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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-20652
AccuMed International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4054899
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 N. Franklin Street, Suite 401, Chicago, IL 60610
----------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number: (312) 642-9200
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
---------------------------------------
(Title of Class)
Indicate by checkmark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by checkmark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not 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-K
or any amendment to this Form 10-K. [ X ]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant on March 30, 1998 was: $22,162,830. Number of shares of Common
Stock outstanding on March 30, 1998: 31,718,031.
The information required by Part III, Items 10, 11, 12 and 13 are
incorporated by reference to the definitive proxy statement dealing with the
election of directors to be filed within 120 days of the last fiscal year end.
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ITEM 1 OF THIS FORM 10-K ENTITLED "BUSINESS" AND ITEM 7 OF THIS FORM 10-K
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. BUSINESS
(a) General Development of Business
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(TM) microbiology business by purchasing certain assets
and all of the shares of Sensititre(TM) Limited, an English registry company
(renamed AccuMed International Limited, 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 changed its name to AccuMed
International, Inc., reincorporated under Delaware law and changed its fiscal
year end from September 30 to December 31 in 1995.
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"). Oncometrics was formed in 1995 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 acquired all the outstanding
shares of Common Stock not already owned by the Company of RADCO Ventures, Inc.,
a Delaware corporation ("RADCO"), at which time RADCO became a wholly-owned
subsidiary of the Company. RADCO was formed in March 1996, for the purpose of
developing a diagnostic microbiology test panel and automated reading instrument
known as FluoreTone(TM). RADCO was merged with and into the Company effective
November 15, 1996, at which time RADCO ceased to exist as a separate corporate
entity.
The Company completed an underwritten public offering of its
Common Stock in October of 1996 and received $11.7 million net of expenses. The
proceeds were used for research and development of new products, scale-up of
manufacturing, the Oncometrics and RADCO acquisitions and general corporate and
working capital purposes.
On March 3, 1997, the Company acquired the ESP(TM) Culture
System II product line (the "ESP(TM) Product Line") for a total purchase price
of $6,000,000 in cash. This acquisition consisted of accounts receivable,
inventories, production equipment and a portfolio of rental instruments used to
detect microorganisms in blood cultures. The purchase price was ultimately
funded by an $8,500,000 private placement of convertible debt and warrants to
purchase 850,000 shares of the Company's Common Stock.
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(b) Financial Information About Industry Segments
The Company's operations are in two laboratory market
segments: 1) Microbiology - proprietary disposable products and automated
instruments used to identify infectious microorganisms and determine
susceptibility to antimicrobial agents, and 2) Cytopathology - systems made up
of multiple instruments networked via proprietary software that support the
review and analysis of Pap smears and other microscope slide-based cytology
preparations. Refer to note 19 of the Financial Statements and related footnotes
for industry segment information.
(c) Narrative Description of Business
GENERAL
The Company's primary focus is on the development of
cytopathology products that support the review and analysis of Pap smears and
other cytology preparations in order to improve the quality of cell and specimen
analyses and increase productivity in the clinical diagnostic laboratory. The
Company has made significant expenditures on research and development, patent
applications, and regulatory approvals to bring these products to a marketable
position.
The Company believes it is the only company competing in the
computer-assisted cytology market with a modular, expandable product (the
"AcCell(TM)" systems) that allows customers to upgrade to more fully automated
versions. Given the present health care and regulatory environment, the Company
believes its products will be more readily accepted than higher priced,
non-modular, non-interactive products that attempt to eliminate human experts
from the diagnostic process.
Although the cervical Pap test is the largest volume
diagnostic 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 optical microscopy and careful error-free management of data
to be effectively implemented. The Company is currently developing products for
these applications by combining its AcCell(TM) technology with proprietary
technology to be licensed from Oncometrics for use in connection with the
analysis of these tests in a manner similar to that of Pap smear tests.
The Company also develops, manufactures and markets in vitro
diagnostic clinical microbiology products for the human clinical laboratory,
veterinary and pharmaceutical markets. In March 1997, the Company acquired the
ESP(TM) Product Line to enhance its product offerings. The Company continues to
make significant research, patent and regulatory expenditures in such
microbiology products. On March 5, 1998, the Company announced that the Board of
Directors has authorized management to seek buyers for those aspects of the
Company's business that do not contribute to the development and marketing of an
integrated product line of imaging-based cytopatholgy systems and testing
procedures. The Company has received inquiries from parties who have expressed
interest in acquiring the Company's microbiology business. However, currently
there is no agreement to sell the microbiology business.
Certain developments in the diagnostic markets served by the
Company have created growth opportunities. Cost containment pressures and demand
for preventative, early detection and diagnosis, and therapeutic monitoring
medical technology are likely to create demand for labor-saving laboratory
products that improve the quality and efficiency of laboratory-based diagnoses.
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The Company's goal is to develop cost-effective, accurate,
easy-to-use, and innovative diagnostic products that improve patient outcomes
and healthcare provider performance, with competitive advantages in the markets
in which it operates.
The Company's growth and profitability will depend, to a great
extent, upon its ability to complete development of and successfully introduce
new products. To achieve this, the Company will need to continue research and
development activities and obtain regulatory approval for such products.
MARKETS AND PRODUCTS
The Company's products and equipment are sold to customers
that operate principally in the diagnostic laboratory segments of the health
care market. For fiscal year 1997 and 1996, sales to this market represented all
of the Company's total sales.
Due in part to a recent trend toward consolidation of
diagnostic laboratories, the Company expects that the number of potential
domestic customers for its cytopathology products will decrease. Due to the
relative size of the largest U.S. laboratories, it is likely that a significant
portion of cytopathology products will be concentrated among a relatively small
number of customers. In order to promote acceptance in the market, the Company
will need to foster an awareness of and acceptance by these potential customers
of the Company's products and their potentials benefits of such systems over
current methods. The Company's increasing dependence on sales to large
laboratories may strengthen the purchasing leverage of these potential
customers.
CYTOPATHOLOGY PRODUCTS
During 1997, the Company marketed its initial product - the
AcCell(TM) Cytopathology System "AcCell(TM) 2000" series, a computer-assisted
microscopy workstation with an automated slide handling and data management
system. In August 1997, the United States Food and Drug Administration (the
"FDA") granted the Company clearance to market the TracCell(TM) 2000 Slide
Mapping System (the "TracCell(TM) 2000") in the United States pursuant to 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"). The TracCell(TM)
2000 is intended as a computer-aided Slide Mapping System integrated to a
computer-aided microscope AcCell(TM) workstation. The TracCell(TM) 2000 is used
to map adequately stained, well-preserved, cervical cytology preparations that
have been prepared using a Papanicolaou or pap-like staining protocol. The
TracCell(TM) 2000 can be used to locate all material of diagnostic relevance.
The cellular material will be included in automatically selected fields-of-view
presented for human screening after TracCell(TM) 2000 guided mapping. A single
TracCell(TM) 2000 is designed to support multiple AcCell(TM) instruments based
on normal laboratory usage.
To extend the functionality of the AcCell(TM) 2000, several
system configuration options are available, and multiple workstations can be
networked together within a laboratory. The AcCell(TM) 2001 includes a robotic
cassette handling subsystem that enables the user to process multiple slides
automatically. The Company is currently developing proprietary telepathology
software which, if developed, would enable the AcCell(TM) workstation to be
operated by remote users.
The Company is developing a second generation specimen
pre-screening and slide mapping product, the TracCell(TM) 3000, to automate the
mapping process further. The TracCell(TM) 3000, if successfully developed,
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will eliminate from presented fields-of-view not only empty space, debris,
scratches, bubbles, artifacts, and other material eliminated by the TracCell(TM)
2000, but will also eliminate certain normal cellular material and modify the
sequence of the presentation of the diagnostic cells to the human screeners. The
Company believes, based on preliminary studies it has conducted, that the
technology embodied in the TracCell(TM) 3000 may be capable of further reducing
the portion of the specimen required to be reviewed by the cytotechnologist and
speed the screening process. Further testing and development and additional
resources are necessary to determine whether a commercially viable TracCell(TM)
3000 instrument can be developed.
CYTOPATHOLOGY EDUCATIONAL AND TRAINING PRODUCTS
The Company has recently advanced the development of the
MacroVision(TM) feature, a specially modified AcCell(TM) 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. Using the MacroVision(TM) feature, the teacher or trainer can
display the specimen being reviewed on one or more video monitors. The monitor
can be viewed directly by the student or can be linked with other computers and
monitors to provide remote or even off-site viewing.
BUSINESS OF ONCOMETRICS
Oncometrics is developing a proprietary high resolution image
cytometer that uses an AcCell(TM) workstation, a high-resolution digital camera,
proprietary image processing and 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 detecting and
measuring small variations in cell nucleus DNA, which assists the
cytotechnologist in detecting lung cancer in an early more curable stage of
development. Because the presence of cancer cells can cause changes in the
nuclear DNA of non-cancerous cells, in some cases the Oncometrics instrument can
detect cancer even in the absence of cancer cells in the sample.
Oncometrics has demonstrated the feasibility of its technology
as it applies to the detection of early cancer in lung sputum. 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 clinicians at cancer research and patient care
institutions.
MICROBIOLOGY PRODUCTS
The Company offers the microbiology laboratory a variety of
FDA-cleared products, under the trade name Sensititre(TM), 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. The
Sensititre(TM) products incorporate a range of accessories including substrate
strips, dosing heads, broths, and test panels for both susceptibility and
identification applications.
The Sensititre(TM) panels have significant advantages over
competitors, including a two-year shelf life and the ability to be stored at
ambient room temperature. The Sensititre(TM) product line also
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includes four automated instruments, each of which uses compatible technologies,
and allows customers to upgrade without replacing the entire system.
In March 1997, the Company acquired and began offering the
ESP(TM) 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 ESP(TM) Culture System II is
an instrument that automates the process of detecting the growth of
microorganisms using disposable bottles containing proprietary media.
ALAMARBLUE(TM)
The Company licenses and markets alamarBlue(TM), a
proprietary, non-toxic, water-soluble indicator reagent that measures cell
growth for in vitro testing. AlamarBlue(TM) 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.
KB READER
The Company is currently developing a low-cost KB Reader, the
AccuZone(TM), 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 certain software algorithms that are intended to be integrated into the
hardware being developed by the Company. The Company has completed development
of a prototype AccuZone(TM) instrument which is undergoing testing.
SALES AND MARKETING
The Company currently markets its products on an international
basis through exclusive and/or semi-exclusive distributors and a direct sales
force.
CYTOPATHOLOGY
In May 1997, the Company entered into an agreement with Leica
Microscopy and Systems GmbH ("Leica") a leader in precision microscopy and
imaging technology which gives Leica exclusive third-party distribution rights
to the AcCell(TM) 2000 and 2001 Systems outside the Western Hemisphere. Leica
also has a right of first refusal and negotiation to be the exclusive
distributor outside the Western Hemisphere of future cytopathology products
developed by the Company. From May 1996 until September 1997, the Company had
granted Olympus America ("Olympus") exclusive third-party distribution rights to
the AcCell(TM) 2000 and 2001 Systems in the Western Hemisphere. Effective
September 1997, the Company and Olympus entered into an amendment to terminate
the original agreement and permit Olympus to require the Company to repurchase
at the original purchase price up to six AcCell(TM) systems per month from
Olympus' inventory beginning in October 1997. The Company is now using its
direct sales force primarily in the U.S. market.
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MICROBIOLOGY
The Company's Sensititre(TM) products are marketed in the
pharmaceutical, veterinary laboratory and clinical/hospital reference laboratory
markets. The Company's Sensititre(TM) human clinical microbiology products are
exclusively distributed in the United States by Fisher Scientific ("Fisher")
under a four-year agreement expiring on December 31, 2000. The Company provides
training and technical support to the sales personnel and customers of Fisher.
The Company markets alamarBlue(TM) directly to industrial and research
customers, including the biotechnology industry. Prior to September 1996, 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 and pharmaceutical markets
are through direct sales.
COMPETITION
The Company believes that for both cytopathology and
microbiology products it must compete on the basis of functionality, product
features and effectiveness of the product in standard medical practice, although
price is also an important competitive factor.
The Company's cytopathology products will face competition
from companies that have developed or may be developing competing systems. 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 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, sales 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.
OPERATIONS
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 purchased and modified the
stage-control mouse for use with the AcCell(TM) 2000 series workstations but is
currently developing a proprietary stage-control mouse which the Company expects
to manufacture along with the AcCell(TM) 2000. During 1997, the Company began to
scale up its manufacturing capacity for the AcCell(TM) 2000 and is currently
developing the manufacturing process for the TracCell(TM) 2000.
In the ESP(TM) Product Line acquisition, the Company acquired
certain pieces of manufacturing equipment which had been used by affiliates of
the seller to manufacture the disposable bottles which comprise part of the
ESP(TM) Product Line. The Company entered into a Manufacturing Agreement with
affiliates of the seller pursuant to which such affiliates will manufacture such
disposable bottles, using such
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equipment, for the Company for a period of two years ending March 1999. Other of
the ESP(TM) assets include molds, robotics and conveyor equipment used to
manufacture a component for the instruments which comprise part of the ESP(TM)
Product Line. Such assets are located at the facilities of a third party
manufacturer. The Company intends that such assets will continue to be used to
manufacture ESP(TM) instruments, directly by the Company or through a third
party, until such time, if ever, as the Company sells the microbiology business.
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.
Under the FD&C Act regulations 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 efficacy as indicated for its intended uses. Medical
devices may be authorized by the FDA for marketing in the United States either
pursuant to a 510(k) Pre-market Notification or a Pre-marketing Approval
("PMA"). The process of obtaining FDA marketing clearance and other applicable
regulatory authorities may be costly. Some FDA 510(k) Notification applications
and PMA's require preliminary internal studies, field studies and/or clinical
trials in addition to an FDA submission to attain market clearance (the 510(k)
process or market approval (the PMA process)).
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 an existing FDA cleared predicate product. An
applicant may only market a product submitted through the 510(k) Notification at
such time as the FDA issues a written clearance determining that the product has
been found to be substantially equivalent.
A PMA is the FDA submission process where the product must
demonstrate, independently of other like devices, that it is safe and effective
for its indications for 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. The approval process
usually takes substantially longer. 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 enforcement policy strictly prohibits the promotion of
learned 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.
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.
Marketing in the United States of the Company's products under
development may require additional FDA clearances. For example, the Company's
proposed next generation automated pre-screening, specimen mapping workstation,
the TracCell(TM) 3000 Series, 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
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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.
Sales of medical devices outside the United States are subject
to foreign regulatory requirements that vary from country to country. The time
required to obtain 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 Foreign Governments 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.
The Company intends to seek EN46001 qualification, an
international manufacturing quality standard, and is seeking the "CE" mark for
the AcCell(TM) series and proposed products. The CE mark is recognized by
countries that are members of the European Free Trade Association and will be
required to be affixed to all medical devices sold in the European Union.
The Company is subject to certain registration, record-keeping
and Medical Device Record reporting requirements, and certain of the Company's
manufacturing facilities are obligated to follow FDA's Quality System Regulation
and are subject to periodic FDA inspections. Any failure to comply with Quality
System Regulation or any other FDA or other government regulations could have a
material adverse effect on the Company's operations.
RAW MATERIALS AND COMPONENTS
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.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on
introducing new cytopathology 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 goals. During the fiscal years ended
December 31, 1997 and 1996, expenditures for research and development were
approximately $5.3 million and $9.1 million respectively. Amounts recorded for
the 1996 fiscal year reflect approximately $6.0 million of 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
arrangement, 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
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to secure and protect its intellectual property rights. Two of the Company's
patent applications have been granted as of the date of this Report, and several
other applications remain pending or are in development.
The Company has been issued a Great Britain patent and has
filed or been assigned 14 U.S. patent applications 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. The Company has been assigned
one U.S. patent related to the ESP(TM) Product Line and one U.S. and two
European patent applications related to such issued patent, as well as on
additional U.S. patent application relating to the ESP(TM) 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(TM) 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(TM) microbiology technology. However, subsequently BioMerieux (one of
the Company's competitors) filed an Opposition to the grant of such European
patent. The Company filed its response to such Opposition in November 1997.
There can be no assurance that such Opposition will be overcome and that such
European patent will issue.
The Company is continuing to prepare additional patent
applications. 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. 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 had 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.
EMPLOYEES
At March 25, 1998, the Company employed 172 full-time and two
part-time employees. None of the Company's employees are represented by a labor
union, and the Company considers its relations with its employees to be good.
ITEM 2. PROPERTY
The Company currently leases (i) a 12,500 square foot facility
at 900 North Franklin Street, Chicago, Illinois, pursuant to a lease expiring
September 30, 2004, and (ii) an additional 5,200 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
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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. This facility is used to warehouse and distribute its
microbiology products. From March 1997 until March 31, 1998, the Company leased
a portion of a certain research and development facility from an affiliate of
Difco located in Ann Arbor, Michigan for microbiology research and development
pursuant to the Transition Services and Facilities Agreement between the Company
and such Difco affiliate. AccuMed International Limited leases an 18,000 square
foot microbiology manufacturing facility in East Grinstead, West Sussex,
England, pursuant to a lease expiring in 2009. This facility manufactures the
microbiology product line for distribution in Europe and in the U.S.
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. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
No Matters were submitted to a vote of security holders during
the fourth quarter ended December 31, 1997.
ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and positions of all
of the Company's executive Officers. Officers are elected annually by the Board
of directors at the first meeting of the Board following the annual meeting of
shareholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Paul F. Lavallee 57 Chairman of the Board, Chief Executive Officer and
President
Norman J. Pressman, Ph.D. 49 Senior Vice President of Research and Development and
Chief Scientific Officer
Leonard R. Prange 52 Chief Operating Officer, Chief Financial Officer,
Corporate Vice-President
Joyce L. Wallach, Esq. 37 General Counsel and Secretary
</TABLE>
PAUL F. LAVALLEE. Mr. Lavallee has been a director of the
Company since December 1995 and was elected Chairman, Chief Executive Officer
and President by the Board of Directors on January 30, 1998. Since January 1996,
Mr. Lavallee has been a health care consultant to the Venture Capital industry
and has served as Chairman of the Board for two start-up companies. From 1989
until December 1995, Mr. Lavallee served as Chairman, President and Chief
Executive Officer of Sigmedics,
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Inc. Mr. Lavallee has a B.S. degree in biology from Bates College and a M.B.A.
degree from the University of Chicago.
NORMAN J. PRESSMAN, Ph.D. Dr. Pressman served as a Senior Vice
President of the Company and President of the Company's Cytopathology Division
from July 1996 to May 1997 when he became Senior Vice President for Research and
Development and Chief Scientific Officer. From July 1993 until joining the
Company, Dr. Pressman was Manager of Biotechnology Development, Strategic
Business Development Group of Olympus America, the former 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 as 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.
LEONARD R. PRANGE Mr. Prange has been Chief Financial Officer
of the Company since September 1996, and has been Chief Operating Officer since
March 1997. From September 1996 until March 1997, Mr. Prange served as Corporate
Vice President. 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 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.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
During 1997, the Company's Common Stock was quoted on the
Nasdaq National Market under the symbol "ACMI". Beginning on February 19, 1998,
the Company's Common Stock has been quoted on the Nasdaq SmallCap Market under
the symbol "ACMIC" pursuant to a temporary exception to certain listing
requirements. On March 25, 1998, the last reported sale price of the Common
Stock on The Nasdaq SmallCap Market
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was $1.03 per share. The table below sets forth, for the periods indicated, the
range of high and low sales prices for the Common Stock during the periods
specified.
<TABLE>
<S> <C> <C>
1996 FISCAL YEAR High Low
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 4.06 2.47
Second Quarter 4.13 3.00
Third Quarter 3.63 2.25
Fourth Quarter 2.97 1.16
</TABLE>
As of March 25, 1998, the Company had approximately 312 record
holders of Common Stock. As of March 25, 1997, the Company estimates that there
are approximately 5,000 beneficial holders of Common Stock, based on preliminary
results of the broker search for the March 23, 1998 record date for the upcoming
stockholders meeting.
The Company has never paid dividends on its Common Stock and
does not intend to pay cash dividends for the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal years Ended December 31, (1)
(in thousands, except per share data)
----------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales 19,110 6,222 515 1,162 419
Gross Profit (loss) 7,259 2,231 (916) (388) (493)
Operating (loss) (13,819) (14,230) (3,707) (3,146) (3,192)
Interest expense,
(income), net 3,584 408 38 (36) (48)
(Loss) before income taxes
(16,919) (11,574) (3,759) (3,112) (3,144)
Income taxes -- -- -- 1 1
Net (loss) (16,919) (11,574) (3,759) (3,113) (3,145)
PER SHARE DATA:
Net (loss) (0.77) (0.68) (0.59) (0.65) (1.00)
Weighted average
shares outstanding (000's)
22,053 16,975 6,376 4,776 3,131
BALANCE SHEET DATA:
Working capital
(deficit) 1,043 3,378 (246) 817 3,531
Total assets 20,549 14,480 2,989 2,049 4,543
Long-term debt 11,455 231 111 184 41
Shareholders' equity 733 10,136 1,098 1,345 4,144
</TABLE>
(1) The Company changed from a September 30 fiscal year end to a December
31 fiscal year end effective in 1995. Fiscal years 1995, 1994 and 1993
are September 30 year-end amounts. For the three months ended December
31, 1995, the Company's net loss was $5,742,000, or $0.49 per share.
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<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company is engaged in the development and marketing of
cost effective screening instruments and systems for clinical diagnostic
laboratories, hospitals and others. The Company markets products in two business
segments: 1) Microbiology - proprietary disposable products and automated
instruments used to identify infectious organisms and determine susceptibility
to antimicrobial agents, and 2) Cytopathology - systems made up of multiple
instruments networked via proprietary software that support the review and
analysis of Pap smears.
On December 31, 1995, the Company changed its fiscal year end
from September 30 to December 31. Unless otherwise noted, references to fiscal
1997, 1996 and 1995 relate to the fiscal years ended December 31, 1997,
1996, and September 30, 1995.
OVERVIEW
The Company's primary focus is on the development and
marketing of computer-aided diagnostic imaging systems for the cytopathology and
microbiology laboratory marketplaces. The Company's integrated systems use
reliable, accurate and innovative products and methods to provide laboratories
with comprehensive solutions that improve efficiency and reduce costs wile
achieving significant improvements in disease detection, diagnostic and
therapeutic monitoring.
In August 1997, the FDA cleared the Company's TracCell(TM)
2000 Slide Mapping System for marketing domestically. The device, which creates
an electronic "map" of a cervical cytology specimen (Pap smear), is an integral
part of the AcCell(TM) Cytopathology System and enables human screeners to focus
time and attention on diagnostically relevant material. The next generation
TracCell(TM) and AcCell(TM) devices are slated for release in 1999. The
TracCell(TM) 3000 is a fully-automated, high volume slide mapping product; the
AcCell(TM) 3000 is a fully-integrated microscopy workstation.
The Company's in vitro diagnostic microbiology products and
systems offer the hospital, clinical reference, veterinary, and pharmaceutical
laboratory markets cost-effective, rapid results and ease of use that
demonstrate efficacy in meeting current clinical market requirements. The
Company announced a new product, the AccuZone automated Kirby-Bauer reader, in
the fourth quarter of 1997, which is undergoing testing. The Company is
continuing research and development in this segment and has several pending FDA
submissions to augment the functionality of these systems.
On December 29, 1995, the Company acquired all of the Common
Stock of AccuMed, Inc. and its wholly-owned subsidiary. Pursuant to the terms of
the merger agreement, 1,881,910 shares of Common Stock and 126,945 warrants were
issued to AccuMed, Inc. stockholders and warrantholders, respectively, which
were contingent and subject to forfeiture if specified performance goals were
not achieved by the merged entity. The contingency associated with 940,955
shares of Common Stock and 63,473 warrants was resolved (performance goal
achieved) in March 1996 resulting in contingent consideration of $5,430,326.
Such amount has been allocated to identifiable intangibles of acquired
proprietary technology ($1,930,599) and in process research and development
($3,499,727). The acquired proprietary technology is being amortized over the
expected period to be benefited of ten years, with the in-process research and
development charged to operations during the year ended December 31, 1996.
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<PAGE> 15
The contingency associated with the remaining 940,955 shares
of Common Stock and 63,472 warrants was resolved (performance goal achieved) in
March 1997, resulting in contingent consideration of $3,582,068. Such amount has
been recorded as goodwill associated with the Merger and charged off in its
entirety to operations during the year ended December 31, 1997 as an impaired
asset.
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"). Oncometrics was formed in 1995 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. Also on the same date, the Company acquired all the
outstanding shares of Common Stock not already owned by the Company of RADCO
Ventures, Inc., a Delaware corporation ("RADCO"), at which time RADCO became a
wholly-owned subsidiary of the Company. RADCO was formed in March 1996, for the
purpose of developing a diagnostic microbiology test panel and automated reading
instrument known as FluoreTone(TM). RADCO was merged with and into the Company
effective November 15, 1996, at which time RADCO ceased to exist as a separate
corporate entity. The results of operations reflected in the Company's
consolidated statement of operations for fiscal year 1996 include the results of
operations of the Oncometrics and RADCO from the date of acquisition, whereas
results of operations for fiscal year 1997 include the results of these
acquisitions for the entire year.
Effective March 3, 1997, the Company acquired certain assets
and liabilities of Difco Microbiology Systems, Inc. relating to the ESP(TM)
Culture System II Product Line (the "ESP(TM) Product Line") for a total purchase
price of $6,000,000 in cash. The results of operations reflected in the
Company's consolidated statement of operations for fiscal year 1997 include the
results of operations of the ESP(TM) Product Line from the date of the
acquisition, whereas results of operations for fiscal years 1996 and 1995
reflect the operations of the Company exclusive of such acquisition. The ESP(TM)
Product Line is considered part of the Company's microbiology division.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
REVENUES
Sales revenues for the fiscal year 1997 increased to
$19,110,000, an increase of 307% over sales of $6,222,000 for the fiscal year
ended 1996. This increase is due primarily to additional revenues from the
microbiology division and the addition of the ESP(TM) Product Line. Sales for
the cytopathology division for fiscal 1997 were $1,001,000, compared to
$1,405,000 for fiscal 1996. The lack of increase in cytopathology sales was due
to delays in obtaining FDA approval to market a new product and in building and
training a direct sales force. Sales increases were achieved without any
significant price increases.
COST OF SALES
Cost of sales increased from $3,991,000 in the year
ended December 31, 1996 to $11,851,000 in the year ended December 31, 1997,
reflecting the increased unit sales volume in the microbiology product line and
the addition of the ESP(TM) Product Line. Cost of sales for the cytopathology
business of $1,557,000 and $1,389,000 for 1997 and
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<PAGE> 16
1996, respectively.
GROSS MARGINS
Gross margins increased from 35.9% in the year 1996
to 38.0% in the year 1997, reflecting the unit growth in microbiology sales
including the ESP(TM) product line acquisition. Cytopathology recorded an
operating loss of $685,000 reflecting unabsorbed volume variances of the
cytopathology product line. The unabsorbed costs relate mainly to overhead costs
associated with expanding manufacturing capacity of that product line which
could not be capitalized.
OPERATING EXPENSES
General and administrative expenses increased from
$4,982,000 in the year 1996 to $7,891,000 in 1997, a 60% increase, due primarily
to increases in staffing, office, professional fees, and investor relations
efforts.
Research and development expenses increased from
$3,110,000 in the year 1996 to $5,315,000 in the year 1997, a 71% increase, due
primarily to increased spending as a result of the ESP(TM) acquisition in the
microbiology area.
Sales and marketing expenses increased from
$2,465,000 in the year 1996 to $4,289,000 in the year 1997, a 74% increase, due
to the expansion of the sales staff for the ESP(TM) acquisition.
Interest expense of $3,584,000 in fiscal year 1997
reflected amounts accrued on the three year notes issued in March 1997, the $1.9
million write-off of the "in the money" conversion feature of those motes, and
installment and bridge financing received in the third quarter. The interest
expense for 1996 of $458,000 reflected non-cash interest incurred for issuance
of warrants connected with notes payable repaid in 1996.
OTHER INCOME
The Company realized net other income of $2,700,000
for fiscal year 1996 compared to net other income of $24,000 for fiscal year
1997. The primary reason for the decrease was the recognition of $3,500,000 in
licensing fee income for fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES
Sales revenues for the year ended December 31, 1996
increases to $6,200,000 compared to $515,000 for the year ended September 30,
1995, due primarily to the increase in sales in the microbiology product line
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 the original Alamar microbiology products.
COST OF SALES
Cost of sales increased from $1,400,000 in fiscal
year 1995 to $4,000,000 in fiscal year 1996, reflecting the expansion of sales
volume and broadening of the microbiology product line. Fiscal 1996 also
reflected costs associated with the ramp-up of cytopathology product line
production and costs related to the transfer of manufacturing certain
microbiology products to a third party.
OPERATING EXPENSES
General and administrative expenses increased from
$2,000,000 in fiscal year 1995 to $4,900,000 in fiscal year 1996, primarily due
to increases in staffing and relocation costs, professional fees, and investor
relations efforts.
Research and development expenses increased from
$387,000 in fiscal year 1995 to $3,100,000 in the year ended December 31, 1996.
This reflected the Company's reinstatement of an active research and
development program in both the cytopathology and microbiology division.
Acquired research and development expenses for
fiscal 1996 were $6,000,000. These expenses represent the write-off of
$3,500,000 of in-process research and development cost which arose from the
Merger and $2,500,000 which arose from the RADCO and Oncometrics acquisitions.
The Company had no comparable expenses in fiscal 1995.
Sales and marketing expenses increased from $309,000
in fiscal 1995 to $2,500,000 in fiscal year 1996. This increase is attributed
to the expansion of sales staffs for both product lines, additional support
staff to service new distribution relationships, and the establishment of a
client service center. In fiscal 1995, the Company had curtailed selling
efforts to focus resources on pursuing patent infringement litigation.
OTHER INCOME
The Company realized net other income of $2,700,000
for fiscal year 1996 compared to net other expenses of $52,000 for fiscal year
1995. The primary reason for the increase was the full recognition of a
$3,500,000 licensing fee. Fiscal year 1996 also reflect the $124,000 on-third
minority interest share in the net operating loss of Oncometrics. The 1996
amounts were somewhat offset by the increase of $412,000 in interest expense
for the period.
THREE MONTHS ENDED DECEMBER 31, 1995
The three months ended December 31, 1995, represents
the transition period resulting from the change in the Company's fiscal year-end
from September 30 to December 31. General and administrative costs primarily
reflect legal expenses related to subsequently resolved litigation, expenses of
relocating the Company's operations, and payments to AccuMed, Inc. for its
services pursuant to manufacturing, distribution and research and development
agreements pending consummation of the Merger. Acquired research and development
expenses of $32,000 reflect the curtailment of programs pending resolution of
the Merger. Acquired research and development expenses for the 1995 period were
$4,000,000 which represented the write-off of the in-process research and
development arising from the Merger of AccuMed, Inc. into the Company in
December, 1995. Sales and marketing expenses decreased 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> 17
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for research and
development expenses, including salaries, material and consulting support, to
develop and market new cytopathology products. During fiscal year 1997, the
Company has spent $17,495,000 for research and product development, scale-up of
cytopathology manufacturing capacity, sales and marketing efforts and other
general corporate purposes. The Company anticipates it will have no material
capital expenditures for 1998, and has no commitments outstanding in that
regard.
The microbiology division, including the ESP(TM) Product Line,
provided a positive cash flow from operations of $4,410,000 in fiscal year 1997,
which contributed to the operational cash needs of the cytopathology division.
The operating loss of the cytopathology division of $13,916,000 was also funded
by $1,718,000 from a private placement, $6,300,000 in bank loans and increased
accounts payable financing from its vendors. Management believes that existing
cash balances, internally generated funds and other financing sources will be
sufficient to finance the Company's projected operations through at least the
next 12 months.
Historically, the Company has been substantially dependent on
the private placements of its debt and equity securities and the proceeds of its
public offerings of securities to fund its cash requirements. From the initial
public offering in October 1992 through December 31, 1997, the Company has
raised approximately $43,000,000 in aggregate net proceeds from public offerings
and private placements of securities.
In March 1997, the Company closed a private placement,
resulting in the issuance of $8,500,000 of three year convertible notes bearing
interest at a rate of 12% per year and 850,000 detachable warrants. Of the
private placement proceeds, $6,130,000 (including $130,000 of interest) was used
to repay a $6,000,000 bridge loan used for the ESP(TM) Product Line acquisition
on March 3, 1997, $651,500 was used for issuance costs, and the remaining
$1,718,500 was retained to cover transition costs of the acquired business.
In September 1997, the Company received a $4,500,000 loan
secured by all assets of the Company, which was used to pay operating expenses
and related bridge loans. In October 1997, the Company entered into a one-year
revolving credit facility with the same lender. Under this arrangement, the
Company may borrow up to $4,000,000 on a revolving basis based on the amount of
eligible trade receivables. The proceeds from this were used for operational
expenses of both divisions. The Company had a credit line of $2,094,000 based on
borrowing base calculations at December 31, 1997, of which $220,000 was unused.
During the year 1997, the Company received a total of $668,000
upon the exercise of stock options and warrants and a $100,000 abatement of
investment banking fees. The money was used for cytopathology operating
expenses.
The decrease in net current assets of $2,335,000 as of
December 31, 1997 as compared to December 31, 1996 is due primarily to a
decrease in net current assets of the cytopathology division, partially offset
by an increase in net current assets relating to the Company's acquisition at
March 3, 1997 of the ESP(TM) Product Line.
The non-current warranty reserve liability was recorded as a
result of the acquisition of the ESP(TM) Product Line, and represents estimated
future costs to be borne by the Company to repair and replace equipment sold to
its customers. Management estimates the timing and
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<PAGE> 18
amount of the payments for such repairs will occur principally over the final
years of the equipment leases, which are scheduled to expire in the years 1999
through 2001.
The Company's NT server-based network and software are Year
2000 compliant. The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. This
could result in a system failure or miscalculations causing disruptions of
operations, including, but not limited to, a temporary inability to process
transactions, invoices or other similar normal business activities. Based on a
recent assessment, the Company has determined that no modifications of its
software are needed for its computer network to properly utilize data beyond
December 31, 1999. As a result, the Company does not anticipate any material
costs for modification of its computer systems in this regard.
In February 1998, the Commission declared effective the
Company's registration statement covering the resale of 3,770,000 shares of
Common Stock. At the time of effectiveness, 25,000 shares were outstanding,
1,025,000 shares were issuable upon exercise of warrants at an exercise price of
$3.125 per share and 2,720,000 shares were issuable upon conversion of the
Convertible Promissory Notes due 2000 ("Convertible Notes"). The Company
received no proceeds as a result of this registration. Subsequent to the
effective date of the registration statement, certain of the Convertible Notes
were exchanged for preferred stock and warrants. Accordingly, the Company will
file an amendment deregistering resale of the underlying shares.
On February 2, 1998, a director/shareholder loaned the Company
$1,000,000 repayable on the earlier of April 2, 1998 or upon the closing of a
securities offering in which the Company receives gross proceeds of at least
$3,000,000. The loan is unsecured and bears an interest rate of 12% per annum.
The Company also issued 100,000 five-year warrants at an exercise price of $1.56
per share (subject to adjustment) in connection with this loan. Pursuant to the
reset provisions of the warrants, the exercise price has been reduced to $0.75
per share. The $1,000,000 principal amount of this loan was exchanged for Common
Stock and warrants of the Company on March 19, 1998 in the private placement
described below.
In February 1998, the Company exchanged $5,275,000 in
principal amount of its Convertible Notes plus accrued interest thereon of
$329,000 for 1,245,000 shares of Series A Convertible Preferred Stock
(convertible into 4,900,000 shares of Common Stock at a conversion price of
$1.125 per share) and five-year warrants exercisable to purchase 1,245,000
shares of Common Stock at $1.125 per share (the "Note Exchange"). As a result of
the Note Exchange, the Company's net tangible assets increased by approximately
$4,700,000 and its interest expense will be reduced by approximately $1,294,000
through March 2000. The balance of $3,225,000 of the Convertible Notes remains
outstanding and unaffected by the Note Exchange.
On March 5, 1998, the Company announced that the Board of
Directors has authorized management to seek buyers for those aspects of the
Company's business that do not contribute to the development and marketing of an
integrated product line of imaging-based cytopathology systems and testing
procedures. The Company has received inquiries from parties who have expressed
interest in acquiring the Company's microbiology business. However there is
currently no agreement for such a sale. The Board and management believe, that
the Company's future depends on the success of the AcCell(TM) Cytopathology
System and directly related technologies. This divestiture would allow the
Company to commit its resources to support and market the cytopathology product
line and build upon the AcCell(TM) platform. On January 30, 1998, the Board
voted not to complete the equity carve-out of the research and
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<PAGE> 19
development portion of its cytopathology business as previously announced.
In March 1998, the Company sold an aggregate of 8,686,666
shares of Common Stock and seven-year warrants to purchase an aggregate of
8,686,666 shares of Common Stock at an exercise price of $0.75 per share, for
gross proceeds of $6,515,000 and net proceeds of approximately $5,910,000, after
payment of fees, commissions and expenses related to the private placement. The
Company issued seven-year warrants to purchase an aggregate of 1,337,333
warrants to finders and the placement agent, exercisable at $0.75 per share.
NEW ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share, regarding computation of Basic and
Diluted earnings per share (EPS) effective December 31, 1997. Basic EPS excludes
all dilution, while Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue Common Stock were exercised or
converted into Common Stock or resulted in the issuance of Common Stock that
then shared in the earnings of the Company. Adoption of this statement did not
have a material impact on the Company's Basic EPS for the reported fiscal years
as compared to primary EPS. Diluted EPS is not presented as the effect of the
adjustments are anti-dilutive.
SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, requires companies to disclosure information about segments
of an enterprise. The Company adopted SFAS No. 131 effective December 31, 1997,
and has included such information in the Notes to the Financial Statements for
the years ended December 31, 1997 and 1996. The effect of this disclosure did
not have a material effect on the financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed with this report
as pages F-1 through F-22 following the signature page:
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
ITEM 9. 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
sheet of AccuMed, Inc. as of December 31, 1994, and the statement of operations,
stockholder's 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
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statements of net sales, cost of sales, and selling expenses for the eight
months ended December 31, 1994 did not contain any adverse opinions or
disclaimers of opinions, or modifications as to the uncertainty, audit scope or
accounting principles, except that for the opinions related to AccuMed, Inc. 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 disagreement in
connection with its report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to executive officers is included
in this report in the last section of Part I under the caption "Executive
Officers of the Registrant". Information relating to directors appearing under
the caption "Election of Directors" in the definitive Proxy Statement for the
1998 Combined Annual and Special Meeting of Stockholders to be filed with the
Securities and Exchange Commission (the "Commission") within 120 days following
the Company's last fiscal year end is hereby incorporated herein by reference.
Information concerning compliance with Section 16(a) of the Securities Exchange
Act of 1934 appearing under the caption "Compliance With Reporting Requirements"
in the definitive Proxy Statement for the 1998 Combined Annual and Special
Meeting of Stockholders to be filed with the Commission is within 120 days
following the Company's last fiscal year end is hereby incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive
Compensation" contained in the definitive Proxy Statement for the 1998 Combined
Annual and Special Meeting of stockholders to be filed with the Commission
within 120 days following the Company's last fiscal year end is hereby
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security
Ownership of Certain Beneficial Owners and Management" contained in the
definitive Proxy Statement for the 1998 Combined Annual and Special Meeting of
Stockholders to be filed with the Commission within 120 days following the
Company's last fiscal year end is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Certain
Relationships and Related Transactions" contained in the definitive Proxy
Statement for the 1998 Combined Annual and Special Meeting of Stockholders to be
filed with the Commission within 120 days following the Company's last fiscal
year end is hereby incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS. The following financial statements are filed
as part of this report as pages F-1 through F-22 following the
signature page:
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(b) REPORTS ON FORM 8-K. The following Current Reports on form 8-K were
filed by the Company with the Securities and Exchange Commission during
the quarter ended December 31, 1997.
1. On October 9, 1997, Amendment No. 3 to Current Report on
Form 8-K/A dated October 15, 1996: Item 2 - Acquisition or
disposal of Assets-reporting the acquisition of Oncometrics
Imaging Corp. and Radco Ventures, Inc. and Item 7 - Financial
Statements and Exhibits, including the following financial
statements:
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Oncometrics Imaging Corp:
1. Independent Auditor's Report
2. Balance Sheets as of August 31,
1995, December 31, 1995, May 31,
1996 and September 30, 1996
(unaudited)
3. Statement of Operations and Deficit
for the 12 months ended August 31,
1995; four months ended December
31, 1995; five months ended May 31,
1996 and the four months ended
September 30, 1996 (unaudited)
4. Statement of Changed in Financial
Position for the 12 months ended
August 31, 1995; the four months
ended December 31, 1995; the five
months ended May 31, 1996 and the
four months ended September 30,
1996 (unaudited)
5. Notes to Financial Statements
Radco Ventures, Inc.:
1. Independent Auditor's Report
2. Balance Sheet as of September 30,
1996
3. Statement of Operations for the
period from March 6, 1996 (date of
incorporation) through September
30, 1996
21
<PAGE> 22
4. Statement of Stockholder's Equity
(Deficit) for the period from March
6, 1996 (date of incorporation)
through September 30, 1996
5. Statement of Cash flows for the
period from March 6, 1996 (date of
incorporation) through September
30, 1996
6. Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION:
AccuMed International, Inc.:
1. Pro Forma Condensed Combining
Balance Sheet as of September 30,
1996.
