<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ x ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement (by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12)
AccuMed International, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
Not applicable
---------------------------------------
(Name of Person Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
Not applicable
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(2) Aggregate number of securities to which transactions applies:
Not applicable
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Not applicable
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(4) Proposed maximum aggregate value of transaction:
$15,750,000
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(5) Total Fee paid:
$3,150.
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[X] Fee paid previously with preliminary material: $3,150.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
Not applicable.
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(2) Form, Schedule or Registration Statement No.:
Not applicable.
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(3) Filing party:
Not applicable.
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(4) Date filed:
Not applicable.
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<PAGE> 2
ACCUMED INTERNATIONAL, INC.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited to attend
the Special Meeting of Stockholders (including any adjournment or postponement
thereof, the "Meeting") of AccuMed International, Inc. (the "Company") to be
held at 10:00 a.m. (Chicago time) on December 22, 1998 at the offices of the
Company located at 900 North Franklin Street, Suite 401, Chicago, Illinois.
At the Meeting, you will be asked to consider and vote upon approval of
the sale by the Company of substantially all the assets and certain liabilities
related to its Microbiology Division, including the Company's wholly-owned
subsidiary AccuMed International Ltd., an English registry company
(collectively, the assets and certain liabilities to be sold are referred to as
the "Microbiology Business"), to AMI Acquisition Corp., a Delaware corporation
(the "Purchaser"). The consideration to be received by the Company, in addition
to the assumption of certain liabilities by the Purchaser, will be an initial
purchase price of $15,150,000 in cash which will be paid to the Company in
immediately available funds at the closing. An additional $600,000 in cash will
be deposited by the Purchaser into an escrow account at the closing. The initial
purchase price may be increased or reduced following computation of the net
working capital of the Microbiology Business at the closing date (see "TERMS OF
THE PROPOSED SALE--Purchase and Sale; Adjustment to Initial Purchase Price").
The Company's Microbiology Division accounted for approximately $15.4 million
(99.5%) of the first nine months of 1998 revenues and $18.1 million (94.8%) of
1997 revenues. Important details regarding the structure of the transaction and
other matters are described more fully in the accompanying Proxy Statement.
Following the transactions, you will continue to be a stockholder of the
Company. Nevertheless, because of the importance of the business being sold,
Delaware law requires that the Company seek your approval before proceeding. The
business to be sold does not include the Company's Cytopathology Division.
Portions of the net cash proceeds of the sale will be used (i) to repay
indebtedness under the Company's secured debt facilities (approximately $5.5
million), and (ii) to repay the Company's 12% Convertible Promissory Notes due
2000 (approximately $3.3 million). The balance of the proceeds, approximately
$6.95 million, will be used to pay expenses related to the transaction, for
working capital, including reduction of outstanding accounts payable, and
general corporate purposes to fund the continuing operations of the Company's
Cytopathology Division.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND RECOMMENDS THAT
YOU VOTE "FOR," THE PROPOSED SALE OF THE COMPANY'S MICROBIOLOGY BUSINESS. In
arriving at its recommendation, the Board of Directors has given careful
consideration to a number of factors described in the enclosed Proxy Statement.
The Board of Directors has for some time considered the strategic
direction of the Company in light of, among other things, the competitive
conditions facing the Company and the Company's financial condition and
leverage. Based on these and other considerations more fully described in the
enclosed Proxy Statement, the Board of Directors believes that the proposed sale
is expedient and fair and in the best interests of the Company and its
stockholders.
The approval of the proposed sale requires the affirmative vote of the
holders of at least a majority of the outstanding shares of common stock, par
value $0.01 per share.
You are urged to carefully consider all the material in the Proxy
Statement and mark, sign, date and return the enclosed proxy as soon as
possible, regardless of whether you expect to attend the Meeting. Giving a proxy
will not prevent you from voting in person at the Meeting.
<PAGE> 3
Very truly yours,
PAUL F. LAVALLEE
Chairman of the Board, President
and Chief Executive Officer
Dated: December 1, 1998
<PAGE> 4
ACCUMED INTERNATIONAL, INC
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on December 22, 1998
----------------------
Dear Stockholders:
NOTICE IS HEREBY GIVEN THAT A SPECIAL MEETING (the "Meeting") OF
STOCKHOLDERS OF ACCUMED INTERNATIONAL, INC., a Delaware corporation (the
"Company"), will be held at the Company's offices located at 900 North Franklin
Street, Suite 401, Chicago, Illinois, on December 22, 1998 at 10:00 a.m.
(Chicago time), to consider and act upon the following matters.
1. PROPOSED SALE. To consider and vote upon approval of the sale (the
"Proposed Sale") by the Company to AMI Acquisition Corp., a Delaware corporation
(the "Purchaser"), of substantially all of the assets and liabilities related to
the Company's Microbiology Division, including all of the issued and outstanding
ordinary shares of AccuMed International Ltd., an English registry company and
wholly-owned subsidiary of the Company, pursuant to the terms and conditions of
Asset Purchase Agreement dated as of November 20, 1998 between the Company and
the Purchaser.
2. OTHER BUSINESS. To transact such other business and to consider and
take action upon any and all other matters that may properly come before the
Meeting or any adjournment or postponements thereof.
The Board of Directors knows of no matters, other than those set forth
in paragraph (1) above that will be presented for consideration at the Meeting.
The Board of Directors has fixed the close of business on November 18,
1998 as the record date for the determination of stockholders entitled to vote
at the Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE MARK,
DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
Chicago, Illinois JOYCE L. WALLACH
December 1, 1998 General Counsel and Secretary
<PAGE> 5
PROXY STATEMENT
OF
ACCUMED INTERNATIONAL, INC.
900 NORTH FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
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SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1998
-----------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to holders of common stock, par
value $0.01 per share (the "Common Stock"), of AccuMed International, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Company's Board of Directors for use at a Special Meeting of
Stockholders scheduled to be held at the Company's principal offices located at
900 North Franklin Street, Suite 401, Chicago, Illinois on December 22, 1998 and
at any and all adjournments or postponements thereof (the "Meeting").
It is anticipated that this Proxy Statement and the accompanying form of
proxy will first be sent to stockholders on or about December 1, 1998. Only
stockholders of record at the close of business on November 18, 1998 are
entitled to vote at the Meeting.
At the Meeting, stockholders will be asked to (i) consider and vote upon
a proposal to approve the principal terms of the sale (the "Proposed Sale") by
the Company to AMI Acquisition Corp., a Delaware corporation (the "Purchaser"),
of substantially all of the assets (the "Acquired Assets") and liabilities (the
"Acquired Liabilities") related to the Company's Microbiology Division,
including all of the issued and outstanding ordinary shares of AccuMed
International Ltd., an English registry company and wholly-owned subsidiary of
the Company, (the Acquired Assets and Acquired Liabilities, collectively, are
referred to as the "Microbiology Business"), pursuant to the terms and
conditions of the Asset Purchase Agreement dated as of November 20, 1998 between
the Company and the Purchaser (the "Asset Purchase Agreement"), and (ii) to
consider such other business as may properly come before the Meeting.
A copy of the Asset Purchase Agreement is attached to this Proxy
Statement as Appendix A.
The consideration to be received by the Company in the Proposed Sale, in
addition to the assumption of the Assumed Liabilities by the Purchaser, will be
an initial purchase price of $15,150,000 in cash which will be paid to the
Company in immediately available funds at the closing. An additional $600,000 in
cash will be deposited by the Purchaser into an escrow account at the closing.
The initial purchase price may be increased or reduced following computation of
the net working capital of the Microbiology Business at the closing date (see
"TERMS OF THE PROPOSED SALE--Purchase and Sale; Adjustment to Initial Purchase
Price"). The Company's Microbiology Division accounted for approximately $15.4
million 99.5%) of the first nine months of 1998 revenues and $18.1 million
(94.8%) of 1997 revenues. The Proposed Sale does not include the Company's
Cytopathology Division. See "TERMS OF THE PROPOSED SALE." Portions of the net
cash proceeds of the Proposed Sale will be used (i) to repay indebtedness under
the Company's secured debt facilities (approximately $5.5 million), and (ii) to
repay the Company's 12% Convertible Promissory Notes due 2000
<PAGE> 6
(approximately $3.3 million). The balance of the proceeds, approximately $6.95
million, will be used to pay expenses related to the transaction, for working
capital, including reductions in outstanding accounts payable, and general
corporate purposes to fund the continuing operations of the Company's
Cytopathology Division.
See "USE OF PROCEEDS."
VOTING AND PROXIES
REVOCABILITY OF PROXIES
A proxy for use at the Meeting is enclosed. Any stockholder who executes
and delivers such proxy may revoke it at any time prior to its use by: (i)
filing with the Secretary of the Company a notice of revocation of proxy or a
valid proxy bearing a later date, or (ii) by attending the Meeting and voting in
person.
SOLICITATION OF PROXIES
This proxy solicitation is being made by the Board of Directors of the
Company. The expense of the solicitation will be paid by the Company. The
Company has retained Corporate Investor Communications, Inc. ("CIC") to conduct
a broker search, distribute the proxy materials and act as proxy solicitor in
connection with the Meeting. For such services, the Company will pay CIC a fee
of $4,500 and reimburse CIC for certain out-of-pocket expenses, estimated not to
exceed $800. To the extent necessary to assure sufficient representation at the
Meeting, proxies may be solicited by any appropriate means by CIC and, in
addition, by directors, officers, regular employees of the Company and the stock
transfer agent for the Common Stock, who will not receive any additional
compensation therefor. CIC will request that banks, brokers and other
fiduciaries distribute proxy materials to their customers who own beneficially
the Common Stock listed of record in names of nominees and, although there is no
formal arrangement to do so, the Company will reimburse such persons the
reasonable expenses of such distribution.
OUTSTANDING SECURITIES
The Board of Directors has fixed November 18, 1998, as the record date
(the "Record Date") for the determination of stockholders entitled to notice of,
and to vote at, the Meeting. At the close of business on the Record Date, there
were outstanding and entitled to vote 5,485,453 shares of Common Stock.
VOTE REQUIRED AND VOTING PROCEDURES
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share standing in its name on the books of the Company as of
the Record Date on each of the matters duly presented for a vote at the Meeting.
In connection with the solicitation by the Board of Directors of proxies
for use at the Meeting, the Board of Directors has designated Paul F. Lavallee,
Chairman of the Board, President and Chief Executive Officer, and Leonard R.
Prange, Chief Operating Officer and Chief Financial Officer, as proxies. Shares
represented by all properly executed proxies will be voted at the Meeting in
accordance with the instructions specified thereon. If no instructions are
specified, the shares represented by any properly executed proxy will be voted
FOR the proposal to approve the Proposed Sale.
The Board of Directors is not aware of any matters that will come before
the Meeting other than as described above. However, if such matters are
presented, the named proxies will, in the absence of instructions to the
contrary, vote such proxies in accordance with the judgment of such named
proxies with respect to any such other matter properly coming before the
Meeting.
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A majority of the outstanding shares of Common Stock must be represented
in person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. The affirmative vote of holders of a majority of the
outstanding shares of Common Stock is required for the approval of the Proposed
Sale.
With regard to the Proposed Sale, votes cast against the proposal will
be counted for purposes of determining (i) the presence or absence of a quorum
and (ii) the total number of votes cast with respect to such proposal.
Abstentions will be counted for purposes of determining both (i) the presence or
absence of a quorum for the transaction of business and (ii) the total number of
votes cast with respect to such proposal. Accordingly, abstentions as to the
approval of the Proposed Sale will have the same effect as a vote against such
proposal.
