtor to pay each of the amounts owing
hereunder is absolute and unconditional and will not be affected by any
circumstance, including any set-off, claim, counterclaim, defence or other
right which the Debtor now or hereafter has against the Lender or anyone else
for any reason whatsoever.
9. The taking of a judgment against the Debtor on any of the agreements
herein contained will not operate as a merger of those agreements or affect the
Lender's right to recover the amounts owing hereunder (including interest at
the rate payable thereon).
10. Time is of the essence of this Note and each of the obligations
evidenced hereby.
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<PAGE> 3
11. This Note may only be amended by a document executed by both the
Lender and the Debtor.
12. The Debtor agrees to pay all costs, including reasonable legal fees on
a solicitor and own client basis, incurred by the Lender in connection with the
preparation, enforcement or collection of this Note, the Security Agreement or
any other agreements or documents relating hereto.
13. Any notices, requests, demands or other communications required or
permitted to be sent hereunder or under any related document shall be delivered
personally, sent by telefax, sent by overnight courier or mailed by registered
or certified mail, return receipt requested, to such address as set out on page
one of this Note or such other address either party hereto shall from time to
time notify the other, and shall be deemed to have been received on the day of
personal delivery, when sent by telefax on the day when confirmation is
received, one (1) business day after deposit with an overnight domestic courier
or five (5) days after deposit in the mail, as the case may be.
14. This Note shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein. The Debtor and Lender hereby irrevocably attorn to the jurisdiction
of the courts of the Province of British Columbia and consent to service of
process in any manner authorized by British Columbia law.
15. This Note shall be binding upon and enure to the benefit of the Lender
and Debtor and their respective successors and assigns.
16. The Lender has not made any representation or agreement or undertaken
any obligation in connection with the subject matter of this Note other than as
specifically set out herein.
DATED February 11, 1997.
ACCUMED INTERNATIONAL, INC.
By:/s/ Peter P. Gombrich
-------------------------------------
Authorized Signatory
By:/s/ Leonard R. Prange
-------------------------------------
Authorized Signatory
3
<PAGE> 1
EXHIBIT 10.34
SECURITY AGREEMENT
This Security Agreement ("Agreement") made February 11, 1997 by
ACCUMED INTERNATIONAL, INC., a corporation duly incorporated and existing
under the laws of the State of Delaware, United States of America ("Debtor"),
with its principal place of business at 900 North Franklin Street, Suite 401,
Chicago, Illinois 60610, in favor of ONCOMETRICS IMAGING CORP., a corporation
duly incorporated and existing under the laws of the Yukon Territory, Canada
("Secured Party"), with its principal place of business at 505-601 West
Broadway Street, Vancouver, British Columbia, Canada V5Z 4C2.
RECITAL: Debtor has executed a certain Promissory Note of even date
herewith made payable to Secured Party (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Note"), providing
for the making of a $500,000 term loan to Debtor. It is a condition precedent
to the making of such loan that Debtor shall have granted the security interest
contemplated by this Agreement.
1. DEFINITIONS
1.1 General Definitions. When used herein, the following terms
shall have the following meanings:
(a) "Accounts" shall mean all present and future accounts
receivable and other rights of Debtor to payment for goods sold or
leased or for services rendered, which are not evidenced by
instruments or chattel paper, and whether or not they have been earned
by performance.
(b) "Account Debtor" shall mean the party who is
obligated on or under an Account.
(c) "Code" shall mean the Uniform Commercial Code as in
effect in the State of Illinois from time to time.
(d) "Collateral" shall mean all property and interests in
property in which a security interest is granted to Secured Party by
Debtor hereunder or under any of the other Financing Agreements.
(e) "Default" shall mean the occurrence or existence of
any of the following (i) any event described in Paragraph 5 of the
Note, (ii) at any time, for any reason, this Agreement ceases to be in
full force and effect or the Debtor seeks to repudiate its obligations
hereunder or the Debtor seeks to render the Liens intended to be
created hereby invalid or unperfected or (iii)
<PAGE> 2
Liens in favor of the Secured Party contemplated by this Agreement
shall, at any time, for any reason, be invalidated or otherwise cease
to be in full force and effect with respect to any material portion of
the Collateral, or such Liens shall be subordinated or shall not have
the priority contemplated by this Agreement.
(f) "Equipment" shall mean all of Debtor's tangible
personal property, including, without limitation, equipment,
machinery, furniture and fixtures, together with any and all
accessions, parts and appurtenances thereto, wherever located, which
property is used or bought for use in the business of Debtor, other
than Inventory.
(g) "Financing Agreements" shall mean the Note and all
other agreements, instruments and documents executed by or on behalf
of Debtor and delivered to Secured Party in connection therewith,
including, without limitation, this Agreement.
(h) "General Intangibles" shall mean all general
intangibles, choses in action, causes of action, contract rights and
all other intangible personal property of Debtor of every kind and
nature (other than Accounts, Investment Property and capital stock or
other interests of Debtor in Secured Party, Accumed International
Limited or any other subsidiary or affiliate of Debtor), including,
without limitation, corporate or other business records, inventions,
designs, patents, patent applications, service marks, service mark
applications, trademarks, trademark applications, trade names, trade
secrets, goodwill, registrations, copyrights, copyright applications,
licenses, franchises, customer lists, computer software, files, disks,
tapes, drawings, blueprints, manuals, technology, data, proprietary
information, know-how, formulas, specifications, research and
development reports, tax refund claims, tax refunds, and the like,
wherever located.
(i) "Inventory" shall mean all inventory, goods,
merchandise and other personal property now owned or hereafter
acquired by Debtor which is held for sale or lease, furnished under
any contract of service or held as raw materials, work in process,
supplies or materials used or consumed in Debtor's business, wherever
located.
(j) "Investment Property" shall mean all securities,
whether certificate or uncertificated, securities entitlements,
financial assets, securities accounts, commodities contracts and
commodities accounts other than capital stock or other interests of
Debtor in Secured Party, Accumed International Limited or any other
subsidiary or affiliate of Debtor.
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<PAGE> 3
(k) "Liabilities" shall mean all liabilities, obligations
and indebtedness of any and every kind and nature that arise under the
Note, this Agreement or any other Financing Agreement, whether
heretofore, now or hereafter owing, arising, due or payable from
Debtor to Secured Party.
(l) "Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, conditional sale agreement, deposit
arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever in respect
of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capitalized lease
or under any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing
statement or similar notice, under the Code or other comparable law
of any jurisdiction.
(m) "Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, limited liability company, corporation,
institution, entity, party, or government (whether national, federal,
state, provincial, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or
department thereof).
1.2 Other Terms. All other terms contained in this Agreement,
where the context so indicates (unless otherwise specifically defined herein),
shall have the meanings provided by the Code to the extent the same are used or
defined therein.
2. COLLATERAL
2.1 Security Interest. To secure payment and performance of
Debtor's Liabilities, Debtor hereby grants to Secured Party a continuing
security interest in and to the following property and interests in property:
all of Debtor's now owned and hereafter existing or acquired Accounts, General
Intangibles, Investment Property, Inventory, Equipment, documents, instruments,
chattel paper, cash, deposit accounts, and any and all property of Debtor now
or hereafter in the possession of, or pledged or assigned to Secured Party, and
all products, replacements and proceeds of, and accessions and additions to,
any of the foregoing property and interests in property, together with all of
Debtor's books and records relating to any of the foregoing property.
2.2 Financing Statements. Debtor will execute and deliver to
Secured Party such financing statements or amendments thereof or supplements
thereto, and such other instruments as Secured Party may from time to time
require in order to preserve, protect and maintain the security interest hereby
granted. Debtor further agrees that a
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<PAGE> 4
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Representations and Warranties. Debtor hereby represents and
warrants to Secured Party that:
(a) The Debtor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
(ii) is duly qualified to do business as a foreign corporation and is
in good standing under the laws of Illinois and each jurisdiction in
which the nature of the Debtor's business or the ownership of property
requires such qualification, and (iii) has all requisite corporate
power and authority to own, operate and encumber its property and to
conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the
transactions contemplated by the Note and this Agreement.
(b) The Debtor has the requisite corporate power and
authority to execute, deliver and perform each of the Note, this
Agreement and each document which is to be executed by it in
connection with either of them. The execution, delivery, performance
and filing, as the case may be, of each such document have been duly
approved by the Executive Committee of the board of directors of the
Debtor and such approval has not been rescinded. No other corporate
action or proceedings on the part of the Debtor is necessary to
consummate such transactions. Each of the Note, this Agreement and
each document which is to be executed by the Debtor in connection with
either of them has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, is in full force and effect.
(c) The execution, delivery and performance of each of the
Note, this Agreement and each document which is to be executed by the
Debtor in connection with either of them do not and will not (i)
conflict with the Debtor's certificate of incorporation or by- laws,
(ii) any law known to the Debtor to be applicable to, or binding on,
its business or the Collateral or any contractual restriction binding
on or affecting the Debtor, or (iii) result in or require the creation
or imposition of any lien, encumbrance or security interest whatsoever
upon any of the property or assets of the Debtor, other than Liens
contemplated by the Note or this Agreement.
(d) The Debtor is and will be the owner of, and has and will
have good and marketable title to, the Collateral except for
Collateral sold in the ordinary course of business. The Debtor is the
legal and beneficial owner of the Collateral free and clear of any
Lien or other interest of a third party, except for the security
interest created by this Agreement and the Liens identified on
Schedule A. No financing
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<PAGE> 5
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office on the date
hereof, except such as may have been filed in favor of (i) Secured
Party and (ii) as set forth on Schedule A.
(e) The office where Debtor keeps its records concerning
the Collateral and Debtor's principal place of business and chief
executive office are and will be located at the address(es) set forth
on Schedule B attached hereto and made a part hereof. All of Debtor's
other places of business and all other places where Collateral is kept
are located at the addresses set forth on Schedule B except for
Inventory in transit. The amount represented by the Debtor from time
to time to Secured Party as the amount owing by each account debtor or
by all account debtors in respect of any Accounts will, at such time,
be the correct amount actually and unconditionally owing by such
account debtor(s) thereunder to the best of the Debtor's knowledge
(except to the extent, if any, that such account debtor(s) may be
entitled to normal trade discounts, adjustments, returns and
allowances).
(f) The correct corporate name of the Debtor on the date
hereof is AccuMed International, Inc. and the Debtor will not use any
other corporate or fictitious name other than AccuMed, Alamar and
Sensititre. The Debtor will not change its name, identity or structure
in any manner without the prior written consent of the Secured Party
which shall not be unreasonably withheld, provided, that, as a
condition to the effectiveness of any such consent, the Debtor shall
execute and deliver to the Secured Party, at the Debtor's expense,
any financing statements or other documents requested by the Secured
Party reasonably necessary or desirable to maintain the validity,
perfection and priority of the Liens intended to be created hereby.
(g) This Agreement, together with the filing of a financing
statement with the offices of the Secretary of State of Illinois, the
Secretary of State of Ohio and the County Recorder of Cuyahoga County,
Ohio, upon the giving of value to the Debtor by Secured Party, creates
a valid and perfected security interest in the Collateral (other than
Inventory in transit outside the States of Illinois and Ohio and
Collateral in which a security interest may not be perfected by filing
a financing statement under the Code and the Uniform Commercial Code
as in effect in the State of Ohio), securing the payment of the
Secured Obligations.
(h) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing
with, any governmental authority is required (i) for the grant by the
Debtor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Debtor, (ii) for the
perfection or, except for the filing of the appropriate continuation
statements with respect to the financing statements described in
clause (g) above, maintenance of the security interest created hereby
(including the maintenance of the relative priority of
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<PAGE> 6
such security interest) or (iii) for the exercise by Secured Party of
its rights and remedies hereunder.
(i) The Debtor has delivered to the Secured Party a draft of
financial statements for the fiscal year ending December 31, 1996. All
such financial statements were prepared in all material respects in
conformity with United States generally accepted accounting
principles, except as otherwise noted therein, and fairly present in
all material respects the respective consolidated financial position,
and the consolidated results of operations and cash flows for the
period covered thereby of the Debtor and its subsidiaries as at the
respective dates thereof. All assets shown under the headings
"Chicago" and "Cleveland" in such financial statements are assets
owned by the Debtor. The Debtor has no contingent liability or
liability for any taxes, long-term leases or commitments, not
reflected in such financial statements or otherwise disclosed to the
Secured Party in writing, which will have or is reasonably likely to
have a material adverse effect on the financial condition, operations,
assets or prospects of the Debtor or any of its Subsidiaries. As of
the date hereof, the Debtor does not anticipate the final versions of
such financial statements will differ in any material respect from
such drafts so delivered to the Secured Party.
(j) The Debtor has obtained, and will maintain, insurance
with responsible companies in such amounts and against such risks as
are customarily carried by corporations engaged in similar businesses
similarly situated.
(k) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived in writing.
3.2 Covenants. Until performance, payment and/or
satisfaction, in full, of the Liabilities, Debtor covenants and agrees as
follows:
(a) Debtor will at all times keep accurate and complete
records and books of account with respect to all of Debtor's business
activities, in accordance with sound accounting practices and
generally accepted accounting principles. Such records and accounts
will be maintained at the address of Debtor set forth at the beginning
of this Agreement.
(b) Secured Party, or any Person designated by it, shall
have the right, from time to time and upon reasonable notice, to call
at Debtor's place or places of business during reasonable business
hours, and, without hindrance or delay, to inspect, audit, check and
make extracts from Debtor's books, records, journals, orders, receipts
and any correspondence and other data relating to Debtor's business or
to any transactions between the parties hereto, and shall have the
right to make such verification concerning the Collateral as Secured
Party may consider reasonable
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<PAGE> 7
under the circumstances, all at Debtor's expense. Debtor will furnish
to Secured Party such information relevant to the Collateral as
Secured Party may from time to time reasonably request, including,
without limitation, the original delivery or other receipts and
duplicate invoices relating to the Accounts.
(c) Debtor will keep the Collateral in good condition,
repair and order, ordinary wear and tear excepted; will not permit the
Collateral, or any party thereof, to be levied upon under execution,
attachment, distraint or other legal process; and will not sell,
lease, grant a security interest in or otherwise dispose of the
Collateral, or any part thereof, except as expressly permitted in this
Agreement or in any of the other Financing Agreements. Debtor will
not permit any of the Collateral to be kept at any location other than
locations specified on Schedule B without the prior written consent of
the Secured Party.
4. SALES, COLLECTIONS AND REPORTS
4.1 Sale of Inventory. Debtor may, in the ordinary
course of its business, and at its own expense, sell any of the Inventory
normally held by Debtor for such purpose, and use and consume, in the ordinary
course of its business, any Inventory normally held by Debtor for such purpose.
4.2 Collection of Accounts. Debtor may collect its
Accounts, but only in the ordinary course of its business and only until such
time, upon or after the occurrence of a Default, as such privilege is revoked,
in whole or in part, by Secured Party's notification to Account Debtors to make
payments directly to Secured Party. Debtor will take such action with respect
to the collection of those Accounts and of the proceeds thereof, as Secured
Party may request.
4.3 Notification of Account Debtors. Secured Party shall
have the right, at any time or times after the occurrence of a Default and
while it is continuing, to notify all Account Debtors that Accounts have been
assigned to Secured Party and that Secured Party has a security interest
therein; to direct all such Account Debtors to make payments to Secured Party
of all or any part of the sums owing Debtor by such Account Debtors; to enforce
collection of any of the Accounts by suit or otherwise; to surrender, release
or exchange all or any part of such Accounts; or to compromise, settle, extend
or renew for any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby.
4.4 Endorsement by Secured Party. Debtor hereby
authorizes Secured Party to indorse, in the name of Debtor, any item, howsoever
received by Secured Party, representing payment on or other proceeds of any of
the Collateral.
4.5 Notice of Loss. Debtor will deliver to Secured
Party, at such times and in such form as shall reasonably be designated by
Secured Party, assignments,
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<PAGE> 8
schedules and reports relating to the Collateral. Upon request by Secured
Party, Debtor will mark its books and records to reflect the security interest
of Secured Party in the Accounts. Debtor will promptly notify Secured Party
of any substantial loss or depreciation in the value of the Collateral.
4.6 Return of Goods. Debtor shall promptly report to
Secured Party the return or repossession of any goods, the sale or lease of
which shall have given rise to any Account. Secured Party shall have a
security interest in all such goods.
5. DEFAULT; REMEDIES
5.1 Remedies. In the event a Default shall occur and
while it is continuing:
(a) All Liabilities may (notwithstanding any provisions
thereof), at the option of Secured Party, and without demand, notice
or legal process of any kind, be declared, and immediately shall
become, due and payable, and Secured Party may exercise from time to
time any rights and remedies available to it under applicable laws or
in equity, including, without limitation, the Code, in addition to,
and not in lieu of, any rights and remedies expressly granted in this
Agreement, in any of the other Financing Agreements, or otherwise, all
of which remedies shall be cumulative.
(b) Without notice, demand or legal process of any kind,
Secured Party, its nominee, designee or agent may take possession of
any or all of the Collateral (in addition to Collateral of which it
may already have possession), wherever it may be found, and for that
purpose may pursue the same wherever it may be found, and may, without
a breach of the peace, enter onto any of Debtor's premises
("Premises") where any of the Collateral is or may be located, and
search for, and take possession of, any or all of the Collateral until
the same shall be sold or otherwise disposed of. Secured Party, its
nominee, designee or agent shall have the right to remove any or all
of the Collateral from the Premises and/or to assemble and store the
Collateral on the Premises, and otherwise to operate, occupy and use
the Premises, in connection with public or private sales of the
Collateral, all without cost to Secured Party, its nominee, designee
or agent.
(c) At Secured Party's request, Debtor will, at Debtor's
expense, assemble the Collateral at one or more places, reasonably
convenient to both parties, where the Collateral may, at Secured
Party's option, remain, at Debtor's expense, pending sale or other
disposition thereof.
(d) Debtor acknowledges that any breach by Debtor of any
of the provisions of this Section 5.1 will cause irreparable injury to
Secured Party, and that there is not adequate remedy at law for a
breach of the provisions of such Section.
- 8 -
<PAGE> 9
Debtor agrees that Secured Party will have the immediate right, upon
such breach, to obtain injunctive and other equitable relief in any
court of competent jurisdiction without any requirement of notice, and
that the granting of any such relief shall not preclude Secured Party
from pursuing any other available relief or remedies for such breach.
5.2 Sale of Collateral. Any notification required by law
of intended sale, lease or other disposition by or on behalf of Secured Party
of any of the Collateral shall be deemed reasonably and properly given if
mailed, postage prepaid, to Debtor at Debtor's address set forth at the
beginning of this Agreement, at least ten (10) calendar days before such sale,
lease or other disposition. Notice sent in such manner shall be deemed
received on the fifth business day following the day of deposit in the mails.
Any proceeds of any sale, lease or other disposition by Secured Party of any of
the Collateral may be applied by Secured Party to the payment of expenses in
connection with the Collateral, including, without limitation, reasonable
"attorneys' fees" (as defined in Section 5.3 below) and legal expenses. Any
balance of such proceeds may be applied by Secured Party toward the payment of
the Liabilities in the manner set forth in Section 7.5 below. Debtor shall
remain liable for any deficiency, and Secured Party shall account for any
surplus.
5.3 Attorneys' Fees; Costs and Expenses. As used in this
Agreement, "attorneys' fees" shall be defined as the reasonable value of the
services of the attorneys employed by Secured Party, from time to time, to
commence, defend or intervene in any court proceeding, or to file a petition,
complaint, answer, motion or other pleadings, or to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise) relating to
the Collateral, this Agreement, the Note, or any of the other Financing
Agreements, or to protect, collect, lease, sell, take possession of, or
liquidate any of the Collateral or to attempt to enforce any security interest
in any of the Collateral, or to enforce any rights of Secured Party to collect
any of the Liabilities. Such attorneys' fees, and any expenses, costs and
charges relating thereto, including, without limitation, all fees of all
paralegals and other staff employed by such attorneys, and all other costs and
expenses incurred by Secured Party with respect to the enforcement, collection
or protection of its interests in the Collateral shall be repayable by Debtor
to Secured Party on demand, shall be additional Liabilities and shall be
secured by the Collateral.
5.4 Waiver of Bonds. IN THE EVENT SECURED PARTY SEEKS TO
TAKE POSSESSION OF ANY OR ALL OF THE COLLATERAL BY COURT PROCESS, TO OBTAIN ANY
INJUNCTION OR OTHER EQUITABLE RELIEF REQUIRING DEBTOR TO COMPLY WITH ANY OR ALL
OF THE TERMS AND PROVISIONS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTION 5.1 ABOVE, OR OTHERWISE TO COMPLY WITH APPLICABLE LAW, DEBTOR HEREBY
IRREVOCABLY WAIVES ANY BONDS AND ANY SURETY THEREON OR SECURITY RELATING
THERETO WHICH IS REQUIRED OR ALLOWED BY ANY STATUTE, COURT RULE OR OTHERWISE AS
AN INCIDENT TO SUCH POSSESSION OR INJUNCTION, AND WAIVES ANY DEMAND FOR
- 9 -
<PAGE> 10
POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH
RESPECT THERETO.
5.5 Waiver of Demand. Demand, presentment, protest and
notice of nonpayment is hereby waived by Debtor. Debtor also waives the
benefit of all valuation, appraisement and exemption laws.
5.6 Waiver of Notice. IN THE EVENT OF A DEFAULT
(PURSUANT TO AUTHORITY GRANTED BY ITS BOARD OF DIRECTORS), DEBTOR HEREBY WAIVES
ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY SECURED
PARTY OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO
REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL WITHOUT PRIOR NOTICE OR HEARING,
EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5.2. DEBTOR ACKNOWLEDGES THAT IT HAS
BEEN ADVISED BY COUNSEL WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.
5.7 Grant of License. The Secured Party is hereby
granted a license and right to use, following the occurrence and during the
continuance of a Default, without payment of royalty or other compensation, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, customer lists and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral.
6. TERM
6.1 Term of Agreement. This Agreement shall continue in
full force and effect as long as any Liabilities are owing by Debtor to Secured
Party.
6.2 Termination. No termination of this Agreement shall
in any way affect or impair the rights and liabilities of the parties hereto
relating to any transactions or events which occurred prior to such termination
date or to any Collateral in which Secured Party has a security interest. All
agreements, warranties and representations of Debtor shall survive such
termination.
7. MISCELLANEOUS
7.1 Receipt of Payments. For purposes of determining the
amount of the Liabilities, including, without limitation, the computations of
interest which may from time to time be owing by Debtor to Secured Party, the
receipt of any check or any other item of payment by Secured Party shall not be
treated as a payment on account of the Liabilities until such check or other
item of payment is actually paid in collected funds. Any statement of account
rendered by Secured Party to Debtor relating to the Liabilities, including,
without limitation, all statements of balances owing, accrued interest,
expenses
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<PAGE> 11
and costs, shall be presumed to be correct and accurate and constitute an
account stated unless, within thirty (30) days after receipt thereof by Debtor,
Debtor shall deliver to Secured Party written objection thereto specifying the
error or errors, if any, contained in any such statement.
7.2 Successors and Assigns. Whenever in this Agreement
there is reference made to any of the parties hereto, such reference shall be
deemed to include, wherever applicable, a reference to the successors and
assigns of such party. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the successors and assigns of Debtor and
Secured Party.
7.3 Survival of Representations. All representations and
warranties of Debtor, and all terms, provisions, conditions and agreements to
be performed by Debtor contained herein, and in any of the other Financing
Agreements shall be true and satisfied at the time of the execution of this
Agreement, and shall survive the closing hereof and the execution and delivery
of this Agreement.
7.4 Governing Law; Severability. This Agreement shall be
construed in all respects in accordance with, and governed by, the laws and
decisions of the State of Illinois. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
7.5 Application of Payment. Debtor irrevocably waives
the right to direct the application of any and all payments at any time or
times hereafter received by Secured Party from Debtor, and Debtor does hereby
irrevocably agree that Secured Party shall have the continuing exclusive right
to apply and reapply any and all payments received at any time or times
hereafter against the Liabilities hereunder in such manner as Secured Party may
deem advisable, notwithstanding any entry by Secured Party upon any of its
books and records.
7.6 Invalidated Payment. Debtor agrees that to the
extent that Debtor makes a payment or payments to Secured Party, which payment
or payments, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to Debtor,
its estate, trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Liability or part thereof which has been paid,
reduced or satisfied by the amount so repaid shall be reinstated and included
within the Liabilities as of the date such initial payment, reduction or
satisfaction occurred.
7.7 Submission to Jurisdiction. DEBTOR CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
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<PAGE> 12
STATE OF ILLINOIS, AND DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON DEBTOR AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO DEBTOR AT ITS ADDRESS STATED AT THE BEGINNING OF
THIS AGREEMENT. SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO POSTED.
7.8 Notice. Except as otherwise provided for herein, any
statement, notice or other communication required or permitted hereunder shall
be in writing and may be personally served, sent facsimile transmission or
courier service or United States certified mail and shall be deemed to have
been given when delivered in person or by courier service, upon receipt of a
facsimile transmission, or seven (7) business days after deposit in the United
States or Canadian mail with postage prepaid and properly addressed. For the
purposes hereof, the addresses of the parties hereto shall be as follows:
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<PAGE> 13
If to the Debtor, at:
AccuMed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
Attention: Leonard R. Prange
Chief Financial Officer
Telecopier: (312) 642-8684
If to the Secured Party, at:
Oncometrics Imaging Corp.
505-601 West Broadway Street
Vancouver, British Columbia, Canada V5Z 4C2
Attention: President
Telecopier: (604) 875-9024
or, as to each party, at such other address as may be designated by such party
in a written notice to the other party to this Agreement in accordance with
this Section 7.8.
[The following page is the signature page]
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<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ Leonard R. Prange
-----------------------------------
Name: Leonard R. Prange
Title: Corporate Vice President and
Chief Financial Officer
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<PAGE> 15
SCHEDULE A
to
Security Agreement
dated February 11, 1997
Liens, Claims and Encumbrances
Against the Collateral
None, except:
(i) Liens for taxes not yet due or liens for taxes being
contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the
Debtor in accordance with generally accepted accounting principles;
(ii) Liens on property or assets of the Debtor that were
incurred in the ordinary course of business, such as carriers',
warehousemen's, landlords' and mechanics' liens and other similar
liens arising in the ordinary course of business and that (x) do not
in the aggregate materially detract from the value of the property or
assets subject thereto or materially impair the use thereof in the
operation of the business of the Debtor or (y) that are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property
or assets subject to such lien;
(iii) Liens (other than any lien imposed by the Employee
Retirement Income Security Act of 1974, as the same may be
supplemented or amended from time to time, or in connection with any
environmental violation), pledges or deposits incurred or made in
connection with workmen's compensation, unemployment insurance and
other social security benefits, or securing the performance of bids,
tenders, leases, contracts (other than for the repayment of borrowed
money), statutory obligations, progress payments, surety and appeal
bonds and other obligations of like nature, in each case incurred in
the ordinary course of business; and
(iv) Financing statement 003581568 filed with the Illinois
Secretary of State on August 21, 1996, naming the Debtor as debtor and
Nortech Telecommunications Inc., as secured party relating to certain
telephone equipment leased by the Debtor. All of the obligations of
the Debtor relating to such financing statement have been paid in
full.
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<PAGE> 16
SCHEDULE B
to
Security Agreement
dated February 11, 1997
Locations of Collateral and Books
and Records Concerning Collateral;
Debtor's Places of Business
----------------------------------
1. Locations of Collateral:
None, except:
900 North Franklin Street, Suites 401 and 403
Chicago, Illinois, U.S.A. 60610
920 North Franklin Street, Suite 405
Chicago, Illinois, U.S.A. 60610
29299 Clemens Road, Suite 1-K
Westlake, Ohio, U.S.A. 44145
2. Location of Books and Records Concerning the
Collateral and Debtor's Principal Place of Business and Chief Executive Office:
900 North Franklin Street, Suite 401
Chicago, Illinois, U.S.A. 60610
3. Debtor's Other Places of Business:
None.
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<PAGE> 1
EXHIBIT 10.35
CONVERTIBLE PROMISSORY NOTE
$6,000,000 February 28, 1997
FOR VALUE RECEIVED, Accumed International, Inc., a Delaware
corporation (the "Maker") hereby promises to pay to Robert L. Priddy and Edmund
H. Shea, Jr. (collectively the "Payee") having an address at 1800 Phoenix
Boulevard, Suite 126, Atlanta, Georgia (or at such other location as the Payee
may from time to time designate by notice in writing to the Maker), the
principal amount of Six Million Dollars ($6,000,000), together with interest
thereon from the date hereof at the rate of twelve (12%) percent per annum
payable on March 21, 1997 ( the "Maturity Date"); provided, however, that Maker
shall be required to prepay this Note upon the deposit into escrow for the
benefit of Maker of gross proceeds of at least Seven Million Dollars
($7,000,000) from any private placement of securities of Maker. Payment
hereunder shall be in such coin or currency of the United States of America as
at the time shall be legal tender for the payment of public and private debts.
This Note may be declared immediately due and payable by the Payee in
the event of an occurrence of an event of default under the Loan Agreement
between Maker and Payee, of even date herewith. All rights or remedies of the
Payee provided herein and in the Loan Agreement shall be cumulative, and the
exercise of any right or remedy shall not preclude the exercise of any other
right or remedy. From and after maturity, whether by acceleration or
otherwise, the principal balance hereunder shall, at Maker's option, bear
interest at the rate of eighteen percent (18%) per annum.
All payments required or permitted to be made under this Note or the
Loan Agreement shall be made to the address specified in the first paragraph of
this Note (or such other address as the Payee may from time to time designate
by notice in writing to the Maker). Maker shall have fully satisfied its
obligation with respect to any such payment by making payment in such manner.
Maker shall not be responsible or incur any liability (including, without
limitation, by way of any indemnification set forth in the Loan Documents) for
any allocation or misallocation of such payment, or any portion thereof, as
between the Payees or any other holder or holders of this Note.
This Note is issued subject to the following additional terms and
conditions:
1. Optional Conversion.
(a) Unless this Note has been paid in full, on or after
the date (the "Amendment Date") that Maker amends its certificate of
incorporation to increase the number of its authorized shares of Common Stock,
Payee shall have the right at its option to convert subject to the terms and
provisions hereof, all or a portion of the outstanding principal amount of this
Note, into shares of Maker's Common Stock at the conversion price hereinafter
provided.
(b) To convert the principal amount of this Note, in
whole or in part as provided herein at Payee's election, Payee shall surrender
this Note to Maker during usual business hours at the Maker's principal
executive office, accompanied by written notice (the "Conversion Notice") to
Maker in form reasonably satisfactory to Maker of the Payee's intention to
convert, stating the portion of the Note that is to be converted and the name
and address of each person in whose name a share or shares of stock issuable
upon such
<PAGE> 2
conversion is to be registered. At the time of conversion, simultaneous with
the issuance of the shares of Common Stock to be issued upon such conversion,
all accrued and unpaid interest on the principal amount to be converted shall
be paid to the Payee, whereupon the Payee shall return this Note marked
"canceled" to Maker.
(c) As promptly as practical after the surrender and
giving of notice to convert as herein provided, Maker shall deliver or cause to
be delivered at its office or agency maintained for that purpose to or upon
written order of Payee certificates representing the number of fully paid and
nonassessable shares of Common Stock of Maker into which said Note is converted
(which shares shall be free and clear of all liens) and, in the event of
partial conversion, a new Note in an aggregate principal amount equal to the
unconverted portion of said Note, dated as of the date of the Note and in all
other respects identical to the Note converted. The conversion shall be
available only for the principal amount of the Note.
(d) The conversion price for each share of Common Stock
issuable pursuant to the conversion of the Note shall be the closing price as
quoted in the Wall Street Journal at the close of business on the day prior to
Closing which shall be adjusted as provided in Section 3 hereof, and as
provided below (hereinafter called the "Conversion Price").
2. Reserved Shares.
(a) Maker covenants and agrees that as of the Amendment
Date, it shall have reserved and shall at all time thereafter reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of issuing such shares upon the conversion of this Note, the full
number of shares of Common Stock deliverable upon the conversion hereof. Maker
covenants and agrees that the shares of its Common Stock delivered upon
conversion of this Note shall, at the time of delivery of the certificates for
such shares of Common Stock, be validly issued and fully paid and nonassessable
shares of Common Stock. Maker further covenants and agrees that it will pay
when due and payable any and all Federal and state original issue taxes which
may be payable in respect of the issuance of this Note or any shares of Common
Stock upon the conversion of this Note.
(b) Each person in whose name any certificate for shares
of Common Stock is issuable upon the conversion of this Note shall for all
purposes be deemed to have become the holder of record of the Common Stock
represented thereby on, and such certificate shall be dated, the date upon
which the Note was duly surrendered and notice of conversion was given in
accordance with the provisions of this Note; provided, however, that if the
date of such surrender and notice is a date upon which the stock transfer books
of Maker are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
business day on which the stock transfer books of the Maker are open.
3. Adjustments to Conversion Price.
3.1 Certain Events. In case the Maker shall:
(i) declare a dividend of Common Stock on its
Common Stock,
(ii) subdivide outstanding Common Stock into a
larger number of shares of Common Stock by reclassification,
stock split or otherwise, or
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<PAGE> 3
(iii) combine outstanding Common Stock into a
smaller number of shares of Common Stock by reclassification
or otherwise,
the number of shares of Common Stock issuable and conversion price per share
upon conversion of this Note immediately prior to any such event shall be
adjusted proportionately so that thereafter Payee shall be entitled to receive
upon conversion of this Note the number of shares of Common Stock which Payee
would have owned after the happening of any of the events described above had
this Note been converted immediately prior to the happening of such event,
provided that the Conversion Price shall in no event be reduced to less than
the par value of the shares issuable upon conversion. An adjustment made
pursuant to this Section 3.1 shall become effective immediately after the
record date in the case of a dividend and shall become effective immediately
after the effective date in the case of a subdivision or combination.
3.2 Notice. In case Maker proposes to take any action
referred to in Section 3.1 above, or to effect the liquidation, dissolution or
winding up of the Maker, then Maker shall cause notice thereof to be mailed to
Payee, at Payee's address set forth above, at least ten (10) days prior to the
date on which the transfer books of Maker shall close or a record be taken for
such stock dividend or the date when such reclassification, liquidation,
dissolution or winding up shall be effective, as the case may be.
3.3 Statement of Adjustment. Whenever the Conversion
Price shall be adjusted as provided in Section 3.1 above, Maker shall forthwith
file at the office designated for the conversion of the Note, a statement,
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer or Secretary of the Company, showing in reasonable detail the facts
requiring such adjustment and the Conversion Price that will be effective after
such adjustment. Maker shall also cause a notice setting forth any such
adjustment to be sent by mail, first class, postage prepaid, to Payee at its
address set forth above. Where appropriate, such notice may be given in
advance and may be included as part of a notice required to be mailed under the
provisions of Section 3.2 hereof.
3.4 Fractional Shares. No fractional shares of Common
Stock shall be issuable upon conversion of this Note, but a payment in cash
will be made in respect of any fraction of a share which would otherwise be
issuable upon the surrender of this Note, or portion hereof, for conversion.
Such payment shall be based on the closing price for share of the Common Stock
at the time of conversion of this Note.
4. Prepayment Premium. This Note may be prepaid in whole at any
time, however, should the Note be prepaid prior to the Maturity Date (including
a prepayment required as a result of a deposit into escrow of gross proceeds of
a private placement of securities as described in the first paragraph of this
Note), Maker will pay a prepayment premium equal to the difference between
Sixty Thousand Dollars ($60,000) and the amount of accrued and unpaid interest
at the time of prepayment.
This note shall bind the Maker and its successors and assigns, and the
benefits hereof shall inure to the Payee and its successors and assigns, and
any holder hereof.
This note shall be construed and enforced in accordance with, and
governed by, the laws of the State of Illinois, without regard to its conflict
of laws principles. No delay on the part of the Holder hereof in enforcing any
rights with respect hereto shall operate as a waiver of such rights.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, this Note has been duly executed and delivered by
the undersigned.
ACCUMED INTERNATIONAL, INC.
By:/s/ Peter P. Gombrich
------------------------------------
- 4 -
<PAGE> 1
EXHIBIT 10.36
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") dated as of the 28th day of
February, 1997 is made and entered into on the terms and conditions hereinafter
set forth, by and between ACCUMED INTERNATIONAL, INC. ("Debtor" or the
"Company") and ROBERT L. PRIDDY and EDMUND H. SHEA, JR. (collectively
"Lender").
RECITALS
WHEREAS, Debtor has requested that Lender make available to Debtor a
term loan in the original principal amount of Six Million and no/100ths Dollars
($6,000,000.00) (the "Loan") on the terms and conditions hereinafter set forth,
and for the purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Debtor, Debtor
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements
of Debtor, has agreed to make the Loan upon the terms and conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement of Lender to make
the Loan, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor and Lender hereby agree as follows:
SECTION 1
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the
terms and conditions hereof, the Lender shall make the Loan to Debtor by wire
transfer in immediately available funds. The Loan shall be evidenced by a
Convertible Promissory Note in the original principal amount of Six Million and
No/100ths Dollars ($6,000,000.00), substantially in the form of Exhibit A
attached hereto and incorporated herein by this reference (the "Note" or the
"Promissory Note"), executed by Debtor in favor of Lender. The Loan shall be
payable in accordance with the terms of the Note. Unless the Note has
previously been paid in full, upon an amendment to the Debtor's certificate of
incorporation, the Note shall be convertible, at the option of Lender, into
shares of the common stock, $.01 par value per share (the "Common Stock") of
Debtor as provided in the Note. The Note, this Agreement and any other
instruments and documents executed by Debtor now or hereafter evidencing or in
any way related to the indebtedness evidenced by the Note are herein
individually referred to as a "Loan Document" and collectively referred to as
the "Loan Documents."
1.2 Partial Prepayment. Debtor may prepay the indebtedness
evidenced by the Note in whole or in part at any time and from time to time
subject to a prepayment premium as specified in the Note.
1.3 Loan Origination Fee. Debtor shall pay to Lender a loan
origination fee equal to Seventy-Nine Thousand Seven Hundred Twenty- Six and
00/100 ($79,726.00), which shall be payable upon the maturity of the Note.
<PAGE> 2
1.4 Purposes of Loan and Use of Proceeds. The purpose of the
Loan shall be to provide capital to Debtor to acquire certain assets relating
to the ESP Product Line from Difco Microbiology Systems, Inc.
1.5 Further Documents. Debtor agrees, on request of Lender, at
any time and from time to time to execute or join with Lender in the execution
and filing of additional documents in the form and content reasonably required
by Lender to effectuate the terms of this Agreement.
SECTION 2
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and other
transactions to be consummated contemporaneously herewith, the Debtor hereby
represents and warrants to the Lender, as of the date hereof, as follows:
2.1 Organization and Standing; Certificate and By-Laws. The
Company is a corporation duly organized and existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such laws. The
Company has the requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. Except as disclosed on Exhibit 2.1 attached
hereto and made a part hereof, the Company is currently qualified to do
business as a foreign corporation in any jurisdiction in which such
qualification is required, except where the failure to be so qualified will not
have a material adverse effect on the Company's business as now conducted. The
Company has furnished Lender or its counsel with copies of its Certificate of
Incorporation and By-Laws, as amended. Said copies are true, correct and
complete and contain all amendments through the date hereof.
2.2 Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver the Loan Documents and to
carry out and perform its obligations under the terms of this Agreement.
2.3 Financial/SEC Filings.
(a) The Company has previously furnished Lender true and
complete copies of the following documents which have been filed by the Company
with the Securities and Exchange Commission ("SEC") pursuant to Sections 13(a),
14(a), (b) or (c) or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") (such documents are hereinafter collectively called the
"Accumed SEC Filings"): (i) its Annual Report on Form 10-K for the transition
period ended December 31, 1995, (ii) quarterly reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, which
reports include Consolidated Balance Sheets, Consolidated Statements of Income
and Consolidated Statements of Cash Flows of the Company at and for the
respective fiscal periods then ended and at and for the corresponding date and
fiscal periods for the prior year, (iii) all reports on Form 8-K filed by the
Company with the SEC during the period from and after January 1, 1996, (iv) the
Company's Prospectus dated October 2, 1996, included in a Form S-2 Registration
Statement (the "Prospectus"), and (v) the Company's Registration Statement on
Form S-4 dated December 1995. The Accumed SEC Filings constitute all reports
the Company was required to file under Sections 13(a), 14(a), (b) or (c) and
15(d) of the Exchange Act since January 1, 1996. At the time of filing with
the SEC, the Accumed SEC Filings
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(i) were prepared in all material respects in accordance with the applicable
requirements of the Exchange Act, and the rules and regulations thereunder,
(ii) did not contain any untrue statement of a material fact, and (iii) did not
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited and unaudited financial statements contained in the Accumed SEC Filings
are true and correct in all material respects and present fairly the
consolidated financial condition and results of operations and changes in
stockholders' equity and cash flows as of the dates and for the periods
indicated, except as may otherwise be stated in such financial statements. For
purposes of this Agreement, all financial statements of the Company shall be
deemed to include any notes to such financial statements. The financial
statements described in this Section 2.3 are hereinafter referred to as the
"Accumed Financial Statements".
(b) Since September 30, 1996, there has not been,
occurred or arisen which has not been either publicly disclosed by the Company
or disclosed in a separate schedule to Lender: (i) any material adverse change
in the consolidated financial condition or in the operations of the business of
the Company from that shown on the Accumed Financial Statements, or (ii) any
event, condition or state of facts (other than the general state of the
national economy and proposed federal legislation or regulation) of any
character which, to the best of the knowledge of the Company, materially and
adversely affects the results of operations or business or financial condition
or properties of the Company.
(c) The Company's last annual meeting of stockholders
was held in December 1995, and the next annual meeting of stockholders is
expected to be held prior to June 30, 1997.
(d) As of the date hereof, Debtor has no indebtedness
which, in accordance with generally accepted accounting principles would be
included in determining liabilities as shown on the liability side of the
balance sheet of the Debtor other than (i) trade payables incurred in the
ordinary course of business, (ii) liabilities reflected on the Accumed
Financial Statements, (iii) indebtedness not to exceed $500,000 which is
evidenced by a promissory note dated February 11, 1997 in the original
principal amount of $500,000 payable to Oncometrics Imaging Corp., a
majority-owned subsidiary of Debtor and (iv) indebtedness, the incurrence of
which or the repayment of which is not reasonably likely to have a material
adverse effect on the financial condition, operations, assets or prospects of
the Debtor or any of its Subsidiaries.
(e) Debtor owns all of its assets free and clear of
liens, claims and encumbrances (collectively, "Liens") other than (i) Liens for
taxes not yet due or liens for taxes being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Debtor in accordance with generally accepted
accounting principles, (ii) Liens on property or assets of the Debtor that were
incurred in the ordinary course of business, such as carriers', warehousemen's,
landlords' and mechanics' liens and other similar liens arising in the ordinary
course of business and that (x) do not in the aggregate materially detract from
the value of the property or assets subject thereto or materially impair the
use thereof in the operation of the business of the Debtor or (y) that are
being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or assets
subject to such lien, (iii) Liens (other than any lien imposed by ERISA or in
connection with any environmental violation), pledges or deposits incurred or
made in connection with workmen's compensation, unemployment insurance and
other social security benefits, or securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money), statutory
obligations, progress payments, surety and appeal bonds and other obligations
of like nature, in each case incurred in the ordinary course of business, (iv)
the Lien evidenced by financing statement 003581568 filed with the Illinois
Secretary of State on August 21, 1996, naming the Debtor as
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debtor and Nortech Telecommunications Inc., as secured party relating to
certain telephone equipment leased by the Debtor, and (v) a Lien in favor of
Oncometrics Imaging Corp. on substantially all of Debtor's assets securing the
indebtedness described in Section 2.3(d)(iii).
2.4 Capitalization. The authorized capital stock of the Company
consists of Thirty Million (30,000,000) shares of common stock, $.01 par value
(the "Common Stock"), of which Twenty-Two Million Sixty-Six Thousand Nine
Hundred Thirty-Eight (22,066,938) shares are issued and outstanding and Five
Million (5,000,000) shares of preferred stock, $.01 par value, of which no
shares are issued and outstanding. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved Seven Million One Hundred Sixty-Seven Thousand Five
Hundred One (7,167,501) shares of Common Stock for issuance upon the exercise
of warrants or options that have been granted prior to the date hereof or that
may hereafter be granted under the Company's stock option plans.
2.5 Amendment to Certificate of Incorporation. The Board of
Directors of the Company has approved a resolution to amend its certificate of
incorporation to increase the number of shares of authorized Common Stock of
the Company to fifty million (50,000,000). Such resolution also provides that
the Board of Directors will recommend that the shareholders approve such
amendment. The Company agrees that such resolutions will not be altered in any
respect without Lender's consent.
2.6 Stock. Unless the Note is earlier paid in full, upon the
adoption of the amendment to the Company's certificate of incorporation as set
forth in Section 2.5 above, the shares of Common Stock that may be issued upon
conversion of the Note shall have been duly and validly reserved and, when
issued in compliance with the provisions of the Note, will be validly issued,
fully paid and nonassessable, and will be free of any liens, claims, charges,
encumbrances, voting proxies or voting agreements, other than those agreed to
by Lender and those imposed by federal and applicable state securities laws.
2.7 Prior Registration Rights. Except as described under the
caption "Description of Capital Stock - Registration Rights" in the Prospectus,
the Company has not granted to any persons any demand or piggyback registration
rights to holders of any securities of the Company or to holders of any rights
to acquire securities of the Company.