2. Pro Forma Condensed Combining
Statement of Operations for the 9
months ended September 30, 1996.
3. Pro Forma Condensed Combining
Statement of Operations for the 3
months ended December 31, 1995.
4. Notes to the Pro Forma Condensed
Consolidated Financial Statements.
2. On December 9, 1997, Amendment No. 5 to Current Report on
From 8-K dated March 3, 1997: Item 2 - Acquisition or Disposal of Assets -
reporting the acquisition of the ESP(TM) Culture System II product line, and
Item 7 - Financial Statements and Exhibits, including the following financial
statements:
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Net Assets Sold of Difco Microbiology
Systems, Inc.
1. Independent Auditor's Report
2. Statement of Net Assets Sold as of
December 31, 1996 and December 31,
1995.
3. Statement of Revenues and Expenses
for the year ended December 31,
1996 and December 31, 1995.
4. Statement of Changes in Equity of
Net Assets sold for the year ended
December 31, 1996 and December 31,
1995.
5. Statement of Cash Flows from Net
Assets sold for the year ended
December 31, 1996 and December 31,
1995.
6. Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION:
AccuMed International, Inc.:
1. Pro Forma Condensed Consolidated
Balance
22
<PAGE> 23
Sheet of December 31, 1996.
2. Pro Forma Condensed Consolidated
Statement of Operations for the 12
months ended December 31, 1996.
3. Notes to the Pro Forma Condensed
Consolidated Financial Statements.
(c) EXHIBITS. The following exhibits are filed
herewith.
Exhibit
No. Description of Exhibit
3.1 Certificate of Incorporation of the Registrant. (1)
3.2 Certificate of Amendment to Registrant's Certificate of Incorporation.
(14)
3.3 Certificate of Designation, Rights and Preferences of Series A
Convertible Preferred Stock. (15)
3.4 Certificate of Correction to Certificate of Designation, Rights and
Preferences of Series A Convertible Preferred Stock. (15)
3.5 Bylaws of the Registrant. (1)
3.6 Amendment No. 1 to Bylaws of the Registrant.
4.1 Specimen stock certificate for Common Stock. (1)
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 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 Joyce L. Wallach dated as
of November 25, 1996. (4)(16)
10.5 Employment Agreement between the Registrant and Michael D. Burke dated
May 23, 1997. (4)(17)
10.6 Separation Agreement and General Release between the Registrant and
Michael D. Burke dated December 31, 1997. (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)
10.10 License and Distribution Agreement dated February 20, 1996
23
<PAGE> 24
between the Registrant and BioKit, S.A. (1)
10.11 Addendum to License and Distribution Agreement dated February 20, 1996
between the Registrant and BioKit, S.A.
10.12 1995 Stock Option Plan. (1)(4)
10.13 Amendment No. 1 to the Registrant's 1995 Stock Option Plan.(4)(7)
10.14 Amendment No. 2 to the 1995 Stock Option Plan. (4)(16)
10.15 Amendment No. 3 to the 1995 Stock Option Plan. (4)
10.16 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)
10.17 Form of Non-Qualified Stock Option Agreement governing options granted
to employees and consultants under the 1995 Stock Option Plan. (1)(4)
10.18 Form of Incentive Stock Option Agreement governing options granted to
employees under the 1995 Stock Option Plan. (1)(4)
10.19 Amended and Restated 1990 Stock Option Plan. (4)(8)
10.20 Amendment No. 1 to Amended and Restated 1990 Stock Option Plan.(4)(16)
10.21 The Registrant's Amended and Restated 1992 Stock Option Plan.(10)(4)
10.22 Amendment No. 1 to Amended and Restated 1992 Stock Option Plan.(4)(16)
10.23 Lease between the Registrant and NCP, LTD dated February 20, 1995
pertaining to the offices located at 29299 Clemens, Suite I-K,
Westlake, Ohio 44145. (1)
10.24 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)
10.25 Rider 1 to Franklin Square Commercial Lease between the Registrant and
the Lumber Company dated May 30, 1996. (5)
10.26 Collaboration Agreement and Worldwide Exclusive License between the
Registrant and G&G Dispensing, Inc. dated March 22, 1994. (5)
10.27 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.
10.28 O.E.M. Supply Agreement between Olympus America, Inc., Precision
Instrument division and the Registrant dated May 31, 1996.(11)
10.29 Securities Purchase Agreement dated May 31, 1996 among the Registrant,
Kingdon Associates, L.P., Kingdon Partners, L.P., and Kingdon Offshore
N.V. (12)
24
<PAGE> 25
10.30 Share Purchase Agreement between the Registrant and Xillix Technologies
Corp. dated as of August 16, 1996. (10)
10.31 Subscription Agreement between the Registrant and Oncometrics Imaging
Corp. dated as of August 16, 1996. (10)
10.32 Stock Purchase Agreement by and among the Registrant, RADCO Ventures,
Inc. and the Selling Stockholders named therein dated as of August 15,
1996. (9)
10.33 Distribution Agreement by and between the Registrant and Fisher
Scientific Company, dated September 10, 1996. (11)+
10.34 Employment Agreement between the Registrant and Leonard R. Prange dated
September 9, 1996. (4)(9)
10.35 Security Agreement dated as of February 11, 1997 between the Registrant
and Oncometrics Imaging Corp. (16)
10.36 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. (16)
10.37 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. (16)
10.38 Loan Agreement dated as of February 19, 1997 among the Registrant and
Robert L. Priddy and Edmund H. Shea, Jr. (16)
10.39 Agency Agreement between the Registrant and Commonwealth Associates
dated as of March 3, 1997. (16)
10.40 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. (16)
10.41 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.
(16)
10.42 Form of Subscription Agreement between the Registrant and several
investors in the private placement consummated on March 13, 1997. (16)
10.43 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. (16)
10.44 Form of Warrant to Purchase Common Stock dated February 23, 1998
between the Registrant and Commonwealth Associates representing an
aggregate of 200,000 Common Stock purchase Warrants issued to
Commonwealth Associates and/or its designees in exchange for warrants
previously issued thereto in connection with the placement of 12%
Convertible Promissory Notes.
10.45 Manufacturing and License Agreement dated December 30, 1996, between
the Registrant and Salcom S.r.l. (16)
10.46 Asset Purchase Agreement dated as of March 3, 1997 between the
Registrant and Difco Microbiology Systems, Inc. (13)
25
<PAGE> 26
10.47 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. (16)
10.48 Transition Services and Facilities Agreement dated as of March 3, 1997
between the Registrant and Difco Laboratories Incorporated, a Michigan
corporation. (16)
10.49 Base Media License Agreement dated as of March 3, 1997 between the
Registrant and Difco Laboratories Incorporated. (16)
10.50 Sale and Leaseback Agreement between the Registrant and Leasetec, Inc.
(8)
10.51 License Agreement dated July 6, 1994, between the Registrant, Vanellus
AB, and Uppsala Bildbehandlings AB. (1)
10.52 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)(16)
10.53 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)(16)
10.54 O.E.M Supply Agreement between the Registrant and Leica Microscopie und
Systems GmbH dated as of May 26, 1996. (17)
10.55 Manufacturing and Supply Agreement between the Registrant and RELA,
Inc. dated as of May 26, 1997. (17)
10.56 Equipment Loan and Security Agreement dated as of September 23, 1997
between the Registrant and Transamerica Business Credit Corporation.
(17)
10.57 Promissory Note No. 1 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.58 Promissory Note No. 2 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.59 Promissory Note No. 3 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.60 Loan and Security Agreement dated October 24, 1997 between the
Registrant as Borrower and Transamerica Business Credit Corporation as
Lender, and Schedule thereto.
10.61 Revolving Credit Note dated October 24, 1997 in the original principal
amount of $4,000,000 by the Registrant in favor of Transamerica
Business Credit Corporation.
10.62 Depository Account Agreement dated October 24, 1997 among Transamerica
Business Credit Corporation, the Registrant and Bank One, N.A.
(incorporated by reference to Exhibit 10.60 filed herewith).
10.63 Patent and Trademark Security Agreement dated as of October 24, 1997
between the Registrant and Transamerica Business Credit
26
<PAGE> 27
Corporation.
10.64 Security Agreement in Copyrighted Works dated as of October 24, 1997
between the Registrant and Transamerica Business Credit Corporation.
10.65 Promissory Note made August 18, 1997 by the Registrant in favor of
Robert L. Priddy representing indebtedness in the original principal
amount of $500,000.
10.66 Security Agreement dated as of August 18, 1997 between the Registrant
as Debtor and Robert L. Priddy as Secured Party.
10.67 Warrant Agreement dated as of August 18, 1997 between the Registrant
and Robert L. Priddy representing warrants to purchase 50,000 shares of
Common Stock.
10.68 Promissory Note made February 3, 1998 by the Registrant in favor of
Robert L. Priddy representing indebtedness in the original principal
amount of $1,000,000.
10.69 Security Agreement dated as of February 3, 1998 between the Registrant
as Debtor and Robert L. Priddy as Secured Party.
10.70 Warrant Agreement dated as of February 3, 1998 between the Registrant
and Robert L. Priddy representing warrants to purchase 100,000 shares
of Common Stock.
10.71 Description of Compensation Arrangements effective January 30, 1998 for
Paul F. Lavallee, the Registrant's Chairman, Chief Executive Officer
and President. (4)
10.72 Agency Agreement dated as of February 13, 1998, as amended by Amendment
No. 1 dated as of February 23, 1998, between the Registrant and
Commonwealth Associates pertaining to a Note Exchange Offer.
10.73 Warrant Agreement dated as of February 23, 1998 between the Company and
Commonwealth Associates, including form of Warrant Certificate attached
as Exhibit A thereto, representing an aggregate of 1,245,340 Common
Stock purchase Warrants issued to investors in a Note Exchange Offer.
(15)
10.74 Warrant Agreement dated March 19, 1998 between the Registrant and
Commonwealth Associates representing an aggregate of 350,000 Common
Stock purchase Warrants issued to Commonwealth Associates and/or its
designees in exchange for warrants issued thereto in connection with a
Note Exchange Offer.
10.75 Form of Subscription Agreement and Registration Rights Agreement dated
as of February 23, 1998 between the Registrant and each of the
investors in a Note Exchange Offer. (15)
10.76 Agency Agreement dated as of March 12, 1998, as amended by Amendment
No. 1 dated as of March 19, 1998, between the Registrant and
Commonwealth Associates pertaining to a private placement.
10.77 Warrant Agreement dated as of March 19, 1998, as amended by Amendment
No. 1 dated as of March 23, 1998, between the Registrant and
Commonwealth Associates pertaining to an aggregate of 8,686,667 Common
Stock purchase Warrants issued to investors in a private placement.
10.78 Form of Warrant Certificate representing an aggregate of
27
<PAGE> 28
8,686,667 Common Stock purchase Warrants issued to investors in a
private placement in March 1998.
10.79 Form of Warrant to Purchase Common Stock dated March 19, 1998 or March
23, 1998, including form of Warrant Certificate attached as Exhibit A
thereto, representing an aggregate of 1,337,333 Common Stock purchase
Warrants issued to Commonwealth Associates, Bellingham Capital
Industries, and Harold S. Blue and/or their respective designees in
connection with a private placement.
10.80 Form of Subscription Agreement and Registration Rights Agreement dated
March 19, 1998 or March 23, 1998 between the Registrant and each of the
investors in a private placement.
10.81 Second Amendment dated August 31, 1997 to O.E.M. Supply Agreement
between Olympus America, Inc., Precision Instrument division and the
Registrant dated May 31, 1996.
22.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand LLP.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
27.5 Financial Data Schedule
27.6 Financial Data Schedule
27.7 Financial Data Schedule
27.8 Financial Data Schedule
27.9 Financial Data Schedule
- ----------------
+ 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.
28
<PAGE> 29
(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 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.
(14) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Regis. No. 333-28125) filed with the Commission on May 30,
1997.
(15) Incorporated by reference to the Registrant's Current Report on Form
8-K dated March 20, 1998.
(16) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996.
(17) Incorporated by reference to Registrant's Quarterly Report on From
10-QSB for the quarter ended June 30, 1997.
(18) Incorporated by reference to Registrant's Quarterly Report on From
10-QSB for the quarter ended September 30, 1997.
(d) FINANCIAL STATEMENT SCHEDULES. The following
financial statement schedule is filed as part of this report as page F-24
following the signature page:
Schedule IX - Valuation and Qualifying Accounts
All other schedules required by Form 10-K Annual
Report have been omitted because they were not applicable, were included in the
notes to be consolidated financial statements, or were otherwise not required
under the instructions contained in Regulation S-X.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Dated: April 3, 1998 ACCUMED INTERNATIONAL, INC.
By: /s/ PAUL F. LAVALLEE
-----------------------------
Paul F. Lavallee, Chairman of
the Board and Chief Executive
Officer
(principal executive officer)
By: /s/ LEONARD R. PRANGE
-----------------------------
Leonard R. Prange, Chief
Financial Officer and Chief
Operating Officer (principal accounting officer)
Pursuant to the requirements of the Securities and Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and the dates so indicated.
Each Director of the registrant whose signature appears below,
hereby appoints Paul F. Lavallee and Leonard R. Prange, and each of them
individually as his attorney-in-fact to sign in his name and on his behalf as a
Director of the registrant, and to file with the Commission any and all
Amendments to this Annual report on Form 10-K to the same extent and with the
same effect as if done personally.
DATED: April 3, 1998 By: /s/ PAUL F. LAVALLEE
---------------------
Paul F. Lavallee, Chairman
DATED: April 3, 1998 By: /s/ PETER P. GOMBRICH
----------------------
Peter P. Gombrich, Director
DATED: April 3, 1998 By: /s/ JACK H. HALPERIN
----------------------
Jack H. Halperin, Director
DATED: April 3, 1998 By: /s/ JOSEPH W. PLANDOWSKI
-------------------------
Joseph W. Plandowski, Director
DATED: April 3, 1998 By: /s/ LEONARD M. SCHILLER
------------------------
Leonard M. Schiller, Director
30
<PAGE> 31
DATED: __________, 1998 By:
---------------------
Robert L. Priddy, Director
DATED: __________, 1998 By:
---------------------
J. Donald Gaines, Director
31
<PAGE> 32
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report ...................................... F-2
Report of Independent Accountants ................................. F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996 ...... F-4
Consolidated Statement of Operations for the Years Ended
December 31, 1997 and 1996, Three Months Ended December 31, 1995
and Year Ended September 30, 1995 ................................. F-5
Consolidated Statement of Stockholders' Equity for the Years Ended
December 31, 1997 and 1996, Three Months Ended December 31, 1995
and Year Ended September 30, 1995 ................................. F-6
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997 and 1996, Three Months Ended December 31, 1995
and Year Ended September 30, 1995 ................................. F-7
Notes to Consolidated Financial Statements ........................ F-8
</TABLE>
F-1
<PAGE> 33
Independent Auditors' Report
To the Board of Directors and Stockholders
AccuMed International, Inc.:
We have audited the accompanying consolidated balance sheets of AccuMed
International, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AccuMed
International, Inc. and subsidiaries as of December 31, 1997 and December 31,
1996, and the results of its operations and its cash flows for the years ended
December 31, 1997 and 1996, and the three months ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Chicago, IL
March 23, 1998
F-2
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders
Alamar Biosciences, Inc.
We have audited the accompanying balance sheets of Alamar Biosciences, Inc. as
of September 30, 1995 and 1994, and related statements of operations,
shareholders' equity, and cash flows for the years ended September 30, 1995,
1994, and 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provided a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alamar Biosciences, Inc., at
September 30, 1995 and 1994, and the results of its operations and its cash
flows for the years ended September 30, 1995, 1994 and 1993, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
is involved in litigation and is proposing to merge with another company. The
Company has taken certain actions to meet cash flow requirements, including a
reduction in work force, overhead and product development, until the disputes
can be resolved. There can be no assurance that the Company's efforts related
to the lawsuit will be successful. In addition, there can be no assurance that
combined operations of the proposed merger will produce the necessary cash flow
required. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
/s/ Coopers & Lybrand L.L.P.
Sacramento, California
November 19, 1995
F-3
<PAGE> 35
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 469,639 $ 2,801,359
Restricted cash -- 100,000
Accounts receivable, net 4,664,152 2,143,596
Prepaid expenses and deposits 183,817 217,198
Production inventory 3,464,190 1,772,127
------------ ------------
Total current assets 8,781,798 7,034,280
------------ ------------
Fixed assets, net 5,178,528 1,696,071
------------ ------------
Notes receivable 164,199 214,273
Deferred financing costs 640,224 --
Purchased technology 4,950,753 5,340,411
Other assets 833,215 194,507
------------ ------------
$ 20,548,717 $ 14,479,542
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,590,022 $ 3,031,033
Payroll and related accruals 458,794 95,211
Accrued interest 441,100 --
Other current liabilities 660,842 241,301
Notes payable 1,888,273 173,455
Current portion of debt and capital lease obligations 700,000 114,910
------------ ------------
Total current liabilities 7,739,031 3,655,910
------------ ------------
Warranty reserves 467,299 --
Long term debt 11,454,755 230,795
Minority interest 154,560 456,841
------------ ------------
12,076,614 687,636
------------ ------------
Stockholders' equity
Preferred stock, 5,000,000 authorized; 382,500 Series A
8% Cumulative -- --
Common stock, $0.01 par value, 50,000,000 shares
authorized, 22,728,868 shares issued and outstanding
at Dec. 31, 1997, 20,854,157 at December 31, 1996 227,289 208,542
Additional paid-in capital 51,953,823 44,424,646
Cumulative translation adjustment 22,586 32,586
Accumulated deficit (51,253,889) (34,335,313)
Less treasury stock, 37,956 shares at Dec. 31, 1997,
and 31,812 shares at December 31, 1996, respectively (216,737) (194,465)
------------ ------------
Total stockholders' equity 733,072 10,135,996
------------ ------------
Commitments and Contingencies
$ 20,548,717 $ 14,479,542
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 36
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended Year Ended
--------------------------------- December 31, September 30,
1997 1996 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 19,109,661 $ 6,222,449 $ 100,130 $ 514,776
Less cost of sales (11,850,692) (3,991,430) (338,730) (1,431,187)
------------ ------------ ------------ -----------
Gross profit (loss) 7,258,969 2,231,019 (238,600) (916,411)
------------ ------------ ------------ -----------
Operating expenses:
General and administrative 7,891,320 4,927,657 1,418,797 2,094,890
Acquired research and development -- 5,957,927 3,965,000 --
Research and development 5,315,411 3,110,426 32,600 386,882
Asset impairment 3,582,068 -- -- --
Sales and marketing 4,289,447 2,464,668 7,197 309,208
------------ ------------ ------------ -----------
Total operating expenses 21,078,246 16,460,678 5,423,594 2,790,980
------------ ------------ ------------ -----------
Operating income (loss) (13,819,277) (14,229,659) (5,662,194) (3,707,391)
------------ ------------ ------------ -----------
Other income (expense):
Interest income 23,383 50,604 4,748 7,949
Interest expense (3,584,160) (458,214) (10,862) (46,657)
Other income (expense) 24,351 2,939,537 (72,929) (13,211)
Minority interest 437,127 123,919 -- --
------------ ------------ ------------ -----------
Total other income (expense) (3,099,299) 2,655,846 (79,043) (51,919)
------------ ------------ ------------ -----------
Loss before income taxes (16,918,576) (11,573,813) (5,741,237) (3,759,310)
Income tax expense -- -- 800 800
------------ ------------ ------------ -----------
Net loss $(16,918,576) $(11,573,813) $ (5,742,037) $ 3,760,110
============ ============ ============ ===========
Net loss per share - Basic $ (0.77) $ (0.68) $ (0.49) $ (0.59)
============ ============ ============ ===========
Weighted average common shares outstanding 22,052,929 16,975,470 11,742,980 6,375,627
============ ============ ============ ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 37
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balances at September 30, 1994 4,844,294 $ 48,443 $ 14,555,950 $(13,259,353)
------------ ------------ ------------ ------------
Issuances of common stock 6,085,045 60,850 3,309,636 --
Issuances of warrants -- -- 142,500 --
Net loss -- -- -- (3,760,110)
------------ ------------ ------------ ------------
Balances at September 30, 1995 10,929,339 $ 109,293 $ 18,008,086 $(17,019,463)
------------ ------------ ------------ ------------
Issuances of common stock 4,501,845 45,019 4,984,557 --
Issuances of warrants -- -- 308,252 --
Warrants exercised 140,000 1,400 33,600 --
Net loss -- -- -- (5,742,037)
------------ ------------ ------------ ------------
Balances at December 31, 1995 15,571,184 155,712 23,334,495 (22,761,500)
------------ ------------ ------------ ------------
Issuances of common stock 4,280,955 42,810 17,838,083 --
Issuances of warrants -- -- 1,689,464 --
Stock options exercised 578,732 5,787 744,587 --
Warrants exercised 256,700 2,567 741,558 --
Conversion of debt 166,586 1,666 76,459 --
Cumulative translation adjustment -- -- -- --
Shares received in litigation settlement -- -- -- --
Net loss -- -- -- (11,573,813)
------------ ------------ ------------ ------------
Balances at December 31, 1996 20,854,157 208,542 44,424,646 (34,335,313)
------------ ------------ ------------ ------------
Issuances of common stock 71,360 713 205,576 --
Issuances of warrants -- -- 3,187,606 --
Stock options exercised 361,860 3,619 404,942 --
Warrants exercised 500,536 5,005 254,624 --
Refund of stock issuance fees, net -- -- 74,877 --
Cumulative translation adjustment -- -- -- --
Shares received in litigation settlement -- -- -- --
Contingent shares issued 940,955 9,410 3,401,552 --
Net loss -- -- -- (16,918,576)
------------ ------------ ------------ ------------
Balances at December 31, 1997 22,728,868 $ 227,289 $ 51,953,823 $(51,253,889)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
TRANSLATION TREASURY STOCKHOLDERS'
ADJUSTMENT STOCK EQUITY
------------ ------------ ------------
<S> <C> <C> <C>
Balances at September 30, 1994 $ -- $ -- $ 1,345,040
------------ ------------ ------------
Issuances of common stock -- -- 3,370,486
Issuances of warrants -- -- 142,500
Net loss -- -- (3,760,110)
------------ ------------ ------------
Balances at September 30, 1995 -- -- 1,097,916
------------ ------------ ------------
Issuances of common stock -- -- 5,029,576
Issuances of warrants -- -- 308,252
Warrants exercised -- -- 35,000
Net loss -- -- (5,742,037)
------------ ------------ ------------
Balances at December 31, 1995 -- -- 728,707
------------ ------------ ------------
Issuances of common stock -- -- 17,880,893
Issuances of warrants -- -- 1,689,464
Stock options exercised -- -- 750,374
Warrants exercised -- -- 744,125
Conversion of debt -- -- 78,125
Cumulative translation adjustment 32,586 -- 32,586
Shares received in litigation settlement -- (194,465) (194,465)
Net loss -- -- (11,573,813)
------------ ------------ ------------
Balances at December 31, 1996 32,586 (194,465) 10,135,996
------------ ------------ ------------
Issuances of common stock -- -- 206,289
Issuances of warrants -- -- 3,187,606
Stock options exercised -- -- 408,561
Warrants exercised -- -- 259,629
Refund of stock issuance fees, net -- -- 74,877
Cumulative translation adjustment (10,000) -- (10,000)
Shares received in litigation settlement -- (22,272) (22,272)
Contingent shares issued -- -- 3,410,962
Net loss -- -- (16,918,576)
------------ ------------ ------------
Balances at December 31, 1997 $ 22,586 $ (216,737) $ 733,072
============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE> 38
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Three Months
Ended December 31 Ended Year Ended
---------------------------- December 31, September 30,
1997 1996 1995 1995
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(16,918,576) $(11,573,813) $(5,742,037) $(3,760,110)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,636,836 1,124,475 38,400 235,529
Provision for bad debts 268,728 108,160 -- 11,725
Write-off of debt discount 2,139,000 -- -- --
Write-off of in-process research and development -- 5,957,927 3,965,000 --
Write-off of impaired goodwill 3,582,068 -- -- --
Minority interest (437,127) (123,919) -- --
Expenses paid with issuance of stock or warrants -- 1,441,484 606,750 308,500
Non-cash gain on settlement (22,272) (194,465) -- --
Loss on asset disposals -- 74,706 -- 63,609
Changes in assets and liabilities:
Decrease (Increase) in restricted cash 100,000 263,000 (178,000) (185,000)
Decrease (Increase) in accounts receivable (578,619) (1,377,044) 107,906 259,420
Decrease (Increase) in prepaid expenses and deposits (83,953) (92,362) 1,833 20,035
Decrease (Increase) in production inventory (818,064) (629,007) 64,999 193,796
(Increase) in intangible and other assets (692,948) (33,316) 80,059 (1,525)
Increase in accounts payable 1,364,512 334,908 168,460 766,900
Decrease (Increase) in deferred financing costs (849,124) -- (750,352) (299,650)
Increase in other current liabilities 142,513 (688) 155,941 8,571
Increase (Decrease) in warranty reserves (332,701) -- -- --
Increase (Decrease) in deferred revenue (21,516) (1,307,482) 946,429 470,238
------------ ------------ ----------- -----------
Net cash used in operating activities (10,521,243) (6,027,436) (534,612) (1,907,962)
------------ ------------ ----------- -----------
Cash used in investing activities:
Purchase of fixed assets (1,208,130) (1,479,694) (62,196) (49,834)
Acquisition of business, net (6,000,000) (3,854,737) 48,237 --
------------ ------------ ----------- -----------
Net cash used in investment activities (7,208,130) (5,334,431) (13,959) (49,834)
------------ ------------ ----------- -----------
Cash flows from financing activities:
Proceeds from issuances of common stock, net 743,064 13,976,390 35,000 3,204,486
Notes receivable (issued) collected 50,074 (214,273) -- (700,000)
Payment of capital lease obligation (89,992) (89,907) (22,132) (50,115)
Proceeds from issuance of notes payable 14,994,373 1,025,000 -- --
Proceeds from bridge loan 6,000,000 592,551 -- --
Payment of notes payable and bridge loan (6,289,866) (1,339,629) -- --
------------ ------------ ----------- -----------
Net cash provided by financing activities 15,407,653 13,950,132 12,868 2,454,371
------------ ------------ ----------- -----------
Effect of exchange rate changes on cash (10,000) 32,586 -- --
------------ ------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents (2,331,720) 2,620,851 (535,703) 496,575
Cash and cash equivalents at beginning of period 2,801,359 180,508 716,211 219,636
------------ ------------ ----------- -----------
Cash and cash equivalents at end of period $ 469,639 $ 2,801,359 $ 180,508 $ 716,211
============ ============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 39
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
AccuMed International, Inc. and subsidiaries ("the Company") (formerly
Alamar Biosciences, Inc.) engage in the development and manufacturing of cost
effective screening instruments and systems for clinical diagnostic
laboratories, hospitals and others. These activities are conducted primarily in
the United States, the United Kingdom and Canada. The Company markets products
in two laboratory market segments: 1) Microbiology - proprietary disposable
products and automated instruments used to identify infectious organisms and
determine susceptibility to antimicrobial agents, and 2) Cytopathology - systems
made up of multiple instruments networked via proprietary software that support
the review and analysis of Pap smears. In 1995, the Company changed to a fiscal
year ending December 31.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of AccuMed
International, Inc. and its majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
Contract revenue from research agreements is recorded when earned and
as the related costs are incurred. Payments received related to future
performance are deferred and recognized as revenue when earned over future
performance periods. Product revenue is recognized when products are shipped to
customers.
Cash and Cash Equivalents
Cash and cash equivalents include cash held by financial institutions
and money market fund investments with original maturities of three months or
less.
Restricted Cash
Restricted cash represents security deposits for letters of credit and
escrow account arrangements. As such, these balances are not immediately
available to fund operations as of the balance sheet date indicated.
Inventories
Inventories consist primarily of raw materials, work in process and
finished product and are stated at the lower of cost (average cost) or market.
Cost is determined by the first-in first-out method (FIFO).
Property, Plant and Equipment
Property, plant and equipment 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.
Purchased Technology
Purchased technology consists principally of values assigned to
acquired proprietary technology. Such amounts are
F-8
<PAGE> 40
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
being amortized on a straight-line basis over the expected periods to be
benefited, generally 10 years. The Company assesses the recoverability of such
assets 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. The amount of impairment, if any, is measured based on
projected discounted future operating cash flows of the related acquired
businesses using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of these various assets will be impacted if
the estimated future operating cash flows are not achieved.
Deferred Financing Costs
Deferred financing costs are amortized over the term of the related
debt using the effective interest rate method.
Patents
The cost of patents is amortized straight line over the estimated
useful lives of the patent, generally 17 years.
Research and Development Costs
Research and development costs are charged to operations as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
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.
Earnings Per Share
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128 regarding computation of Basic and Diluted
earnings per share (EPS). Basic EPS excludes all dilution, while Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Adoption of this statement did not have a material impact on the
Company's Basic EPS for the reported fiscal years as compared to primary EPS.
Diluted EPS is not presented as the effect of the adjustments is anti-dilutive;
however, outstanding options and warrants may have a dilutive effect in future
years.
Warranty
Estimated future warranty obligations related to certain products are
provided by charges to operations in the period in which the related revenue is
recognized.
F-9
<PAGE> 41
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of trade receivables. The Company's trade
receivables result primarily from its microbiology operations and reflect a
broad customer base throughout the United States and Europe. At December 31,
1997 and 1996, respectively, the Company's foreign accounts receivable were
about $1,188,000 and $267,000.
Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the disclosure
of contingent assets and liabilities, and the reported amounts of revenues and
expenses to prepare these financial statements in conformity with generally
accepted accounting principles. Estimates are used when accounting for allowance
for uncollectable accounts receivable, inventory valuation, depreciation,
warranty costs, income taxes and contingencies, among others. Actual results
could be materially different from those estimates.
Valuation of Options and Warrants Issued
The Company utilizes the Black-Scholes pricing model to determine the
fair value of warrants and options issued in exchange for goods or services.
During 1996 and 1997, the Company incorporated the following assumptions into
the model: risk free rate - ranging from 6% to 7%, expected volatility - 20% and
expected dividend zero. The risk-free rate is determined based on the interest
rate of U.S. Government treasury obligations with a maturity date comparable to
the life of the option or warrant issued. Other assumptions, relating to option
life, strike price and stock price, are determined at the date the option or
warrant is issued.
Non-monetary Transactions
Non-monetary transactions are recorded based on the fair values of the
assets or services involved. Fair values are determined based on the assets
exchanged or received, whichever is more clearly evident.
General Information Regarding Reportable Segments of an Enterprise
Effective December 31, 1997, the Company adopted SFAS No. 131 regarding
disclosures about segments of an enterprise and related information. Refer to
Note 1 for a description of the types of products from which each reportable
segment derives its revenues and Note 19 for detailed segment information.
Reclassifications
Certain amounts in the 1996 financial statements have been reclassified
to conform to the 1997 presentation.
F-10
<PAGE> 42
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTS RECEIVABLE
Accounts receivable are carried at estimated net realizable value and
include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Trade receivables $ 5,058,972 $ 2,269,688
Allowance for doubtful accounts (394,820) (126,092)
----------- -----------
Total $ 4,664,152 $ 2,143,596
----------- -----------
</TABLE>
Bad debt expense was $268,728, $108,160 and $11,725 for the years ended
December 31, 1997, 1996 and September 30, 1995, respectively.
4. INVENTORIES
Inventories includes the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw material and packaging supplies $ 999,561 $ 828,985
Work in process 402,269 270,718
Finished goods 2,062,360 672,424
---------- ----------
Total $3,464,190 $1,772,127
---------- ----------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following at December 31:
<TABLE>
<CAPTION>
Estimated
Useful Life 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Equipment 3 - 5 Years $ 7,035,277 $ 2,051,134
Leasehold improvements 5 - 13 Years 964,392 544,892
------------ -----------
7,999,669 2,596,026
Less accumulated depreciation and amortization (2,821,141) (899,955)
------------ -----------
Total $ 5,178,528 $ 1,696,071
------------ -----------
</TABLE>
Maintenance and repair expenses for the years ended December 31, 1997,
1996, and September 30, 1995 were $166,720, $106,144 and $78,435 respectively.
There were no material construction commitments outstanding as of December 31,
1997.
F-11
<PAGE> 43
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER ASSETS
Other assets includes the following at December 31:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Patents, net of amortization $590,243 $194,507
Deposits for equipment 126,000 --
Other 116,972 --
-------- --------
Total $833,215 $194,507
-------- --------
</TABLE>
7. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred revenue $125,452 $146,968
Customer deposits 12,924 94,333
Current portion of warranty reserve 130,000 --
Accrued rent 31,000 --
Other 361,466 --
-------- --------
Total $660,842 $241,301
-------- --------
</TABLE>
8. NOTES PAYABLE
The Company entered into a revolving line of credit in October 1997,
the balance of which was $1,888,273 at December 31, 1997. Under terms of the
agreement, the Company may borrow up to 80% of eligible accounts receivable up
to $4,000,000. The line of credit expires in October, 1998, and is renewable for
up to three consecutive 1 year periods. The line is secured by substantially all
of the Company's assets and bears an interest rate of the higher of 9% or the
highest prime rate plus 2.5% (11% at December 31, 1997).
9. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996, respectively, consists of
the following:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
14.5% secured note payable in 48 equal monthly installments of principal and $ 4,085,055 $ --
interest of $113,400, through September 2001, with a balloon payment of
$675,000 due October 31, 2001; net of unamortized deferred financing costs of $181,200
12% unsecured convertible notes due March 13, 2000, net of unamortized 7,843,200 --
deferred financing costs of $656,800
Capitalized lease obligation -- 89,810
Non-interest bearing repayable contribution and other 226,500 255,895
----------- --------
Total long-term debt 12,154,755 345,705
Less current installments 700,000 114,910
----------- --------
Long-term debt, excluding current installments $11,454,755 $230,795
----------- --------
</TABLE>
F-12
<PAGE> 44
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The 12 % convertible notes payable are convertible into 2,720,000
shares of common stock, at a conversion price of $3.125 per share at any time
through the maturity date. See Note 20 regarding subsequent events related to
the conversion of a portion of these convertible notes into preferred stock.
The secured note payable agreement contains various financial
restrictions and covenants regarding lien restrictions and acquisition and sale
of assets and subsidiaries, and is secured by substantially all assets of the
Company.
The repayable contribution was received under a foreign government
program and calls for semi-annual installments based on future sales of product.
Management does not estimate any future sales that would result in a payment due
in the next fiscal year.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 700,000
1999 1,041,100
2000 8,845,000
2001 1,568,655
2002 --
Thereafter --
</TABLE>
10. 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 as of December 31, 1997. See Note 20
regarding subsequent events.
Warrants
At December 31, 1997, the Company had outstanding warrants to purchase
shares of Common Stock at any time through the expiration date as follows:
<TABLE>
<CAPTION>
Shares Price Expiration Date
------ ----- ---------------
<S> <C> <C>
825,000 $ 3.13 March, 1998
120,000 3.42 March, 1999
367,500 3.87 March, 1999
175,000 5.00 December, 1999
25,275 5.00 April, 2000
249,833 0.63 May, 2000
294,239 0.63 August, 2000
121,596 0.82 August, 2000
121,595 1.64 August, 2000
121,594 2.47 August, 2000
63,500 0.25 September, 2000
</TABLE>
F-13
<PAGE> 45
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C>
75,000 1.13 December, 2000
719,000 1.25 December, 2000
100,000 1.25 January, 2001
100,000 2.13 March, 2001
200,000 1.13 March, 2002
50,000 2.50 September, 2002
245,783 2.60 September, 2002
</TABLE>
Stock Option Plan
The Company has the following stock option plans for its employees,
directors and consultants: the 1990 plan, the 1992 plan, the 1995 plan and the
1997 plan. Terms of the plans are summarized as follows:
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, 1995 and 1997 plans, fair market value as determined by
the closing price of the Common Stock on the date of issuance as reported by
NASDAQ.
Vesting Period - A portion of the options granted to certain participants vest
immediately with the remaining options vesting on varying schedules not
exceeding six years from date of grant. Options granted to others vest on
varying schedules not exceeding six years from date of grant.
Shares Available - The maximum number of shares that may be issued under the
1995 Plan is 1,668,332 at December 31, 1997. On May 23, 1997 the board of
directors authorized up to 3,200,000 shares of common stock be reserved for the
1997 Plan.
At December 31, 1997, there were 2,605,681 additional shares available
for grant under the Plans.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its Stock Option Plans for employees. 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>
Year Ended December 31,
---------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net loss, as reported $ (16,918,576) $ (11,573,813)
Net loss, Pro-forma (17,906,072) (12,147,534)
Net loss per share, as reported $ (0.77) $ (0.68)
Net loss per share, Pro-forma (0.81) (0.72)
</TABLE>
Pro forma net loss and loss per share reflect only options granted
since December 31, 1994. 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.
F-14
<PAGE> 46
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Dividend yield 0% 0%
Volatility 20% 20%
Risk free interest rate 7% 7%
Expected term in years 10 10
</TABLE>
Stock option activity during the periods indicated was as follows:
<TABLE>
<CAPTION>
Weighted
Number of Average Exercise
Options Price
------- -----
<S> <C> <C>
Balance at December 31, 1995 1,586,845 $ 1.23
Granted 909,000 $ 4.99
Exercised (578,732) $ 1.30
Forfeited (182,084) $ 1.13
Expired -- --
---------
Balance at December 31, 1996 1,735,029 $ 3.15
Granted 1,616,398 $ 3.94
Exercised (361,860) $ 1.13
Forfeited (492,060) $ 5.70
Expired -- --
---------
Balance at December 31, 1997 2,497,507 $ 3.45
---------
</TABLE>
The fair value of options granted in 1997 and 1996 were $2.56 and
$4.88 per share, respectively. The following table summarizes information
about stock options outstanding as of December 31, 1997:
<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 $1.58 510,294 7.14 $1.12 494,197 $1.12
$1.59 to $3.98 1,845,713 8.89 3.78 302,179 2.94
$3.99 to $8.38 141,500 3.51 7.34 141,500 7.34
--------- -------
$0.63 to $8.38 2,497,507 8.23 3.45 937,876 2.64
--------- -------
</TABLE>
F-15
<PAGE> 47
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. INCOME TAXES
The net deferred tax assets and liabilities consist of the following at
December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $12,231,000 $ 8,165,000
Research and development credits 300,000 479,000
Other 745,000 604,000
----------- -----------
Total 13,276,000 9,248,000
Valuation allowance (13,276000) (9,248,000)
----------- -----------
Net deferred tax assets and liabilities $ -- $ --
----------- -----------
</TABLE>
At December 31, 1997, the Company had approximately $33,095,000 and
$14,966,000 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 2013 for federal purposes and from 2011 to
2013 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.
The Company has recorded a valuation allowance equal to the deferred
tax assets based on its continuing operating losses.
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.
12. WARRANTY RESERVE
The warranty reserve represents management's estimate of future costs
associated with repair or replacement of cytopathology and microbiology products
sold. The reserve balance on December 31, 1997 and 1996 was $597,000 and
$30,000, respectively. The estimated current warrant reserve of $130,000 as of
December 31, 1997 is included with other current liabilities.
13. LEASES
Operating Leases
The Company leases its facilities and certain office equipment under
operating type leases expiring at various dates through 2009. Rental expense is
recognized on a straight-line basis over the life of the lease. Total rental
expense for facilities and equipment during the years ended December 31, 1997
and 1996 was $812,000 and $485,000, respectively.
F-16
<PAGE> 48
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum annual lease payments under operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 701,000
1999 $ 703,000
2000 $ 705,000
2001 $ 672,000
2002 $ 676,000
Thereafter $ 762,000
</TABLE>
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing and financing activities:
During the year ended December 31, 1997, the Company issued common
stock and warrants for the payment of interest, fees, consideration for the
merger (see Note 16) and patents. The value of common stock and warrants issued
was $2,101,000, $77,500, $3,582,000 and $206,000, respectively. The Company
received common stock as compensation for a litigation settlement, valued at
$22,272 and recorded as treasury stock in the accompanying consolidated balance
sheet.
During the year ended December 31, 1996, the Company issued common
stock and warrants valued at $257,094 for the payment of expenses. A shareholder
returned previously issued shares to the Company as compensation for a
litigation settlement, valued at $194,465 and recorded as treasury stock in the
accompanying consolidated balance sheet.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Cash paid during the year for: 1997 1996
---------- -------
<S> <C> <C>
Interest $ 821,719 $76,350
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company is obligated to repurchase certain
equipment sold to a former distributor. Terms of the agreement call for maximum
payment of $340,000 to be paid in equal monthly installments over the next 10
months.