A proxy submitted by a stockholder may indicate that all or a portion of
the shares of Common Stock represented by such proxy are not being voted by such
stockholder with respect to a particular matter. This could occur, for example,
when a broker is not permitted to vote stock held in street name on certain
matters in the absence of instructions from the beneficial owner of the stock.
The shares subject to any such proxy which are not being voted with respect to a
particular matter would be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of votes cast with respect to such proposal. Accordingly, such
non-votes as to the approval of the Proposed Sale will have the same effect as a
vote against such proposal.
INSPECTOR OF ELECTIONS
The Board of Directors has appointed Joyce L. Wallach, General Counsel
and Secretary of the Company, or her designee, as the Inspector of Elections for
the Meeting. The Inspector of Elections will determine the number of shares of
Common Stock represented in person or by proxy at the Meeting, whether a quorum
exists, the authenticity, and validity and effect of proxies, and will receive
and count the votes.
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THE PROPOSED SALE
REASONS FOR THE SALE; FAIRNESS OF PURCHASE PRICE; APPROVAL BY THE
BOARD OF DIRECTORS
The Company's Board of Directors has unanimously approved the Asset
Purchase Agreement, which defines the terms and conditions governing the sale.
The Board of Directors has also unanimously determined that the Proposed Sale is
advisable, expedient and fair and in the best interests of the Company and its
stockholders, and unanimously recommends that the stockholders vote FOR approval
of the Proposed Sale in accordance with terms of the Asset Purchase Agreement.
In reaching its unanimous decision in favor of the Proposed Sale, the
Board of Directors considered numerous factors, both internal and external to
the Company. These factors relate to current and future stockholder value, the
funds required to continue to support development of microbiology products, and
expenditures required to purchase plant and equipment necessary to maintain the
Microbiology Division. In addition, the Board considered that the Company's
primary competition in the clinical microbiology marketplace consists of
companies, that are far larger and have significantly greater financial
resources and product marketing and distribution capabilities. The Board also
considered the ability of the Company to raise the capital necessary to fund the
aforementioned requirements through sources available to the Company.
EARLY HISTORY OF THE COMPANY. From its inception in 1988 through the time
of the merger with AccuMed, Inc. at December 29, 1995, the Company expended
substantial funds to develop the alamarBlue(TM) family of microbiology products.
In late 1995, the Company licensed the alamarBlue(TM) technology to Becton
Dickinson and Company ("Becton") for its exclusive use in the clinical
infectious disease market place. The Company received $3.0 million for the
license, and is entitled to receive royalty payments from Becton, including an
initial advance royalty payment of $500,000 received in early 1996, on all sales
of products, during a specified period, using the technology. With the exception
of the advance payment, no royalty payments have been received by the Company to
date. (Also, in September 1998, the Company and Becton entered into a letter of
intent which contemplates several transactions including amending the license to
eliminate any future royalty payments.) While the granting of this license did
not prohibit the Company from continuing to develop alamarBlue products, it did
provide an opportunity for a formidable competitor in the clinical field. During
1996, the Company continued the development of a clinical alamarBlue product at
its facility in England. The Company determined that it could not manufacture
the product in a cost-effective manner and transferred the manufacturing process
and
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related equipment in December 1996 to Salcom S.A., an Italian company, in
exchange for $150,000 and future royalty payments. The Company has not received
any royalty payments to date under this arrangement. The Company currently
generates less than $400,000 in annual revenue from alamarBlue products.
MICROBIOLOGY RESEARCH AND DEVELOPMENT EXPENDITURES. During 1996, the
Company began development of Fluortone(TM), a new microbiology MIC/ID (minimum
inhibitory concentration identification) product. The development costs for this
product were originally funded through a private placement of notes in RADCO
Ventures, Inc., a research and development entity, 10% of which was owned by the
Company. Concurrent with the closing of an underwritten public offering of
Common Stock completed in October 1996, the Company purchased the remaining 90%
of RADCO Ventures, Inc. and repaid the outstanding RADCO notes at an aggregate
cost of $1.4 million in cash. The acquired research and development costs
represented by the purchase price were written-off in 1996. The Company expended
additional funds through mid-1997 on continuing development of Fluortone(TM),
taking the process to a point where a substantial capital investment in
manufacturing technology was required.
The Company was unable to fund the required capital and the development
process was postponed indefinitely. To complete the development process, acquire
the necessary manufacturing equipment, and bring the product through the process
of Food and Drug Administration ("FDA") clearance and market introduction, would
require the expenditure of substantial funds, which the Company does not have,
cannot generate from internal sources, and does not believe that it can obtain
from external sources.
ACQUISITION OF ESP II BLOOD CULTURE SYSTEM. On March 3, 1997, the Company
completed the acquisition of certain assets relating to the ESP(TM) II blood
culture system from Difco Laboratories Systems, Inc. and affiliates ("Difco").
The purchase price of $6.0 million was funded through the issuance of $8.5
million in original principal amount of 12% Convertible Promissory Notes due
2000 (the "Notes"). The $2.5 million in excess funds generated by the Notes, was
used for transition services and working capital for the new ESP(TM) business.
Included in the acquired ESP(TM) related assets was certain manufacturing
equipment used to produce the ESP(TM) consumable media product at the Sun
Prairie, Wisconsin manufacturing plant (the "Sun Prairie Facility") owned by
Difco. At the time of the acquisition, Difco was unwilling to include the plant
in the acquired assets. Therefore, the Company entered into a Manufacturing
Agreement with Difco whereby Difco was required to provide the ESP(TM)
consumable product to the Company through March 3, 1999. It was the Company's
intention to relocate the manufacturing equipment and process to its own
facility, or to another third-party supplier. In early 1998, Becton (which
acquired Difco in 1997) informed the Company that it was willing to consider
selling to the Company the Sun
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Prairie Facility and certain shared manufacturing equipment. The estimated
purchase price for these assets is in the range of $3.0 million. The Company
does not have sufficient capital to fund the entire purchase price of the
assets, and would be required to use outside funding, which may prove costly, to
finance the acquisition of the Sun Prairie Facility.
The ESP instruments are currently manufactured by a third-party supplier
at a cost to the Company which puts the product at a competitive disadvantage in
the market. The Company will be required to invest funds in the start up of a
manufacturing process for the ESP(TM) instruments. Such investment will include
space, potentially in the Sun Prairie Facility if the Company is able to
purchase or lease it from a third party purchaser, engineering and support
personnel, and direct manufacturing personnel. The Company believes that the
assumption of instrument manufacturing directly is in the best interests of the
Microbiology Division.
GENERAL MICROBIOLOGY DIVISION ISSUES. In addition to the specific projects
outlined above and their related funding requirements, the ESP(TM) and
Sensititre(TM) microbiology product lines are continually being upgraded with
enhancements and additions. This process is funded through current operations.
The accompanying pro forma financial statements indicate that, while the
Microbiology Division is profitable, it cannot generate sufficient free cash to
fund the development of the new products and the capital asset purchases
required to maintain the existing business. Based on the Company's current
financial condition, the Board believes that the Company will not be able to
obtain additional cash from external sources to fund these projects.
CYTOLOGY AND CYTOMETRY DIVISION. The Board also believes that the
investment community's current perception of the Company is that it is engaged
primarily in the field of automated cytology instruments used in laboratories,
with a sub-focus on women's health issues. Accordingly, the Company is included
in an investment market segment with companies that are focused on these same
areas. Since this market segment is still in the development stages of product
introduction, revenue and profit performance for the segment as a group have not
met expectations. Factors contributing to this lack of performance are longer
development cycles, product costs, market acceptance of new technologies, and
longer than anticipated FDA clearance times. Accordingly, this market segment,
exclusive of general market conditions, has experienced a significant decline in
stockholder value.
The Board believes that the future of the Company and the best
opportunity to increase stockholder value is in the continued development and
marketing of cytology and cytometry instruments, related data management
systems, and individual patient tests utilizing the instrument and software
technology. One of these
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products, the AcCell(TM) Cytopathology System, is currently being supported at
three test "beta" sites at which data on productivity and quality performance is
being accumulated to support the marketing concept behind the system. Others,
such as the current and future generation TracCell(TM) Slide Mapping System are
nearing completion and awaiting market introduction or are in various stages of
development. The Company, in conjunction with its wholly-owned subsidiary
Oncometrics Imaging Corp. is currently marketing the AcCell(TM) Savant research
instrument used in DNA measurement tests and is involved in research and
development of a lung sputum test for the early detection of lung cancer. The
Board believes that the resources of the Company should be committed to the
completion of the development and market introduction of these products.
PAST AND FUTURE CAPITAL FUNDING. The Company, despite the revenue and
profit performance of the Microbiology Division, has also experienced a
significant decline in stockholder value. The Board believes that it is
difficult for the investment community to evaluate the current contribution and
future potential of the Microbiology Division due to a lack of companies with
comparable business segmentation. Hence, little credit is given to the
Microbiology Division in the calculation of the Company's investment value.
Therefore, the Company has limited, if any, ability to raise additional funds,
to meet the current and future needs of the combined business, in the public or
private investment markets without significant dilution to current stockholders.
THE PROPOSED SALE. From time to time the Company has received inquiries
from various parties as to whether the Microbiology Division was available for
sale. Most recently, in mid-1997, the Company had preliminary meetings with a
potential buyer, including discussions of a possible purchase price. The Board
believes that the Company will not be able, via internal or external means, to
provide adequate funding to meet the current or future needs of the Microbiology
Division. Failure to meet these needs could result in a decline in the financial
performance of the Microbiology Division and contribute to a decline in its
overall value. Since the Microbiology Division's current financial performance
is at an all time high level, thus enhancing its value, the Board felt that it
was an opportune time to explore the possibilities of selling the Microbiology
Division.
On March 3, 1998, the Board unanimously voted to authorize management to
begin the search for a potential buyer. Management contacted numerous parties
and was contacted by others who had seen the information release concerning the
Company's interest in selling the division. In all, 19 potential buyers were
evaluated and numerous preliminary due diligence procedures were performed.
Several offers were received, some for segments of the Microbiology Division and
several for the entire Microbiology Division. The Board evaluated all of the
offers and determined that it was in the
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best interests of the Company to sell the Microbiology division in its entirety.
The offer review process involved extensive work by management and the Board
during which factors of price, timing, terms and conditions, employee retention,
and many other factors were evaluated in detail. The Board believes that the all
cash offer of $15.75 million (subject to adjustment) from the Purchaser offers
the Company and the stockholders the best value.
RISKS OF NON-APPROVAL. The foregoing discussion of information and factors
considered and given weight by the Board of Directors is not intended to be
exhaustive. In view of the variety of factors considered in connection with its
evaluation of the Proposed Sale, the Board did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE PROPOSED SALE.
GOVERNMENTAL AND REGULATORY APPROVALS
The Company is not aware of any governmental or regulatory approvals
required for the consummation of the Proposed Sale.
TERMS OF THE PROPOSED SALE
The detailed terms and conditions of the Proposed Sale are contained in
the Asset Purchase Agreement, which is attached hereto as Appendix A and made a
part of this Proxy Statement. THE FOLLOWING DISCUSSION SETS FORTH A DESCRIPTION
OF CERTAIN MATERIAL TERMS AND CONDITIONS OF THE ASSET PURCHASE AGREEMENT AND IS
QUALIFIED BY THE MORE COMPLETE INFORMATION SET FORTH IN THE ASSET PURCHASE
AGREEMENT. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE ASSET PURCHASE
AGREEMENT IN ITS ENTIRETY.