2.8 Subsidiaries. Except as disclosed in the SEC Filings, the
Company has no subsidiaries or affiliated companies and does not otherwise own
or control, directly or indirectly, any equity interest in any corporation,
association or business entity.
2.9 Authorization and Enforceability. Other than shareholder
approval of the Charter Amendment (as defined in Section 3.6) which is required
prior to the effectiveness of Lender's rights to convert the Note into Common
Stock, all corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of the Loan Documents by the Company, and the performance of all of
the Company's obligations hereunder have been taken. This Agreement, as well
as each of the other Loan Documents, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms.
2.10 Absence of Changes. Except as disclosed in the SEC Filings or
in Exhibit 2.10 attached hereto and made a part hereof, since September 30,
1996, (a) there has been no material adverse change in the condition (financial
or otherwise), business, property, assets or liabilities of the Company other
than
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changes in the ordinary course of business, none of which, individually or in
the aggregate, has been materially adverse; (b) there has been no resignation
or termination of employment of any key officer or employee of the Company, and
the Company does not know of the impending resignation or termination of
employment of any such officer or employee that if consummated would have a
material adverse effect on its business; (c) there has been no labor dispute
involving the Company or its employees and none is pending or, to the knowledge
of the Company, threatened; (d) there has not been any change, except in the
ordinary course of business, in the contingent obligations of the Company, by
way of guaranty, endorsement, indemnity, warranty or otherwise; and (e) there
has been no other event or condition of any character pertaining to and
materially adversely affecting the assets or business of the Company.
2.11 Trademarks, Etc. To the knowledge of the Company, the
Company owns, possesses or has the right to exploit, free of any obligation to
make any payment (whether of a royalty, license fee, compensation or
otherwise), all trademarks, service marks, trade names or copyrights
(collectively, the "Marks"), all of which are the only Marks which are
necessary to the conduct of its business. Except as disclosed on Exhibit 2.11,
the Company does not have any knowledge, or reason to know, that the Company's
ownership, possession or other use or exploitation of any of the Marks
conflicts with the rights of any person or entity. The Company has used
reasonable efforts to protect the Marks. To the knowledge of the Company, no
present or former shareholder, officer, director, agent or independent
contractor of the Company owns or has any other right in or to, or has claimed
any ownership or other right in or to, any Mark which is necessary or desirable
in connection with the Company's business, either as now conducted or as
contemplated by management of the Company.
2.12 Taxes. The Company has filed or obtained extensions for all
required federal, state and local tax returns. Each return or report is true
and correct and all taxes, fees and other governmental charges reflected
thereon have been paid or accrued. The balance sheet as of September 30, 1996,
contained as a part of the Financial Statements (the "Current Balance Sheet")
reflects an adequate reserve for any and all taxes relating to the conduct of
the Company's business prior to the date hereof. The Company has appropriately
withheld, collected and paid over all taxes which, under applicable law, it is
required to withhold, collect and pay over.
2.13 Labor Relations, Etc.
(a) Except as disclosed in the SEC Filings, the Company
is neither a party to nor has any obligations under any agreement, collective
bargaining or otherwise, with any party regarding the rates of pay or working
conditions of any of the employees of the Company. The Company is not
obligated under any agreement to recognize or bargain with any labor
organization or union on behalf of its employees. There is not now any formal
organization activity among any of the employees of the Company, nor has the
Company been charged with, or received notice of, any threatened action with
respect to any unfair labor practice.
(b) The Company has reasonably satisfactory labor
relations with its employees.
(c) The Company has complied with all material
applicable federal and state laws and regulations concerning the
employer/employee relationship and with all of its respective agreements
relating to the employment of its employees, including without limitation
provisions thereof relating to wages, bonuses, hours of work and payment of
Social Security taxes. Except as disclosed on Exhibit 2.9 attached hereto and
made a part hereof or reserved for on the Current Balance Sheet, the Company is
not liable for
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any unpaid wages, bonuses or commissions, or any tax, penalty, assessment or
forfeiture for failure to comply with any of the foregoing.
2.14 Licenses, Permits, Compliance, Etc. The Company has all
material licenses, franchises, permits and government authorizations
(collectively, the "Permits") necessary for the conduct of the Business, none
of which will be terminated or otherwise materially adversely affected by the
consummation of the transactions contemplated by this Agreement. The Company
holds each Permit free and clear of any claims or restrictions. No event has
occurred that would allow, after the giving of notice the lapse of time or
both, the revocation or termination thereof or that would result in any other
material impairment of the rights of the holder thereof. The Company currently
complies and has complied with all laws, regulations and orders applicable to
it and to the Company's business, the violation of which would have a material
adverse effect on it or its business. The present conduct of the Company's
business does not violate any laws, regulations, ordinances, decrees,
injunctions or orders applicable to health, occupational safety, building
codes, fire codes and consumer protection, in each case, of which the Company
is aware.
2.15 Benefit Plans. Except as disclosed in the SEC Filings or in
Exhibit 2.15, the Company and each benefit program are or will be, within the
time permitted by law, in compliance with the provisions of ERISA and the
Internal Revenue Code (the "Code") applicable to it. No benefit program which
is subject to the minimum funding standards of ERISA or the Code, if any, has
incurred any accumulated funding deficiency within the meaning of ERISA or the
Code. The Company has not incurred any liability to the Pension Benefit
Guaranty Corporation in connection with any benefit program which is subject to
Title IV of ERISA. The assets of each benefit program that is subject to Title
IV of ERISA, if any, are sufficient to provide the benefits under such benefit
program for which the Pension Benefit Guaranty Corporation would guarantee the
payment if such benefit program terminated, and are also sufficient to provide
all other benefits due under the benefit program. No event which constitutes a
"reportable event" (as defined in Section 4043 of ERISA) has occurred and is
continuing with respect to any benefit program covered by ERISA.
2.16 Consents and Approvals. As of the date hereof, the Company
has obtained, in form and substance acceptable to Lender, the waiver, consent
and approval (i) of all persons or entities whose waiver, consent or approval
is required and material for the Company to consummate its obligations with
respect to the transactions contemplated by this Agreement except that
shareholder approval of the Charter Amendment (as defined in Section 3.6) is
required prior to the effectiveness of Lender's rights to convert the Note into
Common Stock; (ii) of any person or entity which is required by any material
agreement, lease, instrument, arrangement, judgment, decree, order or license
to which the Company is a party or subject as of the date hereof, and which
would prohibit such transactions, or require the waiver, consent or approval of
any person to such transactions; or (iii) under any material agreement, lease,
instrument, arrangement, judgment, decree, order or license under which,
without such waiver, consent or approval, such transactions would constitute an
occurrence of a breach or a default, result in the acceleration of any material
obligation thereunder, or give rise to a right of any party thereto to
terminate its obligations thereunder.
2.17 Compliance with Other Instruments, None Burdensome, etc.
The Company is not in violation of any term of its Certificate of Incorporation
or By-Laws, or, in any material respect, of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decrees, and is not in violation of any order, statute, rule or regulation
applicable to the Company where such violation would materially and adversely
affect the Company. The execution, delivery and
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performance of and compliance with this Agreement have not resulted and will
not result in any violation of, or conflict with, or constitute a default
under, the Company's Certificate or By-laws or, in any material respect, any of
its agreements or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company,
other than the liens being created hereunder; and, there is no such violation
or default which materially and adversely affects the business of the Company
or any of its properties or assets.
2.18 Litigation, etc. Except as described in the SEC Filings or
in Exhibit 2.18 attached hereto and made a part hereof, there are no actions,
claims, suits, proceedings or investigations pending against the Company or its
properties before any court, governmental agency, arbitration board or other
tribunal, norhas the Company received any written threat thereof.
2.19 Brokers or Finders. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
2.20 Bankruptcy. Neither the Company nor any entities affiliated,
related or controlled by the Company, has filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof; made any general assignment for the
benefit of creditors; or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding which
has not been discharged prior to the date hereof.
2.21 Disclosure. This Agreement, the Exhibits hereto and the
other Loan Documents, as well as all other written materials provided by the
Company to the Lender, when taken as a whole, do not (as of the respective
dates thereof) contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made.
2.22 Use of Proceeds. The proceeds of the Loan will be used
solely for the benefit of the Company and will be applied for the Company's
acquisition of certain assets relating to the ESP Product Line from Difco
Microbiology Systems, Inc.
2.23 No Impending Material Adverse Event. The Company does not
have any knowledge of any impending material loss of business or of any other
condition, the occurrence of which might have a material adverse effect on the
business, financial condition or prospects of the Company.
SECTION 3
CERTAIN CONTINUING COVENANTS
As long as the Note remains unpaid, Debtor covenants and agrees as
follows:
3.1 Notice of Litigation and Disputes. The Company will promptly
notify the Lender of any material (i) suits, assessments, litigation or
governmental audits or investigations instituted against it, and (ii)
reportable event under ERISA or any environmental law arising out of any act or
omission of the Company.
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3.2 Compliance. The Company will comply in all material respects
with all applicable statutes and governmental regulations, including, but not
limited to, applicable federal and state securities laws, zoning and land use
regulations, ERISA and environmental laws, which if not complied with would
reasonably be expected to have a material adverse effect on the Company. The
Company shall pay and discharge, before any penalty attaches thereto for
non-payment thereof, all taxes, assessments and governmental charges of any
kind levied upon or assessed against Company; provided, however, that Company
shall not be required to pay any such taxes, assessments or other governmental
charges so long as it shall in good faith contest the validity thereof, and if
such contest is made, the Company sets aside sufficient amounts for the payment
of the taxes, assessments or other governmental charges so contested in a
manner satisfactory to Lender.
3.3 Continuing Existence. The Company will maintain its
corporate existence, business, assets (except for dispositions in the ordinary
course of business consistent with past practice) and foreign qualifications in
all necessary jurisdictions, except where failure to maintain such
qualifications would not reasonably be expected to have a material adverse
effect on the Company.
3.4 Related Party Contracts. Without Lender's consent, the
Company shall not engage in any material transaction with any corporation,
partnership, trust or business entity owned or controlled directly or
indirectly, by an executive officer or director of the Company or any affiliate
thereof other than transactions with the Company's subsidiaries (not otherwise
prohibited hereunder) the boards of directors of which are under common control
with the Company.
3.5 Negative Covenants. As long as the Note remains unpaid,
Debtor will not, without the prior written consent of Lender:
(a) incur any indebtedness for money borrowed other than
the debt evidenced by the Note and except as contemplated in connection with
the pending private placement of up to Eight Million Five Hundred Thousand
Dollars ($8,500,000) (but not less than Seven Million Dollars ($7,000,000)) in
convertible promissory notes a portion of the proceeds of which are to be used
to repay the indebtedness evidenced by the Note;
(b) pay a dividend or redeem or repurchase any stock of
Debtor;
(c) lend or advance any monies to any employees,
officers or directors of Debtor with the exception of advancements for the
payment of expenses of the Debtor made in the ordinary course of business;
(d) lend or contribute any funds to any subsidiaries of
Debtor;
(e) change the Debtor's main line of business, or enter
into any business unrelated to its current businesses, or make any material
change in its business;
(f) agree to sell a substantial portion of the Company's
assets, merge with any other corporation, partnership, trust or other form of
business entity, or consolidate its assets with any other corporation,
partnership, trust or other form of business entity;
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(g) dispose of any equity interest in any subsidiary or
permit any subsidiary to issue any equity to any other person;
(h) issue or agree to issue any preferred stock or other
stock with rights superior to that of the Common Stock; or
(i) issue any securities or rights to acquire securities
of the Company unless the proceeds thereof, up to the amounts due under the
Note and this Agreement, are applied in payment of Debtor's obligations under
the Note and this Agreement.
3.6 Amendment to Certificate of Incorporation. The Company
agrees to submit the amendment to the Company's certificate of incorporation
(the "Charter Amendment") increasing its authorized Common Stock to its
shareholders at a meeting to be held as soon as reasonably practicable after
the date hereof. In connection therewith, the Company agrees that it will
within thirty (30) days after the date hereof file with the Securities and
Exchange Commission a preliminary proxy statement relating to its solicitation
of proxies at such meeting and to use commercially reasonable efforts to cause
such meeting to be held within ninety (90) days after the date hereof. Such
proxy statement shall include a proposal to adopt the Charter Amendment and the
recommendation of the Company's Board of Directors that the shareholders
approve same. Upon approval of the Charter Amendment by the Company's
shareholders, the Company shall notify Lender of same and promptly cause such
Charter Amendment to be filed with the Secretary of State of Delaware.
3.7 Private Placement. The Company will use commercially
reasonable efforts to enter into an agency agreement with Commonwealth
Associates as promptly as practicable relating to the sale of convertible notes
and warrants of the Company, a portion of the proceeds from which will be used
to satisfy the Note in full. The escrow agreement under which subscriptions
will be deposited pending the closing of such private placement will provide
that, upon closing, disbursement will be made directly to Lender to the extent
necessary to satisfy the Note in full.
SECTION 4
DEFAULT
The occurrence of one or more of the following events shall, at the
option of Lender, constitute an "Event of Default" hereunder:
(a) if Debtor defaults in the payment of the Note or any
installment thereof or interest thereon or any other payment due Lender within
five (5) days after its due date except in the case of payments pursuant to
Sections 11.4 and 11.7 of this Agreement, within thirty (30) days after the
respective due dates;
(b) if any warranty or representation of Company contained
herein, in any Collateral Document or in any other Loan Document shall be
materially false or misleading when made;
(c) if Company shall (i) cease to do business as a going concern,
(ii) generally fall to meet its obligations as they mature, (iii) file a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, (iv)
make any general assignment for the benefit of creditors, (v) consent to the
appointment of a receiver or trustee, including a custodian
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under the United States bankruptcy laws, whether such receiver or trustee is
appointed in a voluntary or involuntary proceeding, or (vi) permit a request or
petition for liquidation, reorganization or other relief under the bankruptcy
laws of the United States, or any state thereof, or any other type of
insolvency proceedings, to not be vacated or dismissed within sixty (60) days
of such event under the bankruptcy laws of the United States or any state or
territory thereof, whether such filing or petition is voluntary or involuntary;
(d) a default occurs herein or in the Note, any other Loan
Document, or any agreement executed pursuant thereto or in connection
therewith, or if Company fails to perform or keep any of the other covenants,
agreements or warranties contained herein or therein and fails to cure same
within ten (10) business days of notice from Lender to cure, unless a shorter
or longer time period is expressly specified for any particular covenant;
(e) in the event (i) an event of default occurs under any other
agreement pursuant to which Debtor has incurred obligations for monies owed in
principal amount in excess of One Million Dollars ($1,000,000) and such event
of default results in the right to accelerate such obligations; or (ii) an
event of default occurs under any other material agreement to which Company is
a party or by which it is bound and such event of default results in the
Company becoming obligated to pay an amount in excess of One Million Dollars
($1,000,000); or
(f) the execution, without Lender's prior written consent, of any
agreement to merge or consolidate the Debtor with any other form of business
entity, or to sell a substantial portion of the assets of the Debtor.
Upon the occurrence of any Event of Default as defined above, at
Lender's option, the entire unpaid principal balance of the Note, together with
all accrued and unpaid interest thereon and all other indebtedness secured
hereby shall immediately become due and payable, without notice or demand, and
Lender shall have all of the rights and remedies stated in this Agreement or
other documents which now or hereafter evidences the Loan evidenced by the
Note. Such rights and remedies shall be cumulative, and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedy.
SECTION 5
OTHER AGREEMENTS
5.1 Escrow Agreement. Lender shall fund the Loan into an escrow
account (the "Escrow Account"), established by Lender pursuant to an Escrow
Agreement (the "Escrow Agreement") in the form attached hereto as Exhibit 5.1.
SECTION 6
DELIVERIES AT CLOSING
The following deliveries shall be made, for or on behalf of the
Company, contemporaneously with the execution of this Agreement:
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(a) all other documents required to be executed and delivered in
connection herewith, including without limitation the Promissory Note to be
delivered by the Company in favor of the Lender;
(b) any consents or approvals required pursuant to this
Agreement;
(c) payment of expenses set forth in Section 11.4 hereof to be
paid simultaneously herewith;
(d) the legal opinions of the Company's general counsel and
Sidley & Austin, outside counsel for the Company, dated as of the date hereof,
and in form and substance reasonably satisfactory to the Lender's counsel;
(e) agreements from Peter P. Gombrich, Michael Falk and
Commonwealth Associates to vote their shares of stock in the Company in favor
of the Charter Amendment; and
(f) such other documents as the Lender may reasonably request, in
form and substance reasonably satisfactory to the Lender's counsel.
SECTION 7
REGISTRATION RIGHTS
7.1 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Conversion Stock" shall mean any Common Stock of
the Company issued or issuable upon the conversion of the Note into equity of
the Company.
(c) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(d) "Holder" shall mean the Lender which holds
Registrable Securities and any other person holding Registrable Securities to
whom the rights under this Section 7 have been transferred in accordance with
Section 7.12 hereof.
(e) "Initiating Holders" shall mean Holders owning a
majority of the Conversion Stock.
(f) "Registrable Securities" means (i) Conversion Stock,
and (ii) any other securities issued or issuable with respect to the Conversion
Stock upon any stock split, stock dividend, recapitalization or similar event,
or any Common Stock otherwise issued or issuable with respect to the Conversion
Stock held by the Lender or any other Holder.
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(g) "Register", "registered" and "registration" refer to
a registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
(h) "Registration Expenses" shall mean all expenses,
except Selling Expenses as defined below, incurred by the Company in complying
with Sections 7.3 and 7.4 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company) and the reasonable
fees and disbursements of one counsel for all Holders.
(i) "Securities Act" shall mean the Securities Act of
1933, as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(j) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and, except as set forth in the definition
of Registration Expenses, all reasonable fees and disbursements of counsel for
any Holder.
7.2 Limitations on Registration. Registration rights referred to
in this Section 7 apply only to shares of Common Stock, and shall not apply to
the Note prior to its conversion into Common Stock of the Company.
Notwithstanding the foregoing, in the event of a notice of proposed
registration pursuant to Section 7.4(a)(i) hereof, the Holder of the Note may
exercise its rights to convert the Note into Common Stock and elect to register
the Common Stock received pursuant to such conversion and the Company shall
take all steps reasonably appropriate herewith in order to insure that the
Holder's rights to exercise and register are protected.
7.3 Registration on Request.
(a) At any time after the Note shall have been converted
into Conversion Stock (such date being referred to as the "Conversion Date"),
upon the written request of Initiating Holders requesting that the Company
effect the registration under the Securities Act of all or any part of such
Initiating Holders' Registrable Securities, and specifying the intended method
or methods of disposition thereof, the Company will promptly, but in any event
within 10 days, give written notice of such requested registration to all
holders of Registrable Securities, and thereupon will use commercially
reasonable efforts to effect, as expeditiously as practicable, the registration
under the Securities Act, on an appropriate form of the Commission selected by
the Company including by means of a shelf registration pursuant to Rule 415
under the Securities Act if so requested in such request (but in the case of a
shelf registration only if the Company is then eligible to use Form S-2 or S-3
(or any successor forms)), of:
(i) the Registrable Securities which the Company
has been so requested to register by such Initiating Holder or
Holders, for disposition in accordance with the intended method or
methods of disposition stated in such request, and
(ii) all other Registrable Securities which the
Company has been requested to register by the Holders thereof by
written request delivered to the Company within 30 days after
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<PAGE> 13
the giving of such written notice by the Company (which request shall
specify the intended method or methods of disposition thereof), all
to the extent necessary to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered. Subject to Section 7.3(e), the
Company may include in such registration other securities for the
account of any other person, including for the Company's account.
(b) Number of Registrations; Timing. The Company shall
not be required to effect more than one registration pursuant to this Section
7.3; provided that such registration shall permit the disposition of at least
80% of the Registrable Securities which the Company has been so requested to
register and if such registration shall not permit the disposition of at least
80% of such Registrable Securities, the Company shall be required to effect one
additional registration (for a total of two) pursuant to this Section 7.3. The
Company shall not be required to effect a registration pursuant to this Section
7.3 within the 12-month period occurring immediately subsequent to the
effectiveness (within the meaning of Section 7.3(d)) of a registration
statement filed pursuant to this Section 7.3.
(c) Registration Statement Form. Registrations under
this Section 7.3 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and as shall be acceptable
to the Initiating Holders and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in the request for their registration. The Company
agrees to include in any such registration statement all information which any
holder of Registrable Securities being registered, upon advice of counsel,
shall reasonably request. The Company may, if permitted by law, effect any
registration requested under this Section 7.3 by the filing of a registration
statement on Form S-3 (or any successor or similar short form registration
statement).
(d) Effective Registration Statement. A registration
requested pursuant to this Section 7.3 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if the registration does not remain effective for a period of
at least 270 days (or, with respect to any registration statement filed
pursuant to Rule 415 under the Securities Act, for a period of at least three
years) or, in either case if earlier, until all the Registrable Securities
requested to be registered in connection therewith were sold, (iii) if, after
it has become effective, such registration is interfered with for a period of
more than fifteen (15) days by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason, or (iv) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied and no such registration occurs, other than by
reason of some act or omission by the Holders of the Registrable Securities
that were to have been registered.
(e) Priority in Requested Registrations. If a
requested registration pursuant to this Section 7.3 involves an underwritten
offering, and the managing underwriter shall advise the Company in writing
(with a copy to each Holder of Registrable Securities requesting registration)
that, in its opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering within a
price range acceptable to the Initiating Holders (such writing to state the
basis of such opinion and the approximate number of shares of securities which
may be included in such offering without such effect), the Company will include
in such registration, to the extent of the number of securities which the
Company is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be registered by the Holders thereof pursuant to
Section 7.3(a), and (ii) second, all other securities of the Company proposed
to be included in such registration in accordance with the priorities, if any,
then existing among the Company and the holders of such securities.
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<PAGE> 14
7.4 Incidental Registration.
(a) If the Company at any time proposes to register on
any form which may be used for the registration of Registrable Securities other
than Form S-4 or S-8 (or any successor or similar forms then in effect) any of
its securities under the Securities Act (other than pursuant to Section 7.3),
whether or not pursuant to registration rights granted to other holders of its
securities and whether or not for sale for its own account in a manner which
would permit registration of Registrable Securities for sale to the public
under the Securities Act, it will each such time give prompt written notice to
all Holders of Registrable Securities of its intention to do so and of such
Holders' rights under this Section 7.4; provided that in any event, such notice
shall be given to all such Holders at least 20 days prior to such proposed
registration. Upon the written request of any such Holder made within 15 days
after notice is deemed given of any such notice (which request shall specify
the Registrable Securities intended to be disposed of by such Holder and the
intended method or methods of disposition thereof), the Company will use
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by the Holders thereof, to the extent necessary to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered. Prior to the effective date of
any registration statement filed in connection with a registration described in
this Section 7.4, immediately upon notification to the Company from the
managing underwriter, in the case of an underwritten offering, of the price at
which the Registrable Securities requested to be registered pursuant to this
Section 7.4 are to be sold, the Company shall advise each requesting Holder of
such price, and if such price is below the price which any requesting Holder
shall have indicated to be acceptable to such requesting Holder, such
requesting Holder shall then have the right to withdraw its request to have its
Registrable Securities included in such registration statement.
(b) No registration effected pursuant to this Section
7.4 shall be deemed to have been effected pursuant to Section 7.3.
(c) If the Company shall previously have received a
request for registration pursuant to Section 7.3 or pursuant to this Section
7.4, and if such previous registration shall not have been withdrawn or
abandoned, the Company will not effect any registration of any of its
securities under the Securities Act, whether or not for sale for its own
account, until a period of 120 days shall have elapsed from the effective date
of such previous registration.
(d) Notwithstanding anything to the contrary in this
Section 7.4, the Company shall have the right to discontinue any registration
under this Section 7.4 at any time prior to the effective date of such
registration, if the registration of other securities giving rise to such
registration under this Section 7.4 is discontinued; but no such
discontinuation shall preclude an immediate or subsequent request for
registration pursuant to Section 7.3 or 7.4.
(e) If a registration contemplated by this Section 7.4
involves an underwritten offering and the managing underwriter of such
underwritten offering shall advise the Company in writing (with a copy to the
Holders of Registrable Securities requesting such registration) stating that,
in its opinion the number of shares proposed to be included in such
registration of some or all of the Registrable Securities requested exceeds the
number which can be sold in such offering within a price range acceptable to
the Company and the requesting Holders (such writing to state the basis of such
opinion and the approximate number of such securities which may be included in
such offering without such effect), then the Company
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<PAGE> 15
will include in such registration, to the extent of the number of securities
which the Company is so advised can be sold in such offering, (i) first,
securities that the Company proposes to issue and sell for its own account
(unless the registration giving rise to the incidental registration rights of
the Holders of Registrable Securities hereunder is as a result of the exercise
of demand registration rights by Holders of the Company's securities pursuant
to a registration rights agreement with the Company, in which case this clause
(i) shall not have effect), (ii) second, securities proposed to be offered as a
result of the exercise by Holders of demand registration rights pursuant to a
registration rights agreement, (iii) third, Registrable Securities requested to
be registered by the Holders thereof pursuant to Section 7.4, and (iv) fourth,
all other securities of the Company proposed to be included in such
registration in accordance with the priorities, if any, then existing among the
Company and the Holders of such securities.
7.5 Obligations of the Company. Whenever required tinder this
Section 7 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use commercially
reasonable efforts to cause such registration statement to become effective,
and keep such registration statement effective for not less than three years,
or until at least 80% of the Registrable Securities have been issued or sold
pursuant to such registration statement or otherwise.
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use commercially reasonable efforts to register and
qualify the securities covered by such registration statement under such other
state securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
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<PAGE> 16
(g) Use commercially reasonable efforts to furnish, at
the request of any Holder, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 7, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters,
on the date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders.
7.6 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 7
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
7.7 Expense of Registration. The Company shall bear and pay all
Registration Expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 7.3 or 7.4 for each Holder but excluding Selling Expenses
relating to Registrable Securities.
7.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 7.4 to include any of the requesting
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters).
7.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act or the Exchange Act or under
any state securities or "blue sky" laws, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act or any state securities or "blue
sky" law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subSection 7.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the
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<PAGE> 17
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Requesting Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter, any other holder selling securities in such registration statement
and any controlling person of any such underwriter or other holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, or the Exchange
Act or any state securities or "blue sky" laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such holder expressly for use in connection with such
registration; and each such holder will pay any legal or other expenses
reasonably incurred by any person intended to bp indemnified pursuant to this
Section 7.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 7.9(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the holder, which consent shall
not be unreasonably withheld; provided that in no event shall any indemnity
under this subsection 7.9(b) exceed the gross proceeds from the offering
received by such holder.
(c) Promptly after receipt by an indemnified party under
this Section 7.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 7.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party or parties by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party or
parties represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
7.9.
(d) If the indemnification provided for in this Section
7.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then to the extent permitted by law, the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified
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<PAGE> 18
party on the other in connection with the statements or omissions that result
in such loss, liability, claim, damage or expenses as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 7.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 7 and otherwise.
7.10 Reports under the Exchange Act. With a view to making
available to the Holders of Registrable Securities the benefits of Rule 144
promulgated under the Securities Act and any other rule of regulation of the
Commission that may at any time permit such a Holder to sell securities of the
Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Commission Rule 144, at all times;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to any Holder of Registrable Securities, so
long as such Holder owns any Registrable Securities, forthwith upon request (i)
a written statement by the Company that it has complied with the reporting
requirements of Commission Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any such Holder of any
rule or regulation of the Commission which permits the selling of any such
securities without registration or pursuant to such form.
7.11 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Initiating Holders, enter into any agreement with any
holder or prospective holder of any securities of the Company which would take
effect prior to the repayment of the Note and would allow such holder or
prospective holder (a) to include such securities in any registration filed
under Section 7.3 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of its securities will not reduce the amount
of the Registrable Securities of the olders thereof which is included or (b) to
make a demand registration which could result in such registration statement
being declared effective prior to or within ninety (90) days of the effective
date of any registration effected pursuant to Section 7.3.
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<PAGE> 19
7.12 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to the Lender under Sections 7.3 and 7.4
may be assigned to a transferee or assignee of the Lender.
SECTION 8
WAIVER OF BREACH
No delay or failure on the part of Lender to exercise any right or
remedy accruing to Lender hereunder or under the Note upon any default or
breach by Company of any covenant, condition or provision hereof shall be held
to be an abandonment thereof, and no delay on the part of Lender in exercising
any of its rights or remedies shall preclude Lender from the exercise thereof
at any time during the continuance of any default or breach, nor shall any
waiver of a single default or breach be deemed a waiver of any subsequent
default or breach. All waivers under this Agreement must be in writing.
Lender may enforce any one or more remedies hereunder successively or
concurrently, at its option.
SECTION 9
APPLICABLE LAW
All acts, agreements, certificates, assignments, transfers and
transactions hereunder, and all rights of the parties hereto, shall be governed
as to validity, enforcement, interpretation, construction, effect and in all
other respects by the laws and decisions of the State of Illinois.
SECTION 10
NOTICES
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given: (i) upon
delivery if delivered by hand or by telecopy (receipt confirmed), or (ii) if
mailed, by United States certified or registered mail, prepaid, and three
business days shall have elapsed after the same shall have been mailed to the
parties, or (iii) on the date following the day sent by a reputable express air
courier service guaranteeing next day delivery, when addressed as follows:
As to Lender:
Robert L. Priddy
1800 Phoenix Boulevard
Suite 126
Atlanta, Georgia 30349
Telecopy No.: (770) 933-1685
Edmund H. Shea, Jr.
J. F. Shea & Co.
655 Brea Canyon Road
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<PAGE> 20
Walnut, California 91789
Telecopy No.: (909) 869-0840
With a copy to:
Robert B. Goldberg, Esq.
Ellis, Funk, Goldberg, Labovitz & Dokson, P.C.
One Securities Centre
Suite 400
3490 Piedmont Road
Atlanta, Georgia 30305
Telecopy No.: (404) 233-2188
As to Debtor:
AccuMed International, Inc.
900 N. Franklin Street
Suite 401
Chicago, Illinois 60610
Attn: Peter P. Gombrich, Chief Executive Officer
Telecopy No.: (312) 642-3101
Confirmation No.: (312) 642-9200
With a copy to:
AccuMed International, Inc.
1500 7th Avenue
Sacramento, California 95818
Attn: Joyce L. Wallach, General Counsel
Telecopy No.: (916) 443-6850
Confirmation No.: (916) 443-6800
Any party may change its address for notices by giving the other a
notice of address change no later than ten (10) days in advance of the
effective date of the change of address.
SECTION 11
GENERAL
11.1 This Agreement together with the Note supersedes all prior
agreements and negotiations between Lender and Company relating hereto.
11.2 No amendment hereto shall be valid unless in a writing duly
executed by Lender and Debtor.
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<PAGE> 21
11.3 This Agreement shall benefit and bind the successors and
assigns of the parties, but Debtor may not assign this Agreement. Lender may
freely assign the obligations of Lender hereunder and its security interest in
the Note, in whole or in part, at any time. The section titles herein are for
convenience only and do not define, limit or construe the contents of such
sections.
11.4 Simultaneously herewith, the Company will pay all reasonable
documented costs and expenses actually incurred by the Lender in connection
with the preparation and execution of the Loan Documents. In addition, the
Company will pay all taxes and recording expenses, including all intangible and
stamp taxes, if any, all fees and commissions due to brokers in connection with
this transaction at closing, and all reasonable legal fees of outside counsel
for Lender. All amounts hereunder shall be due upon demand, and shall be an
Event of Default if not paid within thirty (30) days following the date on
which notice is deemed given by Lender.
11.5 In the event that Lender employs legal counsel after default
with respect to any action or proceeding relating to the maintenance,
enforcement or defense of this Agreement, or in the relationship created hereby
or any and all rights of Lender hereunder, all reasonable, documented
attorneys' fees actually incurred by Lender arising from such services and any
reasonable expenses, costs and charges relating thereto shall constitute
additional obligations of Company secured hereby, payable on demand.
11.6 The parties shall consult and agree upon the form and
substance of any press release or other form of public disclosure regarding the
transaction described herein.
11.7 If Company fails to perform any obligation under this
Agreement, Lender may, at its option, perform such obligation or cause it to be
performed by others, and any reasonable cost or expense incurred or funds
advanced by Lender for such purposes shall be immediately paid by Company to
Lender on demand. Any such sum shall, at Lender's option, bear simple interest
after demand at the rate set forth in the Note, or such lesser rate as Lender
shall designate. All amounts hereunder shall be due upon demand, and shall be
an Event of Default if not paid within thirty (30) days following the date on
which notice is deemed given by Lender.
11.8 All rights of Lender hereunder and under the Note and Escrow
Agreement may be exercised by Robert L. Priddy on behalf of both parties
comprising the Lender hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
ACCUMED INTERNATIONAL, INC.,
Debtor
By:/s/ Peter P. Gombrich
------------------------------------
Title:Chief Executive Officer
---------------------------------
Attest:Leonard R. Prange
--------------------------------
Title:Corporate Vice President
and Chief Financial Officer
---------------------------------
(CORPORATE SEAL)
/s/ Robert L. Priddy
---------------------------- (SEAL)
Robert L. Priddy, Lender
/s/ Edmund H. Shea, Jr.
---------------------------- (SEAL)
Edmund H. Shea, Jr., Lender
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<PAGE> 1
EXHIBIT 10.37
ACCUMED INTERNATIONAL, INC.
AGENCY AGREEMENT
Commonwealth Associates
733 Third Avenue
New York, New York 10017
March 3, 1997
Gentlemen:
AccuMed International, Inc., a Delaware corporation (the "Company"),
proposes to offer for sale to "accredited investors", in a private placement
(the "Offering"), up to eighty-five (85) units ("Units"), each Unit consisting
of $100,000 principal amount of 12% convertible promissory notes ("Notes") and
10,000 common stock purchase warrants ("Warrants"). A minimum of seventy (70)
Units ("Minimum Offering") and a maximum of eight-five (85) Units ("Maximum
Offering") will be sold in the offering at $100,000 per Unit. The Units will
be offered pursuant to those terms and conditions acceptable to you as
reflected in the Confidential Term Sheet, including all exhibits, attachments
and supplements thereto (the "Term Sheet"). Of the Units, seventy (70) will be
offered on a "best efforts - all-or-none" basis and fifteen (15) Units will be
offered on a "best efforts" basis. The Units are being offered pursuant to the
Term Sheet and related documents in accordance with Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and Regulation D
promulgated thereunder.
Commonwealth Associates is sometimes referred to herein as the
"Placement Agent." The Term Sheet (including the exhibits thereto), as it may
be amended from time to time, and the form of proposed subscription agreement
between the Company and each subscriber (the "Subscription Agreement") and the
exhibits which are part of the Term Sheet and/or Subscription Agreement are
collectively referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units ("Subscriber")
will be required to deliver, among other things, a Subscription Agreement and a
confidential purchaser questionnaire ("Questionnaire") in the form to be
provided to offerees.
<PAGE> 2
Capitalized terms used herein, unless otherwise defined or unless the context
otherwise indicates, shall have the same meanings provided in the Offering
Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of
the Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering Period
herein specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the offering (the "Offering") described in the Offering
Documents. The Offering Period shall commence on the day the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for sale of the Units and shall continue until the
earlier to occur of (i) the sale of all of the Maximum Offering or (ii) March
14, 1997 (unless extended for a period of up to sixty (60) days under
circumstances specified in the Term Sheet). If the Minimum Offering is not
sold prior to the end of the Offering Period, the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of
its obligations to be performed under this Agreement and to the completeness
and accuracy of all representations and warranties of the Company contained in
this Agreement, Commonwealth Associates hereby accepts such agency and agrees
to use its best efforts to assist the Company in finding qualified subscribers
pursuant to the Offering described in the Offering Documents. It is understood
that the Placement Agent has no commitment to sell the Units. Your agency
hereunder is not terminable by the Company except upon termination of the
Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") and that have executed a Selected Dealers Agreement
substantially in the form attached hereto as Schedule A, to assist you in the
Offering (each such person being hereinafter referred to as a "Selected
Dealer") and you may allow such persons such part of the compensation and
payment of expenses payable to you hereunder as you shall determine. Each
Selected Dealer shall be required to agree in writing to comply with the
provisions of, and to make the representations, warranties and covenants
contained in this Section 1.
(d) Subscriptions for Units shall be evidenced by the
execution by Subscribers of a Subscription Agreement. No Subscription
Agreement shall be effective unless and until it is accepted by the Company.
Until the Closing, all subscription funds received shall be held as described
in the Subscription Agreement. The Placement Agent shall not have any
obligation to independently verify the accuracy or completeness of any
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<PAGE> 3
information contained in any Subscription Agreement or the authenticity,
sufficiency, or validity of any check delivered by any prospective investor in
payment for Units.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent, as follows:
(a) Securities Law Compliance. The Offering Documents
conform in all respects with the requirements of Section 4(2) of the Securities
Act and Regulation D promulgated thereunder and with the requirements of all
other published rules and regulations of the Securities and Exchange Commission
(the "Commission") currently in effect relating to "private offerings" to
"accredited investors" of the type contemplated by the Company. The Offering
Documents will not contain an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Offering or other termination of this
Agreement any event shall occur as a result of which it might become necessary
to amend or supplement the Offering Documents so that they do not include any
untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
you and will supply you with amendments or supplements correcting such
statement or omission. The Company will also provide the Placement Agent for
delivery to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent deems
necessary to comply with applicable state and federal law.
(b) Organization. Each of the Company and Oncometrics
Imaging Corporation ("Oncometrics") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own and
lease their respective properties, to carry on its business as currently
conducted and as proposed to be conducted, to execute and deliver this
Agreement and to carry out the transactions contemplated by this Agreement, as
appropriate and is duly licensed or qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of its business or
ownership or leasing of its properties requires it to be so qualified, except
where the failure to so qualify would not have a material adverse effect on the
business of the Company and Oncometrics, taken as a whole. AccuMed
International Limited ("AccuMed International") is a corporation possessing
substantially the same characteristics under the laws of the United Kingdom.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company prior to the consummation of the
transactions contemplated hereby is as set forth in Exhibit C. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any stockholder of the Company. All prior sales of securities of the Company
were either registered under the Act and applicable state securities laws or
exempt from such registration, and no security holder has any rescission rights
with respect thereto.
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<PAGE> 4
(d) Warrants, Preemptive Rights, Etc. Except for the
warrants to purchase shares of Common Stock to be issued to you or your
designees in consideration for your acting as Placement Agent hereunder (the
"Agent's Warrants"), and except as set forth in or contemplated by the Offering
Documents or set forth on Exhibits C and D, there are not, nor will there be
immediately after the Closing (as hereinafter defined), any outstanding
warrants, options, agreements, convertible securities, preemptive rights to
subscribe for or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other securities
of the Company and this offering will not cause any anti-dilution adjustments
to such securities or commitments except as reflected in the Term Sheet.
(e) Subsidiaries and Investments. The Company has no
subsidiaries other than Oncometrics and AccuMed International (the
"Subsidiaries") and the Company does not own, directly or indirectly, any
capital stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
All of the issued and outstanding capital stock of each of the Subsidiaries has
been duly authorized and validly issued and is fully paid and (except for the
shares of Oncometrics not owned by the Company) is owned by the Company free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity.
(f) Financial Statements. The financial information
contained in the Offering Documents is accurate in all material respects. The
Company's Form 10-QSB for the nine month period ended September 30, 1996
contains the Company's (i) Balance Sheets at December 31, 1995 and at September
30, 1996 (hereinafter, September 30, 1996 being referred to as the "Balance
Sheet Date"), (ii) Statements of Operations for the three and nine months ended
September 30, 1995, and 1996 and (iii) Statements of Cash Flows for each of the
nine months ended September 30, 1995 and September 30, 1996 (such financial
statements attached to the Offering Documents hereinafter referred to
collectively as the "Financial Statements"). The Financial Statements have
been prepared in conformity with generally accepted accounting principles
consistently applied and show all material liabilities, absolute or contingent,
of the Company required to be recorded thereon and present fairly the financial
position and results of operations of the Company as of the dates and for the
periods indicated.
(g) Absence of Changes. Since the Balance Sheet Date and
except as described in the Offering Documents or set forth in Exhibit G hereto,
neither the Company nor the Subsidiaries have incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company or the Subsidiaries, and, except as set
forth in Exhibit G to this Agreement and except as described in the Term Sheet,
there has not been any change in the capital stock of, or any incurrence of
long-term debt by, the Company or the Subsidiaries, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or the
Subsidiaries, or any adverse change or any development involving, so far as the
Company
4
<PAGE> 5
can now reasonably foresee, a prospective adverse change in the condition
(financial or otherwise), net worth, results of operations, business, key
personnel or properties which would be material to the business or financial
condition of the Company and the Subsidiaries, taken as a whole, and neither
the Company nor the Subsidiaries has become a party to, and neither the
business nor the property of the Company or the Subsidiaries has become the
subject of, any material litigation whether or not in the ordinary course of
business.
(h) Title. Except as set forth on Exhibit H hereto, each
of the Company and the Subsidiaries have good and marketable title to all
properties and assets, owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to the Company's or the Subsidiaries' business; all of
the material leases and subleases under which the Company or the Subsidiaries
are the lessor or sublessor of properties or assets or under which the Company
or the Subsidiaries hold properties or assets as lessee or sublessee are in
full force and effect, and neither the Company nor the Subsidiaries are in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and to the Company's knowledge, no material
claim has been asserted by anyone adverse to rights of the Company or the
Subsidiaries as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company or the Subsidiaries to continued possession of the leased or subleased
premises or assets under any such lease or sublease. Except with respect to
leases and properties related to the ESP Business (as defined in the Term
Sheet), which are subject to closing the Acquisition (as defined in the Term
Sheet), the Company and the Subsidiaries own or lease all such properties as
are necessary to their respective operations as now conducted and to be
conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule
I hereto and except as set forth in the Offering Documents, the Company and the
Subsidiaries own or possess adequate and enforceable rights to use all patents,
patent applications, trademarks, service marks, copyrights, trade secrets,
processes, formulations, technology or know-how used or proposed to be used in
the conduct of their respective business as described in the Offering Documents
(the "Proprietary Rights"). Neither the Company nor the Subsidiaries have
received any notice of any claims, nor does the Company have knowledge of any
threatened claims or facts which would form the basis of any claim, asserted by
any person to the effect that the sale or use of any product or process now
used or offered by the Company or the Subsidiaries or proposed to be used or
offered by the Company or the Subsidiaries infringes on any patents or
infringes upon the use of any such Proprietary Rights of another person and, to
the best of the Company's knowledge, no others have infringed the Company's or
the Subsidiaries' Proprietary Rights.
(j) Litigation. Except as set forth in the Term Sheet,
there is no material action, suit, investigation, customer complaint, claim or
proceeding at law or in equity by or before any arbitrator, governmental
instrumentality or other agency now
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<PAGE> 6
pending or, to the knowledge of the Company, threatened against the Company or
the Subsidiaries the adverse outcome of which would materially adversely affect
the Company's or the Subsidiaries' business or prospects, taken as a whole.
Neither the Company nor the Subsidiaries are subject to any judgment, order,
writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which would materially adversely affect the Company's and
the Subsidiaries' business or prospects, taken as a whole.
(k) Non-Defaults; Non-Contravention. Neither the Company
nor the Subsidiaries are in violation of or default under, nor will the
execution and delivery of this Agreement or any of the Offering Documents, the
Notes, the Warrant Agreement, or the Agent's Warrants (as defined herein) or
consummation of the transactions contemplated herein or therein result in a
violation of or constitute a default in the performance or observance of any
obligation (i) under its Certificate of Incorporation, or its By-laws, or any
indenture, mortgage, contract, material purchase order or other agreement or
instrument to which the Company or the Subsidiaries are a party or by which it
or its property is bound or affected or (ii) with respect to any material
order, writ, injunction or decree of any court of any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there exists no condition, event or
act which constitutes, nor which after notice, the lapse of time or both, could
constitute a default under any of the foregoing, which in either case would
have a material adverse effect on the business, financial condition or
prospects of the Company and the Subsidiaries, taken as a whole.
(l) Taxes. The Company has filed all Federal, state,
local and foreign tax returns which are required to be filed by it and all such
returns are true and correct in all material respects. Except for tax
obligations subject to reasonable dispute by the Company, the Company has paid
all taxes pursuant to such returns or pursuant to any assessments received by
it or which it is obligated to withhold from amounts owing to any employee,
creditor or third party. The Company has properly accrued all taxes required
to be accrued. The tax returns of the Company are not currently the subject of
any audit by any state, local or Federal authorities. The Company has not
waived any statute of limitations with respect to taxes or agreed to any
extension of time with respect to any tax assessment or deficiency.
(m) Compliance With Laws; Licenses, Etc. Except as set
forth in the Offering Documents, neither the Company nor the Subsidiaries have
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
respective business which has not been cured, the violation of, or
noncompliance with which, would reasonably be expected to have a materially
adverse effect on the business or operations of the Company and the
Subsidiaries, taken as a whole. Each of the Company and the Subsidiaries have
all licenses and permits and other governmental certificates, authorizations
and permits and approvals (collectively, "Licenses") required by every Federal,
state and local government or
6
<PAGE> 7
regulatory body for the operation of their respective business as currently
conducted and the use of its properties, except where the failure to be
licensed would not have a material adverse effect on the business of the
Company and the Subsidiaries, taken as a whole. The Licenses are in full force
and effect and no violations are or have been recorded in respect of any
License and no proceeding is pending or, to the knowledge of the Company,
threatened to revoke or limit any thereof.