16. MERGER AND RELATED TRANSACTIONS
On December 29, 1995, the Company acquired all of the common stock of
AccuMed, Inc. and its wholly owned subsidiary ("AccuMed"). Pursuant to the terms
of the merger agreement, 1,881,910 shares of Common Stock and 126,945 warrants
were issued to AccuMed stockholders and warrantholders respectively, which were
contingent and subject to forfeiture if specified performance goals were not
achieved by the merged entity during the 24 months beginning January 1, 1996.
The contingency associated with 940,955 shares of Common Stock and 63,472
warrants was resolved (performance goal achieved) in March 1996 resulting in
contingent consideration of approximately $5,430,000. Such amount has been
allocated to acquired proprietary technology ($1,930,000) and in-process
research and development ($3,500,000). The acquired proprietary technology is
being amortized over the expected period to be benefited of ten years, with the
in-process research and development charged to operations during 1996. The
contingency associated with the remaining 940,955
F-17
<PAGE> 49
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
shares of Common Stock and 63,472 warrants was resolved (performance goal
achieved) in March 1997 resulting in contingent consideration of approximately
$3,582,000. Such amount has been recorded as goodwill associated with the merger
and charged off in its entirety to operations during 1997 as an impaired asset.
The acquisition of AccuMed was accounted for using the purchase method
of accounting, and, accordingly, the purchase price was allocated to the assets
purchased and liabilities assumed based upon the estimated 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 ($2,645,000) 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.
17. RELATED-PARTY TRANSACTIONS
In March 1997, the Company received a $6,000,000 bridge loan from a
director/shareholder of the Company. The loan was repaid 10 days later, together
with interest and a prepayment premium of $130,000. The Company used the
proceeds from this loan to purchase the ESP Product Line (see Note 18).
In September 1997, the Company received a $500,000 bridge loan from a
director/shareholder of the Company. The loan was repaid 30 days later, together
with interest and a prepayment premium of $10,000 and 50,000 5-year warrants to
purchase common stock of the Company at an exercise price of $2.50 per share.
The warrants were valued at $39,500 and recorded as interest expense in 1997.
During 1996, the Company issued 100,000 warrants valued at $230,000 to
an individual for consulting services. A major stockholder of the Company
received 687,500 warrants valued at $852,000 for consulting services. Also,
another related party received 85,000 options valued at $224,000 for consulting
services.
18. ACQUISITIONS
On March 3, 1997 the Company acquired the ESP Product Line for a total
purchase price of $6,000,000. The acquisition of the ESP Product Line was
accounted for using the purchase method of accounting, and, accordingly, the
purchase price was allocated to the assets purchased and liabilities assumed
based upon the estimated fair values at the date of acquisition. This treatment
resulted in no excess purchase price over the estimated fair value of the net
assets received. The operations associated with this acquisition have been
included in the consolidated statement of operations since the date of
acquisition.
The pro-forma results of operations of the Company giving effect to the
ESP Product Line acquisition as if it had occurred on January 1, 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Sales $ 21,748,783 $ 22,057,183
Net loss $(17,351,585) $(15,371,866)
Net loss per share $ (0.79) $ (0.91)
</TABLE>
F-18
<PAGE> 50
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On October 15, 1996, the Company acquired a two-thirds interest in
Oncometrics Imaging Corp. ("Oncometrics") for a total purchase price of
$4,000,000 which includes $2,000,000 to be used solely as working capital for
Oncometrics. 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 the fair values at the date of
acquisition. The excess purchase price consists of $1,645,200 of acquired
in-process research and development and $1,096,000 of purchased technology and
reflects the 33% minority interest holding. The Company's share of operations of
Oncometrics from the purchase date have been recorded in the Consolidated
Statement of Operations.
The pro-forma results of operations of the Company giving effect to the
Oncometrics acquisition as if it had occurred on October 1, 1995 are as follows:
<TABLE>
<CAPTION>
Three Months
Year ended Ended
December 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
Sales $ 6,235,892 $ 247,089
Net loss $(12,066,170) $ ( 5,876,285)
Net loss per share $ (0.71) $ (0.50)
</TABLE>
19. COMPANY SEGMENT AND RELATED INFORMATION
The Company has two reportable segments: 1) Microbiology - manufactures
and markets proprietary disposable products and automated instruments used to
identify infectious organisms and determine susceptibility to antimicrobial
agents, and 2) Cytopathology - manufactures and markets systems made up of
multiple instruments networked via proprietary software that support the review
and analysis of Pap smears.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on profit of loss from operations before income taxes not
including nonrecurring gains and losses and foreign exchange gains and losses.
The Company's reportable segments are strategic business units that
offer different products and services. They are managed separately because each
business requires different technology and manufacturing processes. Each
business was acquired as a unit, and the management at the time of the
acquisition was retained.
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS 1997 1996
-------------------------------- ------------- ---------------
<S> <C> <C>
Revenues from External Customers
Cytopathology $ 1,001,000 $ 1,412,000
Microbiology 18,109,000 4,810,000
</TABLE>
F-19
<PAGE> 51
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS 1997 1996
-------------------------------- ------------- ---------------
<S> <C> <C>
Intersegment Revenues
Cytopathology -- --
Microbiology -- --
Depreciation and Amortization Expense
Cytopathology 455,000 255,000
Microbiology 1,390,000 90,000
Segment Operating Profit (Loss)
Cytopathology (13,916,000) (12,886,000)
Microbiology 1,982,000 (923,000)
Segment Assets
Cytopathology 10,151,000 11,798,000
Microbiology 10,398,000 2,594,000
Expenditures for Segment Long-lived Assets
Cytopathology 852,000 1,350,000
Microbiology 3,596,000 580,000
</TABLE>
Reconciliations of reportable segment items are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Revenues
Total revenue for reportable segments $ 19,110,000 $ 6,222,000
Total consolidated revenue $ 19,110,000 $ 6,222,000
Profit or (loss)
Total profit or (loss) for reportable segments $(11,934,000) $ 6,222,000
Other corporate income (expenses) (1,838,000) (2,680,000)
Unallocated amounts
Interest expense (3,584,000) (458,000)
Minority Interest 437,000 124,000
------------ ------------
Income before income taxes $(16,919,000) $(11,574,000)
------------ ------------
Assets
Total assets for reportable segments $ 20,549,000 $ 14,392,000
Other assets -- 88,000
------------ ------------
Consolidated total assets $ 20,549,000 $ 14,480,000
------------ ------------
</TABLE>
Other Significant Items
<TABLE>
<CAPTION>
Segment Consolidated
Total Adjustments Total
------------ ------------ ------------
<S> <C> <C> <C>
1997 Expenditures for assets $ 4,448,000 $ (3,240,000) $ 1,208,000
</TABLE>
F-20
<PAGE> 52
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciling item to adjust expenditures for assets is the amount of assets
purchased in the ESP Product Line acquisition reported as part of the
acquisition of business, net in the Consolidated Statement of Cash Flows. None
of the other adjustments are significant.
<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION 1997 1996
---------------------- ------------- -----------
<S> <C> <C>
Net trade sales
United States $ 16,637,000 $ 4,543,000
United Kingdom 2,195,000 1,672,000
Canada 279,000 7,000
Interarea transfers
United States -- --
United Kingdom 1,217,000 1,170,000
Canada -- --
Eliminations (1,217,000) (1,170,000)
------------- -----------
Total $ 19,110,000 $ 6,222,000
------------- -----------
Long - Lived Assets
United States $ 9,379,000 $ 6,598,000
United Kingdom 331,000 268,000
Canada 420,000 170,000
------------- -----------
Total $ 10,130,000 $ 7,036,000
------------- -----------
</TABLE>
20. SUBSEQUENT EVENTS
On January 22, 1998, the Company filed a registration statement with
the Securities and Exchange Commission for the sale of 2,720,000 shares of its
Common Stock and 850,000 warrants to purchase shares of its Common Stock at a
price of $3.125 per share. This registration was for the shares underlying its
$8,500,000 12% convertible notes and the related 850,000 detachable warrants.
The Company received no proceeds as a result of this registration.
On February 2, 1998 a director/stockholder loaned the Company
$1,000,000 repayable on the earlier of April 2, 1998 or upon the closing of a
securities offering in which the Company receives gross proceeds of at least
$3,000,000. The loan is unsecured and bears an interest rate of 12% per annum.
The lender also received 100,000 5-year warrants to purchase Common Stock of the
Company at an exercise price of $1.56 per share.
On February 23, 1998, the Company agreed to exchange $5,275,000 in
principal amount of its 12% convertible notes due in March 2000 plus accrued
interest thereon of $329,030 for 1,245,340 shares of Series A Convertible
Preferred Stock (the "Preferred Stock") and 5-year warrants to purchase
1,245,340 shares of Common Stock at $1.125 per share. The Preferred Stock is
convertible into 4,981,360 shares of the Company's Common Stock at a conversion
price of $1.125 per share. The Company intends to register the Preferred Stock
and underlying Common Stock with the Securities and Exchange Commission during
1998.
F-21
<PAGE> 53
ACCUMED INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On March 23, 1998, the Company sold an aggregate of 8,686,666 shares of
common stock and seven-year warrants to purchase an aggregate of 8,686,888
shares of the Company's common stock at an exercise price of $0.75 per share,
for gross proceeds of $6,515,000 and net proceeds of approximately $5,910,000
after payment of fees, commissions and expenses related to the private
placement. Such offering is to be registered with the Securities and Exchange
Commission. The Company intends to use the net proceeds raised by such offering
for working capital purposes.
F-22
<PAGE> 54
Independent Auditors' Report
The Board of Directors and Stockholders
AccuMed International, Inc.:
Under date of March 23, 1998 we reported on the consolidated balance sheet of
AccuMed International, Inc. and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended and the three months ended December 31,
1995, as contained in the annual report on Form 10-K for the year 1997. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Chicago, IL
March 23, 1998
F-23
<PAGE> 55
Accumed International, Inc.
Schedule IX - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
Beginning costs and Other end of
Description of period expenses Retirements changes period
----------- --------- -------- ----------- ------- ------
<S> <C> <C> <C> <C> <C>
Reserves and allowances deducted
from asset accounts
Allowance for uncollectible
accounts receivable
Year ended September 30, 1995(b)
3 Months Ended December 31, 1995 $ 19,725 $ -- $ (1,793) $ -- $ 17,932
Year Ended December 31, 1996 $ 17,932 $108,160 $ -- $ -- $126,092
Year Ended December 31, 1997 $126,092 $268,728 $ -- $ -- $394,820
Reserves and allowances which support
balance sheet caption reserves
Warranty reserves
Year ended September 30, 1995(b)
3 Months Ended December 31, 1995 $ -- $ -- $ -- $ -- $ --
Year Ended December 31, 1996 $ -- $ 30,000 $ -- $ -- $ 30,000
Year Ended December 31, 1997 $ 30,000 $ -- $(332,701) $900,000(a) $597,299
</TABLE>
(a) reserves acquired through ESP product line acquisition on March 3,1997
(b) omitted due to immateriality
F-24
<PAGE> 56
INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
3.1 Certificate of Incorporation of the Registrant. (1)
3.2 Certificate of Amendment to Registrant's Certificate of Incorporation.
(14)
3.3 Certificate of Designation, Rights and Preferences of Series A
Convertible Preferred Stock. (15)
3.4 Certificate of Correction to Certificate of Designation, Rights and
Preferences of Series A Convertible Preferred Stock. (15)
3.5 Bylaws of the Registrant. (1)
3.6 Amendment No. 1 to Bylaws of the Registrant.
4.1 Specimen stock certificate for Common Stock. (1)
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 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 Joyce L. Wallach dated as
of November 25, 1996. (4)(16)
10.5 Employment Agreement between the Registrant and Michael D. Burke dated
May 23, 1997. (4)(17)
10.6 Separation Agreement and General Release between the Registrant and
Michael D. Burke dated December 31, 1997. (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)
10.10 License and Distribution Agreement dated February 20, 1996 between the
Registrant and BioKit, S.A. (1)
10.11 Addendum to License and Distribution Agreement dated February 20, 1996
between the Registrant and BioKit, S.A.
10.12 1995 Stock Option Plan. (1)(4)
10.13 Amendment No. 1 to the Registrant's 1995 Stock Option Plan.(4)(7)
10.14 Amendment No. 2 to the 1995 Stock Option Plan. (4)(16)
<PAGE> 57
10.15 Amendment No. 3 to the 1995 Stock Option Plan. (4)
10.16 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)
10.17 Form of Non-Qualified Stock Option Agreement governing options granted
to employees and consultants under the 1995 Stock Option Plan. (1)(4)
10.18 Form of Incentive Stock Option Agreement governing options granted to
employees under the 1995 Stock Option Plan. (1)(4)
10.19 Amended and Restated 1990 Stock Option Plan. (4)(8)
10.20 Amendment No. 1 to Amended and Restated 1990 Stock Option Plan.(4)(16)
10.21 The Registrant's Amended and Restated 1992 Stock Option Plan.(10)(4)
10.22 Amendment No. 1 to Amended and Restated 1992 Stock Option Plan.(4)(16)
10.23 Lease between the Registrant and NCP, LTD dated February 20, 1995
pertaining to the offices located at 29299 Clemens, Suite I-K,
Westlake, Ohio 44145. (1)
10.24 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)
10.25 Rider 1 to Franklin Square Commercial Lease between the Registrant and
the Lumber Company dated May 30, 1996. (5)
10.26 Collaboration Agreement and Worldwide Exclusive License between the
Registrant and G&G Dispensing, Inc. dated March 22, 1994. (5)
10.27 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. (16)
10.28 O.E.M. Supply Agreement between Olympus America, Inc., Precision
Instrument division and the Registrant dated May 31, 1996.(11)
10.29 Securities Purchase Agreement dated May 31, 1996 among the Registrant,
Kingdon Associates, L.P., Kingdon Partners, L.P., and Kingdon Offshore
N.V. (12)
10.30 Share Purchase Agreement between the Registrant and Xillix Technologies
Corp. dated as of August 16, 1996. (10)
10.31 Subscription Agreement between the Registrant and Oncometrics Imaging
Corp. dated as of August 16, 1996. (10)
10.32 Stock Purchase Agreement by and among the Registrant, RADCO Ventures,
Inc. and the Selling Stockholders named therein dated as of August 15,
1996. (9)
10.33 Distribution Agreement by and between the Registrant and Fisher
<PAGE> 58
Scientific Company, dated September 10, 1996. (11)+
10.34 Employment Agreement between the Registrant and Leonard R. Prange dated
September 9, 1996. (4)(9)
10.35 Security Agreement dated as of February 11, 1997 between the Registrant
and Oncometrics Imaging Corp. (16)
10.36 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. (16)
10.37 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. (16)
10.38 Loan Agreement dated as of February 19, 1997 among the Registrant and
Robert L. Priddy and Edmund H. Shea, Jr. (16)
10.39 Agency Agreement between the Registrant and Commonwealth Associates
dated as of March 3, 1997. (16)
10.40 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. (16)
10.41 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.
(16)
10.42 Form of Subscription Agreement between the Registrant and several
investors in the private placement consummated on March 13, 1997. (16)
10.43 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. (16)
10.44 Form of Warrant to Purchase Common Stock dated February 23, 1998
between the Registrant and Commonwealth Associates representing an
aggregate of 200,000 Common Stock purchase Warrants issued to
Commonwealth Associates and/or its designees in exchange for warrants
previously issued thereto in connection with the placement of 12%
Convertible Promissory Notes.
10.45 Manufacturing and License Agreement dated December 30, 1996, between
the Registrant and Salcom S.r.l. (16)
10.46 Asset Purchase Agreement dated as of March 3, 1997 between the
Registrant and Difco Microbiology Systems, Inc. (13)
10.47 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. (16)
10.48 Transition Services and Facilities Agreement dated as of March 3, 1997
between the Registrant and Difco Laboratories Incorporated, a Michigan
corporation. (16)
<PAGE> 59
10.49 Base Media License Agreement dated as of March 3, 1997 between the
Registrant and Difco Laboratories Incorporated. (16)
10.50 Sale and Leaseback Agreement between the Registrant and Leasetec, Inc.
(8)
10.51 License Agreement dated July 6, 1994, between the Registrant, Vanellus
AB, and Uppsala Bildbehandlings AB. (1)
10.52 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)(16)
10.53 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)(16)
10.54 O.E.M Supply Agreement between the Registrant and Leica Microscopie und
Systems GmbH dated as of May 26, 1996. (17)
10.55 Manufacturing and Supply Agreement between the Registrant and RELA,
Inc. dated as of May 26, 1997. (17)
10.56 Equipment Loan and Security Agreement dated as of September 23, 1997
between the Registrant and Transamerica Business Credit Corporation.
(17)
10.57 Promissory Note No. 1 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.58 Promissory Note No. 2 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.59 Promissory Note No. 3 dated as of September 30, 1997 by the Registrant
in favor of Transamerica Business Credit Corporation in the original
principal amount of $1,500,000. (17)
10.60 Loan and Security Agreement dated October 24, 1997 between the
Registrant as Borrower and Transamerica Business Credit Corporation as
Lender, and Schedule thereto.
10.61 Revolving Credit Note dated October 24, 1997 in the original principal
amount of $4,000,000 by the Registrant in favor of Transamerica
Business Credit Corporation.
10.62 Depository Account Agreement dated October 24, 1997 among Transamerica
Business Credit Corporation, the Registrant and Bank One, N.A.
(incorporated by reference to Exhibit 10.60 filed herewith).
10.63 Patent and Trademark Security Agreement dated as of October 24, 1997
between the Registrant and Transamerica Business Credit Corporation.
10.64 Security Agreement in Copyrighted Works dated as of October 24, 1997
between the Registrant and Transamerica Business Credit Corporation.
10.65 Promissory Note made August 18, 1997 by the Registrant in favor of
Robert L. Priddy representing indebtedness in the original principal
amount of $500,000.
10.66 Security Agreement dated as of August 18, 1997 between the
<PAGE> 60
Registrant as Debtor and Robert L. Priddy as Secured Party.
10.67 Warrant Agreement dated as of August 18, 1997 between the Registrant
and Robert L. Priddy representing warrants to purchase 50,000 shares of
Common Stock.
10.68 Promissory Note made February 2, 1998 by the Registrant in favor of
Robert L. Priddy representing indebtedness in the original principal
amount of $1,000,000.
10.69 Security Agreement dated as of February 2, 1998 between the Registrant
as Debtor and Robert L. Priddy as Secured Party.
10.70 Warrant Agreement dated as of February 2, 1998 between the Registrant
and Robert L. Priddy representing warrants to purchase 100,000 shares
of Common Stock.
10.71 Description of Compensation Arrangements effective January 30, 1998 for
Paul F. Lavallee, the Registrant's Chairman, Chief Executive Officer
and President. (4)
10.72 Agency Agreement dated as of February 13, 1998, as amended by Amendment
No. 1 dated as of February 23, 1998, between the Registrant and
Commonwealth Associates pertaining to a Note Exchange Offer.
10.73 Warrant Agreement dated as of February 23, 1998 between the Company and
Commonwealth Associates, including form of Warrant Certificate attached
as Exhibit A thereto, representing an aggregate of 1,245,340 Common
Stock purchase Warrants issued to investors in a Note Exchange Offer.
(15)
10.74 Warrant Agreement dated March 19, 1998 between the Registrant and
Commonwealth Associates representing an aggregate of 350,000 Common
Stock purchase Warrants issued to Commonwealth Associates and/or its
designees in exchange for warrants issued thereto in connection with a
Note Exchange Offer.
10.75 Form of Subscription Agreement and Registration Rights Agreement dated
as of February 23, 1998 between the Registrant and each of the
investors in a Note Exchange Offer. (15)
10.76 Agency Agreement dated as of March 12, 1998, as amended by Amendment
No. 1 dated as of March 19, 1998, between the Registrant and
Commonwealth Associates pertaining to a private placement.
10.77 Warrant Agreement dated as of March 19, 1998, as amended by Amendment
No. 1 dated as of March 23, 1998, between the Registrant and
Commonwealth Associates pertaining to an aggregate of 8,686,667 Common
Stock purchase Warrants issued to investors in a private placement.
10.78 Form of Warrant Certificate representing an aggregate of 8,686,667
Common Stock purchase Warrants issued to investors in a private
placement in March 1998.
10.79 Form of Warrant to Purchase Common Stock dated March 19, 1998 or March
23, 1998, including form of Warrant Certificate attached as Exhibit A
thereto, representing an aggregate of 1,337,333 Common Stock purchase
Warrants issued to Commonwealth Associates, Bellingham Capital
Industries, and Harold S. Blue and/or their respective designees in
connection with a private placement.
<PAGE> 61
10.80 Form of Subscription Agreement and Registration Rights Agreement dated
March 19, 1998 or March 23, 1998 between the Registrant and each of the
investors in a private placement.
10.81 Second Amendment dated August 31, 1997 to O.E.M. Supply Agreement
between Olympus America, Inc., Precision Instrument division and the
Registrant dated May 31, 1996.
22.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand LLP
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
27.5 Financial Data Schedule
27.6 Financial Data Schedule
27.7 Financial Data Schedule
27.8 Financial Data Schedule
27.9 Financial Data Schedule
- ----------------
+ 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.
<PAGE> 62
(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 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.
(14) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Regis. No. 333-28125) filed with the Commission on May 30,
1997.
(15) Incorporated by reference to the Registrant's Current Report on Form
8-K dated March 20, 1998.
(16) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996.
(17) Incorporated by reference to Registrant's Quarterly Report on From
10-QSB for the quarter ended June 30, 1997.
(18) Incorporated by reference to Registrant's Quarterly Report on From
10-QSB for the quarter ended September 30, 1997.
<PAGE> 1
EXHIBIT 3.6
Amendment No. 1 to Bylaws
of
AccuMed International, Inc.
Pursuant to a resolution of the Board of Directors of AccuMed
International, Inc. (the "Company") adopted March 23, 1998, and in accordance
with Article IX, Section 1 of the Bylaws of the Company, such Bylaws are hereby
amended as follows.
1. Article III, Section 1 is hereby deleted in its entirety and the
following is inserted in lieu thereof:
ARTICLE III
Directors
Section 1. The board of directors shall consist of a minimum of seven
and a maximum of nine members, as determined from time to time by resolution of
the board of directors. Such directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and shall
hold office until their successors are elected and qualified or until their
earlier resignation or removal. Directors need not be stockholders.
All other provisions of the Bylaws shall remain in full force and
effect. A copy of this Amendment No. 1 to Bylaws shall be inserted in the
Company's minute book.
Respectfully submitted,
/s/ JOYCE L. WALLACH
--------------------------------
Joyce L. Wallach, Secretary
<PAGE> 1
EXHIBIT 10.6
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release is entered into as of the
31st day of December 1997 by Michael D. Burke ("Burke") and AccuMed
International, Inc., its subsidiaries. parent and affiliated companies,
and respective past and present officers, directors, attorneys,
employees, and agents of these companies (collectively referred to as
"AccuMed" or "Company"):
WHEREAS, Burke and AccuMed have engaged in discussions resulting
in the separation of Burke's employment relationship with AccuMed
effective December 31, 1997;
WHEREAS, Burke and AccuMed have had a full opportunity to review
and consider this document;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, it is agreed by and between the parties as
follows:
1. It is understood and agreed that this Separation Agreement and
General Release does not constitute an admission by AccuMed or Burke
that any action taken with respect to the other was unlawful or
wrongful, or in violation of any federal, state, or local law,
constitution, policy, rule, or regulation, or of any express or implied
contract. Instead, this Separation Agreement and General Release Is
entered into solely for the purpose of compromise and to fully resolve
all matters which may have arisen, or may arise, out of Burke's
employment with, and termination of employment from, AccuMed,
2. In consideration for the promises by Burke berein and the
execution by Burke of this Separation Agreement and General Release, and
in settlement of any and all claims Burke may have against AccuMed,
AccuMed agrees to'pay Burke the following:
a) Nine (9) months salary continuation on the same
terms and pay practices as currently existing and
in the gross amount of $131,250, less applicable
federal, state, and local taxes;
b) Four (4) weeks vacation pay in the gross amount of
$I 3,462, less applicable federal, state, and local
taxes;
c) Continuation of existing employee benefits for nine
(9) months through the end of September, 1998 upon
which Burke shall be eligible for continuation
coverage in accordance with the Consolidated
Omnibus Budget Reconciliation Act ("COBRA"), Burke
acknowledges that he has been advised of his rights
under COBRA;
<PAGE> 2
d) Continuation of all existing car allowance payments
not to exceed a total of $5,000 for Burke's auto;
e) Outplacement assistance not to exceed a total of
$15,000 following Burke's December 31, 1997,
effective termination date. Any outplacement
assistance must be provided by Lawrence & Allen, or
another outplacement firm mutually agreed upon by
Burke and AccuMed, with the fees to be paid by
AccuMed directly to the firm within five (5)
business days after its receipt of an invoice;
f) Relocation benefits in accordance with existing
Company policy not to exceed a total of $25,000, to
be paid by the Company upon submission to the
Company by Burke of proper receipts, such $25,000
amount to be upwardly adjusted for any tax effects
incurred by Burke, pursuant to the Company's
policy:
g) All proper business "expenses incurred, minus all
advances received, Burke acknowledges that he has
submitted to the Company all outstanding expenses
incurred to date in accordance with Company policy;
h) AccuMed agrees that the Payments described above to
the extent incurred to date for Vacation,
relocation, and business expenses shall be payable
by certified check to be delivered to Burke
simultaneously with the execution hereof.
Upon the death of Burke, any benefits payable with respect to his
participation in any employee benefit plans or programs shall be paid
in accordance with the applicable terms of such plans and programs, and
any other payments remaining to be made pursuant to this Section 2
shall be paid to such person(s) or trust(s) as shall have been
designated by written notice delivered to the Company by Burke. If no
such person(s) or trust(s) have been so designated, such payments shall
be made to Burke's estate.
3. Burke agrees that he will be a Consultant of the Company
through September 30, 1999, and that the compensation set forth in
paragraph 2(a) above, in addition to any expense reimbursed, will be
the only compensation due for his consulting services. In his
consulting capacity, Burke agrees, among other things, to assist
Accumed with the smooth transition of his duties and responsibilities
and the integration of the Microbiology and Cytology business.
<PAGE> 3
Burke will make himself generally available, offsite and by telephone,
to the extent reasonably practicable for these duties.
4. AccuMed agrees that Burke shall be eligible for stock options
vesting through December 31, 1997, the date upon which his
employment Shall terminate. Burke agrees that he is not eligible for
a fourth quarter bonus under the sales bonus plan and acknowledges
that his rights if any, to any additional bonus are canceled.
5. Burke agrees to return all Company property of any kind,
including credit cards, discs, computer information, files, papers,
customer information, contact names, business and product
information. AccuMed agrees that Burke shall be entitled to retain
only the laptop computer provided him by AccuMed, but not any
computer accessories, Burke acknowledges that the laptop data base
as that data base existed upon the termination of his employment has
been provided to AccuMed and that the data base has been deleted in
its entirety from the laptop, but Burke may retain the computer
programs installed therein and is granted a license by AccuMed for-
the continued use thereof.
6. Burke waives any right to reemployment or reinstatement to his
former position or any other position with AccuMed, and agrees that
he will never seek employment with AccuMed or any of its affiliated
companies.
7. Burke agrees to not make any disparaging remarks about the
Company, including its products, operations, customers, clients,
business ventures, officers, directors, employees and shareholders.
Likewise, AccuMed agrees not to make any disparaging remarks about
Burke and his employment with the Company.
8. Burke reaffirms his obligation to maintain the confidentiality
of the Company's product lines, customers, processes and other trade
secrets learned in the course of his employment.
For 12 months following his termination date, Burke acknowledges that
disclosure of this information would be irreparably harmful to the Company
unless such material has become public knowledge through no fault of Burke.
Burke agrees that he will not retain, and at no time will use or disclose,
directly or indirectly, any of the Company's confidential information.
Confidential information includes, without limitation, all new product
information, customer lists, customer specifications, customer contact
persons, specialized business methods, techniques, computer data, plans and
knowledge relating to the business of the Company; advertising, marketing
materials and concepts, customer information, methods for developing and
maintaining business relationships with clients and prospective clients,
prospective customer lists, procedural manuals, employee training and review
programs, price lists, payroll and
<PAGE> 4
personnel information, cost information and any other confidential
information or trade secrets that may have been imparted to Burke by the
Company, or which Burke has learned as a result of his employment with the
Company, in all cases such information not having become public, unless such
public status occurred though fault of Burke.
9. Burke agrees that until December 31, 1998, he will not either alone or
in association with others, directly or indirectly, whether as proprietor,
partner, director, officer, agent, salesperson, consultant or otherwise (a)
solicit, or employ, or authorize to be solicited for employment active employees
of the Company or any persons who were, at any time within six (6) months prior
to the termination of his employment employees of the Company; or (b) in any way
divert, take away or interfere with any of the customers of the Company, its
products or its employees.
10. Burke acknowledges and agrees that until December 31, 1998, he will
not engage in any manner as an officer, director, employee, partner, agent,
consultant or in any other individual or representative capacity, with the
following named competitors of the Company or their subsidiaries - Neopath,
Neuromedical Systems, Autocyte, Cytec, MicroScan, Vitek, and Morphometrix
Technologies.
11. AccuMed has provided Burke with a signed letter of reference from the
Chief Executive Officer of AccuMed in the form attached hereto and AccuMed
agrees not to rescind it in any way.
12. In the event AccuMed defaults on its obligations hereunder, Burke's
recourse is limited to filing a lawsuit to enforce his rights hereunder and
under his May 1997 Employment Agreement, under this Separation Agreement.
AccuMed acknowledges that in the event it defaults, the non-compete provided
herein would be void. However, prior to exercising Ms rights as provided in this
paragraph, Burke shall provide AccuMed with written notice to the Company's
Chief Executive Officer of any such default and allow AccuMed ten days from the
delivery of said notice to cure any default.
13. The parties agree that they will be responsible for their own legal
fees incurred in connection with the negotiation and consummation of this
Separation Agreement and General Release.
14. The parties hereto represent that in negotiating this Separation
Agreement and General Release, they received legal advice as to their respective
rights. Burke acknowledges that he has carefully read and understands the terms
of this Separation Agreement and General Release, that he has entered into this
Agreement and General Release voluntarily, knowingly and without duress, with
fall understanding of all terms.
15. This Separation Agreement and General Release shall be binding upon
and inure to the benefit of the parties, their respective representatives,
predecessors,
<PAGE> 5
successors, heirs, assigns, officers, and directors. Both parties agree that
this Separation Agreement and General Release may be used as evidence in a
subsequent proceeding in which any of the parties allege a breach of this
Agreement.
16. Both parties agree that in the event any provision of this Separation
Agreement and/or General Release is deemed to be invalid or unenforceable by any
court or administrative agency of competent jurisdiction, the separation
Agreement and/or General Release shall be deemed to be restricted in scope or
otherwise modified to the extent necessary to render the same valid and
enforceable, or, in the event that any provision of the Separation Agreement
and/or General Release cannot be modified or restricted so as to be valid and
enforceable, then the same shall be deemed excised from the Separation Agreement
and/or attached General Release if circumstances so require.
17. Both parties agree that the terms of this Separation Agreement and
General Release may be enforced in any court of competent jurisdiction as with
any other contract entered into in ft state of Illinois and that breach of the
terms hereof shall subject the breaching party to such damages or other remedies
as may be available at law or in equity.
18. This instrument constitutes and contains the entire agreement and
understanding between the parties concerning the subject matter of Burke's
separation, and supersedes all prior negotiations, proposed agreements and
understandings, if any, between the parties. There may be no modification of the
terms of this Agreement except in writing signed by both parties,
19. Burke acknowledge that the only consideration for his execution of
this Separation Agreement and General Release arc the terms stated above; that
no other promise or agreement of any kind has caused Burke to execute this
Separation Agreement and General Release; that he is competent to execute this
separation Agreement and General Release; and that he fully understands the
meaning and intent of this document which is that it constitutes a complete
General Release.
20. Burke and the Company agree that they will keep confidential, to the
full extent permitted by law, the terms of this Agreement, all performance
hereunder and all circumstances relating to Burke's separation from the Company,
provided, however, that Burke and the Company may disclose the same as required
by law (including, but not by way of limitation, the filing of this Agreement
with the Securities and Exchange Commission), for purposes of tax reporting,
pursuant to legal process, in an action to enforce this agreement, to claim
benefits under this Agreement or under Company benefit plans in which Burke is a
participant or beneficiary, to members of Burke's immediate family, legal
advisors, and to persons from whom Burke seeks financial advice.
21. The Company further agrees that, if Burke is sued individually
concerning any act, omission or conduct which he undertook in his capacity as an
employee, officer, director or agent of the Company or any of its subsidiaries,
then the Company shall
<PAGE> 6
defend Burke from the claim and indemnify Burke for any judgment, fine or
settlement resulting therefrom to the same extent as is then authorized by the
Company's By-Laws and/or Certificate of Incorporation for employees as of that
time. The Company hereby represents and warrants that Burke is currently covered
by director and officer liability insurance maintained by the Company which
provides coverage on an occurrence basis through December 31, 1997. To the
extent that the Company maintains director and officer liability insurance in
the future, Burke will be covered by such insurance on the same basis as and to
the same extent as all other senior officers of the Company employed by the
Company during the period of Burke's employment with the Company.
PLEASE- READ CAREFULLY:
A. The following General Release constitutes a release of all known
and unknown claims. It does not waive rights or claims that may
arise after the date it is executed.
B. Burke agrees that he is waiving rights and claims he may have in
exchange for consideration in addition to things of value to which
he is already entitled.
C. Burke understands that he has been advised that he has the right to
consult with an attorney prior to executing the following General
Release.
D. Burke understands that he has at least twenty-one (21) days within
which to consider the following C3cneral Release.
E. Burke understands that he has at least seven (7) days following his
execution of the following General Release to revoke it and that
the release shall not become effective or enforceable until the
revocation period has expired.
Release and Covenant Not to Sue
(a) Burke, on behalf of himself, his heirs, executors, attorneys,
administrators, successors and assigns, hereby fully and forever, to the
full extent permitted by law, releases and discharges the Company, and
each of its subsidiaries and affiliated companies and entities and each
of their partners, principals, members, shareholders, directors,
officers, trustees, employees, contractors, consultants, agents and
attorneys, past, present and future, and all predecessors, successors
and assigns thereof (collectively "Released Company Parties") from any
and all claims, demands, agreements, actions, suits, causes of action,
damages, injunctions, restraints and liabilities of whatever kind or
nature, in law, equity or otherwise, whether now known or unknown or
which have ever existed or which may now exist (except to enforce the
terms of this Agreement), including, but not limited to, any and all
claims, liabilities, demands or causes of action relating to or arising
out of Burke's employment, resignation from the positions of Vice
President and Group President or separation from employment with the
Company,
<PAGE> 7
including (but not by way of limitation) claims under Title VI of the
Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000c et al., 42
U.S.C. Sectionl 981, the Civil Rights Act of 1991, the Americans with
Disabilities Act, the Rehabilitation Act of 1973, the Fmployment
Retirement Income Security Act of 1974, the Illinois Wage Payment
Collection Act, the Illinois Human Rights Act, the Family and Medical
Leave Act, the Age Disc on in Employment Act, as amended by the Older
Workers Benefit Protection Act, the anti-trust and restraint of trade
statutes and common law, the federal and state (including, without
limitation, Illinois) statutes or common law, or claims for breach of
contract, for misrepresentation, for violation of any other federal,
state or local state, ordinance or regulation or common law dealing in
any respect with discrimination in employment or otherwise, defamation,
retaliatory or wrongful discharge under the common law of any state,
infliction of emotional distress or any other tort under the common law
of any state or for attorneys' fees. Burke acknowledges and agrees that
this General Release and the Covenant Not To Sue set forth herein are
essential and material terms of this Separation Agreement and that
without such release and covenant not to sue no agreement would have
been reached by the parties. Burke understands and acknowledges the
significance and consequences of this General Release.
(b) The following provisions are applicable to, and made a part of,
this Settlement Agreement and General Release.
(i) Burke does not release or waive any right or claim
that arises after the date of execution of this Agreement which may
hereafter arise under the Age Discrimination in Employment Act, as
amended by the Older Workers Benefits Protection Act, provided that any
claim based upon Ms resignation from the positions of Vice President and
Group President and his separation from the Company has, for all
purposes relating to this Agreement, arisen prior to the execution of
this Agreement.
(ii) Burke does not waive any right to the receipt of
payments or benefits not yet due and owing, whether under this Agreement
or under the Company benefit and compensation plans in which Burke is a
participant or beneficiary.
(iii) In exchange for this General Release and Waiver
hereunder, Burke hereby acknowledge that he has received separate
consideration beyond that to which he is otherwise entitled under the
Company's policy or applicable law.
(iv) The Company has advised, and hereby again expressly
advises, Burke to consult with an attorney of his choosing regarding,
and prior to executing, this Agreement, which contains a general release
and waiver.
<PAGE> 8
(v) This release shall not apply to workers' compensation
claims, or t o claims under state and federal unemployment insurance
laws.
(c) To the maximum extent permitted by law, Burke covenants not
to sue or to institute or cause to be instituted any kind of claim or
action (except to enforce this Agreement or for any cause excepted from
the foregoing release under the provisions of subparagraph (b) above) in
any federal, state or local agency or court against any of the released
parties relating to the matters covered by the foregoing General
Release. Burke further understands and agrees that in the event that any
claim, suit, or action whatsoever shall be commenced by him or his
heirs, executors or administrators against AccuMed which relates to
Burke's employment with or termination of employment from AccuMed (other
Om to enforce this Agreement), this Separation Agreement and General
Release shall constitute a complete defense to any such claim, suit or
action so instituted in any federal, state or local agency or court
against the Company relating to matters covered by the foregoing
release.
(d) For good and valuable consideration received by the Company,
the Company, on behalf of itself and its subsidiaries and affiliated
companies and entities, hereby fully and forever, to the full extent
permitted by law, releases and discharges Burke and his heirs,
executors, attorneys, administrators, successors and assigns
(collectively "Released Executive Parties") from any and all claims,
demands, agreements, actions, suits, causes of action, damages,
injunctions, restraints and liabilities of whatever kind or nature, in
law, equity or otherwise, which have ever existed or which may now exist
(except to enforce the terms of this Agreement), including, but not
limited to, any and all claims, liabilities, demands or causes of action
relating to or arising out of Burke's employment, resignation from the
positions of Vice President and Group President or separation fmm
employment with the Company, including (but not by way of limitation)
claims under federal and state (including, without limitation, Illinois)
statutes or common law, or claims for breach of contract,
misrepresentation, defamation, or any other for under the common law of
any state or for attorneys fees; provided, however, that this release
and discharge does not apply to any rights or claims based upon
information which is not, as of the date hereof, known to the Board of
Directors of the Company, the Chief Executive Officer of the Company or
legal counsel for the Company, including, but not by way of limitation,
information relating to possible embezzlement, fraud or other theft from
the Company by Burke. The Company acknowledges and agrees that this
General Release and the Covenant Not To Sue set forth herein, are
essential and material terms of this Agreement and that without such
General Release and Covenant Not To Sue no agreement would have been
reached by the parties. The Company understands and acknowledges the
significance and consequences of this General Release and this
Agreement.
(e) To the maximum extent permitted by law, the Company covenants
not to sue or to institute or cause to be instituted any kind of claim or
action (except
<PAGE> 9
to enforce this Agreement or for any act excepted under the provision of
subparagraph (d) immediately preceding). The Company further understands
and agrees that in the event that any claim, suit or action whatsoever
shall be commenced by it against Burke for any matter released hereunder,
this Separation Agreement and General Release shall constitute a complete
defense of any such claim, suit or action so instituted in any federal,
state or local agency or court against Burke relating to the matters
covered by the foregoing release.
IN WITNESS WHEREOF, the parties have executed this Separation Agreement and
General Release on the day and date indicated below.
MICHAEL D. BURKE- ACCUMED INTERNATIONAL, INC.
\s\ MICHAEL D. BURKE By: \s\ ROBERT CORBETT
---------------------- --------------------------
Vice President Human Resources
------------------------------
Date: January 6, 1998 Date: January 5, 1998
--------------- ---------------
<PAGE> 1
ADDENDUM EXHIBIT 10.11
TO THE LICENCE & DISTRIBUTION AGREEMENT, entered into between BIOKIT, S.A. on
February 20, 1996, and ACCUMED INTERNATIONAL, INC. on March 7, 1996.
Mr. Jose Luis Zarroca, on behalf and in representaion of BIOKIT, S.A., a
corporation duly formed and validly existing under the laws of the Kingdom of
Spain, with registered offices in Can Male, s/n 08186 Llica d'Amunt, Barcelona,
Spain.
Mr. Peter Gombrich (Ceo/Chairman), on behalf and in representation of ACCUMED
INTERNATIONAL, INC., a corporation duly formaed and organized and validly
existing under the laws of Delaware, with registered offices at 920 N. Franklin
Suite 402, Chicago, Illinois, United States of America.