PURCHASE AND SALE; ADJUSTMENT TO INITIAL PURCHASE PRICE
Pursuant to the Asset Purchase Agreement, the Company has agreed to sell
to the Purchaser, and the Purchaser has agreed to acquire, substantially all the
assets (the "Acquired Assets") and certain liabilities (the "Acquired
Liabilities" and together with the Acquired Assets, the "Microbiology Business")
related to the Company's Microbiology Division, including all the stock of the
Company's wholly-owned subsidiary AccuMed International Ltd., an English
registry company ("AccuMed UK"). In addition to the assumption of certain
liabilities by the Purchaser, the initial purchase price will be $15,150,000 in
cash (the "Initial Purchase Price") paid to the Company in immediately available
funds upon consummation of the Proposed Sale (the "Closing"). The Purchaser will
deposit an additional $600,000 in cash (the "Escrow Funds")
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into an escrow account at National City Bank, Cleveland, Ohio at the Closing.
The Initial Purchase Price may be increased or reduced in accordance with the
procedures described below.
Within 60 days following the Closing, Ernst & Young LLP will prepare a
statement including a computation of the current assets over current liabilities
of the Microbiology Business at the Closing (the "Net Working Capital").
Following receipt of such statement, the Company will have 15 days to propose
any adjustments thereto. If the Company and the Purchaser are unable to agree as
to the treatment of such proposed adjustment during the subsequent 15 days, the
question will be submitted to the binding determination of an independent
so-called "big five" public accounting firm (other than the Company's auditors
or Ernst & Young LLP).
If the Net Working Capital exceeds $4.5 million, the Initial Purchase
Price shall be increased by the excess amount (the "Additional Purchase Price").
If the Additional Purchase Price is $600,000 or less, such amount shall be
released from the Escrow Funds to the Company (and the balance, if any, of the
Escrow Funds shall be returned to the Purchaser). If the Additional Purchase
Price exceeds $600,000, all the Escrow Funds shall be released to the Company
and the amount of the Additional Purchase Price in excess of $600,000 shall be
paid to the Company by the Purchaser in immediately available funds.
If, however, the Net Working Capital is less than $4.5 million, an
amount equal to such deficiency (the "Deficiency") shall be released from the
Escrow Funds to the Purchaser, up to $600,000. If the Deficiency is greater than
$600,000, the balance of the Deficiency shall be paid to the Purchaser directly
by the Company, effectively reducing the Initial Purchase Price.
CONDUCT OF BUSINESS PENDING THE PROPOSED SALE
The Company has agreed that during the period from the date of the Asset
Purchase Agreement through the Closing, that the Company will and will cause
AccuMed UK, among other things, to: (i) conduct the Microbiology Business as a
going concern and maintain and operate the Acquired Assets diligently and in the
ordinary course consistent with past practice; (ii) to consult with the
Purchaser as to any matters relating to the Microbiology Business which are
material or outside the ordinary course of business; and (iii) use reasonable
best efforts to cause the conditions to closing to be performed by the Company
to be satisfied by the date on which the Closing occurs (the "Closing Date").
The Company has also agreed that during such period, neither the Company
nor AccuMed UK shall: (i) in connection with the Microbiology Business and
Acquired Assets, (a) assume or incur any debt (except as permitted under
existing credit facilities), (b)
9
<PAGE> 14
become liable for the obligation of any other person, or (c) make any loans,
advances or capital contributions to any person (except trade payables); (ii) in
connection with any employees of the Microbiology Business, (a) increase their
compensation, (b) make any payment pursuant to an employee benefit plan (except
as required thereby), (c) enter into any collective bargaining agreement, or (d)
commit to any additional employee benefit plan or employment or consulting
agreement; (iii) dispose of or agree to dispose of any Acquired Assets (except
inventory in the ordinary course of business consistent with past practice);
(iv) fail to maintain the Acquired Assets in good working condition (normal wear
and tear excepted); (v) enter into any agreements or undertakings relating to
the Microbiology Business (except in the ordinary course of business consistent
with past practice, (vi) create a lien in any of the Acquired Assets; (vii)
cause any of the insurance policies related to the Microbiology Business to
terminate, lapse or be cancelled; (viii) settle any litigation, claim or
investigation relating to the Microbiology Business (except in the ordinary
course of business or by insurers involving amounts not exceeding $10,000); (ix)
cause any of the Company's representations and warranties made in the Asset
Purchase Agreement to be untrue or incorrect as of the Closing; (x) in
connection with the Microbiology Business, engage in any transactions relating
to the purchase or sale of goods, raw materials, inventories or other operating
or production items with any affiliate (except in the ordinary course of
business); (xi) declare or pay any dividend; (xii) authorize for issuance,
issue, sell or deliver any capital stock (except shares of the Company's Common
Stock upon exercise or conversion of options, warrants, convertible preferred
stock, and convertible notes outstanding on the date of the Asset Purchase
Agreement); (xiii) amend the charter documents of AccuMed UK; (xiv) change its
accounting policies or practices or fail to maintain its books, accounts and
records for the Microbiology Business in accordance with generally accepted
accounting principles; (xv) fail to (a) preserve any existing permits (except
those no longer required), (b) operate the Microbiology Business in accordance
with its existing permits and applicable laws, or (c) file with the FDA any
application, registration, filing or report required to be filed in connection
with operation of the Microbiology Business; (xvi)delay or postpone payment of
accounts payable and other liabilities or institute any unusual collection
efforts with respect to accounts receivable, beyond normal practice; (xvii)
permit any of their employees who are not employees of the Microbiology Business
to transfer employment to the Microbiology Business; or (xviii) agree or commit
to do any of the foregoing.
NO SOLICITATION
The Company has agreed that, from the date of the Asset Purchase
Agreement through the termination of the Agreement or the Closing, neither the
Company nor any of its affiliates, employees, officers, agents or advisors shall
(except to the extent
10
<PAGE> 15
contemplated by the letter on intent between the Company and Becton dated as of
September 25, 1998) (i) solicit, initiate or encourage any inquiries, proposals
or offers from any person relating to acquisition of the Acquired Assets or the
Microbiology Business, or any securities of, or merger, consolidation or
business combination with, the Company or AccuMed UK, or (ii) with respect to
any attempt by another person to seek any of the foregoing, (a) participate in
any discussions or negotiations, (b) furnish any information with respect to, or
afford access to the properties, books or records relating to the Company,
AccuMed Uk, the Acquired Assets or the Microbiology Business, or (c) otherwise
cooperate in any way with or encourage such effort. The Company has agreed to
promptly notify the Purchaser of any such proposal or inquiry.
NON-COMPETE AND NON-SOLICITATION ARRANGEMENT
The Company has agreed that, during the period ending on the third
anniversary of the Closing Date, it shall not: (i) engage in any business that
competes with the Microbiology Business, (x) within a 100 mile radius of an
office or manufacturing facility operated by the Microbiology Business or (y)
with any customer of the Microbiology Business during the two years prior to the
Closing Date (collectively, the "Restricted Territory"); (ii) solicit customers,
active prospects, business or patronage for any business that competes with the
Microbiology Business in the Restricted Territory; or (iii) solicit, or
otherwise take away, any customers, former customers, active prospects,
business, patronage or orders of the Microbiology Business. The Company has also
agreed that during such period it shall not and shall cause its affiliates not
to at any time solicit or induce or attempt to solicit or induce any employee,
representative or agent of the Microbiology Business to terminate his, her or
its employment, representation or other association with the Microbiology
Business.
REPRESENTATIONS AND WARRANTIES
The Company and the Purchaser have made various representations and
warranties of the kind customary in agreements for sale of a division such as
the Microbiology Business, including, among other things, (i) their
organization, existence, good standing, corporate power and similar corporate
matters, (ii) their authorization, execution, delivery and performance of the
Asset Purchase Agreement and related agreements, and (iii) the absence of
conflicts, violations and defaults under their certificates of incorporation and
by-laws and certain other agreements and documents.
The Company has represented and warranted (subject to specified
exceptions) to the Purchaser, concerning, among other matters (i) ownership of
the Acquired Assets and Acquired Liabilities, (ii) the absence of certain
changes and events, and (iii) operations of the Microbiology Business.
11
<PAGE> 16
CLOSING AND CLOSING CONDITIONS
The Closing will occur at the offices of the Purchaser's counsel not
later than the third business day after all the Closing conditions set forth in
the Asset Purchase Agreement have been satisfied or waived or at such other
place and date as the parties shall agree in writing.
The obligations of the Company and the Purchaser to consummate the
Proposed Sale are subject to the satisfaction or waiver of certain conditions,
including among others, (i) approval of the Proposed Sale by holders of a
majority of the shares of Common Stock, (ii) absence of an injunction,
restraining order or other decree prohibiting the Closing, (iii) all
representations and warranties of the other party being true on the closing
Date, and (iv) performance and compliance with all covenants and agreements
required to be performed or complied with by the other party at or prior to the
Closing Date.
The obligations of the Purchaser to consummate the Proposed Sale are
subject to the satisfaction or waiver of certain additional conditions,
including among others, (i) delivery of certain third-party consents, (ii)
delivery of certain documents, (iii) absence of a material adverse change in the
condition, results of operations, properties, assets, liabilities, business or
prospects of the Microbiology Business, (iv) delivery of a covenant not to sue
pertaining to alleged patent infringement by the Company, (v) execution of the
following agreements (in form and substance reasonably satisfactory to the
Purchaser) between the Company and Becton or an affiliate thereof, (a) Exchange
Agreement and Amendment, (b) Manufacturing Agreement, (c) Option to Purchase the
Sun Prairie Facility, and (d) Purchase and Sale Agreement (see "--Related
Agreements with Becton"), (vi) the Purchaser's satisfaction with the results of
its due diligence investigation of the environmental condition of the Sun
Prairie Facility, (vii) release of all liens on the Acquired Assets and the
assets of AccuMed UK, (viii) execution and delivery of a Sublease between the
Company and the Purchaser, (ix) Purchaser's satisfaction with its due diligence
investigation of the environmental condition of AccuMed UK's leased real
property, (x) delivery of a solvency letter from an independent third party to
the effect that the Company will be solvent upon consummation of the Proposed
Sale, (xi) execution and delivery of a Transition Services Agreement between the
Company and the Purchaser, (xii)execution and delivery by the Company of a
release relating to AccuMed UK, (xiii) the Purchaser's satisfaction with the
Company's estimated statement of current assets and current liabilities of the
Microbiology Business as of the Closing Date, and (xiv) the Purchaser's
satisfaction with evidence that other potential buyers of the Microbiology
Business have returned or destroyed all confidential information provided by or
on behalf of the Company or AccuMed UK.
12
<PAGE> 17
INDEMNIFICATION
The Purchaser has agreed to indemnify, defend and hold harmless the
Company, its affiliates, and their respective directors, officers,
representatives, employees and agents from and against any and all liabilities
incurred by them resulting or arising from (i) failure of the Purchaser to
assume, pay, perform and discharge the Assumed Liabilities, (ii) failure of the
Purchaser to report the purchase of the Acquired Assets in accordance with the
allocations specified in the Asset Purchase Agreement, (iii) breach of a
representation, warranty, covenant, obligation or agreement of the Purchaser
contained in the Asset Purchase Agreement or another document contemplated
thereby, and (iv) conduct of the Microbiology Business following the Closing.