(n) Authorization of Agreement, Etc. This Agreement has
been duly and validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement, the Escrow Agreement and the Warrant Agreement have
been duly authorized by all requisite corporate action by the Company and when
delivered, constitute or will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(o) Authorization of Notes and Warrants Etc. The
issuance, sale and delivery of the Notes and Warrants and the Agent's Warrants
have been duly authorized by all requisite corporate action of the Company.
When so issued, sold and delivered, the Notes and the Warrants will be duly
executed, issued and delivered and will constitute valid and legal obligations
of the Company enforceable in accordance with their respective terms and, in
each case, will not be subject to preemptive or any other similar rights of the
stockholders of the Company or others which rights shall not have been waived
prior to the Initial Closing.
(p) Authorization of Reserved Shares. Except as
otherwise described in the Term Sheet, the issuance, sale and delivery by the
Company of the shares of Common Stock issuable upon conversion and/or exercise
of the Notes and Warrants including the Agent's Warrants (the "Reserved
Shares") have been duly authorized by all requisite corporate action of the
Company, and the Reserved Shares have been duly reserved for issuance upon
conversion and/or exercise of all or any of the Notes, Warrants and the Agent's
Warrants and when so issued, sold, paid for and delivered, the Reserved Shares
will be validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive or any other similar rights of the stockholders of the
Company or others which rights shall not have been waived prior to the Initial
Closing.
(q) Exemption from Registration. Assuming (i) the
accuracy of the information provided by the respective Subscribers in the
Subscription Documents and (ii) that the Placement Agent has complied in all
material respects with the provisions of Regulation D promulgated under the
Securities Act, the offer and sale of the Units pursuant to the terms of this
Agreement are exempt from the registration requirements of the Securities Act
and the rules and regulations promulgated thereunder (the "Regulations"). The
Company is not disqualified from the exemption under Regulation D by virtue of
the disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
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<PAGE> 8
(r) Registration Rights. Except with respect to holders
of the Units and the Agent's Warrants, and except as referenced or described in
the Offering Documents, no person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
(s) Brokers. Neither the Company nor any of its
officers, directors, employees or stockholders has employed any broker or
finder in connection with the transactions contemplated by this Agreement other
than the Placement Agent.
(t) Title to Units. When certificates representing the
securities comprising the Units and/or the Reserved Shares shall have been duly
delivered to the purchasers and payment shall have been made therefor, the
several purchasers shall have good and marketable title to the Notes and
Warrants and/or the Reserved Shares free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising or through the acts
of the purchasers and except as arising from applicable Federal and state
securities laws), and the Company shall have paid all taxes, if any, in respect
of the original issuance thereof.
(u) Right of First Refusal. Except as set forth on
Schedule U, no person, firm or other business entity is a party to any
agreement, contract or understanding, written or oral entitling such party to a
right of first refusal with respect to the transactions contemplated by this
Agreement, except such as have been waived prior to the Initial Closing Date.
(v) Securities Exchange Act Compliance. The Company has
filed with the Securities and Exchange Commission ("SEC") on a timely basis all
filings required of a company whose securities have been registered under the
Securities Exchange Act of 1934, as amended ("Exchange Act") during the prior
three years. All information contained in such filings is true, accurate and
complete in all material respects. For a period of five years from the date of
this Agreement, the Company covenants to maintain the registration of its
Common Stock under the Exchange Act and to make all filings thereunder on a
timely basis. For the purpose of this paragraph, filings pursuant to Rule
12b-25 of the Exchange Act shall be deemed timely.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have
been subscribed for and funds representing the sale thereof shall have cleared,
a closing (the "Initial Closing") shall take place at the offices of the
Placement Agent, 733 Third Avenue, New York, N.Y. within five (5) days
following the Termination Date (which date (the "Closing Date") may be
accelerated or adjourned by agreement between the Company and the Placement
Agent). At the Initial Closing, payment for the Units issued and sold by the
Company shall be made against delivery of the Notes and the certificates
representing the Warrants comprising such Units. In addition, subsequent
closings (if applicable) may be
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<PAGE> 9
scheduled at the discretion of the Company and Placement Agent, each of which
shall be deemed a "Closing" hereunder.
(b) Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The
offering contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued, and
no proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue
Sky qualification materials nor the Term Sheet, contains an untrue statement of
a fact which in the opinion of the Placement Agent is material, or omits to
state a fact, which in the opinion of the Placement Agent is material and is
required to be stated therein, or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(iii) Compliance with Agreements. The Company will
have complied with all agreements and satisfied all conditions on its part to
be performed or satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have
taken all necessary corporate action, including, without limitation, obtaining
the approval of the Company's board of directors, for the execution and
delivery of this Agreement, the performance by the Company of its obligations
hereunder and the offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent
shall receive the opinion of Graham & James LLP, dated the Closing(s),
substantially to the effect that:
(A) Each of the Company and Oncometrics
has been duly organized and is validly existing and in good standing under the
laws of the State of its incorporation, has all requisite power and authority
necessary to own or hold its properties and conduct its business and is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such qualification, except where
the failure to so qualify or be licensed would not have a material adverse
effect on the
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<PAGE> 10
business and condition (financial or otherwise) of the Company; AccuMed
International is a corporation duly organized and validly existing under the
laws of the United Kingdom;
(B) each of this Agreement, the Notes,
the Warrant Agreement, the Subscription Agreement and the Agent's Warrants has
been duly and validly authorized, executed and delivered by the Company, and is
the valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to any applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and to general equitable
principles;
(C) the authorized, issued and
outstanding capital stock of the Company (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Offering
Documents as of their respective dates. Except for the Units and Warrants to
be issued as contemplated by this Agreement, to such counsel's knowledge, there
are no outstanding warrants, options, agreements, convertible securities,
preemptive rights or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other securities
of the Company other than as set forth in the Term Sheet. All of the issued
shares of capital stock of the Company have been duly and validly authorized
and issued, are fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any securityholder of the Company. The
offers and sales during the three years immediately prior to the date hereof of
such outstanding securities were either registered under the Act and applicable
state securities laws or exempt from such registration requirements. The
Reserved Shares (except as otherwise described in the Term Sheet) have been
duly reserved, and when issued in accordance with the terms of the Notes, the
Warrants and the Agent's Warrants will be validly issued, fully paid and
nonassessable and not subject to preemptive or any other similar rights and no
personal liability will attach to the ownership thereof;
(D) assuming (i) the accuracy of the
information provided by the Subscribers in the Subscription Documents and (ii)
that the Placement Agent has complied in all material respects with the
requirements of section 4(2) of the Securities Act (and the provisions of
Regulation D promulgated thereunder), the issuance and sale of the Units is
exempt from registration under the Securities Act and Regulation D promulgated
thereunder;
(E) neither the execution and delivery
of this Agreement, the Notes, the Warrants, the Warrant Agreement, the
Subscription Agreement, or the Agent's Warrants nor compliance with the terms
hereof or thereof, nor the consummation of the transactions herein or therein
contemplated, has, nor will, conflict with, result in a breach of, or
constitute a default under the Certificate of Incorporation or By-laws of the
Company or the Subsidiaries, or, to the best of our knowledge, any material
contract, instrument or document to which the Company or the Subsidiaries are a
party, or by which the Company, the Subsidiaries or any of their respective
properties are bound, or,
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<PAGE> 11
to the best of our knowledge, violate any applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or the Subsidiaries or any of their respective
properties or businesses;
(F) to our knowledge, there are no
claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against or affecting the Company or the Subsidiaries or involving
the properties of the Company or the Subsidiaries which might materially and
adversely affect the business, properties or financial condition of the Company
or the Subsidiaries or which might materially adversely affect the transactions
or other acts contemplated by this Agreement or the validity or enforceability
of this Agreement, except as set forth in or contemplated by the Offering
Documents; and
(G) such counsel has participated in the
preparation of the Offering Documents and nothing has come to the attention of
such counsel to cause them to have reason to believe that the Offering
Documents contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading (except with
respect to information concerning Difco, Difco Labs Michigan and Difco Labs
Wisconsin and except for the financial statements, notes thereto and other
financial information and statistical data contained therein, as to which such
counsel need express no opinion).
(vi) Advice of Patent Counsel. The Placement
Agent shall receive the advice of Graham & James LLP, patent counsel to the
Company, dated the Closing Date, in form and substance satisfactory to the
Placement Agent.
(vii) The Placement Agent shall receive a
certificate of the Company, signed by the President or Chief Financial Officer
and Corporate Vice President and Secretary thereof, that the representations
and warranties contained in Section 2 hereof are true and accurate in all
material respects at such Closing with the same effect as though expressly made
at such Closing.
(viii) Within five days after the Closing, the
Placement Agent shall receive copies of all letters from the Company to the
investors transmitting the Notes and Warrants and shall receive a letter from
the Company confirming transmittal of the securities to the investors.
(c) Blue Sky. A summary blue sky survey shall be
prepared by counsel to the Company stating the extent to which and the
conditions upon which offers and sales of the Units may be made in certain
jurisdictions. It is understood that such survey may be based on or rely upon
(i) the representations of each Subscriber set forth in the Subscription
Agreement delivered by such Subscriber, (ii) the representations, warranties
and agreements of the Company set forth in Section 2 of this Agreement, (iii)
the representations and warranties of the Placement Agent, and (iv) the
representations
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<PAGE> 12
of the Company set forth in the certificate to be delivered at the Closing
pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously
with payment for and delivery of the Units at each Closing as provided in
paragraph 3(a) above, the Company shall at such Closing pay to the Placement
Agent (i) a commission equal to seven percent (7%) of the aggregate purchase
price of the Units sold; and (ii) an accountable expense allowance up to
$75,000; provided, however, if such accountable expenses exceed $75,000, such
excess amount shall be reimbursed by the Company upon written approval by the
Company (collectively, the "Transaction Fee"). The Company shall also pay all
expenses in connection with the qualification of the Units under the securities
or Blue Sky laws of the states which the Placement Agent shall designate. The
Company will, at the Initial Closing, issue to you or your designees (which may
include any Selected Dealer or any officer of the Placement Agent or a Selected
Dealer) the Agent's Warrants in the form annexed hereto as Exhibit 1 to
purchase 200,000 shares of Common Stock. The Agent's Warrants will be
exercisable for a period of five years from the Initial Closing Date. The
Placement Agent will be entitled to receive the Transaction Fee whether or not
the Units offered in the Private Placement are sold by the Placement Agent, the
Company or any third party. Further, if the Company consummates any equity or
debt financing on or after the date of this Agreement, but in no event later
than twelve (12) months after the final closing of the Offering, with any party
initially introduced to the Company by the Placement Agent, the Placement Agent
will be entitled to receive the Transaction Fee in the same proportion to any
such investment in the Company by such party as the Transaction Fee bears to
the Offering.
(e) Bring-Down Opinions and Certificates. If
there is more than one Closing, then at each such Closing there shall be
delivered to the Placement Agent updated opinions and certificates as described
in (v), (vi) and (vii) of Section 3(b) above, respectively.
(f) No Adverse Changes. There shall not have
occurred, at any time prior to the Closing or, if applicable, any additional
Closing, (i) any domestic or international event, act or occurrence which has
materially disrupted, or in the Placement Agent's opinion will in the immediate
future materially disrupt, the securities markets; (ii) a general suspension
of, or a general limitation on prices for, trading in securities on the New
York Stock Exchange or the American Stock Exchange or in the over-the-counter
market; (iii) any outbreak of major hostilities or other national or
international calamity; (iv) any banking moratorium declared by a state or
federal authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material interruption in
the mail service or other means of communication within the United States;
(vii) any material adverse change in the business, properties, assets, results
of operations, or financial condition of the Company; or (viii) any change in
the market for securities in general or in political, financial, or economic
conditions which, in the Placement Agent's
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<PAGE> 13
reasonable judgment, makes it inadvisable to proceed with the offering, sale,
and delivery of the Units.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the
Offering will be used by the Company substantially as set forth in the Term
Sheet. Other than as contemplated in the Term Sheet, the Company shall not use
any of the proceeds from the Offering to repay any indebtedness of the Company,
including but not limited to indebtedness to any current executive officers,
directors or principal stockholders of the Company.
(b) Expenses of Offering. The Company shall be
responsible for, and shall bear all expenses directly incurred in connection
with, the proposed Offering including, but not limited to, legal fees
(including those of counsel to the Placement Agent) relating to the costs of
preparing the Offering Documents and all amendments, supplements and exhibits
thereto; preparing and delivering all placement agent and selling documents,
including, but not limited to, the Agency Agreement with the Placement Agent
and the blue sky memorandum; Notes and Warrant certificates, blue sky fees,
filing fees and the fees and disbursements of counsel in connection with blue
sky matters (the "Company Expenses"). Such expenses shall not include the cost
of the Placement Agent's reasonable mailing, telephone, telegraph, travel, due
diligence meeting and other similar expenses (the "Placement Agent Expenses")
which are covered by the accountable expense allowance set forth in Section
3(d) above, payable by the Company to the Placement Agent.
If the Private Placement is not completed
because the Company prevents it or because of a breach by the Company of any
such covenants, representations or warranties or, if the Company effects the
contemplated acquisition of the assets from Difco or repays the indebtedness
incurred to effect such transaction without the use of the proceeds
contemplated to be funded in this Offering and the Placement Agent has at least
$7,000,000 in an escrow account, the Company shall pay to the Placement Agent
an amount equal to $300,000 and, in such event, the Placement Agent shall
receive the Agent's Warrants for the purchase of 100,000 shares of Common Stock
of the Company exercisable at the then current market price of the Common
Stock. In the event that the Company fails to effect the acquisition of the
assets from Difco, and the Placement Agent has at least $7,000,000 in an escrow
account, the Placement Agent will be entitled to receive, at the Company's
option, $300,000 or shares of Common Stock having a then current market value
of $300,000, and the Agent's Warrants to purchase 100,000 shares of Common
Stock exercisable at the then current market price of the Common Stock.
(c) Notification. The Company shall notify the
Placement Agent immediately, and in writing, (A) when any event shall have
occurred during the period commencing on the date hereof and ending on the
later of the last Closing or the Termination Date as a result of which the
Offering Documents would include any untrue
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<PAGE> 14
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(B) of the receipt of any notification with respect to the modification,
rescission, withdrawal or suspension of the qualification or registration of
the Units, or of any exemption from such registration or qualification, in any
jurisdiction. The Company will use its best efforts to prevent the issuance of
any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
(d) Blue Sky. The Company will use its
commercially reasonable efforts to qualify or register the Units for offering
and sale under, or establish an exemption from such qualification or
registration under, the securities or "blue sky" laws of such jurisdictions as
you may reasonably request; provided however, that the Company will not be
obligated to qualify as a dealer in securities or be subject to general service
of process in any jurisdiction in which it is not so qualified or subject. The
Company will not consummate any sale of Units in any jurisdiction in which it
is not so qualified or in any manner in which such sale may not be lawfully
made.
(e) Form D Filing. The Company shall file five
copies of a Notice of Sales of Securities on Form D with the Securities and
Exchange Commission (the "Commission") no later than 15 days after the first
sale of the Units. The Company shall file promptly such amendments to such
Notices on Form D as shall become necessary and shall also comply with any
filing requirement imposed by the laws of any state or jurisdiction in which
offers and sales are made. The Company shall furnish the Placement Agent with
copies of all such filings.
(f) Press Releases, Etc. The Company shall not,
during the period commencing on the date hereof and ending on the later of the
last Closing and the Termination Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior consent of the Placement Agent,
which consent shall not be unreasonably withheld unless, in the opinion of
Company's counsel, the press release is required under the securities laws of
the United States.
(g) Form 10-KSB The Company will provide to the
Placement Agent, promptly upon the filing thereof with the Commission (and in
any event no later than 5 days of such filing), a copy of its Annual Report on
Form 10-KSB for the year ended December 31, 1996.
(h) Restrictions on Issuance of Securities.
Prior to the Closing Date, the Company will not, without the prior written
consent of the Placement Agent, issue additional shares of Common Stock or
grant any warrants, options or other securities of the
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<PAGE> 15
Company except for issuances of shares upon the exercise of outstanding options
and warrants and the issuance of the Bridge Note described in the Term Sheet.
(i) Authorized Capital; Reservation of Common
Stock. Following the Initial Closing, the Company will use its best efforts to
take all actions as may be necessary (including obtaining stockholder approval)
to amend its Certificate of Incorporation to increase the Company's authorized
shares of Common Stock in order for the Company to have a sufficient number of
authorized shares of Common Stock (after taking into account all shares
reserved for issuance on the conversion of convertible securities and the
exercise of outstanding options and warrants) to permit the issuance of all
shares issuable upon conversion and/or exercise of the Notes, Warrants and the
Agent's Warrants sold in this Offering. Thereafter, the Company shall reserve
and keep available that maximum number of its authorized but unissued shares of
Common Stock which are issuable upon conversion and/or exercise of the Notes
and Warrants, including the shares underlying the Agent's Warrants.
5. Indemnification.
(a) (i) The Company agrees to indemnify and
hold harmless the Placement Agent and its shareholders, directors, officers,
agents and controlling persons (an "Indemnified Party") against any and all
loss, liability, claim, damage and expense whatsoever (and all actions in
respect thereof), and to reimburse the Placement Agent for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, and
the costs of investigating, preparing or defending any such action or claim
whether or not in connection with litigation in which the Placement Agent is a
party), arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Offering Documents or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(ii) The Placement Agent agrees to
indemnify and hold harmless the Company and its respective shareholders,
directors, officers, agents and controlling persons against any and all loss,
liability, claim, damage and expense whatsoever (and all actions in respect
thereof), and to reimburse the Company for legal fees and related expenses
(including, but not limited to the costs of giving testimony or furnishing
documents in response to a subpoena or otherwise, and the costs of
investigating, preparing or defending any such action or claim whether or not
in connection with litigation in which the Placement Agent is a party), arising
out of any untrue statement or alleged untrue statement of a material fact
contained in the Offering Documents or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, to
the
15
<PAGE> 16
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by the Placement Agent to
the Company specifically for inclusion in the Offering Documents. In no event
shall the liability of the Placement Agent hereunder be greater in amount than
the dollar amount of the proceeds of this Offering.
(b) The Company agrees to indemnify and hold
harmless an Indemnified Party to the same extent as the foregoing indemnity,
against any and all loss, liability, claim, damage and expense whatsoever
directly arising out of the exercise by any person of any right under the
Securities Act or the Exchange Act or the securities or Blue Sky laws of any
state on account of violations of the representations, warranties or agreements
set forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled
to indemnification pursuant to the foregoing subsection (a) or (b) under this
Section of notice of the commencement of any action, the indemnified party
will, if a claim in respect thereof is to be made against the Indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to the indemnified party
otherwise than under this Section. In case any such action is brought against
an indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to the indemnified party under this
Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that the fees and expenses of such counsel shall be at the expense of the
Indemnifying party if (i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the indemnifying party and, in the judgment of the
indemnified party, it is advisable for the indemnified party or parties to be
represented by separate counsel (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
the indemnified party or parties. No settlement of any action against an
indemnified party shall be made without the consent of the
16
<PAGE> 17
indemnified party, which shall not be unreasonably withheld in light of all
factors of importance to the indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section (5) but
it is found in a final judicial determination, not subject to further appeal,
that such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Securities Act,
the Exchange Act, or otherwise, then the Company (including for this purpose
any contribution made by or on behalf of any officer, director, employee or
agent for the Company, or any controlling person of the Company), on the one
hand, and the Placement Agent and any Selected Dealers (including for this
purpose any contribution by or on behalf of an indemnified Party), on the other
hand, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, in such proportions as
are appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Placement Agent and the Selected Dealers, on the other
hand; provided, however, that if applicable law does not permit such
allocation, then other relevant equitable considerations such as the relative
fault of the Company and the Placement Agent and the Selected Dealers in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. In no case shall the Placement
Agent or a Selected Dealer be responsible for a portion of the contribution
obligation in excess of the compensation received by it pursuant to Section 3
hereof or the Selected Dealer Agreement, as the case may be. No person guilty
of a fraudulent misrepresentation shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each person, if any, who controls the Placement Agent within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee and agent of the
Placement Agent, shall have the same rights to contribution as the Placement
Agent, and each person, if any who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, employee and agent of the Company, shall have the same
rights to contribution as the Company, subject in each case to the provisions
of this Section 6. Anything in this Section 6 to the contrary notwithstanding,
no party shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 6 is
intended to supersede any right to contribution under the Securities Act, the
Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party
except that the
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<PAGE> 18
indemnification provided in Section 5 hereof and the contribution provided in
Section 6 hereof shall survive any termination and shall survive the Closing
for a period of five years.
(b) Representations, Warranties and Covenants to Survive
Delivery. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company as of the date hereof shall
survive execution of this Agreement and delivery of the Units and the
termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended
for the sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or corporation
shall have any third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York without
regard to conflict of law provisions.
(e) Counterparts. This Agreement may be signed in
counterparts with the same effect as if both parties had signed one and the
same instrument.
(f) Notices. Any communications specifically required
hereunder to be in writing, if sent to the Placement Agent, will be mailed,
delivered and confirmed to it at Commonwealth Associates, 733 Third Avenue, New
York, New York 10017, Att: Keith Rosenbloom, Esq., with a copy to Bachner,
Tally, Polevoy & Misher LLP, 380 Madison Avenue, New York, New York 10017,
Att: Alison S. Newman, Esq. and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at AccuMed International, Inc.,
900 North Franklin Street, Suite 401, Chicago, IL 60610, Att: Peter P.
Gombrich, with a copy to AccuMed International, Inc., 1500 Seventh Avenue,
Sacramento, CA 95818, Attn: Joyce Wallach, General Counsel and to Graham &
James LLP, 400 Capitol Mall, Sacramento, CA 95814-4602, Attn: Kevin Coyle,
Esq..
(g) Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
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<PAGE> 19
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
ACCUMED INTERNATIONAL, INC.
By: /s/ Leonard R. Prange
-----------------------------------
Title: Corporate Vice President and
Chief Financial Officer
Agreed:
COMMONWEALTH ASSOCIATES
By: /s/ Basil Asciutto
-----------------------------
Authorized Officer
19
<PAGE> 20
SCHEDULE A
AccuMed INTERNATIONAL, INC.
Units
PRIVATE PLACEMENT SELLING AGREEMENT
New York, New York
, 1997
[ ]
Dear Sirs:
1. AccuMed International, Inc. (the "Company") is offering for
sale on a "best efforts, all or none" basis, a total of up to eighty-five (85)
Units. The Units and the terms under which they are to be offered for sale by
the Company are more particularly described in the Confidential Term Sheet
dated , 1997 (the "Term Sheet") and the form of subscription
agreement between the Company and each subscriber (the "Subscription
Agreement"), the exhibits to the Term Sheet and the Subscription Agreement, and
any other documents delivered to subscribers (herein, collectively the
"Offering Documents"). Commonwealth Associates (the "Placement Agent") has
agreed to act as exclusive placement agent to the Company for the purpose of
assisting the Company in finding subscribers who satisfy the requirements set
forth in the Offering Documents and more particularly in the Subscription
Agreement (herein, "Qualified Subscribers") pursuant to the offering ("Private
Placement") described in the Offering Documents.
2. The Units are to be offered to a limited number of subscribers
by the Company at the price per Unit set forth in the Offering Documents (the
"Subscription Price"), in accordance with the terms of offering thereof set
forth in the Offering Documents.
3. We are extending the right, subject to the terms and conditions
hereof, to assist the Company in finding Qualified Subscribers to purchase a
portion of the Units, to certain dealers who are actually engaged in the
investment banking or securities business and who are members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") (such
dealers who shall agree to assist in locating Qualified Subscribers for Units
hereunder being herein called "Selected Dealers"), at the Subscription Price,
for which they will receive a commission of ____% of the Subscription Price for
Units purchased by Qualified Subscribers presented to the Company by them. The
Selected
<PAGE> 21
Dealers have agreed to comply with the provisions of all applicable Rules of
Fair Practice of the NASD. We may be included among the Selected Dealers.
4. We shall have full authority to take such action as we may
deem advisable in respect of all matters pertaining to the Private Placement of
the Units.
5. If you desire to present to the Company any Qualified
Subscribers for Units, your application should reach us promptly by telephone
or telegraph at 733 Third Avenue, New York, New York 10007, Attention:
__________________________, telephone number 212-297-7000. We reserve the
right to reject subscriptions in whole or in part, to make allotments and to
close the subscription books at any time without notice. The Units allotted to
the Qualified Subscribers presented by you will be confirmed, subject to the
terms and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified
Subscribers for the Units is extended to you only so long as the Company may
lawfully sell the Units to residents in the state in which any such Qualified
Subscribers reside pursuant to the terms of the Offering Documents.
7. Any Units offered under the terms of this Agreement and the
Offering Documents may only be offered and sold subject to the securities or
blue sky laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the number
of sets of Offering Documents delivered to qualified subscribers by you
hereunder at the time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the offer or sale
of the Units other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in
finding Qualified Subscribers for the Units, you agree to comply with all the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act") specifically with respect to the requirements of Regulation D thereunder.
You confirm that you are familiar with Rules 501 and 502 under the 1933 Act
relating to the limitations on the manner in which a private placement may be
conducted pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Units have been qualified
or are exempt from registration requirements for offer and sale under the
respective securities or blue sky laws of such states and other jurisdictions,
but we do not assume any obligation or
2
<PAGE> 22
responsibility as to the right of any Selected Dealer to offer the Units in any
state or other jurisdiction or as to the eligibility of the Units for sale
therein. We will, if requested, file a Further State Notice in respect of the
Units pursuant to Article 23-A of the General Business Law of the State of New
York.
10. No Selected Dealer is authorized to act as our agent or an
agent of the Company or otherwise to act on our behalf in assisting the Company
in finding Qualified Subscribers or otherwise or to furnish any information or
make any representation except as contained in the Offering Documents.
11. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to
the contrary. We shall not be under any liability for or in respect of value,
validity or form of the components of the Units or the delivery of the Notes
and Warrants comprising the Units, or the performance by anyone of any
agreement on its part, or the qualification of the Units for offer or sale
under the laws of any jurisdiction, or for or in respect of any other matter
relating to this Agreement, except for lack of good faith and for obligations
expressly assumed by us in this Agreement and no obligation on our part shall
be implied herefrom. The foregoing provisions shall not be deemed a waiver of
any liability imposed under the federal securities laws.
12. Payment for the Units subscribed for hereunder is to be made
by Qualified Subscribers at the Subscription Price during the term of the
Private Placement set forth in the Offering Documents at the office of
Commonwealth Associates, 733 Third Avenue, New York, New York 10017, by a
certified or official bank check, payable to the order of [Escrow Agent name
and account].
13. Notice to us should be addressed to Commonwealth Associates,
733 Third Avenue, New York, New York 10017, Attention: __________________.
Notices to you shall be deemed to have been duly given if mailed to you at the
address to which this letter is addressed.
14. If you desire to assist the Company in finding Qualified
Subscribers pursuant to the terms set forth above, please confirm your
application by signing and returning to us your confirmation on the duplicate
copy of this letter enclosed herewith, even though you may have previously
advised us thereof by telephone or telegraph. Our signature hereon may be by
facsimile.
Very truly yours,
COMMONWEALTH ASSOCIATES
By:
-----------------------------------
Authorized Officer
3
<PAGE> 23
We hereby present to AccuMed International, Inc. (the
"Company") Qualified Subscribers for Units in accordance with the terms and
conditions stated in the foregoing letter. We hereby acknowledge receipt of
the Offering Documents referred to in the first paragraph thereof relating to
said Units. We confirm that we are a dealer actually engaged in the investment
banking or securities business and that we are a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"). We hereby agree
to comply with all of the applicable provisions of the Rules of Fair Practice
of the NASD.
By:
----------------------------------
Authorized Officer
Dated: ________________________
<PAGE> 1
EXHIBIT 10.38
WARRANT AGREEMENT
AGREEMENT, dated as of this 13th day of March, 1997, by and among
ACCUMED INTERNATIONAL, INC., a Delaware corporation (the "Company"), AMERICAN
STOCK TRANSFER & TRUST COMPANY, as warrant agent (the "Warrant Agent"), and
COMMONWEALTH ASSOCIATES, a New York corporation ("Commonwealth").
W I T N E S S E T H
WHEREAS, in connection with a private placement (the "Private
Placement") of a minimum of seventy (70) and a maximum of eighty-five (85)
units ("Units"), each Unit consisting of $100,000 principal amount of 12%
Convertible Promissory Notes ("Notes"), and 10,000 common stock purchase
warrants ("Warrants"), each Warrant exercisable to purchase one share of the
Company's Common Stock, $.01 par value, the Company will issue up to 850,000
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, and the
holders of certificates representing the Warrants, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distributions of earnings and assets of the Company without limit as to amount
or percentage, which at the date hereof consists of 30,000,000 authorized
shares of Common Stock, $.01 value.
(b) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 40 Wall Street,
New York, New York.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney
<PAGE> 2
duly authorized in writing, and (b) payment in cash, or by official bank or
certified check made payable to the Company, of an amount in lawful money of
the United States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean (i) the date of
the final closing of the Private Placement with respect to Warrants to purchase
up to 749,955 shares of Common Stock issuable pursuant to this Warrant
Agreement and (ii) the date in which the Company has a sufficient number of
authorized shares of Common Stock reserved for issuance (after taking into
account all shares reserved for issuance on the conversion of convertible
securities and the exercise of outstanding options and warrants, including the
shares of Common Stock issuable upon the conversion of the Notes) to permit the
issuance of the shares of Common Stock to be issued pursuant to the exercise of
the Warrants ("Authorized Share Date") with respect to Warrants to purchase up
to 100,045 shares of Common Stock issuable pursuant to this Warrant Agreement.
(e) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price shall
be $3.125 per share subject to adjustment from time to time pursuant to the
provisions of Section 8 hereof and subject to the Company's right to reduce the
Purchase Price upon notice to all warrantholders.
(f) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books maintained
by the Company.
(g) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(h) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on (i) the six month anniversary of the final closing of the Private
Placement, with respect to Warrants to purchase up to 749,955 shares of Common
Stock and (ii) the six month anniversary of the Authorized Share Date with
respect to Warrants to purchase up to 100,045 shares of Common Stock; provided,
however, if the Company redeems the Notes prior to the three month anniversary
of the final closing of the Private Placement, the Warrant Expiration date with
respect to all of the Warrants shall be extended until 5:00 P.M. (New York
time) on the five year anniversary of the final closing of the Private
Placement, provided that if either of such date shall in the State of New York
be a holiday or a day on which banks are authorized to close, then 5:00 P.M.
(New York time) on the next following day which in the State of New York is not
a holiday or a day on which banks are authorized to close. Upon notice to all
warrantholders the Company shall have the right to extend the Warrant
Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
-2-
<PAGE> 3
(a) A Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one share of Common
Stock upon the exercise thereof, in accordance with the terms hereof, subject
to modification and adjustment as provided in Section 8.
(b) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall execute and deliver stock certificates in required whole
number denominations representing up to an aggregate of 850,000 shares of
Common Stock, subject to adjustment as described herein, upon the exercise of
Warrants in accordance with this Agreement.
(c) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall execute and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise
of fewer than all Warrants represented by any Warrant Certificate, to evidence
any unexercised Warrants held by the exercising Registered Holder, (iii) those
issued upon any transfer or exchange pursuant to Section 6; (iv) those issued
in replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7; and (v) at the option of the Company, in such form as
may be approved by the its Board of Directors, to reflect (a) any adjustment or
change in the Purchase Price or the number of shares of Common Stock
purchasable upon exercise of the Warrants, made pursuant to Section 8 hereof
and (b) other modifications approved by Warrantholders in accordance with
Section 16 hereof.
SECTION 3. Form and Execution of Warrant Certificates. (a)
The Warrant Certificates shall be substantially in the form annexed hereto as
Exhibit A (the provisions of which are hereby incorporated herein) and may have
such letters, numbers or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed, engraved or typed
thereon as the Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any law
or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in
registered form. Warrants shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer of the Company
before the date of issuance of the Warrant Certificates and issue and delivery
thereof, such Warrant Certificates may nevertheless be issued and delivered
with the same
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<PAGE> 4
force and effect as though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company. After execution by the Company,
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder upon exercise thereof
as of the close of business on the Exercise Date. As soon as practicable on or
after the Exercise Date the Warrant Agent shall deposit the proceeds received
from the exercise of a Warrant, and promptly after clearance of checks received
in payment of the Purchase Price pursuant to such Warrants, cause to be issued
and delivered by the Transfer Agent, to the person or persons entitled to
receive the same, a certificate or certificates for the securities deliverable
upon such exercise, (plus a certificate for any remaining unexercised Warrants
of the Registered Holder). Notwithstanding the foregoing, in the case of
payment made in the form of a check drawn on an account of Commonwealth or such
other investment banks and brokerage houses as the Company shall approve,
certificates shall immediately be issued without any delay. Upon the exercise
of any Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Warrant to the Company or as the
Company may direct in writing.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes;
etc. (a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants and payment of the Purchase Price shall, at the time of
delivery, be duly and validly issued, fully paid, nonassessable and free from
all taxes, liens and charges with respect to the issue thereof (other than
those which the Company shall promptly pay or discharge).
(b) The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws with respect
to the exercise of the Warrants; provided, however, that the Company shall not
be obligated to file any general consent to service of process or qualify as a
foreign corporation in any jurisdiction. With respect to any such securities
laws, however, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
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<PAGE> 5
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions.
SECTION 6. Exchange and Registration of Transfer.
Subject to the restrictions on transfer contained in the Warrant
Certificates and the Subscription Agreements between the Company and the
purchasers of Units:
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and upon satisfaction of the terms and provisions hereof, the Company shall
execute, and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at its office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company, duly executed by the Registered Holder or his attorney-in-fact
duly authorized in writing.
(d) The Company may require payment by such holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
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<PAGE> 6
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation of the Warrant Agent, or, with the
prior written consent of Commonwealth, disposed of or destroyed, at the
direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and
loss, theft, destruction or mutilation of any Warrant Certificate and (in case
of loss, theft or destruction) of indemnity satisfactory to them, and (in the
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a
bonafide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. Adjustment of Exercise Price and Number of Shares of
Common Stock or Warrants.
(a) Subject to the exceptions referred to in Section 8(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the current fair market value per share of the Common Stock on the date of the
sale or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
8(f)(F) below), if any, for the issuance of such additional shares would
purchase at such current market price per share of Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such
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<PAGE> 7
additional shares. Such adjustment shall be made successively whenever such an
issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section 8,
the total number of shares of Common Stock purchasable upon the exercise of
each Warrant shall (subject to the provisions contained in Section 8(b) hereof)
be such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price immediately prior to such adjustment multiplied by a fraction,
the numerator of which shall be the Purchase Price in effect immediately prior
to such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment of
the number of Warrants shall become that number of Warrants (calculated to the
nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. Upon each adjustment of the number
of Warrants pursuant to this Section 8, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrant
Certificates on the date of such adjustment Warrant Certificates evidencing,
subject to Section 10 hereof, the number of additional Warrants to which such
Holder shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such Holder in substitution and
replacement for the Warrant Certificates held by him prior to the date of
adjustment (and upon surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such Holder shall be
entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Warrant
immediately prior to
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such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(c) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share, and the number of shares purchasable were expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and (iii) a brief statement of the facts accounting for such adjustment. The
Company will promptly file such certificate with the Warrant Agent and cause a
brief summary thereof to be sent by ordinary first class mail to Commonwealth
and to each registered holder of Warrants at his last address as it shall
appear on the registry books of the Warrant Agent. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity thereof except as to the holder to whom the Company failed to mail
such notice, or except as to the holder whose notice was defective. The
affidavit of an officer of the Warrant Agent or the Secretary or an Assistant
Secretary of the Company that such notice has been mailed shall, in the absence
of fraud, be prima facie evidence of the facts stated therein.
(f) For purposes of Section 8(a) and 8(b) hereof, the following
provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by
or for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or decrease of at
least $.10 in such price; provided that any adjustments which by
reason of this clause (B) are not
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<PAGE> 9
required to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which,
together with any adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price then in
effect hereunder.
(C) In case of (1) the sale by the Company for cash of
any rights or warrants to subscribe for or purchase, or any options
for the purchase of, Common Stock or any securities convertible into
or exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such convertible or
exchangeable securities being herein called "Convertible Securities"),
or (2) the issuance by the Company, without the receipt by the Company
of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than
the Market Price of the Common Stock on the date of the issuance or
sale of such rights, warrants or options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 8(a) and 8(b) hereof and
shall be deemed to have been sold for cash in an amount equal to such
price per share.
(D) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (x)
the total amount of consideration received by the Company for the sale
of such Convertible Securities, plus the minimum
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aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such convertible
Securities) is less than the Market Price of the Common Stock on the
date of the sale of such Convertible Securities, then the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the date of the sale
of such Convertible Securities) shall be deemed to be outstanding
shares of Common Stock for purposes of Sections 8(a) and 8(b) hereof
and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(E) If the exercise or purchase price provided for in any
right, warrant or option referred to in (C) above, or the rate at
which any Convertible Securities referred to in (C) or (D) above are
convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect
against dilution), the Purchase Price then in effect hereunder shall
forthwith be readjusted to such Purchase Price as would have obtained
(1) had the adjustments made upon the issuance or sale of such rights,
warrants, options or Convertible Securities been made upon the basis
of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities, (2)
had adjustments been made on the basis of the Purchase Price as
adjusted under clause (1) for all transactions (which would have
affected such adjusted Purchase Price) made after the issuance or sale
of such rights, warrants, options or Convertible Securities, and (3)
had any such rights, warrants, options or Convertible Securities then
still outstanding been originally issued or sold at the time of such
change. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder
shall forthwith be readjusted to such Purchase Price as would have
obtained (a) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of Common
Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the
Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after
the issuance or sale of such rights, warrants, options or Convertible
Securities.
(F) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to subscribe
for or purchase, or
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any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall
be deemed to be the gross sales price therefor without deducting
therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each Warrant
will be made, however,
(i) upon the exercise of any of the options presently
outstanding under the Company's Stock Option Plans (the "Plans") for
officers, directors and certain other key personnel of the Company; or
(ii) upon the grant or exercise of any other options which
may hereafter be granted or exercised under the Plan or under any
other employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants or any
other Warrants issued by the Company, including the warrants to be
issued to Commonwealth in connection with the Private Placement; or
(iv) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants
or options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(v) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not
any adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such Convertible Securities and whether
or not such Convertible Securities were outstanding on the date of the
original sale of the Warrants or were thereafter issued or sold; or
(vi) upon any amendment to or change in the terms of any
rights or warrants to subscribe for or purchase, or options for the
purchase of, Common Stock or Convertible Securities or in the terms of
any Convertible Securities, including, but not limited to, any
extension of any expiration date of any such right, warrant or option,
any change in any exercise or purchase price provided for in any such
right, warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable for Common
Stock or any change in the rate at which any Convertible Securities
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<PAGE> 12
are convertible into or exchangeable for Common Stock (other than
rights, warrants, options or Convertible Securities issued or sold
after the close of business on the date of the original issuance of the
Warrants (i) for which an adjustment in the Purchase Price then in
effect was theretofore made or required to be made, upon the issuance
or sale thereof, or (ii) for which such an adjustment would have been
required had the exercise or purchase price of such rights, warrants or
options at the time of the issuance or sale thereof or the rate of
conversion or exchange of such Convertible Securities, at the time of
the sale of such Convertible Securities, or the issuance or sale of
rights or warrants to subscribe for or purchase, or options for the
purchase of, such Convertible Securities, been the price or rate as
changed, in which case the provisions of Section 8(f)(E) hereof shall
be applicable if, but only if, the exercise or purchase price thereof,
as changed, or the rate of conversion or exchange thereof, as changed,
consists of cash or requires the payment of additional consideration,
if any, consisting of cash and the Company did not receive any
consideration other than cash, if any, in connection with such change).
(h) As used in this Section 8, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 8(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 8, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of Directors
of the Company.
(j) If and whenever the Company shall declare any dividends or
distributions or grant to the holders of Common Stock, as such, rights or
warrants to subscribe for or to purchase, or any options for the purchase of,
Common Stock or securities convertible into or exchangeable for or carrying a
right, warrant or option to purchase Common Stock, the
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Company shall notify each of the then Registered Holders of the Warrants of
such event prior to its occurrence to enable such Registered Holders to
exercise their Warrants and participate as holders of Common Stock in such
event.
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SECTION 9. Registration Under The Securities Act of 1933.
The Company agrees to register for resale the shares of Common Stock
issued or issuable upon exercise of Warrants under the Securities Act of 1933,
as amended (the "Act") as more fully set forth in Section IV of the
Subscription Agreement between the Company and each of the investors in the
Private Placement.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 8 hereof, the Company
shall nevertheless not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges
on such exchange or listed for trading on the Nasdaq National
Market System ("NMS") or Nasdaq SmallCap Market ("NSM"), the
current market value shall be the last reported sale price of
the Common Stock on such exchange on the last business day
prior to the date of exercise of this Warrant or if no such
sale is made on such day or no closing sale price is quoted,
the average of the closing bid and asked prices for such day
on such exchange or system; or
(2) If the Common Stock is listed in the
over-the-counter market (other than on NMS or NSM) or admitted
to unlisted trading privileges, the current market value shall
be the mean of the last reported bid and asked prices reported
by the National Quotation Bureau, Inc. on the last business
day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked
prices are not so reported, the current market value shall be
an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder
of Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the
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<PAGE> 15
holder of Warrants, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue or reclassification
of stock, change of par value or change of stock to no par value,
consolidation, merger or conveyance or otherwise), or to receive notice of
meetings, or to receive dividends or subscription rights, until such Holder
shall have exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect
to this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, on his own behalf and
for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificate and this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his attorney
duly authorized in writing and only if the Warrant Certificates representing
such Warrants are surrendered at the office of the Warrant Agent, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to the Warrant
Agent and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name the
Warrant Certificate is registered as the holder and as the absolute, true and
lawful owner of the Warrants represented thereby for all purposes, and the
Company shall not be affected by any notice or knowledge to the contrary,
except as otherwise expressly provided in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be cancelled by it and
retired. The Warrant Agent shall also cancel Common Stock following exercise
of any or all of the Warrants represented thereby or delivered to it for
transfer, splitup, combination or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and
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<PAGE> 16
delivering Warrant Certificates or by any other act hereunder be deemed to make
any representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued
upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay the Company, as provided in Section
4, all moneys received by the Warrant Agent upon the exercise of such Warrants.
The Warrant Agent shall, upon request of the Company from time to time, deliver
to the Company such complete reports of registered ownership of the Warrants
and such complete records of transactions with respect to the Warrants and the
shares of Common Stock as the Company may request. The Warrant Agent shall
also make available to the Company and Commonwealth for inspection by their
agents or employees, from time to time as either of them may request, such
original books of accounts and record (including original Warrant Certificates
surrendered to the Warrant Agent upon exercise of Warrants) as may be
maintained by the Warrant Agent in connection with the issuance and exercise of
Warrants hereunder, such inspections to occur at the Warrant Agent's office as
specified in Section 17, during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of facts contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible
for any failure on the part of the Company to comply with any of its covenants
and obligations contained in this Agreement or in any Warrant Certificate, or
(iii) be liable for any act or omission in connection with this Agreement
except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed
by the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be
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<PAGE> 17
liable for any action taken, suffered or omitted by it in accordance with such
notice, statement, instruction, request, direction, order or demand believed by
it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's negligence
or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to the Registered Holder of
each Warrant Certificate at the Company's expense. Upon such resignation, or
any inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of 15 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for
the appointment of a new warrant agent. Any new warrant agent, whether
appointed by the Company or by such a court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
stockholders, of not less than $10,000,000 or a stock transfer company. After
acceptance in writing of such appointment by the new warrant agent is received
by the Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein
as the Warrant Agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
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<PAGE> 18
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions
of Section 4(b), the parties hereto may by supplemental agreement make any
changes or corrections in this Agreement (i) that it shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained; (ii) to reflect an increase in the
number of Warrants which are to be governed by this Agreement resulting from an
increase in the size of the Private Placement; or (iii) that it may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant Certificates
representing not less than 50% of the Warrants then outstanding; and provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the consent
in writing of the Registered Holder of the Warrant Certificate representing
such Warrant, other than such changes as are specifically prescribed by this
Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at 900 North Franklin Street, Suite 401,
Chicago, IL 60610, Attention: Peter P. Gombrich, President; if to the Warrant
Agent, at its Corporate Office and if to Commonwealth at Commonwealth
Associates, 733 Third Avenue, New York, New York 10022, Attention: Keith
Rosenbloom.
SECTION 18. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent (and their
respective successors and assigns) and the holders from time to time of Warrant
Certificates. Nothing in this
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<PAGE> 19
Agreement is intended or shall be construed to confer upon any other person any
right, remedy or claim, in equity or at law, or to impose upon any other person
any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate on the
earlier to occur of (i) the close of business on the Expiration Date of all
the Warrants; or (ii) the date upon which all Warrants have been exercised.
SECTION 21. Counterparts. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ Peter P. Gombrich
----------------------------------
Peter P. Gombrich, President
COMMONWEALTH ASSOCIATES
By: /s/ Jospeh P. Wynne
----------------------------------
Chief Financial Officer
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ Herb Lemmer
----------------------------------
Authorized Officer
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<PAGE> 1
EXHIBIT 10.39
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
UNTIL (1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER
OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE
SECURITIES LAWS.
No. Warrants
VOID AFTER ____________, 1997
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
ACCUMED INTERNATIONAL, INC.