The parties recognize each other capacity to act herein and
AGREE
One. BIOKIT and ACCUMED agree to amend paragraph 3.2 of Article III of the
Licence & Distribution Agreement entered into between BIOKIT on February 20,
1996, and ACCUMED on March 7, 1996 (hereinafter the "AGREEMENT"), whereby the
said paragraph shall herinafter read as follows:
"Such amount shall be paid by ACCUMED as follows:
A) 25,000$ upon the signature of the Agreement.
B) 50,000$ upon delivery of the complete software code, tapes, and
documentation to ACCUMED.
C) 25,000$ on December 31, 1997.
D) 50,000$ on April 30, 1998.
The parties recognize that the amounts mentioned in letter A) and B)
have been duly paid by ACCUMED."
Two. BIOKIT and ACCUMED agree to amend paragraph 7.1 of Article VII of the
AGREEMENT, whereby the said paragraph shall hereinafter read as follows:
"ACCUMED shall pay to BIOKIT the following royalties:
five per cent (5%) of the NET SALES of the SYSTEM to AFFILIATES, distributors or
customers up to the initial one million US$ (1,000,000$); and
four per cent (4%) of the NET SALES of the SYSTEM to AFFILIATES, distributors or
customers on the excess of the first one million US$ (1,000,000$).
Royalties shall be due starting as of the First Use and for the whole
term of this
<PAGE> 2
Agreement."
Three. BIOKIT and ACCUMED agree to amend paragraph 7.2 of Article VII of the
AGREEMENT, whereby the said paragraph shall hereinafter read as follows:
"During the first four years ACCUMED undertakes to pay to BIOKIT the
following minimum royalties:
<TABLE>
<CAPTION>
Year Without FDA approval With FDA approval
- ----
<S> <C> <C>
1 US$20,000 US$35,000
2 US$40,000 US$65,000
3 US$55,000 US$85,000
4 US$60,000 US$90,000
</TABLE>
For the purposes of this Agreement the term "Year" shall mean, for the
first year, the period comprised between the last day of the month in
which the FIRST USE occurs and the same day of the following year.
Following years shall mean the 12 month period following the end of the
previous year."
Four. BIOKIT and ACCUMED expressly declare that the rest of the AGREEMENT shall
be deemed to be valid and in force.
IN WITNESS WHEREOF, the parties hereto have executed this document by their duly
authorized officers on the last date mentioned below.
BIOKIT ACCUMED
By: BIOKIT S.A. By: ACCUMED INTERNATIONAL, INC.
Name: Jose Luis Zarroca Name: Peter Gombrich
Date: Date:
Place: Barcelona (Spain) Place: Chicago, Illinois (USA)
<PAGE> 1
EXHIBIT 10.15
AMENDMENT NO. 3 TO ACCUMED INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
AMENDMENT NO. 3 dated March 16, 1998 (this "Amendment") to the
AccuMed International, Inc. (formerly "Alamar Biosciences, Inc.,"
the "Company") 1995 Stock Option Plan as amended by Amendment No.
1 dated July 12, 1996 and Amendment No. 2 dated February 20, 1997
(the "Plan").
WHEREAS, the Plan currently provides for the grant of options to
purchase up to an aggregate of 1,268,332 shares of the Company's common stock,
par value of $.01 per share (the "Common Stock");
WHEREAS, on March 16, 1998, the Compensation Committee of the Board of
Directors adopted resolutions amending the Plan to decrease the number of shares
available under the Plan by 128,332 shares; thereby providing for the grant of
options to purchase an aggregate of 1,140,000 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, 1,140,000 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.
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EXHIBIT 10.44
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 ______________ Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
ACCUMED INTERNATIONAL, INC.
This is to Certify That, FOR VALUE RECEIVED, _____________
[Commonwealth Associates, and/or designees] or assigns ("Holder"), is entitled
to purchase, subject to the provisions of this Warrant, from AccuMed
International, Inc., a Delaware corporation ("Company"), 20,000 fully paid,
validly issued and nonassessable shares of Common Stock, par value $.01 per
share, of the Company ("Common Stock") at a price of $1.125 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, is being issued in exchange for the cancellation
of the Warrants originally issued pursuant to an agency agreement dated February
27, 1997 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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(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 hereof ("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
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
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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 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 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
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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 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
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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 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
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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 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
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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, 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
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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) 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.
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(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 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.
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(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 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
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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.
(2) If any majority holder (as defined in Subsection (4)
of this
11
<PAGE> 12
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
12
<PAGE> 13
the intentions of such holders) in connection therewith as
the Company shall 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
13
<PAGE> 14
indemnification shall include each person, if any, who
controls any such underwriter within the meaning of such
Act provided, however, that the 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 ____________________________________
[SEAL] Leonard R. Prange, Chief Financial
Officer and Chief Operating Officer
Dated: February 23, 1998
Attest:
14
<PAGE> 15
_____________________________
Joyce L. Wallach, Secretary
15
<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 __________________________________
<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> 18
********************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
ACCUMED INTERNATIONAL, INC.
********************************************************************************
<PAGE> 1
EHIBIT 10.60
TBCC
LOAN AND SECURITY AGREEMENT
BORROWER: ACCUMED INTERNATIONAL, INC.,
A DELAWARE CORPORATION
ADDRESS: 900 N. FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
DATE: OCTOBER 24, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower (the "Borrower"), having its chief executive office and
principal place of business at the address shown above, and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC") having its
principal office at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018
and having an office at 16133 Ventura Blvd., Suite 700, Encino, California
91436. The Schedule to this Agreement (the "Schedule") being signed concurrently
is an integral part of this Agreement. (Definitions of certain terms used in
this Agreement are set forth in Section 9 below.) The parties agree as follows:
1. LOANS.
1.1. Loans. TBCC, subject to the terms and conditions of this Agreement, agrees
to make loans (the "Loans") to Borrower, from time to time during the period
from the date of this Agreement to the Maturity Date set forth in the Schedule,
at Borrower's request, in an aggregate principal amount at any one time
outstanding not to exceed the Credit Limit shown on the Schedule. If at any time
the total outstanding Loans and other unpaid monetary Obligations exceed said
limit, Borrower shall repay the excess immediately without demand. Borrower
shall use the proceeds of all Loans solely for lawful general business purposes.
1.2. Due Date. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name of
Borrower (the "Loan Account"). All Loans and advances made by TBCC to Borrower
or for Borrower's account and all other monetary Obligations will be charged to
the Loan Account. All amounts received by TBCC from Borrower or for Borrower's
account will be credited to the Loan Account. TBCC will send Borrower a monthly
statement reflecting the activity in the Loan Account, and each such monthly
statement shall be an account stated between Borrower and TBCC and shall be
final conclusive and binding absent manifest error.
1.4. Collection of Receivables. Borrower shall remit to TBCC all Collections
including all checks, drafts and other documents and instruments evidencing
remittances in payment (collectively referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements. For purposes of calculating interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC three Business Days after receipt of cleared funds. Borrower's Loan Account
will be credited only with the net amounts actually received in payment of
Receivables, and such payments shall be credited to the Obligations in such
order as TBCC shall determine in its discretion. Pending delivery to TBCC,
Borrower will not commingle any Items of Payment with any of its other funds or
property, but will segregate them from the other assets of Borrower and will
hold them in trust and for the account and
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<PAGE> 2
as the property of TBCC. Borrower hereby agrees to endorse any Items of Payment
upon the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its sole and absolute
discretion: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
Receivables and Eligible Inventory, (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory, and
(iv) establish reserves against available Loans.
1.6. Term.
(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the terms of this
Agreement, provided that the Maturity Date shall automatically be extended, and
this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice to the
other, not less than sixty days prior to the next Maturity Date, that such party
elects to terminate this Agreement effective on the next Maturity Date. On the
Maturity Date or on any earlier termination of this Agreement Borrower shall pay
in full all Obligations, and notwithstanding any termination of this Agreement
all of TBCC's security interests and all of TBCC's other rights and remedies
shall continue in full force and effect until payment and performance in full of
all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as follows:
(i) by Borrower, effective three business days after written notice of
termination is given to TBCC; or (ii) by TBCC at any time after the occurrence
of an Event of Default, without notice, effective immediately. If this Agreement
is terminated by Borrower or by TBCC under this Section 1.6(b), Borrower shall
pay to TBCC a termination fee (the "Termination Fee") in the amount shown on the
Schedule. The Termination Fee shall be due and payable on the effective date of
termination. Notwithstanding the foregoing, Borrower shall have no right to
terminate this Agreement at any time that any principal of, or interest on any
of the Loans or any other monetary Obligations are outstanding, except upon
prepayment of all Obligations and the satisfaction of all other conditions set
forth in the Loan Documents.
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day that
is not a Business Day, the payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
amount of interest due.
1.8. Conditions to Initial Loan. The obligation of TBCC to make the initial
Loan is subject to the satisfaction of the following conditions prior to or
concurrent with such initial Loan:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan proceeds,
if any, no consent or authorization of, filing with or other act by or in
respect of any Governmental Authority or any other Person is required in
connection, with the execution, delivery, performance, validity or
enforceability of this Agreement, or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or the
continuing operations of the Borrower following the consummation of such
transactions, except for compliance by Borrower with the disclosure requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (collectively, the "SEC Disclosure
Requirements").
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel: (i) a Depository Account Agreement, duly
executed by the Borrower and its Bank on TBCC's standard form; (ii)
acknowledgment copies of Uniform Commercial Code financing statements (naming
TBCC as secured party and the Borrower as debtor), duly filed in all
jurisdictions that TBCC deems necessary or desirable to perfect and protect the
Liens created hereunder, and Official Uniform Commercial Code searches in such
jurisdictions, showing such financing statements of record; (iii) the opinion of
counsel for the Borrower covering such matters incident to the transactions
contemplated by this Agreement as TBCC may specify in its discretion; (iv)
certified copies of all policies of insurance required by this Agreement and the
other Loan Documents, together with loss payee endorsements for all such
policies naming TBCC as lender loss payee and an additional insured; (v) Copies
of the Borrower's articles or certificate of incorporation, certified as true,
correct and complete by the secretary of state of Borrower's state of
incorporation within 45 days of the date hereof; (vi) copies of the bylaws of
the
-2-
<PAGE> 3
Borrower and a copy of the resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Agreement, the other
Loan Documents, and the transactions contemplated hereby and thereby, attached
to which is a certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) that such copies of the bylaws and resolutions are true,
complete and accurate copies thereof, have not been amended or modified since
the date of such certificate and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of the Borrower who are
authorized to sign the Loan Documents; (vii) a good standing certificate from
the Secretary of State of Borrower's state of incorporation and each state in
which the Borrower is qualified as a foreign corporation, each dated within ten
days of the date hereof; (viii) such other agreements and instruments as TBCC
deems necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
1.9. Conditions to Lending. The obligation of TBCC to make any Loan is subject
to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action relating to
this Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
(b) Borrower shall be in compliance with all Requirements of Law and
Material Contracts, other than such noncompliance that could not have a Material
Adverse Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and shall
constitute first priority Liens, except for Permitted Liens;
(d) All representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(e) No Default or Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan as of the date of such
request; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans and
other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per annum.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the
Schedule.
2.3. Calculations. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1. Grant of Security Interest. To secure the payment and performance when due
of all of the Obligations, Borrower hereby grants to TBCC a security interest in
all of its present and future Receivables, Inventory, Equipment, Other Property,
and other Collateral, wherever located, EXCEPT for (A) 35% of the Borrower's
shares of the capital stock of AccuMed International Limited; (B) the Borrower's
shares of the capital stock of Oncometrics Imaging Corp. and (C) royalty
payments due to the Borrower pursuant to the License Agreement dated as of
October 10, 1995 between Borrower and Becton Dickinson.
3.2. Other Liens; Location of Collateral. Borrower represents, warrants and
covenants that all of the Collateral is, and will at all times continue to be,
free and clear of all Liens, other than Permitted Liens and Liens in favor of
TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule, except for Inventory and Equipment in transit in the
ordinary course of business, and except that Borrower may open new places of
business at which Collateral will be located, provided that Borrower gives TBCC
at least 30 days prior written notice thereof.
3.3. Receivables.
(a) Schedules. As often as requested by TBCC in accordance with its normal
practice and procedures, Borrower shall execute and deliver to TBCC written
schedules of Receivables and Eligible Receivables (but the failure to execute or
deliver any schedule shall not affect or limit TBCC's security interest in all
Receivables). On TBCC's request, Borrower shall also furnish to TBCC copies of
invoices to customers and shipping and delivery receipts. Borrower shall deliver
to TBCC the originals of all letters of credit, notes, and instruments in its
favor and such endorsements or assignments as TBCC may reasonably request.
(b) Records, Collections. Borrower shall report all customer credits to TBCC,
on the regular reports to TBCC in the form from time to time specified by TBCC.
Borrower shall notify TBCC of all returns and recoveries of merchandise and of
all claims asserted with respect to merchandise, on its regular reports to TBCC.
Borrower shall not settle or adjust any dispute or claim, or grant any discount,
credit or allowance or accept any return of merchandise, except in the ordinary
course of its business, without TBCC's prior written consent.
<PAGE> 4
TBCCLOAN AND SECURITY AGREEMENT
(c) Representations. Borrower represents and warrants to TBCC that each
Receivable with respect to which Loans are requested by Borrower shall, on the
date each Loan is requested and made, represent an undisputed, bona fide,
existing, unconditional obligation of the account debtor created by the sale,
delivery, and acceptance of goods or the rendition of services, in the ordinary
course of Borrower's business, and meet the Minimum Eligibility Requirements set
forth in Section 9.1(n) below.
3.4. Inventory. Borrower shall maintain full, accurate and complete records
respecting the Inventory describing the kind, type and quantity of the Inventory
and Borrower's cost therefor, withdrawals therefrom and additions thereto,
including a perpetual inventory for work in process and finished goods
3.5. Equipment. Borrower shall at all times keep correct and accurate records
itemizing and describing the location, kind, type, age and condition of the
Equipment, Borrower's cost therefor and accumulated depreciation thereof and
retirements, sales, or other dispositions thereof. Borrower shall keep all of
its Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, ordinary wear and tear
excepted. No Equipment shall be annexed or affixed to or become part of any
realty, unless the owner of the realty has executed and delivered a Landlord
Waiver or a bailee waiver, as applicable, in such form as TBCC shall specify.
Where Borrower is permitted to dispose of any Equipment under this Agreement or
by any consent thereto hereafter given by TBCC, Borrower shall do so at arm's
length, in good faith and by obtaining the maximum amount of recovery
practicable therefor and without impairing the operating integrity or value of
the remaining Equipment.
3.6. Further Assurances. Borrower will perform any and all steps that TBCC may
reasonably request to perfect TBCC's security interests in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing statements or similar
documents or instruments covering the Collateral whether or not Borrower's
signature appears thereon. Borrower agrees, from time to time, at TBCC's
request, to file notices of Liens, financing statements, similar document or
instruments, and amendments, renewals and continuations thereof, and cooperate
with TBCC, in connection with the continued perfection and protection of the
Collateral. If any Collateral is in the possession or control of any Person
other than a public warehouseman where the warehouse receipt is in the name of
or held by TBCC, Borrower shall notify such Person of TBCC's security interest
therein and, upon request, instruct such Person or Persons to hold all such
Collateral for the account of TBCC and subject to TBCC's instructions. If so
requested by TBCC, Borrower will deliver to TBCC warehouse receipts covering any
Collateral located in warehouses showing TBCC as the beneficiary thereof and
will also cause the warehouseman to execute and deliver such agreements as TBCC
may request relating to waivers of liens by such warehouseman and the release of
the Inventory to TBCC on its demand. Borrower shall defend the Collateral
against all claims and demands of all Persons, other than Persons holding
Permitted Liens.
3.7. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder and (iv) to make any
payment or take any act reasonably necessary or desirable to protect or preserve
any Collateral. TBCC's authority hereunder shall include, without limitation,
the authority to execute and give receipt for any certificate of ownership or
any document, transfer title to any item of Collateral and take any other
actions arising from or incident to the powers granted to TBCC under this
Agreement. This power of attorney is coupled with an interest and is
irrevocable.
4. Representations and Warranties of Borrower. Borrower represents and warrants
as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above, (ii) has the corporate power and authority to own
its properties and assets and to transact the businesses in which it is engaged
and (iii) is duly qualified, authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing would not have a Material Adverse
Effect.
4.2. Locations of Offices, Records and Collateral. The address of the principal
place of business and chief executive office of Borrower is, and the books and
records of Borrower and all of its chattel paper and records relating to
Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in heading of this Agreement and at the location
of the Borrower in Westlake, Ohio. Borrower has places of business, and
Collateral is
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<PAGE> 5
TBCC Loan and
Security Agreement
located, only at such address and at the addresses set forth in the Schedule.
4.3. Authority. Borrower has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents.
All corporate action necessary for the execution, delivery and performance by
Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered, each
other Loan Document will be, the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan Document
by Borrower does not and will not contravene (i) any of the Governing Documents,
(ii) any Requirement of Law or (iii) any Material Contract and will not result
in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or filing
with or other act by, any shareholders of Borrower or any Governmental Authority
or other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby or thereby or
the continuing operations of Borrower following such consummation, except (i)
those that have been obtained or made, (ii) the filing of financing statements
under the Uniform Commercial Code and (iii) compliance with SEC Disclosure
Requirements.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion of
all transactions contemplated to occur on or before the date of this Agreement
(including, without limitation, the Loans to be made on the date of this
Agreement).
4.8. Financial Data. Borrower has provided to TBCC complete and accurate
Financial Statements, which have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered. Borrower has no Contingent Obligation or liability for taxes,
unrealized losses, unusual forward or long-term commitments or long-term leases,
which is not reflected in such Financial Statements or the footnotes thereto.
Since the last date covered by such Financial Statements and the Quarterly
Report on Form 10-Q-SB of the Borrower filed with the Securities and Exchange
Commission for the quarter ended June 30, 1997, there has been no sale, transfer
or other disposition by Borrower of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
financial condition of Borrower at said date. Since said date, (i) there has
been no change, occurrence, development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (ii) none of the
capital stock of Borrower has been redeemed, retired, purchased or otherwise
acquired for value by Borrower.
4.9. Accuracy and Completeness of Information. All data, reports and
information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are true and accurate in all material respects on the
date as of which such data, reports and information are dated or certified, and
with respect to such data, reports and information hereafter submitted by or on
behalf of Borrower to TBCC or the Auditors, such data, reports and information
will be true in all material respects as of the date thereof or the date of
certification relating thereto, and not incomplete by omitting to state any
material fact necessary to make such data, reports and information not
materially misleading at such time. There are no facts now known to Borrower
which individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect and which have not been disclosed in writing to TBCC.
4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not engaged
in any joint venture or partnership with any other Person. Borrower has two
Subsidiaries.
4.11. Corporate and Trade Name. During the past five years, Borrower has not
been known by or used any other corporate, trade or fictitious name except for
its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists no
actual or, to the best of Borrower's knowledge after due inquiry, threatened
termination, cancellation or limitation of, or any modification or change in the
business relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly
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Security Agreement
completed and timely filed all income tax returns it is required to file. The
information filed is complete and accurate in all material respects. All
deductions taken in such income tax returns are appropriate and in accordance
with applicable laws and regulations, except deductions that may have been
disallowed but are being challenged in good faith and for which adequate
reserves have been made in accordance with GAAP. All taxes, assessments, fees
and other governmental charges for periods beginning prior to the date of this
Agreement have been timely paid (or, if not timely paid, paid in full with all
applicable penalites) (or, if not yet due, adequate reserves therefor have been
established) and Borrower has no liability for taxes in excess of the amounts so
paid or reserves so established. No deficiencies for taxes have been claimed,
proposed or assessed by any taxing or other Governmental Authority against
Borrower and no notice of any tax Lien has been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability for
taxes and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not a
party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
4.15. No Judgments or Litigation. No judgments, orders, writs or decrees are
outstanding against Borrower, nor is there now pending or, to the knowledge of
Borrower after due inquiry, threatened litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against Borrower
except as disclosed on Exhibit A hereto.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
Investment except pursuant to the shareholder agreement relating to Oncometrics
Imaging Corp.; (ii) is not a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, by-law or other corporate
restriction or any injunction, order, restriction or decree, which would
materially and adversely affect its business, operations, assets or financial
condition; (iii) is not a party to any "take or pay" contract as to which it is
the purchaser, except for the manufacturing agreement relating to RELA; or (iv)
has no material contingent or long-term liability, including management
contracts (excluding employment contracts of full-time individual officers or
employees), which could have a Material Adverse Effect.
4.17. No Defaults; Legal Compliance. Borrower is not in default under any term
of any Material Contract or (to the best of Borrower's knowledge after
reasonable inquiry) in violation of any Requirement of Law, nor (to the best of
Borrower's knowledge after reasonable inquiry) is Borrower subject to any
investigation with respect to a claimed violation of any Requirement of Law.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth on Exhibit B is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are reasonably necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of its knowledge
after due inquiry, Borrower has not infringed any patent, trademark,
service-mark, tradename, copyright, license or other right owned by any other
Person by the sale or use of any product, process, method, substance, part or
other material presently contemplated to be sold or used, where such sale or use
would reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
4.21. Licenses and Permits. Borrower has obtained and holds in full force and
effect, all franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary or advisable for the operation of its business as presently
conducted and as proposed to be conducted, except where the failure to possess
any of the foregoing (individually or in the aggregate) would not have a
Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur
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Security Agreement
indebtedness or its ability to consummate the transactions contemplated by this
Agreement and the other Loan Documents.
4.23. Business and Properties. The business of Borrower is not affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25. Survival of Representations. All representations made by Borrower in this
Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this Agreement
and payment and satisfaction of all Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate existence,
(ii) maintain in full force and effect all material licenses, bonds, franchises,
leases, trademarks, qualifications and authorizations to do business, and all
material patents, contracts and other rights necessary or advisable to the
profitable conduct of its business (except where the failure to do so would not
have a Material Adverse Effect), and (iii) continue in, and limit its operations
to, the same lines of business as presently conducted by it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear and
tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any of
its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of Law
applicable to it, including, without limitation, all applicable Federal, State,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters, the Employee Retirement
Income Security Act of 1974, and the collection, payment and deposit of
employees' income, unemployment and social security taxes, provided that
Borrower shall not be deemed in violation hereof if Borrower's failure to comply
with any of the foregoing would not require more than $50,000 to cure the same.
5.6. Insurance. Borrower shall maintain public liability insurance, business
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to TBCC in its commercially reasonable
judgment, all of which policies covering the Collateral shall name TBCC as an
additional insured and lender loss payee in case of loss, and contain other
provisions as TBCC may reasonably require to protect fully TBCC's interest in
the Collateral and any payments to be made under such policies, provided that
with respect to business interruption insurance coverage, TBCC acknowledges that
Borrower has applied for such coverage as of September 29, 1997 and will obtain
such coverage forthwith.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Borrower at any time and
from time to time, during normal business hours and upon reasonable notice under
the circumstances, and at any time on and after the occurrence of a Default or
Event of Default, for the purposes of (A) inspecting and verifying the
Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a
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TBCC Loan and
Security Agreement
special inspection if TBCC deems the same appropriate. If TBCC's own employees
are used, Borrower shall also pay therefor $600 per person per day (or such
other amount as shall represent TBCC's then current standard charge for the
same), or, if outside examiners or accountants are used, Borrower shall also pay
TBCC such sum as TBCC is obligated to pay as fees therefor.
5.8. Notification Requirements. Borrower shall give TBCC the
following notices and other documents:
(a) Notice of Defaults. Borrower shall give TBCC written notice of any
Default or Event of Default within three Business Days after becoming aware of
the same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written notice
of any of the following, promptly, and in any event within five Business Days
after Borrower becomes aware of any of the following: (i) any proceeding being
instituted or threatened by or against it in any federal, state, local or
foreign court or before any commission or other regulatory body involving a sum,
together with the sum involved in all other similar proceedings, in excess of
$50,000 in the aggregate, (ii) any order, judgment or decree being entered
against Borrower or any of its properties or assets involving a sum, together
with the sum of all other orders, judgments or decrees, in excess of $50,000 in
the aggregate, and (iii) any actual or prospective change, development or event
which has had or could reasonably be expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional Places of
Business. Borrower shall give TBCC at least 30 days' prior written notice of any
change of Borrower's corporate name or its chief executive office or of the
opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to TBCC, within
ten Business Days, of (A) any material damage to, the destruction of or any
other material loss to any asset or property owned or used by Borrower other
than any such asset or property with a net book value (individually or in the
aggregate over a six month time period) less than $10,000 (provided that such
notice need not be given as to any Equipment with an aggregate net book value of
less than $100,000 which is being repaired or replaced with the proceeds of
insurance) or (B) any condemnation, confiscation or other taking, in whole or in
part, or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such asset or property owned or used by Borrower
together with the amount of the damage, destruction, loss or diminution in value
and (ii) diligently file and prosecute its claim or claims for any award or
payment in connection with a any of the foregoing.
5.9. Qualify to Transact Business. Borrower shall qualify to transact business
as a foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized would have a Material
Adverse Effect.
5.10. Financial Reporting. Borrower shall timely deliver to TBCC the following
financial information: the information set forth in the Schedule, and, when
requested by TBCC in its good-faith judgment, any further information respecting
Borrower or any Collateral. Borrower authorizes TBCC to communicate directly
with its officers, employees and Auditors and to examine and make abstracts from
its books and records. Borrower authorizes its Auditors to disclose to TBCC any
and all financial statements, work papers and other information of any kind that
they may have with respect to Borrower and its business and financial and other
affairs. Borrower shall deliver a letter addressed to the Auditors requesting
them to comply with the provisions of this paragraph when requested by TBCC.
5.11. Payment of Liabilities. Borrower shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12. Trademarks. Borrower shall do and cause to be done all things necessary
to preserve and keep in full force and effect all of its material registrations
of trademarks, service marks and other marks, trade names and other trade
rights.
5.13. Proceeds of Collateral. Without limiting any of the other terms of this
Agreement, and without implying any consent to any sale or other transfer of
Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC. Notwithstanding the foregoing, provided no
Event of Default and no event which, with notice or passage of time or both,
would constitute an Event of Default has occurred and is continuing, Borrower
need not deliver to TBCC the proceeds of the disposition of Equipment which is
disposed of by Borrower in the ordinary course of business consistent with past
practice, so long as such dispositions do not exceed $50,000 in the aggregate in
any twelve-month period.
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TBCC Loan and
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5.14. Solvency. Borrower shall be Solvent at all times.
6. NEGATIVE COVENANTS. Until termination of this Agreement and payment and
satisfaction of all Obligations:
6.1. Contingent Obligations. Borrower will not, directly or indirectly, incur,
assume, or suffer to exist any Contingent Obligation, excluding indemnities
given in connection with this Agreement or the other Loan Documents in favor of
TBCC or in connection with the sale of Inventory or other asset dispositions
permitted hereunder and excluding normal or customary indemnities which are part
of the terms of manufacturing agreements, agreements relating to securities or
other agreements entered into in the ordinary course of business.
6.2. Corporate Changes. Borrower will not, directly or indirectly, merge or
consolidate with any Person, or liquidate or dissolve (or suffer any liquidation
or dissolution).
6.3. Change in Nature of Business. Borrower will not at any time make any
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any fiscal
year, sell, transfer or otherwise dispose of any assets, or grant any option or
other right to purchase or otherwise acquire any assets other than (i) Equipment
with an aggregate value of less than $50,000 the proceeds of which shall be paid
to TBCC and applied to the Obligations (except as set forth in Section 5.13
above), (ii) sales of Inventory in the ordinary course of business, (iii)
trade-ins of Equipment in connection with the replacement of such Equipment in
the ordinary course of business.
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt owed to
it, except in the ordinary course of business.
6.6. Loans to Other Persons. Borrower will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of $250,000 in the aggregate at any time for all such
loans, including, without limitation, loans to employees in connection with
their relocation expenses.
6.7. Liens. Borrower will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or indirectly,
pay any dividends or distributions on, purchase, redeem or retire any shares of
any class of its capital stock or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding ("Stock"), or make
any payment on account of or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of its Stock, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of Borrower, except
for dividends paid solely in stock of the Borrower.
6.9. Investments in Other Persons. Borrower will not, directly or indirectly,
at any time make or hold any Investment in any Person (whether in cash,
securities or other property of any kind) other than (i) Investments in Cash
Equivalents, (ii) Investments in Borrower's Subsidiaries made prior to the
current fiscal year of the Borrower and (iii) Investments in Oncometrics Imaging
Corp. made in the current fiscal year of the Borrower or any subsequent fiscal
year, in an aggregate amount not exceeding $2,000,000 in the current or any such
subsquent fiscal year.
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business.
6.11. Fiscal Year. Borrower will not change its fiscal year.
6.12. Accounting Changes. Borrower will not at any time make or permit any
change in accounting policies or reporting practices, except as required by
GAAP.
6.13. Broker's or Finder's Fees. Borrower will not pay or incur any broker's or
finder's fees in connection with this Agreement or the transactions contemplated
hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or bill and hold basis,
or on any other unusual terms (collectively, "Prohibited Terms of Sale"), other
than as TBCC may approve in writing from time to time, except that Borrower may
utilize Prohibited Terms of Sale in sales of products in Borrower's
cyto-pathology line of business (but all Receivables arising from the sale of
such products utilizing Prohibited Terms of Sale shall be ineligible for
borrowing).
6.15. Amendments of Material Contracts. Borrower will not amend, modify, cancel
or terminate, or permit the amendment, modification, cancellation or termination
of, any Material Contract, if such amendment, modification,
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TBCC Loan and
Security Agreement
cancellation or termination could have a Material Adverse Effect.
6.16. Sale and Leaseback Obligations. Borrower will not at any time create,
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit or
agree to acquire all or any stock, securities or assets of any other Person
other than (i) Inventory and Equipment acquired in the ordinary course of
business, or (ii) acquisitions for which the consideration paid and payable by
Borrower is solely stock of the Borrower.
7. EVENTS OF DEFAULT.
7.1. Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default":
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any agreement,
covenant, condition, provision or term contained in Section 1.1, 1.2, 1.4, 3.3,
5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this Agreement, or
Borrower shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of five Business
Days after the date it occurs; or
(d) Borrower shall dissolve, wind up or otherwise cease to conduct its
business; or
(e) Borrower shall become the subject of (i) an Insolvency Event except as
set forth in clause (e) of the definition of Insolvency Event or (ii) an
Insolvency Event as set forth in clause (e) of the definition of Insolvency
Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower to TBCC,
under this Agreement or otherwise, shall be incorrect or misleading in any
material respect when made or deemed made; or
(g) A change in the ownership or control of more than 70% of the voting stock
of the Borrower, in a single transaction or series of related transactions,
compared to such ownership on the date of this Agreement;
(h) any judgment or order for the payment of money shall be rendered against
Borrower and shall not be stayed, vacated, bonded or discharged within thirty
days; or
(i) Borrower shall deny or disaffirm its obligations under any of the Loan
Documents or any Liens granted in connection therewith; or any Liens granted in
any of the Collateral shall be determined to be void, voidable or invalid, are
subordinated or are not given the priority contemplated by this Agreement,
unless, with respect to any such subordinated Lien, TBCC has otherwise agreed in
writing to such subordination on terms and subject to conditions acceptable to
TBCC in its sole discretion; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or (k) the independent public accountants
for Borrower shall deliver a Qualified opinion on any Financial Statement; or
(l) Borrower (i) shall fail to pay any Indebtedness in excess of $50,000
owing to any Person other than TBCC or any interest or premium thereon, when due
(whether at scheduled maturity or by required prepayment, acceleration, demand
or otherwise), or (ii) shall otherwise be in breach or default in any of its
obligations under any agreement with respect to any such Indebtedness, if the
effect of such breach, default or failure to pay is to cause such Indebtedness
to become due or redeemed or permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to declare such
Indebtedness due or require such Indebtedness to be redeemed prior to its stated
maturity; or
(m) the occurrence of any event or condition that, in TBCC's good faith
business judgment, could reasonably be expected to have a Material Adverse
Effect; or
(n) an Event of Default shall occur under the Equipment Loan Agreement.
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event of
Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set forth in Section
7.1(e), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of TBCC.
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(b) Cease making any Loans or other extensions of credit to Borrower of any
kind.
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credits, or
bring suit on the Receivables and other Collateral (in the name of Borrower or
TBCC) and otherwise administer and collect the Receivables and other Collateral;
(e) Sell, assign and deliver the Receivables and other Collateral, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(f) Foreclose the security interests created pursuant to the Loan Documents
by any available procedure, take possession of any or all of the Collateral,
with or without judicial process and enter any premises where any Collateral may
be located for the purpose of taking possession of or removing the same.
(g) TBCC may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by Borrower, if permitted under
applicable law. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
7.3. Receivables. Upon the occurrence and during the continuance of an Event of
Default, or at any time that TBCC believes in good faith that fraud has occurred
or that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
TBCC may (i) settle or adjust disputes or claims directly with account debtors
for amounts and upon terms which it considers advisable, and (ii) notify account
debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4. Right of Setoff. In addition to all rights of offset that TBCC may have
under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower all deposits and other obligations
then or thereafter owing by TBCC to or for the credit or the account of
Borrower. In the event that TBCC exercises any of its rights under this Section,
TBCC shall provide notice to Borrower of such exercise, provided that the
failure to give such notice shall not affect the validity of the exercise of
such rights.
7.5. License for Use of Software and Other Intellectual Property. After the
occurrence and during the continuance of an Event of Default, unless expressly
prohibited by any licensor thereof, TBCC is hereby granted a license to use all
computer software programs, data bases, processes, trademarks, trade names and
materials used by Borrower in connection with its businesses or in connection
with the Collateral.
7.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash proceeds
resulting from TBCC's exercise of any of its rights with respect to Collateral,
including any and all Collections (after deducting all of TBCC's reasonable
expenses related thereto), shall be applied by TBCC to such of the Obligations
in such order as TBCC shall elect in its sole and absolute discretion, whether
due or to become due. Borrower shall remain liable to TBCC for any deficiencies
and TBCC shall remit to Borrower or its successor or assign, any surplus
resulting therefrom. The remedies specified in this Agreement are cumulative,
may be exercised in such
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TBCC Loan and
Security Agreement
order and with respect to such Collateral as TBCC may deem desirable and are not
intended to be exclusive, and the full or partial exercise of any of them shall
not preclude the full or partial exercise of any other available remedy under
this Agreement, under any other Loan Document, at equity or at law.
7.7. Waivers. Borrower hereby waives any bonds, security or sureties required
by any statute, rule or any other law as an incident to any taking of possession
by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8. Right to Make Payments. In the event that Borrower shall fail to purchase
or maintain insurance required hereunder, or to pay any tax, assessment,
government charge or levy, except as the same may be otherwise permitted
hereunder, or in the event that any Lien prohibited hereby shall not be paid in
full or discharged, or in the event that Borrower shall fail to perform or
comply with any other covenant, promise or obligation to TBCC hereunder or under
any other Loan Document, TBCC may (but shall not be required to) perform, pay,
satisfy, discharge or bond the same for the account of Borrower, and all amounts
so paid by TBCC shall be treated as a Loan hereunder to Borrower and shall
constitute part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
8.1. Assignments. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents.
8.2. Participations. TBCC may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of the Loans); provided, however, that TBCC's obligations under
this Agreement shall remain unchanged.
8.3. Disclosure. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower, provided that if Borrower has provided confidential
information to TBCC and has so indicated in writing the confidential status of
such information concurrently with the delivery thereof to TBCC, then TBCC shall
take reasonable steps in order to maintain the confidential status of such
information in any disclosure thereof to any assignee or participant or proposed
assignee or participant.
9. DEFINITIONS.
9.1. General Definitions. As used herein, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) "Affiliate" means as to any Person, any other Person who directly or
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) "Agreement" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) "Auditors" means a nationally recognized firm of independent public
accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) "Borrowing" means a borrowing of Loans.
(f) "Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banks in Chicago, Illinois are required or permitted by
law to close.
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TBCC Loan and
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(g) "Cash Equivalents" means (i) securities issued, guaranteed or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; and (iv) other
instruments, commercial paper or investments acceptable to TBCC in its sole
discretion.
(h) "Collateral" means Receivables, Inventory, Equipment, and Other Property,
and all additions and accessions thereto and substitutions and replacements
therefor and improvements thereon, and all proceeds (whether cash or other
property) and products thereof, including, without limitation, all proceeds of
insurance covering the same and all tort claims in connection therewith, and all
records, files, computer programs and files, data and writings relating to the
foregoing, and all equipment containing the foregoing, PROVIDED that the
Collateral shall not include (i) the royalties payable to the Borrower pursuant
to the License Agreement dated October 10, 1995 between Borrower and Becton
Dickinson, or (ii) Equipment hereafter acquired with the proceeds of the
issuance of industrial revenue bonds secured directly or indirectly by real
property and such hereafter acquired Equipment.
(i) "Collections" means all cash, funds, checks, notes, instruments, any
other form of remittance tendered by account debtors in respect of payment of
Receivables and any other payments received by Borrower with respect to any
other Collateral.
(j) "Compliance Certificate" means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
(k) "Contingent Obligation" means any direct, indirect, contingent or
non-contingent guaranty or obligation for the indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) "Default" means any of the events specified in Section 7.1, whether or
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) "Eligible Inventory" [Inapplicable.]
(n) "Eligible Receivables" means and includes only those Receivables which
TBCC in its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time to
time and less any such reserves as TBCC, in its sole discretion, may require.
Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of TBCC's sole discretion, the following (the
"Minimum Eligibility Requirements") are the minimum requirements for a
Receivable to be an Eligible Receivable: (i) the Receivable must not be
outstanding for more than 90 days from its invoice date, (ii) the Receivable
must not represent progress billings, or be due under a fulfillment or
requirements contract with the account debtor, (iii) the Receivable must not be
subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
account debtor may be conditional), (iv) the Receivable must not be owing from
an account debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable), (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
account debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to TBCC, or which, fails or goes out
of a material portion of its business, (vii) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to TBCC's satisfaction, with the United
States Assignment of Claims Act), (viii) the Receivable must not be owing from
an account debtor located outside the United States or Canada (unless
pre-approved by TBCC in its discretion in writing, or backed by a letter of
credit satisfactory to TBCC, or FCIA insured satisfactory to TBCC), (ix) the
Receivable must not be owing from an account debtor to whom Borrower is or may
be liable for goods purchased from such account debtor or otherwise. Receivables
owing from one account debtor will not be deemed Eligible Receivables to the
extent they exceed 50% of the total eligible Receivables outstanding. In
addition, if more than 50% of the Receivables owing from an account debtor are
outstanding more than 90 days from their invoice date (without regard to
unapplied credits) or are otherwise not eligible Receivables, then all
Receivables owing from that account debtor will be deemed ineligible for
borrowing. TBCC may, from time to time, in its sole discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
(o) "Equipment" means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in
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Security Agreement
which Borrower may have any interest as lessee or otherwise (to the extent of
such interest), together with all additions and accessions thereto, all
replacements and all accessories and parts therefor, all manuals, blueprints,
know-how, warranties and records in connection therewith, all rights against
suppliers, warrantors, manufacturers, sellers or others in connection therewith,
and together with all substitutes for any of the foregoing.
(o-1) "Equipment Loan Agreement" shall have the meaning set forth in Section
8 of the Schedule to Loan Agreement.
(p) "Event of Default" means the occurrence of any of the events specified in
Section 7.1.
(q) "Financial Statements" means the balance sheets, profit and loss
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, for the period specified, prepared in accordance with GAAP and
consistent with prior practices.
(r) "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
(s) "Governing Documents" means the articles or certificate of incorporation
and by-laws of Borrower.
(t) "Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(u) "Guarantor" means any present or future guarantor of any or all of the
Obligations.
(v) "Indebtedness" means, with respect to any Person, as of the date of
determination any indebtedness for borrowed money and, liability or obligation
of such Person (including without limitation obligations under capital leases
and contingent obligations, but not including trade payables incurred in the
ordinary course of business).
(w) "Insolvency Event" means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (e) such Person,
or a substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, and such proceeding is not dismissed or stayed within sixty
days, or the appointment of a receiver, trustee, custodian or liquidator, and
such receiver is not dismissed within sixty days.
(x) "Inventory" means all present and future goods intended for sale, lease
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(y) "Investment" in any Person means, as of the date of determination
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property contributed
or committed to be contributed by any Person, on its account for or in
connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person in
whom such Investment is made or any evidence of indebtedness by reason of a
loan, advance, extension of credit, guaranty or other similar obligation for any
debt, liability or indebtedness of such Person in whom the Investment is made.
(z) "Lien" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(aa) "Loan Account" has the meaning specified in Section
1.3.
(bb) "Loan Documents" means this Agreement and all present and future
documents and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any
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TBCC Loan and
Security Agreement
Guarantor under, in connection with or relating to this Agreement, as each of
the same may be amended, supplemented or otherwise modified from time to time.
(cc) "Loans" means the loans and financial accommodations made by TBCC
hereunder.
(dd) "Material Adverse Effect" means (i) a material adverse effect on the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, (ii) the impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of TBCC to enforce the Obligations or realize upon the
Collateral or (iii) a material adverse effect on the value of the Collateral or
the amount which TBCC would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the
Collateral.