The Seller has agreed to indemnify, defend and hold harmless the
Purchaser, AccuMed UK, and their respective affiliates and directors, officers,
representatives, employees and agents from and against any and all liabilities
incurred by them resulting or arising from (i) failure of the Company to assume,
pay, perform and discharge its liabilities other than the Acquired Liabilities,
(ii) failure of the Company to report the purchase of the Acquired Assets in
accordance with the allocations specified in the Asset Purchase Agreement, (iii)
breach of a representation, warranty, covenant, obligation or agreement of the
Company contained in the Asset Purchase Agreement or another document
contemplated thereby, (iv) failure to comply with bulk transfer laws applicable
to the transfer of the Acquired Assets, (iv) conduct of the Microbiology
Business prior to the Closing, and (v) certain other matters.
TERMINATION
The Asset Purchase Agreement may be terminated at any time prior to the
Closing by (i) mutual written consent of the Company and the Purchaser, (ii) by
either party if the Closing has not occurred on or before March 31, 1999 (the
"Termination Date"), (iii) by the Purchaser if there has been a material breach
by the Company of any of its representations, warranties, covenants, obligations
or agreements contained in the Asset Purchase Agreement or any other writing
delivered by the Company pursuant thereto, (iv) by the Company if there has been
a material breach by the Purchaser of any of its representations, warranties,
covenants, obligations or agreements contained in the Asset Purchase Agreement
or other writing delivered by the Purchaser pursuant thereto, (v) by either
party if consummation of the transactions contemplated by the Proposed Sale
shall violate any non-appealable final order, decree or judgment of any court or
governmental authority having competent jurisdiction, (vi) by either party if
stockholder approval of the Proposed Sale has not been obtained by the
Termination Date, and (vii) by either party if any of its respective conditions
to closing is not satisfied and has not been waived by it on or prior to the
Termination Date.
13
<PAGE> 18
FEES AND EXPENSES
All fees and expenses incurred in connection with the Proposed Sale will
be paid by the party incurring such fees and expenses, whether or not the
Proposed Sale is consummated. Expenses payable to independent auditors to
resolve disputes, if any, regarding the net working capital at Closing will be
shared equally by the Purchaser and the Company.
PURCHASER
The Purchaser, AMI Acquisition Corp., is a newly-created Delaware
corporation that was created to acquire, and, following the Closing, to conduct,
the Microbiology Business. The Purchaser's mailing address is c/o Key Equity
Capital Corporation, 127 Public Square, Cleveland, Ohio, and its telephone
number is 216-689-4873. The stockholders of the Purchaser are Key Equity Capital
Corporation, certain of its affiliates, and certain person who will be members
of the management of the Microbiology Business following the Closing (including
Michael D. Burke). Mr. Burke is a stockholder and former executive officer of
the Company.
The Purchaser intends to finance its purchase of the Microbiology
Business with a combination of debt and equity. The Purchaser's acquisition of
the Microbiology Business is not contingent upon financing.
RELATED AGREEMENTS WITH BECTON
The Company and Becton have entered into a letter of intent dated
September 25, 1998, pursuant to which the parties have been drafting definitive
documentation to consummate, among other things, the following transactions.
EXCHANGE AGREEMENT. The Company and Becton would enter into a definitive
Exchange Agreement whereby Becton would (i) offset $500,000 against accounts
payable owed by the Company to Becton, and (ii) convey Becton's right, title and
interest in certain manufacturing equipment used in the production of ESP bottle
disposables at Becton's Sun Prairie Facility. In exchange, the License Agreement
dated October 10, 1995 between the Company and Becton would be amended to (i)
expand Becton's exclusive field of use (subject only to the Company's reserved
rights) to include mycobacteria, and (ii) provide that the license is fully-paid
up and not subject to royalty payments.
REAL ESTATE PURCHASE OPTION. The Company and Becton would enter into a
Purchase Option pursuant to which the Company or its assignee reasonably
acceptable to Becton would be entitled to purchase from Becton the Sun Prairie
Facility whereat Becton currently manufactures ESP bottle disposables pursuant
to the Manufacturing Agreement dated March 3, 1997 with the Company (the "Old
Manufacturing Agreement"). The Company would also purchase
14
<PAGE> 19
certain personal property currently used at the Sun Prairie Facility.
NEW MANUFACTURING AGREEMENT. The Old Manufacturing Agreement would be
terminated and the parties would enter into a new manufacturing agreement
pursuant to which Becton would supply certain component ingredients used in the
ESP bottle disposables to the Company or its assignee. The Company would
purchase inventories, raw materials and work-in-process used in manufacturing
the ESP bottle disposables from Becton upon termination of the Old Manufacturing
Agreement.
USE OF PROCEEDS
Portions of the net cash proceeds of the sale will be used (i) to repay
indebtedness under the Company's secured debt facilities (approximately $5.5
million), and (ii) to repay the Company's 12% Convertible Promissory Notes due
2000 (approximately $3.3 million). The balance of the proceeds, approximately
$6.95 million (assuming a final purchase price of $15.75 million), will be used
to pay expenses related to the Proposed Sale, for working capital, including
reductions in outstanding accounts payable, and general corporate purposes to
fund the continuing operations of the Company's Cytopathology Division.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the Company will recognize income or
gain as a result of the Proposed Sale. After reduction of deferred tax valuation
allowances, the Company expects that the Proposed Sale will not result in any
income tax expense.
Additionally, the Company has determined that the Proposed Sale will not
have any federal income tax consequences to the stockholders of the Company.
ACCOUNTING TREATMENT
The Proposed Sale will be treated as a sale for accounting purposes.
15
<PAGE> 20
ACCUMED INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
-------------- -------------
ASSETS Sept. 30, 1998 Dec. 31, 1997
-------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 114,339 $ 469,639
Accounts receivable, net 4,289,957 4,664,152
Prepaid expenses 319,768 183,817
Production inventory 5,194,688 3,464,190
------------ ------------
TOTAL CURRENT ASSETS 9,918,752 8,781,798
------------ ------------
FIXED ASSETS, NET 3,655,305 5,178,528
------------ ------------
Notes receivable 164,199 164,199
Deferred financing costs 196,824 640,224
Purchased technology 5,244,573 4,950,753
Other assets 812,165 833,215
------------ ------------
$ 19,991,818 $ 20,548,717
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,519,842 $ 3,590,022
Payroll and related accruals 120,000 458,794
Accrued interest 94,865 441,100
Other current liabilities 753,924 660,842
Notes payable 1,636,582 1,888,273
Long term debt, current portion 802,900 700,000
------------ ------------
TOTAL CURRENT LIABILITIES 5,928,113 7,739,031
------------ ------------
Warranty reserves, non-current 430,626 467,299
Long term debt 6,289,139 11,454,755
Minority interest -- 154,560
------------ ------------
6,719,765 12,076,614
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, series A convertible 4,329,466 --
Common stock, $0.01 par value 54,855 227,289
Additional paid-in capital 59,539,595 51,953,823
Other comprehensive income 14,783 22,586
Accumulated deficit (56,378,022) (51,253,889)
Treasury stock (216,737) (216,737)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,343,940 733,072
------------ ------------
$ 19,991,818 $ 20,548,717
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
16
<PAGE> 21
ACCUMED INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 4,917,491 $ 4,914,004 $ 15,451,174 $ 14,157,306
COST OF SALES (2,784,895) (3,331,740) (8,825,530) (8,905,595)
------------ ------------ ------------ ------------
Gross profit 2,132,596 1,582,264 6,625,644 5,251,711
------------ ------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 1,666,923 1,833,732 4,928,149 6,280,715
Research and development 767,393 1,340,234 2,621,889 3,639,509
Goodwill writeoff -- -- -- 3,582,068
Sales and marketing 872,244 1,125,213 2,560,261 3,215,636
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 3,306,560 4,299,179 10,110,299 16,717,928
------------ ------------ ------------ ------------
OPERATING (LOSS) (1,173,964) (2,716,915) (3,484,655) (11,466,217)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (343,304) (472,851) (1,267,913) (2,960,893)
Other income 549,012 102,090 796,515 342,042
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 205,708 (370,761) (471,398) (2,618,851)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS (968,256) (3,087,676) (3,956,053) (14,085,068)
INCOME TAX EXPENSE -- -- -- --
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (968,256) (3,087,676) (3,956,053) (14,085,068)
EXTRAORDINARY ITEM - DEBT EXTINGUISHMENT LOSS -- -- (1,168,080) --
------------ ------------ ------------ ------------
NET LOSS $ (968,256) $ (3,087,676) $ (5,124,133) $(14,085,068)
============ ============ ============ ============
BASIC LOSS PER SHARE BEFORE EXTRAORDINARY ITEM $ (0.18) $ (0.82) $ (0.80) $ (3.92)
EXTRAORDINARY LOSS PER SHARE
FROM DEBT EXTINGUISHMENT -- -- (0.24) --
------------ ------------ ------------ ------------
BASIC NET LOSS PER SHARE $ (0.18) $ (0.82) $ (1.04) $ (3.92)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,485,453 3,747,051 4,950,396 3,595,683
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
17
<PAGE> 22
ACCUMED INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
UNAUDITED
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (5,124,133) $(14,085,068)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,379,000 2,161,617
Write-off of debt discount -- 1,966,340
Debt extinguishment loss 1,168,080 --
Write-off of impaired goodwill -- 3,582,068
Minority interest (191,560) (303,785)
Non-cash gain on settlement -- (22,272)
Changes in assets and liabilities:
Decrease in restricted cash -- 100,000
Decrease (Increase) in accounts receivable 58,195 (679,152)
Decrease (Increase) in prepaid expenses and deposits (135,951) (436,495)
Decrease (Increase) in production inventory (1,414,498) (457,178)
Decrease (Increase) in other assets (7,770) (571,147)
Decrease (Increase) in deferred financing costs (1,100) (821,884)
Increase (Decrease) in accounts payable (971,180) 2,387,921
Increase (Decrease) in other current liabilities (411,708) (61,844)
Increase (Decrease) in warranty reserves (36,673) (435,908)
------------ ------------
CASH USED IN OPERATING ACTIVITIES (4,689,298) (7,676,787)
------------ ------------
INVESTING ACTIVITIES:
Purchase of fixed assets (164,580) (898,372)
Purchase of Oncometrics stock (528,000) --
Acquisition of business, net -- (6,000,000)
------------ ------------
CASH USED IN INVESTMENT ACTIVITIES (692,580) (6,898,372)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuances of common stock, net 4,852,394 556,466
Notes receivable (issued) collected -- (11,427)
Payment of capital lease obligation -- (32,870)
Proceeds from issuance of notes payable 1,362,550 14,750,000
Proceeds from bridge loan -- 6,000,000
Payment of notes payable and bridge loan (1,188,366) (7,938,455)
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 5,026,578 13,323,714
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (355,300) (1,251,445)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 469,639 2,801,359
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114,339 $ 1,549,914
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
18
<PAGE> 23
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Preparation of Interim Financial Statements
In the opinion of the management of AccuMed International, Inc. and
Subsidiaries ("the Company"), the accompanying unaudited condensed consolidated
financial statements include all normal adjustments considered necessary to
present fairly the financial position as of September 30, 1998, and the results
of operations for the three months and nine months ended September 30, 1998 and
cash flows for the nine months ended September 30, 1998 and 1997. Interim
results are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's audited consolidated financial statements and notes for the fiscal
year ended December 31, 1997.
2. Basis of Presentation
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances, transactions and stockholdings have been eliminated.
Since June 1998, the Company has been actively negotiating to sell the
Company's microbiology division to a third party. Consummation of such sale is
subject to approval by the Board of Directors of terms of a definitive agreement
and execution and delivery of such agreement, stockholder approval and certain
other approvals and other conditions to closing. The Company will present the
operating results of the microbiology division and discontinued operations if
the stockholders approve the proposed sale.