This certifies that FOR VALUE RECEIVED ________________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share of Common Stock, $.01 par value ("Common Stock")
of AccuMed International, Inc., a Delaware corporation (the "Company") at any
time commencing on (i) the date of the final closing of the Private Placement
(as defined below), with respect to up to 88.23% of the Warrants to purchase
shares of Common Stock represented hereby, and (ii) the date in which the
Company has a sufficient number of authorized shares of Common Stock reserved
for issuance (after taking into account all shares reserved for issuance on the
conversion of convertible securities and the exercise of outstanding options
and warrants, including the shares of Common Stock issuable upon the conversion
of the Notes) to permit the issuance of the shares of Common Stock to be issued
pursuant to the exercise of the Warrants ("Authorized Share Date") with respect
to up to 11.77% of the Warrants to purchase shares of Common Stock represented
hereby, and in both cases, prior to the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of American Stock Transfer & Trust Company, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of an amount equal to
$3.125 for each Warrant (the "Purchase Price") in lawful money of the United
States of America in cash
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<PAGE> 2
or by official bank or certified check made payable to AccuMed International,
Inc. The Company may, at its election, reduce the Purchase Price.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated March 13,
1997 by and among the Company, the Warrant Agent and Commonwealth Associates in
connection with a private placement (the "Private Placement") of Units of the
Company.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
(i) the six month anniversary of the final closing of the Private Placement,
with respect to Warrants to purchase up to 88.23% of the Warrants to purchase
shares of Common Stock represented hereby and (ii) the six month anniversary of
the Authorized Share Date, with respect to Warrants to purchase up to 11.77% of
the Warrants to purchase shares of Common Stock represented hereby; provided,
however, if the Company redeems the Notes of the Company issued in the Private
Placement prior to the three month anniversary of the final closing of the
Private Placement, the Expiration Date shall be extended to 5:00 P.M. (New York
time) on the five year anniversary of the final closing of the Private
Placement. If either of such date shall in the State of New York be a holiday
or a day on which the banks are authorized to close, then the Expiration Date
shall mean 5:00 P.M. (New York time) the next following day which in the State
of New York is not a holiday or a day on which banks are authorized to close.
The Company may, at its election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any tax or
other governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates
A-2
<PAGE> 3
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any of the rights of a stockholder
of the Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company) for all purposes and shall not be affected by any notice to the
contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
ACCUMED INTERNATIONAL, INC.
Dated: _____________, 1997
By:_____________________________
By:______________________________
[seal]
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By:______________________________
A-3
<PAGE> 4
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise __________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and be delivered to
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below.
______________________________________
(Name of NASD Member)
Dated:______________________
X ________________________
____________________
____________________
Address
_______________________________
Taxpayer Identification Number
__________________________
Signature Guaranteed
____________________
A-4
<PAGE> 5
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
____________________________________________
____________________________________________
____________________________________________
____________________________________________
[please print or type name and address]
_________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________________________ _______________________________ Attorney
to transfer this Warrant Certificate on the books of the Company, with full
power of substitution in the premises.
Dated:____________________
X________________________
Signature Guaranteed
_________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
A-5
<PAGE> 1
EXHIBIT 10.40
ACCUMED INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT made as of this ____ day of ________, 1997
between ACCUMED INTERNATIONAL, INC., a Delaware corporation with its principal
offices at 900 N. Franklin, Suite 401, Chicago, Illinois 60610 (the "Company")
and the undersigned (the "Subscriber").
WHEREAS, the Company desires to issue a minimum of seventy (70) and a
maximum of eighty-five (85) units ("Units") in a private placement (the
"Private Placement"), each Unit consisting of $100,000 principal amount of 12%
Convertible Promissory Notes of the Company (the "Notes") in the form attached
hereto as Exhibit A and 10,000 common stock purchase warrants (the "Warrants")
in the form included in the warrant agreement (the "Warrant Agreement")
attached hereto as Exhibit B on the terms and conditions hereinafter set forth
and the Subscriber desires to acquire the number of Units set forth on the
signature page hereof;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Units as is set forth upon the signature page hereof at
a price equal to $100,000 per Unit, and the Company agrees to sell such Units
to the Subscriber for said purchase price subject to the Company's right to
sell to the Subscriber such lesser number of Units as it may, in its sole
discretion, deem necessary or desirable. The purchase price is payable by
certified or bank check made payable to Chase Manhattan Bank, as Escrow Agent
for AccuMed International, Inc., contemporaneously with the execution and
delivery of this Subscription Agreement. The Notes and Warrants will be
delivered by the Company within ten (10) days following the consummation of
this offering as set forth in Article III hereof. The Subscriber understands
however, that this purchase of Units is contingent upon the Company making
sales of a minimum of seventy ($7,000,000 principal amount of Notes and 700,000
Warrants) prior to the Termination Date as defined in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units
involves a high degree of risk in that (i) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (ii) he may
not be able to liquidate his investment; (iii) transferability of the
securities comprising the Units is extremely limited; and (iv) in the event of
a disposition, an investor could sustain the loss of his entire investment, as
well as other risk factors as more fully set forth herein and in the
Confidential Term Sheet (the "Term Sheet"), including the attachments thereto.
<PAGE> 2
1.3 The Subscriber represents that he is an "accredited
investor" as such term in defined in Rule 501 of Regulation D promulgated under
the United States Securities Act of 1933, as amended (the "Act"), as indicated
by his responses to the Investor Questionnaire, and that he is able to bear the
economic risk of an investment in the Units.
1.4 The Subscriber acknowledges that he has prior
investment experience, including investment in non-listed and non-registered
securities, or he has employed the services of an investment advisor, attorney
or accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Units and to
evaluate the merits and risks of such an investment on his behalf, and that he
recognizes the highly speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful
review of the Term Sheet and the attachments thereto (the "Offering Documents")
and hereby represents that he has been furnished by the Company during the
course of this transaction with all information regarding the Company which he
had requested or desired to know; that all documents which could be reasonably
provided have been made available for his inspection and review; and that such
information and documents have, in his opinion, afforded the Subscriber with
all of the same information that would be provided him in a registration
statement filed under the Act; that he has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
offering, and any additional information which he had requested.
1.6 The Subscriber acknowledges that this offering of
Units may involve tax consequences, including but not limited to the possible
need to recognize interest income relating to the Warrants and that the
contents of the Offering Documents do not contain tax advice or information.
The Subscriber acknowledges that he must retain his own professional advisors
to evaluate the tax and other consequences of an investment in the Units.
1.7 The Subscriber acknowledges that this offering of
Units has not been reviewed by the United States Securities and Exchange
Commission ("SEC") because of the Company's representations that this is
intended to be a nonpublic offering pursuant to Sections 4(2) or 3(b) of the
Act. The Subscriber represents that the Notes and Warrants comprising his
Units are being purchased for his own account, for investment and not for
distribution or resale to others. The Subscriber agrees that he will not sell
or otherwise transfer such securities unless they are registered under the Act
or unless an exemption from such registration is available.
1.8 The Subscriber understands that the Notes and
Warrants comprising the Units have not been registered under Act by reason of a
claimed exemption under the provisions of the Act which depends, in part, upon
his investment intention. In this connection, the Subscriber understands that
it is the position of the SEC that the statutory basis for such exemption would
not be present if his representation merely meant that his present intention
was
2
<PAGE> 3
to hold such securities for a short period, such as the capital gains period of
tax statutes, for a deferred sale, for a market rise, assuming that a market
develops, or for any other fixed period. The Subscriber realizes that, in the
view of the SEC, a purchase now with an intent to resell would represent a
purchase with an intent inconsistent with his representation to the Company,
and the SEC might regard such a sale or disposition as a deferred sale to which
such exemptions are not available.
1.9 The Subscriber understands that there is no public
market for the securities comprising the Units. Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a one year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended,
or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the securities
comprising the Units under the Act, with the exception of certain registration
rights set forth in Article IV herein. The Subscriber consents that the
Company may, if it desires, permit the transfer of the securities comprising
the Units or issuable upon exercise and/or conversion thereof out of his name
only when his request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively "Securities Laws"). The Subscriber agrees to hold the
Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as
a result of any misrepresentation made by him contained herein or any sale or
distribution by the undersigned Subscriber in violation of any Securities Laws.
1.10 The Subscriber consents to the placement of a legend
on any certificate or other document evidencing the Notes and Warrants
comprising his Units and the Common Stock issuable upon exercise and/or
conversion of such Warrants and Notes stating that they have not been
registered under the Act and setting forth or referring to the restrictions on
transferability and sale thereof.
1.11 The Subscriber understands that the Company will
review this Subscription Agreement and is hereby given authority by the
undersigned to call his bank or place of employment or otherwise review the
financial standing of the Subscriber; and it is further agreed that the Company
reserves the unrestricted right to reject or limit any subscription and to
close the offer at any time.
1.12 The Subscriber hereby represents that the address of
Subscriber furnished by him at the end of this Subscription Agreement is the
undersigned's principal
3
<PAGE> 4
residence if he is an individual or its principal business address if it is a
corporation or other entity.
1.13 The Subscriber acknowledges that if he is a
Registered Representative of an NASD member firm, he must give such firm the
notice required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.14 The Subscriber hereby represents that, except as set
forth in the Offering Documents, no representations or warranties have been
made to the Subscriber by the Company or any agent, employee or affiliate of
the Company and in entering into this transaction, the Subscriber is not
relying on any information, other than that contained in the Offering Documents
and the results of independent investigation by the Subscriber.
1.15 The Subscriber hereby represents that such Subscriber
either has a preexisting personal or business relationship with the Company or
any of its partners, officers, directors or controlling persons, or by reason
of such Subscriber's business or financial experience or the business or
financial experience of such Subscriber's professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate
or selling agent of the Company, directly or indirectly, and could be
reasonably assumed to have the capacity to protect such Subscriber's own
interests in connection with the transaction.
1.16 The Subscriber expressly agrees and understands that
the Company does not currently have sufficient shares to permit conversion of
the Notes and exercise of a portion of the Warrants and that the ability of the
Company to increase its authorized shares is contingent on certain factors
beyond the Company's control, including stockholder approval. The Subscriber
hereby agrees that in the event the Company, despite use of its best efforts,
is unable to effect an increase in the number of authorized shares, such
holder's sole remedy shall be the increased interest and decreased conversion
price set forth in Section 1.E. of the Notes.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that
prior to the consummation of this offering and at the Closing Date:
(a) Each of the Company and its subsidiaries is a
corporation duly organized, existing and in good standing under the laws of the
State of its incorporation and has the corporate power to conduct the business
which it conducts and proposes to conduct.
(b) The execution, delivery and performance of this
Subscription Agreement by the Company will have been duly approved by the Board
of Directors of the Company and all other actions required to authorize and
effect the offer and sale of the Units and the securities contained therein
will have been duly taken and approved.
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<PAGE> 5
(c) The Notes and Warrants comprising the Units have been
duly and validly authorized and when issued and paid for in accordance with the
terms hereof, will be valid and binding obligations of the Company enforceable
in accordance with their respective terms.
(d) Except as set forth in the Term Sheet, the Company
will at all times during the term of the Notes and Warrants have authorized and
reserved a sufficient number of shares of Common Stock to provide for exercise
and/or conversion of the Warrants and Notes.
(e) The Company and its subsidiaries have obtained, or
are in the process of obtaining, all licenses, permits and other governmental
authorizations necessary to the conduct of their respective business; such
licenses, permits and other governmental authorizations obtained are in full
force and effect; and the Company and its subsidiaries are in all material
respects complying therewith, except where the failure to comply will not
materially adversely affect the business, property, financial condition or
operations of the Company and its subsidiaries, taken as a whole.
(f) The Company knows of no pending or threatened legal
or governmental proceedings to which the Company or its subsidiaries is a party
which could materially adversely affect the business, property, financial
condition or operations of the Company and its subsidiaries, taken as a whole.
(g) The Company is not in violation of or default under,
nor will the execution and delivery of this Subscription Agreement, the
issuance of the Notes or the Warrants, and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions herein or
therein contemplated, result in a violation of, or constitute a default under,
the certificate of incorporation or by-laws, in the performance or observance
of any material obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party or by which it or any
of its properties may be bound or in violation of any material order, rule,
regulation, writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign.
(h) The selected financial information contained in the
Term Sheet previously furnished by the Company to the Subscriber presents
fairly the financial condition of the Company as of the date and for the
periods indicated.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin as of February 27,
1997 and will terminate at 11:59 PM Eastern time on March 14, 1997, unless
extended by the Company and the Placement Agent for up to an additional sixty
(60) days (the "Termination Date"). Of the
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<PAGE> 6
Units seventy will be offered on a "best efforts-all or none" basis and the
remaining fifteen Units will be offered on a "best efforts" basis as more
particularly set forth in the Term Sheet. The minimum subscription per
subscriber shall be one-half Unit ($50,000), provided, however, that smaller
investments may be accepted at the discretion of the Placement Agent and the
Company.
3.2 Placement of the Units will be made by Commonwealth
Associates (the "Placement Agent"), which will receive (i) a placement fee in
the amount of 7% of the purchase price of the Units placed; (ii) an
accountable expense allowance of up to $75,000; (iii) warrants to purchase
200,000 shares of Common Stock of the Company for assisting the Company in the
placement and (iv) other compensation as summarized in the Term Sheet.
3.3 Pending the sale of the Units, all funds paid
hereunder shall be deposited by the Company in escrow with Chase Manhattan
Bank. If the Company shall not have obtained subscriptions (including this
subscription) for purchases of seventy (70) Units ($7,000,000 principal amount
of Notes and 700,000 Warrants) for an aggregate purchase price of $7,000,000 on
or before the Termination Date, then this subscription shall be void and all
funds paid hereunder by the Subscriber, without interest, shall be promptly
returned to the Subscriber, subject to paragraph 3.5 hereof. If seventy (70)
Units are sold at or prior to the Termination Date, then all subscription
proceeds shall be paid over to the Company within ten days thereafter. In
such event, placements of additional Units may continue until the Termination
Date, with subsequent releases of funds to be at the mutual consent of the
Company and the Placement Agent.
3.4 The Subscriber hereby authorizes and directs the
Company to deliver the securities to be issued to such Subscriber pursuant to
this Subscription Agreement to the residential or business address indicated in
the Confidential Investor Questionnaire included herein.
3.5 The Subscriber hereby authorizes and directs the
Company to return any funds for unaccepted subscriptions to the same account
from which the funds were drawn, including any customer account maintained with
the Placement Agent.
3.6 The Subscriber acknowledges that at such time, if
ever, as any of the Securities are registered, sales of such Securities will be
subject to state securities laws, including those of states which may require
any securities sold therein to be sold through a registered broker-dealer or in
reliance upon an exemption from registration.
3.7 If the Subscriber is not a United States person, such
Subscriber hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any invitation to
subscribe for the Securities or any use of this Agreement, including (i) the
legal requirements within its jurisdiction for the purchase of the Securities,
(ii) any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the
income tax and other tax consequences, if
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<PAGE> 7
any, that may be relevant to the purchase, holding, redemption, sale or
transfer of the Securities. Such Subscriber's subscription and payment for,
and his or her continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of the Subscriber's
jurisdiction.
IV. REGISTRATION RIGHTS
4.1 Demand Registration. If at any time after three (3)
months following the last closing of the Private Placement, but not more than
five (5) years from the Termination Date, the Company shall receive a written
request therefor (the "Demand Notice") from holders of Notes convertible into
at least thirty percent (30%) of the shares of Common Stock ("Registrable
Securities") issuable or issued upon conversion of the Notes or the exercise of
the Warrants (the "Requesting Holders"), the Company shall prepare and file
with the SEC a registration statement under the Act covering the "Registrable
Securities" which are the subject of such request and shall use its best
efforts to cause such registration statement to become effective. In addition,
upon the receipt of such request, the Company shall promptly give written
notice to all other record holders of registrable Securities that such
registration is to be effected. The Company shall include in such registration
statement such Registrable Securities for which it has received written
requests to register by such other record holders within thirty (30) days after
the delivery of the Company's written notice to such other record holders.
In the event that at the time of the Demand Notice the Company
is in the process of preparing a registration statement under the Act relating
to an underwritten public offering, then no holder of securities of the
Company, including Requesting Holders, may include securities in such
registration if in the good faith judgment of the managing underwriter of such
public offering the inclusion of such securities would interfere with the
successful marketing of the securities being underwritten. Shares to be
excluded from an underwritten public offering shall be selected in a manner
provided in Section 4.2 below. To the extent only a portion of the Registrable
Securities held by a Requesting Holder is included in the underwritten public
offering, a registration statement covering those Registrable Securities which
are excluded from the underwritten public offering will be filed within 180
days of the consummation of the underwritten public offering.
The obligation of the Company under this Section 4.1 shall be
limited to one registration statement. The Company shall pay the expenses
described in Section 4.4 for the registration statement filed pursuant to this
Section 4.1, except for underwriting discounts and commissions and legal fees
of the Requesting Holders, which shall be borne by the Requesting Holders.
4.2 "Piggyback" Registration Rights. From and after the
last closing of the Private Placement, and until such time as the Registrable
Securities are freely salable (without restriction) under Rule 144 promulgated
under the Act, if the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Act in
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<PAGE> 8
connection with the proposed offer and sale of any of its securities by it or
any of its security holders (other than a registration statement on Form S-4,
S-8 or other limited purpose form), the Company will give written notice of its
determination to all record holders of the Registrable Securities. Upon the
written request from the Requesting Holders, (as defined in Section 4.1) within
twenty (20) days after receipt of any such notice from the Company, the Company
will, except as herein provided, cause all such Registrable Securities to be
included in such registration statement, all to the extent requisite to permit
the sale or other disposition by the prospective seller or sellers of the
Registrable Securities to be so registered; provided, further, that nothing
herein shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 4.2 shall be
underwritten in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this Section 4.2 be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. In the event that the Registrable
Securities requested for inclusion pursuant to this Section 4.2 together with
any other shares which have similar piggyback registration rights (such shares
and the Registrable Securities being collectively referred to as the "Requested
Stock") would, in the good faith judgment of the managing underwriter of such
public offering, reduce the number of shares to be offered by the Company or
interfere with the successful marketing of the shares of stock offered by the
Company, the number of shares of Requested Stock otherwise to be included in
the underwritten public offering may be reduced pro rata (by number of shares)
among the holders thereof requesting such registration or excluded in their
entirety if so required by the underwriter. To the extent only a portion of
the Requested Stock is included in the underwritten public offering, those
shares of Requested Stock which are thus excluded from the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 180 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering. A registration
statement covering those shares of Requested Stock excluded from the
underwritten offering will be filed within 180 days of the consummation of the
underwritten public offering.
The obligation of the Company under this Section 4.2 shall be
unlimited to the number of registration statements.
4.3 Registration Procedures. If and whenever the Company
is required by the provisions of Section 4.1 or 4.2 to effect the registration
of Registrable Securities under the Act, the Company will:
(a) prepare and file with the SEC a registration
statement with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective until the
Registrable Securities are freely salable without the volume limitations of
Rule 144;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to
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<PAGE> 9
keep such registration statement effective until the Registrable Securities are
freely salable without the volume limitations of Rule 144;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state securities
or blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within twenty (20) days following the original
filing of such registration statement, except that the Company shall not for
any purpose be required to execute a general consent to service of process or
to qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the
SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the
request of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under the Act or the
rules and regulations thereunder in connection with the distribution of Common
Stock by such holder;
(h) prepare and promptly file with the SEC and promptly
notify such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for
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<PAGE> 10
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
4.4 Expenses.
(a) With respect to each registration requested
pursuant to Section 4.1 hereof, and with respect to each inclusion of
Registrable Securities in a registration statement pursuant to Section 4.2
hereof, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering (as specified in paragraph (b) below) in
connection therewith shall be borne by the Company, provided, however, that any
security holders participating in such registration shall bear their pro rata
share of the underwriting discount and commissions and transfer taxes.
(b) The fees, costs and expenses of registration
to be borne by the Company as provided in paragraph (a) above shall include,
without limitation, all registration, filing, and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, and all
legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered and qualified (except as provided in 4.4(a)
above). Fees and disbursements of counsel and accountants for the selling
security holders and any other expenses incurred by the selling security
holders not expressly included above shall be borne by the selling security
holders.
4.5 Indemnification.
(a) The Company will indemnify and hold harmless
each holder of Registrable Securities which are included in a registration
statement pursuant to the provisions of Sections 4.1 or 4.2 hereof, its
directors and officers, and any underwriter (as defined in the Act) for such
holder and each person, if any, who controls such holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such holder
and each such underwriter and controlling person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
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(b) Each holder of Registrable Securities
included in a registration pursuant to the provisions of Sections 4.1 or 4.2
hereof will indemnify and hold harmless the Company, its directors and
officers, any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling person and
any underwriter with respect to, any and all loss, damage, liability, cost or
expense to which the Company or any controlling person and/or any underwriter
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in strict conformity with written information
furnished by or on behalf of such holder specifically for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified
party pursuant to the provisions of paragraph (a) or (b) of this Section 4.5 of
notice of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim thereof
is to be made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party, provided, however, if the defendants in any action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or in addition to those available to the indemnified party, or if there is
a conflict of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party or parties
have the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed counsel in accordance with the
provisions of the preceding sentence, (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
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V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder
shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, addressed to the Company, at its registered
office, 900 North Franklin, Suite 401, Chicago, Illinois 60610 , Attention:
Peter P. Gombrich and Joyce Wallach and to the Subscriber at his address
indicated on the last page of this Subscription Agreement. Notices shall be
deemed to have been given on the date of mailing, except notices of change of
address, which shall be deemed to have been given when received.
5.2 This Subscription Agreement shall not be changed,
modified or amended except by a writing signed by the parties to be charged,
and this Subscription Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets
forth the entire agreement and understanding between the parties as to the
subject matter thereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of New York. The parties hereby
agree that any dispute which may arise between them arising out of or in
connection with this Subscription Agreement shall be adjudicated before a court
located in New York City and they hereby submit to the exclusive jurisdiction
of the courts of the State of New York located in New York, New York and of the
federal courts in the Southern District of New York with respect to any action
or legal proceeding commenced by any party, and irrevocably waive any objection
they now or hereafter may have respecting the venue of any such action or
proceeding brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Subscription Agreement
or any acts or omissions relating to the sale of the securities hereunder, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall furnish
in writing to the other.
5.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement
by the Subscriber, this Subscription Agreement shall become a binding
obligation of the Subscriber with respect to the purchase of Units as herein
provided; subject, however, to the right hereby reserved to the Company to
enter into the same agreements with other subscribers and to add and/or to
delete other persons as subscribers and to not accept the subscription
hereunder.
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5.6 The holding of any provision of this Subscription
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Subscription Agreement, which
shall remain in full force and effect.
5.7 It is agreed that a waiver by either party of a
breach of any provision of this Subscription Agreement shall not operate, or be
construed, as a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Subscription Agreement.
5.9 The Company agrees not to disclose the names,
addresses or any other information about the Subscribers, except as required by
law, provided, that the Company may use information relating to the Subscriber
in any registration statement under the Act with respect to the Registrable
Securities.
VI. CONFIDENTIAL INVESTOR QUESTIONNAIRE
6.1 The Subscriber represents and warrants that he, she
or it comes within one category marked below, and that for any category marked,
he or she has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE
TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order
to verify the answers set forth below.
Category A ____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
EXPLANATION. In calculating net worth you may
include equity in personal property and real
estate, including your principal residence,
cash, short-term investments, stock and
securities. Equity in personal property and
real estate should be based on the fair
market value of such property less debt
secured by such property.
Category B ____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or
joint income with his or her spouse in excess of
$300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and loses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
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Category C ____ The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
Category D ____ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company;
registered business development company; licensed
small business investment company ("SBIC"); or
employee benefit plan within the meaning of Title 1
of ERISA and (a) the investment decision is made by a
plan fiduciary which is either a bank, savings and
loan association, insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that
are accredited investors.
_______________________________________________
_______________________________________________
(describe entity)
Category E ____ The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment
Advisors Act of 1940.
_______________________________________________
_______________________________________________
(describe entity)
Category F ____ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit
organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed
for the specific purpose of acquiring the Units and
with total assets in excess of $5,000,000.
_______________________________________________
_______________________________________________
(describe entity)
Category G ____ The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the Units, where the purchase is directed
by a "sophisticated person" as defined in Regulation
506(b)(2)(ii).
Category H ____ The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors"
within one or more of the above categories. If
relying upon this Category alone, each equity owner
must complete a separate copy of this Agreement.
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_______________________________________________
_______________________________________________
(describe entity)
Category I ____ The undersigned is not within any of the categories above and
is therefor not an accredited investor.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
6.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the Company by which you are employed and its principal
business:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(c) For an individual Subscriber, do you expect your current level of
income to significantly decrease in the foreseeable future:
YES ____ NO ____
(d) For all Subscribers, please check types of prior investments:
U.S. Government Securities ______ Private Placements _____
Publicly Traded Corporate Mutual Funds _____
Securities _____ Other (describe)_____________
Real Estate Investments _____ _____________
(e) For all Subscribers, please state whether you have participated in
other private placements before:
YES ____ NO ____
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(f) For all Subscribers, please indicate frequency of such prior
participation in private placements:
Public Private
Companies Companies
Frequently __________ __________
Occasionally __________ __________
Never __________ __________
(g) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need
sudden cash requirements in excess of cash readily available to you:
YES ____ NO ____
(h) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you
seek to subscribe?
YES ____ NO ____
(i) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of
losing your entire investment?
YES ____ NO ____
6.3 Manner In Which Title to be Held. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
(j) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the
foreseeable future:
YES ____ NO ____
*IF UNITS ARE BEING SUBSCRIBED FOR BY AN ENTITY, THE ATTACHED
CERTIFICATE OF SIGNATORY MUST ALSO BE COMPLETED.
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6.4 NASD Affiliation:
Are you associate(1) with an NASD member firm(2) (please check one):
YES ____ NO ____
If Yes, please describe:
______________________________________________________
______________________________________________________
______________________________________________________
(1) The NASD defines a "person associated with a member" or "associated
person of a member" as being every sole proprietor, general or limited
partner, officer, director or branch manager of any member, or any
natural person occupying a similar status or performing similar
functions, or any natural person engaged in the investment banking or
securities business who is directly or indirectly controlling or
controlled by such member (for example, any employee), whether or not
any such person is registered or exempt from registration with the
NASD. Thus, "person associated with a member" or "associated person
of a member" includes a sole proprietor, general or limited partner,
officer, director or branch manager of an organization of any kind
(whether a corporation, partnership or other business entity) which
itself is either a "member" or a "Person associated with a member" or
"associated person of a member." In addition, an organization of any
kind is a "person associated with a member" or "associated person of a
member" if its sole proprietor or any one of its general or limited
partners, officers, directors or branch managers is a "member,"
"person associated with a member" or "associated person of a member."
(2) The NASD defines a "member" as being any individual, partnership,
corporation or other legal entity that is a broker or dealer admitted
to membership in the NASD.
*IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE WITH AN NASD MEMBER
FIRM, HAVE THE FOLLOWING ACKNOWLEDGMENT SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm acknowledges receipt of the notice
required by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice or
any successor rules or regulations.
__________________________
Name of NASD Member Firm
By: _____________________
Authorized Officer
17
<PAGE> 18
Date: ___________________
6.5 The undersigned is informed of the significance to the Company
of the foregoing representations and answers contained in the Confidential
Investor Questionnaire contained in this Section 6 and such answers have been
provided under the assumption that the Company will rely on them.
18
<PAGE> 19
INDIVIDUAL INVESTOR SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
NUMBER OF UNITS _____ X $__________ = $__________
____________________________________ ____________________________________
Signature Signature (if purchasing jointly)
____________________________________ ____________________________________
Name Typed or Printed Name Typed or Printed
____________________________________ ____________________________________
Address Address
____________________________________ ____________________________________
City, State and Zip Code City, State and Zip Code
____________________________________ ____________________________________
Telephone - Business Telephone - Business
____________________________________ ____________________________________
Telephone - Residence Telephone - Residence
____________________________________ ____________________________________
Facsimile - Business Facsimile - Business
____________________________________ ____________________________________
Facsimile - Residence Facsimile - Residence
____________________________________ ____________________________________
Tax ID# or Social Security # Tax ID# or Social Security #
Name in which securities should be issued: ____________________________________
Dated: _____________ ____, 1997
This Subscription Agreement is agreed to and accepted as of
_________________, 1997.
ACCUMED INTERNATIONAL, INC.
_______________________________________
Name:
Title:
19
<PAGE> 20
INSTITUTIONAL INVESTOR SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
NUMBER OF UNITS _____ X $__________ = $__________
____________________________________ ____________________________________
Name of Institution Number of Partners (If Applicable)
____________________________________ ____________________________________
Address Number of Shareholders (If Applicable)
____________________________________ ____________________________________
City, State and Zip Code State of Formation
____________________________________ ____________________________________
Telephone Date of Formation
____________________________________ ____________________________________
Facsimile Tax ID# or Social Security # of
Institution
____________________________________
Signature
____________________________________
Name (Typed or Printed) of Individual
Signing on Behalf of Institution
____________________________________
Position or Title
Name in which securities should be issued:
___________________________________________
Dated: __________________, 1997
This Subscription Agreement is agreed to and accepted as of
_________________, 1997.
ACCUMED INTERNATIONAL, INC.
_______________________________________
Name:
Title:
20
<PAGE> 21
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I, ____________________________, am the _____________________________
of ______________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement and to purchase
and hold the Units, and the Notes and Warrants underlying the Units and certify
further that the Subscription Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of the
Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of
________________, 1997.
_________________________________
(Signature)
21
<PAGE> 1
EXHIBIT 10.41
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE
SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS
LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
Dated: March ___, 1997
ACCUMED INTERNATIONAL, INC.
No. $
FORM OF
12% CONVERTIBLE PROMISSORY NOTE
ACCUMED INTERNATIONAL, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to ______ or registered assigns (the
"Payee") on ________ __, 2000 (such date or such earlier date as the principal
amount of this Note shall become due and payable pursuant to the terms hereof,
the "Maturity Date") at the offices of the Company, 900 N. Franklin St., Suite
401, Chicago, IL 60610, the principal amount of ______ ($____), together with
any accrued and unpaid interest at the rate of twelve percent (12%) per annum
as set forth below, subject to the provisions of Section 1 herein, in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts and in immediately
available funds.
This Note is issued in connection with a private placement of Units
(the "Private Placement"), each Unit consisting of 12% Convertible Promissory
Notes and warrants ("Warrants") to purchase Common Stock, $.01 par value, of
the Company ("Common Stock") and pursuant to a Subscription Agreement, between
the Company and the Payee (the "Subscription Agreement"), a copy of which
agreement is available for inspection at the Company's principal office. This
Note is one of a series of Notes of the Company issued in the Private
Placement, which, together with this Note, are herein referred to as the Notes.
Notwithstanding any provision to the contrary contained herein, this Note is
subject and entitled to certain terms, conditions, covenants and agreements
contained in the Subscription Agreement. Any transferee or transferees of the
Note, by their acceptance hereof, assume the obligations of the Payee in the
Subscription Agreement with respect to the conditions and procedures for
transfer of the Note. Reference to the Subscription Agreement shall in no way
<PAGE> 2
impair the absolute and unconditional obligation of the Company to pay both
principal and interest hereon as provided herein.
1. Interest and Penalty Provisions
A. Interest shall be payable on the unpaid principal
amount of this Note from the date hereof until such principal amount is repaid
in full, semi-annually in arrears on August 15 and February 15 of each year
until the Maturity Date, upon maturity (whether stated maturity, by
acceleration or otherwise) upon any prepayment and after maturity, from such
due date until paid in full (after as well as before judgment) such
post-maturity interest to be payable on demand. All computations of the
interest rate hereunder shall be made on the basis of a year of 365 days on the
actual number of days (including the first day but excluding the last day) any
such principal amount is outstanding.
B. In the event that the Company shall fail to file a
registration statement ("Registration Statement") under the Securities Act
relating to the registration of the shares of Common Stock issuable upon
conversion of the Notes and the shares of Common Stock issuable upon exercise
of the Warrants by May 31, 1997 (the "Registration Date") and use its best
efforts to cause such Registration Statement to become effective, interest
shall accrue and be payable on this Note at the rate of sixteen percent (16%)
per annum, from and after the Registration Date until and including such date
as the shares of Common Stock are registered under the Securities Act and the
Conversion Price, as then in effect (as defined in Section 6(A)) shall be
reduced by twenty percent (20%).
C. In the event that the Company defaults (beyond any
applicable grace period) in the payment of the accrued interest on any of the
Notes when and as the same shall become due and payable, whether by
acceleration or otherwise, interest shall accrue and be payable on this Note at
the rate of sixteen percent (16%) per annum, from and after the date in which
such amount is first due until and including the date when such amount is
actually collected by the holder of this Note and the Conversion Price, as then
in effect (as defined in Section 6(A)) shall be reduced by twenty percent
(20%).
D. In the event that the Company defaults in the payment
of the principal on any of the Notes when and as the same shall become due and
payable, whether by acceleration or otherwise, interest shall accrue and be
payable on this Note at the rate of sixteen percent (16%) per annum, from and
after the date in which such amount is first due until and including the date
when such amount is actually collected by the holder of this Note and the
Conversion Price, as then in effect (as defined in Section 6(A)) shall be
reduced by twenty percent (20%).
E. In the event that the Company shall fail to obtain
stockholder approval of an amendment to its Certificate of Incorporation
increasing the Company's authorized shares of Common Stock to provide
sufficient authorized shares of Common Stock to permit the Company to reserve
for issuance out of its authorized Common Stock (in
<PAGE> 3
addition to shares of Common Stock reserved for issuance on the conversion
and/or exercise of currently
-3-
<PAGE> 4
outstanding convertible securities, options and warrants) all shares of Common
Stock issuable on the conversion and/or exercise of the Notes and Warrants
issued in the Private Placement by May 31, 1997, commencing thirty days
thereafter, this Note shall be due and payable upon written demand by the
holder hereof at one hundred and fifty percent (150%) of the principal amount
of this Note plus accrued and unpaid interest and the Conversion Price (as
defined in Section 5(A)) shall be reduced by twenty percent (20%).
2. Prepayment
The principal amount of this Note may be prepaid by the
Company, in whole or in part, without penalty, at any time or from time to
time.
3. Covenants of Company
A. The Company covenants and agrees that, so long as
this Note shall be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes,
assessments, and governmental charges or levies imposed upon the Company or
upon its income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided, however, that the Company, if so required under
generally accepted accounting principles, shall not be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings
and the Company shall set aside on its books adequate reserves with respect to
any such tax, assessment, charge, levy or claim so contested;
(ii) Do or cause to be done all things reasonably
necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises and comply with all laws applicable to the
Company, except where the failure to comply would not have a material adverse
effect on the Company;
(iii) At all times reasonably maintain, preserve, protect
and keep its property used in and material to the conduct of its business in
good repair, working order and condition (ordinary wear and tear excluded), and
from time to time make such repairs, renewals, replacements, betterments and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) To the extent reasonably necessary for the operation
of its business, keep adequately insured by all financially sound reputable
insurers, all property of a character usually insured by similar corporations
and carry such other insurance as is usually carried by similar corporations;
-4-
<PAGE> 5
(v) At all times keep true and correct books, records and
accounts; and
(vi) Except for $5,000,000 principal amount of bank debt
and $500,000 principal amount of intercompany indebtedness and except for the
incurrence of any indebtedness (including without limitation, the incurrence of
any guarantee or contingent payment obligation with respect thereto) secured by
a lien, mortgage or guarantee on the property (whether real or personal) or
equipment of the Company and any refinancings or replacements thereto or trade
debt incurred in the ordinary course of business, not incur any indebtedness
whatsoever which indebtedness does not expressly provide that no payments will
be made on such indebtedness (except for regularly scheduled interest payments)
until payment in full of the principal amount and interest on the Notes and
such indebtedness is otherwise wholly subordinated in right of payment to the
indebtedness evidenced by the Notes.
4. Events of Default
A. This Note shall become and be due and payable upon
written demand made by the holder hereof if one or more of the following
events, herein called events of default, shall happen and be continuing:
(i) Default in the payment of the principal and accrued
interest on any of the Notes when and as the same shall become due and payable,
whether by acceleration or otherwise and, with respect to a default in the
payment of accrued interest, such default shall continue uncured for five (5)
days;
(ii) Default (beyond any applicable grace period) in the
due observance or performance of any material covenant, condition or agreement
on the part of the Company to be observed or performed pursuant to the terms
hereof and such default shall continue uncured for thirty (30) days after
written notice thereof, specifying such default, shall have been given to the
Company by the holder of the Note;
(iii) Default (beyond any applicable grace period) in the
payment of any outstanding indebtedness in excess of $500,000 principal amount
or in the due observance or performance of any material covenant, condition or
agreement on the part of the Company with respect to any outstanding
indebtedness with the result that such outstanding indebtedness shall become
due and payable prior to the due date otherwise specified therefor and such
default shall continue uncured or such acceleration shall not be rescinded or
annulled within thirty (30) days after written notice thereof to the Company
from the holder of this Note;
(iv) Application for, or consent to, the appointment of a
receiver, trustee or liquidator of the Company or of its property;
(v) Admission in writing of the Company's inability to
pay its
-5-
<PAGE> 6
debts as they mature;
(vi) General assignment by the Company for the benefit of
creditors;
(vii) Filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors;
(viii) Entering against the Company of a court order
approving a petition filed against it under the Federal bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated within
sixty (60) days;
(ix) The sale by the Company of substantially all of its
assets unless, upon the consummation of the transaction, (1) the acquiring
company is a corporation organized or existing under the laws of the United
States, one of the states thereof or the District of Columbia and has the same
or greater net worth as the Company, (2) the transaction does not otherwise
result in a default under the Notes, (3) the acquiring company assumes in
writing all of the obligations of the Company under the Notes and (4) the
transaction does not impair the Company's or the acquiring company's ability to
repay the Notes;
(x) The merger by the Company with or into another
corporation, other than for purposes of changing domicile, where the Company is
not the surviving corporation unless, upon the consummation of the transaction,
(1) the resulting or surviving company is a corporation organized or existing
under the laws of the United States, one of the states thereof or the District
of Columbia and has the same or greater net worth as the Company, (2) the
transaction does not otherwise result in a default under the Notes, (3) the
resulting or surviving company assumes in writing all of the obligations of the
Company under the Notes and (4) the transaction does not impair the Company's
or the resulting or surviving company's ability to repay the Notes;
(xi) A material breach of the Company's representations
contained in the Subscription Agreement; or
(xii) The entry of a final judgment for the payment of
money in excess of $500,000 by a court of competent jurisdiction against the
Company, which judgment the Company shall not discharge (or provide for such
discharge) in accordance with its terms within thirty (30) days of the date of
entry thereof, or procure a stay of execution thereof within thirty (30) days
from the date of entry thereof and, within such thirty (30) day period, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal.
B. The Company agrees that notice of the occurrence of
any event of default will be promptly given to the holder at his or her
registered address by certified mail.
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<PAGE> 7
C. Subject to the provisions of 5(B) hereof, in case any
one or more of the events of default specified above shall happen and be
continuing, the holder of this Note may proceed to protect and enforce his
rights by suit in the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such holder.
5. Amendments and Waivers
A. Subject to the provisions of 5(D) and (E) hereof, the
covenants set forth in 2(A) hereof may be waived by the written consent of the
holders of a majority in outstanding principal amount of the Notes.
B. Subject to the provisions of 5(D) and (E) hereof, the
events of default set forth in clauses (i), (ii), (iii), (xi) and (xii) of 4(A)
hereof may be waived by the written consent of the holders of a majority in
outstanding principal amount of the Notes.
C. Subject to the provisions of 5(D) and (E) hereof, the
penalty provisions set forth in Section 1(B), (C), (D) and (E) hereof may be
waived by the written consent of the holders of a majority in outstanding
principal amount of the Notes.
D. The Company may amend or supplement this Note with
the written consent of the holders of a majority in outstanding principal
amount of the Notes; provided, however, that without the consent of each
Noteholder, no amendment, supplement or waiver may:
1. reduce the principal amount of Notes whose
holders must consent to any amendment,
supplement or waiver;
2. reduce the rate of interest or principal of
the Note;
3. extend the maturity date of the Note or the
time for payment of interest by more than one year from the
respective date(s) set forth herein.
E. After any waiver, amendment or supplement under this
section becomes effective, the Company shall mail to the holders of the Notes a
notice briefly describing such waiver, amendment or supplement.
6. Conversion
A. (i) Subject to subsection (A)(ii) below,
commencing on the three month anniversary of the last closing of the Private
Placement (the "Final Closing"), Payee may convert all, but not less than all,
of the outstanding principal amount and accrued
-7-
<PAGE> 8
interest on this Note into shares of Common Stock of the Company. The initial
conversion price is $3.125 per share, subject to adjustment upon the happening
of certain events as provided in Section 6(C) below ("Conversion Price"). The
number of shares to be issued upon the conversion of this Note shall be
determined by dividing the principal amount and accrued interest to be
converted by the Conversion Price in effect on the date of conversion. The
Company will deliver a check for any fractional shares.
(ii) Notwithstanding the foregoing subsection
(A)(i), this Note shall not be convertible until such as time as the Company
shall have sufficient authorized shares of Common Stock (after taking into
account all shares reserved for issuance on the conversion of convertible
securities and the exercise of outstanding options and warrants, including the
shares of Common Stock issuable on the exercise of the Warrants issued in
connection with the Private Placement) to permit the issuance of the shares of
Common Stock to be issued pursuant to the conversion of all of the Notes.
B. To convert this Note the Payee must (1) complete and
sign the conversion notice attached hereto, (2) surrender the Note to the
Company, (3) furnish appropriate endorsements and transfer documents if
required and (4) pay any transfer or similar tax, if required.
C. The Conversion Price in effect at any time and the
number and kind of securities purchasable upon the conversion of this Note
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Conversion Price by a fraction, the denominator of which
shall be the number of shares of Common Stock outstanding after giving effect
to such action, and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above shall occur.
(2) In the case of any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
Company, or in the case of any consolidation or merger of the Company with or
into another corporation or the conveyance of all or substantially all of the
assets of the Company to another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon conversion of
this Note), this Note shall thereafter be convertible at the Conversion Price
in effect on the day immediately
-8-
<PAGE> 9
preceding such reclassification, reorganization, merger or consolidation into
the number of shares of stock or
-9-
<PAGE> 10
other securities or property to which a holder of the number of shares of
Common Stock of the Company deliverable upon conversion of this Note would have
been entitled upon such reclassification, change, consolidation, merger or
conveyance; and, in any such case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holder of
this Note, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of this Note. The foregoing provisions of this subsection
(C)(2) shall similarly apply to successive reclassification, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
D. In case at any time:
(1) The Company shall declare any dividend upon,
or other distribution in respect of, its Common Stock; or
(2) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all or
substantially all of the assets of the Company, or a consolidation or merger of
the Company with another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and which does not
result in any reclassification), or change of then outstanding shares of Common
Stock or other capital stock issuable upon the conversion of this Note (other
than a change in par value, or from par value to no par value, or from no par
value to par value or as a result of subdivision or combination) or conversion
of outstanding options and warrants currently outstanding; or
(3) There shall be a voluntary or involuntary
dissolution; liquidation or winding-up of the Company;
Then, in any one or more of said cases, the Company shall cause to be
mailed to the registered holder of this Note at the earliest practicable time
(and, in any event not less than 10 days before any record date or other date
set for definitive action), written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend,
distribution or such reorganization, reclassification, sale, consolidation,
merger or dissolution, liquidation or winding-up shall take place, as the case
may be. Such notice shall also set forth such facts as shall indicate the
effect of such action (to the extent such effect may be known at the date of
such notice) on the Conversion Price and the kind and amount of the shares of
stock and other securities and property deliverable upon the conversion of this
Note. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, sale,
consolidation, merger or dissolution, liquidation or winding-up, as the
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<PAGE> 11
case may be.
E. The Company shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
Common Stock upon conversion of this Note by the holder of this Note; provided,
however, that the Company shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of this
Note, and the Company shall not be required to issue or deliver any such
certificate unless and until the person requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
Company's satisfaction that such tax has been paid.
F. All shares of Common Stock which may be issued upon
conversion of this Note will, upon issuance by the Company in accordance with
the terms of this Note, be validly issued, free from all taxes and liens with
respect to the issuance thereof and, subject to the payment in full, in an
amount equal to the Conversion Price of such shares multiplied by the number of
shares so issued, of any indebtedness of the Payee to the Company created in
consideration of the issuance of this Note, fully paid and non-assessable.
7. Reservation of Shares. The Company agrees to use
its best efforts to take all actions as may be necessary (including obtaining
stockholder approval) to amend its Certificate of Incorporation to increase the
Company's authorized shares of Common Stock in order for the Company to have a
sufficient number of authorized shares of Common Stock (after taking into
account all shares reserved for issuance on the conversion of convertible
securities and the exercise of outstanding options and warrants) to permit the
Company to reserve for issuance out of its authorized Common Stock (in addition
to shares of Common Stock reserved for issuance on the conversion and/or
exercise of currently outstanding convertible securities, options and warrants)
all shares issuable upon conversion of the Notes sold in the Private Placement.
Thereafter, the Company covenants and agrees that, during the period within
which the conversion rights contained in this Note may be exercised, the
Company will at all times have authorized and reserved, solely for the purpose
of such possible conversion, out of its authorized but unissued shares, a
sufficient number of shares of its Common Stock to provide for the exercise in
full of the conversion rights contained in this Note.