(ee) "Material Contract" means any contract or other arrangement to which
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(ff) "Obligations" means and includes all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document or any other
agreement executed in connection herewith or therewith, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, reasonable attorneys' fees, and any
other sum properly chargeable to Borrower under this Agreement, the other Loan
Documents or any other agreement executed in connection herewith or therewith.
(gg) "Other Property" means all present and future: instruments, documents,
documents of title, securities, investment securities, bonds, notes, promissory
notes, drafts, acceptances, letters of credit and rights to receive proceeds of
letters of credit, deposit accounts, chattel paper, certificates, insurance
policies, insurance proceeds, leases, computer tapes, causes of action,
judgments, claims against third parties, leasehold rights in any personal
property, books, ledgers, files and records, general intangibles (including
without limitation, all contract rights, tax refunds, rights to receive tax
refunds, patents, patent applications, copyrights (registered and unregistered),
royalties, licenses, permits, franchise rights, authorizations, customer lists,
rights of indemnification, contribution and subrogation, computer programs,
discs and software, trade secrets, computer service contracts, trademarks, trade
names, service marks and names, logos, goodwill, deposits, choses in action,
designs, blueprints, plans, know-how, telephone numbers and rights thereto,
credits, reserves, and all forms of obligations whatsoever now or hereafter
owing to Borrower), all property at any time in the possession or under the
control of TBCC, and all security given by Borrower to TBCC pursuant to any
other Loan Document or agreement.
(hh) "Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen and other like Persons arising by
operation of law in the ordinary course of business for sums which are not yet
due and payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables or Inventory or Other Property), (iii) zoning
restrictions, easements, encroachments, licenses, restrictions or covenants on
the use of the Property which do not materially impair either the use of the
Property in the operation of the business of Borrower or the value of the
Property, (iv) rights of general application reserved to or vested in any
municipality or other governmental, statutory or public authority to control or
regulate property, or to use property in a manner which does not materially
impair the use of the property for the purposes for which it is held by
Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, (vi) Purchase Money Liens, (vii) Liens in favor of
TBCC, and (viii) Liens on real property or improvements thereon or Equipment
hereafter acquired with the proceeds of the issuance of industrial revenue bonds
secured directly or indirectly by real property and such hereafter acquired
Equipment.
(ii) "Person" means any individual, sole proprietorship,
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TBCC Loan and
Security Agreement
partnership, joint venture, limited liability company, limited liability
partnership, trust, unincorporated organization, joint stock company,
association, corporation, institution, entity, party or government (including
any division, agency or department thereof) or any other legal entity, whether
acting in an individual, fiduciary or other capacity, and, as applicable, the
successors, heirs and assigns of each.
(jj) "Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
(kk) "Purchase Money Lien" means a Lien on any item of Equipment created
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach only
to the Equipment acquired.
(ll) "Qualification" or "Qualified" means, with respect to any report of
independent public accountants covering Financial Statements, a material
qualification to such report (i) resulting from a limitation on the scope of
examination of such Financial Statements or the underlying data, (ii) as to the
capability of Borrower to continue operations as a going concern or (iii) which
could be eliminated by changes in Financial Statements or notes thereto covered
by such report (such as by the creation of or increase in a reserve or a
decrease in the carrying value of assets) and which if so eliminated by the
making of any such change and after giving effect thereto would result in a
Default or an Event of Default.
(mm) "Receivables" means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(nn) "Requirement of Law" means (a) the Governing Documents, (b) any law,
treaty, rule, regulation, order or binding determination of an arbitrator, court
or other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(oo) "Schedule" means the Schedule to this Agreement being signed
concurrently by Borrower and TBCC, as amended from time to time.
(pp) "Solvent" means when used with respect to any Person that as of the date
as to which such Person's solvency is to be measured: (a) the fair salable value
of its assets is in excess of the total amount of its liabilities (including
contingent liabilities as valued in accordance with applicable law) as they
become absolute and matured; (b) it has sufficient capital to conduct its
business; and (c) it is able to meet its debts as they mature.
(qq) "Subsidiary" means, as to any Person, a corporation or other entity in
which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2. Accounting Terms and Determinations. Unless otherwise defined or specified
herein, all accounting terms used in this Agreement shall be construed in
accordance with GAAP, applied on a basis consistent in all material respects
with the Financial Statements delivered to TBCC on or before the date of this
Agreement. All accounting determinations for purposes of determining compliance
with this Agreement shall be made in accordance with GAAP as in effect on the
date of this Agreement and applied on a basis consistent in all material
respects with the audited Financial Statements delivered to TBCC on or before
the date of this Agreement. The Financial Statements required to be delivered
hereunder, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements delivered to TBCC on or before the date of this Agreement,
the Compliance Certificates required to be delivered pursuant to this Agreement
shall include calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the Financial Covenants (if any)
based upon GAAP as in effect on the date of this Agreement.
9.3. Other Terms; Headings; Construction. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of Illinois, shall have the meanings set forth
therein. Each of the words "hereof," "herein," and "hereunder" refer to this
Agreement as a whole. The term "including" whenever used in this Agreement,
shall mean "including (but not limited to)". An Event of Default shall
"continue" or be "continuing" unless and until such Event of Default has been
waived or cured within the grace period specified therefor under Section 7.1.
References to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against TBCC or Borrower under any rule of construction or
otherwise.
10. GENERAL PROVISIONS.
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TBCC Loan and
Security Agreement
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND TBCC,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC IN GOOD
FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, 1209 ORANGE STREET, WILMINGTON, DELAWARE 19801, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST
TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof. No single or partial exercise by TBCC of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement, and with
respect to the Borrower, with copies to AccuMed International, Inc., 1500 7th
Avenue, Sacramento, California 95818 and by telecopier to Joyce L. Wallach,
General Counsel, at 916-443-6850 (fax). All such notices and correspondence
shall be deemed given (i) if sent by certified or registered mail, three
Business Days after being postmarked, (ii) if sent by overnight delivery
service, when received at the above stated addresses or when delivery is refused
and (iii) if sent by telecopier transmission, when receipt of such transmission
is acknowledged. Borrower's and TBCC's telecopier numbers for purpose of notice
hereunder are set forth in the Schedule; each party's number may be changed by
written notice to the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower hereby
indemnifies and agrees, whether or not any of the transactions contemplated by
this Agreement or the other Loan Documents are consummated, to defend and hold
harmless (on an after-tax basis) TBCC, its successors
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<PAGE> 18
TBCC Loan and
Security Agreement
and assigns and their respective directors, officers, agents, employees,
advisors, shareholders, attorneys and Affiliates (each, an "Indemnified Party")
from and against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
Claim is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding which arises out of or is related
to (A) Borrower, or this Agreement, any other Loan Document or the transactions
contemplated hereby or thereby, (B) any actual or proposed use by Borrower of
the proceeds of the Loans, or (C) TBCC's entering into this Agreement or any
other Loan Document or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
reasonable fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding, (ii) any remedial or other
action taken by Borrower in connection with compliance by Borrower, or any of
its properties, with any federal, state or local environmental laws, rules or
regulations, and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of Borrower or any actual or
purported violation of Borrower's charter, by-laws or any other agreement or
instrument to which Borrower is a party or by which any of its properties is
bound. In addition and without limiting the generality of the foregoing,
Borrower shall, upon demand, pay to TBCC all reasonable costs and expenses
incurred by TBCC (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to
TBCC all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce TBCC's security interest in, the Collateral; and otherwise
represent TBCC in any litigation relating to Borrower. Without limiting the
generality of the foregoing, Borrower shall pay TBCC a fee with respect to each
wire transfer in the amount of $15 plus all bank charges and a fee of $15 for
all returned checks plus all bank charges. If either TBCC or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. If and to the extent that the Obligations of
Borrower hereunder are unenforceable for any reason, Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of the Obligations
which is permissible under applicable law. Borrower's obligations under Section
2.4 and this Section shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any of the other Obligations.
10.8. Amendments and Waivers. Any provision of this Agreement or any other Loan
Document may be amended or waived if, but only if, such amendment or waiver is
in writing and signed by Borrower and TBCC and then any such amendment or waiver
shall be effective only to the extent set forth therein. The failure of TBCC at
any time or times to require Borrower to strictly comply with any of the
provisions of this Agreement or any other present or future agreement between
Borrower and TBCC shall not waive or diminish any right of TBCC later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other agreement now
or in the future executed by Borrower and delivered to TBCC shall be deemed to
have been waived by any act or knowledge of TBCC or its agents or employees, but
only by a specific written waiver signed by an authorized officer of TBCC and
delivered to Borrower.
10.9. Counterparts; Telecopied Signatures. This Agreement and any waiver or
amendment hereto may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in
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<PAGE> 19
TBCC Loan and
Security Agreement
connection herewith or therewith may be executed and delivered by telecopier or
other facsimile transmission all with the same force and effect as if the same
was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.11. Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
10.12. Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations, under the laws of the State of Illinois (or the laws of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum non-usurious interest rate than under the laws of the
State of Illinois (or such other jurisdiction), in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance TBCC should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the other
Loan Documents constitute the entire agreement between the parties, supersede
any prior written and verbal agreements between them, and shall bind and benefit
the parties and their respective successors and permitted assigns. There are no
oral understandings, oral representations or oral agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
ACCUMED INTERNATIONAL, INC.
By____________________________________
Leonard R. Prange,
Chief Operating Officer and
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<PAGE> 20
Chief Financial Officer
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By____________________________________
Title____________________________
Form-8
Version: -4
TBCC
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: ACCUMED INTERNATIONAL, INC.
ADDRESS: 900 N. FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
DATE: OCTOBER 24, 1997
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION ("TBCC") and the above borrower
("Borrower") of even date.
1. CREDIT LIMIT (Section 1.1):
An amount (the "Credit Limit") not to exceed
the lesser of: (i) $4,000,000 at any one time
outstanding; or (ii) 80% of the amount of
Borrower's Eligible Receivables (as defined in
Section 9.1(n) above);
PROVIDED that the foregoing Credit Limit shall
not affect or relate to the loans made under
the Equipment Loan Agreement (as defined in
Section 8 below).
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<PAGE> 21
2. INTEREST. (Section 2.1):
The interest rate in effect throughout each
calendar month during the term of this
Agreement shall be the highest "Base Rate" in
effect during such month, plus 2.50% per annum,
provided that the interest rate in effect in
each month shall not be less than 9.00% per
annum, and provided that the interest charged
for each month shall be a minimum of $10,000,
regardless of the amount of the Obligations
outstanding. Interest shall be calculated on
the basis of a 360-day year for the actual
number of days elapsed. "Base Rate" shall mean
the higher of (a) the highest prime, base or
equivalent rate of interest announced from time
to time by Citibank, N.A., First National Bank
of Chicago and Bank of America National Trust
and Savings Association (which may not be the
lowest rate of interest charged by such bank)
and (b) the published annualized rate for
90-day dealer commercial paper which appears in
the "Money Rates" section of The Wall Street
Journal. Interest on the loans under the
Equipment Loan Agreement shall be governed by
the provisions thereof.
3. FEES (Section 2.2):
Loan Fee: $40,000, payable concurrently
herewith.
Termination Fee: An amount equal to $5,000
multiplied by each month (or portion thereof)
from the effective date of termination to the
Maturity Date, which Termination Fee shall be
payable on the date of termination.
4. MATURITY DATE (Section 1.6):
ONE YEAR FROM THE DATE HEREOF (the "Maturity
Date"), subject to automatic renewal and early
termination as provided in Section 1.6 above,
provided that the maturity date relating to the
loans under the Equipment Loan Agreement shall
be governed by the provisions thereof.
5. REPORTING (Section 5.10): Borrower shall provide TBCC with the following
reports:
(a) Monthly Financial Statements. Monthly
unaudited financial statements, as soon as
available, and in any event within 30 days
after the end of each month.
(b)Monthly Receivable Agings. Monthly
Receivable agings, aged by invoice date, within
10 days after the end of each month.
(c) Monthly Payable Agings. Monthly accounts
payable agings, aged by
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<PAGE> 22
invoice date, and outstanding or held check
registers within 10 days after the end of each
month.
(e) Monthly Compliance Certificates. As soon as
available, but not later than thirty days after
the end of each month, a Compliance
Certificate, with an attached schedule of
calculations demonstrating compliance or
indicating non-compliance with any Financial
Covenants.
(f) Quarterly Financial Statements. Quarterly
unaudited financial statements, as soon as
available, and in any event within 45 days
after the end of each fiscal quarter of
Borrower.
(g) Annual Financial Statements. As soon as
available, but not later than 90 days after the
end of the Borrower's fiscal year, (A)
Borrower's annual audited Financial Statements;
(B) a comparison in reasonable detail to the
prior year's audited Financial Statements; (C)
the Auditors' opinion without Qualification, a
"Management Letter" and a statement indicating
that the Auditors have not obtained knowledge
of the existence of any Default or Event of
Default during their audit; (D) a narrative
discussion of Borrower's financial condition
and results of operations and the liquidity and
capital resources for such fiscal year.
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11):
Alamar Biosciences, Inc.
(b) Prior Trade Names of Borrower (Section
4.11): Sensititre and Alamar
(c) Existing Trade Names of Borrower (Section
4.11): None
(d) Other Places of Business and Locations of
Collateral (Section 4.2): See Representations
and Warranties form of Borrower dated September
16, 1997
<PAGE> 23
7. FACSIMILE NUMBERS:
Borrower: 312-642-2985
TBCC: 818-995-9148
8. OTHER COVENANTS:
The following additional covenants and
provisions shall apply at all times to this
Agreement and the Borrower:
(1) Reference is made to the Equipment Loan and
Security Agreement dated September 23, 1997
between Borrower and TBCC (the "Equipment Loan
Agreement"). To the extent of any conflicts
between the provisions of this Agreement and
the Equipment Loan Agreement, such provision
that grants TBCC greater rights shall be the
controlling provision of either Agreement.
Borrower: TBCC:
ACCUMED INTERNATIONAL, INC. TRANSAMERICA BUSINESS CREDIT
CORPORATION
By___________________________________ By_______________________________
Leonard R. Prange, Chief Operating Title____________________________
Officer and Chief Financial Officer
Form-8
Version: -4
-4-
<PAGE> 24
EXHIBIT A TO LOAN AGREEMENT
LITIGATION (SECTION 4.15)
MERRILL CORPORATION V. ACCUMED INTERNATIONAL, INC., CIRCUIT COURT OF COOK
COUNTY, I. CASE NO. 97LO7158
<PAGE> 25
EXHIBIT B TO LOAN AGREEMENT
INTELLECTUAL PROPERTY (SECTION 4.19)
<PAGE> 26
DEPOSITORY ACCOUNT AGREEMENT
<PAGE> 27
THIS DEPOSITORY ACCOUNT AGREEMENT entered as of October __, 1997, is
between Transamerica Business Credit Corporation, a Delaware corporation having
an office at 225 N. Michigan Avenue, Chicago, Illinois, 60601 ("TBCC"), AccuMed
International, Inc. having an office at 900 N. Franklin Street, Suite 401,
Chicago, Illinois 60610 ("Borrower"), and ________________________, having an
office at ________________________________ ("Bank").
W I T N E S S E T H
WHEREAS, Borrower has entered into certain financing arrangements with
TBCC pursuant to which Borrower is indebted to TBCC; and
WHEREAS, Borrower has granted TBCC a first, senior security interest and
lien on all of Borrower's accounts receivable and inventory and certain of its
other property to secure the full and prompt performance of Borrower of its
obligations to TBCC; and
WHEREAS, TBCC requires that the provisions of the Agreement be
implemented as a condition for the continuation of said financing arrangements
between TBCC and Borrower; and
WHEREAS, Borrower's Operating Account, Account [#____________]
["Operating Account"), is with the Bank;
NOW, THEREFORE, TBCC, Borrower, and Bank hereby agrees as follows:
1. Bank shall establish and maintain Account [#___________] entitled
"TBCC Business Credit Corporation for funds received in favor of AccuMed
International, Inc." ("the Account"). The Account shall be owned by TBCC and
subject only to the signing authority designated from time to time by the board
of directors of TBCC.
2. TBCC's name and address shall appear on all statements of the Account
issued by Bank together with the notation ["for AccuMed International, Inc."].
The original of each statement of the Account, together with all debt and credit
advises pertaining to the Account, shall be sent at the end of each month to
TBCC at the following address (or such address as TBCC from time to time may
designate to Bank):
Transamerica Business Credit
16133 Ventura Blvd. Suite 700
Encino, CA 91436
818-995-9145 fax: 818-995-9148
A duplicate of the statement is to be sent to:
AccuMed International, Inc.
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
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<PAGE> 28
3. Until TBCC otherwise directs, Borrower shall deliver all collections
of its Receivables (as defined in the Loan and Security Agreement between TBCC
and Borrower) to TBCC by depositing such collections in the Account. Upon
deposit in the Account, all such collections shall be TBCC's property and
Borrower shall have no interest therein or control thereover.
4. Each day, Borrower shall telecopy a copy of the receipted deposit
slip to TBCC at the following number: _______________________, Attention
_______________. Such telecopy will be confirmed by the Borrower's mailing a
copy of the same receipt to TBCC.
5. On the same day that funds are deposited by Borrower in the Account,
TBCC may withdraw such funds by (i) automated clearing house (ACH) debit, (ii)
depository transfer check (DTC), or (iii) such other method(s) as Bank
customarily permits for withdrawals to be made from a depository account.
6. If any check, draft, or other item or instrument deposited in the
Account is dishonored or returned unpaid for any reason, Bank shall charge the
amount of such dishonored or returned check, draft, item or instrument against
the Operating Account of Borrower. In the event that there are insufficient
funds in the Operating Account to satisfy such item for five (5) business days
and Borrower fails to reimburse the Bank, TBCC shall indemnify Bank for the
amount of the returned item.
7. All service charges and other expenses for the establishment and
maintenance of the Account shall be charged by Bank to the Operating Account of
Borrower. TBCC agrees to permit Bank to review and consider the Account balances
when determining the service charges to be paid to Bank by Borrower.
8. The Account will not be subject to deduction, setoff, bankers' lien,
or any other right in favor or any person or entity other than TBCC.
IN WITNESS WHEREOF, TBCC, Borrower, and Bank have executed this
Agreement as of the date first above written.
-3-
<PAGE> 29
TBCC: BORROWER:
TRANSAMERICA BUSINESS CREDIT ACCUMED INTERNATIONAL, INC.
CORPORATION
By:_______________________________ By:.................................
Title:_______________________________ ....................................
Title:______________________________
Date: October __, 1997 Date: October __, 1997
Bank:
______________________________
By:_______________________________
Title:_______________________________
Date: October __, 1997
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<PAGE> 1
EXHIBIT 10.61
REVOLVING CREDIT NOTE
$4,000,000. CHICAGO, ILLINOIS OCTOBER 24, 1997
FOR VALUE RECEIVED, ACCUMED INTERNATIONAL, INC., a DELAWARE corporation
having its chief executive office and principal place of business at 900 N.
FRANKLIN STREET, SUITE 401, CHICAGO, ILLINOIS 60610 (the "Borrower"), hereby
unconditionally and absolutely promises to pay to the order of TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation (the "TBCC"), on the
Maturity Date, at TBCC's office at 9399 West Higgins Road, Suite 600, Rosemont,
Illinois 60018, or at such other location as TBCC may from time to time
designate, in lawful money of the United States of America and in immediately
available funds, the principal amount equal to $4,000,000 or such greater or
lesser amount as represents the aggregate unpaid principal amount of all Loans
made by TBCC to the Borrower pursuant to the Loan and Security Agreement between
TBCC and Borrower dated OCTOBER 24, 1997 (the "Loan Agreement"). The Borrower
further promises to pay interest in like money and funds at TBCC's office
specified above (or at such other location as TBCC may from time to time
designate) on the unpaid principal amount hereof from time to time outstanding
from and including the date hereof until paid in full (both before and after
judgment) at the rates and on the dates set forth in the Loan Agreement. All
capitalized terms used herein which are not defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
The holder of this Note is authorized to record the date and amount of each
Loan evidenced by this Note, the date and amount of each payment or prepayment
of principal hereof and the interest rate with respect thereto on a schedule
attached hereto, or on a continuation of such schedule attached hereto and made
a part hereof, and any such notation shall be conclusive and binding for all
purposes absent manifest error; provided, however, that the failure of TBCC to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Loan Agreement.
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due hereunder.
This Note is entitled to the benefit of all terms and conditions of, and
the security of all security interests, liens, mortgages, deeds of trust and
rights granted pursuant to, the Loan Agreement and the other Loan Documents, and
is subject to optional and mandatory prepayment as provided therein.
Upon the occurrence of any one or more Events of Default, all amounts then
remaining unpaid on this Note may be declared to be or may automatically become
immediately due and payable as provided in the Loan Agreement.
The Borrower acknowledges that the holder of this Note may assign, transfer
or sell all or a portion of its rights and interests to and under this Note to
one or more Persons as provided in the Loan Agreement and that such Persons
shall thereupon become vested with all of the rights and benefits of TBCC in
respect hereof as to all or that portion of this Note which is so assigned,
transferred or sold.
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<PAGE> 2
In the event of any conflict between the terms hereof and the terms and
provisions of the Loan Agreement, the terms and provisions of the Loan Agreement
shall control.
The Borrower and all other parties that at any time may be liable hereupon
in any capacity, jointly or severally, waive presentment, demand for payment,
protest and notice of dishonor of this Note and authorize the holder hereof,
without notice, to increase or decrease the rate of interest on any amount owing
under this Note in accordance with the Loan Agreement. The Borrower further
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and any requirement that TBCC exhaust any
rights or take any action against any other Person or any collateral. The
Borrower further hereby waives notice of or proof of reliance by TBCC upon this
Note, and the Obligations shall conclusively be deemed to have been created,
contracted, incurred, renewed, extended, amended or waived in reliance upon this
Note. The Borrower shall make all payments hereunder and under the Loan
Agreement without defense, offset or counterclaim. No failure to exercise and no
delay in exercising any rights hereunder on the part of the holder hereof shall
operate as a waiver of such rights. This Note may not be changed orally, but
only by an agreement in writing, which is signed by the party or parties against
whom enforcement of any waiver, change, modification or discharge is sought.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND THE OTHER
LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS NOTE,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS
OF THE STATE OF ILLINOIS.
ALL DISPUTES ARISING UNDER OR IN CONNECTION WITH THIS NOTE AND ANY OTHER
LOAN DOCUMENT BETWEEN THE BORROWER AND THE TBCC, WHETHER SOUNDING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS
LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE TBCC SHALL HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN
ANY LOCATION REASONABLY SELECTED BY THE TBCC IN GOOD FAITH TO ENABLE THE TBCC TO
REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF THE TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE TBCC.
THE BORROWER WAIVES ANY OBJECTION THAT THE BORROWER MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH THE TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, 1209
ORANGE STREET, WILMINGTON, DELAWARE 19801 AS THE DESIGNEE AND AGENT OF THE
BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER SERVICE OF PROCESS IN ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT.
IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS
WILL BE PROMPTLY FORWARDED BY MAIL TO THE BORROWER,
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BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY
THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TBCC
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
THE BORROWER AND, BY ITS ACCEPTANCE HEREOF, THE TBCC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (I) THIS NOTE; OR (II) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (III) ANY CONDUCT, ACTS OR
OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR BORROWER; IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
ACCUMED INTERNATIONAL, INC.
By:_____________________________________
Leonard R. Prange, Chief Operating
Officer and Chief Financial Officer
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SCHEDULE
TO REVOLVING CREDIT NOTE
DATED OCTOBER __, 1997
OF ACCUMED INTERNATIONAL, INC. TO
TRANSAMERICA BUSINESS CREDIT CORPORATION
Date Amount of Interest Rate Amount of Unpaid Notation
- ---- --------- ------------- --------- ------ --------
Loan Principal Paid Principal Made by
---- -------------- --------- -------
Balance
-------
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<PAGE> 1
EXHIBIT 10.63
PATENT AND TRADEMARK SECURITY AGREEMENT
This PATENT AND TRADEMARK SECURITY AGREEMENT ("Agreement"), dated as of October
24, 1997, is entered into between ACCUMED INTERNATIONAL, INC., a Delaware
corporation ("Grantor"), which has a mailing address at 900 N. Franklin Street,
Suite 401, Chicago, Illinois 60610, and TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation, ("TBCC") having its principal office at
9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018 and having an office
at 16133 Ventura Blvd., Suite 700, Encino, California 91436.
RECITALS
A. Grantor and TBCC are, contemporaneously herewith, entering into that
certain Loan and Security Agreement ("Loan Agreement") and other instruments,
documents and agreements contemplated thereby or related thereto (collectively,
together with the Loan Agreement, the "Loan Documents"); and
B. Grantor is the owner of certain intellectual property, identified
below, in which Grantor is granting a security interest to TBCC.
NOW THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth and for other
good and valuable consideration, the parties hereto mutually agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. The following terms, as used in this Agreement, have
the following meanings:
"Code" means the Illinois Uniform Commercial Code, as amended and
supplemented from time to time, and any successor statute.
"Collateral" means all of the following, whether now owned or
hereafter acquired:
(i) Each of the trademarks and rights and interest which are
capable of being protected as trademarks (including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company
names, business names, fictitious business names, trade styles, and
other source or business identifiers, and applications pertaining
thereto), which are presently, or in the future may be, owned, created,
acquired, or used (whether pursuant to a license or otherwise) by
Grantor, in whole or in part, and all trademark rights with respect
thereto throughout the world, including all proceeds thereof (including
license royalties and proceeds of infringement suits), and rights to
renew and extend such trademarks and trademark rights;
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(ii) Each of the patents and patent applications which are
presently, or in the future may be, owned, issued, acquired, or used
(whether pursuant to a license or otherwise) by Grantor, in whole or in
part, and all patent rights with respect thereto throughout the world,
including all proceeds thereof (including license royalties and proceeds
of infringement suits, but not including royalty payments due to the
Grantor pursuant to the License Agreement dated as of October 10, 1995
between Grantor and Becton Dickinson), foreign filing rights, and rights
to extend such patents and patent rights;
(iii) All of Grantor's right to the trademarks and trademark
registrations listed on Exhibit A attached hereto, as the same may be
updated hereafter from time to time (but not including royalty payments
due to the Grantor pursuant to the License Agreement dated as of October
10, 1995 between Grantor and Becton Dickinson);
(iv) All of Grantor's right, title, and interest, in and to
the patents and patent applications listed on Exhibit B attached hereto,
as the same may be updated hereafter from time to time (but not
including royalty payments due to the Grantor pursuant to the License
Agreement dated as of October 10, 1995 between Grantor and Becton
Dickinson);
(v) All of Grantor's right, title and interest to register
trademark claims under any state or federal trademark law or regulation
of any foreign country and to apply for, renew, and extend the trademark
registrations and trademark rights, the right (without obligation) to
sue or bring opposition or cancellation proceedings in the name of
Grantor or in the name of TBCC for past, present, and future
infringements of the trademarks, registrations, or trademark rights and
all rights (but not obligations) corresponding thereto in the United
States and any foreign country;
(vi) All of Grantor's right, title, and interest in all
patentable inventions, and to file applications for patent under federal
patent law or regulation of any foreign country, and to request
reexamination and/or reissue of the patents, the right (without
obligation) to sue or bring interference proceedings in the name of
Grantor or in the name of TBCC for past, present, and future
infringements of the patents, and all rights (but not obligations)
corresponding thereto in the United States and any foreign country;
(vii) the entire goodwill of or associated with the businesses
now or hereafter conducted by Grantor connected with and symbolized by
any of the aforementioned properties and assets;
(viii) All general intangibles relating to the foregoing and
all other intangible intellectual or other similar property of the
Grantor of any kind or nature, associated with or arising out of any of
the aforementioned properties and assets and not otherwise described
above; and
(ix) All products and proceeds of any and all of the foregoing
(including, without limitation, license royalties and proceeds of
infringement suits, but not including royalty payments due to the
Grantor pursuant to the License Agreement dated as of October 10, 1995
between Grantor and Becton Dickinson) and, to the extent not otherwise
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included, all payments under insurance, or any indemnity, warranty, or
guaranty payable by reason of loss or damage to or otherwise with
respect to the Collateral.
"Obligations" means all obligations, liabilities, and
indebtedness of Grantor to TBCC, as defined in the Loan Agreement.
1.2 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and other similar terms refer to this
Agreement as a whole and not to any particular provision of this Agreement. Any
initially capitalized terms used but not defined herein shall have the meaning
set forth in the Loan Agreement. Any reference herein to any of the Loan
Documents includes any and all alterations, amendments, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against TBCC or Grantor, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
Grantor, TBCC, and their respective counsel, and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of TBCC and Grantor. Headings have been
set forth herein for convenience only, and shall not be used in the construction
of this Agreement.
2. GRANT OF SECURITY INTEREST.
To secure the complete and timely payment and performance of all
Obligations, and without limiting any other security interest Grantor has
granted to TBCC, Grantor hereby grants, assigns, and conveys to TBCC a security
interest in Grantor's entire right, title, and interest in and to the
Collateral.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Grantor hereby represents, warrants, and covenants that:
3.1 TRADEMARKS; PATENTS. A true and complete schedule setting forth all
federal and state trademark registrations owned or controlled by Grantor or
licensed to Grantor, together with a summary description and full information in
respect of the filing or issuance thereof and expiration dates is set forth on
Exhibit A; and a true and complete schedule setting forth all patent and patent
applications owned or controlled by Grantor or licensed to Grantor, together
with a summary description and full information in respect of the filing or
issuance thereof and expiration dates is set forth on Exhibit B.
3.2 VALIDITY; ENFORCEABILITY. Except as set forth in Schedule 3.2, to
the knowledge of Grantor, each of the patents and trademarks is valid and
enforceable, and Grantor is not presently aware of any past, present, or
prospective claim by any third party that any of the patents or trademarks are
invalid or unenforceable, or that the use of any patents or trademarks violates
the rights of any third person, or of any basis for any such claims.
3.3 TITLE. Except as set forth in Schedule 3.3, Grantor is the sole and
exclusive owner
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of the entire and unencumbered right, title, and interest in and to each of the
patents, patent applications, trademarks, and trademark registrations (in each
case listed as owned, as opposed to licensed by, Grantor), free and clear of any
liens, charges, and encumbrances, including pledges, assignments, licenses, shop
rights, and covenants by Grantor not to sue third persons.
3.4 NOTICE. Grantor has used and will continue to use proper statutory
notice in connection with its use of each of the patents and trademarks, to the
extent a failure to do so would have a material adverse effect on Grantor or its
business.
3.5 QUALITY. Grantor has used and will continue to use consistent
standards of high quality (which may be consistent with Grantor's past
practices) in the manufacture, sale, and delivery of products and services sold
or delivered under or in connection with the trademarks, including, to the
extent applicable, in the operation and maintenance of its merchandising
operations, and will use commercially reasonable efforts to continue to maintain
the validity of the trademarks.
3.6 PERFECTION OF SECURITY INTEREST. Except for the filing of
appropriate financing statements (all of which filings have been made) and
filings with the United States Patent and Trademark Office necessary to perfect
the security interests created hereunder, and compliance by Borrower with the
"SEC Disclosure Requirements" (as defined in the Loan Agreement), no
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required either for the grant
by Grantor of the security interest hereunder or for the execution, delivery, or
performance of this Agreement by Grantor or for the perfection of or the
exercise by TBCC of its rights hereunder to the Collateral in the United States.
4. AFTER-ACQUIRED PATENT OR TRADEMARK RIGHTS.
If Grantor shall obtain rights to any new trademarks, any new patentable
inventions or become entitled to the benefit of any patent application or patent
for any reissue, division, or continuation, of any patent, the provisions of
this Agreement shall automatically apply thereto. Grantor shall give prompt
notice in writing to TBCC with respect to any such new trademarks or patents, or
renewal or extension of any trademark registration. Grantor shall bear any
expenses incurred in connection with future patent applications or trademark
registrations. Without limiting Grantor's obligation under this Section 4,
Grantor authorizes TBCC to modify this Agreement by amending Exhibits A or B to
include any such new patent or trademark rights. Notwithstanding the foregoing,
no failure to so modify this Agreement or amend Exhibits A or B shall in any way
affect, invalidate or detract from TBCC's continuing security interest in all
Collateral, whether or not listed on Exhibit A or B.
5. LITIGATION AND PROCEEDINGS.
Grantor shall commence and diligently prosecute in its own name, as the
real party in interest, for its own benefit, and its own expense, such suits,
administrative proceedings, or other action for infringement or other damages as
are in its reasonable business judgment necessary to protect the Collateral.
Grantor shall provide to TBCC any information with respect thereto requested by
TBCC. TBCC shall provide at Grantor's expense all necessary cooperation in
connection with any such suits, proceedings, or action, including, without
limitation, joining as a necessary party.
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<PAGE> 5
Following Grantor's becoming aware thereof, Grantor shall notify TBCC of the
institution of, or any adverse determination in, any proceeding in the United
States Patent and Trademark Office, or any United States, state, or foreign
court regarding Grantor's claim of ownership in any of the patents or
trademarks, its right to apply for the same, or its right to keep and maintain
such patent or trademark rights.
6. POWER OF ATTORNEY.
Grantor hereby appoints TBCC as Grantor's true and lawful attorney, with
full power of substitution, to do any or all of the following, in the name,
place and stead of Grantor: (a) file this Agreement (or an abstract hereof) or
any other document describing TBCC's interest in the Collateral with the United
States Patent and Trademark Office; (b) execute any modification of this
Agreement pursuant to Section 4 of this Agreement; (c) take any action and
execute any instrument which TBCC may deem necessary or advisable to accomplish
the purposes of this Agreement (except that TBCC may not register trademarks or
file patent applications without Grantor's prior written consent, except that no
such consent shall be required if an Event of Default (as defined in the Loan
Agreement) has occurred and is continuing); and (d) following an Event of
Default (as defined in the Loan Agreement), (i) endorse Grantor's name on all
applications, documents, papers and instruments necessary for TBCC to use or
maintain the Collateral; (ii) ask, demand, collect, sue for, recover, impound,
receive, and give acquittance and receipts for money due or to become due under
or in respect of any of the Collateral; (iii) file any claims or take any action
or institute any proceedings that TBCC may deem necessary or desirable for the
collection of any of the Collateral or otherwise enforce TBCC's rights with
respect to any of the Collateral, and (iv) assign, pledge, convey, or otherwise
transfer title in or dispose of the Collateral to any person.
7. RIGHT TO INSPECT.
Grantor grants to TBCC and its employees and agents the right, during
normal business hours, to visit Grantor's plants and facilities which
manufacture, inspect, or store products sold under any of the patents or
trademarks, and to inspect the products and quality control records relating
thereto at reasonable times during regular business hours (subject to the
confidentiality provisions set forth in the Loan Agreement).
8. SPECIFIC REMEDIES.
Upon the occurrence of any Event of Default (as defined in the Loan
Agreement), TBCC shall have, in addition to, other rights given by law or in
this Agreement, the Loan Agreement, or in any other Loan Document, all of the
rights and remedies with respect to the Collateral of a secured party under the
Code, including the following:
8.1 NOTIFICATION. TBCC may notify licensees to make royalty payments on
license agreements directly to TBCC (but this provision shall not apply to the
License Agreement dated as of October 10, 1995 between Grantor and Becton
Dickinson);
8.2 SALE. TBCC may sell or assign the Collateral and associated goodwill
at public or private sale for such amounts, and at such time or times as TBCC
deems advisable. Any requirement
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of reasonable notice of any disposition of the Collateral shall be satisfied if
such notice is sent to Grantor five (5) days prior to such disposition. Grantor
shall be credited with the net proceeds of such sale only when they are actually
received by TBCC, and Grantor shall continue to be liable for any deficiency
remaining after the Collateral is sold or collected. If the sale is to be a
public sale, TBCC shall also give notice of the time and place by publishing a
notice one time at least five (5) days before the date of the sale in a
newspaper of general circulation in the county in which the sale is to be held.
To the maximum extent permitted by applicable law, TBCC may be the purchaser of
any or all of the Collateral and associated goodwill at any public sale and
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Collateral sold at any
public sale, to use and apply all or any part of the Obligations as a credit on
account of the purchase price of any Collateral payable by TBCC at such sale.
9. GENERAL PROVISIONS.
9.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Grantor and TBCC.
9.2 NOTICES. Except to the extent otherwise provided herein, all
notices, demands, and requests that either party is required or elects to give
to the other shall be in writing and shall be governed by the notice provisions
of the Loan Agreement.
9.3 NO WAIVER. No course of dealing between Grantor and TBCC, nor any
failure to exercise nor any delay in exercising, on the part of TBCC, any right,
power, or privilege under this Agreement or under the Loan Agreement or any
other agreement, shall operate as a waiver. No single or partial exercise of any
right, power, or privilege under this Agreement or under the Loan Agreement or
any other agreement by TBCC shall preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege by TBCC.
9.4 RIGHTS ARE CUMULATIVE. All of TBCC's rights and remedies with
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.
9.5 SUCCESSORS. The benefits and burdens of this Agreement shall inure
to the benefit of and be binding upon the respective successors and permitted
assigns of the parties; provided that Grantor may not transfer any of the
Collateral or any rights hereunder, without the prior written consent of TBCC,
except as specifically permitted hereby.
9.6 SEVERABILITY. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
9.7 AMENDMENT; ENTIRE AGREEMENT. This Agreement is subject to
modification only by a writing signed by the parties, except as provided in
Section 4 of this Agreement. To the extent that any provision of this Agreement
conflicts with any provision of the Loan Agreement, the
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provision giving TBCC greater rights or remedies shall govern, it being
understood that the purpose of this Agreement is to add to, and not detract
from, the rights granted to TBCC under the Loan Agreement. This Agreement, the
Loan Agreement, and the documents relating thereto comprise the entire agreement
of the parties with respect to the matters addressed in this Agreement.
9.8 FEES AND EXPENSES. Grantor shall pay to TBCC on demand all costs and
expenses that TBCC pays or incurs in connection with the negotiation,
preparation, consummation, administration, enforcement, and termination of this
Agreement, including: (a) reasonable attorneys' and paralegals' fees and
disbursements of counsel to TBCC; (b) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with this
Agreement and the transactions contemplated hereby; (c) costs and expenses of
lien and title searches; (d) taxes, fees, and other charges for filing this
Agreement at the United States Patent and Trademark Office, or for filing
financing statements, and continuations, and other actions to perfect, protect,
and continue the security interest created hereunder; (e) sums paid or incurred
to pay any amount or take any action required of Grantor under this Agreement
that Grantor fails to pay or take; (f) costs and expenses of preserving and
protecting the Collateral; and (g) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) paid or incurred to enforce
the security interest created hereunder, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of this Agreement, or to defend
any claims made or threatened against the TBCC arising out of the transactions
contemplated hereby (including preparations for the consultations concerning any
such matters). The foregoing shall not be construed to limit any other
provisions of this Agreement or the Loan Documents regarding costs and expenses
to be paid by Grantor. The parties agree that reasonable attorneys' and
paralegals' fees and costs incurred in enforcing any judgment are recoverable as
a separate item in addition to fees and costs incurred in obtaining the judgment
and that the recovery of such attorneys' and paralegals' fees and costs is
intended to survive any judgment, and is not to be deemed merged into any
jugment.
9.9 INDEMNITY. Grantor shall protect, defend, indemnify, and hold
harmless TBCC and TBCC's assigns from all liabilities, losses, and costs
(including without limitation reasonable attorneys' fees) incurred or imposed on
TBCC relating to the matters in this Agreement (except to the extent that any
loss is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from TBCC's gross negligence or
willful misconduct).
9.10 FURTHER ASSURANCES. At TBCC's request, Grantor shall execute and
deliver to TBCC any further instruments or documentation, and perform any acts,
that may be reasonably necessary or appropriate to implement this Agreement, the
Loan Agreement or any other Loan Documents, including without limitation any
instrument or documentation reasonably necessary or appropriate to create,
maintain, perfect, or effectuate TBCC's security interests in the Collateral.
9.11 RELEASE. At such time as Grantor shall completely satisfy all of
the Obligations and the Loan Agreement shall be terminated, the security
interests granted herein shall terminate, and TBCC shall execute and deliver to
Grantor all assignments and other instruments as may be reasonably necessary or
proper to perfect such termination TBCC's security interest in the Collateral,
subject to any disposition of the Collateral which may have been made by TBCC
pursuant to this
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Agreement. For the purpose of this Agreement, the Obligations shall be deemed to
continue if Grantor enters into any bankruptcy or similar proceeding at a time
when any amount paid to TBCC could be ordered to be repaid as a preference or
pursuant to a similar theory, and shall continue until it is finally determined
that no such repayment can be ordered.
9.12 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS. ALL DISPUTES BETWEEN
THE GRANTOR AND TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS,
AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER,
THAT TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED
BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE GRANTOR AGREES THAT IT
WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY TBCC. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
9.13 WAIVER OF RIGHT TO JURY TRIAL. TBCC AND GRANTOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND GRANTOR; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR GRANTOR OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
GRANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
TRANSAMERICA BUSINESS CREDIT ACCUMED INTERNATIONAL, INC.