During the quarter ended March 31, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements, and requires a total for
comprehensive income to be provided in condensed financial statements of
interim periods. Comprehensive income includes all changes in stockholders'
equity during the period except those resulting from investments by owners and
distributions to owners. Comprehensive loss consisted of the following:
<TABLE>
<CAPTION>
3 Months Ended Sept. 30, 9 Months Ended Sept.30,
------------------------- ----------------------------
1998 1997 1998 1997
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net loss $(968,256) $(3,087,676) $(5,124,133) $(14,085,068)
Other comprehensive income (loss):
Foreign currency translation adjustments (5,991) -- (7,803) --
--------- ----------- ----------- ------------
Comprehensive loss $(974,247) $(3,087,676) $(5,131,936) $(14,085,068)
========= =========== =========== ============
</TABLE>
19
<PAGE> 24
3. Reverse Stock Split
On May 19, 1998, the stockholders approved a reverse one-for-six stock
split, which was effected by the Board of Directors as of May 21, 1998. The
reverse split covered all outstanding common shares and all agreements
concerning stock options, warrants, convertible notes and other commitments
payable in shares of the Company's common stock. All references to per-share
information in the condensed consolidated financial statements have been
adjusted to reflect the reverse split on a retroactive basis.
4. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Raw material and packaging $1,694,034 $ 999,561
Finished good and work in process 3,500,654 2,464,629
---------- ----------
Total inventories $5,194,688 $3,464,190
---------- ----------
</TABLE>
5. Debt Conversion
On February 23, 1998, the Company exchanged $5,275,000 in principal amount
of its 12% Convertible Promissory Notes (the "Convertible Notes") 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 207,557
shares of Common Stock at an exercise price of $6.75 per share. The Preferred
Stock is convertible into 830,227 shares of Common Stock at a conversion price
of $6.75 per share. The Company has registered the resale of the shares of
Common Stock underlying the Preferred Stock and Warrants with the Securities
and Exchange Commission during 1998.
Related to the debt conversion, the Company incurred an extraordinary loss
of $1,168,080, including stock, warrants and fees paid to the placement agent,
warrants issued as an inducement to the converting noteholders, accounting fees,
and the write-off of a proportional amount of deferred financing costs
associated with the issuance of the Convertible Notes. The placement agent
received fees of $175,000, 8,334 shares of Common Stock valued at $40,000,
7-year warrants to purchase 58,334 shares of Common Stock at $6.75 per share
valued at $84,000, and repricing of previously issued 4-year warrants to
purchase 33,334 shares of Common Stock at an exercise price of $18.75 per share
to $6.75 per share, valued at $26,000. The converting noteholders received
5-year warrants to purchase 207,557 shares of Common Stock at an exercise price
of $6.75 per share, valued at $37,380.
The Company utilized the Black-Scholes pricing model to determine the fair
value of warrants issued. The following assumptions were incorporated into the
model: risk-free rate - 6%, 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
20
<PAGE> 25
the life of the warrant issued. Other assumptions, relating to warrant life,
strike price and stock price, are determined at the date the warrant was issued.
6. Private Placement
During March 1998, the Company consummated a private placement of
1,447,778 shares of Common Stock and 7-year warrants to purchase an aggregate
of 1,447,778 shares of Common Stock at an exercise price of $4.50 per share for
gross proceeds of $6,515,000, including $1,000,000 in notes payable converted
into Common Stock, and net proceeds of $5,864,000 after payment of fees,
commissions and expenses related thereto.
Such securities were sold in units (the "Units"), each Unit consisting of
22,223 shares of Common Stock, and seven-year warrants to purchase 22,223
shares of Common Stock at an exercise price of $4.50 per share (the "Unit
Warrants"). The Company has registered the resale of the outstanding Common
Stock and the Common Stock underlying the Unit Warrants with the Securities and
Exchange Commission.
If the Common Stock is delisted from The Nasdaq SmallCap Stock Market at
any time on or prior to December 31, 1998, original purchasers of the Units will
be entitled to receive, at their option, in exchange for the Units, 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 Preferred"), having an aggregate stated value of $100,000 (the "Series
B Stated Value"), convertible into shares of Common Stock at an initial
conversion price of $4.50 per share (the "Series B Conversion Price"), and (ii)
warrants (the "Alternate Warrants") exercisable to purchase the number of shares
of Common Stock issuable upon exercise of the Unit Warrants at the same initial
Unit Warrant exercise price.
The Series B Preferred, if issued, will be immediately convertible at the
option of the holder into shares of Common Stock at the Series B Conversion
Price.
7. Acquisition
On June 29, 1998, the Company acquired the remaining 33% of the
outstanding capital stock of Oncometrics Imaging Corp. ("Oncometrics") it did
not already own. The Company paid $342,000 in cash and $342,000 in a
convertible 18-month note bearing interest at a rate of 2% over the Canadian
prime rate in exchange for the stock and a loan payoff to the seller of
$154,000. The note is convertible, in whole or in part, into Common Stock of
the Company at a price of $1.79 per share.
The acquisition was accounted for using the purchase method of accounting
with the purchase price allocated to the net assets acquired based on their
estimated fair values at the date of acquisition. The excess purchase price
consists of $700,000 of purchased technology recorded on the condensed
consolidated balance sheet in the second quarter. The operating results of
Oncometrics have been included in the statement of operations from the date of
acquisition.
21
<PAGE> 26
Oncometrics was formed in 1995 and is currently developing an automated
instrument, using the Company's AcCell(TM) workstation, designed for use in the
detection, diagnosis and prognosis of early-stage cancer by measuring the DNA
in cells on microscope slides. Prototypes of the instrument are currently being
tested with scientists at cancer research and patient care institutions.
8. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
9 Months ended
September 30,
-----------------------
1998 1997
---------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Interest paid $1,024,918 $655,632
NON-CASH INVESTING AND FINANCING ACTIVITIES
Deposit reclassified to fixed assets $ 140,000 --
</TABLE>
The Company extinguished debt with a carrying value of $4,818,800 through
the issuance of preferred stock and warrants with a fair value of $5,986,880
including transaction fees, resulting in an extraordinary loss of $1,168,000.
The Company satisfied its obligation under a $1,000,000 note payable
through the issuance of 222,223 shares of Common Stock and seven-year warrants
to purchase 222,223 shares of Common Stock.
22
<PAGE> 27
<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 income (16,919) (11,574) (3,759) (3,113) (3,145)
PER SHARE DATA:
Net (Loss) (4.62) (4.08) (3.54) (3.90) (6.00)
Weighted average
shares outstanding
(000's) 3,676 2,829 1,063 796 522
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 $2.94 per share.
23
<PAGE> 28
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On the Closing Date, AccuMed International, Inc. ("the Company") will
sell all of the net assets related to its Microbiology Division, pursuant to an
Asset Purchase Agreement dated November 20, 1998 (the "Agreement") between the
Company and the Purchaser.
The accompanying condensed consolidated financial statements illustrate
the effect of the divestiture ("Pro Forma") on the Company's financial position
and results of operations. The condensed consolidated balance sheet as of
December 31, 1997 is based on the historical balance sheet of the Company on
that date and assumes the divestiture took place on that date. The condensed
consolidated statements of operations for the years ended December 31, 1997, and
1996, and nine months ended September 30, 1998 are based on the historical
statements of continuing operations of the Company as of those dates and assumes
the divestiture took place on the first day of operations in the period.
24
<PAGE> 29
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(1) (2)
(Audited) Asset Sale Loan Payoff
ASSETS December 31, 1997 Adjustments Adjustments Pro Forma
----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 469,639 $ 15,662,344 $(15,095,628) $ 1,036,355
Accounts receivable, net 4,664,152 (4,178,251) 485,901
Prepaid expenses and deposits 183,817 (141,419) 42,398
Production inventory 3,464,190 (2,070,866) 1,393,324
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 8,781,798 9,271,808 (15,095,628) 2,957,978
------------ ------------ ------------ ------------
FIXED ASSETS, NET 5,178,528 (3,236,799) 1,941,729
------------ ------------ ------------ ------------
Notes receivable 164,199 -- 164,199
Deferred financing costs 640,224 -- (640,224) --
Purchased technology 4,950,753 -- 4,950,753
Other assets 833,215 (32,709) 800,506
------------ ------------ ------------ ------------
$ 20,548,717 $ 6,002,300 $(15,735,852) $ 10,815,165
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,590,022 $ (1,399,182) $ 2,190,840
Payroll and related accruals 458,794 (103,655) 355,139
Accrued interest 441,100 -- (441,100) --
Other current liabilities 660,842 (586,917) 73,925
Notes payable 1,888,273 -- (1,888,273) --
Long term debt, current portion 700,000 -- (700,000) --
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 7,739,031 (2,089,754) (3,029,373) 2,619,904
------------ ------------ ------------ ------------
Warranty reserves, non-current 467,299 (267,299) 200,000
Long term debt 11,454,755 -- (11,228,255) 226,500
Minority interest 154,560 154,560
------------ ------------ ------------ ------------
12,076,614 (267,299) (11,228,255) 581,060
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value 227,289 227,289
Additional paid-in capital 51,953,823 51,953,823
Accumulated other comprehensive income 22,586 22,586
Accumulated deficit (51,253,889) 8,359,353(4) (1,478,224) (44,372,760)
Treasury stock (216,737) (216,737)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 733,072 8,359,353 (1,478,224) 7,614,201
------------ ------------ ------------ ------------
$ 20,548,717 $ 6,002,300 $(15,735,852) $ 10,815,165
============ ============ ============ ============
</TABLE>
See accompanying notes to pro forma condensed consolidated
financial statements.
25
<PAGE> 30
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Unaudited Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 15,451,174 $ 15,379,864 (3) $ 71,310
COST OF SALES (8,825,530) (8,353,362)(3) (472,168)
------------ ------------ ------------
Gross profit (loss) 6,625,644 7,026,502 (400,858)
------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 4,928,149 914,213 (3) 4,013,936
Research and development 2,621,889 567,490 (3) 2,054,399
Sales and marketing 2,560,261 1,474,299 (3) 1,085,962
------------ ------------ ------------
TOTAL OPERATING EXPENSES 10,110,299 2,956,002 7,154,297
------------ ------------ ------------
OPERATING INCOME (LOSS) (3,484,655) 4,070,500 (7,555,155)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,267,913) (886,322)(3) (381,591)
Other income (expense) 796,515 13,189 (3) 783,326
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (471,398) (873,133) 401,735
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (3,956,053) 3,197,367 (7,153,420)
INCOME TAX EXPENSE -- -- --
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS $ (3,956,053) $ 3,197,367 $ (7,153,420)
============ ============ ============
BASIC NET LOSS PER SHARE
FROM CONTINUING OPERATIONS $ (0.80) $ (1.44)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,950,396 4,950,396
============ ============
</TABLE>
See accompanying notes to pro forma condensed consolidated
financial statements.