8. Redemption. (a) Commencing on the date of the
Final Closing and until the three month anniversary of the Final Closing, the
Company shall have the right to redeem all of the Notes at one hundred and ten
percent (110%) of the principal amount of the Notes plus accrued and unpaid
interest. In the event of the redemption of the Notes pursuant to this Section
8(a), the expiration date of the Warrants issued in the Private Placement will
be adjusted as provided for in the Warrant Agreement governing the Warrants.
(b) Commencing on the three month anniversary of
the Final Closing, if the Market Price (defined in clause (c) below) of the
Company's Common Stock is
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<PAGE> 12
in excess of one hundred and seventy-five percent (175%) of the Conversion
Price, as in effect from time to time, the Company shall have the right to
redeem all of the Notes at the principal amount of the Notes plus accrued and
unpaid interest; provided however, in no event shall the Company redeem this
Note pursuant to this Section 8(b) unless, on the Redemption Date, the Company
has a sufficient number of authorized shares of Common Stock reserved for
issuance on the conversion and/or exercise of currently outstanding convertible
securities, options and warrants, including the Notes and Warrants issued in
the Private Placement. For purposes of this Section 8(b), the Calculation Date
shall mean a date within 15 days of the mailing of the notice of redemption.
(c) "Market Price" shall mean (i) the average closing bid
price of the Common Stock, for twenty (20) consecutive days ending within 15
days of the Calculation Date as reported by Nasdaq, if the Common Stock is
traded on the Nasdaq SmallCap Market, or (ii) the average last reported sale
price of the Common Stock, for twenty (20) consecutive business days ending
within 15 days of the Calculation Date, as reported by the primary exchange on
which the Common Stock is traded, if the Common Stock is traded on a national
securities exchange, or by Nasdaq, if the Common Stock is traded on the Nasdaq
National Market, or (iii) if not so reported or traded, as determined by the
Board of Directors of the Company in its reasonable discretion.
(d) If the conditions set forth in Section 8 are met, and
the Company desires to exercise its right to redeem the Notes, it shall mail a
notice of redemption ("Redemption Notice") to each of the holders of the Notes
to be redeemed, first class, postage prepaid, not later than the fifteenth day
before the date fixed for redemption ("Redemption Date"), at their last address
as shall appear on the records of the Company. Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the holder receives such notice.
(e) The Redemption Notice shall specify (i) the
redemption price, (ii) Redemption Date, (iii) the place where the certificates
for the Notes shall be delivered and the redemption price paid, and (iv) if
applicable, that the right to convert the Notes shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
No failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
holder (a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Secretary or an Assistant Secretary of the Company that notice
of redemption has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(f) Any right to convert this Note shall terminate at
5:00 P.M. (New York time) on the business day immediately preceding the
Redemption Date. On and after the Redemption Date, holders of the Note shall
have no further rights except to receive, upon surrender of the Note, the
redemption price.
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<PAGE> 13
9. Miscellaneous
A. The Company may consider and treat the person in
whose name this Note shall be registered as the absolute owner thereof for all
purposes whatsoever (whether or not this Note shall be overdue) and the Company
shall not be affected by any notice to the contrary. The registered owner of
this Note shall have the right to transfer it by assignment (subject to the
limitations on transfer contained in the Subscription Agreement) and the
transferee thereof shall, upon his registration as owner of this Note, become
vested with all the powers and rights of the transferor. Registration of any
new owner shall take place upon presentation of this Note to the Company at its
offices, 900 N. Franklin Street, Suite 401, Chicago, IL 60610, together with a
duly authenticated assignment. In case of transfer by operation of law, the
transferee agrees to notify the Company of such transfer and of his address,
and to submit appropriate evidence regarding the transfer so that this Note may
be registered in the name of the transferee. This Note is transferable only on
the books of the Company by the holder hereof, in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all holders or transferees of the Note not
registered at the time of sending the communication.
B. Payments of interest shall be made as specified above
to the registered owner of this Note. Payment of principal and interest shall
be made to the registered owner of this Note upon presentation of this Note
upon or after maturity. Whenever any payment to be made by the Company
hereunder is stated to be due which is not a day, other than a Saturday,
Sunday, legal holiday or other day on which banks are permitted or required to
be closed (any such non-excluded day being a "Business Day"), the payment shall
instead be due on the immediately following Business Day, and any such
extension of time shall be included in the computation of the payment of
interest hereunder.
C. This Note shall be construed and enforced in
accordance with the laws of the State of New York.
D. The holder of this Note shall have such registration
rights with respect to the shares of Common Stock issued upon the conversion of
this Note, as are set forth in the Subscription Agreement.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its Chief Financial Officer.
ACCUMED INTERNATIONAL, INC.
By: ____________________________________
Leonard R. Prange, Chief Financial
Officer and Corporate Vice President
-13-
<PAGE> 14
CONVERSION FORM
____ To convert this Note into shares
of Common Stock of the Company, check this box: ____
If you want common stock certificate, if any, made out in another
person's name, fill in the form below:
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(insert assignee's social sec. or tax I.D. no.)
Date:____________________________
Your Signature: ________________________
(Sign exactly as your name appears on
the fact of this Note)
Signature Guarantee*
________________________
* Signature(s) must be guaranteed by an eligible guarantor institution
which is a member of a recognized signature guarantee program, i.e.,
Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP) or New York Stock Exchange Medallion
Signature Program (MSP).
<PAGE> 1
EXHIBIT 10.42
************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
ACCUMED INTERNATIONAL, INC.
************************************************************************
<PAGE> 2
THIS WARRANT AND THE SHARES OF COMMON STOCK INTO WHICH IT IS EXERCISABLE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED
IN CONNECTION WITH THE PROPOSED TRANSFER.
Void after 5:00 p.m. New York Time, on March 13, 2002.
Warrant to Purchase 200,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
ACCUMED INTERNATIONAL, INC.
This is to Certify That, FOR VALUE RECEIVED, Commonwealth Associates,
or assigns ("Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from AccuMed International, Inc., a Delaware corporation
("Company"), 200,000 fully paid, validly issued and nonassessable shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock") at a
price of $3.125 per share at any time or from time to time during the period
from the Initial Warrant Exercise Date (defined below) to March 13, 2002, but
not later than 5:00 p.m. New York City Time, on March 13, 2002. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon
such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant Shares" and the exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price". This Warrant, together with
warrants of like tenor, constituting in the aggregate warrants (the "Warrants")
to purchase up to 200,000 shares of Common Stock, was originally issued
pursuant to an agency agreement between the Company and Commonwealth Associates
("Commonwealth"), in connection with a private placement ("Private Placement")
through Commonwealth of Units, in consideration of $20 received for the
Warrants.
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<PAGE> 3
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at
any time or from time to time on or after the date in which the Company has a
sufficient number of authorized shares of Common Stock reserved for issuance
(after taking into account all shares reserved for issuance on the conversion
of convertible securities and the exercise of outstanding options and warrants,
including the shares of Common Stock issuable upon the conversion of the Notes
and exercise of the Warrants issued in the Private Placement) to permit the
issuance of the shares of Common Stock to be issued pursuant to the exercise of
this Warrant ("Initial Warrant Exercise Date") and until March 13, 2002 (the
"Exercise Period"), subject to the provisions of Section (j)(2) hereof;
provided, however, that (i) if either such day is a day on which banking
institutions in the State of New York are authorized by law to close, then on
the next succeeding day which shall not be such a day, and (ii) in the event of
any merger, consolidation or sale of substantially all the assets of the
Company as an entirety, resulting in any distribution to the Company's
stockholders, prior to March 13, 2002, the Holder shall have the right to
exercise this Warrant commencing at such time through March 13, 2002 into the
kind and amount of shares of stock and other securities and property (including
cash) receivable by a holder of the number of shares of Common Stock into which
this Warrant might have been exercisable immediately prior thereto. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto duly executed and accompanied by payment
of the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the warrants, but not later
than seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificate for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
(2) At any time during the Exercise Period, the Holder
may, at its option, exchange this Warrant, in whole or in part (a "Warrant
Exchange"), into the number of Warrant Shares determined in accordance with this
Section (a)(2), by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent, accompanied by a notice
stating such Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange or, if later, the
date the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the shares issuable upon such Warrant Exchange and, if
2
<PAGE> 4
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares specified by the
Holder in its Notice of Exchange (the "Total Number") less (ii) the number of
Warrant Shares equal to the quotient obtained by dividing (A) the product of
the Total Number and the existing Exercise Price by (B) the current market
value of a share of Common Stock. Current market value shall have the meaning
set forth Section (c) below, except that for purposes hereof, the date of
exercise, as used in such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company agrees to use its best
efforts to take all actions as may be necessary (including obtaining
stockholder approval) to amend its Certificate of Incorporation to increase the
Company's authorized shares of Common Stock in order for the Company to have a
sufficient number of authorized shares of Common Stock (after taking into
account all shares reserved for issuance on the conversion of convertible
securities and the exercise of outstanding options and warrants) to permit the
Company to reserve for issuance out of its authorized Common Stock (in addition
to shares of Common Stock reserved for issuance on the conversion and/or
exercise of currently outstanding convertible securities, options and warrants)
all shares issuable upon exercise of this Warrant. Thereafter, the Company
shall at all times reserve for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share, determined as
follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market, the
current market value shall be the last reported sale price of the
Common Stock on such exchange or market on the last business day prior
to the date of exercise of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on
such exchange or market; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq SmallCap
Market, the current Market Value shall be the average of the closing
bid and asked prices for such day on such market and if the Common
Stock is not so traded, the current market value shall be the mean of
the last reported bid and asked prices reported by the
3
<PAGE> 5
National Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal year of the
Company ending prior to the date of the exercise of the Warrant,
determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock transfer agent,
if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be cancelled. This Warrant may
be divided or combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any Warrants
into which this Warrant may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and deliver a new Warrant
of like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be
at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a
4
<PAGE> 6
greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall
be made successively whenever any event listed above shall occur.
(2) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less
than the current market price of the Common Stock (as defined in
Subsection (8) below) on the record date mentioned below, or less than
the Exercise Price on such record date the Exercise Price shall be
adjusted so that the same shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately
prior to the date of such issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered)
would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on such record date and the number
of additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are
convertible) or (ii) in the event the Subscription Price is equal to
or higher than the current market price but is less than the Exercise
Price, the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered)
would purchase at the Exercise Price in effect immediately prior to
the date of such issuance, and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding on the record
date mentioned below and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued
and shall become effective immediately after the record date for the
determination of shareholders
5
<PAGE> 7
entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible
into Common Stock are not delivered) after the expiration of such
rights or warrants the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis
of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (1) above) or subscription
rights or warrants (excluding those referred to in Subsection (2)
above), then in each such case the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied
by the current market price per share of Common Stock (as defined in
Subsection (8) below), less the fair market value (as determined by
the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares of Common
Stock outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately
after the record date for the determination of shareholders entitled
to receive such distribution.
(4) In case the Company shall issue shares of its Common
Stock [excluding shares issued (i) in any of the transactions
described in Subsection (1) above, (ii) upon exercise of options
granted to the Company's employees under a plan or plans adopted by
the Company's Board of Directors and approved by its shareholders, if
such shares would otherwise be included in this Subsection (4), (but
only to the extent that the aggregate number of shares excluded hereby
and issued after the date hereof, shall not exceed 5% of the Company's
Common Stock outstanding at the time of any issuance), (iii) upon
exercise of options and warrants outstanding at March 13, 1997, and
this Warrant (iv) to shareholders of any corporation which merges into
the Company in proportion to their stock holdings of such corporation
immediately prior to such merger, upon such merger, or (v) issued in a
bona fide public offering pursuant to a firm commitment underwriting,
but only if no adjustment is required pursuant to any other specific
subsection of this Section (f) (without regard to Subsection (9)
below) with respect to the transaction giving rise to such rights] for
a consideration per share (the "Offering Price") less than the current
market price per share [as defined in Subsection (8) below] on the
date the Company fixes the offering price of such additional shares or
less than the Exercise Price, the
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<PAGE> 8
Exercise Price shall be adjusted immediately thereafter so that it
shall equal the lower of (i) the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to the issuance of such additional
shares and the number of shares of Common Stock which the aggregate
consideration received [determined as provided in Subsection (7)
below] for the issuance of such additional shares would purchase at
such current market price per share of Common Stock, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares
or (ii) in the event the Offering Price is equal to or higher than the
current market price per share but less than the Exercise Price, the
price determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration
received [determined as provided in subsection (7) below] for the
issuance of such additional shares would purchase at the Exercise
Price in effect immediately prior to the date of such issuance, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares.
Such adjustment shall be made successively whenever such an issuance
is made.
(5) In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock [excluding
securities issued in transactions described in Subsections (2) and (3)
above] for a consideration per share of Common Stock (the "Conversion
Price") initially deliverable upon conversion or exchange of such
securities [determined as provided in Subsection (7) below] less than
the current market price per share [as defined in Subsection (8) below]
in effect immediately prior to the issuance of such securities, or less
than the Exercise Price, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the number of
shares of Common Stock which the aggregate consideration received
[determined as provided in Subsection (7) below] for such securities
would purchase at such current market price per share of Common Stock,
and the denominator of which shall be the sum of the number of shares
of Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock of the Company deliverable
upon conversion of or in exchange for such securities at the initial
conversion or exchange price or rate or (ii) in the event the
Conversion Price is equal to or higher than the current market price
per share but less than the Exercise Price, the price determined by
multiplying the Exercise Price in effect immediately prior to the date
of issuance by a fraction,
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<PAGE> 9
the numerator of which shall be the sum of the number of shares
outstanding immediately prior to the issuance of such securities and
the number of shares of Common Stock which the aggregate consideration
received [determined as provided in subsection (7) below] for such
securities would purchase at the Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the maximum
number of shares of Common Stock of the Company deliverable upon
conversion of or in exchange for such securities at the initial
conversion or exchange price or rate. Such adjustment shall be made
successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (1), (2), (3), (4)
and (5) above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number of
Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(7) For purposes of any computation respecting
consideration received pursuant to Subsections (4) and (5) above, the
following shall apply:
(A) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount
of such cash, provided that in no case shall any deduction be
made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise
in connection therewith;
(B) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good
faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof), whose determination
shall be conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof [the consideration in each case
to be determined in the same manner as provided in clauses (A)
and (B) of this Subsection (7)].
8
<PAGE> 10
(8) For the purpose of any computation under Subsections
(2), (3), (4) and (5) above, the current market price per share of
Common Stock at any date shall be determined in the manner set forth
in Section (c) hereof except that the current market price per share
shall be deemed to be the higher of (i) the average of the prices for
30 consecutive business days before such date or (ii) the price on the
business day immediately preceding such date.
(9) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Subsection (9) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations
under this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in
this Section (f) to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section (f), as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal Income
tax liability to the holders of Common Stock or securities convertible
into Common Stock (including Warrants).
(10) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days after
any request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. In the event the
Company does not provide the Holder with such notice and information
within 10 days of a request by the Holder, then notwithstanding the
provisions of this Section (f), the Exercise Price shall be
immediately adjusted to equal the lowest Offering Price, Subscription
Price or Conversion Price, as applicable, since the date of this
Warrant, and the number of shares issuable upon exercise of this
Warrant shall be adjusted accordingly. The Company may retain a firm
of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company)
to make any computation required by this Section (f), and a
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
(11) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall
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<PAGE> 11
become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable
upon exercise of this Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained in
Subsections (1) to (9), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price
or the number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the holder or any
holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of all
or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall
cause to be mailed by certified mail to the Holder, at least fifteen days prior
the date specified in (x) or (y) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common
10
<PAGE> 12
Stock of the Company, or in case of any consolidation or merger of the Company
with or into another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that
the Holder shall have the right thereafter by exercising this Warrant at any
time prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) The Company shall advise the Holder of this Warrant
or of the Warrant Shares or any then holder of Warrants or Warrant
Shares (such persons being collectively referred to herein as
"holders") by written notice at least four weeks prior to the filing
of any registration statement or post-effective amendment thereto
under the Securities Act of 1933 (the "Act") covering securities of
the Company and will for a period of five years, commencing on the
initial closing of the Private Placement, upon the request of any such
holder, include in any such registration statement such information as
may be required to permit a public offering of the Warrant Shares. The
Company shall supply prospectuses and other documents as the Holder
may request in order to facilitate the public sale or other
disposition of the Warrant Shares, qualify the Warrant Shares for sale
in such states as any such holder designates and do any and all other
acts and things which may be necessary or desirable to enable such
Holders to consummate the public sale or other disposition of the
Warrant Shares, and furnish indemnification in the manner as set forth
in Subsection (3)(C) of this Section (j). Such holders shall furnish
information and indemnification as set forth in Subsection (3)(C) of
this Section (j), except that the maximum amount which may be
recovered from the Holder shall be limited to the amount of proceeds
received by the Holder from the sale of the Warrant Shares.
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<PAGE> 13
(2) If any majority holder (as defined in Subsection (4)
of this Section (j) below) shall give notice to the Company at any
time during the five year period commencing on the initial closing of
the Private Placement to the effect that such holder contemplates (i)
the transfer of all or any part of his or its Warrants and/or Warrant
Shares, or (ii) the exercise and/or conversion of all or any part of
his or its Warrants and the transfer of all or any part of the
Warrants and/or Warrant Shares under such circumstances that a public
offering (within the meaning of the Act) of Warrant Shares will be
involved, and desires to register under the Act the Warrant Shares,
then the Company shall, within two weeks after receipt of such notice,
file a registration statement on Form S-1 or such other form as the
holder requests, pursuant to the Act, to the end that the Warrant
Shares may be sold under the Act as promptly as practicable thereafter
and the Company will use its best efforts to cause such registration
to become effective and continue to be effective (current) (including
the taking of such steps as are necessary to obtain the removal of any
stop order) until the holder has advised that all of the Warrant
Shares have been sold; provided that such holder shall furnish the
Company with appropriate information (relating to the intentions of
such holders) in connection therewith as the Company shall reasonably
request in writing. In the event the registration statement is not
declared effective under the Act prior to March 13, 2002, the Company
shall extend the expiration date of the Warrants to a date not less
than 90 days after the effective date of such registration statement.
The holder may, at its option, request the registration of the Warrant
Shares in a registration statement made by the Company as contemplated
by Subsection (1) of this Section (j) or in connection with a request
made pursuant to Subsection (2) of this Section (j) prior to the
acquisition of the Warrant Shares upon exercise of the Warrants and
even though the holder has not given notice of exercise of the
Warrants. If the Company determines to include securities to be sold
by it in any registration statement originally requested pursuant to
this Subsection (2) of this Section (j), such registration shall
instead be deemed to have been a registration under Subsection (1) of
this Section (j) and not under Subsection (2) of this Subsection (j).
The holder may thereafter at its option, exercise the Warrants at any
time or from time to time subsequent to the effectiveness under the
Act of the registration statement in which the Warrant Shares were
included.
(3) The following provision of this Section (j) shall
also be applicable:
(A) Within ten days after receiving any such
notice pursuant to Subsection (2) of this Section (j), the
Company shall give notice to the other holders of Warrants and
Warrant Shares, advising that the Company is proceeding with
such registration statement and offering to include therein
Warrant Shares of such other holders, provided that they shall
furnish the Company with such appropriate information
(relating to the intentions of such holders) in connection
therewith as the Company shall
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<PAGE> 14
reasonably request in writing. Following the effective date of
such registration, the Company shall upon the request of any
owner of Warrant Shares forthwith supply such a number of
prospectuses meeting the requirements of the Act, as shall be
requested by such owner to permit such holder to make a public
offering of all Warrant Shares from time to time offered or
sold to such holder, provided that such holder shall from time
to time furnish the Company with such appropriate information
(relating to the intentions of such holder) in connection
therewith as the Company shall request in writing. The
Company shall also use its best efforts to qualify the Warrant
Shares for sale in such states as such majority holder shall
designate.
(B) The Company shall bear the entire cost and
expense of any registration of securities initiated by it
under Subsection (1) of this Section (j) notwithstanding that
Warrant Shares subject to this Warrant may be included in any
such registration. The Company shall also comply with one
request for registration made by the majority holder pursuant
to Subsection (2) of this Section (j) at its own expense and
without charge to any holder of any Warrants and/or Warrant
Shares; and the Company shall comply with one additional
request made by the majority holder pursuant to Subsection (2)
of this Section (j) (and not deemed to be pursuant to
Subsection (1) of this Section (j)) at the sole expense of
such majority holder. Any holder whose Warrant Shares are
included in any such registration statement pursuant to this
Section (j) shall, however, bear the fees of his own counsel
and any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant Shares sold
by him pursuant thereto.
(C) The Company shall indemnify and hold harmless
each such holder and each underwriter, within the meaning of
the Act, who may purchase from or sell for any such holder any
Warrants and/or Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement under the Act or any
prospectus included therein required to be filed or furnished
by reason of this Section (j) or caused by any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or
alleged untrue statement or omission or alleged omission based
upon information furnished or required to be furnished in
writing to the Company by such holder or underwriter expressly
for use therein, which indemnification shall include each
person, if any, who controls any such underwriter within the
meaning of such Act provided, however, that the
13
<PAGE> 15
Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration
statement, said preliminary prospectus, said final prospectus
or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Holder
or any other Holder, specifically for use in the preparation
thereof.
(D) Neither the giving of any notice by any such
majority holder nor the making of any request for prospectuses
shall impose such majority holder or owner making such request
any obligation to sell any Warrants and/or Warrant Shares, or
exercise any Warrants.
(4) The term "majority holder" as used in this Section
(j) shall include any owner or combination of owners of Warrants or
Warrant Shares in any combination if the holdings of the aggregate
amount of:
(i) the Warrants held by him or among them, plus
(ii) the Warrants which he or they would be
holding if the Warrants for the Warrant Shares owned by him or
among them had not been exercised,
would constitute a majority of the Warrants originally issued.
The Company's agreements with respect to Warrants or Warrant Shares in
this Section (j) shall continue in effect regardless of the exercise and
surrender of this Warrant.
ACCUMED INTERNATIONAL, INC.
By /s/ Leonard R. Prange
-----------------------------------
[SEAL]
Dated: March 13, 1997
Attest:
/s/ Joyce L. Wallach
- --------------------------
Secretary
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<PAGE> 16
PURCHASE FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _______ shares of Common Stock and hereby
makes payment of _______ in payment of the actual exercise price thereof.
________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature ____________________________
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<PAGE> 17
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers
unto
Name _____________________________
(Please typewrite or print in block letters)
Address ____________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ___________ as attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
<PAGE> 1
EXHIBIT 10.43
MANUFACTURING AND LICENSE AGREEMENT
THIS MANUFACTURING AND LICENSE AGREEMENT (this "Agreement") is made as
of this 30th day of December, 1996 by and between Accumed International, Inc.,
a corporation organized under the laws of the State of Delaware, U.S.A.
("Accumed"), with its principal place of business located at 900 North Franklin
Street, Suite 401, Chicago, Illinois 60610, U.S.A. and Salcom S.r.l., organized
under the laws of Italy ("Salcom") with its principal place of business located
at via Fiorentina n.l., 53100 Siena, Italy. Except as otherwise specified
herein, this Agreement, and the parties' obligations hereunder, shall be
effective as of the date Accumed ceases manufacturing the Products (as defined
in Recital B below) at its plant located in East Grinstead, England and ships
the Equipment (as defined in Section 4(b) below) to Salcom (the "Effective
Date").
RECITALS
A. Accumed owns or has the right to grant licenses with respect
to certain technology, inventions, trade secrets, know-how, and patents
relating to "alamarBlue(TM)," a metabolic cell viability indicatory technology
utilizing metabolic dyes and various poising agents to measure the activity of
cells in the field of microbiology for application in the identification of
bacteria and their susceptibility to antibiotics;
B. Accumed designs, manufactures and markets products
incorporating or relating to alamarBlue(TM) for hospitals, physicians,
veterinarians and clinical laboratories. The products that are the subject of
this Agreement (the "Products") are listed in Exhibit A and Exhibit B attached
hereto. Exhibit A lists Products which Salcom will manufacture and market
pursuant to this Agreement under its own trademark; Exhibit B lists Products
which Salcom will manufacture and market under the "Alamar" trademark for
resale only to Accumed's distributor in Japan. Configurations for the
antibiotic susceptibility and identification Products on Exhibits A and B may
be selected from the list of antibiotics included on the list of U.S. FDA
cleared antibiotics attached hereto as Exhibit C. Exhibits A, B and C are
hereby incorporated into this Agreement by reference.
C. On November 22, 1993, Accumed (f/k/a Alamar Biosciences, Inc.)
and Salcom entered into a European Distributor Agreement, whereby Accumed
appointed Salcom to act as its exclusive distributor for the Products in the
European territories therein specified (the "Distributor Agreement"), and a
Joint Research and Development Agreement, whereby the parties established a
framework for pooling their resources to pursue research and development of new
and improved diagnostic testing products in the field of microbiology (the
"Research Agreement"). Within thirty (30) days of the execution of this
Agreement, Accumed will approach Becton Dickinson and Company with the request
to add the territories of the Middle East, Korea and Hong Kong.
D. Salcom desires to obtain from Accumed the right to
manufacture, use and sell the Products using Accumed's technology, inventions,
trade secrets, know-how and patents, and to obtain technical training from
Accumed in the use of such information and inventions,
<PAGE> 2
and Accumed is willing to grant such rights and to provide such technical
training to Salcom, all pursuant and subject to the terms and conditions of
this Agreement. On July 24, 1996, the parties hereto entered into a Letter of
Understanding setting forth the general terms of such a manufacturing and
license arrangement (the "Letter of Understanding").
E. Except as otherwise specified herein, the parties desire to
supersede the Distributor Agreement, the Research Agreement and the Letter of
Understanding with this Agreement as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Accumed and Salcom hereby agree
as follows:
1. Grant of License.
(a) For the term of this Agreement, and upon the
conditions hereinafter more specifically set forth, Accumed hereby grants to
Salcom the right to manufacture, use and sell the Products pursuant to
Accumed's Licensed Technology (as hereinafter defined) only in the area set
forth in Exhibit D hereto (the "Territory"). Salcom shall have the exclusive
right to sell the Products listed on Exhibit A in the Territory (other than
Japan), except to the extent provided in Section 8(b) and Section 16(e)(3) of
this Agreement, but only as a private-label manufacturer under its own
trademark and trade name. In Japan, Salcom shall only have the right to sell
the Products listed on Exhibit B, to be manufactured and marketed using the
"Alamar" trademark, to AMCO Incorporated ("AMCO"), Accumed's distributor in
Japan pursuant to that certain Distributor Agreement dated February 20, 1996
between AccuMed International Limited, a wholly-owned subsidiary of Accumed
("Accumed Limited"), and AMCO (the "AMCO Agreement"); provided, however, that
Salcom's license to sell Products to AMCO shall not be effective until and
unless Accumed obtains AMCO's written consent to assign to Salcom all of
Accumed Limited's rights and obligations under the AMCO Agreement. Outside the
Territory, Salcom will not (i) actively promote sales of the Products, (ii)
solicit customers for the Products, or (iii) establish any sales organizations
or maintain any inventories or distribution depots with respect to the
Products.
As used herein, "Licensed Technology" means information, technology,
technical and production data, trade secrets, know-how, and foreign and U.S.
patents and patent applications, which is owned, possessed or controlled by
Accumed and utilized by Accumed in its manufacture of the Products listed on
Exhibit A and Exhibit B.
(b) In consideration of the above-granted license, Salcom
agrees not to sell, manufacture, promote, distribute, represent or otherwise
act as agent for any products which compete with the Products in the clinical,
physician, veterinary, or hospital laboratory markets in the Territory;
provided, that Salcom shall have the right to continue to market to persons in
the Territory the "abac" instrument and related reagents and panels.
2
<PAGE> 3
(c) Salcom shall not have any rights under this Agreement
to sell, manufacture, promote, distribute, represent or otherwise act as agent
for any Accumed products which do not appear on Exhibit A or Exhibit B or that
require antibiotics that do not appear on Exhibit C, as such Exhibits may be
amended from time to time.
(d) Except as the parties may agree in writing, Salcom
shall have no right (i) to disclose to or permit or sublicense third parties to
use the Licensed Technology, (ii) to use or sell the Products or any part or
component thereof as a component in other products manufactured or sold by
Salcom, or (iii) to use the Licensed Technology in connection with the
manufacture, use or sale of products manufactured by Salcom other than the
Products. Salcom expressly acknowledges and agrees that, except in the
Territory and to the extent of the grant set forth in Section 1(a) above, it
does not acquire under this Agreement any rights in or to the use of the
Licensed Technology used or adopted in connection with the Products by Accumed
anywhere in the world.
2. Additional Consideration under Manufacturing and License
Agreement
In further consideration of the mutual agreements contained
herein, Salcom agrees to pay to Accumed a total of U.S. $150,000 in two equal
payments of U.S. $75,000, the first which shall be due and payable on February
1, 1998 and the second of which shall be due and payable on February 1, 1999.
3. New and Improved Products
All applicable specifications, data and other information
relating to any inventions, improvements, patents or patent applications made
or acquired by Salcom applicable to the Products, including the development of
any new antibiotic, shall be immediately disclosed to Accumed by Salcom for its
review and approval. If Accumed is required or requested by Salcom to develop,
or otherwise test or support any new or improved product (including new
antibiotics) in addition to or in connection with its review and approval
process, Salcom shall pay Accumed for such services at a price agreed to by the
parties. Any new or improved Products resulting from the above process shall
be added to Exhibit A, Exhibit B and/or Exhibit C.
Salcom shall grant and hereby grants to Accumed an exclusive,
worldwide, unrestricted, irrevocable, royalty-free right and license, together
with the right to sublicense others, under all of such inventions,
improvements, patents and patent applications for the full term of said
patents, subject only to Salcom's rights pursuant to this Agreement. In the
event Salcom does not wish to file patent applications on any such inventions
or improvements, it will so notify Accumed and, at Accumed's request, execute
and procure the execution of any and all patent applications and all documents
necessary or desirable to enable Accumed to protect such inventions or
improvements and whatever assignments or transfer instruments are necessary to
effectuate ownership of the rights in Accumed in any
3
<PAGE> 4
and all countries of the world which Accumed may elect. Any expense incurred
in the prosecution of such patent applications by Accumed shall be borne by
Accumed.
4. Disclosure of Licensed Technology; Manufacturing Equipment;
Training
(a) Accumed will, within a reasonable time after the date
hereof, furnish to Salcom all Licensed Technology in its possession or control
in documentary form relating to its manufacture of the Products.
(b) Accumed will provide to Salcom the machines and
equipment necessary for the production of the Products and identified on
Exhibit E hereto (the "Equipment"), at no cost to Salcom. Any additional
machines, equipment or tooling necessary for Salcom's manufacturing of the
Products shall be acquired by Salcom, at its cost and expense, and Salcom shall
also be responsible for facility modifications and improvements necessary to
produce the Products in accordance with all applicable laws and Accumed's
manufacturing specifications. Salcom shall, at its own cost and expense, be
responsible for providing all necessary maintenance and repair to the Equipment
provided by Accumed, shall not misuse, modify or alter the Equipment in any
way, and shall return the Equipment to Accumed in the same condition delivered,
normal wear and tear excepted, promptly after the termination of this
Agreement. Salcom assumes all risk and liability arising from Salcom's
possession, use and operation of the Equipment. The Equipment will be shipped
to Salcom's principal place of business by approximately January 1, 1997 and
Salcom shall be responsible for all transportation costs, port, dock and
handling charges, insurance, tariffs, customers, duties, and all applicable
taxes and other costs of exportation after leaving Accumed's premises in either
Westlake, Ohio, U.S.A. or East Grinstead, England, including all costs of
importation, and shall reimburse Accumed for all such costs as may be paid by
Accumed. Accumed will maintain all right, title and interest in the Equipment,
and Salcom agrees to execute any financing statements or other documents, and
take any other actions, requested by Accumed to evidence such ownership.
ACCUMED IS PROVIDING THE EQUIPMENT TO SALCOM "AS IS," AND ACCUMED SPECIFICALLY
DISCLAIMS ANY AND ALL REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(c) Within two weeks after the delivery of the Equipment
to Salcom, or at such other time as the parties agree in writing, Accumed will
send two competent representatives to Salcom's principal place of business for
the purpose of training Salcom personnel in connection with the production of
the Products. The duration of such training trip shall not exceed 30 total
calendar days and training shall take place on consecutive business days. In
consideration of such training, Salcom shall pay Accumed U.S. $7,500 within
seven (7) business days of the conclusion of the training. Salcom shall
additionally pay for all reasonable, documented out-of-pocket expenses, such as
travel, meals and accommodation, incurred by Accumed's training personnel.
4
<PAGE> 5
5. Raw Materials and READars(TM)
(a) Salcom shall purchase from Accumed, and Accumed shall
sell to Salcom, all of its inventory of raw materials relating to the
production of Products in existence at Accumed's premises in East Grinstead,
England on the date Accumed ceases manufacturing the Products in East Grinstead
and ships the Equipment to Salcom (the "Raw Materials"). The amount of Raw
Materials in existence on the date hereof is identified on Exhibit F hereto and
its reasonable estimated value is U.S. $50,000. Salcom shall purchase the Raw
Materials for the reasonable estimated value of the Raw Materials remaining on
the above shipping date, as documented by Accumed. Accumed will ship the Raw
Materials to Salcom's principal place of business by approximately January 31,
1997 and Salcom shall be responsible for all transportation costs, port, dock
and handling charges, insurance, tariffs, customers, duties, and all applicable
taxes and other costs of exportation after leaving Accumed's premises in East
Grinstead, England, including all costs of importation, and shall reimburse
Accumed for all such costs as may be paid by Accumed. Salcom shall render
payment to Accumed for the Raw Materials based on the following payment
schedule: 25% shall be due and payable on each of May 31, 1997, June 30, 1997,
and July 31, 1997, with the final 25% due and payable on August 31, 1997.
(b) Accumed shall deliver to Salcom all of Accumed's
inventory of READars(TM) and new boards redesigned to comply with CE
requirements in existence as of the date hereof, estimated at 50 total
READars(TM). Accumed will ship the READars(TM) to Salcom's principal place of
business beginning approximately February 1, 1997 and Salcom shall be
responsible for all transportation costs, port, dock and handling charges,
insurance, tariffs, customers, duties, and all applicable taxes and other costs
of exportation after leaving Accumed's premises in Westlake, Ohio, including
all costs of importation, and shall reimburse Accumed for all such costs as may
be paid by Accumed Accumed shall retain all right, title and interest in and to
the READars(TM) until full payment as required in Section 2 hereunder is made
by Salcom to Accumed. Salcom agrees to execute any financing statements or
other documents, and to take any other actions, requested by Accumed to
evidence such ownership.
(c) Salcom shall inspect the Raw Materials and
READars(TM) promptly upon arrival at Salcom's warehouses. All shortages,
defects, or other failures attributed to Accumed's fault or neglect must be
reported within thirty (30) days after arrival. All other defects or failures
to conform shall be reported to Accumed in writing within thirty (30) days
after their discovery (but not later than sixty (60) days after arrival). If
Salcom fails to so report within the above periods, such Raw Materials and
READars(TM) shall be deemed accepted by Salcom.
6. Royalties, Accounting and Payment
(a) During the term of this Agreement, Salcom shall pay
to Accumed a royalty of four percent (4%) on the Net Sales of Products sold by
or for Salcom in the
5
<PAGE> 6
Territory. As used herein, "Net Sales" means the total received by Salcom from
the sale of Products to a third party, less reasonable and customary
unrecovered transportation charges and such taxes, normal and customary
quantity and cash discounts, and allowances and credits on account of rejection
or return of Products, actually allowed for the Products. In the event any
taxes (withholding or otherwise) or other charges are levied by a taxing
authority of a foreign government in connection with the accrual or payment of
any royalties payable under this Agreement to Accumed in that country, which
taxes or other charges Salcom is required by law to pay on Accumed's behalf,
the same shall be deducted from any royalty payments made hereunder, and the
payment to Accumed of the net amount due after reduction by the amount of such
taxes shall satisfy Salcom's royalty obligations under this Agreement. In any
such event, Salcom shall furnish Accumed with tax receipts issued by
appropriate tax authorities.
(b) Salcom shall submit to Accumed within sixty (60) days
following the end of each calendar quarter during the term of this Agreement,
and for the calendar quarter immediately following termination of this
Agreement, reports for the preceding three (3) month period identifying: (i)
the Net Sales, (ii) quantity and net selling price of each Product sold by
Salcom during the calendar quarter, (iii) the customers to whom sold, and (iv)
the total royalty due to Accumed, together with payment of such royalty amount.
(c) Unless otherwise directed by Accumed in writing,
royalty payments shall be made to Accumed by wire transfer to a bank in the
United States designated by Accumed in writing, in United States Dollars
converted by an authorized foreign exchange bank in Italy at the prevailing
rate applicable at the time payment is due.
(d) Salcom shall maintain complete and accurate books of
account and records showing all sales of Products and all Net Sales
attributable to such sales. Accumed shall have the right, at Accumed's
expense, to audit the records of Salcom at reasonable times (but no more than
twice in one year) to verify the accuracy of royalties paid by Salcom pursuant
to this Agreement. In the event that any such audit shows any under-reporting
or underpayment by Salcom of at least five percent (5%), then Salcom shall pay
or reimburse Accumed for its audit expenses and Accumed shall be entitled to
pursue any other remedies available to it under this Agreement.
(e) In the event Salcom makes any payment due to Accumed
under either Section 5 or Section 6 of this Agreement after the due date,
Salcom agrees to pay interest at the rate of 1-1/2% per month on the unpaid
balance, or the highest rate permitted by law, whichever is less. In the
event Salcom defaults on any of its payment obligations to Accumed under this
Agreement, Salcom shall also be responsible for any legal and other costs
incurred in connection with Accumed's collection efforts.
7. Quality Control, Service and Sales Support
6
<PAGE> 7
(a) Salcom shall maintain the highest standards of
quality and workmanship in its manufacture of Products. Salcom shall conduct
its business according to regularly accepted high standards, and will employ
its best endeavors to maintain, promote and create goodwill in connection with
the Products. Salcom shall use its best efforts to promote the sale of
Products in the Territory. All support, service and training of its customers
with respect to the Products shall be the sole responsibility of Salcom.
Salcom shall maintain adequate telephone support for the purpose of answering
questions and otherwise assisting its customers with respect to the Products.
(b) In connection with its obligations under Section
7(a), Salcom specifically agrees to perform all of the following duties (which
duties shall be illustrative, and shall not be construed to exclude any other
duties reasonably necessary to comply with Section 7(a) of this Agreement):
(1) report promptly to Accumed any changes in the
design, specifications, material or similar characteristics of any of the
Products, or the production process used to manufacture the Products;
(2) provide adequate training and instruction for
users of the Products, including training of the customer on the semi-automated
instrument and data management system, which training can be performed at
Salcom's facility or at the customer's laboratory,
(3) advertise and promote the Products in a manner
consistent with Salcom's advertising of its own products;
(4) provide, at Accumed's request, copies of any
advertisement, brochure, promotion, or other literature to be distributed to
users or otherwise used in promotional activities depicting or referring to the
Products;
(5) provide to Accumed, at its request, reasonable
access to Salcom's facilities to Accumed personnel for purposes of inspection
to ensure that the process of manufacture, storage, handling, service and
support of the Products is being accomplished in a manner consistent with the
terms of this Agreement;
(6) advise Accumed of the existence of any known
regulation, law or market custom that may affect the sale or use of the
Products in the Territory;
(7) maintain an inventory of products and
replacement and repair parts adequate to serve the reasonably foreseeable needs
of its customers for a period of sixty (60) days;
(8) sell the READars(TM) purchased from Accumed in
the same condition in which such READars(TM) shall be delivered to Salcom
(unless such Products were delivered
7
<PAGE> 8
in a defective or otherwise unsalable condition), without removing or altering
in any way the trademarks, trade names, tradedress or numbers of such Product;
(9) distribute to its customers all appropriate
documents, including, but not limited to, service notes, maintenance notices
and recall notices, as may be necessary to ensure that Salcom's customers are
serviced and aware of changes to the Products;
(10) maintain and use adequate facilities for the
proper manufacture, storage, quality control testing, and shipment of the
Products, including refrigeration where necessary;
(11) immediately inform Accumed of any defect or
other condition that in any way alters the quality or specifications of any
Product or packaging of any Product of which Salcom becomes aware, and Salcom
shall not sell to any person any Product that Salcom knows, or should have
known, contains any such defect or condition;
(12) develop and maintain a technically competent
sales force and distribution network to aggressively promote, sell, follow-up
with and service the Products with respect to potential and actual customers of
the Products. Salcom's duty to sell the Product shall include efforts to
locate new customers and efforts to convert existing customers to the Products;
(13) provide Accumed with a customer list at least
once every six months that includes the name, address and usage of each
customer using Products, including, where applicable, the number of beds per
customer and the number of panels used by each customer on an average monthly
basis. Accumed shall forward to Salcom any inquiries with respect to Products
that Accumed may receive from potential customers within the Territory; and
(14) be responsible for the installation, repairs
and maintenance of the Accumed READar(TM) instrument to the customer's
satisfaction. Salcom shall provide adequate trained service personnel and
shall purchase from Accumed all replacement parts, manuals and tools required
to perform such service which do not constitute Products hereunder. Salcom
agrees to use its best efforts to respond to a repair or service call within 18
hours by telephone and within 48 hours for on-site visits.
(c) Notwithstanding any other provision of this
Agreement, in the event Salcom fails to adequately solicit, support or service
any customer in the Territory, Accumed shall have the right to directly
solicit, support or service such customer until such time, if ever, as Salcom
shall assume such duties.
8. Computer Hardware and Software
8
<PAGE> 9
(a) Accumed is an authorized, non-exclusive distributor
of the computer hardware and accessories necessary for the operation of the
SOFTmar(TM) data management system in conjunction with the READar(TM)
semi-automated instrument. Salcom may purchase from Accumed the computer
hardware and accessories at its current prices therefor. Salcom may also
purchase such hardware and accessories from another source. If Salcom desires
to purchase such hardware and/or accessories from an alternative source, Salcom
shall ensure that such hardware and/or accessories meet the minimum
specifications necessary to effective operate the SOFTmar(TM) software and
Salcom shall represent and warrant to Accumed that Salcom will continue to
provide computer products that will meet the minimum specifications necessary
to be compatible with the READar(TM) semi-automated instrument and the
SOFTmar(TM) data management software. Accumed shall provide no representation
or warranty with respect to the performance of any computer hardware not
purchased from Accumed.
(b) Accumed is the owner and exclusive worldwide
distributor of the SOFTmar(TM) software; however, Salcom shall not be
prohibited from developing a data management software system using a different
source code that will be compatible with the READar(TM). In the event Salcom
develops a competing data management software system, the following provisions
shall apply:
(1) In connection with development of the software,
Salcom shall be prohibited from using in any way the source and object codes
embodied in the SOFTmar(TM) software, including any updates or enhancements to
such codes as may be subsequently incorporated into the SOFTmar(TM) software.
(2) Prior to making any sales of any Salcom software
to users of Accumed's instruments, Salcom shall deliver to Accumed sufficient
copies of such software so as to enable Accumed to fully and completely
evaluate the performance of such software in connection with Accumed
instruments. Accumed shall undertake such evaluation with all reasonable
dispatch, and in no event shall Salcom sell such software to any user of
Accumed products unless and until Accumed consents to such sale, which consent
shall not be unreasonably withheld.
(3) Whether or not Accumed has reviewed and
consented to sale of the Salcom software, Accumed hereby disclaims any and all
liability in connection with the use of Salcom software with the Products, and
Accumed's warranty shall under no circumstances extend to any Products with
respect to which a software system other than SOFTmar(TM) or another Accumed
product is being used.
(4) Salcom shall grant to Accumed an irrevocable,
royalty-free worldwide right and license to use, manufacture and sell any
Salcom software relating to the Products, if developed, upon payment by Accumed
of a commercially reasonable price, provided that in no event shall the price
exceed fifty thousand U.S. Dollars (US $50,000).
9
<PAGE> 10
9. Translation
(a) Any translation of the Licensed Technology, or of
procedural manuals, package inserts or promotional materials originally
prepared by Accumed for the Products, shall be performed by Salcom at its own
expense and Salcom shall be responsible for ensuring that any translated
materials accurately convey the original English meaning. Salcom shall
indemnify and hold Accumed harmless from and against any claims, damages,
liabilities or any other obligations whatsoever arising from or claimed as a
result of any errors made in the course of any translation.
(b) Instructions, interfaces, prompts and similar aspects
of the SOFTmar(TM) data management system software were also originally
prepared in English. If Salcom desires to convert the SOFTmar(TM) software to
a language other than English, Accumed and Salcom will negotiate in good faith
for allocating the cost of the translation between Accumed and Salcom. In the
event the SOFTmar(TM) instructions, interfaces, prompts and the like are
translated hereunder to a language other than English, Accumed will retain all
rights in and to the source and object codes and to the English versions of
such instructions, interfaces, prompts and the like and Salcom shall hold the
rights to the translated materials. Salcom shall grant to Accumed a
royalty-free, worldwide, irrevocable right and license to make, use and sell
any such translated materials.
10. Regulatory Matters
(a) Salcom shall be responsible for identifying and
obtaining all approvals, licenses, registrations, permits and other
authorizations from local regulatory authorities for the manufacture, sale and
marketing of the Products in the Territory and the importation of the Raw
Materials and READars(TM) into the Territory. Salcom shall be responsible for
complying with all other regulatory requirements and taxes, including, without
limitation, product approvals, labeling requirements, importation duties,
special shipping requirements, quarantine and customs and the regulations and
laws of the European Community. Salcom shall assign to Accumed any permits,
licenses, registrations or other authorizations permitted to be so assigned
upon termination of this Agreement.