CORPORATION
By_________________________ By_________________________
Title_______________________ Leonard R. Prange, Chief Operating
Officer and Chief Financial Officer
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Exhibit "A"
REGISTERED TRADEMARKS
Trademark Registration Date Registration No.
PENDING TRADEMARKS
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Exhibit "B"
PATENTS
Patent Description/Title Issue Date Patent No. Name of Inventor
PATENT APPLICATIONS
Description Filing Date Serial No. Name of Inventor
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SCHEDULE 3.2
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SCHEDULE 3.3
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EXHIBIT 10.64
SECURITY AGREEMENT IN COPYRIGHTED WORKS
This Security Agreement In Copyrighted Works (this "Agreement") is made
at Chicago, Illinois as of October 24, 1997, is entered into between ACCUMED
INTERNATIONAL, INC., a Delaware corporation ("Grantor"), which has a mailing
address at 900 N. Franklin Street, Suite 401, Chicago, Illinois 60610, and
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC")
having its principal office at 9399 West Higgins Road, Suite 600, Rosemont,
Illinois 60018 and having an office at 16133 Ventura Blvd., Suite 700, Encino,
California 91436.
RECITALS
A. TBCC is providing financing to Grantor pursuant to the Loan and
Security Agreement of even date herewith between TBCC and Grantor (as amended
from time to time, the "Loan Agreement"). Pursuant to the Loan Agreement,
Grantor has granted to TBCC a security interest in substantially all of
Grantor's present and future assets, including without limitation all of
Grantor's present and future general intangibles, and including without
limitation the "Copyrights" (as defined below), to secure all of its present and
future indebtedness, liabilities, guaranties and other obligations to TBCC.
B. To supplement TBCC's rights in the Copyrights, Grantor is executing
and delivering this Agreement.
NOW, THEREFORE, for valuable consideration, Grantor agrees as follows:
1. Assignment. To secure the complete and timely payment and performance
of all "Obligations" (as defined in the Loan Agreement), and without limiting
any other security interest Grantor has granted to TBCC, Grantor hereby
hypothecates to TBCC and grants, assigns, and conveys to TBCC a security
interest in Grantor's entire right, title, and interest in and to all of the
following, now owned and hereafter acquired (collectively, the "Collateral"):
(a) Registered Copyrights and Applications for Copyright
Registrations. All of Grantor's present and future United States registered
copyrights and copyright registrations, including, without limitation, the
registered copyrights listed in Schedule A to this Agreement (and including all
of the exclusive rights afforded a copyright registrant in the United States
under 17 U.S.C. Section106 and any exclusive rights which may in the future
arise by act of Congress or otherwise) and all of Grantor's present and future
applications for copyright registrations (including applications for copyright
registrations of derivative works and compilations) (collectively, the
"Registered Copyrights"), and any and all royalties, payments, and other amounts
payable to Grantor in connection with the Registered Copyrights, together with
all renewals and extensions of the Registered Copyrights, the right to recover
for all past, present, and future infringements of the
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Registered Copyrights, and all computer programs, computer databases, computer
program flow diagrams, source codes, object codes and all tangible property
embodying or incorporating the Registered Copyrights, and all other rights of
every kind whatsoever accruing thereunder or pertaining thereto.
(b) Unregistered Copyrights. All of Grantor's present and future
copyrights which are not registered in the United States Copyright Office (the
"Unregistered Copyrights"), whether now owned or hereafter acquired, including
without limitation the Unregistered Copyrights listed in Schedule B to this
Agreement, and any and all royalties, payments, and other amounts payable to
Grantor in connection with the Unregistered Copyrights, together with all
renewals and extensions of the Unregistered Copyrights, the right to recover for
all past, present, and future infringements of the Unregistered Copyrights, and
all computer programs, computer databases, computer program flow diagrams,
source codes, object codes and all tangible property embodying or incorporating
the Unregistered Copyrights, and all other rights of every kind whatsoever
accruing thereunder or pertaining thereto. The Registered Copyrights and the
Unregistered Copyrights collectively are referred to herein as the "Copyrights."
(c) Licenses. All of Grantor's right, title and interest in and
to any and all present and future license agreements with respect to the
Copyrights, including without limitation the written license agreements listed
in Schedule C to this Agreement (the "Licenses").
(d) Accounts Receivable. All present and future accounts,
accounts receivable and other rights to payment arising from, in connection with
or relating to the Copyrights.
(e) Proceeds. All cash and non-cash proceeds of any and all of
the foregoing.
2. Representations. Grantor represents and warrants that:
(a) Each of the Copyrights is valid and enforceable (except to
the extent that the Unregistered Copyrights must be registered to be enforced);
(b) Except for the security interests granted to TBCC and the
non-exclusive licenses granted to Grantor's licensees with respect to the
Copyrights in the ordinary course of business of Grantor, Grantor is (and upon
creation of all future Copyrights, will be) the sole and exclusive owner of the
entire and unencumbered right, title, and interest in and to each of the
Copyrights and other Collateral, free and clear of any liens, charges, or
encumbrances (except for the interests of other persons with whom Grantor
jointly develops software in the future);
(c) There is no pending claim that the use of any of the
Copyrights does or may infringe upon or violate the rights of any third person
nor does Grantor have knowledge of any pending or threatened infringement of any
of the Copyrights by any third person.
(d) Listed on Schedules A and B are all copyrights owned by
Grantor, in which Grantor has an interest, or which are sublicensed by Grantor
to others in the ordinary course of Grantor's business.
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<PAGE> 3
(e) Listed on Schedule C are all Licenses to which Grantor is a
party.
(f) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Grantor or
was an employee of Grantor acting within the scope of his or her employment at
the time of said creation.
(g) All of Grantor's present and future software, computer
programs and other works of authorship subject to United States copyright
protection, the sale, licensing or other disposition of which results in
royalties receivable, license fees receivable, accounts receivable or other sums
owing to Grantor (collectively, "Receivables"), shall be registered with the
United States Copyright Office prior to the date Grantor requests or accepts any
loan from TBCC with respect to such Receivables and prior to the date Grantor
includes any such Receivables in any accounts receivable aging, borrowing base
report or certificate or other similar report provided to TBCC, and Grantor
shall provide to TBCC copies of all such registrations promptly upon the receipt
of the same. Without limiting the foregoing, Grantor shall cause its present
software programs listed on Schedule B to be registered with the United States
Copyright Office within two weeks after the date hereof and promptly provide
evidence thereof to TBCC.
3. Covenants. Until all of the Obligations have been satisfied in full
and the Loan Agreement has terminated:
(a) Grantor shall not grant a security interest in any of the
Copyrights or other Collateral to any other person and shall not enter into any
agreement or take any action that is inconsistent with Grantor's obligations
hereunder or Grantor's other Obligations or would impair TBCC's rights, under
this Agreement or otherwise, without TBCC's prior written consent.
(b) Grantor shall ensure that, commencing two weeks after the
date hereof, each copy of the Registered Copyrights shall carry a complete and
accurate copyright notice.
(c) Grantor shall use its best efforts to preserve and defend
Grantor's rights in the Copyrights unless Grantor, with the concurrence of TBCC,
reasonably determines that a Copyright is not worth preserving or defending.
(d) Grantor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Grantor all rights of
authorship to any copyrighted material in which Grantor has or subsequently
acquires any right or interest.
4. License Rights. Grantor may license or sublicense the Copyrights only
in the ordinary course of business and only on a non-exclusive basis, and only
to the extent of Grantor's rights and subject to TBCC's security interest and
Grantor's obligations under this Agreement.
5. TBCC May Supplement. Grantor authorizes TBCC to modify this Agreement
by amending Schedule A or B to include any future copyrights to be included in
the Copyrights. Grantor shall from time to time update the lists of Registered
Copyrights and Unregistered
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<PAGE> 4
Copyrights on Schedules A and B and lists of License Agreements on Schedule C as
Grantor obtains or acquires copyrights or grants or obtains licenses in the
future. Notwithstanding the foregoing, no failure to so modify this Agreement or
amend Schedules A or B or C shall in any way affect, invalidate or detract from
TBCC's continuing security interest in all Copyrights, whether or not listed on
Schedule A or B and all license agreements whether or not listed on Schedule C.
6. Default. Upon an Event of Default (as defined in the Loan Agreement)
TBCC shall have, in addition to all of its other rights and remedies under the
Loan Agreement, all rights and remedies of a secured party under the Uniform
Commercial Code (as enacted in any jurisdiction in which the Copyrights or other
Collateral are located or deemed to be located) or other applicable law. Upon
occurrence of an Event of Default, Grantor shall, upon request of TBCC, give
written notice to all parties to the Licenses that all payments thereunder shall
be made to TBCC, and TBCC may itself give such notice (in which case it shall
promptly provide copies thereof to Grantor).
7. Fees and Expenses. On demand by TBCC, without limiting any of the
terms of the Loan Agreement, Grantor shall pay all reasonable fees, costs, and
expenses (including without limitation reasonable attorneys' fees and legal
expenses) incurred by TBCC in connection with (a) preparing this Agreement and
all other documents relating to this Agreement, (b) consummating this
transaction, (c) filing or recording any documents (including all taxes in
connection therewith) in public offices; and (d) paying or discharging any
taxes, counsel fees, maintenance fees, encumbrances, or other amounts in
connection with protecting, maintaining, or preserving the Copyrights or
defending or prosecuting any actions or proceedings arising out of or related to
the Copyrights.
8. TBCC's Rights. In the event that Grantor fails to use its best
efforts to preserve and defend Grantor's rights in the Copyrights (except as
permitted by paragraph 3(c) hereof) within a reasonable period of time after
learning of the existence of any actual or threatened infringement thereof, upon
twenty (20) days' prior written notice to Grantor, TBCC shall have the right,
but shall in no way be obligated to, bring suit or take any other action, in its
own name or in Grantor's name, to enforce or preserve TBCC's or Grantor's rights
in the Copyrights. Grantor shall at the request of TBCC and at Grantor's expense
do any lawful acts and execute any documents requested by TBCC to assist with
such enforcement. In the event Grantor has not taken action to enforce or
preserve TBCC's and Grantor's rights in the Copyrights and TBCC thereupon takes
such action, Grantor, upon demand, shall promptly reimburse and indemnify TBCC
for all costs and expenses incurred in the exercise of TBCC's or Grantor's
rights under this Section 8.
9. No Waiver. No course of dealing between Grantor and TBCC, nor any
failure to exercise nor any delay in exercising, on the part of TBCC, any right,
power, or privilege under this Agreement or under the Loan Agreement or any
other agreement, shall operate as a waiver. No single or partial exercise of any
right, power, or privilege under this Agreement or under the Loan Agreement or
any other agreement by TBCC shall preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege by TBCC.
10. Rights Are Cumulative. All of TBCC's rights and remedies with
respect to the Copyrights and other Collateral whether established by this
Agreement, the Loan Agreement, or any
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<PAGE> 5
other documents or agreements, or by law shall be cumulative and may be
exercised concurrently or in any order.
11. Copyright Office. At the request of TBCC, Grantor shall execute any
further documents necessary or appropriate to create and perfect TBCC's security
interest in the Copyrights, including without limitation any documents for
filing with the United States Copyright Office and/or any applicable state
office. TBCC may record this Agreement, an abstract thereof, or any other
document describing TBCC's interest in the Copyrights with the United States
Copyright Office, at the expense of Grantor.
12. Indemnity. Grantor shall protect, defend, indemnify, and hold
harmless TBCC and TBCC's assigns from all liabilities, losses, and costs
(including without limitation reasonable attorneys' fees) incurred or imposed on
TBCC relating to the matters in this Agreement, including, without limitation,
in connection with TBCC's defense of any infringement action brought by a third
party against TBCC (except to the extent that any loss is determined in a final
and non-appealable judgment by a court of competent jurisdiction to have
directly resulted from TBCC's gross negligence or willful misconduct).
13. Severability. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
14. Amendments; Entire Agreement. This Agreement is subject to
modification only by a writing signed by the parties, except as provided in
Section 5 of this Agreement. To the extent that any provision of this Agreement
conflicts with any provision of the Loan Agreement, the provision giving TBCC
greater rights or remedies shall govern, it being understood that the purpose of
this Agreement is to add to, and not detract from, the rights granted to TBCC
under the Loan Agreement. This Agreement, the Loan Agreement, and the documents
relating thereto comprise the entire agreement of the parties with respect to
the matters addressed in this Agreement.
15. Further Assurances. At TBCC's request, Grantor shall execute and
deliver to TBCC any further instruments or documentation, and perform any acts,
that may be reasonably necessary or appropriate to implement this Agreement, the
Loan Agreement or any other agreement, and the documents relating thereto,
including without limitation any instrument or documentation reasonably
necessary or appropriate to create, maintain, perfect, or effectuate TBCC's
security interests in the Copyrights or other Collateral.
16. Release. At such time as Grantor shall completely satisfy all of the
Obligations and the Loan Agreement shall be terminated, the security interests
granted herein shall terminate, and TBCC shall execute and deliver to Grantor
all assignments and other instruments as may be reasonably necessary or proper
to perfect such termination of TBCC's security interest in the Copyrights,
subject to any disposition of the Copyrights which may have been made by TBCC
pursuant to this Agreement. For the purpose of this Agreement, the Obligations
shall be deemed to
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<PAGE> 6
continue if Grantor enters into any bankruptcy or similar proceeding at a time
when any amount paid to TBCC could be ordered to be repaid as a preference or
pursuant to a similar theory, and shall continue until it is finally determined
that no such repayment can be ordered.
17. True and Lawful Attorney. Grantor hereby appoints TBCC as Grantor's
true and lawful attorney, with full power of substitution, to do any or all of
the following, in the name, place and stead of Grantor: (a) execute an abstract
of this Agreement or any other document describing TBCC's interest in the
Copyrights, for filing with the United States Copyright Office; (b) execute any
modification of this Agreement pursuant to Section 5 of this Agreement; and (c)
following an Event of Default (as defined in the Loan Agreement) execute any
assignments, notices or transfer documents for purposes of transferring title or
right to receive any of the Copyrights or other Collateral to any person,
including without limitation TBCC.
18. Successors. The benefits and burdens of this Agreement shall inure
to the benefit of and be binding upon the respective successors and permitted
assigns of the parties; provided that Grantor may not transfer any of the
Collateral or any rights hereunder, without the prior written consent of TBCC,
except as specifically permitted hereby.
19. Governing Law. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS. ALL DISPUTES BETWEEN
THE GRANTOR AND TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS,
AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER,
THAT TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED
BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE GRANTOR AGREES THAT IT
WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY TBCC. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
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<PAGE> 7
20. WAIVER OF RIGHT TO JURY TRIAL. TBCC AND GRANTOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND GRANTOR; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR GRANTOR OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
GRANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
WITNESS the execution hereof as of the date first written above.
Grantor:
ACCUMED INTERNATIONAL, INC.
By:
Leonard R. Prange, Chief Operating Officer
and Chief Financial Officer
Accepted.
TBCC:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: ..............................................
Name (please print):
..................................................
Title:............................................
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<PAGE> 8
Schedule A
to
Security Agreement in Copyrighted Works
ACCUMED INTERNATIONAL, INC.
Registered Copyrights
U.S. Copyrights
REGISTRATION DATE
TITLE OF WORK/YEAR OF NUMBER OF ISSUANCE
CREATION
NONE.
-8-
<PAGE> 9
Schedule B
to
Security Agreement in Copyrighted Works
ACCUMED INTERNATIONAL, INC.
Unregistered Copyrights
(Where No Copyright Application Is Pending)
Copyright Description
ESP Software 4.0
AcCell DMS
TracCell 200
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<PAGE> 10
Schedule C
to
Security Agreement in Copyrighted Works
ACCUMED INTERNATIONAL, INC.
License Agreements
NONE.
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<PAGE> 1
EXHIBIT 10.65
PROMISSORY NOTE
$500,000 August 18, 1997
FOR VALUE RECEIVED, the undersigned, ACCUMED INTERNATIONAL, INC.,
a Delaware corporation (together with its successors and assigns, "Maker"),
HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of ROBERT L. PRIDDY, an
individual (together with his successors and assigns, "Payee"), at 3435
Kingsboro Road #1601, Atlanta, Georgia 30326, or at such other place as the
holder of this Promissory Note (this "Note") may from time to time designate in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00), together with interest on the unpaid principal balance at the
rate of twelve percent (12%) per annum, from the date hereof until the principal
amount is paid in full.
The unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be paid in full on the earlier of (i)
October 15, 1997 and (ii) the closing of a senior debt financing with a
financial institution (other than Heller Financial, Inc.) in which Maker
receives at least $1,000,000 in gross loan proceeds (the "Maturity Date"). This
Note may be prepaid in whole at any time, however, should the Note be prepaid
prior to the Maturity Date, Maker will pay a prepayment penalty equal to the
difference between Ten Thousand Dollars ($10,000) and the amount of accrued and
unpaid interest at the time of the prepayment.
In the event the interest paid hereunder exceeds the maximum rate
of interest permitted by applicable law, such excess shall be applied toward the
repayment of the principal amount of this Note, and any further excess shall be
paid over to Maker after satisfaction in full of the outstanding principal
balance hereof. Maker further agrees to pay on demand all costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Payee or
its representatives in connection with the collection or enforcement of Maker's
obligations hereunder.
All payments and prepayments received by Payee hereunder shall be
applied first to all unpaid costs and expenses payable by Maker hereunder,
second to all accrued and unpaid interest hereunder, and third to the unpaid
principal balance hereof.
Each of the following shall constitute an "Event of Default"
under this Note:
(1) Maker fails to pay when due, whether by acceleration or
otherwise, any payment required under this Note within five (5) days
after the date on which such payment is due;
<PAGE> 2
(2) Maker shall (i) cease to do business as a going concern, (ii)
generally fail 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 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 after such event, whether
such filing or petition is voluntary or involuntary;
(3) A default occurs under any agreement, document or instrument
delivered in connection herewith, or if Maker fails to perform or keep
any of the other covenants, agreements or warranties contained herein or
therein and fails to cure the same within ten (10) business days after
notice from Payee to cure, unless a shorter or longer time period is
expressly specified in any particular covenant, agreement or warranty;
(4) An event of default occurs under any other agreement pursuant
to which Maker has incurred obligations for monies owed in a principal
amount in excess of $1,000,000 and such event of default results in the
right to accelerate such obligations, or an event of default occurs
under any other material agreement to which Maker is a party or by which
it is bound and such event of default results in Maker becoming
obligated to pay an amount in excess of $1,000,000; or
(5) The execution, without Payee's prior written consent, of any
agreement to merge or consolidate Maker with any other form of business
entity or to sell a substantial portion of the assets of Maker.
In the event that any Event of Default described above shall occur, Payee, in
its sole discretion, may declare all obligations and liabilities of Maker due
and payable, whereupon all of the obligations and liabilities of Maker shall be
immediately due and payable. Payee shall promptly advise Maker of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the provisions, terms and conditions contained in
this Note or in any other agreement, instrument or document, now or at any time
or times hereafter, executed by Maker or any third party and delivered to Payee
or its representative, shall not waive, affect or diminish any right of Payee at
any time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of Payee, its
agents or representatives, unless such waiver is contained in an instrument in
writing signed by the executor of Payee and directed to Maker specifying such
waiver. No waiver by or on behalf of Payee of any Event of Default or any event
which, with the giving of notice or the
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<PAGE> 3
passage of time, or both, would become an Event of Default (a "Potential Event
of Default") shall operate as a waiver of any other Event of Default or
Potential Event of Default or the same Event of Default or Potential Event of
Default on a future occasion. No delay on the part of Payee or its
representatives in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Payee or its representatives of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
To the extent not waived in the preceding two paragraphs, demand,
presentment, protest and notice of nonpayment and protest are hereby waived by
Maker.
Maker also irrevocably waives all of its now existing and
hereafter arising rights to set-off any amounts owing to Payee under this Note,
or otherwise, against any amounts now or hereafter owing by Payee or its
representatives to Maker.
Whenever in this Note reference is made to Payee or Maker, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of said successors and assigns. Maker's
successors and assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession of or for Maker.
THIS NOTE SHALL BE CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE OF ILLINOIS.
MAKER CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF ILLINOIS, AND MAKER HEREBY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON MAKER AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO MAKER AT ITS ADDRESS STATED
IN THE FIRST PARAGRAPH OF THIS NOTE. SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED.
EACH OF MAKER AND PAYEE WAIVES TRIAL BY JURY AND WAIVES
ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT.
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<PAGE> 4
Whenever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note 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 Note.
ACCUMED INTERNATIONAL, INC.
By: \S\ LEONARD R. PRANGE
Name: Leonard R. Prange
Title: Chief Financial Officer and
Chief Operating Officer
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<PAGE> 1
EXHIBIT 10.66
SECURITY AGREEMENT
This Security Agreement ("Agreement") made as of August 18, 1997
by ACCUMED INTERNATIONAL, INC., a Delaware corporation ("Debtor"), with its
principal place of business at 900 North Franklin Street, Suite 401, Chicago,
Illinois 60610, in favor of ROBERT L. PRIDDY, an individual ("Secured Party")
having an address at 3435 Kingsboro Road #1601, Atlanta, Georgia 30326.
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) "Account" shall mean, collectively, all accounts (as
defined in the Code) arising from the sale of cytopathology
instruments and software by the Debtor to Olympus America, Inc.,
the balance of which as of the date hereof is $275,560.
(b) "Account Debtor" shall mean the party or parties who
are obligated on or the Account.
(c) "Code" shall mean the Uniform Commercial Code as in
effect in the State of Illinois from time to time.
(d) "Collateral" has the meaning specified in Section 2.1.
(e) "Default" shall mean the occurrence or existence of
any "Event of Default" under (and as defined in) the Note.
(f) "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.
<PAGE> 2
(g) "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.
(h) "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.
(i) "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 right, title and interest in the Account, and all proceeds of
the Account, together with all of Debtor's books and records relating to the
Account (the "Collateral").
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 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
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<PAGE> 3
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 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
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
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<PAGE> 4
Debtor's other places of business and all other places where Collateral
is kept are located at the addresses set forth on Schedule B. The amount
represented by the Debtor from time to time to Secured Party as the
amount owing by each account debtor in respect of the Account 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 Michigan, the Secretary of State of Wisconsin and
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 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 States of Michigan, Ohio and Wisconsin),
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 such security
interest) or (iii) for the exercise by Secured Party of its rights and
remedies hereunder.
(i) 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
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<PAGE> 5
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 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 Account.
4. SALES, COLLECTIONS AND REPORTS
4.1 Collection of Account. Debtor may collect the Account, 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 the Account and of the proceeds thereof, as Secured Party may
request.
4.2 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 applicable Account Debtors that the Account has 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 Account by suit or otherwise; to surrender, release or
exchange all or any part of the Account; or to compromise, settle, extend or
renew for any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby.
4.3 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.
4.4 Other Collateral Issues. Debtor will deliver to Secured
Party, at such times and in such form as shall reasonably be designated by
Secured Party, assignments, 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 Account.
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<PAGE> 6
4.5 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 the 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. 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
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<PAGE> 7
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 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
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<PAGE> 8
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 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.
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<PAGE> 9
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 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
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<PAGE> 10
mail with postage prepaid and properly addressed. For the purposes hereof, the
addresses of the parties hereto shall be as follows:
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
with a copy to:
AccuMed International, Inc.
1500 7th Avenue
Suite 100
Sacramento, California 95818
Attention: Joyce L. Wallach, General Counsel
Telecopier: (916) 443-6850
If to the Secured Party, at:
Robert L. Priddy
3435 Kingsboro Road #1601
Atlanta, Georgia 30326
Telecopier: (404) 842-9431
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> 11
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the day and year first above written.
ACCUMED INTERNATIONAL, INC.
By: __________________________
Name:
Title:
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<PAGE> 12
SCHEDULE A
TO
SECURITY AGREEMENT
DATED AS OF AUGUST 18, 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> 13
SCHEDULE B
TO
SECURITY AGREEMENT
DATED AS OF AUGUST 18, 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
Chicago, Illinois 60610
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 60610
3. Debtor's Other Places of Business:
920 North Franklin Street, Suites 403 and 405
Chicago, Illinois 60610
29299 Clemens Road, Suite 1-K
Westlake, Ohio 44145
29307 Clemens Road
Westlake, Ohio 44145
1180 Elsworth Road
Ann Arbor, Michigan 48108
210 Business Park Drive
Sun Prairie, Wisconsin 53990
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<PAGE> 1
EXHIBIT 10.67
WARRANT AGREEMENT dated as of August 18, 1997 (this "Agreement"),
by and between AccuMed International, a Delaware corporation (the "Company"),
and Robert L. Priddy, an individual residing in the State of Nevada ("Priddy").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Priddy a warrant (the
"Warrant") to purchase up to 50,000 shares (the "Warrant Shares") of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"); and
WHEREAS, the Warrant issued pursuant to this Agreement is being
issued by the Company to Priddy in consideration for the making of a loan by
Priddy to the Company in the principal amount of $500,000 pursuant to a
Promissory Note and Security Agreement even date herewith.
NOW, THEREFORE, in consideration of the premises, the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. On the terms and subject to the conditions set forth
herein, and unless this Agreement is terminated prior to exercise in accordance
with Section 16 hereof, Priddy or other registered holder hereof (hereinafter
"the Holder") is hereby granted the right to purchase, at any time from August
18, 1997 until 5:00 P.M., New York time, on August 18, 2002 (the "Warrant
Exercise Term"), up to 50,000 Warrant Shares at an initial exercise price
(subject to adjustment as provided in Article 7 hereof) of $2.50 per Warrant
Share.
2. Warrant Certificate. The warrant certificate (the "Warrant
Certificate") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
Cash Exercise. The Warrant initially is
exercisable at a price of $2.50 per Warrant Share, payable in cash or by check
to the order of the Company, or any combination of cash or check, subject to
adjustment as provided in Article 7 hereof. Upon surrender of the Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with
<PAGE> 2
payment of the Exercise Price (as hereinafter defined) for the Warrant Shares
purchased, at the Company's principal offices (currently located at 900 N.
Franklin Street, Ste. 401, Chicago, Illinois 60610, Attn: Corporate Controller).
The Holder shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder, in whole or in part
(but not as to fractional Warrant Shares). In the case of the purchase of less
than all the Warrant Shares purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable thereunder.
4. Issuance of Certificates.
Upon the exercise of the Warrants for cash, the issuance of
certificates for the Warrant Shares purchased shall be made forthwith without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Article 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificate and the certificates representing the
Warrant Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of the
Company. The Warrant Certificate shall be dated the date hereof and certificates
representing the Warrant Shares shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Warrant Shares shall bear a legend substantially similar to the
following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT
2
<PAGE> 3
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
5. Restriction on Transfer of Warrants.
Priddy, by his acceptance thereof, covenants and agrees that the
Warrant is being acquired as an investment and not with a view to the
distribution thereof, and that neither the Warrant nor, if exercised, any
Warrant Shares, may be sold, transferred, assigned, hypothecated or otherwise
disposed of except in accordance with applicable securities laws.
6. Price.
6.1. Initial and Adjusted Exercise Price. The
initial exercise price of the Warrant shall be $2.50 per Warrant Share. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Adjustments of Exercise Price and Number of Warrant Shares.
7.1. Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
7.2. Adjustment in Number of Warrant Shares.
Upon each adjustment of the Exercise Price pursuant to the provisions of this
Article 7, the number of Warrant Shares issuable upon the exercise of the
Warrant shall be adjusted to the nearest full Warrant Share by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of the Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
7.3. Reclassification, Consolidation, Merger,
etc. In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the
case of any consolidation of the Company with, or merger of the Company into,
3
<PAGE> 4
another corporation (other than a consolidation or merger in which the Company
is the surviving corporation and which does not result in any reclassification
or change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder was the owner of the Warrant Shares
underlying the Warrant at a price equal to the product of (x) the number of
shares of Common Stock issuable upon conversion of the Warrant Shares and (y)
the Exercise Price prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Warrant.
7.4. Redemption of Warrant; Redemption of Warrant
Shares. Notwithstanding anything to the contrary contained in the Warrant or
elsewhere, the Warrant cannot be redeemed by the Company under any
circumstances.
7.5. Dividends and Other Distributions with
Respect to Outstanding Securities. In the event that the Company shall at any
time prior to the exercise of the Warrant declare a dividend (other than a
dividend consisting solely of shares of Common Stock or a cash dividend or
distribution payable out of current or retained earnings) or otherwise
distribute to its stockholders any monies, assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another person or entity, or any other thing of value, the
Holder of the Warrant shall thereafter be entitled, in addition to the
securities receivable upon the exercise thereof, to receive, upon the exercise
of such Warrant, the same monies, property, assets, rights, evidences of
indebtedness, securities or any other thing of value that he would have been
entitled to receive at the time of such dividend or distribution. At the time of
any such dividend or distribution, the Company shall make appropriate reserves
to ensure the timely performance of the provisions of this Subsection 7.5.
7.6. Subscription Rights for Shares of Common Stock or Other
Securities. In the case that the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of the Warrant issue
any rights to subscribe for shares of Common Stock or any other securities of
the Company or of such affiliate to all the stockholders of the Company, the
Holder of the unexercised Warrant shall be entitled, in addition to the
securities receivable upon the exercise of the Warrant, to receive its pro rata
portion of such rights at the
4
<PAGE> 5
time such rights are distributed to the stockholders of the Company.
8. Exchange and Replacement of Warrant Certificates.
The Warrant Certificate is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of the Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Warrant Shares upon the exercise of the Warrant, nor
shall it be required to issue scrip or pay cash in lieu of fractional interests,
it being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Warrant
Shares.
10. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of
its authorized shares of Common Stock, solely for the purpose of issuance upon
the exercise of the Warrant and conversion of the Warrant Shares, such number of
shares of Warrant Stock and Common Stock as shall be issuable upon such exercise
or conversion, as the case may be. The Company covenants and agrees that, upon
exercise of the Warrant and payment of the Exercise Price therefor, all shares
of Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Company's Warrant shall be outstanding, the Company
shall use its best efforts to cause all Warrant Shares to be quoted by Nasdaq or
listed on such national securities exchanges as the Common Stock is listed.
5
<PAGE> 6
11. Notices to Warrant Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than
out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
to the Holder of such event at least five (5) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
6
<PAGE> 7
12. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrant,
to the address of such Holder as shown on the books of
the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the
Company may designate by notice to the Holder.
13. Supplements and Amendments.
The Company and Schiller may from time to time supplement or
amend this Agreement without the approval of any Holder of the Warrant and/or
securities underlying the Warrant in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and Schiller may deem necessary
or desirable and which the Company and the Underwriter deem not to adversely
affect the interests of the Holder of the Warrant.
14. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holder inure to the benefit of their respective
successors and assigns hereunder.
15. Termination.
This Agreement shall terminate at the close of business on August
18, 2002. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when the Warrant has been exercised and all securities underlying
the Warrant have been resold to the public.
16. Governing Law.
This Agreement and the Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Illinois and for
all purposes shall be construed in accordance with the laws of said State.
17. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to
7
<PAGE> 8
any person or corporation other than the Company and Schiller and any other
registered Holder of the Warrant or any securities underlying the Warrant any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and
Schiller and any such other Holder.
18. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
[SEAL] ACCUMED INTERNATIONAL, INC.
By: \s\ LEONARD R. PRANGE
---------------------------------------
Name: Leonard R. Prange
Title: Chief Financial Officer
and Chief Operating Officer
Attest:
\S\ GARY A NEWBERRY
- ---------------------------
Gary A. Newberry
Assistant Secretary
\S\ ROBERT L. PRIDDY
---------------------------
Robert L. Priddy
8
<PAGE> 9
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE AT ANY TIME FROM August 18, 1997 UNTIL
5:00 P.M., NEW YORK TIME, August 18, 2002
50,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Robert L. Priddy, an
individual residing in the State of Florida ("Priddy"), or registered assigns,
is the registered holder of Warrants to purchase, at any time from August 18,
1997, until 5:00 P.M. New York City time on August 18, 2002 ("Expiration Date"),
up to 50,000 fully-paid and non-assessable share(s) (the "Shares") of Common
Stock, par value $0.01 per share ("Common Stock"), of AccuMed International,
Inc., a Delaware corporation (the "Company"), at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $2.50 per
share, upon surrender of this Warrant Certificate and, if exercised for cash,
payment of the Exercise Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Warrant Agreement dated as of
August 18, 1997, by and between the Company and Priddy (the "Warrant
Agreement"). Payment of the Exercise Price may be made in cash, or by check
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time,
on the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is
<PAGE> 10
hereby referred to in a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: August 18, 1997 ACCUMED INTERNATIONAL, INC.
[SEAL] By: \S\ LEONARD R. PRANGE
--------------------------------------
Name: Leonard R. Prange
Title: Chief Financial Officer
and Chief Operating Officer
Attest:
\S\ GARY A NEWBERRY
- --------------------------
Gary A. Newberry
Assistant Secretary
3
<PAGE> 12
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ shares of Common
Stock of AccuMed International, Inc. (or its successor) and herewith tenders in
payment for such shares cash or a check payable to the order of AccuMed
International, Inc. in the amount of $ , all in accordance with the terms
hereof. The undersigned requests that a certificate for such shares be
registered in the name of_________________________________________________ ,
whose address is____________________________, and that such Certificate be
delivered to___________________, whose address is ________________________.
Dated: Signature:__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE> 13
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_______________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
1.
<PAGE> 1
EXHIBIT 10.68
PROMISSORY NOTE
$1,000,000 February 2, 1998
FOR VALUE RECEIVED, the undersigned, ACCUMED INTERNATIONAL, INC.,
a Delaware corporation (together with its successors and assigns, "Maker"),
HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of ROBERT L. PRIDDY, an
individual (together with his successors and assigns, "Payee"), at 3435
Kingsboro Road #1601, Atlanta, Georgia 30326, or at such other place as the
holder of this Promissory Note (this "Note") may from time to time designate in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), together with interest on the unpaid principal balance at the
rate of twelve percent (12%) per annum, from the date hereof until the principal
amount is paid in full.
The unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, shall be paid in full on the earlier of (i)
April 2, 1998, and (ii) the closing of a private placement of securities in
which Maker receives at least $3,000,000 in gross proceeds (the "Maturity
Date"). This Note may be prepaid in whole at any time, however, should the Note
be prepaid prior to the Maturity Date, Maker will pay a prepayment penalty equal
to the difference between Twenty Thousand Dollars ($20,000) and the amount of
accrued and unpaid interest at the time of the prepayment.
In the event the interest paid hereunder exceeds the maximum rate
of interest permitted by applicable law, such excess shall be applied toward the
repayment of the principal amount of this Note, and any further excess shall be
paid over to Maker after satisfaction in full of the outstanding principal
balance hereof. Maker further agrees to pay on demand all costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Payee or
its representatives in connection with the collection or enforcement of Maker's
obligations hereunder.
All payments and prepayments received by Payee hereunder shall be
applied first to all unpaid costs and expenses payable by Maker hereunder,
second to all accrued and unpaid interest hereunder, and third to the unpaid
principal balance hereof.
Each of the following shall constitute an "Event of Default"
under this Note:
(1) Maker fails to pay when due, whether by acceleration or
otherwise, any payment required under
<PAGE> 2
this Note within five (5) days after the date on which
such payment is due;
(2) Maker shall (i) cease to do business as a going concern, (ii)
generally fail 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 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 after such event, whether
such filing or petition is voluntary or involuntary;
(3) A default occurs under any agreement, document or instrument
delivered in connection herewith, or if Maker fails to perform or keep
any of the other covenants, agreements or warranties contained herein or
therein and fails to cure the same within ten (10) business days after
notice from Payee to cure, unless a shorter or longer time period is
expressly specified in any particular covenant, agreement or warranty;
(4) An event of default occurs under any other agreement pursuant
to which Maker has incurred obligations for monies owed in a principal
amount in excess of $1,000,000 and such event of default results in the
right to accelerate such obligations, or an event of default occurs
under any other material agreement to which Maker is a party or by which
it is bound and such event of default results in Maker becoming
obligated to pay an amount in excess of $1,000,000; or
(5) The execution, without Payee's prior written consent, of any
agreement to merge or consolidate Maker with any other form of business
entity or to sell a substantial portion of the assets of Maker.
In the event that any Event of Default described above shall occur, Payee, in
its sole discretion, may declare all obligations and liabilities of Maker due
and payable, whereupon all of the obligations and liabilities of Maker shall be
immediately due and payable. Payee shall promptly advise Maker of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the provisions,
- 2 -
<PAGE> 3
terms and conditions contained in this Note or in any other agreement,
instrument or document, now or at any time or times hereafter, executed by Maker
or any third party and delivered to Payee or its representative, shall not
waive, affect or diminish any right of Payee at any time or times hereafter to
demand strict performance thereof and such right shall not be deemed to have
been waived by any act or knowledge of Payee, its agents or representatives,
unless such waiver is contained in an instrument in writing signed by the
executor of Payee and directed to Maker specifying such waiver. No waiver by or
on behalf of Payee of any Event of Default or any event which, with the giving
of notice or the passage of time, or both, would become an Event of Default (a
"Potential Event of Default") shall operate as a waiver of any other Event of
Default or Potential Event of Default or the same Event of Default or Potential
Event of Default on a future occasion. No delay on the part of Payee or its
representatives in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Payee or its representatives of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
To the extent not waived in the preceding two paragraphs, demand,
presentment, protest and notice of nonpayment and protest are hereby waived by
Maker.
Maker also irrevocably waives all of its now existing and
hereafter arising rights to set-off any amounts owing to Payee under this Note,
or otherwise, against any amounts now or hereafter owing by Payee or its
representatives to Maker.
Whenever in this Note reference is made to Payee or Maker, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of said successors and assigns. Maker's
successors and assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession of or for Maker.
THIS NOTE SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH,
AND GOVERNED BY, THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
MAKER CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF ILLINOIS, AND MAKER HEREBY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON MAKER AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO MAKER AT ITS ADDRESS STATED
IN THE FIRST PARAGRAPH OF THIS NOTE. SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED.
EACH OF MAKER AND PAYEE WAIVES TRIAL BY JURY AND WAIVES ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
- 3 -
<PAGE> 4
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.
Whenever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note 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 Note.
ACCUMED INTERNATIONAL, INC.
By: \S\ PAUL F. LAVALLEE
---------------------------------------
Paul F. Lavallee, Chairman and
Chief Executive Officer
4
<PAGE> 1
EXHIBIT 10.69
SECURITY AGREEMENT
This Security Agreement ("Agreement") made as of February 2, 1998
by ACCUMED INTERNATIONAL, INC., a Delaware corporation ("Debtor"), with its
principal place of business at 900 North Franklin Street, Suite 401, Chicago,
Illinois 60610, in favor of ROBERT L. PRIDDY, an individual ("Secured Party")
having an address at 3435 Kingsboro Road #1601, Atlanta, Georgia 30326.
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 $1,000,000 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) "Code" shall mean the Uniform Commercial Code as in
effect in the State of Illinois from time to time.
(b) "Collateral" has the meaning specified in Section 2.1.
(c) "Default" shall mean the occurrence or existence of
any "Event of Default" under (and as defined in) the Note.
(d) "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.
(e) "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.
(f) "Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale agreement, deposit
arrangement, security interest,
<PAGE> 2
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.
(g) "Person" shall mean any individual, sole
proprietorship, partnership, limited liability 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).
(h) "Royalty Stream" has the meaning specified in Section
2.1.
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 second
priority security interest (junior to the security interest therein of Becton
Dickinson and Company ("Becton")) in and to the following property and interests
in property: all of Debtor's right, title and interest in any and all royalty
payments which may become payable to Debtor by Becton (the "Royalty Stream")
pursuant to the License Agreement dated as of October 10, 1995 between the
Debtor (previously named Alamar Biosciences, Inc.) the and all proceeds of the
Royalty Stream, together with all of Debtor's books and records relating to the
Royalty Stream (the "Collateral").
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 carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
- 2 -
<PAGE> 3
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 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 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
- 3 -
<PAGE> 4
by this Agreement and the Liens identified on Schedule A. No financing
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. The amount represented by the
Debtor from time to time to Secured Party as the amount owing by Becton
in respect of the Royalty Stream will, at such time, be the correct
amount actually and unconditionally owing by Becton thereunder to the
best of the Debtor's knowledge (except to the extent, if any, that
Becton 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 Michigan, 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 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 States of
Michigan and 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
- 4 -
<PAGE> 5
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 such security interest) or (iii) for the exercise by Secured
Party of its rights and remedies hereunder.
(i) 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 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 Account.
4. SALES, COLLECTIONS AND REPORTS
4.1 Collection of Royalty Stream. Debtor may collect the Royalty
Stream, 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 Becton to make payments
directly to Secured Party. Debtor will take such action with respect to the
collection of the Royalty Stream and of the proceeds thereof, as Secured Party
may request.
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<PAGE> 6
4.2 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 Becton that the Royalty Stream has been assigned to
Secured Party and that Secured Party has a security interest therein; to direct
Becton to make payments to Secured Party of all or any part of the sums of the
Royalty Stream owing Debtor by Becton; to enforce collection of any of the
Royalty Stream by suit or otherwise; to surrender, release or exchange all or
any part of the Royalty Stream; or to compromise, settle, extend or renew for
any period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby.