26
<PAGE> 31
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Unaudited Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 19,109,661 $ 18,108,885 (3) $ 1,000,776
COST OF SALES (11,850,692) (10,293,517)(3) (1,557,175)
------------ ------------ ------------
Gross profit (loss) 7,258,969 7,815,368 (556,399)
------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 7,891,320 1,692,655 (3) 6,198,665
Research and development 5,315,411 1,632,008 (3) 3,683,403
Asset impairment 3,582,068 -- (3) 3,582,068
Sales and marketing 4,289,447 2,861,712 (3) 1,427,735
------------ ------------ ------------
TOTAL OPERATING EXPENSES 21,078,246 6,186,375 14,891,871
------------ ------------ ------------
OPERATING INCOME (LOSS) (13,819,277) 1,628,993 (15,448,270)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (3,584,160) (2,570,557)(3) (1,013,603)
Other income (expense) 484,861 (26,284)(3) 511,145
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (3,099,299) (2,596,841) (502,458)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (16,918,576) (967,848) (15,950,728)
INCOME TAX EXPENSE -- -- --
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS $(16,918,576) $ (967,848) $(15,950,728)
============ ============ ============
BASIC NET LOSS PER SHARE
FROM CONTINUING OPERATIONS $ (4.60) $ (4.34)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,675,488 3,675,488
============ ============
</TABLE>
See accompanying notes to pro forma condensed consolidated
financial statements.
27
<PAGE> 32
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Unaudited Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 6,222,449 $ 4,810,193 (3) $ 1,412,256
COST OF SALES (3,991,430) (2,664,038)(3) (1,327,392)
------------ ------------ ------------
Gross profit (loss) 2,231,019 2,146,155 84,864
------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 4,927,657 1,301,993 (3) 3,625,664
Acquired research and development 5,957,927 -- (3) 5,957,927
Research and development 3,110,426 636,018 (3) 2,474,408
Sales and marketing 2,464,668 1,131,122 (3) 1,333,546
------------ ------------ ------------
TOTAL OPERATING EXPENSES 16,460,678 3,069,133 13,391,545
------------ ------------ ------------
OPERATING INCOME (LOSS) (14,229,659) (922,978) (13,306,681)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (458,214) (21,242)(3) (436,972)
Other income (expense) 3,114,060 95,513 (3) 3,018,547
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 2,655,846 74,271 2,581,575
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (11,573,813) (848,707) (10,725,106)
INCOME TAX EXPENSE -- -- --
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS $(11,573,813) $ (848,707) $(10,725,106)
============ ============ ============
BASIC LOSS PER SHARE
FROM CONTINUING OPERATIONS $ (4.09) $ (3.79)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,829,242 2,829,242
============ ============
</TABLE>
See accompanying notes to pro forma condensed consolidated
financial statements.
28
<PAGE> 33
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF DIVESTITURE
On the Closing Date, AccuMed International, Inc. ("the Company") will
sell all of the net assets related to its microbiology division, pursuant to an
Asset Purchase Agreement dated November 20, 1998 (the "Agreement") between the
Company and the Purchaser.
The accompanying condensed consolidated financial statements illustrate
the effect of the divestiture ("Pro Forma") on the Company's financial position
and results of operations. The condensed consolidated balance sheet as of
December 31, 1997 is based on the historical balance sheet of the Company on
that date and assumes the divestiture took place on that date. The condensed
consolidated statements of operations for the years ended December 31, 1997, and
1996, and nine months ended September 30, 1998 are based on the historical
statements of operations of the Company as of those dates and assumes the
divestiture took place on the first day of operations in the period.
The pro forma condensed consolidated financial statements may not be
indicative of the actual results of the divestiture. In particular, the pro
forma condensed consolidated financial statements are based on management's
estimate of the final purchase price, the actual amount of which may differ
based on a final audit reporting the value of the assets purchased and
liabilities assumed by the Purchaser.
The accompanying condensed consolidated pro forma financial statements
should be read in connection with the historical financial statements of the
Company.
NOTE B - PRO FORMA ADJUSTMENTS
The following adjustments are reflected in the Pro Forma Condensed
Consolidated Financial Statements under the columns headed "Adjustments".
(1) Sale of Net Assets of the Microbiology Division.
To reflect receipt of the $15.8 million cash from the sale of the
Microbiology Division. The final sales price may be adjusted per terms of the
Agreement depending on the value of net working capital transferred as
determined by independent audit. The additional adjustments to accounts
receivable, prepaid expenses, production inventory, property and equipment,
current liabilities and warranty reserves in the Pro Forma Condensed
Consolidated Balance Sheet as of December 31, 1997 are based on the Microbiology
Division book values of those items as of that date assumed by the Purchaser.
29
<PAGE> 34
(2) Debt retirement
A portion of the funds received from the sale of the Microbiology
Division will be used to retire debt secured by the assets sold, the related
unsecured debt issued to acquire such assets and the related accrued interest
thereon. The unamortized deferred financing costs and debt discount associated
with the retired debt will also be written off. The adjustments to deferred
financing costs, accrued interest and debt in the Pro Forma Condensed
Consolidated Balance Sheet as of December 31, 1997 are based on the book values
of those items as of that date.
(3) Eliminate Microbiology Division revenues and expenses
All recorded revenues and expenses of the Microbiology Division are
eliminated to reflect the sale of the division as of the first day of the
reported period. Interest expense associated with the debt of the division is
also eliminated.
(4) Record gain on Microbiology Division disposal
The estimated gain on the disposal of the Microbiology Division is reported
as a discontinued operation. The gain is based on the estimated sales price and
the net book value of the assets to be sold to and liabilities to be assumed by
the Purchaser as of the date of the balance sheet presented.
30
<PAGE> 35
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information regarding beneficial
ownership of the Company's Common Stock as of November 18, 1998 (the "Reference
Date"), of (i) each person known to the Company to own beneficially 5% or more
of the Common Stock, (ii) each director of the Company, (iii) the Chief
Executive Officer and each other executive officer named in the compensation
tables set forth in the Company's proxy statement filed in connection with the
1998 annual meeting of stockholders, and (iv) all directors and executive
officers as a group. The content of this table is based upon information
supplied by the persons identified in the table. On the Reference Date, there
were 5,485,453 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NUMBER PERCENT OF
OF SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) OWNED(2)
- ---------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Bellingham Capital Industries(3) ...................................... 1,333,334 21.7%
P.O. Box 323
St. Helier Jersey, Chan. Islands
Robert L. Priddy(4) ................................................... 921,149 15.2%
Michael Falk(5) ....................................................... 629,575 10.6%
c/o Commonwealth Associates
830 Third Avenue
New York, NY 10022
Commonwealth Associates(6) ............................................ 421,106 7.3%
830 Third Avenue
New York, NY 10022
Peter P. Gombrich(7) .................................................. 391,072 7.1%
c/o Inpath L.L.C.
900 N. Franklin, Suite 206
Chicago, IL 60610
Edmund Shea(8) ........................................................ 307,556 5.4%
Paul F. Lavallee(9) ................................................... 91,000 1.6%
Harold S. Blue(10) .................................................... 62,223 1.1%
Leonard M. Schiller(11) ............................................... 35,360 *
Leonard R. Prange(12) ................................................. 23,966 *
Norman J. Pressman(13) ................................................ 20,834 *
Jack H. Halperin(14) .................................................. 20,065 *
J. Donald Gaines(15) .................................................. 6,667 *
Mark Banister(16) ..................................................... 3,333 *
Joyce L. Wallach, Esq(17) ............................................. 1,252 *
All directors and executive officers as a group (12 persons)(18) ...... 1,185,846 18.0%
</TABLE>
- ----------
* Represents less than 1%.
31
<PAGE> 36
(1) Except as otherwise noted, the address for each person is c/o AccuMed
International, Inc., 900 North Franklin Street, Suite 401, Chicago,
Illinois 60610.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options or the conversion of convertible preferred stock. Each beneficial
owner's percentage ownership is determined by including shares, underlying
options or warrants which are exercisable or preferred stock which is
convertible by such person currently, or within 60 days following the
Reference Date, and excluding shares underlying options, warrants and
convertible preferred stock held by any other person.
(3) Includes 667,667 shares underlying warrants held by Bellingham Capital
Industries which are exercisable currently or within 60 days following the
Reference Date.
(4) Includes 322,897 shares underlying warrants and 236,031 shares underlying
Series A Convertible Preferred Stock held by Mr. Priddy that are
exercisable or convertible currently or within 60 days following the
Reference Date.
(5) Mr. Falk directly owns 72,593 shares of Common Stock and warrants to
purchase up to 119,210 shares of Common Stock. The number shown includes an
additional 120,926 shares, and 300,180 shares underlying warrants that are
exercisable currently or within 60 days following the Reference Date, held
by Commonwealth Associates (excluding securities held in Commonwealth
Associates' trading account). Mr. Falk is a control person of the corporate
general partner of Commonwealth Associates and may be deemed to be
beneficial owner of securities held by Commonwealth Associates. The number
of shares also includes an additional 16,667 shares underlying warrants
that are exercisable currently or within 60 days following the Reference
Date held by Anne Falk, Mr. Falk's spouse. Mr. Falk disclaims beneficial
ownership of the securities held by Commonwealth Associates except to the
extent of his percentage ownership interests in Commonwealth Associates.
Certain shares and warrants held directly by Mr. Falk were transferred to
him by Commonwealth Associates.
(6) Includes 300,180 shares underlying warrants held by Commonwealth Associates
that are exercisable currently or within 60 days following the Reference
Date. Excludes securities held in Commonwealth Associates' trading
accounts.
(7) Includes 52,078 shares held of record by Gwenda Gombrich, Mr. Gombrich's
wife, directly or as custodian for a minor child, as to which Mr. Gombrich
disclaims beneficial ownership.
(8) Includes 85,334 shares underlying 12% Convertible Promissory Notes due 2000
and 111,112 shares underlying warrants which are currently convertible or
exercisable or within 60 days following the Reference Date.
(9) Includes 91,000 shares underlying stock options held by Mr. Lavallee that
are exercisable currently or within 60 days following the Reference Date.
(10) Includes 55,556 shares underlying warrants and 6,667 shares underlying
stock options held by Mr. Blue that are exercisable currently or within 60
days following the Reference Date.
(11) Includes 12,500 shares underlying warrants and 10,833 shares underlying
stock options held by Mr. Schiller that are exercisable currently or within
60 days following the Reference Date.
(12) Includes 16,667 shares underlying stock options held by Mr. Prange that are
exercisable currently or within 60 days following the Reference Date.
(13) Includes 16,667 shares underlying stock options held by Mr. Pressman that
are exercisable currently or within 60 days following the Reference Date.
(14) Includes 12,216 shares underlying stock options held by Mr. Halperin that
are exercisable currently or within 60 days following the Reference Date.
32
<PAGE> 37
(15) Includes 6,667 shares underlying stock options held by Mr. Gaines that are
exercisable currently or within 60 days following the Reference Date.
(16) Includes 3,333 shares underlying stock options held by Mr. Banister that
are exercisable currently or within 60 days following the Reference Date.
(17) Includes 1,000 shares underlying stock options held by Ms. Wallach that are
exercisable currently or within 60 days following the Reference Date.
(18) Includes 236,031 shares underlying Series A Convertible Preferred Stock and
862,682 shares underlying warrants or options held by executive officers
and directors that are exercisable currently or within 60 days of the
Reference Date.
33
<PAGE> 38
DIVIDENDS
The Company has never declared or paid a cash dividend on the Common Stock
and is currently prohibited from paying any dividends on the Common Stock under
the terms of its credit agreements. The Board of Directors does not anticipate
paying any cash dividends in the foreseeable future.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP ("KPMG") has been the Company's principal accountants
for the fiscal years ended December 31, 1996 and 1997 and have been selected by
the Board of Directors to serve as the principal accountants for the 1998 fiscal
year. Representatives of KPMG are expected to be present at the Meeting, will
have the opportunity to make a statement if they so desire, and are expected to
be available to respond to appropriate questions.