(b) Accumed shall provide, at Salcom's expense, all
reasonable assistance (including data, materials and personnel) Salcom deems
necessary in order to secure from any local authorities all licenses, permits,
registrations and other authorizations.
(c) Notwithstanding anything to the contrary in this
Agreement, Accumed shall be responsible for complying with all regulatory
requirements relating to the licensing of the Licensed Technology, and the sale
of the Raw Materials and READars(TM) to Salcom, including, without limitation,
obtaining marketing approval or clearance from the U.S. Food and Drug
Administration ("FDA"), if necessary, complying with all applicable provisions
of the Export Administration Regulations of the U.S. Department of Commerce and
complying with all requirements of U.S. state law applicable to such license
and sale.
10
<PAGE> 11
(d) In order to assist Accumed in meeting its obligations
to report to the U.S. FDA whenever Accumed receives or otherwise becomes aware
of information that reasonably suggests that one of its marketed devices may
have caused or contributed to a death or serious injury or has malfunctioned
and that the device or any other device marketed by Accumed would be likely to
cause or contribute to a death or serious injury, if the malfunction were to
recur, Salcom shall maintain appropriate records and notify Accumed by
telephone as soon as possible, but no later than five (5) calendar days of
initial receipt of information that an Accumed product may have caused or
contributed to a death or serious injury. Salcom shall follow the telephone
report with a written report to Accumed within fifteen (15) working days of
initial receipt of the information.
(e) If, because of any exchange control restrictions of
any country or the European Community, Salcom is unable to make payment when
due in United States Dollars, Salcom shall deposit such payment in the name of
Accumed or its nominee in such bank or other institution in Italy and in such
type of account as shall be specified by Accumed. Accumed shall be entitled to
interest on such deposit amounts to the extent earned thereon.
11. Labeling, Trademarks, Trade Names and Copyrights
(a) All Products manufactured by Salcom under the terms
of this Agreement shall bear the name and trademark of Salcom, except for
Products manufactured for sale to the Japanese distributor, which shall bear
the "Alamar" trademark. Salcom shall accommodate Accumed's wishes, to the
extent possible, as to the placement, size, color and other characteristics of
the Alamar trademark on such Products. The SOFTmar(TM) software shall bear the
Alamar trademark and copyright notice.
(b) In addition to the foregoing names, trademarks and
logos, all Products manufactured by Salcom under the terms of this Agreement
shall bear the legend "Manufactured by Salcom S.r.l. under license from Accumed
International, Inc." or a substantially similar legend. Salcom and Accumed
shall agree in good faith as to the placement of the Accumed legend and Salcom
name and logo, with the understanding that the Salcom materials shall bear a
more conspicuous placement. Except as specified above, Salcom is not
authorized to use the name "Accumed International, Inc." in any manner in
connection with its manufacture, sale or marketing of the Products.
(c) During the term of this Agreement, Salcom is
authorized by Accumed with permission of Accumed, to use the Alamar trademark,
and the trademarks "READar(TM) and "SOFTmar(TM)" solely in connection with
Salcom's manufacture, sale, advertisement and promotion of the Products
pursuant to this Agreement. Nothing contained in this Agreement shall give
Salcom any interest in such trademark or trade name except as heretofore
provided, and Salcom's right to use such trademark or trade name shall cease
upon termination of this Agreement. Salcom agrees not to affix any of
Accumed's trademarks, logos or trade names to products other than the
appropriate Products and not to register or use any name or mark confusingly
similar to Accumed's or any name used to describe any of
11
<PAGE> 12
Accumed's Products. Salcom agrees not to register, in its name or in the name
or on behalf of any third party, or otherwise claim or purport to have any
right, title or interest in any to any Accumed trademark or trade name used in
connection with the manufacture, sale, distribution or service of the Products.
(d) Salcom agrees to place or retain Accumed's copyright
legends on all materials or media supplied to Salcom hereunder and so marked,
whether or not Salcom is allowed to reproduce such materials or media by the
terms of this Agreement Salcom further agrees not to affix any of Accumed's
copyright legends to any materials or media other than the appropriate Accumed
materials or media.
12. Indemnification
(a) Accumed agrees to indemnify and hold harmless Salcom,
its affiliates, and their respective officers, directors and authorized
representatives from and against any and all claims, demands, loss, damage,
liability or expenses (including reasonable attorneys' fees, court costs and
expenses) arising or resulting from breaches of representations and warranties
made by Accumed hereunder, as well as any claim, action or proceeding made or
brought against Salcom, its affiliates, distributors or customers by a third
party's alleging that it is the Licensed Technology portion of the Product
being manufactured, marketed or sold by Salcom that infringes or is alleged to
infringe such third party's intellectual property rights, provided that Salcom
shall have promptly notified Accumed in writing of any such claim and Accumed
shall be permitted, but not required, to participate in the defense or
settlement thereof. Accumed and Salcom shall make available to the other for
the purpose of such defense all relevant information pertinent thereto in its
control.
Salcom agrees to indemnify and hold harmless Accumed, its affiliates,
and their respective officers, directors and authorized representatives from
and against any and all claims, demands, loss, damage, liability or expenses
(including reasonable attorneys' fees, court costs and expenses) arising or
resulting from breaches of representations and warranties made by Salcom
hereunder, as well as any claim, action or proceeding made or brought against
Accumed, its affiliates, distributors or customers by a third party arising out
of the manufacture, sale, use, distribution or other disposition of Products or
any part thereof by Salcom or its distributors or its or their customers,
unless any such claim, action or proceeding is based upon an allegation that it
is the Licensed Technology portion of the Product being manufactured, marketed
or sold by Salcom that infringes or is alleged to infringe the claiming party's
intellectual property rights, provided that Accumed shall have promptly
notified Salcom in writing of any such claim and Salcom shall be permitted, but
not required, to participate in the defense or settlement thereof. Accumed and
Salcom shall make available to the other for the purpose of such defense all
relevant information pertinent thereto in its control.
(b) Notwithstanding any other provision of this
Agreement, Accumed assumes no liability for (i) infringement of patent claims
covering any product that Salcom
12
<PAGE> 13
incorporates or uses any Product, (ii) any trademark infringements involving
any marking or branding of Accumed's trademarks not approved by Accumed, or
(iii) Salcom's or any third party's modification to or alteration of any of the
Products so that such Products no longer conform to Accumed's specifications
therefor.
(c) The foregoing provisions of this Section 12 set forth
the entire liability and obligations of Accumed and the exclusive remedy of
Salcom with respect to any alleged patent or trademark infringement or
violation by the Products or any part thereof.
(d) The indemnification provisions set forth in this
Section 12 shall survive the termination of this Agreement.
13. Independent Contractor
The relationship of Accumed and Salcom established by this
Agreement is that of independent contractors, and nothing contained in this
Agreement shall be construed to (i) give either party the power to direct and
control the day-to-day activities of the other, or (ii) constitute the parties
as partners, joint venturers, co-owners or otherwise as participants in a joint
or common undertaking. Neither party nor its agents or employees is the
representative of the other party for any purpose except as expressly set forth
in this Agreement, and has no power or authority as agent, employee or in any
other capacity to represent, act for, bind, or otherwise create or assume an
obligation on behalf of the other for any purpose whatsoever. All financial
obligations associated with Salcom's business are the sole responsibility of
Salcom. All sales and other agreements between Salcom and its customers are
Salcom's exclusive responsibility and shall have no effect on Salcom's
obligations under this Agreement.
14. Reservations and Limitations
(a) Accumed shall not be liable to any person for any
injury or damage to business, earnings, profits or good will suffered by any
such person and caused, directly or indirectly, by Products manufactured by
Salcom pursuant to this Agreement, even if Accumed shall have been advised of
the possibility of same.
(b) Accumed reserves the right to discontinue the
availability of any Product or to alter the Licensed Technology relating to any
Product.
15. Representations and Warranties.
(a) Accumed hereby represents and warrants to Salcom
that: (i) other than certain rights in and to the Licensed Technology granted
to Becton, Dickinson and Company ("Becton") pursuant to that certain License
Agreement between Alamar Biosciences, Inc. and Becton dated October 10, 1995
(the "Becton Agreement"), it is the owner of the entire right, title and
interest to the Licensed Technology or has the right to grant licenses with
respect to
13
<PAGE> 14
such Licensed Technology; (ii) to Accumed's knowledge, the Licensed Technology
has not infringed, is not now infringing, and Accumed has not received any
notice of any infringement by the Licensed Technology of any intellectual
property right belonging to any third party and there is no infringement by any
other party of the Licensed Technology; (iii) it has full authority and power
to enter into this Agreement and to grant the rights and license specified
herein; and (iv) except for obtaining AMCO's consent to Accumed Limited's
assignment of the AMCO Agreement to Salcom, and except for obtaining Becton's
final acceptance of the relationship contemplated by this Agreement (which will
not be forthcoming until Becton receives a copy of this Agreement executed by
both parties), it has secured any and all approvals, permits or consents
necessary for the consummation of the transactions contemplated hereby,
including the conditional consent of Becton in a letter dated July 17, 1996.
(b) Salcom hereby represents and warrants to Accumed
that: (i) it has full authority and power to enter into this Agreement and to
carry out its obligations hereunder; (ii) it has secured any and all necessary
approvals, permits or consents necessary for the consummation of the
transactions contemplated hereby, and Salcom's execution and performance of
this Agreement will not conflict with or result in the breach of any agreement
or arrangement to which Salcom is a party; and (iii) it will execute all
documents and take all actions necessary to assume all of Accumed Limited's
rights and obligations under the AMCO Distributor Agreement.
(c) ACCUMED IS PROVIDING THE RAW MATERIALS AND
READARS(TM) TO SALCOM "AS IS," AND ACCUMED SPECIFICALLY DISCLAIMS AND WAIVES
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
AND ALL OTHER WARRANTIES OF ACCUMED, EXPRESS OR IMPLIED, ARISING OUT OF OR IN
CONNECTION WITH THE SALE, RESALE, AND PURCHASE OF THE RAW MATERIALS AND
READARS(TM), OR THE USE, REPAIR OR PERFORMANCE THEREOF. Salcom and Accumed
agree that the price offered to Salcom by Accumed for the Raw Materials and
READars(TM) is a consideration in limiting Accumed's liability as provided in
this Section 15(c).
15A. Covenant of Salcom
Salcom agrees to use its best efforts to facilitate the
repayment in full of Salcom's prior indebtedness to Accumed in the amount of
approximately U.S. $88,000, which repayment shall be made by Salcom no later
than June 30, 1997.
16. Term and Termination
(a) The initial term of this Agreement shall commence on
the Effective Date and shall terminate on September 30, 1999 (the "Initial
Termination Date"). Six months prior to the Initial Termination Date, the
parties shall negotiate in good faith the terms of an additional five year term
of this Agreement beginning October 1, 1999. In the
14
<PAGE> 15
event the parties are able to agree to the renewal terms by sixty (60) days
prior to the Initial Termination Date, this Agreement shall automatically
extend for an additional term of five (5) years beginning October 1, 1999. In
the event the parties are unable to agree to the renewal terms minimums by such
date, Accumed may terminate this Agreement and may negotiate with alternative
manufacturers and/or distributors for the Territory.
(b) This Agreement may be terminated by either party
prior to the Initial Termination Date or any renewal termination date upon
default or breach of a material obligation or condition under this Agreement by
the other, such termination being effective thirty (30) days after receipt by
the alleged breaching party of written notice of such termination specifying
the breach; provided, however, that if the default or breach is cured or shown
to be non-existent within the thirty (30) day period after receipt of written
notice, the notice shall be deemed automatically withdrawn and of no effect.
(c) In addition, Accumed may terminate this Agreement in
the event that Salcom defaults in any payment to Accumed for any Raw Materials
or READars(TM) purchased from Accumed, or of any royalties owed to Accumed, and
such default continues unremedied for a period of thirty (30) days.
(d) To the extent permitted by applicable law, this
Agreement may also be terminated by either party immediately upon notice to the
other party in the even that any of the following occurs:
(1) either party, voluntarily or involuntarily (i)
files a petition in bankruptcy or insolvency, (ii) files a petition seeking
reorganization, readjustment or rearrangement of its business under any law
relating to bankruptcy, (iii) has such a petition filed on its behalf or has
bankruptcy proceedings initiated against it by any other party which are not
dismissed within sixty (60) days, (iv) is adjudicated by a competent court or
regulatory authority or agent to be a bankrupt or insolvent or a receiver is
appointed for substantially all of the party's property, (v) has an assignment
made for the benefit of credits, (vi) has proceedings brought for the
liquidation or winding up of its business which are not dismissed within sixty
(60) days, or (vii) is unable to pay and discharge its obligations when the
same shall become due and payable; or
(2) if any transaction or series of transactions
should occur which results in a change or transfer of ownership or control,
directly or indirectly of a majority of the capital stock with right to vote or
of substantially all of the assets of either party or its parent entity and
such change or transfer of ownership or control materially affects the ability
of either party to perform under this Agreement.
(e) Upon the date of termination of this Agreement for
any reason (the "Termination Date"), the following provisions shall apply:
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<PAGE> 16
(1) Salcom shall promptly pay to Accumed amounts
owing to Accumed in accordance with the terms of this Agreement.
(2) Salcom shall cease all manufacture and sale of
the Products, except that Salcom shall have the right for a period of ninety
(90) days from the Termination Date to fulfill all outstanding orders and sell
all Products on hand at the Termination Date so long as the royalties from such
sales due Accumed are paid to and statements rendered to Accumed with respect
to such sales of Products when due in accordance with this Agreement.
(3) Accumed will have the right to appoint, accept
orders from and deliver Products to a new manufacturer and/or distributor for
the Territory (or any portion thereof) who may begin deliveries thereof to
customers in the Territory immediately after the Termination Date and Accumed
may act as its own manufacturer and/or distributor. Salcom shall provide to
Accumed with a reasonable time after the Termination Date a list of all
Salcom's current customers with respect to which subsection (2) above applies.
(4) After the ninety (90) day period after the
Termination Date, Accumed may, but shall not be required to, purchase any
unsold Products from Salcom at cost to Salcom, and Salcom shall sell any such
Products to Accumed at its request.
(f) Except to the extent necessary to comply with Section
16(e) above, upon termination of this Agreement, Salcom shall:
(1) cease to use any of Accumed's trademarks, logos
or trade names in connection with any Salcom promotion or advertising of the
Products;
(2) surrender to Accumed any trademark or trade name
registrations or commercial permits relating to Accumed;
(3) return to Accumed the Equipment pursuant to
Section 4(b) hereof; and
(4) return to Accumed all documents (including but
not limited to any reproductions, notes or summaries), models and other
materials relating to the Licensed Technology.
(g) NEITHER ACCUMED NOR SALCOM SHALL BE LIABLE TO THE
OTHER FOR DAMAGES OF ANY KIND INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES ON
ACCOUNT OF TERMINATION OF THIS AGREEMENT FOR ANY REASON WHATSOEVER.
17. Confidentiality and Ownership of Licensed Technology
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<PAGE> 17
Salcom acknowledges and agrees that all Licensed Technology
furnished to Salcom hereunder remains the property of Accumed. Salcom agrees
to keep all Licensed Technology confidential, using at least the same care to
safeguard the Licensed Technology as it takes to safeguard its own proprietary,
confidential or trade secret information. Salcom shall not, without Accumed's
prior written consent, communicate or allow to be communicated any Licensed
Technology to anyone except to its officers, employees or agents to the extent
necessary for the proper manufacture and sale of the Products in accordance
with this Agreement, all of which persons shall agree to treat all Licensed
Technology as confidential and to further restrict its use in the manner
provided above. Salcom agrees to take all necessary precautions to keep the
Licensed Technology secret and to restrict its use. Salcom agrees that any
reproductions, notes, summaries or similar documents relating to the Licensed
Technology immediately upon their creation become and remain the property of
Accumed.
18. European Community Considerations
(a) If either party shall cause this Agreement to be made
the subject of an application for negative clearance and/or notification for
exemption to the Commission of the European Communities (the "Commission") then
in the event any provision of this Agreement is held to be in contravention of
Article 85(1) of the Treaty establishing the European Economic Community and
not qualifying for exemption under Article 85(3) of the Treaty, the parties
shall consider jointly such amendment or amendments as would avoid infringement
of that Article and attempt to agree in good faith to such amendment or
amendments. In the event Salcom or Accumed becomes aware of any violation or
potential violation of any other law or regulation of the European Community
occasioned by the parties' performance under this Agreement and any other
agreements between the parties, that affects the fundamental understanding of
the parties with respect to exclusivity, exclusive territories, royalties,
product manufacturing and product distribution, the parties shall notify each
other of such violation or potential violation and shall negotiate in good
faith an amendment to this Agreement that complies with such laws or
regulations and as nearly as possible reflects the parties' understanding with
respect to such matters as set forth in this Agreement.
(b) The parties understand and acknowledge that the
royalties to be paid by Salcom and certain other aspects of this Agreement may
include terms and conditions which differ from those offered or included in
agreements between Accumed and its other manufacturers and/or distributors.
Accumed confirms that where such differences result in more favorable terms and
conditions being offered to Salcom, these benefits have been extended to Salcom
because of the economic benefits that Accumed considers it will receive as a
result of Salcom's greater manufacturing capabilities, more extensive
distribution system, greater purchasing requirement and in recognition of
Salcom's acceptance of more onerous manufacturing, marketing and sales
obligations.
19. Miscellaneous
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(a) This Agreement shall be construed under and governed
by the substantive law of the State of Illinois, United States of America. The
appropriate U.S. Federal and State courts of the State of Illinois, County of
Cook, shall have exclusive jurisdiction over any dispute between the parties
hereto relating to the subject matter of this Agreement.
(b) Neither party shall be liable for failure to perform
hereunder due to any emergency or casualty beyond its control, including acts
of God, fire, floods, wars, earthquakes, civil wars, terrorism, sabotage
strikes, governmental laws, regulations or other casualties and emergencies.
If a party's failure or inability to perform by reason of the foregoing should
last for a period of ninety (90) days or more, consecutively or cumulatively,
in any one year period beginning on the date hereof, then either party shall
have the right in its discretion to terminate this Agreement by giving written
notice of termination to the other party, provided that the period of failure
or inability to perform on such emergency or casualty shall not extend or
prolong any term or period of time provided for hereunder.
(c) This Agreement in the English language constitutes
the entire understanding of the parties hereto with regard to its subject
matter. This Agreement supersedes and voids any prior oral or written
agreement between the parties, including without limitation the Distributor
Agreement, the Research Agreement and the Letter of Understanding.
Notwithstanding the foregoing, this Agreement shall not supersede or void that
certain U.S. Distributor Agreement between the parties dated November 22, 1993,
which shall continue in full force and effect in accordance with its terms.
This Agreement may be amended only by means of a written document subscribed by
both parties.
(d) This Agreement shall not be assigned, transferred or
delegated to another by either party, in whole or in part, without the prior
written consent of the other party, except that Accumed and Salcom shall be
free at any time to assign and transfer this Agreement to any of their parent
or affiliated companies at its discretion, so long as any such assignee agrees
to accept and abide by the terms of this Agreement and such assignment does not
materially impair the ability of the assigning party to perform under this
Agreement.
(e) If at any time any provision of this Agreement is or
becomes invalid illegal or unenforceable in any respect under the law of any
jurisdiction then such provision shall be treated in such jurisdiction as
severed from the remaining provisions and neither the validity, legality or
enforceability of the remaining provisions nor the validity, legality or
enforceability of such provisions under the law of any other jurisdiction shall
in any way be affected or impaired.
(f) Any notice called for by this Agreement shall be
forwarded by one party to the other by registered or certified air mail or by
facsimile transmission addressing it:
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as to: Accumed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
USA
Fax: 312-642-8684
as to: Salcom S.r.l.
Via Fiorentia, n.l.
53100
Siena, Italy
Fax: 577-245530
or to such other address that one party shall set out to the other by like
notice. Any period of time given or provided by such notice shall commence to
run on and include the date of its actual mailing as evidenced by the postal
register or certified mail receipt or transmission as identified by appropriate
record.
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers, executed this Agreement as of the date first written above.
SALCOM S.r.l. ACCUMED INTERNATIONAL, INC.
/s/ Ricardo Paolini /s/ Michael Burke
- ----------------------------- ---------------------------------
By By:
President President
- ----------------------------- ---------------------------------
Title Title
December 31st, 1996
- -------------------
Date:
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<PAGE> 20
EXHIBIT A
SALCOM - TRADEMARKED PRODUCTS
<TABLE>
<CAPTION>
CATALOG
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------
<S> <C>
41-103 GRAM NEGATIVE MIC PANEL
41-110 GRAM POSITIVE MIC PANEL
41-203 GRAM NEGATIVE SIR
41-210 GRAM POSITIVE SIR
41-520 ID PANEL
(One Patient per Panel)
41-533 ID PANEL
(Three Patients per Panel)
41-303 ID/MIC COMBINATION PANEL, GRAM NEGATIVE
41-310 ID/MIC COMBINATION PANEL, GRAM POSITIVE
41-403 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(One Patient per Panel)
41-410 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(One Patient per Panel)
41-423 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(Two Patients per Panel)
41-420 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(Two Patients per Panel)
41-433 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(Three Patients per Panel)
41-430 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(Three Patients per Panel)
45-502 READer PANEL READER (Without Computer)
40-500 ALAMAR INOCULUM BROTH 25ml
40-570 ALAMAR INOCULUM BROTH, 500ml BAG
31-560 ALAMAR YEAST INOCULUM BROTH, 12.5ml
40-410 0.85% SALINE, 6ml
</TABLE>
<PAGE> 21
EXHIBIT B
ALAMAR - TRADEMARKED PRODUCTS
<TABLE>
<CAPTION>
CATALOG
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------
<S> <C>
31-103 GRAM NEGATIVE MIC PANEL
31-110 GRAM POSITIVE MIC PANEL
31-203 GRAM NEGATIVE SIR
31-210 GRAM POSITIVE SIR
31-520 ID PANEL
(One Patient per Panel)
31-533 ID PANEL
(Three Patients per Panel)
31-303 ID/MIC COMBINATION PANEL, GRAM NEGATIVE
31-310 ID/MIC COMBINATION PANEL, GRAM POSITIVE
31-403 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(One Patient per Panel)
31-410 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(One Patient per Panel)
31-423 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(Two Patients per Panel)
31-420 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(Two Patients per Panel)
31-433 ID/SIR COMBINATION PANEL, GRAM NEGATIVE
(Three Patients per Panel)
31-430 ID/SIR COMBINATION PANEL, GRAM POSITIVE
(Three Patients per Panel)
50-500 READer PANEL READER (Includes SOFTmar, Without Computer)
30-500 ALAMAR INOCULUM BROTH, 25ml
30-570 ALAMAR INOCULUM BROTH, 500ml BAG
30-560 ALAMAR YEAST INOCULUM BROTH, 12.5ml
30-410 0.85% SALINE, 6ml
</TABLE>
<PAGE> 22
EXHIBIT C
ANTIBIOTICS
22
<PAGE> 23
EXHIBIT D
TERRITORY
Austria
Belgium
Cyprus
Egypt
France
Germany
Greece
Libya
Italy
Lebanon
Luxembourg
Malta
Morocco
Netherlands
Spain
Switzerland
Tunisia
Turkey
Japan
<PAGE> 24
EXHIBIT E
EQUIPMENT
1. Sandy Springs dispenser
2. Ansco autoclave
3. Macintosh computer
4. Macintosh printer
5. Zebra printer
6. 168 well dispenser tank and stand
7. Dishwasher (pulsonic)
8. Labeller
9. Hand sealer
10. Punch
11. Tamper
12. Hand puncher
<PAGE> 25
EXHIBIT F
RAW MATERIALS
25
<PAGE> 1
EXHIBIT 10.45
MANUFACTURING AGREEMENT
This Manufacturing Agreement is made as of March 3, 1997 by
and among AccuMed International, Inc., a Delaware corporation ("AccuMed"),
Difco Laboratories Incorporated, a Wisconsin corporation ("SPD"), and Difco
Laboratories Incorporated, a Michigan corporation ("Difco Michigan") (SPD and
Difco Michigan) are sometimes referred to herein individually and collectively
as "Difco," as the context indicates).
WHEREAS, pursuant to the Asset Purchase Agreement between
AccuMed and Difco Microbiology Systems, Inc. ("MSD") dated as of the date
hereof (the "Asset Purchase Agreement"), AccuMed has acquired from MSD
substantially all of the assets pertaining to the ESP Culture System II as set
forth in the Asset Purchase Agreement (capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Asset Purchase
Agreement unless the context requires otherwise);
WHEREAS, the execution and delivery of this Agreement by the
parties hereto is an express condition precedent to AccuMed's obligations under
the Asset Purchase Agreement and the parties are executing and delivering this
Agreement in satisfaction of such condition precedent;
NOW, THEREFORE, based on the covenants and agreements set
forth herein and for other good and valuable consideration, the receipt, value
and sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties agree as follows:
Section 1. DEFINITIONS AND USAGE
1.1 Definitions. As used herein:
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by, or under common
control with such Person.
"Annual Maximum Price Increase" means a maximum price
increase in each year during the term of this Agreement as to a Product equal
to the percentage amount of the then applicable price (before the increase)
equal to the percentage by which the Producer Price Index for the region in
which Difco performs its primary manufacturing obligations hereunder with
respect to such Product (the "PPI") increased in relation to the PPI published
for the immediately preceding calendar year.
1
<PAGE> 2
"Base Media" means Difco's proprietary formula for
the following products:
Description
Septicemia Aerobic Media - for use in ESP 80A and 40A bottles
Septicemia Anaerobic Media - for use in ESP 80N and 40N bottles
Middlebrook 7H9 Broth - for use in ESP Myco bottles
"Base Media Components" means the following
ingredients of DCM which are produced by processes that are proprietary to
Difco:
("Component A") M-0122 Proteose Peptone #3
("Component B") M-0123 Tryptone
("Component C") O-0127 Yeast Extract
("Component D") O-0713 Middlebrook 7H9 Broth
("Component E") O-0259 Casitone
"Bottle Disposable Products" means the following
products consisting of the bottle containing culture media, supplements or
inhibitors (in each case, which on the date hereof are as described in and
having the respective Functional Specifications set forth in Schedule 1 which
are the respective functional specifications defined in the applicable 510(k)
Notification):
80A Aerobic bottles for blood and sterile body fluid testing
7101-44-1
80N Anaerobic bottles for blood and sterile body fluid testing
7103-44-9
EZ Draw 40A Aerobic direct draw for blood and sterile body fluid testing
7105-44-7
EZ Draw 40N Anaerobic direct draw for blood and sterile body fluid testing
7107-44-5
ESP Myco For detection of Mycobacteria in respiratory, blood, stool,
tissue, sterile fluids, urine and wound specimens
7111-42-0
2
<PAGE> 3
ESP GS Myco growth supplement 7112-42-0
ESP Myco PVNA Myco antibiotic inhibitor 7113-42-0
"Confidential Information" means all material information
relating to the Bottle Disposable Products, including Technical Information
(but excluding any information relating to Base Media, DCM and/or the Base
Media Components), whether in Difco's possession on the date hereof or
subsequently transmitted in any manner by AccuMed to Difco, its employees or
representatives pursuant to this Agreement that is marked, designated or
described as confidential at the time of transmission (or thereafter if Difco
will not be prejudiced by the delay).
"DCM" means the bill of materials and recipe to produce the
following products which are required in Base Media:
Component No. Description
M - 6937 Septicemia Aerobic Media - for use
in ESP 80A and 40A bottles
M - 6938 Septicemia Anaerobic Media - for use
in ESP 80N and 40N bottles
0 - 0713 Middlebrook 7H9 Broth - for use in
ESP Myco bottles
"ESP Product Line" means the ESP Culture System II and
predecessors comprised of disposables, software, and instruments for the growth
and detection of microorganisms in blood cultures, sterile body fluids and
Mycobacteria samples in instruments referenced by model Nos. 128, 256 and 384
utilizing ESP intellectual property which was acquired by AccuMed pursuant to
the Asset Purchase Agreement.
"FDA" means the United States Food and Drug Administration.
"Functional Specifications" means, with respect to a specified
Product, the applicable functional specifications therefor set forth on Schedule
1, as modified as provided herein.
"GMP" means the FDA's Good Manufacturing Practice regulations.
"Manufacturing Equipment" means that machinery and equipment
transferred to AccuMed by MSD pursuant to the Asset Purchase Agreement and
listed on Schedule 3.
3
<PAGE> 4
"Person" means any natural person, partnership,
corporation, association, limited liability partnership, limited liability
company, or other legal entity, and any government, political entity or other
sovereign.
"Products" means Bottle Disposable Products, DCM and
Base Media Components, as the context relates and shall include the RISE and
PZA antibiotic kits, new Myco inhibitors and new fungal additives currently in
development by AccuMed provided that Difco and AccuMed shall first have entered
into an amendment to this Agreement adding such products, setting the pricing
therefor (which in the case of RISE and PZA antibiotic kits shall be in
accordance with Schedule 5.7) and modifying the terms of this Agreement as
appropriate, each of the Parties agrees to negotiate in good faith to enter
into such amendment(s) upon the request of any Party.
"Technical Information" means (in each case whether
in electronic format or hard copy) all material know-how, trade secrets,
patents, processes, drawings, specifications, test methods, QA/QC Procedure
documents, bills of materials, bills of costs, and bills of supplies, GMP and
FDA inspection documents relating to the design, assembly, test or operation of
the Bottle Disposable Products in the possession of Difco on the date hereof or
revealed by AccuMed to Difco pursuant to the terms of this Agreement (but
excluding those pertaining to Base Media, DCM and Base Media Components).
"510(k) Notification" means a Pre-market Notification under
Section 510(k) of the Federal Food, Drug and Cosmetic Act).
1.2 References to a Person who is not a party hereto are
also references to its permitted assigns and permitted successors in interest
(by means of merger, consolidation or sale of all or substantially all the
assets of such Person or otherwise, as the case may be), and references to a
Person who is a party hereto are also references to its permitted assigns and
permitted successors in interest as provided in Section 17.
1.3 References to a document are to it as amended, waived
and otherwise modified as of the time in question and references to a statute
or other governmental rule are to it as amended and otherwise modified as of
the time in question (and references to any provision thereof shall include
references to any successor provision in effect as of the time in question).
1.4 References to Sections or to Schedules or Exhibits
are to sections hereof or schedules or exhibits hereto, unless the context
otherwise requires.
4
<PAGE> 5
1.5 The definitions set forth herein are equally
applicable both to the singular and plural forms and the feminine, masculine
and neuter forms of the terms defined.
1.6 The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.
1.7 The term "hereof" and similar terms refer to this
Agreement as a whole.
1.8 References to the "parties" are to the Difco and
AccuMed, unless the context otherwise requires.
1.9 The date on which any notice or other writing is
deemed given shall be determined pursuant to Section 16.
Section 2. GRANT OF RIGHTS TO MANUFACTURE BOTTLE
DISPOSABLE PRODUCTS; LEASE OF MANUFACTURING EQUIPMENT
2.1 Subject to the terms, conditions and
restrictions set forth herein, AccuMed hereby grants to Difco a royalty-free
non-exclusive license to use the Technical Information and Confidential
Information solely to manufacture the Bottle Disposable Products for exclusive
sale to AccuMed.
2.2 Nothing in this Agreement shall be construed
to grant Difco any right or license:
(i) With respect to any AccuMed product other than
the Bottle Disposable Products.
(ii) To manufacture any other product or device
incorporating the Technical Information and Confidential Information (or any
portion thereof) except as otherwise agreed in writing by AccuMed.
(iii) To use, sell, lease or otherwise dispose of the
Bottle Disposable Products manufactured under this Agreement to any Person
other than AccuMed.
(iv) To sublicense, assign or transfer its rights
under this Agreement except as provided in Section 17.
2.3 Difco agrees that it shall not use its rights
granted hereunder in any manner inconsistent with the provisions of this
Agreement and shall only use such rights to the extent and in the manner
required to perform its obligations hereunder.
Section 3. OWNERSHIP AND USE OF MANUFACTURING
5
<PAGE> 6
EQUIPMENT
3.1 The parties acknowledge that the
Manufacturing Equipment is the sole and exclusive property of AccuMed. The
only interest Difco shall have in the Manufacturing Equipment is that of a
lessee under this Agreement.
3.2 In exchange for Difco's agreement to
manufacture Products for AccuMed, AccuMed hereby leases to Difco, until the
Manufacturing Equipment is returned to AccuMed pursuant hereto and at no cost
to Difco (except as otherwise set forth herein), the right to use the
Manufacturing Equipment for the non-exclusive purpose of manufacturing Bottle
Disposable Products for AccuMed. After AccuMed's requirements for Bottle
Disposable Products have been fulfilled, Difco shall be allowed to use the
Manufacturing Equipment to manufacture other products only as follows: Difco
shall be entitled to manufacture (i) Difco products other than Bottle
Disposable Products for a Clinical Purpose (as defined in the License and
Non-competition Agreement) for direct sale by it or to a third-party
distributor and (ii) products (other than products which are competitive with
Bottle Disposable Products for a Clinical Purpose) for sale pursuant to
original equipment manufacturing agreements; Difco expressly acknowledges and
agrees that it is prohibited from using the Manufacturing Equipment for any
other purpose.
3.3 The parties do not intend this Agreement to
be a conditional sales agreement, chattel mortgage, or security agreement
within the meaning of any statute requiring filing or recordation.
Nevertheless, a financing statement or any document relating to this Agreement
may be filed or recorded for any such purpose so as to give notice to any
interested parties.
3.4 The Manufacturing Equipment currently is,
and shall remain in the possession of Difco until returned to AccuMed pursuant
hereto. AccuMed shall be entitled to have (i) one full-time employee
reasonably acceptable to Difco located during normal business hours and any and
all extended hours of operation upon the premises at which the Manufacturing
Equipment is located, and (ii) to have additional employees, agents and
representatives (including its independent auditors) enter such premises of
Difco upon reasonable notice and at reasonable times, to inspect and examine
the Manufacturing Equipment to ensure Difco's compliance with its obligations
under this Agreement. In each case, (i) the presence of such Persons on behalf
of AccuMed shall not interfere with Difco's use of the Manufacturing Equipment
or the operation of other Difco business on such premises, (ii) such Persons
shall at all times comply with all dress, security and other policies (in each
case, of which AccuMed has received notice) applicable to Difco personnel at
6
<PAGE> 7
such premises, (iii) AccuMed shall fully pay, indemnify and hold harmless Difco
and its officers, directors, employees, agents, invitees, affiliates,
successors or assigns (the "Difco Related Parties") from any losses, costs,
liabilities, settlement payments, awards, judgments, fines, penalties, damages
(including compensatory, consequential, incidental, special, punitive and
exemplary), expenses, or other charges (including reasonable attorney's fees)
("Losses") resulting from the presence of such Persons on such premises, and
(iv) prior to entering such premises, AccuMed shall have obtained from each
such Person and delivered to Difco a confidentiality agreement substantially in
the form of Exhibit A.
3.5 Difco shall notify AccuMed, as promptly as
practicable under the circumstances, of any accident connected with the
operation or malfunctioning of the Manufacturing Equipment, and include in such
notice the time, place, and nature of the accident, the damage caused to
property (including but not limited to the Manufacturing Equipment), the names
and addresses of persons injured and of witnesses, and such other information
reasonably requested by AccuMed within the possession of Difco as may be
pertinent to AccuMed's investigation of the accident. Difco shall also notify
AccuMed in writing within five business days after it first acquires knowledge
that any tax lien, attachment, or other judicial process shall attach to any
unit of the Manufacturing Equipment. On written request by AccuMed, Difco
shall give AccuMed written notice of the location of the Manufacturing
Equipment.
3.6 Difco shall obtain and maintain all
licensing and registration of the Manufacturing Equipment that is required by
law. AccuMed shall bear, pay and discharge when due, all license and
registration fees. If by law any such registration or license fee is billed to
Difco, AccuMed at its expense will do all things required to be done by Difco
in connection with the licensing or registration procedure, including payment
of any applicable fees.
3.7 AccuMed shall bear, pay and discharge when
due all assessments, personal property, sales and use taxes applied to the
lease of Manufacturing Equipment hereunder, and other taxes (excluding only any
tax on Difco's income or gross receipts) and governmental charges together with
any penalties or interest applicable to them, now or later imposed by any
state, federal or local governmental authority on the Manufacturing Equipment,
whether they be payable by or assessed to AccuMed or Difco. Difco shall
promptly forward to AccuMed any and all invoices, tax bills or other forms of
notification received by Difco relating to such assessments, and taxes. If
Difco is required to make or actually makes any such payments, AccuMed
7
<PAGE> 8
shall reimburse Difco within 15 business days following the date on which
documented written demand therefor is deemed given to AccuMed.
3.8 Subject to Section 4.3, Difco shall
undertake or cause to be performed the ordinary and necessary repairs and
maintenance to, and installation and operation of the Manufacturing Equipment
according to Difco's customary practices as to its own equipment; AccuMed shall
reimburse Difco for AccuMed's pro rata portion (based upon the relative volume
of use of the Manufacturing Equipment to manufacture (x) Products for AccuMed
and (y) products other than for AccuMed) of the costs related thereto within 15
business days following the date on which a reasonably documented request
therefor is deemed given to AccuMed.
3.9 Difco shall not make any material
alterations, additions, or improvements to the Manufacturing Equipment, and
without AccuMed's prior written consent Difco shall have no authority to incur
expenses for these purposes for AccuMed's account. All alterations or
improvements so approved shall become the property of AccuMed on expiration or
earlier termination of this Agreement.
3.10 At the expense of AccuMed, Difco shall affix
to and maintain on the Manufacturing Equipment all labels and plates provided
by AccuMed, or conspicuously mark the Manufacturing Equipment with such
language as AccuMed may reasonably request, to the effect that the
Manufacturing Equipment is owned by AccuMed and is subject to this Agreement.
3.11 Upon the expiration of Difco's obligation to
manufacture Bottle Disposable Products for AccuMed hereunder, Difco shall
return the Manufacturing Equipment to AccuMed in generally the same condition
as of the date hereof, reasonable wear and tear excepted. The Manufacturing
Equipment shall be surrendered by Difco, at the sole cost and expense of
AccuMed, by loading the Manufacturing Equipment on board any carrier selected
by AccuMed and shipping it as directed by AccuMed, freight collect. At such
time, Difco shall also deliver to AccuMed all reasonably available material
documentation and records pertaining to (i) repair and maintenance of the
Manufacturing Equipment, (ii) manufacturing costs of Bottle Disposable Products
and (iii) suppliers of raw materials and components of Bottle Disposable
Products. Difco shall be entitled to retain copies of such documentation only
(1) to the extent that it believes in good faith that it is legally required to
retain copies or (2) if such documentation relates (or is useful to Difco) in
connection with exercising its rights under the License and Non-competition
Agreement. AccuMed hereby covenants to retain copies of such
8
<PAGE> 9
documentation for a reasonable time and to make such documentation available to
Difco, at Difco's expense, should Difco reasonably require such documentation
in connection with a threatened or pending Claim or investigation or other
action of a Governmental Authority or otherwise and to give Difco at least 30
days' notice of AccuMed's intention to no longer retain copies thereof, in
which case AccuMed shall deliver the same to Difco, at Difco's expense, if
Difco shall so request within such 30-day period.
Section 4. INSURANCE, LOSS, AND DAMAGE TO EQUIPMENT.
4.1 AccuMed, at its own expense, shall not later
than the date hereof procure and maintain physical damage insurance on the
Manufacturing Equipment and bodily injury and property damage insurance in the
amount that it deems commercially reasonable. AccuMed's obligation to maintain
insurance pursuant to this Section 4.1 shall terminate when the Manufacturing
Equipment is delivered to AccuMed pursuant hereto. All such insurance shall
(i) be in a form and with companies approved by Difco (such approval not to be
unreasonably withheld), (ii) name AccuMed as owner of the Manufacturing
Equipment and as loss payee under the physical damage coverage, and (iii) name
Difco as additional insured under the bodily and property damage injury
coverage. Each insurer shall agree, by endorsement on the policies it issues
or by independent instrument furnished to Difco, that it will give Difco 30
days written notice before the policy in question shall be altered or canceled.
Each such policy of insurance shall provide that if AccuMed should fail to
maintain such insurance, Difco shall have the right, but shall not be
obligated, to effect such insurance for the account of Difco. Any expense so
incurred by Difco shall be payable by AccuMed to Difco within 15 business days
following the date on which written demand therefor is deemed given to AccuMed
by Difco. AccuMed shall furnish such evidence as Difco may reasonably require
of the insurance, the terms and conditions of the policy or policies, and the
expiration date.
4.2 The proceeds of any physical damage
insurance, obtained by AccuMed including fire, theft, extended coverage,
vandalism, malicious mischief, collision, or any other insurance covering risks
of loss to owners of interests in the Manufacturing Equipment shall be payable
solely to AccuMed.
4.3 AccuMed assumes the entire risk of loss from
damage, theft or destruction of the Manufacturing Equipment, whether or not
such damage, theft or destruction, shall relieve Difco or AccuMed of any
obligation under this Agreement, except if such damage, theft or destruction is
due to gross negligence
9
<PAGE> 10
on the part of Difco.
4.4 In the event of any loss from damage, theft
or destruction, AccuMed shall have the option to: (1) repair or restore the
Manufacturing Equipment to good condition and working order; or (2) replace the
Manufacturing Equipment with similar equipment in good repair, condition, and
working order.
Section 5. ORDERS; PRICING; CAPITAL EXPENDITURES;
QUALITY CONTROL
5.1 Purchase Order Forecasts. During the term
of this Agreement, AccuMed shall purchase its requirements for (i) each of the
Products other than Bottle Disposable Products from Difco Michigan, and Difco
Michigan shall supply such requirements, and (ii) Bottle Disposable Products
from SPD, and SPD shall supply such requirements, in each case pursuant to the
further terms of this Agreement. Set forth on Schedule 5.1 is a forecast by
calendar quarter of each of the Bottle Disposable Products required by AccuMed
during the term of this Agreement. At least 90 days prior to the last day of
each six-month forecast period, AccuMed shall provide Difco with an updated
forecast for the six-month period beginning on the last day of the then current
six-month forecast period. AccuMed shall be entitled to revise each
subsequent six-month forecast (via the forecast update provided) not more than
once and not later than the 90th day of the then current six-month forecast
period within a range from 5% fewer to up to 5% more of the amount of each
Product as set forth in the original forecast for such six-month period. If
AccuMed shall propose to Difco revisions to the forecasts outside of the
parameters described in the immediately preceding sentence, such revisions
shall not be binding upon Difco without its prior written consent, which
consent shall not be unreasonably withheld.
5.2 Minimum Commitments. AccuMed shall be
firmly committed to take and pay for the highest level of all forecasts
(subject to adjustment as permitted by Section 5.1). AccuMed's obligation
shall be to make such purchase on or prior to the last day of such applicable
forecast period, there being no minimum amounts which AccuMed shall be required
to purchase weekly, monthly or quarterly. Notwithstanding anything to the
contrary contained herein, Difco shall not be obligated to supply Products in
excess of the forecasts (as revised in accordance with Section 5.1) unless
Difco shall subsequently agree in writing, which agreement shall not be
unreasonably withheld.
5.3 Inventory. Difco shall maintain a stock of
inventory of Products sufficient at all times to meet the forecasted demand for
Products by AccuMed, all of which shall
10
<PAGE> 11
have cleared QC/QA Procedures (as defined below).
5.4 Purchase Orders; Shipments. Shipping dates
shall be mutually agreed upon in writing by Difco and AccuMed, but will
generally be determined by the purchase orders delivered by AccuMed to Difco
provided that they are consistent with the applicable forecast(s). Difco
acknowledges that AccuMed shall be entitled to issue multiple purchase orders
per week requiring shipment by Difco to multiple locations per week. Each
shipment hereunder shall be freight collect, F.O.B. point of origin, to each of
the domestic locations listed by AccuMed in a specified purchase order. All
goods shipped are to be identified and all risks of loss shall pass to AccuMed
F.O.B. point of origin. Difco reserves the right to make delivery in
installments. All such installment may be separately invoiced and shall be
paid for when due, without regard to subsequent deliveries. Delay in delivery
of any installment shall not relieve AccuMed of its obligation to accept
remaining deliveries. Difco will not have any responsibility for loss or
damage caused by common carrier. If there exists any evidence of damage to
materials or packaging material or of loss, the receipt to carrier should so
state, and claim shall be made by AccuMed against the carrier without delay.
5.5 Manufacturing Volume; Capital Expenditures.
Difco shall maintain sufficient facilities and employ a sufficient number of
direct personnel so as to effectively perform Difco's obligations set forth in
this Agreement, subject to the forecasted volume as set forth in Section 5.1
(as updated pursuant thereto) and to the manufacturing capacity of the
Manufacturing Equipment. Any and all capital expenditures (excluding
non-capacity capital expenditures such as maintenance and repair) required to
enable Difco to manufacture up to 5,500,000 units of Bottle Disposable Products
per year to fulfill AccuMed's requirements pursuant to this Agreement (which in
all cases shall be subject to the forecasts pursuant to this Agreement) shall
be borne by Difco. If AccuMed requests (which in all cases shall be subject to
the forecasts pursuant to this Agreement) that Difco manufacture Bottle
Disposable Products for AccuMed at a volume higher than 5,500,000 units during
a 12-month period, Difco shall use commercially reasonable efforts to meet such
requirements. If Difco reasonably believes it necessary or appropriate to make
capital improvements and modifications to so increase Difco's production
capacity, AccuMed shall reimburse Difco a pro rata portion of such additional
capital expenditures (based upon the relative volume of use of the
Manufacturing Equipment to manufacture (x) Bottle Disposable Products for
AccuMed and (y) products other than for AccuMed) of the costs related thereto
within 15 business days following the date on which a reasonably documented
request therefor is deemed given to AccuMed.