4.3 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.
4.4 Other Collateral Issues. Debtor will deliver to Secured
Party, at such times and in such form as shall reasonably be designated by
Secured Party, assignments, 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 Royalty Stream.
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
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<PAGE> 7
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. 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
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<PAGE> 8
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 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
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<PAGE> 9
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 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
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<PAGE> 10
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 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:
If to the Debtor, at:
AccuMed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
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<PAGE> 11
Attention: Leonard R. Prange
Chief Financial Officer
Telecopier: (312) 642-2985
with a copy to:
AccuMed International, Inc.
1500 7th Avenue
Sacramento, California 95818
Attention: Joyce L. Wallach, General Counsel
Telecopier: (916) 443-6850
If to the Secured Party, at:
Robert L. Priddy
3435 Kingsboro Road #1601
Atlanta, Georgia 30326
Telecopier: (404) 842-9431
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.
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the day and year first above written.
ACCUMED INTERNATIONAL, INC.
By: \S\ PAUL F. LAVALLEE
---------------------------------
Paul F. Lavallee, Chairman and
Chief Executive Officer
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<PAGE> 12
SCHEDULE A
TO
SECURITY AGREEMENT
DATED AS OF FEBRUARY 2, 1998
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;
(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; and
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<PAGE> 13
(v) A first priority security interest granted in favor of Becton
pursuant to a letter agreement dated as of September 30, 1997 between
Becton and the Company.
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<PAGE> 14
SCHEDULE B
TO
SECURITY AGREEMENT
DATED AS OF FEBRUARY 2, 1998
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
Chicago, Illinois 60610
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 60610
3. Debtor's Other Places of Business:
920 North Franklin Street, Suites 403 and 405
Chicago, Illinois 60610
29299 Clemens Road, Suite 1-K
Westlake, Ohio 44145
29307 Clemens Road
Westlake, Ohio 44145
1180 Elsworth Road
Ann Arbor, Michigan 48108
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<PAGE> 1
EXHIBIT 10.70
WARRANT AGREEMENT dated as of February 3, 1998 (this
"Agreement"), by and between AccuMed International, a Delaware corporation (the
"Company"), and Robert L. Priddy, an individual residing in the State of Nevada
("Priddy").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Priddy a warrant (the
"Warrant") to purchase up to 100,000 shares (the "Warrant Shares") of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"); and
WHEREAS, the Warrant issued pursuant to this Agreement is being
issued by the Company to Priddy in consideration for the making of a loan by
Priddy to the Company in the principal amount of $1,000,000 pursuant to a
Promissory Note (the "Promissory Note")and Security Agreement of even date
herewith.
NOW, THEREFORE, in consideration of the premises, the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. On the terms and subject to the conditions set forth
herein, and unless this Agreement is terminated prior to exercise in accordance
with Section 16 hereof, Priddy or other registered holder hereof (hereinafter
"the Holder") is hereby granted the right to purchase, at any time from February
3, 1998 until 5:00 P.M., New York time, on February 3, 2003 (the "Warrant
Exercise Term"), up to 100,000 Warrant Shares at an initial exercise price
(subject to adjustment as provided in Article 7 hereof) of $1.5625 per Warrant
Share.
2. Warrant Certificate. The warrant certificate (the "Warrant
Certificate") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
Cash Exercise. The Warrant initially is
exercisable at a price of $1.5625 per Warrant Share, payable in cash or by check
to the order of the Company, or any combination of cash or check, subject to
adjustment as provided in Article 7 hereof. Upon surrender of the Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with
<PAGE> 2
payment of the Exercise Price (as hereinafter defined) for the Warrant Shares
purchased, at the Company's principal offices (currently located at 900 N.
Franklin Street, Ste. 401, Chicago, Illinois 60610, Attn: Corporate Controller).
The Holder shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder, in whole or in part
(but not as to fractional Warrant Shares). In the case of the purchase of less
than all the Warrant Shares purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable thereunder.
4. Issuance of Certificates.
Upon the exercise of the Warrants for cash, the issuance of
certificates for the Warrant Shares purchased shall be made forthwith without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Article 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificate and the certificates representing the
Warrant Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of the
Company. The Warrant Certificate shall be dated the date hereof and certificates
representing the Warrant Shares shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Warrant Shares shall bear a legend substantially similar to the
following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT
2
<PAGE> 3
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
5. Restriction on Transfer of Warrants.
Priddy, by his acceptance thereof, covenants and agrees that the
Warrant is being acquired as an investment and not with a view to the
distribution thereof, and that neither the Warrant nor, if exercised, any
Warrant Shares, may be sold, transferred, assigned, hypothecated or otherwise
disposed of except in accordance with applicable securities laws.
6. Price.
6.1. Initial and Adjusted Exercise Price. The
initial exercise price of the Warrant shall be $1.5625 per Warrant Share. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Article 7 hereof.
6.2. Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Adjustments of Exercise Price and Number of Warrant Shares.
7.1. Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
7.2. Adjustment in Number of Warrant Shares.
Upon each adjustment of the Exercise Price pursuant to the provisions of this
Article 7, the number of Warrant Shares issuable upon the exercise of the
Warrant shall be adjusted to the nearest full Warrant Share by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of the Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
7.3. Reclassification, Consolidation, Merger,
etc. In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the
case of any consolidation of the Company with, or merger of the Company into,
3
<PAGE> 4
another corporation (other than a consolidation or merger in which the Company
is the surviving corporation and which does not result in any reclassification
or change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder was the owner of the Warrant Shares
underlying the Warrant at a price equal to the product of (x) the number of
shares of Common Stock issuable upon conversion of the Warrant Shares and (y)
the Exercise Price prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Warrant.
7.4. Redemption of Warrant; Redemption of Warrant
Shares. Notwithstanding anything to the contrary contained in the Warrant or
elsewhere, the Warrant cannot be redeemed by the Company under any
circumstances.
7.5. Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of the Warrant declare a dividend (other than a dividend consisting
solely of shares of Common Stock or a cash dividend or distribution payable out
of current or retained earnings) or otherwise distribute to its stockholders any
monies, assets, property, rights, evidences of indebtedness, securities (other
than shares of Common Stock), whether issued by the Company or by another person
or entity, or any other thing of value, the Holder of the Warrant shall
thereafter be entitled, in addition to the securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrant, the same
monies, property, assets, rights, evidences of indebtedness, securities or any
other thing of value that he would have been entitled to receive at the time of
such dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Subsection 7.5.
7.6. Subscription Rights for Shares of Common Stock or
Other Securities. In the case that the Company or an affiliate of the Company
shall at any time after the date hereof and prior to the exercise of the Warrant
issue any rights to subscribe for shares of Common Stock or any other securities
of the Company or of such affiliate to all the stockholders of the Company, the
Holder of the unexercised Warrant shall be entitled, in addition to the
securities receivable upon the exercise of the Warrant, to receive its pro rata
portion of such rights at the
4
<PAGE> 5
time such rights are distributed to the stockholders of the Company.
7.7 Possible Reduction in Exercise Price upon
Exchange of 12% Convertible Promissory Notes. If (i) prior to repayment in full
of the principal and interest evidenced by the Promissory Note, holders of the
Company's 12% Convertible Promissory Notes due 2000 (the "Notes") are offered
the right to exchange their Notes for Preferred Stock convertible into Common
Stock at a conversion price per share of Common Stock lower than the initial
Exercise Price set forth in Section 6.1 hereof, or (ii) the Company shall issue
other securities convertible into or exercisable for shares of Common Stock at a
price lower than the initial Exercise Price, then the Exercise Price shall be
reduced to equal the lowest of such prices per share.
8. Exchange and Replacement of Warrant Certificates.
The Warrant Certificate is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of the Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
9. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Warrant Shares upon the exercise of the Warrant, nor
shall it be required to issue scrip or pay cash in lieu of fractional interests,
it being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Warrant
Shares.
10. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of
its authorized shares of Common Stock, solely for the purpose of issuance upon
the exercise of the Warrant and conversion of the Warrant Shares, such number of
shares of Warrant Stock and Common Stock as shall be issuable upon such exercise
or conversion, as the case may be. The Company
5
<PAGE> 6
covenants and agrees that, upon exercise of the Warrant and payment of the
Exercise Price therefor, all shares of Common Stock issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Company's Warrant shall
be outstanding, the Company shall use its best efforts to cause all Warrant
Shares to be quoted by Nasdaq or listed on such national securities exchanges as
the Common Stock is listed.
11. Notices to Warrant Holder.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than
out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
to the Holder of such event at least five (5) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such
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<PAGE> 7
record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend or distribution, or the issuance of any convertible or exchangeable
securities or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
12. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrant,
to the address of such Holder as shown on the books of
the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the
Company may designate by notice to the Holder.
13. Supplements and Amendments.
The Company and Schiller may from time to time supplement or
amend this Agreement without the approval of any Holder of the Warrant and/or
securities underlying the Warrant in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and Schiller may deem necessary
or desirable and which the Company and the Underwriter deem not to adversely
affect the interests of the Holder of the Warrant.
14. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holder inure to the benefit of their respective
successors and assigns hereunder.
15. Termination.
This Agreement shall terminate at the close of business on August
18, 2002. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when the Warrant has been exercised and all securities underlying
the Warrant have been resold to the public.
16. Governing Law.
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<PAGE> 8
This Agreement and the Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Illinois and for
all purposes shall be construed in accordance with the laws of said State.
17. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and Schiller and any other
registered Holder of the Warrant or any securities underlying the Warrant any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and
Schiller and any such other Holder.
18. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
[SEAL] ACCUMED INTERNATIONAL, INC.
By: \s\ LEONARD R. PRANGE
--------------------------------------
Name: Leonard R. Prange
Title: Chief Financial Officer
and Chief Operating Officer
Attest:
\s\ GARY A. NEWBERRY
- ---------------------
Gary A. Newberry
Assistant Secretary
\s\ ROBERT L. PRIDDY
--------------------------
Robert L. Priddy
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<PAGE> 9
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN.
EXERCISABLE AT ANY TIME FROM February 3, 1998 UNTIL
5:00 P.M., NEW YORK TIME, February 3, 2003
100,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Robert L. Priddy, an
individual residing in the State of Nevada ("Priddy"), or registered assigns, is
the registered holder of Warrants to purchase, at any time from February 3,
1998, until 5:00 P.M. New York City time on February 3, 2003 ("Expiration
Date"), up to 100,000 fully-paid and non-assessable share(s) (the "Shares") of
Common Stock, par value $0.01 per share ("Common Stock"), of AccuMed
International, Inc., a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $1.5625 per share, upon surrender of this Warrant Certificate and, if
exercised for cash, payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the Warrant
Agreement dated as of February 3, 1998, by and between the Company and Priddy
(the "Warrant Agreement"). Payment of the Exercise Price may be made in cash, or
by check payable to the order of the Company, or any combination of cash or
check.
No Warrant may be exercised after 5:00 P.M., New York City time,
on the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of
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<PAGE> 10
rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: February 3, 1998 ACCUMED INTERNATIONAL, INC.
[SEAL] By: LEONARD R. PRANGE
---------------------------------------
Name: Leonard R. Prange
Title: Chief Financial Officer
and Chief Operating Officer
Attest:
\s\ GARY A. NEWBERRY
- ----------------------
Gary A. Newberry
Assistant Secretary
4
<PAGE> 12
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ shares of Common
Stock of AccuMed International, Inc. (or its successor) and herewith tenders in
payment for such shares cash or a check payable to the order of AccuMed
International, Inc. in the amount of $______________________ , all in accordance
with the terms hereof. The undersigned requests that a certificate for such
shares be registered in the name of __________________________________________
______________________________________________________ , whose address
is_________________________________________________ , and that such Certificate
be delivered to________________________ , whose address is _____________.
Dated: Signature:__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE> 13
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_______________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
1
<PAGE> 1
EXHIBIT 10.71
DESCRIPTION OF COMPENSATION ARRANGEMENTS FOR
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Effective January 30, 1998, the Board of Directors of AccuMed
International, Inc. (the "Company") appointed Paul F. Lavallee to serve as
Chairman of the Board, Chief Executive Officer and President of the Company and
approved the following compensation arrangements for such services.
Mr. Lavallee's salary is $225,000 annually, and he is eligible for an
annual bonus of up to 30% thereof. The employment can be terminated by the
Company upon 12 months' notice.
Mr. Lavallee has been granted a non-qualified stock option to purchase
1,500,000 shares of Common Stock at an initial exercise price of $1.5625 (the
"Initial Exercise Price") (the closing sales price per share of Common Stock on
the grant date, January 30, 1998). If in the Company's first equity offering
subsequent to the grant date, it sells Common Stock, or securities convertible
or exercisable for Common Stock, at a price per share lower than the Initial
Exercise Price, then the Initial Exercise Price shall be reduced to equal such
lower price per share. (In March 1998, the Company completed such equity
offering for shares of Common Stock and warrants exercisable to purchase Common
Stock at $0.75 per share, accordingly the Initial Exercise Price has been reset
to $0.75.) The option is exercisable as follows (i) one-third of the underlying
shares were immediately exercisable (subject to a subsequent lock-up described
below), and (ii) an additional one-third and the final one-third of the
underlying shares, respectively, will become exercisable on the second and third
anniversaries of the grant date. In order to make an additional 1,500,000 shares
of Common Stock available for sale in a private placement by the Company in
March 1998, Mr. Lavallee agreed not to exercise the option until such time as
sufficient additional authorized but unissued shares of Common Stock are
available to reserve for issuance upon exercise of the option.
Mr. Lavallee will be reimbursed for reasonable traveling expenses from
South Dakota to Chicago and living expenses while in Chicago.
<PAGE> 1
EXHIBIT 10.72
ACCUMED INTERNATIONAL, INC.
AGENCY AGREEMENT
Commonwealth Associates
830 Third Avenue
New York, New York 10017
February 13, 1998
Gentlemen:
AccuMed International, Inc., a Delaware corporation (the
"Company"), proposes to exchange up to $6,000,000 principal amount of 12%
convertible promissory notes ("Notes") in an exchange offer (the "Exchange
Offer") for shares (the "Shares") of Series A Convertible Preferred Stock, $0.01
par value per share, of the Company and common stock purchase warrants
("Warrants"). The Exchange Offer will be made pursuant to those terms and
conditions acceptable to you as reflected in the Confidential Exchange Offer
Memorandum dated February 13, 1998, including all exhibits, attachments and
supplements thereto (the "Memorandum"). The Exchange Offer is being made
pursuant to the Memorandum 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 Memorandum (including the exhibits thereto), as it may be
amended from time to time, and the form of proposed subscription agreement and
registration rights agreement between the Company and each subscriber (the
"Subscription Agreement") and the exhibits which are part of the Memorandum
and/or Subscription Agreement, respectively, 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 desiring to exchange Notes for the
Shares and Warrants ("Subscriber") will be required to deliver, among other
things, the Subscription Agreement and a confidential purchaser questionnaire
("Questionnaire") in the form to be provided to offerees. Capitalized terms used
herein, unless otherwise defined or unless the context otherwise indicates,
shall have the same meanings provided in the Offering Documents.
<PAGE> 2
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 Exchange Offer) during the Offering
Period herein specified for the purposes of assisting the Company in soliciting
the exchange of Notes 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 Exchange Offer and shall
continue through 5:00 p.m. New York time on February 19, 1998 (the "Expiration
Date") (unless extended under circumstances specified in the Memorandum).
(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 with the Exchange Offer described in the
Offering Documents. It is understood that the Placement Agent has no commitment
to complete the Exchange Offer. Your agency hereunder is not terminable by the
Company except upon termination of the Offering Period.
(c) You may engage American Equities or such 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 Exchange Offer (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) The exchange of Notes by Subscribers shall be
evidenced by the execution by Subscribers of a Subscription Agreement and Letter
of Transmittal accompanying the Memorandum. No exchange shall be effective
unless and until it is accepted by the Company. The Placement Agent shall not
have any obligation to independently verify the accuracy or completeness of any
information contained in any Subscription Agreement or the authenticity,
sufficiency, or validity of the Notes delivered in exchange for the Shares and
Warrants.
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
2
<PAGE> 3
"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 Exchange Offer 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. The Company 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 its 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.
AccuMed International Limited ("AccuMed International") and Oncometrics Imaging
Corp. ("Oncometrics") are entities possessing substantially the same
characteristics under the laws of the United Kingdom and the Yukon Territory,
respectively.
(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 on Exhibit C hereto. 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.
(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, the Form S-3 Prospectus or set forth on Exhibits C and D, there are
not, nor will there be immediately after the Expiration Date (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 Exchange Offer will not cause any
anti-dilution adjustments to such securities or commitments.
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<PAGE> 4
(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,
except that certain of the shares of AccuMed International are subject to a lien
securing the Company's indebtedness to Transamerica Business Credit Corporation.
(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, 1997, as
amended by Amendment No. 1, contains the Company's (i) Balance Sheets at
December 31, 1996 and at September 30, 1997 (hereinafter, September 30, 1997
being referred to as the "Balance Sheet Date"), (ii) Statements of Operations
for the three and nine months ended September 30, 1996, and 1997 and (iii)
Statements of Cash Flows for each of the nine months ended September 30, 1996
and September 30, 1997 (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 Memorandum,
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 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
4
<PAGE> 5
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. 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 Exhibit 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, except as set
forth on Exhibit I 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 Memorandum or
in an Exhibit thereto which has been incorporated therein or Exhibit I, 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 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
Shares, the Warrant Agreement, or the Agent's
5
<PAGE> 6
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
each 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 of which such authority has
notified the Company. 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 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 and the Warrant Agreement have been duly authorized by
all requisite corporate action by the Company and when
6
<PAGE> 7
delivered, constitute or will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(o) Authorization of Shares and Warrants Etc. The
issuance, sale and delivery of the Shares and Warrants in exchange for the Notes
and the Agent's Warrants have been duly authorized by all requisite corporate
action of the Company. When so issued, sold and delivered, the Shares 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 Expiration Date.
(p) Authorization of Reserved Shares. The issuance, sale
and delivery by the Company of the shares of Common Stock issuable upon
conversion and/or exercise of the Shares and Warrants, respectively, 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
Shares, 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 Expiration Date.
(q) Exemption from Registration. Assuming (i) the accuracy
of the information provided by the respective Subscribers in the Offering
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 exchange of the Notes for the Shares and Warrants 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.
(r) Registration Rights. Except as set forth on Schedule
(r) hereto and except with respect to holders of the Shares and Warrants 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 on the
date hereof.
(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 Securities. When certificates representing
the Shares and Warrants and/or the Reserved Shares shall have been duly
delivered to the purchasers and
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<PAGE> 8
payment shall have been made therefor in accordance with the terms of the
Offering Documents or the Warrant Agreement, as applicable, the Subscribers
shall have good and marketable title to the Shares and Warrants and/or the
Reserved Shares, as the case may be, 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 Expiration 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. Expiration Date; Placement and Fees.
(a) Expiration Date. Provided Notes have been tendered,
the Company in its sole discretion, may reject or accept tenders of Notes in
full or part. If tenders are accepted on the Expiration Date, the Notes shall be
exchanged for the Shares and Warrants and the certificates representing the
Shares and Warrants will be delivered to Subscribers therefor promptly following
the Expiration Date. In addition, subsequent exchanges (if applicable) may be
scheduled at the discretion of the Company and Placement Agent. In such event,
the date of any such subsequent exchange will be deemed an "Expiration Date"
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 the Expiration Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The Exchange
Offer will become qualified or be exempt from qualification under the securities
laws of the several states pursuant to paragraph 4(c) below not later than the
Expiration Date, and (B) at the Expiration Date no stop order suspending the
exchange of the Notes shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
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<PAGE> 9
(ii) No Material Misstatements. Neither the Blue Sky
qualification materials nor the Memorandum contains an untrue statement of a
fact which is material, or omits to state a fact, which 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 the Expiration Date except as to
obligations which by their nature are herein contemplated to be performed after
the Expiration Date;
(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
under the Exchange Offer contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall
receive the opinion of Joyce Wallach, dated the Expiration Date(s),
substantially to the effect that:
(A) the Company 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 business and condition
(financial or otherwise) of the Company; AccuMed International and Oncometrics
are entities duly organized and validly existing under the laws of the United
Kingdom and the Yukon Territory, respectively;
(B) each of this Agreement, the Warrant
Agreement, the Subscription Agreement and Registration Rights Agreement, the
Agent's Warrants and the Share Certificates has been duly authorized, executed
and delivered by the Company, and the Certificate of Designation has been duly
executed by the Company and filed with the Secretary of State of Delaware, and
each of them constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with their respective 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 Exhibit C. Except for the
Shares, Warrants and Agent's 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
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<PAGE> 10
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
Exhibit D. All of the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid (except
for the shares in an escrow described in the Company's Pre-Effective Amendment
No. 3 to the Registration Statement on Form S-3 (Regis. No. 333-28125)) 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 Shares, when issued in accordance with the
terms of the Exchange Offer and the Certificate of Designation, Preferences and
Rights, will be validly issued and will be fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. The Reserved Shares have
been duly reserved, and when issued in accordance with the terms of the Shares,
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 Offering 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 exchange of the Notes for Shares and Warrants is
exempt from registration under the Securities Act and Regulation D promulgated
thereunder;
(E) neither the execution and delivery of this
Agreement, the Shares, the Warrants, the Warrant Agreement, the Subscription
Agreement and Registration Rights 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 such
counsel's 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, to such
counsel's 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 such counsel's 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
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<PAGE> 11
(G) such counsel has participated in the
preparation of the Offering Documents and nothing has come to the attention of
such counsel to cause her 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 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) The Placement Agent shall receive a certificate
of the Company, signed by the Chairman and Chief Executive Officer or Chief
Financial Officer and Chief Operating Officer and Secretary thereof, that the
representations and warranties contained in Section 2 hereof are true and
accurate in all material respects at the Expiration Date with the same effect as
though expressly made at the Expiration Date.
(vii) Promptly after the Expiration Date, if
applicable, the Placement Agent shall receive copies of all letters from the
Company to the investors transmitting the Shares and Warrants.
(c) Blue Sky. A summary blue sky survey shall be prepared
by counsel to the Placement Agent stating the extent to which and the conditions
upon which the exchange of the Notes 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 of the Company
set forth in the certificate to be delivered at the Expiration Date pursuant to
paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with the
exchange of the Notes at the Expiration Date as provided in paragraph 3(a)
above, the Company shall at the Expiration Date pay to the Placement Agent (i) a
commission equal to five percent (5%) of the aggregate principal amount of the
Notes exchanged (payable 60 days following the Expiration Date); and (ii)
reimbursement for accountable expenses. In addition, the Placement Agent shall
have previously received a copy of written documentation from the Company to the
registrar and transfer agent for the Common Stock instructing it to issue to the
Placement Agent a certificate representing 50,000 shares of Common Stock in lieu
of a cash retainer. The Company shall also pay all expenses in connection with
the qualification of the Shares and Warrants under the securities or Blue Sky
laws of the states which the Placement Agent shall designate. The Company will,
at the Expiration Date, 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 5% of the
shares of Common Stock underlying the Shares and Warrants issued in exchange for
the Notes. The Agent's Warrants will be exercisable for a period of seven years
from the Expiration Date. Moreover, an aggregate of 200,000 warrants previously
issued to the Placement Agent or its designees in connection with
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<PAGE> 12
the private placement of the Notes, exercisable at an exercise price of $3.125
per share, will be exchanged for Warrants having identical terms except that the
Warrants will have an exercise price of $1.125 per share. The Placement Agent
will be entitled to receive the Transaction Fee whether or not the exchange is
solicited by the Placement Agent, the Company or any third party.
(e) Bring-Down Opinions and Certificates. If there is more
than one Expiration Date, then at each such Expiration Date with respect to
which Notes are exchanged 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 Expiration Date or, if applicable, any additional
Expiration Date, (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 reasonable judgment,
makes it inadvisable to proceed with the exchange of the Notes.
4. Covenants of the Company.
(a) Expenses of Offering. The Company shall be responsible
for, and shall bear all expenses directly incurred in connection with, the
proposed Exchange Offer 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; Share 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.
(b) Notification. The Company shall notify the Placement
Agent immediately, and in writing, (A) when any event shall have occurred during
the period
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<PAGE> 13
commencing on the date hereof and ending on the Expiration Date as a result of
which the Offering Documents would include any untrue 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 Shares or Warrants, 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.
(c) Blue Sky. The Company will use its commercially
reasonable efforts to qualify or register the Shares and Warrants 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 the exchange of the Notes in any jurisdiction in
which it is not so qualified or in any manner in which such sale may not be
lawfully made.
(d) 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 Expiration Date.
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.
(e) Press Releases, Etc. The Company shall not, during the
period commencing on the date hereof and ending on the Expiration 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 Exchange Offer, without the
prior consent of the Placement Agent, which consent shall not be unreasonably
withheld unless, in the opinion of Company counsel, the press release is
required under the securities laws of the United States or the rules or policies
of Nasdaq.
(f) Form 10-K. 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 after such filing), a copy of its Annual Report on Form 10-K
for the year ended December 31, 1997.
(g) Restrictions on Issuance of Securities. Prior to the
Expiration 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 Company except for issuances of shares upon
(i) the exercise of outstanding options and warrants, and (ii) the transactions
contemplated on Exhibit D.
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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 "Placement Agent 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 (a "Company Indemnified Party" and collectively
as the context requires, with the Placement Agent Indemnified Party, the
"Indemnified Party") 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 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 Notes exchanged in the Exchange
Offer.
(b) The Company agrees to indemnify and hold harmless a
Placement Agent 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
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<PAGE> 15
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 5. 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 5 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 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
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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 Exchange Offer
without consummation thereof shall be without obligation on the part of any
party except that the indemnification provided in Section 5 hereof and the
contribution provided in Section 6 hereof shall survive any termination and
shall survive the Expiration Date 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 the exchange of the Notes 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.
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(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 telecopied,
mailed, delivered and confirmed to it at Commonwealth Associates, 830 Third
Avenue, New York, New York 10017, Att: Keith Rosenbloom, Esq., telecopy number
(212) 223-4756, 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: Paul F. Lavallee, telecopy number (312) 642-3101, with a copy to AccuMed
International, Inc., 1500 7th Avenue, Sacramento, CA 95818, Attn: Joyce Wallach,
General Counsel, telecopy number (916) 443-6850.
(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.
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\ PAUL F. LAVALLEE
-----------------------------
Paul F. Lavallee, Chairman,
Chief Executive Officer and President
Agreed:
COMMONWEALTH ASSOCIATES
By: \s\ JOSEPH D. WYNNE
--------------------------
Chief Financial Officer
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AMENDMENT
TO THE
AGENCY AGREEMENT
Amendment No. 1 to the Agency Agreement (the "Agency Agreement") dated
February 13, 1998 between AccuMed International, Inc., a Delaware corporation
(the "Company"), and Commonwealth Associates (the "Placement Agent").
Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agency Agreement.
The parties hereto agree to the following amendments to the terms of the
Exchange Offer and the Agency Agreement:
Section 3(d) of the Agency Agreement is hereby deleted, and the
following is inserted in lieu thereof:
"(d) Placement Fee and Expenses. Simultaneously with the exchange of the
Notes at the Expiration Date as provided in paragraph 3(a) above, the Company
shall at the Expiration Date pay to the Placement Agent reimbursement for
accountable expenses. Within 60 days following the Expiration Date, the Company
shall pay the Placement Agent a cash fee of $175,000. In addition, the Placement
Agent shall receive a copy of written documentation from the Company to the
registrar and transfer agent for the Common Stock instructing it to issue to the
Placement Agent a certificate representing 50,000 shares of Common Stock in lieu
of a cash retainer. The Company shall also pay all expenses in connection with
the qualification of the Shares and Warrants under the securities or Blue Sky
laws of the states which the Placement Agent shall designate. The Company will,
at the Expiration Date, 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 350,000
shares of Common Stock. The Agent's Warrants will be exercisable for a period of
seven years from the Expiration Date. Moreover, an aggregate of 200,000 warrants
previously issued to the Placement Agent or its designees in connection with the
private placement of the Notes, exercisable at an exercise price of $3.125 per
share, will be exchanged for Warrants having identical terms except that the
Warrants will have an exercise price of $1.125 per share. The Placement Agent
will be entitled to receive the Transaction Fee whether or not the exchange is
solicited by the Placement Agent, the Company or any third party."
<PAGE> 19
Except as expressly provided herein, the terms of the Agency Agreement
shall remain in full force and effect without modification or amendment.
In Witness Whereof, the parties have caused this Amendment No. 1 to be
executed as of February 23, 1998.
ACCUMED INTERNATIONAL, INC.
By: \s\ PAUL F. LAVALLEE
--------------------------------------
Name: Paul F. Lavallee
Title: Chairman, Chief Executive Officer
and President
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.,
a New York corporation, its general partner
By: \s\ JOSEPH D. WYNNE
--------------------------------------
Name: Joseph D. Wynne
Title: Chief Financial Officer
20
<PAGE> 1
EXHIBIT 10.74
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 23, 2005.
Warrant to Purchase 350,000 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"), 350,000 fully paid, validly issued and nonassessable
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") at a price of $0.75 per share at any time or from time to time during
the period from the Initial Warrant Exercise Date (defined below) to March 23,
2005, but not later than 5:00 p.m. New York City Time, on March 23, 2005. 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 350,000 shares of Common Stock, is being
issued in exchange for the cancellation of the repriced warrants issued in
exchange for the warrants was originally issued pursuant to an agency agreement
dated February 27, 1998 between the
<PAGE> 2
Company and Commonwealth Associates ("Commonwealth"), in connection with a
private placement ("Private Placement") through Commonwealth of the Units of the
Company.
(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 of this Warrant ("Initial
Warrant Exercise Date") and until March 23, 2005 (the "Exercise Period"),
subject to the provisions of Section (j)(2) hereof; provided, however, that 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. 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 designed. 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
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.
3
<PAGE> 3
(b) RESERVATION OF SHARES. 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 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
3
<PAGE> 4
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 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
4
<PAGE> 5
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 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
5
<PAGE> 6
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 23, 1998, 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 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
6
<PAGE> 7
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, 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 Warrant Shares purchasable upon
exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Warrant Shares initially
7
<PAGE> 8
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) 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 trading days before such date or
(ii) the price on the trading 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
8
<PAGE> 9
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 Warrant 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 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
9
<PAGE> 10
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 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
10
<PAGE> 11
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 (except, in the
case of the proposed registration statements relating to (i) the
shares of Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock issued in the exchange offer by the
Company in February 1998, and (ii) the shares of Common Stock
issued in the Units sold by the Company in the Private Placement
and the shares of Common Stock underlying Warrants included in
such Units, five days) 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.
(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
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<PAGE> 12
under the Act the Warrant Shares, then the Company shall, within
three weeks after receipt of such notice, file a registration
statement 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 23, 2005, 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. Any registration
requested pursuant to this Section (j)(2) shall, if the Company
is eligible to use Form S-3 (or any successor Form) under the
Act, be effected on a Form S-3 Registration Statement.
(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
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
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<PAGE> 13
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 uponinformation 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 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
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<PAGE> 14
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\ PAUL F. LAVALLEE
------------------------------
[SEAL] Paul F. Lavallee,
Chief Executive Officer and President
Dated: March 23, 1998
Attest:
/s/ JOYCE WALLACH
- ------------------------
Joyce Wallach, Secretary
PURCHASE FORM
Dated ____________, 19
<PAGE> 15
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 ___________________________________
<PAGE> 16
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 10.76
ACCUMED INTERNATIONAL, INC.
AGENCY AGREEMENT
Commonwealth Associates
830 Third Avenue
New York, New York 10022
March 12, 1998
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 sixty (60) units ("Units"), each Unit
consisting of shares of Common Stock, $0.01 par value per share ("Shares") and
Common Stock purchase warrants ("Warrants"). A minimum of forty-five (45) Units
("Minimum Offering") and a maximum of sixty (60) Units ("Maximum Offering") will
be sold in the offering at $100,000 per Unit subject to increase by mutual
consent of the Company and you. The Units will be offered pursuant to those
terms and conditions acceptable to you as reflected in the Confidential Offering
Memorandum, including all exhibits, attachments and supplements thereto (the
"Memorandum"). Of the Units, forty five (45) 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 Memorandum 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 Memorandum (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 Memorandum and/or Subscription Agreement are
collectively referred to herein as the "Offering Documents."
If, for any reason, the Company's Common Stock is delisted from
The Nasdaq Stock Market at any time, on or prior to December 31, 1998, original
investors in this Offering will be entitled to receive, in exchange for the
Units described above, units (the "Alternate Units"), each Alternate Unit
consisting of (i) shares of Series B Convertible Preferred Stock, par value
$0.01 per share of the Company (the "Series B Convertible Preferred") having an
aggregate stated value ("Stated Value") of $100,000, convertible into shares of
the Company's Common Stock at an initial conversion price ("Conversion Price")
equal to the Bid Price of the Common
<PAGE> 2
Stock, subject to reset as described below, and (ii) Warrants (the "Alternate
Warrants"), exercisable to purchase such number of shares of Common Stock of the
Company equal to the number of shares of Common Stock issuable upon conversion
of the Series B Convertible Preferred at the initial Conversion Price, at an
exercise price ("Exercise Price") equal to the higher of (x) $1.00 and (y) 110%
of the Bid Price. In such event, all references in this Agreement and in the
Offering Documents to the Units shall refer to the Alternate Units, all
references to the Shares shall refer to the Series B Convertible Preferred, all
references to the Warrants shall refer to the Alternate Warrants and all
references to Reserved Shares shall include all shares of Common Stock issuable
upon conversion of the Series B Convertible Preferred and exercise of the
Alternate Warrants, unless the context otherwise requires.
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. 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) April 15, 1998 (unless
extended for a period of up to sixty (60) days under circumstances specified in
the Memorandum). 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.
2
<PAGE> 3
(c) You may engage American Equities or such 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
Offering Documents. The Placement Agent shall not have any obligation to
independently verify the accuracy or completeness of any 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. The Company 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 its 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
3
<PAGE> 4
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.
AccuMed International Limited ("AccuMed International") and Oncometrics Imaging
Corp. ("Oncometrics") are entities possessing substantially the same
characteristics under the laws of the United Kingdom and the Yukon Territory,
respectively.
(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 hereto. 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.
(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, the Form S-3 Prospectus 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.
(e) Subsidiaries and Investments. The Company has no
subsidiaries other than Oncometrics Imaging Corp. and AccuMed International,
Ltd. (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 Imaging Corp. not owned by the Company) is
owned by the Company free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity, except that certain of the shares of AccuMed
International Ltd. are subject to a lien securing the Company's indebtedness to
Transamerica Business Credit Corporation.
(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, 1997, as
amended by Amendment No. 1, contains the Company's (i) Balance Sheets at
December 31, 1996 and at September 30, 1997 (hereinafter, September 30, 1997
being referred to as the "Balance Sheet Date"), (ii) Statements of Operations
for the three and nine months ended September 30, 1996, and 1997 and (iii)
Statements of Cash Flows for each of the nine months ended September 30, 1996
and September 30, 1997 (such
4
<PAGE> 5
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 Memorandum,
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 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. 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
5
<PAGE> 6
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, except as set
forth on Exhibit 1 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 Memorandum, or
in an Exhibit thereto which has been incorporated therein or Exhibit 1, 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 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
Shares, 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 each 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
6
<PAGE> 7
Company are not currently the subject of any audit by any state, local or
Federal authorities of which such authority has notified the Company. 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 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 Shares and Warrants, Etc. The
issuance, sale and delivery of the Shares 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 Shares 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 Memorandum, the issuance, sale and delivery by the Company of
the shares of Common Stock issuable upon exercise of the 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 exercise of all or any of the 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
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<PAGE> 8
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.
(r) Registration Rights. Except as set forth on Schedule
(r) hereto and 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 on the date hereof.
(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 Shares and
Warrants and/or the Reserved Shares, as the case may be, 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
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<PAGE> 9
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, 830 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 certificates representing the Shares and the
Warrants comprising such Units. In addition, subsequent closings (if applicable)
may be 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(c) 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 Memorandum, contains an untrue statement of
a fact which is material, or omits to state a fact, which 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 except as to
obligations which by their nature are herein contemplated to be performed after
the 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;
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<PAGE> 10
(v) Opinion of Counsel. The Placement Agent
shall receive the opinion of Joyce Wallach, dated the Closing(s), substantially
to the effect that:
(A) the Company 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 business and condition
(financial or otherwise) of the Company; AccuMed International and Oncometrics
are entities duly organized and validly existing under the laws of the United
Kingdom and the Yukon Territory, respectively;
(B) each of this Agreement, the Share
certificates, the Warrant Agreement, the Subscription Agreement and Registration
Rights Agreement, 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 their respective
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 Exhibit C.
Except for the Shares 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 Exhibit D. All of the issued and outstanding shares of capital
stock of the Company have been duly and validly authorized and issued, are fully
paid (except for the shares in an escrow described in the Company's
Pre-Effective Amendment to the Registration Statement on Form S-3 (Registration
No. 333-28125)) 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 Shares, when issued in
accordance with the terms of the Memorandum will be validly issued and will be
fully paid and nonassessable, with no personal liability attaching to the
ownership thereof. The Reserved Shares have been duly reserved, and when issued
in accordance with the terms of 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 Offering 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
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<PAGE> 11
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 Shares, the Warrants, the Warrant Agreement, the
Subscription Agreement and Registration Rights 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 such
counsel's 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, to such
counsel's 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 such counsel's 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 her 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 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) The Placement Agent shall receive a
certificate of the Company, signed by the Chairman and Chief Executive Officer
or Chief Financial Officer and Chief Operating Officer 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.
(vii) Within five days after the Closing, the
Placement Agent shall receive copies of all letters from the Company to the
investors transmitting the Shares and Warrants and shall receive a letter from
the Company confirming transmittal of the securities to the investors.
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<PAGE> 12
(c) Blue Sky. A summary blue sky survey shall be prepared
by counsel to the Placement Agent 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 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 (collectively, the
"Transaction Fee") to the Placement Agent (i) a commission equal to seven
percent (7%) of the aggregate purchase price of the Units sold; (ii) a
structuring fee equal to three percent (3%) of the aggregate purchase price of
the Units sold; and (iii) 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.
In addition, the Placement Agent shall have previously received a copy of
written documentation from the Company to the registrar and transfer agent for
the Common Stock instructing it to issue to the Placement Agent a certificate
representing shares of Common Stock having a market value of $100,000 on the
date hereof in lieu of a cash retainer. The Company shall also pay all expenses
in connection with the qualification of the Shares and Warrants 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
Schedule 1 to purchase up to 10% of the shares of Common Stock issued in this
Offering, including the shares of Common Stock underlying the Warrants. The
Agent's Warrants will be exercisable for a period of seven 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; provided however,
the Placement Agent shall not receive any cash commissions and Agent's Warrants
with respect to any gross proceeds received by the Company in the Offering from
Robert L. Priddy, Sakura Finetek U.S.A., Inc. and Sunquest Information Systems,
Inc. 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) and (vi)
of Section 3(b) above, respectively.
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(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
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 Memorandum. Other than
as contemplated in the Memorandum, 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;
Shares 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 and the Placement Agent has at least $4,500,000 in
an escrow account, the Company shall pay to the Placement Agent $300,000 in cash
and, in such event, the Placement Agent shall receive the Agent's Warrants for
the purchase of 450,000 shares of Common Stock of the Company exercisable at the
then current market price of the Common Stock.
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<PAGE> 14
(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 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 counsel, the
press release is required under the securities laws of the United States or the
rules or policies of Nasdaq.
(g) Form 10-K. 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 after such filing), a copy of its Annual Report on Form 10-K
for the year ended December 31, 1997.
(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
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<PAGE> 15
shares of Common Stock or grant any warrants, options or other securities of the
Company except for issuances of shares (i) upon the exercise of outstanding
options and warrants and conversion of the Company's 12% Convertible Promissory
Notes and Series A Convertible Preferred Stock and (ii) the transactions
contemplated on Exhibit D.
(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 issued in
connection with the Offering, including the shares issuable upon exercise of the
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 exercise of the
Warrants, including the shares underlying the Agent's Warrant.
(j) 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 Series B Convertible Preferred, the
Alternate Warrants (including, the shares of Common Stock issuable upon the
conversion and/or exercise of the Series B Convertible Preferred and/or
Alternate Warrants in the event of a reset of the conversion price or exercise
price of the Series B Convertible Preferred or Alternate Warrants, as the case
may be) 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 Series B Convertible Preferred and Alternate 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 (a "Placement Agent 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
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<PAGE> 16
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 (a "Company Indemnified Party" and collectively
as the context requires, with the Placement Agent Indemnified Party, the
"Indemnified Party") 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 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 a
Placement Agent 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
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<PAGE> 17
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 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
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<PAGE> 18
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 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 telecopied,
mailed, delivered and confirmed to it at Commonwealth Associates, 830 Third
Avenue, New York, New York 10022, Att: Keith Rosenbloom, Esq., telecopy number
(212) 223-4756 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: Paul F. Lavallee, telecopy number (312) 642-3101, with a copy to AccuMed
International, Inc., 1500 7th Avenue, Sacramento, CA 95818, Attn: Joyce Wallach,
General Counsel, telecopy number (916) 443-6850.