OTHER MATTERS
The Company does not know of any matter other than those discussed in the
foregoing materials contemplated for action at the Meeting. Should any other
matter be properly brought before the Meeting, the holders of the proxies herein
solicited will vote thereon in their discretion.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In accordance with Rule 14a-8 of the proxy rules of the Securities and
Exchange Commission, stockholders are advised that any proposal which a
stockholder wishes to have presented at the 1999 Annual Meeting of Stockholders
and included in the Company's proxy statement and form of proxy for such meeting
must be received by the Company, at its principal executive office, 900 North
Franklin Street, Suite 401, Chicago, Illinois 60610, Attn: Secretary, no later
than January 1, 1999.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference the following documents
filed by the Company with the Securities and Exchange Commission (i) Annual
Report on Form 10-K for the year ended December 31, 1997 (a copy of which
accompanies this Proxy Statement), (ii) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, (ii) Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, (iii) Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, (iv) Current Report on Form 8-K dated February 23, 1998, (v)
Amendment No. 6 to Current Report on Form 8-K dated March 3 ,1997, and (vi) all
documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the date
of the Meeting.
By Order of the Board of Directors
JOYCE L. WALLACH,
General Counsel and Secretary
34
<PAGE> 39
APPENDIX A
================================================================================
---------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ACCUMED INTERNATIONAL, INC.
AND
AMI ACQUISITION CORP.
DATED AS OF NOVEMBER 20, 1998
--------------------
================================================================================
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1. PURCHASE AND SALE OF ASSETS
1.1 Sale and Transfer of Assets.....................................................1
(a) Cash and Cash-Equivalents................................................1
(b) Prepaids.................................................................1
(c) Accounts Receivable......................................................2
(d) Purchased Inventory......................................................2
(e) Fixed Assets.............................................................2
(f) Intellectual Property Rights.............................................2
(g) Business Records.........................................................2
(h) Customer List............................................................2
(i) Supplier List............................................................3
(j) Catalogs and Advertising Materials.......................................3
(k) Contracts................................................................3
(l) Permits..................................................................3
(m) Insurance................................................................3
(n) Goodwill.................................................................3
(o) Real Property............................................................3
(p) Leased Property..........................................................4
(q) AccuMed UK...............................................................4
(r) Shared Tools and Equipment...............................................4
(s) Miscellaneous............................................................4
1.2 Retained Assets.................................................................4
(a) Non-Assigned Contracts...................................................4
(b) Retained Names...........................................................4
(c) Corporate Records........................................................4
(d) Rights Under G&G Collaboration Agreement.................................5
(e) Rights Under BioKit License Agreement....................................5
1.3 Assignability and Consents......................................................5
(a) Required Consents........................................................5
(b) Nonassignable Items......................................................5
ARTICLE 2. LIABILITIES
2.1 Assumption of Liabilities.......................................................6
(a) Certain Balance Sheet Liabilities........................................6
(b) Contracts and Permits....................................................6
(c) Certain Other Liabilities................................................6
2.2 Retained Liabilities............................................................7
(a) Pre-Closing..............................................................7
(b) Liabilities Relating to this Agreement...................................7
(c) Employee-Related Liabilities.............................................7
</TABLE>
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<TABLE>
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(d) Litigation...............................................................7
(e) Product and Safety Liability.............................................8
(f) Taxes....................................................................8
(g) Breach of Agreement......................................................8
(h) Liabilities Relating to Retained Assets..................................8
(i) Post-Closing Liabilities. ..............................................8
(j) Shutdown Costs...........................................................8
(k) Indebtedness.............................................................9
(l) Liabilities Relating to the G&G Collaboration Agreement..................9
(m) Liabilities Relating to the BioKit License Agreement.....................9
(n) MDRs.....................................................................9
(o) Miscellaneous............................................................9
ARTICLE 3. PURCHASE PRICE
3.1 Payment.........................................................................9
(a) Closing Payment..........................................................9
(b) Escrow Funds............................................................10
3.2 Adjustment of Purchase Price...................................................10
(a) Closing Statement.......................................................10
(b) Closing Net Working Capital.............................................10
(c) Cooperation.............................................................11
(d) Review of Auditor Statement.............................................11
(e) Adjustment and Payment Procedures.......................................11
3.3 Purchase Price Allocation......................................................12
ARTICLE 4. CLOSING
4.1 General........................................................................12
4.2 Documents to be Delivered by Seller............................................12
4.3 Documents to be Delivered by Buyer.............................................14
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller.......................................14
(a) Organization; Standing and Authorization................................14
(b) Effect of Agreement.....................................................15
(c) Articles and By-Laws....................................................15
(d) Capitalization of AccuMed UK............................................15
(e) Conflicts; Defaults.....................................................15
(f) Acquired Assets; Title to the Acquired Assets...........................16
(g) Real Property...........................................................17
(h) Contracts...............................................................18
(i) Financial Statements; SEC Filings.......................................18
(j) SEC Filings.............................................................19
</TABLE>
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<TABLE>
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(k) Disclosure Documents....................................................19
(l) Liabilities.............................................................20
(m) Accounts Receivable; Collection; Trade Payables.........................20
(n) Litigation..............................................................20
(o) Regulatory Compliance...................................................21
(p) Intellectual Property...................................................21
(q) Permits.................................................................21
(r) Employee Relations; Collective Bargaining Agreements....................21
(s) Employees and Employee Plans............................................22
(t) Environmental Matters...................................................24
(u) Absence of Certain Changes..............................................25
(v) Taxes...................................................................25
(w) Insurance...............................................................26
(x) Approvals...............................................................26
(y) No Other Agreements to Sell the Acquired Assets or the Business.........26
(z) No Brokers..............................................................26
(aa) Solvency...............................................................26
(bb) Millennium Compliance..................................................26
(cc) Confidential Information...............................................27
5.2 Representations and Warranties of Buyer........................................27
(a) Organization and Standing; Corporate Power and Authority................27
(b) Conflicts; Defaults.....................................................27
(c) No Brokers..............................................................27
5.3 General........................................................................28
ARTICLE 6. CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Each Party....................................28
(a) Seller Stockholder Approval.............................................28
(b) No Injunction...........................................................28
(c) Governmental Consents...................................................28
6.2 Conditions to Buyer's Obligations..............................................28
(a) Representations and Warranties..........................................28
(b) Covenants...............................................................28
(c) Consents................................................................28
(d) Certificate of Seller...................................................28
(e) Documents; Approvals....................................................28
(f) Material Adverse Change.................................................29
(g) Agreement with Akzo Nobel...............................................29
(h) Sun Prairie Facility....................................................29
(i) Elimination of Certain Liens............................................29
(j) Sublease................................................................29
(k) UK Environmental Review.................................................29
(l) Solvency Letter.........................................................29
(m) Release.................................................................29
</TABLE>
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<TABLE>
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(n) Closing Statement.......................................................29
(o) Return of Confidential Information......................................30
(p) Concerning Intellectual Property........................................30
6.3 Conditions to Seller's Obligations.............................................30
(a) Representations and Warranties..........................................30
(b) Covenants...............................................................30
(c) Certificates of Buyer...................................................30
(d) Certificates; Documents.................................................30
ARTICLE 7. COVENANTS OF SELLER
7.1 Conduct of Business............................................................31
(a) Obligations for Borrowed Money..........................................31
(b) Employee Matters........................................................31
(c) Sale of Assets..........................................................31
(d) Failure to Maintain Assets..............................................31
(e) Contracts...............................................................31
(f) Encumbrances............................................................32
(g) Insurance...............................................................32
(h) Litigation..............................................................32
(i) Representations and Warranties..........................................32
(j) Affiliate Transactions; Dividends.......................................32
(k) Charter Amendments......................................................32
(l) Accounting Methods......................................................32
(m) Permits.................................................................32
(n) Accounts Payable and Receivable.........................................33
(o) Transfer of Employees...................................................33
(p) Commitments.............................................................33
7.2 Disclosure Supplements.........................................................33
7.3 Closing........................................................................33
7.4 Confidentiality................................................................33
7.5 Maintenance of Insurance.......................................................34
7.6 Trade Names....................................................................34
(a) License.................................................................34
(b) Use of Tradenames by Seller.............................................34
(c) Remedies................................................................35
7.7 Maintenance of, and Access to, Records.........................................35
7.8 Non-Competition................................................................35
(a) Period and Conduct......................................................35
(b) Restricted Territory....................................................35
(c) Tolling of Covenants....................................................35
(d) Nonsolicitation.........................................................36
(e) Non-Competition - Direct or Indirect....................................36
(f) Remedies................................................................36
(g) Subsidiaries, Division and Affiliates...................................36
</TABLE>
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<TABLE>
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(h) Severability............................................................36
7.9 Accounts Receivable...........................................................37
7.10 No Solicitation...............................................................37
7.11 Plant Closing Obligations.....................................................37
7.12 No Interference...............................................................37
7.13 Sublease......................................................................37
7.14 Further Assurances; Customer and Supplier Relationships; Assertion of
Claims.......................................................................37
7.15 Confidential Information......................................................38
7.16 Solvency Letter...............................................................38
ARTICLE 8. COVENANTS OF BUYER
8.1 Maintenance of, and Access to, Records.........................................39
8.2 Closing........................................................................39
ARTICLE 9. CERTAIN ADDITIONAL COVENANTS
9.1 Due Diligence Investigation....................................................39
(a) Access to Records and Properties........................................39
(b) Confidentiality.........................................................39
9.2 Proxy Material; Stockholder Meeting............................................40
(a) Preparation of Proxy Statement..........................................40
(b) Stockholder Meeting.....................................................40
9.3 Bulk Transfer Laws.............................................................40
9.4 Press Releases and Disclosure..................................................40
9.5 Regulatory Approvals...........................................................41
9.6 Employee Matters...............................................................41
(a) Employee Benefits.......................................................41
(b) Future Employment.......................................................41
(c) No Employment by Seller.................................................41
(d) Employee Information....................................................41
ARTICLE 10. TERMINATION
10.1 Termination...................................................................42
(a) Mutual Consent..........................................................42
(b) Closing Date............................................................42
(c) Seller Misrepresentation or Breach......................................42
(d) Buyer Misrepresentation or Breach.......................................42
(e) Court Order.............................................................42
(f) Buyer's Conditions......................................................42
(g) Seller's Conditions.....................................................43
(h) Solvency Letter.........................................................43