11
<PAGE> 12
5.6 Quality Control/ Quality Assurance;
Substitution.
(i) Difco shall maintain a level of quality in all
aspects of its operations regarding Products in compliance in all material
respects with the FDA's GMP regulations. Any material failure by Difco to
comply with GMP regulations or any other FDA or other governmental regulations
shall be deemed a material breach of this Agreement.
(ii) As noted in Schedule 1, Difco shall deliver to
AccuMed true and complete written copies of the current quality assurance/
quality control procedures of Difco for each Product within 30 days following
the date hereof, which shall be designated as Schedule 5.6 and shall become a
part of this Agreement (such procedures as modified from time to time as
contained in an amendment to Schedule 5.6(ii) are hereinafter referred to as
the "QA/QC Procedures").
(iii) If AccuMed receives a complaint asserting that
Product manufactured by Difco does not meet the Functional Specifications for
such Product, (1) AccuMed shall undertake commercially reasonable efforts to
determine the validity or invalidity of such complaint, (2) if AccuMed
validates such complaint, AccuMed shall forward the complaint information to
Difco, (3) with respect to each validated complaint received by Difco, Difco
shall promptly take such action as it determines in its reasonable judgment as
required by applicable governmental regulations and guidelines, if any. If a
Product manufactured by Difco for AccuMed fails to meet the applicable
Functional Specifications, Difco will use commercially reasonable efforts, at
the expense of AccuMed, to determine the cause of such failure and Difco shall
allow AccuMed to participate as appropriate in such investigation and
applications to resolve each identified problem. Difco reserves the right, in
its sole discretion, to remedy any claimed defect in the Products (including
replacing the Product) or to substitute other products therefor. If not
replaced by Difco as herein provided, Difco's sole and exclusive liability
shall be limited to the stated selling price of such defective Product. Difco
shall in no event by liable for AccuMed's lost profits or goodwill or any other
special, incidental or consequential damages.
(iv) If Difco desires to substitute other products
for Products, Difco shall provide AccuMed prior written notice thereof.
AccuMed shall be required to accept only such substitutes as (x) which shall
have passed Difco's quality control and quality assurance procedures for such
substitute products (which procedures shall be set forth as an addendum to
12
<PAGE> 13
Schedule 5.6), (y) and which shall be required to meet in all material respects
the applicable Functional Specifications for the Product for which it is
substituted.
5.7 Cost of Products. The initial prices for
each of the Products are set forth on Schedule 5.7. The prices may be adjusted
annually by Difco by notice to AccuMed but not in excess of the applicable
Annual Maximum Price Increase.
5.8 Taxes. To the extent legally permissible,
all present and future taxes and governmental charges imposed by any federal,
state, foreign or local governmental authority which Difco may be required to
pay or collect upon or with reference to the sale, purchase, transportation,
delivery, storage, use or consumption of the Bottle Disposable Products or
other Products (except income taxes) shall be added to the purchase price of
the Bottle Disposable Products or other Products, as the case may be, and shall
be paid by AccuMed to Difco within 15 business days following the date on which
written, reasonably documented demand therefor is deemed given by Difco to
AccuMed. AccuMed shall provide Difco with an appropriate and valid exemption
certificate. Upon receipt of said certificate Difco shall not add to the price
of goods shipped hereunder the amount of any sales or use tax applicable to the
sale of such goods to AccuMed. Under no circumstances shall there be added to
such price the amount of any general business tax, personal property tax, or
any tax levied upon Difco based on or measured by the net income of Difco.
AccuMed is solely liable and agrees to hold Difco harmless with respect to all
tariffs, duties, and excise or any other taxes or charges levied on goods
exported or imported by Difco or by AccuMed or its agents.
5.9 Payment. AccuMed shall pay to Difco the
purchase price of all goods shipped under this Agreement on the basis of 30
days net with a 1% discount if paid within 10 days of the date on which the
invoice is deemed given, regardless of whether AccuMed has inspected such goods
before payment is due. If the full amount is not paid when due, AccuMed agrees
to pay a 1% per month service charge with respect to such unpaid amounts until
paid-in-full. All payments by AccuMed under this Agreement shall be made by
AccuMed in full without set off, counterclaim, defense or other reduction
whatsoever.
Section 6. MODIFICATION OF MANUFACTURING SPECIFICATIONS;
OVERSIGHT.
6.1 As set forth on Schedule 1, Difco shall deliver
to AccuMed within 30 days following the date hereof true and complete copies of
the manufacturing specifications and processes for Bottle Disposable Products
as in effect on the date
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of such delivery (the "Initial Manufacturing Specifications"), which shall be
designated as Schedule 6.1 and shall become a part of this Agreement.
6.2 AccuMed shall have the ability to modify the
Initial Manufacturing Specifications (subject to FDA GMP) for Bottle Disposable
Products during the term of this Agreement) provided that Difco shall consent
thereto in writing (which consent shall not be unreasonably withheld and the
parties agree, however, that such consent may be conditioned upon a reasonably
documented change in pricing or modification of other terms of this Agreement).
At AccuMed's request, and subject to the foregoing, Difco shall use
commercially reasonable efforts to cooperate as provided in Section 6.3 with
AccuMed personnel, agents and/or representatives, to modify and adapt the
Initial Manufacturing Specifications as requested by AccuMed to manufacture
Bottle Disposable Products as revised or otherwise modified in accordance with
initial, revised or otherwise modified design, engineering and/or functional
specifications delivered to Difco by AccuMed.
6.3 Difco shall use commercially reasonable efforts
to make available appropriate personnel to cooperate with AccuMed as provided
in Section 6.2 including engineering, research and development and
manufacturing personnel.
6.4 All services provided by Difco pursuant to this
Section 6 shall be at AccuMed's expense. AccuMed shall reimburse Difco for the
actual time (based on salary or hourly wage rate, as the case may be) spent by
its personnel fulfilling Difco's obligations pursuant to this Section 6 and for
reasonably documented, related out-of-pocket expenses within 15 business days
following the date on which reasonably documented request therefor is deemed
given.
6.5 If Difco determines that the implementation of
the modifications to the Initial Manufacturing Specifications pursuant to this
Section 6 will increase the cost to manufacture Bottle Disposable Products, (i)
Difco shall only be required to implement such modifications if AccuMed agrees
to pay a reasonably documented price increase for such Bottle Disposable
Product, and (ii) Difco shall consider and implement, if commercially
reasonable, such methods as may be suggested by AccuMed to reduce the amount of
such cost increase.
Section 7. DELIVERY OF TECHNICAL/CONFIDENTIAL
INFORMATION Difco acknowledges that it currently possesses all relevant
Technical Information and Confidential Information necessary with respect to
the manufacture of the Bottle Disposable Products as manufactured and
configured on the date
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hereof. During the term of this Agreement, AccuMed will provide any revisions,
updates, or modifications to such Technical Information developed by AccuMed.
Such information shall be delivered to Difco in the form then utilized by
AccuMed, and when appropriately marked shall be received by Difco as
Confidential Information and will be subject to the restrictions on disclosure
set forth herein.
Section 8. WARRANTIES; LIMITATION OF LIABILITY
8.1 DIFCO SHALL NOT BE LIABLE FOR ANY INJURY OR
DAMAGE TO ACCUMED, OR TO ANY OF ACCUMED'S CUSTOMERS OR TO ANY OTHER PERSON
CAUSED DIRECTLY OR INDIRECTLY BY THE MANUFACTURE OF PRODUCTS BY DIFCO FOR
ACCUMED HEREUNDER OR BY THE USE, SALE, LEASE OR OTHER DISPOSITION OF ANY OF
PRODUCTS BY ACCUMED OR ITS CUSTOMERS OCCURRING EITHER BEFORE, DURING OR AFTER
THE TERM OF THIS AGREEMENT; PROVIDED FURTHER THAT IN NO EVENT SHALL DIFCO BE
LIABLE TO ACCUMED OR ANY OTHER PERSON FOR ANY LOSS OR INJURY TO EARNINGS,
PROFITS, OR GOODWILL, OR FOR ANY DIRECT, SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES ARISING OUT OF DIFCO'S MANUFACTURE OF PRODUCTS FOR ACCUMED HEREUNDER,
AND ACCUMED AGREES TO INDEMNIFY DIFCO AND HOLD IT HARMLESS WITH RESPECT TO THE
SAME.
8.2 DIFCO WARRANTS EXCLUSIVELY TO ACCUMED THAT
ALL BOTTLE DISPOSABLE PRODUCTS, DCM AND BASE MEDIA COMPONENTS MANUFACTURED BY
IT HEREUNDER WILL BE FREE OF ALL DEFECTS IN WORKMANSHIP AND WILL MEET THEIR
APPLICABLE FUNCTIONAL SPECIFICATIONS.
8.3
(i) DIFCO MAKES ONLY THOSE WARRANTIES WHICH ARE
EXPRESSLY SET FORTH IN SECTION 8.2. DIFCO MAKES NO OTHER WARRANTIES EXPRESS OR
IMPLIED AS TO ANY PRODUCTS, LABOR OR MATERIALS AND IN PARTICULAR NO WARRANTIES
ARE MADE AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE ALL OF
WHICH ARE EXPRESSLY DISCLAIMED.
(ii) Difco's liability under this Agreement is
specifically limited to the stated selling price of the Products. Difco may,
at its option, replace or allow credit for any Products found defective but
expressly disclaims and is absolved from liability for direct, incidental or
consequential damages, loss or expenses resulting from use or nonuse of such
Products. AccuMed's remedies provided in this Section 8 are exclusive of all
others.
(iii) By the provisions of the warranty set forth in
Section 8.2, Difco's sole and exclusive obligation to repair or replace
Products found to be defective in workmanship pursuant
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<PAGE> 16
to the terms of such warranty runs to AccuMed only. THIS IS NOT A CONSUMER
WARRANTY. In no event or circumstance shall anyone other than AccuMed be
considered to have any right, title or interest to assert any rights under this
warranty. Difco shall not assume any warranty obligations or liabilities other
than as expressly set forth herein, nor does AccuMed or any other Person have
any authority to grant any warranty or to assume any obligations or liabilities
whatsoever on behalf of Difco.
8.4 AccuMed shall indemnify, defend and hold
harmless Difco and the Difco Related Parties from, against and in respect of
any Losses arising out of, relating to, or in any way connected with any of the
following (including if arising out of the negligence of Difco) except to the
extent that the following arise out of the gross negligence or willful
misconduct of Difco:
(i) Any injury, death or damage to person or
property (real or personal) caused or contributed to by any Products supplied
by Difco to AccuMed under this Agreement.
(ii) Any product liability claim under any theory
whatsoever, including, but not limited to, breach of warranty, defect in
design, failure to warn, negligence, strict liability, violation of law or
otherwise relating to any Products supplied by Difco to AccuMed under this
Agreement.
(iii) The packaging, shipment, labelling, or other
characteristic of any Products supplied by Difco to AccuMed under this
Agreement not being in full compliance with all applicable laws.
Section 9. PROPRIETARY RIGHTS
9.1 Title to and Ownership of the Technical
Information and Confidential Information reside in AccuMed, and no portion of
such title or ownership is transferred to Difco by reason hereof.
9.2 Except as provided herein, Difco disclaims
any right or interest in the Technical Information and Confidential Information
and agrees that the Confidential Information and Technical Information are and
shall remain the sole and exclusive property of AccuMed.
Section 10. CONFIDENTIALITY
10.1 The obligations imposed by this Section 10 to
maintain and not disclose Technical Information and Confidential Information
shall continue during the term of this Agreement and shall survive termination
of this Agreement, except to the extent
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that such information can be shown to have been (i) in the public domain
through no fault of Difco or any such Affiliate or other Person, (ii) later
lawfully acquired by Difco or any such Affiliate, as the case may be, from a
third-party, or (iii) known to, or practiced by, such third-party if such
information was received by such third-party without an obligation of
confidentiality to a Party as to such information, or independently developed
by such third-party as of the date such third-party acquires, or is acquired
by, Difco or any of its Affiliates; provided that Difco and any such affiliate
may disclose such information to their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement so long as such Persons
are informed by Difco or such affiliate, as the case may be, of the
confidential nature of such information and are directed by Difco or such
affiliate, as the case may be, to treat such information confidentially. The
obligation of Difco and its Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their
own similar information.
10.2 Subject to Section 10.1, at all times during
the term of this Agreement Difco shall refrain from disclosing any Technical
Information or Confidential Information to any third Person without prior
written consent from AccuMed and shall take all necessary and proper action to
preserve the secrecy and prevent disclosure of such Technical Information and
Confidential Information. The obligation of Difco and its Affiliates to hold
any such information in confidence shall be satisfied if they exercise the same
care with respect to such information as they would take to preserve the
confidentiality of their own similar information.
10.3 Difco shall only disclose Technical
Information and Confidential Information and make it available to its employees
and only then on a need-to-know basis and to the extent necessary to perform
its obligations hereunder. In furtherance of the foregoing Difco shall use the
same security procedures to prevent unauthorized access to Technical and
Confidential Information as it uses for its own confidential information.
Difco shall use commercially reasonable efforts to maintain a permanent list
identifying all persons having access to the Technical or Confidential
Information, which shall be available for inspection by AccuMed upon reasonable
notice. All such Difco personnel having access to Technical Information and
Confidential Information shall be advised of the terms of this Agreement and
the requirements of confidentiality, and Difco shall use reasonable efforts
(but which shall not include the payment of additional compensation or
benefits) to obtain from
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such employees an agreement to be bound by these requirements both individually
and as an employee of Difco.
10.4 To the extent reasonably practicable, Difco
shall appropriately identify and mark all reproductions, copies, extracts or
the like of any documents containing Technical or Confidential Information as
the "Property of AccuMed" and as "Confidential" before distributing the same to
its employees. Upon termination of this Agreement Difco shall return all such
reproductions, copies, extracts or the like to AccuMed or an officer of Difco
shall certify in writing as to their destruction. Difco shall not be permitted
to retain any copy of such Information, except only (1) to the extent that it
believes in god faith that it is legally required to retain copies or (2) if
such documentation relates (or is useful to Difco) in connection with
exercising its rights under the License and Non-competition Agreement. AccuMed
hereby covenants to retain copies of such documentation for a reasonable time
and to make such documentation available to Difco, at Difco's expense, should
Difco reasonably require such documentation in connection with a threatened or
pending Claim or investigation or other action of a Governmental Authority or
otherwise and to give Difco at least 30 days' notice of AccuMed's intention to
no longer retain copies thereof, in which case AccuMed shall deliver the same
to Difco, at Difco's expense, if Difco shall so request within such 30-day
period.
10.5 During the term of this Agreement Difco
shall not use any of the Technical Information or Confidential Information
except in connection with the manufacture of Bottle Disposable Products. After
the term of this Agreement, Difco shall cease using all Technical Information
and Confidential Information.
10.6 Difco shall be relieved from its obligations
pursuant to this Section 10, to the extent that it is compelled to disclose by
judicial or administrative process or by other requirements of law, provided
that Difco shall provide AccuMed notice thereof as promptly as practicable in
order to allow AccuMed to seek a protective order, and to the extent that such
information can be shown to have been (i) in the public domain through no fault
of Difco or any Affiliate thereof, (ii) later lawfully acquired by Difco or any
such Affiliate, as the case may be, from a third-party, or (iii) known to, or
practiced by, any third-party where such information was received by such
third-party without an obligation of confidentiality to a Party as to such
information or independently developed by any third-party as of the date such
third-party acquires, or is acquired by, Seller or any of its Affiliates.
Difco shall also be relieved of its obligation pursuant to this Section 10 to
the extent that it may
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disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such Persons are informed by Difco or
such Affiliate, as the case may be, of the confidential nature of such
information and are directed by Difco or such Affiliate, as the case may be, to
treat such information confidentially. The obligation of Difco and its
Affiliates to hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information.
Section 11. AccuMed Option to Purchase Shared
Manufacturing Equipment.
(i) Upon the effective date of the termination of
Difco's obligation to manufacture Bottle Disposable Products for AccuMed
pursuant hereto, AccuMed shall be entitled to purchase from Difco any or all of
the equipment listed on Schedule 11 (to the extent then owned by Difco) at a
purchase price equal to 50% of the fair market value thereof as determined by
an appraiser selected mutually by AccuMed and Difco, provided that AccuMed
shall have given to Difco (either concurrent with AccuMed's notice of
termination or as promptly as practicable following the date on which such
termination notice is deemed given to AccuMed by Difco (but in no event later
than 30 days thereafter), as the case may be) notice of intent to so purchase
such equipment. Such notice of intent shall not be revocable by AccuMed
without Difco's consent, such consent not to be unreasonably withheld. The
closing of the purchase of such equipment shall occur not later than the later
of (x) the date agreed upon in writing by AccuMed and Difco, (y) 180 days
following the date on which notice of termination of Difco's obligation to
manufacture Bottle Disposable Products hereunder is deemed given, and (z) five
business days following the date on which final determination of the purchase
price of such equipment is deemed given to AccuMed and Difco pursuant to
Section 11(ii).
(ii) As promptly as practicable, but no later than 30 days,
following the date on which such notice of intent is deemed given by AccuMed,
AccuMed shall propose an appraiser for Difco's approval. If Difco and AccuMed
are unable to agree upon an appraiser within 15 business days following the
date upon which such notice is deemed given by AccuMed to Difco, then each of
the parties shall be entitled to select its own appraiser and the fair market
value of such equipment shall be deemed to be the average of the value
established by such appraisers.
(iii) Any such equipment transferred by Difco to AccuMed
pursuant to this Section 11 shall be transferred on an
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"AS IS" and "WHERE IS" basis without any representation or warranty (except as
to good and marketable title to transfer such equipment).
(iv) Notwithstanding Section 11(i), Difco shall be entitled
to transfer, sell or otherwise dispose of some or all of such equipment prior
to receipt of a notice described in Section 11(i) from AccuMed, only if (1)
Difco shall have given AccuMed 30 days' prior notice of such intention and (2)
AccuMed shall not have given Difco notice of AccuMed's intention to purchase
such equipment pursuant to the other terms of this Section 11.
Section 12. TERM AND TERMINATION
12.1 The term of SPD's obligation to manufacture
and sell to AccuMed Bottle Disposable Products shall be the two-year period
beginning of the date hereof unless terminated sooner pursuant to the
provisions hereof.
12.2 The term of Difco Michigan's obligation to
manufacture and sell to AccuMed DCM shall be the five-year period beginning of
the date hereof, unless terminated sooner pursuant to the provisions hereof
(including Difco Michigan's right to terminate in its discretion following the
18-month anniversary of the date hereof pursuant to Section 12.7).
12.3 The term of Difco Michigan's obligation to
manufacture and sell to AccuMed Base Media Components shall be the ten-year
period beginning of the date hereof, unless terminated sooner pursuant to the
provisions hereof (including Difco Michigan's right to terminate in its
discretion following the 18-month anniversary of the date hereof pursuant to
Section 12.7).
12.4 AccuMed may, at its option, terminate this
entire Agreement, subject to Section 12.4(i)(3), in the event that:
(i) (1) If Difco shall breach or
otherwise fail to perform or observe any of its material obligations or
covenants to AccuMed hereunder, and any such breach is not cured (if capable of
cure) within 30 days from the date on which notice of breach is deemed given to
Difco by AccuMed, AccuMed shall be entitled to terminate this Agreement
effective as of such 30th day, except that if Difco (a) has promptly and
continually proceeded, and will continue to proceed in good faith to pursue
commercially reasonably actions to cure such breach, and (b) that, upon
reasonable request of AccuMed from time to time, Difco shall have given AccuMed
notice of Difco's progress toward obtaining such cure, then the period for cure
thereof shall be
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extended by additional 30-day period(s) not to exceed the following respective
aggregate maximum periods following the date on which notice of breach is
deemed given by AccuMed: (x) 90 days for breaches related to a failure to
supply a Product meeting the applicable Functional Specifications, and (y) 180
days as to other breaches. If such breach shall not have been cured by the
last day of such applicable period, the Agreement shall be terminated effective
upon such date.
(2) If such breach is incapable of
cure, termination pursuant to this Section 12.4(i) shall be effective
immediately upon the date on which notice of breach is deemed given.
(3) Termination pursuant to this
Section 12.4(i) shall be with respect to this Agreement in its entirety, except
if (x) such breach is related to a failure to supply a Product meeting the
applicable Functional Specifications, and (y) the applicable cure period
pursuant to Section 12.4(i)(x) shall have expired, this Agreement shall be
terminated only with respect to the Product which is the subject of such breach
and the provisions of this Agreement with respect to the remaining Products or
otherwise relating other than to such Product shall remain in full force and
effect.
(ii) At any time following the 18-month
anniversary of the date hereof, if AccuMed, in its sole discretion, determines
that it is in its best interest to terminate this Agreement, AccuMed may
terminate this Agreement on 180 days' prior written notice of termination to
Difco; such termination may be with respect to the entire Agreement or AccuMed
may elect to terminate as to one or more of the Products as specified in
AccuMed's termination notice to Difco, in which case, the provisions of this
Agreement with respect to the remaining Products (or otherwise relating other
than to the terminated Product) shall remain in full force and effect. If this
Agreement is terminated pursuant to this Section 12.4(ii), AccuMed shall
reimburse all reasonable, documented expenses incurred by Difco as a direct
result of such termination and shall take and pay for at Difco's cost all
finished goods, inventory, work-in-process, raw materials, and supplies.
(iii) As to Bottle Disposable Products, a
writ of attachment or execution is levied on the Manufacturing Equipment (while
in possession of Difco) and is not discharged within 120 days after that levy.
(iv) As to Bottle Disposable Products, Difco
attempts to sublet or lend all or any part of the Manufacturing Equipment
without AccuMed's prior written consent.
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12.5 In the event of the termination or expiration
of this Agreement as to Bottle Disposable Products, Difco shall immediately
cease and desist from in any way manufacturing, assembling, using, or selling
any of the Bottle Disposable Products or utilizing any Technical Information
and Confidential Information provided by AccuMed, and provide to AccuMed all of
the Bottle Disposable Products against payment therefor, and shall take and pay
for at Difco's cost all finished goods, inventory, work-in-process, raw
materials, and supplies, in each case that are in Difco's inventory.
12.6 Difco may, at its option, terminate its
obligation to manufacture and sell to AccuMed Products pursuant to this
Agreement upon the occurrence of any of the following.
(i) (1) If AccuMed shall breach or
otherwise fail to perform or observe any of its material obligations or
covenants to Difco hereunder, and any such breach is not cured (if capable of
cure) within 30 days from the date on which notice of breach is deemed given to
AccuMed by Difco, Difco shall be entitled to terminate this Agreement effective
as of such 30th day, except that if AccuMed (a) has promptly and continually
proceeded, and will continue to proceed in good faith to pursue commercially
reasonably actions to cure such breach, and (b) that, upon reasonable request
of Difco from time to time, AccuMed shall have given Difco notice of AccuMed's
progress toward obtaining such cure, then the period for cure thereof shall be
extended by additional 30-day period(s) not to exceed a maximum aggregate
period of 180 days following the date on which notice of such breach is deemed
given by Difco. If such breach shall not have been cured by the last day of
such applicable period, the Agreement shall be terminated effective upon such
date.
(2) If such breach is incapable of
cure, termination pursuant to this Section 12.6(i) shall be effective
immediately upon the date on which notice of breach is deemed given.
12.7 At any time following the 18-month
anniversary of the date hereof, if Difco, in its sole discretion, determines to
terminate this Agreement (including in the event it desires a price increase),
Difco may terminate this Agreement on 180 days' prior written notice of
termination to AccuMed, such termination may be with respect to the entire
Agreement or Difco may elect to terminate as to one or more of the Products as
specified in Difco's termination notice to AccuMed, in which case, the
provisions of this Agreement with respect to the remaining Products (or
otherwise relating other than to the terminated Product) shall remain in full
force and effect.
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12.8 This Agreement may be terminated immediately
by either party upon written notice to the other in upon any of the following
events:
(i) The other is adjudicated bankrupt or
insolvent by any court of competent jurisdiction.
(ii) A trustee or receiver is appointed for the
property of such other or any substantial proportion thereof in any proceeding
in a court of competent jurisdiction.
(iii) In the case of any proceeding in bankruptcy
or insolvency where the applicable bankruptcy or insolvency statutes and codes
permit the trustee, receiver (or similar person) or the bankrupt party to
reaffirm contracts, if the receiver (or similar party) or the bankrupt party
fails, within the time permitted by law, to affirm this Agreement, cure all
outstanding defaults and provide the other party hereto such adequate
assurances as may be necessary to ensure the bankrupt 's continued performance
under this Agreement.
(iv) Any assignment of this Agreement is made or
attempted in contravention of the provisions of Section 17, hereof.
12.9. Notwithstanding any termination of this
Agreement, in part or in its entirety, pursuant to this Section 12, each
obligation which by its nature is to be performed following such termination
shall survive such termination.
Section 13. GOVERNMENT REGULATIONS
13.1 At any time during the term of this
Agreement, AccuMed shall disclose information to be disclosed to Difco and
deliver products to be delivered to Difco hereunder only in compliance with any
Export Administration Regulations of the United States Department of Commerce
in effect from time to time. Difco agrees to abide by any limitation of
disclosure placed on information revealed to it hereunder, and by any
limitation of product deliveries which may be placed thereon as a result of
such regulations. AccuMed shall be solely responsible for complying with all
laws and regulations applicable to the export of the Bottle Disposable
Products. Difco shall provide AccuMed with all documentation and data within
its possession necessary or desirable for compliance with all of those
regulations. AccuMed agrees to indemnify and hold Difco harmless from any
liability arising from the failure of AccuMed to comply with such regulations,
or the provisions of this Section 13.1.
13.2 AccuMed shall be solely responsible for
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complying with all laws and regulations applicable to the exercise of its
rights and the performance of its obligations under this Agreement and agrees
to indemnify and hold Difco harmless from any liability arising from the
failure of AccuMed to comply with such regulations, or the provisions of this
Section 13.2.
Section 14. FORCE MAJEURE
14.1 If either party to this Agreement is totally
or partially prevented or delayed in the performance of any of its obligations
under this Agreement by force majeure and if such party gives written notice
thereof to the other party specifying the matters constituting force majeure
together with such evidence as it reasonably can give and specifying the period
for which it is estimated that such prevention or delay shall be excused from
the performance as from the date of such notice for so long as such cause or
delay shall continue.
14.2 For the purpose of this Agreement, the term
"force majeure" shall be deemed to include any cause affecting the performance
of this Agreement arising from or attributable to acts, events, omissions or
accidents beyond the reasonable control of the party to perform and in
particular but without limiting the generality thereof shall include strikes,
lock-outs or other industrial action, civil commotion, riot, invasion, war,
threat of or preparation for war, fire, explosion, storm, flood, earthquake,
subsidence, epidemic or other natural physical disaster, impossibility of the
use of railways, shipping, aircraft, motor transport, or other means of public
or private transport, accidents, delays in providing materials (in each case
other than as a result of a breach or defaults by a Party or an Affiliate
thereof), shortages in fuel or other materials, breakdowns of equipment, acts,
demands or requirements of any federal, state or local governmental authority.
14.3 As soon as practicable after such
notification the parties shall consult together to decide how if at all the
effects of the force majeure can be mitigated.
Section 15. DISPUTE RESOLUTION
15.1 Governing Choice of Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Michigan (without regard to the conflicts of law provisions thereof).
15.2 Injunctive Relief. Each of the parties
hereto acknowledges that in the event of a breach by any of them of any
material provision of this Agreement, the aggrieved party
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may be without an adequate remedy at law. Each of the parties therefore agrees
that in the event of such a breach hereof the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach hereof. By
seeking or obtaining any such relief, the aggrieved party will not be precluded
from seeking or obtaining any other relief to which it may be entitled.
Notwithstanding Section 15.3, if either party seeks specific performance or any
other extraordinary or provisional relief including, but not limited to,
injunctive relief under this Agreement, then any such action shall not be
subject to arbitration, and each party agrees to submit to the jurisdiction of
the federal and/or state courts in the State of Michigan and waives any and all
objections to jurisdiction and venue that it may have under the laws or courts
of any state, the United States or court.
15.3 Arbitration. Except as otherwise provided in
this Section 15.3, Difco and AccuMed agree that any claim, controversy or
dispute arising out of or relating to this Agreement, the interpretation of any
of the provisions hereof, or the action or inaction of any party to this
Agreement shall be submitted to neutral, binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (or
any successor thereto) and the Federal Arbitration Act, 9 U.S.C.A. sections
1-14 shall apply. Any award or decision obtained from any such arbitration
proceeding shall be final and binding on the parties, and judgment upon any
award thus obtained may be entered in any court having jurisdiction thereof.
The arbitration shall be conducted in Livonia, Michigan (or such other location
in the State of Michigan as the Parties may agree).
Section 16. Notices. All notices given pursuant to this
Agreement shall be in writing and shall be made by hand- delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
overnight air courier guaranteeing next business day delivery to the relevant
address specified below. Except as otherwise provided in this Agreement, each
such notice shall be deemed given: at the time delivered by hand, if personally
delivered or mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and the next business day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next business day
delivery.
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If to AccuMed, to:
AccuMed International, Inc.
900 North Franklin Street, Suite 401
Chicago, IL 60610
Attention: Mr. Peter P. Gombrich
Chief Executive Officer
Telecopy No.: (311) 642-3101
Confirmation No.: (312) 642-9200
with a copy to:
AccuMed International, Inc.
1500 7th Avenue
Sacramento, CA 95818
Attention: Ms. Joyce Wallach
General Counsel
Telecopy No.: (916) 443-6850
Confirmation No.: (916) 443-6800
If to Difco, to:
Difco Laboratories Incorporated
17197 N. Laurel Park, Suite 400
Livonia, Michigan 48152
Attention: Executive Vice President Finance and
Operations
Telecopy No.: (313) 462-8528
Confirmation No.: (313) 462-8500
with a copy to:
Miller Canfield
1400 North Woodward Ave., Suite 100
Bloomfield, MI 48304
Attention: Mr. Thomas Appleman
Telecopy No.: (810) 258-3036
Confirmation No.: (810) 258-3009
or to such other address as such party may indicate by a notice delivered to
the other party hereto.
Section 17 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their successors and permitted assigns. Each party may assign this
Agreement to any of its respective Affiliates or to any Person acquiring all or
substantially all of
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its respective assets provided that any such assignee shall first deliver to
the other party an agreement pursuant to which the assignee assumes all of the
assignor's obligations under this Agreement and agrees to be bound by all terms
and conditions of this Agreement and the assignor shall notwithstanding any
such assignment remain liable for all of its obligations hereunder. Nothing in
this Agreement, expressed or implied, is intended or shall be construed to
confer upon any Person other than the parties and successors and assigns
permitted by this Section 17 any right, remedy or claim under or by reason of
this Agreement, except that Section 3.4 and Section 8.4 shall be for the
benefit of and shall be enforceable by the Difco Related Parties.
Section 18 Entire Agreement. This Agreement and
the Schedules hereto together with the Asset Purchase Agreement, and the
Ancillary Agreements (as defined in the Asset Purchase Agreement) contain the
entire understanding of the parties with regard to the subject matter contained
herein and therein, and supersede all prior agreements and understandings
between the parties including expressly the Offer Term Sheet dated as of
November 25, 1996 and except for the Confidentiality Agreement (as defined in
the Asset Purchase Agreement). Notwithstanding anything to the contrary
contained herein, any action taken by Difco or any of its Affiliates under any
of the Ancillary Agreements (other than this Agreement) shall not constitute a
breach or default under this Agreement.
Section 19 Severability. Wherever possible,
each provision hereof shall be interpreted in such manner as to be effective
and valid under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable, in which case the parties will
negotiate in good faith to enter into appropriate amendments hereto.
Section 20 Amendments. This Agreement shall
not be amended, modified or supplemented except by a written instrument signed
by an authorized representative of each of the parties.
Section 21 Interpretation. Section headings
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement. The
Schedules hereto shall be construed with and as an integral part of this
Agreement to the
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same extent as if they were set forth verbatim herein.
Section 22 Waivers. Any term or provision of
this Agreement may be waived, or the time for its performance may be extended,
by the party or parties entitled to the benefit thereof. Any such waiver shall
be validly and sufficiently authorized for the purposes of this Agreement if,
as to any party, it is authorized in writing by an authorized representative of
such party. The failure of any party to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the
right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
Section 23 Relationship of Parties. The
relationship of AccuMed and Difco shall be solely that of licensor and licensee
or vendor and vendee, as the case may be. Nothing contained herein shall be
construed to imply a joint venture or other principal and agent relationship
between the parties, and neither party shall have any right, power or authority
to create any obligation, express or implied on behalf of the other.
Section 24 Execution in Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
considered an original instrument, and all of which taken together shall
constitute one and the same agreement, and shall become binding when one or
more counterparts have been signed by each of the parties hereto and delivered
to each of the parties.
Section 25 Purchase Orders and Invoices.
The use by Difco or AccuMed of any form of invoice, purchase order or similar
document shall be for convenience only in connection with the transactions
contemplated hereby. Any provisions thereof (whether the same are additional,
conflicting or different) other than quantity and price terms shall not be
deemed to be a part of this Agreement or effective as between the parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ Michael D. Burke
-----------------------------------
Michael D. Burke
President, Microbiology Division
DIFCO LABORATORIES, INCORPORATED,
a Michigan corporation
By: /s/ William B. Burnett
-----------------------------------
William B. Burnett, President
DIFCO LABORATORIES, INC.,
a Wisconsin corporation
By: /s/ William B. Burnett
-----------------------------------
William B. Burnett, President
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AMENDMENT NO 1.
TO
MANUFACTURING AGREEMENT
This Amendment No. 1 (this "Amendment") to the Manufacturing
Agreement dated March 3, 1997 (the "Manufacturing Agreement") is made as of
March 10, 1997 by and among AccuMed International, Inc., a Delaware corporation
("AccuMed"), Difco Laboratories Incorporated, a Wisconsin corporation ("SPD"),
and Difco Laboratories Incorporated, a Michigan corporation ("Difco Michigan")
(SPD and Difco Michigan are sometimes referred to herein individually and
collectively as "Difco," as the context indicates).
WHEREAS, AccuMed and Difco desire to amend the Manufacturing
Agreement pursuant and subject to the terms and conditions of this Amendment.
In consideration of these premises and of the mutual promises
contained in this Amendment and in the Manufacturing Agreement, and intending
to be legally bound, the parties hereby agree as follows:
1. Successors and Assigns.
Section 17 of the Manufacturing Agreement is hereby deleted in
its entirety and the following is hereby inserted in lieu thereof:
Section 17 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their successors and permitted assigns. Each party may
assign this Agreement to any of its respective Affiliates or
to any Person acquiring all or substantially all of its
respective assets provided that any such assignee shall first
deliver to the other party an agreement pursuant to which the
assignee assumed all of the assignor's obligations under this
Agreement and agrees to be bound by all terms and conditions
of this Agreement and the assignor shall notwithstanding any
such assignment remain liable for all of its obligations
hereunder; provided however, notwithstanding anything to the
contrary in the Asset Purchase Agreement, that each of SPD and
Difco Michigan agree that as a condition precedent to the
consummation of a sale of (x) substantially all its respective
assets or (y) such assets as are necessary for it to
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perform its respective obligations hereunder, that such other
party shall be required to execute and deliver to AccuMed an
assumption instrument pursuant to which such other party shall
agree to be legally bound by the terms hereof in the place of
Difco SPD or Difco Michigan, as the case may be. Nothing in
this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and
successors and assignees permitted by this Section 17 any
right, remedy or claim under or by reason of this Agreement,
except that Section 3.4 and Section 8.4 shall be for the
benefit of and shall be enforceable by the Difco Related
Parties.
2. Effect of Amendment. Except as otherwise modified hereby, the
terms of the Manufacturing Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first written above.
ACCUMED INTERNATIONAL, INC.
By:/s/ Michael D. Burke
------------------------------------
Michael D. Burke
President, Microbiology Division
DIFCO LABORATORIES INCORPORATED,
a Michigan corporation
By:/s/ William B. Burnett
------------------------------------
William B. Burnett, President
DIFCO LABORATORIES INCORPORATED,
a Wisconsin corporation
By:/s/ William B. Burnett
------------------------------------
William B. Burnett, President
2
<PAGE> 1
EXHIBIT 10.46
TRANSITION SERVICES AND FACILITIES AGREEMENT
TRANSITION SERVICES AND FACILITIES AGREEMENT (this "Agreement") dated
as of March 3, 1997 by and between AccuMed International, Inc., a Delaware
corporation ("AccuMed"), and Difco Laboratories Incorporated, a Michigan
corporation ("Difco").
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the transactions contemplated by the Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of the date hereof
between AccuMed and Difco Microbiology Systems, Inc., a Michigan corporation
(the "Seller"), (capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Asset Purchase Agreement);
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties hereto agree as follows:
Section 1. Usage.
1.1 References to Persons who are not parties hereto are
also references to its permitted assigns and permitted successors in interest
(by means of merger, consolidation or sale of all or substantially all the
assets of such Person or otherwise, as the case may be), and references to
Persons who are parties hereto are also references to its permitted assigns and
permitted successors in interest as provided in Section 11.
1.2 References to a document are to it as amended, waived
and otherwise modified as of the time in question and references to a statute
or other governmental rule are to it as amended and otherwise modified as of
the time in question (and references to any provision thereof shall include
references to any successor provision in effect as of the time in question).
1.3 References to Sections or to Schedules or Exhibits
are to sections hereof or schedules or exhibits hereto, unless the context
otherwise requires.
1.4 The definitions set forth herein are equally
applicable both to the singular and plural forms and the feminine, masculine
and neuter forms of the terms defined.
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1.5 The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.
1.6 The term "hereof" and similar terms refer to this
Agreement as a whole.
1.7 References to the "parties" are to Difco and AccuMed,
unless the context otherwise requires.
1.8 The date on which any notice or other writing is
deemed given shall be determined pursuant to Section 7.
Section 2. Use of Difco Transition Services.
2.1 Transitional Services. Difco or, at Difco's
election, an Affiliate of Difco, shall use commercially reasonable efforts to
provide to AccuMed the transition services described on Schedule 2.1 during the
respective periods set forth thereon as AccuMed may reasonably request in
connection with the ESP Business. Notwithstanding anything to the contrary set
forth in this Agreement, Difco's obligations to provide such transition
services shall in all cases be subject to the availability of qualified
employees to perform such services and Difco shall have no obligation to hire
or replace employees to provide such services unless Difco shall have
terminated the employment of employees who otherwise would have provided such
services.
2.2 Payment for Services. AccuMed shall pay Difco
compensation for the services described in Section 2.1 in accordance with the
methods of calculation set forth on Schedule 2.1. Payment shall be due within
30 days following the date on which the applicable invoice is deemed given. If
payment in full is not received when due, AccuMed agrees to pay a 1% per month
service charge with respect to such unpaid amounts net of any amounts of
account receivable then in possession of Difco for the account of AccuMed. All
payments under this Section 2, Section 3 or otherwise under this Agreement
shall be made by AccuMed in full without set off, counterclaim, defense or
other reduction whatsoever.
Section 3. Lease of R&D Facilities; Use of Common Areas.
3.1 Lease of R&D Facilities.
(i) The "AccuMed Space" means, collectively, each
of the areas described on Schedule 3.1 as the AccuMed Space, which is located at
the facilities located on the first floor of the building at 1180 Ellsworth
Road, Ann Arbor, Michigan 48108 (the "R&D Facility"). The "Common Areas"
means, collectively, each of
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the areas described on Schedule 3.1 as Common Space, which is located at the R&D
Facility.
(ii) Difco hereby leases to AccuMed and AccuMed
hires from Difco on the terms and conditions set forth herein (the "Lease"),
the following rights, (1) exclusive (subject to the further terms and
conditions hereof) use and enjoyment of the AccuMed Space, and (2)
non-exclusive use and enjoyment of the Common Areas. The initial term of the
Lease shall commence on the date hereof and shall continue until the six month
anniversary of the date hereof or earlier termination in accordance with
Section 5 of this Agreement and shall continue thereafter until either party
shall give notice of termination on not less than 90 days, prior written notice
(which could include a termination effective as of the six month anniversary of
the date hereof (the "Lease Term").
(iii) In consideration of the Lease, AccuMed shall
pay to Difco $10,084 (the "Lease Payments") on the first day of each month
during the term of this Agreement, which amount shall be deemed to include all
payments for electricity and other utilities used by AccuMed but shall not
include telecommunications services (including telephone and facsimile).
AccuMed shall arrange and pay for telecommunications services as it deems
necessary or appropriate. A pro rated Lease Payment shall be made on the date
hereof with respect to the month in which this Agreement is executed and
delivered.
3.2 Title to R&D Facility; Right to Lease; Quiet
Enjoyment. Difco represents to AccuMed that Difco is the fee owner of the R&D
Facility and has full power and lawful authority to grant the Lease and the
rights hereunder. Difco further covenants and warrants that during the Lease
Term and as long as AccuMed is not in default beyond any applicable notice or
cure period under the terms of this Lease, AccuMed shall have quiet and
peaceful possession of the AccuMed Space and quiet and peaceful shared
possession of the Common Areas and shall enjoy all of the rights herein granted
without interference by Difco or any of its Affiliates. Difco further
represents that there are no tenants in the R&D Facility on the date hereof
other than AccuMed.
3.3 The Common Areas shall at all times be subject to
the exclusive control and management of Difco and shall further be subject to
such rules and regulations reasonably adopted by Difco from time to time;
provided that AccuMed shall receive written notice thereof. Difco reserves the
right to make changes, additions, alterations, and improvements in and to the
Common Areas, provided that there shall be no unreasonable obstruction of
AccuMed's right of access to the AccuMed Space and no material impairment of
AccuMed's use of the Common Areas.
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3.4 The AccuMed Space during the continuance of the Lease
will be used and occupied solely for the conduct of the ESP Business (as
modified, expanded or otherwise adapted and developed by AccuMed from time to
time). AccuMed agrees that (i) its use of the AccuMed Space (including the
conduct of the ESP Business therein) will comply in all material respects with
the laws or ordinances of the United States, the State of Michigan or the
municipality in which the AccuMed Space is located, and (ii) AccuMed will not
permit any Person to use the AccuMed Space or any part thereof for any use or
purpose in violation of such laws and ordinances. AccuMed shall not use the
AccuMed Space in any manner which would cause an increase in fire and extended
coverage insurance premiums for the R&D Facility. Difco makes no
representations or warranties as to any governmental zoning, licenses or
permits which may be required for the conduct of AccuMed's business permitted
in the AccuMed Space.
3.5 AccuMed shall not cause any Hazardous Substance (as
defined below) to be used, stored, generated or disposed of on or in the R&D
Facility by AccuMed's or AccuMed's agents, employees, contractors or invitees,
without first obtaining Difco's written consent, such consent not to be
unreasonably withheld. If AccuMed uses, stores, generates or disposes of any
Hazardous Substances in the R&D Facility except as permitted above, or if the
R&D Facility becomes contaminated (excepting preexisting Hazardous Substances
or contamination, if any) in manner by AccuMed, AccuMed's agents, employees,
contractors or invitees, AccuMed shall indemnify and hold harmless Difco from
any and all claims, damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, a decrease in value of the R&D Facility,
damages due to loss or restriction of usable space, or any damages due to
adverse impact on marketing of the space, and any and all sums paid for
settlement of claims, and reasonable, documented attorneys' fees, consultant
and expert fees) arising during or after the Lease Term and arising as a result
of such contamination. This indemnification includes, without limitation, any
and all costs incurred due to any investigation of the site or any cleanup,
removal or restoration mandated by a federal, state or local governmental
agency or political subdivision. Without limitation of the foregoing, if
AccuMed causes the presence of any Hazardous Substance on the R&D Facility and
such results in contamination, AccuMed shall promptly, at its sole expense,
take any and all reasonable actions to return the R&D Facility to the condition
existing prior to the presence of any such Hazardous Substance on the R&D
Facility. AccuMed shall first obtain Difco's approval for any such remedial
action, which approval shall not be unreasonably withheld. "Hazardous
Substance" means any substance which is toxic, ignitable, reactive, corrosive,
or infectious materials and which is regulated by any local government having
jurisdiction over the R&D Facility, the State of Michigan, or the United States
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government. "Hazardous Substance" includes any and all material or substances
which are defined as "hazardous waste", "extremely hazardous waste" or a
"hazardous substance" pursuant to state, federal or local governmental law,
including, but not limited to, the Michigan Medical Waste Regulatory Act, as
amended, the Federal Medical Waste Tracking Act of 1988, as amended, and the
Michigan Public Health Code, as amended. "Hazardous Substance" includes, but
is not restricted to, asbestos, polychlorobiphenyls ("PCB's") and petroleum.
Under no circumstances shall AccuMed be in any way liable for or responsible
for Hazardous Substances or contamination if such Hazardous Substances or
contamination were not brought, introduced, used or handled or otherwise placed
in the AccuMed Space, the Common Areas or the R&D Facility by AccuMed or its
agents, employees, contractors or invitees.
3.6 (i) AccuMed shall maintain and keep in full force
and effect during the term of the Lease, general liability insurance, including
blanket contractual coverage in the amount of $5,000,000 for personal injury or
death resulting from one occurrence in the AccuMed Space and exterior and other
Common Areas and the sum of $1,000,000 for property damage resulting from any
one occurrence in the AccuMed Space and exterior or other Common Areas.