18
<PAGE> 19
(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.
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\ PAUL F. LAVALLEE
-----------------------------
Paul F. Lavallee, Chairman,
Chief Executive Officer and
President
Agreed:
COMMONWEALTH ASSOCIATES
By: \s\ JOSEPH D. WYNNE
--------------------------
Chief Financial 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 Memorandum dated
, 1997 (the "Memorandum") and the form of subscription agreement between the
Company and each subscriber (the "Subscription Agreement"), the exhibits to the
Memorandum 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 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.
<PAGE> 21
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 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
2
<PAGE> 22
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
3
<PAGE> 23
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
4
<PAGE> 24
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> 25
AMENDMENT
TO THE
AGENCY AGREEMENT
Amendment No. 1 to the Agency Agreement (the "Agency Agreement") dated
March 12, 1998 between AccuMed International, Inc., a Delaware corporation (the
"Company"), and Commonwealth Associates (the "Placement Agent"). Capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Agency Agreement or the Memorandum, as supplemented by the First
Supplement dated March 12, 1998, the Second Supplement dated March 18, 1998 and
the Third Supplement dated March 19, 1998 (the "Supplements"), and the terms of
the Offering described therein.
The parties hereto agree to the following amendments to the terms of the
Offering and the Agency Agreement:
1. The term "forty-five (45)" in the first paragraph of the Agency
Agreement is hereby deleted and the term "forty (40)" is inserted in lieu
thereof.
2. All references to the Memorandum and the terms of the Offering shall
include the Supplements and the terms of the Offering described therein.
3. The following paragraph is added after the third paragraph of the
Agency Agreement:
"Following the closing of the Minimum Offering, if permitted by
applicable laws and regulations, the Company will offer to (i) the
holders of the Company's 12% Convertible Notes due 2000 ("Convertible
Notes") which were not exchanged in the Note Exchange (except for those
holders of the Convertible Notes who were previously offered the right
to exchange their Convertible Notes in the Note Exchange) and (ii) the
holders of the Company's Series A Convertible Preferred and related
warrants to purchase Common Stock issued to the holders of the Series A
Convertible Preferred Stock in the Note Exchange (collectively, the
"Securities"), the right to exchange the Securities for the Units or the
Alternate Units, as the case may be."
4. Section 3(d) of the Agency Agreement is hereby deleted, and the
following is inserted in lieu thereof:
<PAGE> 26
"(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 (collectively, the
"Transaction Fee") to the Placement Agent (i) a commission equal to
4.6669% of the aggregate purchase price of the Units sold (except that
with regard to Units sold to Bellingham Industries, Inc. ("Bellingham"),
the commission shall be equal to 2.3338% of the aggregate purchase price
of such Units); (ii) a structuring fee equal to 2.0001% of the aggregate
purchase price of the Units sold (except that with regard to Units sold
to Bellingham, the structuring fee shall be equal to 1.0002% of the
aggregate purchase price of such Units); and (iii) an accountable
expense allowance up to $100,000; provided, however, if such accountable
expenses exceed $100,000, such excess amount shall be reimbursed by the
Company upon written approval by the Company. In addition, the Placement
Agent shall have previously received a copy of written documentation
from the Company to the registrar and transfer agent for the Common
Stock instructing it to issue to the Placement Agent a certificate
representing shares of Common Stock having a market value of $100,000 on
the date hereof in lieu of a cash retainer. The Company shall also pay
all expenses in connection with the qualification of the Shares and
Warrants 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 Schedule 1 to purchase up
to 6.667% of the shares of Common Stock issued in this Offering,
including the shares of Common Stock underlying the Warrants (except
that with regard to Units sold to Bellingham, there shall be issued you
the Placement Agent's Warrants to purchase 3.334% of the shares of
Common Stock included in such Units, including the shares of Common
Stock underlying the Warrants included in such Units). The Agent's
Warrants will be immediately exercisable for a period of seven years
from the Initial Closing Date. The Placement Agent shall not receive any
cash commissions and Agent's Warrants with respect to any gross proceeds
received by the Company in the Offering from Robert L. Priddy, Sakura
Finetek U.S.A., Inc. and Sunquest Information Systems, Inc. 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. In connection with this Offering, the 350,000 Warrants to
purchase Common Stock exercisable at $1.125 per share initially issued
to the Placement Agent and its designees in connection with the Note
Exchange will be exchanged for warrants having identical terms except
that the exercise price shall be reduced to the Amended Bid Price."
5. Section 4(k) is hereby added to the Agency Agreement as follows:
7
<PAGE> 27
"The Board of Directors has agreed that, if the Bellingham Investment is
consummated, to expand the Board of Directors to create two new
directorships and to appoint two persons recommended by Bellingham to
its Board of Directors, one of whom is Harold S. Blue. The Company
agrees to pay Mr. Blue a finder's fee of up to $125,000 in connection
with the Bellingham Investment. The Company also agrees to pay a
finder's fee to Lincoln Estates ("Lincoln") of up to $125,000 in
connection with the Bellingham Investment. Furthermore, the Company
agrees to issue to Bellingham and/or its designees immediately
exercisable warrants to purchase up to 333,000 shares of Common Stock
(assuming an Amended Bid Price of $0.75) at an exercise price equal to
the Amended Bid Price. The Company also agrees to issue Harold S. Blue
and/or his designees immediately exercisable warrants to purchase up to
333,000 shares of Common Stock (assuming an Amended Bid Price of $0.75)
at an exercise price equal to the Amended Bid Price. Such warrants will
be in addition to the Warrants included in the Units purchased by
Bellingham."
6. Section 5(1) is hereby added to the Agency Agreement:
"Following the Initial Closing, the Company will take all actions as may
be necessary to promptly prepare and file with the Securities and
Exchange Commission a registration statement under the Securities Act
covering the Registrable Securities (as defined in the Subscription
Agreement) and shall use its best efforts to cause such registration
statement to become effective."
Except as expressly provided herein, the terms of the Agency Agreement
shall remain in full force and effect without modification or amendment.
In Witness Whereof, the parties have caused this Amendment No. 1 to be
executed as of March 19, 1998.
ACCUMED INTERNATIONAL, INC.
By:\s\ PAUL F. LAVALLEE
Name: Paul F. Lavallee
Title: Chairman, Chief Executive
Officer and President
8
<PAGE> 28
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.,
a New York corporation, its general
partner
By: \s\ JOSEPH D. WYNNE
------------------------------
Name: Joseph D. Wynne
Title: Chief Financial Officer
9
<PAGE> 1
EXHIBIT 10.77
WARRANT AGREEMENT
AGREEMENT, dated as of this 19th day of March, 1998, between
ACCUMED INTERNATIONAL, INC., a Delaware corporation (the "Company"), 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 forty (40) and a maximum of sixty (60) units
("Units"), each Unit consisting of shares of the Company's Common Stock, $.01
par value per share ("Common Stock") and Common Stock purchase warrants
("Warrants"), each Warrant exercisable to purchase one share of the Company's
Common Stock, the Company will issue up to 8,000,000 Warrants; and
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 50,000,000 authorized shares
of Common Stock, $.01 par value per share.
(b) "Corporate Office" shall mean the office of the Company (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 900 North Franklin
Street, Suite 401, Chicago, Illinois 60610.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Company shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon properly completed and
duly executed by the Registered Holder thereof or his attorney 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) March 19, 1998
with
<PAGE> 2
respect to Warrants to purchase up to 3,183,200 shares (39.79%) 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) 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 4,816,800 shares (60.21%) of Common Stock issuable
pursuant to this Warrant Agreement.
(e) "Market Price" shall mean (i) the average closing bid price
of the Common Stock, for twenty (20) consecutive trading days ending on the
Calculation Date as reported by Nasdaq, if the Common Stock is traded on the
SmallCap Market, or (ii) the average last reported sales price of the Common
Stock, for twenty (20) consecutive trading days ending on 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.
(f) "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 $0.75 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.
(g) "Redemption Price" shall mean the price at which the Company
may, at its option in accordance with the terms hereof, redeem the Warrants
which price shall be $0.25 per Warrant.
(h) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books maintained by
the Company.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on March 19, 2005, or such earlier date as the Warrants shall be redeemed,
provided that if 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.
(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.
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<PAGE> 3
(b) From time to time, up to the Warrant Expiration Date, the
Company shall execute and deliver stock certificates in required whole number
denominations representing up to an aggregate of 8,000,000 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
Company 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 Target Price (as defined in Section 9) 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, Chief Executive Officer or Chief Financial
Officer 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 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 Company
to the Registered Holder.
-3-
<PAGE> 4
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 Company 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 promptly be issued without any delay.
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 pursuant to the terms hereof 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 (in such states as requested in writing by or on
behalf of any Warrantholders) under state "blue sky" securities laws or
compliance with exemption requirements (if such exemptions are not self
executing) 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.
(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
-4-
<PAGE> 5
no such delivery shall be made unless (i) the person requesting the same has
paid to the Company the amount of transfer taxes or charges incident thereto, if
any and (ii) the Registered Holder has provided documentation satisfactory to
the Company's counsel that such issuance is not in violation of applicable
Federal and state securities laws.
SECTION 6. Exchange and Registration of Transfer.
Subject to the restrictions on transfer contained in the Warrant
Certificates and the Subscription Agreements and Registration Rights Agreements
(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 Company at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute, and
the Company 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 Company 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 Corporate Office, the Company shall execute and the Company 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 provided to the Company.
(d) The Company may require payment by such Registered Holder of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Company and thereafter retained by the Company until termination of this
Agreement or resignation of the Company or, with the prior written consent of
Commonwealth, disposed of or destroyed.
(f) Prior to due presentment for registration of transfer
thereof, the Company may deem and treat the Registered Holder of any Warrant
Certificate as the absolute
-5-
<PAGE> 6
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) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company of
evidence satisfactory to it 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 it, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and (in the
absence of notice to the Company 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 Company 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 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.
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<PAGE> 7
(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 11 hereof,
the number of additional Warrants to which such Registered Holder shall be
entitled as a result of such adjustment or, at the option of the Company, cause
to be distributed to such Registered Holder in substitution and replacement for
the Warrant Certificates held by it 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 Registered 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 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
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<PAGE> 8
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, Chief Executive Officer or Chief Financial Officer, 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 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
Company. 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 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 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
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<PAGE> 9
(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
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
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<PAGE> 10
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 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,
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<PAGE> 11
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 and
consultants to, the Company; or
(ii) upon the grant or exercise of any other options which
may hereafter be granted or exercised under the Plans 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 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
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<PAGE> 12
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 amended, 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 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.
SECTION 9. Redemption.
(a) On not less than thirty (30) days' notice given at any time
after the date hereof (the "Redemption Notice"), to Registered Holders of the
Warrants being redeemed, the Warrants may be redeemed, at the option of the
Company, at a redemption price of $0.25 per
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<PAGE> 13
Warrant, provided (i) the Market Price of the Common Stock shall equal or exceed
$4.50 per share (the "Target Price"), subject to adjustment as set forth in
Section 9(f), below and (ii) there is an effective registration statement
covering the shares of Common Stock issuable upon exercise of the Warrants. All
Warrants must be redeemed if any are redeemed. For purposes of this Section 9,
the Calculation Date shall mean a date within 15 days of the mailing of the
Redemption Notice. The date fixed for redemption of the Warrants is referred to
herein as the "Redemption Date".
(b) If the conditions set forth in Section 9(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall mail a
Redemption Notice to each of the Registered Holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 6(b). Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the Registered Holder receives such notice.
(c) The Redemption Notice shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that the right to exercise the
Warrant 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 Registered Holder (a) to whom
notice was not mailed or (b) whose notice was defective. An affidavit 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.
(d) Any right to exercise a Warrant 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, Registered Holders of the Warrants shall have
no further rights except to receive, upon surrender of the Warrant, payment of
the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum in cash
equal to the Redemption Price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price, shall
cease.
(f) If the shares of Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the Target Price shall be
proportionally
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<PAGE> 14
adjusted by the ratio which the total number of shares of Common Stock
outstanding immediately prior to such event bears to the total number of shares
of Common Stock to be outstanding immediately after such event.
SECTION 10. 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 11. 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 of Common Stock,
upon exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share of Common
Stock called for upon any exercise of a Warrant, the Company shall pay to the
Registered 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 or Nasdaq SmallCap Market, the current market value shall
be the last reported sale price of the Common Stock on such
exchange on the last trading day prior to the date of exercise of
the applicable Warrant or if no such sale is made on such day or
no last reported 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 Nasdaq) 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 12. 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
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<PAGE> 15
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 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 an applicable Warrant and been issued shares of Common
Stock with respect thereto in accordance with the provisions hereof.
SECTION 13. 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 Company
or of the holder of any other Warrant, may, on its own behalf and for its own
benefit, enforce against the Company his right to exercise its Warrant for the
purchase of shares of Common Stock in the manner provided in the Warrant
Certificate and this Agreement.
SECTION 14. Agreement of Warrant Holders. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, and
every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Company 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 Corporate Office of the Company, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to 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 15. 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 the
Company and retired; the Company 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 16. Modification of Agreement. Subject to the provisions
of Section 4(b), the parties hereto may by supplemental agreement make any
changes or
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<PAGE> 16
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 pursuant to the
adjustment provisions of Section 8 hereof or 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 as
otherwise provided herein.
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: Paul F. Lavallee, Chairman and Chief Executive Officer; and if
to Commonwealth at Commonwealth Associates, 830 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 their respective successors and
assigns) and the Registered Holders from time to time of Warrant Certificates.
Nothing in this 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 two
or more counterparts, each of which shall constitute an original and all of
which 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.
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<PAGE> 17
ACCUMED INTERNATIONAL, INC.
By: /s/ PAUL F. LAVALLEE, Chairman and
Chief Executive Officer
COMMONWEALTH ASSOCIATES
By: /s/ JOSEPH P. WYNNE
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<PAGE> 18
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE
SECURITIES 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 SECURITIES 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 ____________, 2005
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, $0.01 par value per share ("Common
Stock") of AccuMed International, Inc., a Delaware corporation (the "Company"),
at any time commencing on , 1998, with respect to Warrants to purchase up to
________ 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) 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 _______ shares ( %) of Common
Stock represented hereby, and in both cases,and prior to the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Exercise Form on the reverse hereof properly completed and
duly executed, at the corporate office of the Company, accompanied by payment of
an amount equal to $_______ for each Warrant (the "Purchase Price") in lawful
money of the United States of America in cash 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
A-1
<PAGE> 19
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated March __, 1998
between the Company 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 respect thereto. 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 to the Registered Holder a new
Warrant Certificate or Warrant Certificates of like tenor, which the Company
shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time)
on March __, 2005, or such earlier date as the Warrants shall be redeemed,
provided that if 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 sole election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Company, 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 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.
The Warrants represented hereby may be redeemed at the option of
the Company, at a redemption price of $.25 per Warrant at any time after the
date hereof, provided (i) the Market Price (as defined in the Warrant Agreement)
for the Common Stock shall equal or exceed $4.50 per share and (ii) there is an
effective registration statement
A-2
<PAGE> 20
covering the shares of Common Stock issuable upon exercise of the Warrants.
Notice of redemption shall be given not later than the thirtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no rights
with respect to the Warrants represented hereby except to receive the $.25 in
cash per Warrant upon surrender of this Warrant Certificate.
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 without regard to the conflict
of law provisions thereof.
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: _____________, 1998
By:_____________________________
By:______________________________
[seal]
Attest:
_____________________________
Joyce Wallach
Secretary and General Counsel
A-3
<PAGE> 21
NOTICE OF EXERCISE
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> 22
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> 23
AMENDMENT
TO THE
WARRANT AGREEMENT
Amendment No. 1 to the Warrant Agreement (the "Warrant Agreement") dated
March 19, 1998 between AccuMed International, Inc., a Delaware corporation (the
"Company"), and Commonwealth Associates (the "Placement Agent"). Capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Warrant Agreement.
The parties hereto agree to the following amendments to the terms of the
Warrant Agreement:
1. The number "8,000,000" in the first "WHEREAS" clause is hereby
deleted and the number "8,686,667" is inserted in lieu thereof.
2. Section 1(d) of the Warrant Agreement is hereby deleted, and the
following is inserted in lieu thereof:
"(d) "Initial Warrant Exercise Date" shall mean (i) March 19,
1998 with respect to Warrants to purchase up to 3,456,424 shares
(39.79%) 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) 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 5,230,243 shares (60.21%) of Common Stock
issuable pursuant to this Warrant Agreement.
3. The date "March 19, 2005" in Section 1(i) is hereby deleted and the
date "March 23, 2005" is inserted in lieu thereof.
4. The number "8,000,000" in Section 2(b) is hereby deleted and the
number "8,686,667" is inserted in lieu thereof.
<PAGE> 24
Except as expressly provided herein, the terms of the Warrant Agreement
shall remain in full force and effect without modification or amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed as of March 23, 1998.
ACCUMED INTERNATIONAL, INC.
By: /s/ PAUL F. LAVALLEE
---------------------
Name: Paul F. Lavallee
Title: Chairman, Chief Executive Officer
and President
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.,
a New York corporation, its general partner
By: \s\ JOSEPH D. WYNNE
---------------------
Name: Joseph D. Wynne
Title: Chief Financial Officer
-7-
<PAGE> 1
EXHIBIT 10.78
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE
SECURITIES 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 SECURITIES 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 MARCH 23, 2005
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, $0.01 par value per share ("Common
Stock") of AccuMed International, Inc., a Delaware corporation (the "Company"),
at any time commencing on March 19, 1998, with respect to Warrants to purchase
up to ________ shares (39.79%) 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) 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 _______ shares (60.21%) of
Common Stock represented hereby, and in both cases,and prior to the Expiration
Date (as hereinafter defined), upon the presentation and surrender of this
Warrant Certificate with the Exercise Form on the reverse hereof properly
completed and duly executed, at the corporate office of the Company, accompanied
by payment of an amount equal to $0.75 for each Warrant (the "Purchase Price")
in lawful money of the United States of America in cash or by official bank or
certified check made payable to AccuMed International, Inc. The Company may, at
its election, reduce the Purchase Price.
<PAGE> 2
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 19,
1998, as amended as of March 23, 1998 between the Company 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 respect thereto. 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 to the Registered Holder a new
Warrant Certificate or Warrant Certificates of like tenor, which the Company
shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time)
on March 23, 2005, or such earlier date as the Warrants shall be redeemed,
provided that if 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 sole election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Company, 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 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.
The Warrants represented hereby may be redeemed at the option of
the Company, at a redemption price of $.25 per Warrant at any time after the
date hereof, provided (i) the Market Price (as defined in the Warrant Agreement)
for the Common Stock shall equal or exceed
-2-
<PAGE> 3
$4.50 per share and (ii) there is an effective registration statement covering
the shares of Common Stock issuable upon exercise of the Warrants. Notice of
redemption shall be given not later than the thirtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
the Warrants represented hereby except to receive the $.25 in cash per Warrant
upon surrender of this Warrant Certificate.
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 without regard to the conflict
of law provisions thereof.
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: _____________, 1998
By:_____________________________
By:______________________________
[seal]
Attest:
_________________________
Joyce Wallach
Secretary and General Counsel
-3-
<PAGE> 4
NOTICE OF EXERCISE
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
____________________
-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.
-5-
<PAGE> 1
EXHIBIT 10.79
********************************************************************************
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 [19] [23], 2005.
Warrant to Purchase ____________ [aggregate 1,337,333] Shares of Common
Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
ACCUMED INTERNATIONAL, INC.
This is to Certify That, FOR VALUE RECEIVED, _______________
[Commonwealth Associates, Harold S. Blue, Bellingham Capital Industries and/or
designees], or assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from AccuMed International, Inc., a Delaware
corporation ("Company"), 336,302 fully paid, validly issued and nonassessable
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") at a price of $0.75 per share at any time or from time to time during
the period from the Initial Warrant Exercise Date (defined below) to March 23,
2005, but not later than 5:00 p.m. New York City Time, on March 23, 2005. 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 __________ shares of Common Stock, was
originally issued pursuant to an agency agreement between the Company and
Commonwealth Associates ("Commonwealth"), in connection with the private
placement ("Private Placement") through Commonwealth of the Units of the
Company.
2
<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 of this Warrant ("Initial
Warrant Exercise Date") and until March 23, 2005 (the "Exercise Period"),
subject to the provisions of Section (j)(2) hereof; provided, however, that 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. 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 designed. 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
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.
3
<PAGE> 4
(b) RESERVATION OF SHARES. 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 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
4
<PAGE> 5
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 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
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<PAGE> 6
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 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
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<PAGE> 7
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 23, 1998, 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 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
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<PAGE> 8
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, 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 Warrant Shares purchasable upon
exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Warrant Shares initially
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<PAGE> 9
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) 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 trading days before such date or
(ii) the price on the trading 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
9
<PAGE> 10
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 Warrant 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 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
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<PAGE> 11
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 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
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<PAGE> 12
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 (except, in the
case of the proposed registration statements relating to (i) the
shares of Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock issued in the exchange offer by the
Company in February 1998, and (ii) the shares of Common Stock
issued in the Units sold by the Company in the Private Placement
and the shares of Common Stock underlying Warrants included in
such Units, five days) 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.
(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
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<PAGE> 13
under the Act the Warrant Shares, then the Company shall, within
three weeks after receipt of such notice, file a registration
statement 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 23, 2005, 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. Any registration
requested pursuant to this Section (j)(2) shall, if the Company
is eligible to use Form S-3 (or any successor Form) under the
Act, be effected on a Form S-3 Registration Statement.
(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
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
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<PAGE> 14
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 uponinformation 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 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
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<PAGE> 15
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 ________________________________
[SEAL] Leonard Prange,
Chief Executive Officer and President
Dated: March 19, 1998
Attest:
_____________________________
Joyce Wallach, Secretary
PURCHASE FORM
Dated ____________, 19
<PAGE> 16
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 __________________________________
<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 10.80
ACCUMED INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS AGREEMENT made as
of this ____ day of ________, 1998 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 forty-five
(45) and a maximum of sixty (60) units ("Units") in a private placement (the
"Private Placement"), each Unit consisting of shares of the Company's Common
Stock, $.01 par value per share (the "Shares") and Common Stock purchase
warrants (the "Warrants") in the form included in the warrant agreement (the
"Warrant Agreement") attached hereto as Exhibit A 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 United States Trust Company of New York, as Escrow Agent
for AccuMed International, Inc., contemporaneously with the execution and
delivery of this Subscription Agreement. The Shares 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 forty-five Units ($4,500,000) 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 Offering
<PAGE> 2
Memorandum dated March 6, 1998, as supplemented and amended (the "Memorandum"),
including the exhibits thereto incorporated by reference.
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 Memorandum 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 Shares 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.
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<PAGE> 3
1.8 The Subscriber understands that the Shares 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 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 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 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 Shares and Warrants
comprising his Units and the Common Stock issuable upon exercise of such
Warrants 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
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<PAGE> 4
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 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 If the Company has insufficient shares of authorized
but unissued Common Stock to fill all subscriptions, subscriptions shall be
filled in the discretion of the Company and the Placement Agent until such time
as no more shares are available. Funds in respect of such over subscriptions
will be deposited in and remain in the Escrow Account until the earlier of (x)
the date on which the Company has additional authorized shares of Common Stock
to fill such subscriptions, and (y) May 21, 1998. If such additional shares are
not available on or prior to May 21, 1998, the over subscribed funds, with
interest at the rate of 6% per annum, will be promptly be returned to the
subscriber.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that
as of the date of the Memorandum and at the Closing Date:
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<PAGE> 5
(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.
(c) The Shares 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 Memorandum, the Company
will at all times during the term of the Warrants have authorized and reserved a
sufficient number of shares of Common Stock to provide for exercise of the
Warrants.
(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 Shares 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.
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<PAGE> 6
(h) The selected financial information contained in the
Memorandum 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 March 6, 1998
and will terminate at 11:59 PM Eastern time on April 15, 1998, unless extended
by the Company and the Placement Agent for up to an additional sixty (60) days
(the "Termination Date"). Of the Units forty-five (45) will be offered on a
"best efforts-all or none" basis and the remaining fifteen (15) Units will be
offered on a "best efforts" basis as more particularly set forth in the
Memorandum. The minimum subscription per subscriber shall be one Unit
($100,000), 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, except as otherwise
provided in the Memorandum, (i) a placement fee in the amount of 7% of the
purchase price of the Units placed; (ii) a structuring fee in the amount of 3%
of the purchase price of the Units placed; (iii) an accountable expense
allowance; (iv) warrants to purchase 10% of the number of shares of Common Stock
of the Company sold in the Offering, including the shares of Common Stock
underlying the Warrants, for assisting the Company in the placement and (v)
other compensation as summarized in the Memorandum .
3.3 Pending the sale of the Units, all funds paid
hereunder shall be deposited by the Company in escrow with United States Trust
Company of New York. If the Company shall not have obtained and accepted
subscriptions (including this subscription) for purchases of forty-five (45)
Units for an aggregate purchase price of $4,500,000 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 forty-five (45) 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 Except as otherwise provided in Section 1.16, The
Subscriber hereby authorizes and directs the Company to return any funds,
without interest, for
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<PAGE> 7
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 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 (the "Requesting Holders")
of at least thirty percent (30%) of the shares of Common Stock sold in the
Private Placement or issuable or issued upon the exercise of the Warrants
("Registrable Securities"), 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
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<PAGE> 8
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 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.
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<PAGE> 9
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 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
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<PAGE> 10
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 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
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<PAGE> 11
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.
(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
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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.
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: Paul
F. Lavallee 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
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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.
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
13
<PAGE> 14
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.
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)
14
<PAGE> 15
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.
-----------------------------------------------
-----------------------------------------------
(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)
15
<PAGE> 16
(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 ____
16
<PAGE> 17
(f) For all Subscribers, please indicate frequency of such prior
participation in private placements:
<TABLE>
<CAPTION>
Public Private
Companies Companies
--------- ---------
<S> <C> <C>
Frequently __________ __________
Occasionally __________ __________
Never __________ __________
</TABLE>
(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
(i) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the
foreseeable future:
- ------------------------
* IF UNITS ARE BEING SUBSCRIBED FOR BY AN ENTITY, THE ATTACHED
CERTIFICATE OF SIGNATORY MUST ALSO BE COMPLETED.
17
<PAGE> 18
YES ____ NO ____
6.4 NASD Affiliation:
Are you associated(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
18
<PAGE> 19
By: ____________________
Authorized Officer
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.
19
<PAGE> 20
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:
____________________________________
20
<PAGE> 21
Dated: _____________ ____, 1998
This Subscription Agreement is agreed to and accepted as of
_________________, 1998.
ACCUMED INTERNATIONAL, INC.
___________________________________
Name:
Title:
21
<PAGE> 22
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: __________________, 1998
This Subscription Agreement is agreed to and accepted as of
_________________, 1998.
22
<PAGE> 23
ACCUMED INTERNATIONAL, INC.
___________________________________
Name:
Title:
23
<PAGE> 24
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 Shares 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
________________, 1998.
__________________________________
(Signature)
24
<PAGE> 1
EXHIBIT 10.81
SECOND AMENDMENT
TO
O.E.M. SUPPLY AGREEMENT
BETWEEN
OLYMPUS AMERICA INC.-PRECISION INSTRUMENT DIVISION
AND
ACCUMED INTERNATIONAL, INC.
This is the Second Amendment ("Second Amendment") to the O.E.M. Supply
Agreement dated May 31, 1996 ("Agreement") between Olympus America
Inc.-Precision Instrument Division ("OLYMPUS") and AccuMed International, Inc.
("ACCUMED"), as initially amended on July 1, 1996. Capitalized terms used but
not otherwise defined in this Second Amendment will have the meanings ascribed
to such terms in the Agreement. The effective date of this Second Amendment is
August 31, 1997.
OLYMPUS and ACCUMED wish to amend the Agreement. The Agreement is hereby
amended as follows:
Al. The text of Section 7.1 of the Agreement is deleted and replaced with
the following: THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT
COMMENCING ON THE EFFECTIVE DATE (I.E., MAY 31, 1996) AND EXPIRING ON
SEPTEMBER 1, 1997 (THE "AGREEMENT TERM") UNLESS EARLIER TERMINATED
PURSUANT TO SECTION 7.2.
A2. The text of Section 7.4 of the Agreement is deleted and replaced with
the following: UPON EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT,
OLYMPUS SHALL HAVE THE RIGHT, AT ITS OPTION, TO: (A) REQUIRE ACCUMED TO
REPURCHASE FROM OLYMPUS (AT THE PRICE PAID BY OLYMPUS) SIX ACCEIL SYSTEM
UNITS PER CALENDAR MONTH (BEGINNING IN OCTOBER 1997) UNTIL SUCH TIME AS
OLYMPUS'S INVENTORY THEREOF IS DEPLETED, PROVIDED THAT THE SYSTEMS TO BE
REPURCHASED ARE IN GOOD CONDITION; (B) REQUIRE ACCUMED TO PURCHASE FROM
OLYMPUS, AT A PRICE OF $750.00 PER UNIT, THE MICROSCOPE FRAMES ATTACHED
TO THE AFOREMENTIONED ACCEIL SYSTEM UNITS TO BE REPURCHASED BY ACCUMED;
(C) REMOVE, OR REQUIRE ACCUMED TO REMOVE AT ACCUMED'S COST AND EXPENSE,
ANY AND ALL AUTHORIZED TRADEMARKS FROM THE AFOREMENTIONED ACCELL SYSTEM
UNITS TO BE REPURCHASED BY ACCUMED, PROVIDED THAT SUCH REMOVAL DOES NOT
MATERIALLY DEFACE THE SYSTEMS; (D) CONTINUE TO SELL TO THIRD PARTIES ANY
AND ALL
<PAGE> 2
PRODUCTS IN OLYMPUS'S INVENTORY; AND/OR (E) PROVIDE ONGOING SUPPORT AND
SERVICE TO OLYMPUS'S END-USER CUSTOMERS. IN ADDITION, UPON EXPIRATION OR
EARLIER TERMINATION OF THIS AGREEMENT, ACCUMED SHALL NOT SELL (OTHER
THAN TO OLYMPUS) ANY PRODUCT CONTAINING OR WHICH IS PACKAGED IN
MATERIALS CONTAINING THE AUTHORIZED TRADEMARKS AND ACCUMED SHALL
IMMEDIATELY CEASE ANY USE OF THE AUTHORIZED TRADEMARKS. FINALLY, UPON
EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT, OLYMPUS WILL SELL
TO ACCUMED, AT ACCUMED'S OPTION AND AT A PRICE EQUAL TO OLYMPUS'S COST
OF DEVELOPMENT AND PRODUCTION, OLYMPUS'S INVENTORY OF PRODUCT
LITERATURE, PROVIDED THAT OLYMPUS MAY REMOVE OR REQUIRE ACCUMED TO
REMOVE, AT ACCUMED'S COST AND EXPENSE, ANY AND ALL AUTHORIZED TRADEMARKS
FROM SUCH PRODUCT LITERATURE.
A3. The provisions of the Agreement listed in Section 7.6 of the Agreement
shall remain in effect and shall survive the expiration or earlier
termination of the Agreement.
A4. The following Sections will be added to Article 10 (Miscellaneous) of
the Agreement:
10.15 OLYMPUS MICROSCOPES AND ACCESSORIES. OLYMPUS AND ACCUMED WILL
ENDEAVOR TO ENTER INTO A MUTUALLY AGREED-UPON NON-EXCLUSIVE O.E.M.
AGREEMENT WHEREBY ACCUMED WILL PURCHASE MICROSCOPES AND RELATED
ACCESSORIES FROM OLYMPUS. NEITHER ACCUMED NOR OLYMPUS SHALL BE LIABLE TO
THE OTHER IF THEY CANNOT REACH AGREEMENT, FOR ANY REASON, ON A
NON-EXCLUSIVE O.E.M. AGREEMENT.
10.16 RELEASES. (A) "OLYMPUS RELEASED PARTIES" SHALL REFER TO OLYMPUS
AMERICA INC. AND EACH OF ITS PRESENT AND PAST SUBSIDIARIES,
PREDECESSORS, SUCCESSORS, LICENSEES, ASSIGNS, PARTNERSHIPS, PARENTS, AND
AFFILIATED OR RELATED AGENTS, CORPORATIONS AND ENTITIES, AND EACH OF
THEIR RESPECTIVE PRESENT AND PAST OFFICERS, DIRECTORS, TRUSTEES, AGENTS,
INSURANCE CARRIERS, ATTORNEYS, PARTNERS, EMPLOYEES, AND REPRESENTATIVES.
"ACCUMED RELEASED PARTIES" SHALL REFER TO ACCUMED INTERNATIONAL, INC.
AND EACH OF ITS PRESENT AND PAST SUBSIDIARIES, PREDECESSORS, SUCCESSORS,
LICENSEES, ASSIGNS, PARTNERSHIPS, PARENTS AND AFFILIATED OR RELATED
AGENTS, CORPORATIONS AND ENTITIES, AND EACH OF THEIR RESPECTIVE PRESENT
AND PAST OFFICERS, DIRECTORS, TRUSTEES, AGENTS, INSURANCE CARRIERS,
ATTORNEYS, PARTNERS, EMPLOYEES, AND
<PAGE> 3
REPRESENTATIVES.
(B)EXCEPT FOR (I) THE CONTINUING AND/OR SURVIVING OBLIGATIONS, COVENANTS
AND AGREEMENTS OF THIS AGREEMENT LISTED IN SECTION 7.6 AND (II) ANY
AMOUNTS OWED BY ACCUMED TO OLYMPUS FOR ACCUMED'S PURCHASE OF OLYMPUS
PRODUCTS, OLYMPUS AND ITS RESPECTIVE SUCCESSORS AND ASSIGNS GENERALLY
RELEASE AND FOREVER DISCHARGE THE ACCUMED RELEASED PARTIES, AND EACH OF
THEM, FROM ANY AND ALL CLAIMS, CONTRACTS, DEBTS, DAMAGES, LIABILITIES,
DEMANDS, OBLIGATIONS, COSTS, EXPENSES, DISPUTES, SUITS, ACTIONS,
PROCEEDINGS, JUDGMENTS, EXECUTIONS, LOSSES, DUES, DEMANDS, AND CAUSES OF
ACTION OF WHATEVER NATURE WHATSOEVER, AND ANY KIND, WHETHER KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED, FIXED OR CONTINGENT WHICH OLYMPUS NOW
OWNS OR HOLDS OR HAS AT ANY TIME HERETOFORE OWNED OR HELD OR MAY AT ANY
TIME OWN OR HOLD AGAINST THE ACCUMED RELEASED PARTIES, AND EACH OF THEM,
BY REASON OF ANY ACTS, CIRCUMSTANCES, FACTS, EVENTS, TRANSACTIONS,
MATTER, CAUSE OR THING FROM THE BEGINNING OF THE WORLD TO THE DATE
HEREOF.
(C) EXCEPT FOR (I) THE CONTINUING AND/OR SURVIVING OBLIGATIONS,
COVENANTS AND AGREEMENTS OF THIS AGREEMENT LISTED IN SECTION 7.6,
ACCUMED AND ITS RESPECTIVE SUCCESSORS AND ASSIGNS GENERALLY RELEASE AND
FOREVER DISCHARGE THE OLYMPUS RELEASED PARTIES, AND EACH OF THEM, FROM
ANY AND ALL CLAIMS, CONTRACTS, DEBTS, DAMAGES, LIABILITIES, DEMANDS,
OBLIGATIONS, COSTS, EXPENSES, DISPUTES, SUITS, ACTIONS, PROCEEDINGS,
JUDGMENTS, EXECUTIONS, LOSSES, DUES, DEMANDS, AND CAUSES OF ACTIONS OF
WHATEVER NATURE WHATSOEVER, AND ANY KIND, WHETHER KNOWN OR UNKNOWN,
SUSPECTED OR UNSUSPECTED, FIXED OR CONTINGENT WHICH ACCUMED NOW OWNS OR
HOLDS OR HAS AT ANY TIME HERETOFORE OWNED OR HELD OR MAY AT ANY TIME OWN
OR HOLD AGAINST THE OLYMPUS RELEASED PARTIES, AND EACH OF THEM, BY
REASON OF ANY ACTS, CIRCUMSTANCES, FACTS, EVENTS, TRANSACTIONS, MATTER,
CAUSE, OR THING FROM THE BEGINNING OF THE WORLD TO THE DATE HEREOF.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
duly executed as of the date listed in the introductory paragraph
hereof.
<PAGE> 4
OLYMPUS AMERICA INC. ACCUMED INTERNATIONAL, INC.
Precision
Instrument Division
By: \s\ MICHAEL BURKE
----------------------------
By: SIDNEY BRAGINSKY Name: Michael Burke
------------------- Title: President
Name: Sidney Braginsky
Title: President
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
1. AccuMed International, Limited, an English registry company.
2. Oncometrics Imaging Corp., a corporation continuing under the laws of
the Yukon Territory, Canada.
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
AccuMed International, Inc.:
We consent to incorporation by reference in the registration statements Nos.
333-28125, 333-04715, 33-98902, 333-07681 on Form S-3 and Nos. 333-04320 and
333-11219 on Form S-8 of AccuMed International, Inc. of our reports dated March
23, 1998, relating to the consolidated balance sheets of AccuMed International,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows and
related schedule for the years ended December 31, 1997 and 1996 and the three
months ended December 31, 1995, which reports appear in this December 31, 1997
annual report on Form 10-K of AccuMed International, Inc.
/s/ KPMG Peat Marwick LLP
Chicago, IL
April 2, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuMed International, Inc. on Form S-3 (Nos. 333-28125, 333-04715, 33-98902,
333-07681) and on Form S-8 (Nos. 333-04320 and 333-11219) 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 audit of the financial statements of Alamar Biosciences, Inc. as of
September 30, 1995, and for the year then ended, which report is included in
this Annual Report on Form 10-K of AccuMed International, Inc. for the year
ended December 31, 1997.
/s/ Coopers & Lybrand L.L.P.
Sacramento, CA
April 2, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 470
<SECURITIES> 0
<RECEIVABLES> 4,664
<ALLOWANCES> 0
<INVENTORY> 3,464
<CURRENT-ASSETS> 8,782
<PP&E> 5,179
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,549
<CURRENT-LIABILITIES> 7,739
<BONDS> 11,455
0
0
<COMMON> 227
<OTHER-SE> 506
<TOTAL-LIABILITY-AND-EQUITY> 20,549
<SALES> 19,110
<TOTAL-REVENUES> 19,110
<CGS> 11,851
<TOTAL-COSTS> 11,851
<OTHER-EXPENSES> 21,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,584
<INCOME-PRETAX> (16,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,919)
<EPS-PRIMARY> (0.77)
<EPS-DILUTED> (0.77)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,801
<SECURITIES> 0
<RECEIVABLES> 2,144
<ALLOWANCES> 0
<INVENTORY> 1,772
<CURRENT-ASSETS> 7,034
<PP&E> 1,696
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,480
<CURRENT-LIABILITIES> 3,656
<BONDS> 231
0
0
<COMMON> 209
<OTHER-SE> 9,927
<TOTAL-LIABILITY-AND-EQUITY> 14,480
<SALES> 6,222
<TOTAL-REVENUES> 6,222
<CGS> 3,991
<TOTAL-COSTS> 3,991
<OTHER-EXPENSES> 16,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 458
<INCOME-PRETAX> (11,574)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,574)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,574)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 716
<SECURITIES> 0
<RECEIVABLES> 245
<ALLOWANCES> 0
<INVENTORY> 314
<CURRENT-ASSETS> 1,545
<PP&E> 411
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,989
<CURRENT-LIABILITIES> 1,780
<BONDS> 0
0
0
<COMMON> 109
<OTHER-SE> 989
<TOTAL-LIABILITY-AND-EQUITY> 2,989
<SALES> 515
<TOTAL-REVENUES> 515
<CGS> 1,431
<TOTAL-COSTS> 1,431
<OTHER-EXPENSES> 2,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> (3,759)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,759)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,759)
<EPS-PRIMARY> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,627
<SECURITIES> 0
<RECEIVABLES> 4,522
<ALLOWANCES> 0
<INVENTORY> 3,229
<CURRENT-ASSETS> 9,806
<PP&E> 6,438
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,318
<CURRENT-LIABILITIES> 4,242
<BONDS> 8,716
0
0
<COMMON> 219
<OTHER-SE> 10,212
<TOTAL-LIABILITY-AND-EQUITY> 25,318
<SALES> 3,049
<TOTAL-REVENUES> 3,049
<CGS> 1,492
<TOTAL-COSTS> 1,492
<OTHER-EXPENSES> 7,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (6,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,163)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,001
<SECURITIES> 0
<RECEIVABLES> 5,294
<ALLOWANCES> 0
<INVENTORY> 3,340
<CURRENT-ASSETS> 10,278
<PP&E> 6,223
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,256
<CURRENT-LIABILITIES> 6,527
<BONDS> 9,376
0
0
<COMMON> 224
<OTHER-SE> 5,702
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