AccuMed shall deliver to Difco a certificate evidencing such coverage and
naming Difco as an additional insured. Such insurance policy shall provide
that no cancellation shall be effective without at least 30 days' prior written
notice to Difco.
(ii) At all times during the Lease Term, AccuMed will carry
and maintain, at AccuMed's expense, fire and extended coverage insurance
covering all leasehold improvements in the AccuMed Space and all of Difco's
equipment, trade fixtures, appliances, furniture, furnishings and personal
property from time to time in, on or upon the AccuMed Space and insurance
covering all plate glass located from time to time in, on or upon the AccuMed
Space. This insurance will be in an amount not less than the full replacement
cost without deduction for depreciation. This insurance will provide
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended peril
(all-risk), boiler, flood and sprinkler leakage.
(iii) In the event of loss under any policy or policies
provided by AccuMed to Difco under this Section 3.6, other than the liability
policy, the insurance proceeds will be payable to Difco; thereafter, such
proceeds, with the exception of the loss of rents insurance proceeds, will, be
used for the expense of repairing or rebuilding the improvements which have
been damaged or destroyed if Difco is reasonably satisfied that the amount of
insurance proceeds are and will be at all times sufficient to pay for the
completion of the repairs or rebuilding, and, if not in such manner as Difco
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deems appropriate; provided that, if Difco elects not to repair or rebuild such
improvements, AccuMed shall have the right to terminate this Lease immediately
without further obligation to Difco.
(iv) AccuMed hereby waives any and all rights of recovery
against Difco for any loss or damage caused by fire or any of the risks covered
by standard fire and extended coverage, vandalism and malicious mischief
insurance policies.
(v) If AccuMed fails to provide all or any of the insurance
required to be provided by it pursuant to this Section 3.6, Difco may (but
shall not be required to) procure or renew such insurance, and any amounts paid
for such insurance shall be reimbursed by AccuMed within 15 business days
following the date on which demand therefor is deemed given to AccuMed by
Difco.
3.7 (i) AccuMed agrees at its own expense to keep the
AccuMed Space including all structural, electrical, mechanical and plumbing
systems that service the AccuMed Space only, at all times in good order and
repair (including any necessary replacements made necessary by the acts or
omissions of AccuMed) except for normal wear and tear, unless the need for
repairs is caused by the gross negligent acts or omissions of Difco. Difco
shall maintain and keep in good repair the roof and outer walls of the R&D
Facility as well as structural, electrical, mechanical and plumbing systems
that service the Common Areas or the entire R&D Facility, unless the need for
repairs is caused by the acts or omissions of AccuMed.
(ii) Notwithstanding any other provision of the Lease, from
and after the date AccuMed takes occupancy of the AccuMed Space, any repairs,
additions or alterations to the AccuMed Space or any of its systems that
service the AccuMed Space only (e.g., plumbing, electrical, mechanical)
structural or non-structural, which are required by any law, statute,
ordinance, rule, regulation or governmental authority or insurance carrier,
including, without limitation, OSHA, will be the obligation of AccuMed
(provided that any such repairs, additions or alterations must be approved by
Difco in advance and, if requested by Difco, shall be performed by such
contractors as Difco shall approve with all costs and expense paid by AccuMed).
Difco, at its cost and expense, shall be responsible for any non-conformance
existing prior to the date AccuMed takes occupancy of the AccuMed Space.
(iii) AccuMed acknowledges that it has examined the AccuMed
Space prior to the making of this Lease, that no representations or warranties
as to the condition or the state of repairs thereof have been made by Difco
which are not expressly set forth herein, and that AccuMed hereby accepts the
AccuMed Space in its present condition at the date of this Agreement.
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3.8 The parties agree that AccuMed will not make any
alterations, additions, or improvements to the AccuMed Space without the
written consent of Difco, which consent shall not be unreasonably withheld or
delayed. All alterations, additions or improvements made by either of the
parties hereto on the AccuMed Space will be the property of Difco and will
remain on and be surrendered with the AccuMed Space at the termination of the
Lease, except that alterations, additions or improvements made by AccuMed must
be removed and the AccuMed Space restored by AccuMed if so requested by Difco.
3.9 AccuMed will keep the AccuMed Space free of liens of
any sort and will hold Difco harmless from any liens which may be placed on the
AccuMed Space except those attributable to the acts of Difco.
3.10 AccuMed agrees to permit Difco and the authorized
representatives of Difco to enter the AccuMed Space at all reasonable times
upon reasonable prior notice for the purpose of inspecting the same, and
further agrees that Difco and its authorized representatives shall have the
right to enter the AccuMed Space at any time in the event of an emergency.
3.11 At the expiration (or earlier termination) of the
Lease Term, AccuMed will surrender the AccuMed Space broom clean and free of
all contaminants (viral, bacterial and others) and Hazardous Substance if the
same were brought, introduced, used, handled or otherwise placed in the AccuMed
Space, the Common areas or R&D Facility by AccuMed or its agents, employees,
contractors or invitees and in as good condition and repair as it was at the
time AccuMed took possession, reasonable wear and tear excepted, and promptly
upon surrender will deliver all keys and building security cards for the R&D
Facility to Difco at the place then fixed for payment of Lease Payments. All
costs and expenses incurred by Difco in connection with repairing or restoring
the AccuMed Space to the condition in which it was received from Difco together
with the costs, if any, of removing from the AccuMed Space any property of
AccuMed left therein, shall be invoiced to AccuMed and shall be payable as
additional rent within 15 business days after the related invoice is deemed
given.
3.12 AccuMed at its expense will pay, defend, fully
indemnify and save Difco and the Difco Related Parties, harmless from any Loss
(as hereinafter defined) to or for any Person or property, whether based on
contract, tort, negligence or otherwise, arising directly or indirectly out of
or in connection with the condition of the AccuMed Space, the use or misuse
thereof by AccuMed or any other Person, the acts or omissions of AccuMed, its
licensees, servants, agents, employees or contractors or invitees, the failure
of AccuMed to comply with any provision of this
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Agreement, or any event on the AccuMed Space, whatever the cause; provided,
however, that nothing herein shall be construed to require AccuMed to indemnify
against Difco's gross negligence or intentional misconduct.
Section 4. Confidentiality
4.1 Definitions.
(i) "AccuMed's Technical Information" means all
material know-how, Trade Secrets, patents, processes, drawings, data,
specifications, formulas, recipes, test methods, or documentation setting forth
the design, assembly, tests or operation relating to intellectual property
assets, all for which AccuMed holds an ownership interest, including the
Purchased Assets.
(ii) "Difco's Technical Information" means all
material know-how, Trade Secrets, patents, processes, drawings, data,
specifications, formulas, recipes, test methods, or documentation setting forth
the design, assembly, tests or operation relating to intellectual property
assets, all for which DIFCO holds an ownership interest.
(iii) "Know-How" shall mean Technical Information
held in confidence by the owner of such Technical Information.
(iv) "Trade Secrets" shall mean Technical
Information of value and secret, meaning the owner of such Technical
Information regards it as secret and has taken measures to prevent the
Technical Information from becoming available to Persons other than those
selected by the owner for a limited purpose, including marking tangible or
written forms thereof as of "Confidential-Trade Secret."
4.2 Obligations to Maintain Confidentiality. AccuMed and
Difco each agree that the Know-How and/or Trade Secrets owned by the other
party is confidential, and in that regard each agree to:
(i) exercise its best efforts not to acquire, come
into possession of, or assimilate the other's Know-How and/or Trade Secrets in
any manner not in accordance with the terms of this Agreement;
(ii) exercise the same degree of care it uses for its
own confidential information to avoid publishing or otherwise revealing the
other's Know-How and/or Trade Secrets to third
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parties without the prior express written permission of the party who owns the
Know-How and/or Trade Secrets to be revealed;
(iii) treat the other's Know-How and/or Trade Secrets
in accordance with the highest standards used by it for its own most sensitive
information, whether such Know-How is acquired inadvertently or pursuant to or
in violation of the terms of this Agreement;
(iv) disclose or make available the other's Know-How
and/or Trade Secrets only to employees on a so-called "need-to-know" basis,
and only to the extent required to permit each party the full benefits of the
terms and provisions hereof;
(v) to the extent reasonably practicable,
appropriately identify and mark all reproductions, copies, extracts or the like
of any documents containing the other's Know-How and/or Trade Secrets as the
"Property of" such other party and as "Confidential," or "Confidential Trade
Secret", as the case may be, before distributing the same to its officers,
employees, or, if expressly permitted hereunder, to others; and
(vi) notify the other party immediately upon receipt
of any demand or request by a court or other governmental body for access to or
disclosure of any Know-How and/or Trade Secrets owned by the other party, and
shall take all steps and actions reasonably necessary to prevent such
disclosure and shall cooperate with and support the actions of the other, at
the other's expense, to appear and object to such request or demand for access
or disclosure.
4.3 Relief of Obligations. Each party shall be relieved of
its obligations in Section 4.2, to the extent that such party is compelled to
disclose by judicial or administrative process or by other requirements of law,
(provided that it has given notice thereof to the other as soon as
practicable), and to the extent that such information can be shown to have been
(i) in the public domain through no fault of such party or any Affiliate
thereof, (ii) later lawfully acquired by Difco or any such Affiliate, as the
case may be, from a third-party, or (iii) or independently developed by such
third-party as of the date such third-party acquires, or is acquired by, Difco
or any of its Affiliates. Each party shall also be relieved of its obligation
pursuant to Section 4.2 to the extent that such party and any such Affiliate
may disclose such information to their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement
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so long as such Persons are informed by such Party or such Affiliate, as the
case may be, of the confidential nature of such information and are directed by
such party or such Affiliate, as the case may be, to treat such information
confidentially. The obligation of a party and its Affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care with
respect to such information as they would take to preserve the confidentiality
of their own similar information.
4.4 Injunctive Relief. Each of the parties acknowledges
that in the event of a breach by any of them of any provision of this Section
4, the aggrieved party may be without an adequate remedy at law. Each of the
parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court
of competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the
aggrieved party will not be precluded from seeking or obtaining any other
relief to which it may be entitled. Notwithstanding Section 8, if an aggrieved
party seeks specific performance or any other extraordinary or provisional
relief including, but not limited to, injunctive relief pursuant to this
Section 4.4, then any such action shall not be subject to arbitration. Each
of the parties agrees to submit to the non-exclusive jurisdiction of the
federal and/or state court located in the State of Michigan and waives any and
all objections to jurisdiction and venue that it may have under the laws or
court rules of any state, the United States or court.
4.5 Employee Confidentiality Agreements. Difco agrees,
except in an emergency, to use reasonable efforts (without, however, any
obligation to provide any special compensation or benefits) to obtain from each
officer and employee having access to the AccuMed Trade Secrets, Know How and
any other confidential and non-public information an agreement substantially in
the form of Exhibit A whereby such Person agrees to hold in confidence any such
information of AccuMed or any of its Affiliates of which such Person becomes
aware while in the R&D Facility or performing services hereunder or otherwise.
AccuMed agrees to use reasonable efforts (without, however, any obligation to
provide any special compensation or benefits) to obtain, except in the case of
an emergency, from each officer and employee), having access to the AccuMed
Space and/or Common Areas, an agreement substantially in the form of Exhibit A
whereby such Person agrees to hold in confidence any Know-How, Trade Secrets
and other confidential non-public information of Difco or any of its Affiliates
of which such
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Person becomes aware while in the R&D Facility or otherwise. Each of AccuMed
and Difco agrees to use reasonable efforts to maintain a permanent list
identifying all such Persons having access to the Know-How of the other party,
which list, together with the signed agreements, shall be available upon
reasonable notice.
4.6 Return of Know-How. Upon termination of this
Agreement, each party agrees to return all Know-How and/or Trade Secrets owned
by the other party, including any reproductions, copies and extracts or the
like, or an officer of the party in possession shall certify in writing as to
their destruction.
4.7 Continuing Obligations.
(i) Difco's obligations pursuant to Section 4.2 shall
continue for a period of two years beyond the term of this Agreement.
(ii) AccuMed's obligations pursuant to Section 4.2 shall
continue for a period of two years beyond the term of this Agreement.
Section 5. Term; Renewal; Termination.
5.1 Term. The term of this Agreement shall be 6 months
from the date hereof, unless earlier terminated in accordance with the terms
hereof.
5.2 Termination. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement may be terminated at any time:
(i) by the mutual written consent of AccuMed and
Difco;
(ii) by AccuMed in the event of any material
breach by Difco of any of Difco's agreements, representations, warranties or
covenants contained herein and the failure of Difco to cure such breach within
30 days after the date on which notice from AccuMed requesting such breach to
be cured is deemed delivered;
(iii) by Difco in the event of any material breach by
AccuMed of any of AccuMed's agreements, representations,
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warranties or covenants contained herein and the failure of AccuMed to cure
such breach within 30 days after the date on which notice from Difco requesting
such breach to be cured is deemed delivered; or
(vi) by Difco or AccuMed in the event that any
petition in bankruptcy is filed by or against the other and remains undismissed
for 60 days, provided that if applicable law allows the trustee in bankruptcy
or such party to affirm this Agreement and perform the other party's
obligations hereunder, then said trustee or such other party shall cure all
outstanding defaults within the period determined by the bankruptcy court and
provide such other party such adequate assurances as may be necessary to ensure
the other party's continued performance under this Agreement.
Section 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF MICHIGAN, WITHOUT GIVING REGARD TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 7. Notices. All notices given pursuant to this Agreement
shall be in writing and shall be made by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or
overnight air courier guaranteeing next business day delivery to the relevant
address specified below. Except as otherwise provided in this Agreement, each
such notice shall be deemed given: at the time delivered by hand, if personally
delivered or mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and the next business day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next business day
delivery.
If to AccuMed, to:
AccuMed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
Attention: Mr. Peter P. Gombrich
Chief Executive Officer
Telecopy No.: (312) 642-3101
Confirmation No.: (312) 642-9200
with a copy to:
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AccuMed International, Inc.
1500 - 7th Avenue
Sacramento, California
Attention: Ms. Joyce Wallach
General Counsel
Telecopy No.: (916) 443-6850
Confirmation No.: (916) 443-6800
If to Difco, to:
Difco Laboratories Incorporated
17197 N. Laurel Park, Suite 400
Livonia, Michigan 48152
Attention: Mr. Kenneth A. Lawton
Executive Vice President Finance and Operations
Telecopy No.: (313) 462-8528
Confirmation No.: (313) 462-8562
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Attention: Mr. Thomas G. Appleman
Telecopy No.: (810) 258-3036
Confirmation No.: (810) 258-3009
or to such other address as such party may indicate by a notice delivered to
the other party hereto.
Section 8. Arbitration. Difco and AccuMed agree that any
claim, controversy or dispute arising out of or relating to this Agreement,
except as otherwise provided in Section 4.4, the interpretation of any of the
provisions hereof and thereof, or the
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action or inaction of any party shall be submitted to neutral, binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (or any successor thereto) and the Federal Arbitration
Act, 9 U.S.C.A. sections 1-14 shall apply. Any award or decision obtained from
any such arbitration proceeding shall be final and binding on the parties, and
judgment upon any award thus obtained may be entered in any court having
jurisdiction thereof. Any such arbitration shall be conducted in Livonia,
Michigan (or such other location in the State of Michigan as the Parties shall
agree).
Section 9. Exculpation and Indemnification. None of Difco
nor any of its officers, directors, employees, agents, invitees, affiliates,
successors or assigns (the "Difco Related Parties") shall be liable
to AccuMed or any of its officers, directors, employees, agents, invitees,
affiliates, successors or assigns (the "AccuMed Related Parties") with respect
to any losses, costs, liabilities, settlement payments, awards, judgments,
fines, penalties, damages (including compensatory, consequential, incidental,
special, punitive and exemplary), expenses, or other charges (including
reasonable attorney's fees) ("Losses"), and AccuMed (on behalf of itself and
the AccuMed Related Parties) hereby waives and agrees to not make any claim
against any of Difco or the Difco Related Parties therefor, and to pay, fully
indemnify, defend and hold harmless Difco and the Difco Related Parties from
any such Losses resulting from, arising out of or related to the performance of
any of the services provided or required to be provided by Difco under this
Agreement, except only for Losses arising out of the gross negligence or
willful misconduct of Difco. AccuMed and, subject to the foregoing, Difco
shall pay, fully indemnify, defend and hold each other harmless with respect to
any Losses (but excluding any consequential, incidental, special, punitive and
exemplary damages) arising out of either party's violation of, or failure to
comply with, any material provision of this Agreement and, in addition, AccuMed
shall pay, fully indemnify and hold Difco and the Difco Related Parties
harmless from any Losses arising out of any claims made by AccuMed employees
housed in the AccuMed Space except for Losses arising out of the gross
negligence or willful misconduct of Difco.
Section 10. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. AccuMed may not assign this Agreement
without the written consent of Difco. Difco may assign this Agreement to any
of its Affiliates or to any Person acquiring all or substantially all of its
assets provided that any such assignee shall first deliver to AccuMed an
agreement pursuant to which the assignee assumes all of Difco's obligations
under this
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Agreement and agrees to be bound by all terms and conditions of this Agreement
and the assignor shall notwithstanding any such assignment remain liable for
all of its obligations hereunder. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person other than
the parties and successors and assigns permitted by this Section 6 any right,
remedy or claim under or by reason of this Agreement, except that Section 3.12
and Section 9 shall also be for the benefit of, and enforceable by, the Difco
Related Parties.
Section 11. Entire Agreement. This Agreement and the Exhibits and
Schedules hereto together with the Asset Purchase Agreement and the Ancillary
Agreements contain the entire understanding of the parties with regard to the
subject matter contained herein and therein, and supersede all prior agreements
and understandings between the parties including expressly the Offer Term Sheet
dated as of November 25, 1996 and except for the Confidentiality Agreement
dated November 8, 1996, as amended January 7, 1997, between AccuMed and Difco.
Any actions taken by Difco or its Affiliates under any of the Ancillary
Agreements shall not constitute a breach or default under this Agreement.
Section 12. Amendments. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by an authorized
representative of each of the parties.
Section 13. Interpretation. Section headings herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. The Schedules and
Exhibits hereto shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein.
Section 14. Waivers. Any term or provision of this Agreement may
be waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 15. Partial Invalidity. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such
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provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder
of such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable, in which
case the parties will negotiate in good faith to enter into appropriate
amendments hereto.
Section 16. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, and all of which taken together shall constitute one and
the same agreement, and shall become binding when one or more counterparts have
been signed by each of the parties hereto and delivered to each of Difco and
AccuMed.
Section 17. Force Majeure.
(i) If either party to this Agreement is totally or partially
prevented or delayed in the performance of any of its obligations under this
Agreement by force majeure and if such party gives written notice thereof to
the other party specifying the matters constituting force majeure together with
such evidence as it reasonably can give and specifying the period for which it
is estimated that such prevention or delay shall be excused from the
performance as from the date of such notice for so long as such cause or delay
shall continue.
(ii) For the purpose of this Agreement, the term "force
majeure" shall be deemed to include any cause affecting the performance of this
Agreement arising from or attributable to acts, events, omissions or accidents
beyond the reasonable control of the party to perform and in particular but
without limiting the generality thereof shall include strikes, lock-outs or
other industrial action, civil commotion, riot, invasion, war, threat of or
preparation for war, fire, explosion, storm, flood, earthquake, subsidence,
epidemic or other natural physical disaster, impossibility of the use of
railways, shipping, aircraft, motor transport, or other means of public or
private transport, accidents, delays in providing materials (in each case other
than as a result of a breach or defaults by such Party or an Affiliate
thereof), shortages in fuel or other materials, breakdowns of equipment, acts,
demands or requirements of any federal, state or local governmental authority.
(iii) As soon as practicable after such notification the
parties shall consult together to decide how if at all the effects of the force
majeure can be mitigated.
Section 18. Relationship of Parties. The relationship of AccuMed
and Difco shall be solely that of licensor and licensee or lessee and lessor,
as the case may be. Except as otherwise provided herein, nothing contained
herein shall be construed to
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imply a joint venture or other principal and agent relationship between the
parties, and neither party shall have any right, power or authority to create
any obligation, express or implied on behalf of the other.
Section 19. Difco Extraordinary Transaction. Nothing in this
Agreement is intended to, nor shall, restrict, limit or prevent in any fashion
the ability of Difco to consummate any merger, sale of assets or other business
combination transaction and no covenants of Difco or any covenants imposed on
any Affiliate of Difco hereunder, if any, shall bind or apply to any acquiror
or its Affiliates or assets solely by virtue of this Agreement, except only
those imposing obligations of confidentiality.
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ Michael D. Burke
-----------------------------------
Michael D. Burke
President, Microbiology
Division
DIFCO LABORATORIES INCORPORATED
By: /s/ William B. Burnett
-----------------------------------
William B. Burnett
President
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EXHIBIT 10.47
BASE MEDIA LICENSE AGREEMENT
AGREEMENT (this "Agreement") dated as of March 3, 1997, between
AccuMed International, Incorporated a Delaware corporation (AccuMed"), and
Difco Laboratories Incorporated, a Michigan corporation ("Difco").
WITNESSETH:
WHEREAS, AccuMed and Difco Microbiology Systems, Inc., a Michigan
corporation, have entered into an Asset Purchase Agreement dated as of the date
hereof (the "Asset Purchase Agreement") and the execution and delivery of this
Agreement by the parties hereto is an express condition precedent to AccuMed's
obligations under the Asset Purchase Agreement and the parties are executing
and delivering this Agreement in satisfaction of such condition precedent.
NOW THEREFORE, in consideration of the foregoing and of the mutual
agreements hereinafter contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1.1 Definitions.
(a) "Affiliates" shall have the same meaning as that ascribed to
it in the Asset Purchase Agreement.
(b) "Base Media" shall mean Seller's proprietary formulae as
defined in the Asset Purchase Agreement, Sec. 1.1.
(c) The terms "Component A," "Component B," "Component C,"
"Component D" and "Component E" shall have the same meaning as that ascribed to
each, respectively, in the Asset Purchase Agreement, Sec. 1.1. Collectively,
these components are designated "Base Media Components."
(d) "DCM" means Dehydrated Culture Media which is a product(s)
required in the proprietary formulae of the Base Media. DCM contains one or
more of the proprietary Base Media Components A through E;
(e) "Base Media Know-How" shall mean information (including trade
secret information) with respect to the formulae and specifications for
manufacturing Base Media and/or DCM, known to Difco at the effective date of
this Agreement, exclusive of the formulae and specifications for manufacturing
Base Media Components. Notwithstanding the above definition of Base Media
Know-How, confidential information belonging to a third party shall not be
considered Base Media Know-How.
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Base Media License Agreement
(f) "Base Media Intellectual Property Rights" shall mean
proprietary rights to know-how and/or trade secrets, including Base Media
Know-How, relating to Base Media or any of the components thereof, held in
confidence by Difco, its Affiliates, sublicensees, and assigns, and not
otherwise in the public domain.
(g) "Clinical Market" shall mean the worldwide market relating to
all uses and applications of the ESP Product Line related to (i) human
diagnostic testing, including detection of septicemia, fungemia or
mycobacteria, including related testing such as for mycobacterial
susceptibility or sterile body fluids, (ii) veterinary diagnostic testing and
(iii) pharmaceutical research through the end of clinical trials intended for
the human or veterinary clinical market.
(h) "Clinical Purpose" shall have the same meaning ascribed to it
in the Non-Clinical License and Non-Competition Agreement, Sec. 1.1(f).
(i) "Base Media Licensed Products" as used herein shall mean Base
Media and/or DCM manufactured in accordance with the Base Media Know-How.
(j) "ESP Product Line" shall have the same meaning ascribed to it
in the Asset Purchase Agreement, Sec. 1.1, and shall additionally include
modifications thereto, as made by or under the authority of AccuMed, or its
permitted successors or assigns, from time to time.
(k) "Ancillary Agreements" means the Manufacturing Agreement,
Non-Clinical License and Non-Competition Agreement, Transition Services and
Facilities Agreement, the Escrow Agreement, the Escrow (Base Media Components)
Agreement, the Base Media Components License, the Closing Agreement, and the
Instrument of Assumption and Instruments of Assignment, as those terms are
defined in the Asset Purchase Agreement.
(l ) Other capitalized terms used herein, but not specifically
defined in this Agreement, such as "Person," shall have the same meaning
ascribed to them as in the Asset Purchase Agreement or in any relevant
Ancillary Agreement(s), to the extent not inconsistent herewith.
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Base Media License Agreement
1.2 Usage.
(i) References to a Person who is not a party hereto are also
references to its permitted assigns and permitted successors in interest (by
means of merger, consolidation or sale of all or substantially all the assets
of such Person or otherwise, as the case may be), and references to a Person,
in the case of the parties hereto, are also references to its assigns and
successors in interest as provided in Sec. 2 hereof.
(ii) References to a document are to it as amended, waived and
otherwise modified as of the time in question and references to a statute or
other governmental rule are to it as amended and otherwise modified as of the
time in question (and references to any provision thereof shall include
references to any successor provision in effect as of the time in question).
(iii) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(iv) The definitions set forth herein are equally applicable both
to the singular and plural forms and the feminine, masculine and neuter forms
of the terms defined.
(v) The term "including" and correlative terms shall be deemed to
be followed by "without limitation" whether or not followed by such words or
words of like import.
(vi) The term "hereof" and similar terms refer to this Agreement as
a whole.
(vii) References to the "parties" are to AccuMed and Difco, unless
the context otherwise requires.
(viii) The date on which any notice or other writing is deemed given
shall be determined pursuant to Sec.13.
2. License to Manufacture the Base Media and/or DCM.
(a) Difco grants to AccuMed a non-exclusive, worldwide,
royalty-free, fully paid-up license to use the Base Media Know-How to make and
further develop Base Media Licensed Products exclusively for use, distribution,
and sale in connection with the ESP Product Line in the Clinical Market subject
to the terms, conditions and restrictions set forth herein.
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Base Media License Agreement
(b) Difco expressly reserves all other rights in and to
the Base Media Intellectual Property Rights.
(c) The rights granted in this license are not
sublicenseable unless the sublicensee enters into a written sublicense
agreement substantially in the form attached as Schedule 1.
(d) The rights granted in this license may be assigned by
each party to any of its respective Affiliates or to any Person acquiring all
or substantially all of its respective assets, or that portion of the business
relating to the use of the ESP Product Line for the respective purpose provided
that any such party shall first deliver to the other party an executed written
agreement in which the assignee agrees in writing to assume all of the
assignor's obligations under this Agreement and agrees to be bound by all of
the terms and conditions of this Agreement.
(e) The parties acknowledge that all formulae, processes,
procedures, specifications, inventions (whether patentable or not), trade
secrets and other intellectual property of whatever kind or character related
to the Base Media Know-How is, and shall remain, the sole and exclusive
property of Difco. The only interest AccuMed shall have in the Base Media
Know-How is that of licensee.
(f) AccuMed hereby grants and agrees to grant to Difco a
non-exclusive, fully paid-up, worldwide license to make, use, sell, or offer to
sell, products under any patent rights which AccuMed has or may come to have in
improvements related to the Base Media Know- How.
(g) Difco hereby grants and agrees to grant to AccuMed a
non-exclusive, fully paid-up, worldwide license to make, use, sell, or offer to
sell, products in the Clinical Market under any patent rights which Difco has
or may come to have in improvements related to the Base Media Know-How.
3. Relationship of the Parties.
The relationship of the parties hereto shall be that of licensor and
licensee. Nothing in this Agreement shall be construed to imply a joint
venture or other principal and agent relationship between the parties, and
neither party shall have any right, power, or authority to create any
obligation, express or implied, on behalf of the other.
4. Indemnification.
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Base Media License Agreement
(a) AccuMed shall defend, indemnify, and hold harmless
Difco from and against any Actual Loss arising out of any legal action or suit
brought against Difco insofar as such suit or proceeding shall be based on a
claim arising from the manufacture, distribution, use, or sale of any Base
Media Component Licensed Product by AccuMed provided that:
(i) Difco gives AccuMed prompt written notice of any such
claim;
(ii) AccuMed shall have sole control of the defense of any
action against such claim and all negotiations toward settlement or compromise;
and
(iii) Difco shall cooperate fully with AccuMed in any
reasonable way requested and shall make available to AccuMed all information
under its control relating thereto.
For purposes hereof, the term "Actual Loss" means the actual amount of
the judgment or settlement payments and costs and expenses (including
reasonable legal fees) paid or payable by Difco in connection with a legal
action or suit indemnified hereunder.
(b) Compliance with all governmental regulations,
specifically including FDA regulations, shall be the sole responsibility of
AccuMed for all Base Media Licensed Products manufactured by, or on behalf of,
AccuMed or its Affiliates under this Agreement.
5. Warranty.
DIFCO MAKES NO WARRANTY, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, WITH RESPECT TO THE BASE MEDIA KNOW-HOW OR BASE MEDIA LICENSED
PRODUCTS, INCLUDING ANY WARRANTY OF MANUFACTURABILITY, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. DIFCO NEITHER ASSUMES NOR AUTHORIZES ACCUMED
OR ANY OTHER PERSON TO ASSUME OR CREATE FOR IT ANY LIABILITY IN CONNECTION WITH
THE SALE OR USE OF THE BASE MEDIA KNOW-HOW OR BASE MEDIA LICENSED PRODUCTS.
DIFCO SHALL NOT BE LIABLE FOR ANY INJURY OR DAMAGE TO ACCUMED, OR ANY
OF ACCUMED'S CUSTOMERS OR TO ANY OTHER PERSON CAUSED DIRECTLY OR INDIRECTLY BY
THE MANUFACTURE OR USE OF THE BASE MEDIA KNOW-HOW OR BASE MEDIA LICENSED
PRODUCTS OR BY THE USE, SALE, LEASE OR OTHER DISPOSITION OF ANY OF THE BASE
MEDIA
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Base Media License Agreement
LICENSED PRODUCTS BY ACCUMED OR ITS CUSTOMERS OCCURRING EITHER BEFORE, DURING
OR AFTER THE TERM OF THIS AGREEMENT, AND ACCUMED AGREES TO INDEMNIFY AND HOLD
DIFCO HARMLESS WITH RESPECT TO THE SAME.
6. Limitation of Liability and Exclusion of Damages.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN AND EXCEPT
FOR ACTUAL LOSS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR SPECIAL DAMAGES, NOR FOR CLAIMS FOR ANY
LOSS OR INJURY TO EARNINGS, PROFITS, OR GOOD WILL, WHATSOEVER, EVEN IF THE
PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
DIFCO SHALL NOT BE LIABLE FOR ANY INJURY OR DAMAGE TO ACCUMED OR TO
ANY OTHER PERSON CAUSED DIRECTLY OR INDIRECTLY AS A RESULT OF THE EXERCISE OF
THE LICENSE OR ANY RIGHT HEREUNDER, OR THE MANUFACTURE, SALE, OR USE OF ANY
PRODUCT DERIVED FROM AN EXERCISE OF THE LICENSE OR ANY RIGHT HEREUNDER.
7. Confidentiality.
(a) AccuMed acknowledges that the Base Media Know-How is
confidential information and a trade secret of Difco and that disclosure of the
Base Media Know-How would result in irreparable harm to Difco and loss of
valuable Base Media Intellectual Property Rights.
(b) At all times during the term of this Agreement, AccuMed shall
refrain from disclosing the Base Media Know-How to any third person without
prior written consent from Difco, except as required by law, and shall take all
necessary and reasonable steps to preserve the secrecy and prevent disclosure
of the Base Media Know-How. The obligation to hold such information in
confidence shall be satisfied if AccuMed exercises the same care with respect
to such information as it would take to preserve the confidentiality of its own
confidential and trade secret information. AccuMed warrants and represents
that it has security procedures for preserving the confidentiality of its own
information.
(c) AccuMed shall only disclose Base Media Know-How to its
employees on a need-to-know basis and only to the extent necessary to obtain
the benefits of the license granted herein. In furtherance of the foregoing,
AccuMed shall use the same security procedures to prevent unauthorized access
and/or use of the Base Media Know-How as it
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Base Media License Agreement
uses for its own confidential and trade secret information. AccuMed shall use
reasonable commercial efforts to maintain a permanent list identifying all
persons having access to the Base Media Know-How, which list shall be available
for inspection by Difco upon reasonable notice. All AccuMed personnel having
access to the Base Media Know-How shall be advised of the terms of this
Agreement and the requirements of confidentiality, and shall acknowledge in
writing his/her agreement to be bound by these requirements both individually
and as an employee of AccuMed.
(d) AccuMed shall appropriately identify, to the extent possible,
all reproductions, copies, extracts or the like of any document in any form
whatsoever, including electronic media, containing the Base Media Know-How as
the "Property of Difco" and "Confidential" or "Confidential - Trade Secret"
before disseminating same to its officers, employees, or if permitted
hereunder, to others. Upon termination of this Agreement, AccuMed shall return
all such reproductions, copies, extracts or the like to Difco, or an officer of
AccuMed shall certify as to their destruction. AccuMed shall not be permitted
to retain any copies of such information except as required by law; Difco will
provide AccuMed access to any documents required by law in the future to the
extent it continues to maintain the same.
(e) AccuMed shall notify Difco promptly upon receipt of any demand
or request by a court or other governmental body for access to or disclosure of
any Base Media Know-How, and shall, at Difco's expense, take all steps and
actions as reasonably and lawfully requested by Difco as necessary to prevent
such disclosure and shall reasonably and lawfully cooperate with and support
the actions of Difco to appear and object to such request or demand for access
or disclosure.
(f) During the term of this Agreement, AccuMed shall not use Base
Media Know-How for any purpose except in the manufacture of Base Media and/or
DCM for the sole and exclusive use by AccuMed or its Affiliates for the
Clinical Purpose. After termination of this Agreement pursuant to Sec. 8(b) or
Sec. 8(c) herein, AccuMed, its Affiliates, and any sublicensee or assignee,
shall cease using all Base Media Know-How received or learned by AccuMed under
this Agreement, and not in the public domain.
(g) The obligations imposed by this Section to receive, keep and
maintain the Base Media Know-How in confidence shall be binding on AccuMed, its
Affiliates, sublicensees, and assignees, continue during the term of this
Agreement and shall survive the termination of this Agreement.
(h) AccuMed shall be relieved of its obligations of
confidentiality to the extent that information can be shown (i) to have been in
the public domain at the time of AccuMed's receipt from Difco; (ii) to have
come into the public domain through no fault of AccuMed;
7
<PAGE> 8
Base Media License Agreement
(iii) to have been lawfully acquired by AccuMed from a third party in rightful
possession of such information; or (iv) to be the subject of a valid subpoena
or otherwise required by law to be disclosed, provided that advance notice is
given to Difco of the requirement of such disclosure, and AccuMed takes all
reasonable steps to obtain a protective order that will maintain the
confidentiality of the Base Media Components Know-How.
8. Term and Termination.
(a) This Agreement shall be effective on the date written in the
preamble, and unless earlier terminated in accordance with Sec. 8(b) or Sec.
8(c), the license shall be in full force and effect until the day that Difco,
its successors and assigns shall cease to have Base Media Intellectual Property
Rights in any of: the Base Media, DCM, or Base Media Components.
(b) Difco may, at its option, immediately terminate this Agreement
and any rights of AccuMed hereunder by giving AccuMed written notice thereof in
the event that:
(i) AccuMed shall terminate or suspend its business as a
result of bankruptcy or insolvency, become subject to any bankruptcy or
insolvency proceeding if such proceeding remains undismissed for sixty (60)
days, or becomes insolvent or subject to control by a trustee, receiver or
similar authority; or
(ii) AccuMed shall have failed to perform or to observe any of
its material obligations or covenants to Difco hereunder, including
specifically compliance with any requirement set forth in Sec. 7; provided that
Difco shall have first notified AccuMed in writing of any such breach and, if
such breach is capable of cure, AccuMed shall have failed to:
(A) cure such breach within 30 days;
(B) take reasonable steps to cure such breach within 30
days of the date such Notice from Difco is deemed given under
Sec. 13 of this Agreement, and to continue to take reasonable
steps to cure such breach until such breach is cured; and to
promptly notify Difco of all steps being taken to cure the
breach.
If such breach is incapable of cure, termination pursuant to this Sec.
8(b)(ii) shall be effective immediately upon the date on which notice of breach
is deemed to be given.
8
<PAGE> 9
Base Media License Agreement
(c) This Agreement shall automatically and immediately terminate
in the event that AccuMed or its Affiliates willfully disclose, contrary to the
terms of this Agreement, Base Media Know-How not otherwise in the public domain
to a third party, and such disclosure has, or is likely to have, a material
adverse effect on Difco.
(d) In the event of the termination of this Agreement, under Sec.
8(b) and Sec. 8(c), AccuMed shall thereafter cease and desist from in any way
exercising the license granted under this Agreement, except that AccuMed may
sell any Base Media Licensed Products in its inventory at that time that could
otherwise have lawfully been sold under the license herein.
9. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Except
as otherwise provided herein, AccuMed may not assign rights hereunder without
the written consent of Difco.
10. Severability.
Wherever possible, each provision hereof shall be interpreted in such
manner as to be effective and valid under applicable law, but in case any one
or more of the provisions contained herein shall, for any reason, be held
unenforceable, in any respect, such provision shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality, or
unenforceability without invalidating the remainder of such invalid, illegal,
or unenforceable provisions, or any other provisions hereof.
11. Injunctive Relief.
Each of the parties hereto acknowledges that in the event of a breach
by any of them of any material provision of this Agreement relating to the
transfer and protection of intellectual properties, the aggrieved party may be
without an adequate remedy at law. Each of the parties therefore agrees that
in the event of such a breach hereof the aggrieved party may elect to institute
and prosecute proceedings in any court of competent jurisdiction to enforce
specific performance or to enjoin the continuing breach hereof. By seeking or
obtaining any such relief, the aggrieved party will not be precluded from
seeking or obtaining any other relief to which it may be entitled.
Notwithstanding Sec. 12 below, if either party seeks specific performance or
any other extraordinary or provisional relief including, but not limited to,
injunctive relief under this Agreement, then any such action shall not be
subject to arbitration, and each party agrees to submit to the non-exclusive
jurisdiction of the Federal and/or state courts located in the State of
Michigan, and waives
9
<PAGE> 10
Base Media License Agreement
any and all objections to jurisdiction or venue that it may have under the laws
or court rules of any state or United States or any court.
12. Arbitration.
Except as otherwise provided in this Agreement, AccuMed and Difco
agree that any claim, controversy or dispute arising out of or relating to this
Agreement, the interpretation of any of the provisions hereof, shall be
submitted to neutral, binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (or any successor
thereto) and the Federal Arbitration Act, 9 U.S.C.A. sections 1-14 shall apply.
Any award or decision obtained from any parties, and judgment upon any award
thus obtained may be entered in any court having jurisdiction thereof. Any
such arbitration shall be conducted in Michigan.
13. Notices.
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation receipt), (b) sent by
telecopier (with written confirmation of receipt) provided that a copy is
mailed by registered mail, return receipt requested, or (c) received by the
addressee. Notice may be sent to the parties as follows:
If to AccuMed, to:
AccuMed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
Attention: Mr. Leonard R. Prange
Chief Financial Officer
Telecopy No.: (312) 642-8684
Confirmation No.: (312) 642-9200
with a copy to:
10
<PAGE> 11
Base Media License Agreement
AccuMed International, Inc.
1500 - 7th Avenue
Sacramento, California
Attention: Ms. Joyce Wallach
General Counsel
Telecopy No.: (916) 443-6840
Confirmation No.: (916) 443-6800
if to Difco, to:
Difco Laboratories Incorporated
17197 North Laurel Park
Suite 400
Livonia, Michigan 48152
Attention: Kenneth A. Lawton
Executive Vice President Finance and Operation
Telecopy No.: (313) 462-8528
Confirmation No.: (313) 462-8562
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Attention: Thomas G. Appleman, Esq.
Telecopy No.: (810) 258-3036
Confirmation No.: (810) 258-3009
or to such other address as such party may indicate by a notice delivered to
the other party hereto.
14. Jurisdiction.
Any action or proceeding seeking to enforce any provision of, or based
in any right arising out of, this Agreement may be brought against either party
in any court located in the State of Michigan and each of the parties hereby
submits to the respective jurisdiction of
11
<PAGE> 12
Base Media License Agreement
such courts in any such action or proceeding and waives any objection to venue
in such courts.
15. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original, and all of which, when taken together,
will be deemed to constitute one and the same.
16. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan, without regard to the conflicts of law
provisions thereof.
17. Entire Agreement; Amendments.
This Agreement supersedes any prior oral or written agreements and
understandings relating to the subject matter of this Agreement, and contains
the entire agreement of the parties relating to the subject matter hereof. No
amendment or modification of this Agreement shall be binding or enforceable
unless in writing and signed by the parties hereto.
12
<PAGE> 13
Base Media License Agreement
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto on the date first above written:
ACCUMED INTERNATIONAL, INC.
By: /s/ Michael D. Burke
-----------------------------------
Michael D. Burke
President, Microbiology Division
DIFCO LABORATORIES INCORPORATED
By: /s/ William B. Burnett
-----------------------------------
William B. Burnett
President
13
<PAGE> 1
Exhibit 10.50
PROMISSORY NOTE
$64,409.20
Chicago, Illinois
December 30, 1996
FOR VALUE RECEIVED, Dr. Norman Pressman as (the "Maker"), promises to pay to
the order of AccuMed International, Inc. (the "Holder") at 900 North Franklin
Street, Suite 401, Chicago IL 60610 the principal sum of Sixty-four Thousand
Four-hundred and Nine Dollars and twenty cents ($64,409.20), without interest.
This Promissory Note is being made to provide funding for taxes due of Shares
received as signing bonus pursuant to the Employment Agreement between AccuMed
International, Inc. and Dr. Pressman.
The principal hereunder shall be payable within a period of 5 years.
Waiver by the holder of a failure to make any payment hereunder when due shall
not be construed as a waiver of any other such failure. Each of the maker and
the holder irrevocably submit to the jurisdiction of Illinois' state and
federal courts, litigation to enforce terms of this Note and shall be governed
by the laws of the State of Illinois in all respects, including matters of
construction, validity, and performance.
12/31/96 /s/Dr. Norman Pressman
- -------- ---------------------------
Dr. Norman Pressman
<PAGE> 1
Exhibit 10.51
PROMISSORY NOTE
$100,000.00
Chicago, Illinois
October 25, 1996
FOR VALUE RECEIVED, Dr. Norman Pressman as (the "Maker"), promises to pay to
the order of AccuMed International, Inc. (the "Holder") at 900 North Franklin
Street, Suite 401, Chicago IL 60610 the principal sum of One Hundred Thousand
Dollars ($100,000.00), without interest. This Promissory Note is being made to
provide funding for relocation related costs pursuant to the Employment
Agreement between AccuMed International, Inc. and Dr. Pressman.
The principal hereunder shall be payable in quarterly installments, with said
installments constituting fifty percent (50%) of any bonus payments due to Dr.
Pressman under the terms of the Employment Agreement. Payments shall continue
until the entire principal balance has been paid but in no instance will
payments extend beyond five years. If any principal amount is owing at the end
of five years such amount shall become due and payable immediately. All
quarterly payments will be deducted directly from employee's compensation for
the period in which the bonus is paid to the employee.
Waiver by the holder of a failure to make any payment hereunder when due shall
not be construed as a waiver of any other such failure. Each of the maker and
the holder irrevocably submit to the jurisdiction of Illinois's state and
federal courts, litigation to enforce terms of this note and shall be governed
by the laws of the State of Illinois in all respects, including matters of
construction, validity, and performance.
/s/Dr. Norman Pressman
---------------------------------------
Dr. Norman Pressman
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
1. AccuMed International, Limited, an English registry company.
2. Oncometrics Imaging Corp., continuing under the laws of the Yukon
Territory, Canada.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
AccuMed International, Inc.
We consent to incorporation by reference in the registration statements
(No. 333-04715, 033-98902, and 333-07681) on Form S-3 and (No. 333-04320
and 333-11219) on Form S-8 of AccuMed International, Inc. of our report dated
March 28, 1997, relating to the consolidated balance sheets of AccuMed
International, Inc. as of December 31, 1996 and 1995 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1996 and the three months ended December 31, 1995,
which report appears in the December 31, 1996 annual report on Form 10-KSB
of AccuMed International, Inc.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
April 4, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
(No. 333-04715, 033-98902, and 333-07681) on Form S-3 and (No. 333-04320 and
333-11219) on Form S-8 of AccuMed International, Inc. of our report, which
includes an explanatory paragraph related to substantial doubt about the
ability of Alamar Biosciences, Inc. to continue as a going concern, dated
November 19, 1995, on our audits of the financial statements of Alamar
Biosciences, Inc. as of September 30, 1995 and 1994, and for the years ended
September 30, 1995, 1994 and 1993, which report is included in the Annual
Report on Form 10-KSB for the year ended September 30, 1995.
/s/ Coopers & Lybrand L.L.P.
Sacramento, CA
April 4, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the current filing of
Form 10KSB and the registration statements (No. 333-04715, 033-98902, and
333-07681) on Form S-3 and (No. 333-04320 and 333-11219) on Form S-8 of our
report dated December 8, 1995, on our audit of the balance sheets of AccuMed
International Limited as of December 31, 1994, April 30, 1994 and 1993, and
related statements of operations and cashflows for the eight months ended
December 31, 1994, and the years ended April 30, 1994 and 1993, appearing in
the registration statement on Form S-4 (SEC File No. 33-99680) of Alamar
Biosciences, Inc. filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933 as incorporated by reference in the current
Report on Form 8-K dated December 29, 1995.
/s/ COOPERS & LYBRAND
Croydon
United Kingdom
April 4, 1997
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