10.2 Effect of Termination.........................................................43
</TABLE>
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ARTICLE 11. INDEMNIFICATION
11.1 Indemnification by Buyer......................................................43
11.2 Indemnification by Seller.....................................................43
11.3 Notice of Claim; Right to Participate in and Defend Third Party Claim.........44
ARTICLE 12. MISCELLANEOUS
12.1 Amendments....................................................................45
12.2 Entire Agreement..............................................................45
12.3 Governing Law.................................................................46
12.4 Expenses......................................................................46
12.5 Notices.......................................................................46
12.6 Counterparts..................................................................47
12.7 Assignment....................................................................47
12.8 Waivers.......................................................................47
12.9 Third Parties.................................................................47
12.10 Schedules and Exhibits.......................................................47
12.11 Headings; References.........................................................48
12.12 Certain Definitions..........................................................48
12.13 Remedies Not Exclusive.......................................................48
12.14 Gender and Number............................................................48
</TABLE>
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
510(k)s..................................................................... 1.3(a)
Accounts Receivable......................................................... 1.1(c)
Acquired Assets............................................................. 1.1(s)
AccuMed UK.................................................................. 1.1(q)
AccuMed UK Charter.......................................................... 5.1(c)
AccuMed UK Contracts........................................................ 5.1(e)
AccuMed UK Real Property.................................................... 5.1(g)
Adjustment Request.......................................................... 3.2(d)
Affiliate................................................................... 12.12(a)
Agreement................................................................... Recitals
Appraiser................................................................... 7.16
Assumed Liabilities......................................................... 2.1
Audited Balance Sheet....................................................... 3.2(a)
Auditor Statement........................................................... 3.2(b)
Balance Sheet Date.......................................................... 5.1(i)
Balance Sheet Liabilities................................................... 2.1(a)
BD.......................................................................... 6.2(h)
BioKit License.............................................................. 1.2(e)
Business.................................................................... Recitals
Business Contracts.......................................................... 5.1(e)
Business Real Property...................................................... 5.1(g)
Buyer....................................................................... Recitals
Buyer's Auditor............................................................. 3.2(b)
CA Breach................................................................... 7.4(d)
Closing..................................................................... 4.1
Closing Date................................................................ 4.1
Closing Payment............................................................. 3.1(a)
Closing Statement........................................................... 3.2(a)
Closing Net Working Capital................................................. 3.2(b)
Code........................................................................ 5.1(s)
Computer Systems............................................................ 5.1(bb)
Confidentiality Agreement................................................... 9.1(b)
Consents.................................................................... 1.3(a)
Contamination............................................................... 5.1(t)
Contracts................................................................... 1.1(k)
Current Assets.............................................................. 3.2(a)
Customer(s)................................................................. 1.1(h)
Employee(s)................................................................. 5.1(s)
Employee Health Records..................................................... 9.6(d)
Employee Plan(s)............................................................ 5.1(s)
Employee Services Agreement................................................. 7.14
Environmental Laws.......................................................... 5.1(t)
</TABLE>
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<TABLE>
<S> <C>
EPA......................................................................... 5.1(t)
ERA......................................................................... 5.1(s)
ERISA....................................................................... 5.1(s)
Escrow Agent................................................................ 3.1(b)
Escrow Funds................................................................ 3.1(b)
Escrow Period............................................................... 3.1(b)
ESP Products................................................................ 2.1(a)
Financial Statements........................................................ 5.1(i)
Fixed Assets................................................................ 1.1(e)
GAAP........................................................................ 3.2(a)
G&G Collaboration Agreement................................................. 1.2(d)
Governmental Authorities.................................................... 1.1(l)
Hazardous Substances........................................................ 5.1(t)
IDEs........................................................................ 1.3(a)
Indebtedness................................................................ 2.2(k)
Intellectual Property....................................................... 1.1(f)
Laws........................................................................ 2.2(c)
Leases...................................................................... 1.1(p)
Liabilities................................................................. 11.1
Liens....................................................................... 4.2(a)
LOI......................................................................... 5.1(bb)
Materials................................................................... 1.1(i)
MDRs........................................................................ 2.2(n)
Millennium Compliance....................................................... 5.1(bb)
Minimum Net Working Capital................................................. 3.2(e)
Nonassignable Items......................................................... 1.3(b)
Non-Assigned Contracts...................................................... 1.2(a)
PCBs........................................................................ 5.1(t)
Permits..................................................................... 1.1(l)
Permitted Liens............................................................. 5.1(f)
Person...................................................................... 1.3(a)
PMAs........................................................................ 1.3(a)
Products.................................................................... Recitals
Protected Employees......................................................... 7.13
Proxy Statement............................................................. 9.2(a)
Purchase Price.............................................................. 3.1(a)
Release..................................................................... 6.2(m)
Retained Assets............................................................. 1.2
Retained Liabilities........................................................ 2.2
Retained Name............................................................... 1.2(b)
SEC......................................................................... 9.2(a)
Seller...................................................................... Recitals
Seller's knowledge.......................................................... 12.12(b)
Seller Charter.............................................................. 5.1(c)
Seller Disclosure Documents................................................. 5.1(k)
Seller Real Property........................................................ 5.1(g)
</TABLE>
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<TABLE>
<S> <C>
Seller SEC Documents........................................................ 5.1(j)
Seller Stockholder Meeting.................................................. 9.2(b)
Seller Stockholder Vote..................................................... 5.1(a)
Shares...................................................................... 1.1(q)
Solvency Letter............................................................. 7.16
Sublease.................................................................... 7.13
Subsequent Seller SEC Documents............................................. 5.1(j)
Sun Prairie Facility........................................................ 6.2(h)
Supplier(s)................................................................. 1.1(i)
Tax(es)..................................................................... 5.1(v)
Third Party Claim........................................................... 11.3(a)
Termination Date............................................................ 10.1(b)
Tradenames.................................................................. 1.1(f)
Trade Payables.............................................................. 2.1(a)
Transaction Documents....................................................... 5.1(b)
Unaudited Balance Sheet..................................................... 5.1(i)
Unaudited Business Financial Statements..................................... 5.1(i)
Unaudited Consolidated Financial Statements................................. 5.1(i)
U.S. Contracts.............................................................. 1.1(k)
WARN........................................................................ 2.2(j)
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
Schedule Title
- -------- -----
<S> <C>
1.1(e) Fixed Assets
1.1(k) Contracts
1.1(l) Permits
1.1(r) Shared Tools and Equipment
1.2(a) Non-Assigned Contracts
2.1(a) Certain Balance Sheet Liabilities
2.2(k) Capital Leases
2.2(o) Miscellaneous
3.2(a) Calculation of Current Liabilities
3.3 Purchase Price Allocation
5.1(a) Organization; Standing and Authorization
5.1(d) Capitalization of AccuMed UK
5.1(f)(i) Existing Liens
5.1(f)(ii) Permitted Liens
5.1(f)(iii) Fixed Assets
5.1(g)(i) Seller Real Property
5.1(g)(ii) AccuMed UK Real Property
5.1(h) Contracts
5.1(m) Accounts Receivable; Collection; Trade Payables
5.1(n) Litigation
5.1(o) Regulatory Compliance
5.1(p) Intellectual Property
5.1(q) Permits
5.1(s)(i) Employees and Employee Plans
5.1(s)(iv) Employment Contracts
5.1(t) Environmental Matters
5.1(u) Absence of Certain Changes
5.1(w) Insurance
5.1(x) Approvals
5.1(bb) Millenium Compliance
6.2(p) Corrective Actions relating to Intellectual Property
7.12 Protected Employees
9.6 Future Employment
</TABLE>
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit Title
- ------- -----
<S> <C>
Exhibit A Escrow Agreement
Exhibit B Bill of Sale
Exhibit C Patent Assignment
Exhibit D Trademark Assignment
Exhibit E Assumption of Assumed Liabilities
Exhibit F Release
Exhibit G Sublease
</TABLE>
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<PAGE> 51
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of
November 20, 1998, is by and between AMI Acquisition Corp., a Delaware
corporation ("Buyer"), and AccuMed International, Inc., a Delaware corporation
("Seller").
RECITALS
A. Seller and AccuMed UK (as defined in Section 1.1(q)) are engaged
through Seller's Microbiology Division in, among other things, the business (the
"Business") of developing, manufacturing and marketing in vitro diagnostic
clinical microbiology products, devices and equipment for the human clinical
laboratory, veterinary and pharmaceutical markets (collectively, the
"Products");
B. Seller desires to sell certain assets, properties, rights and
interests relating to the Business, and to transfer certain liabilities relating
to the Business, to Buyer; and
C. Buyer desires to purchase and acquire from Seller, upon the terms and
subject to the conditions hereinafter set forth, such assets, properties, rights
and interests of Seller, in consideration of certain payments by Buyer and the
assumption by Buyer of certain liabilities and obligations of Seller
specifically disclosed in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and other good and valuable consideration had
and received, Buyer and Seller, on the basis of, and in reliance upon, the
representations, warranties, covenants, obligations and agreements set forth in
this Agreement, and upon the terms and subject to the conditions contained
herein, hereby agree as follows:
ARTICLE 1. PURCHASE AND SALE OF ASSETS
1.1 Sale and Transfer of Assets. At the Closing and effective as
of the Closing Date (as defined in Section 4.1), Seller will sell, assign,
convey, transfer and deliver to Buyer free and clear of all Liens (as defined in
Section 4.2 (a)), other than Permitted Liens (as defined in Section 5.1(f)), and
Buyer will purchase and acquire from Seller, all of the assets, properties,
rights and interests of Seller related to the Business, wherever situated, as
the same shall exist as of the Closing Date, including, without limitation, the
following:
(a) Cash and Cash-Equivalents. All cash and cash-equivalents and
marketable securities of Seller relating to the Business, cash in
transit and cash, cash-equivalents and marketable securities in
lockboxes or on deposit with or held by any financial institution;
(b) Prepaids. All prepaid expenses, advance payments, deposits,
surety accounts and other similar assets of Seller relating to the
Business, including, without limitation, prepaid deposits with suppliers
and utilities;
<PAGE> 52
(c) Accounts Receivable. All accounts receivable (including
royalties receivable and accounts receivable owed to AccuMed UK by
Seller or any Affiliate thereof), any payments received with respect
thereto after the Closing Date, unpaid interest accrued on any such
accounts receivable and any security or collateral relating thereto
(collectively, "Accounts Receivable") of Seller relating to the
Business, provided that "Accounts Receivable" shall not include any
intercompany accounts receivable owed to or from Seller's Chicago and
Westlake facilities;
(d) Purchased Inventory. All raw materials and supplies,
work-in-process and finished goods of Seller relating to the Business,
including items purchased for distribution or resale and items which
have been ordered for the Business;
(e) Fixed Assets. All tangible personal property, plant,
machinery and equipment (collectively, "Fixed Assets") of Seller
relating to the Business, including, without limitation, the Fixed
Assets identified on Schedule 1.1(e) attached hereto;
(f) Intellectual Property Rights. All inventions, discoveries,
trademarks, service marks, patents, trade names, copyrights, know-how,
intellectual property, software and information systems, shop rights,
licenses, developments, designs, technology, discoveries, trade secrets,
test procedures, processes, research data, formulae and other
confidential information, intellectual and similar intangible property
rights, whether or not patentable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized third party
usage), and any and all applications for, and extensions, divisions and
reissuances of, any of the foregoing, and rights therein relating to the
Business, including, without limitation, (i) the names "AccuZone,"
"alamarBlue," "ARIS," "ESP," "Extra Sensing Power," "Flouretone," "EZ
DRAW," "EZ VIEW," "INSIGHT," "JustOne," "Pathos," "Pipetar," "ReadAr,"
"SAMS," "Sensititre," "SensiTouch," "YeastOne," and all related trade
names and trademarks (collectively, the "Tradenames"), (ii) the
intellectual and intangible property rights described on Schedule
5.1(p), and (iii) the production methods, formulae, know-how and
technical expertise relating to the manufacture of Products presently or
previously manufactured or sold by the Business (collectively, the
"Intellectual Property");
(g) Business Records. All books and records relating to the
Business, including, without limitation, all files, invoices, forms,
accounts, correspondence, production records, technical, accounting,
manufacturing and procedural records and manuals (including all good
manufacturing practice records and manuals), employment records relating
to Employees (as defined in Section 5.1(s)), and other books and written
and electronic records of Seller and relating to the Business, and any
confidential information that has been reduced to writing or other
tangible medium relating to the Business;
(h) Customer List. Any lists of Persons (as defined in Section
1.3(a)) to whom or to which Seller has sold or otherwise furnished
Products, directly or indirectly, (individually, a "Customer" and
collectively, the "Customers," such terms to include any assignee or
successor of any such Person, whether by consolidation, merger, sale of
assets or otherwise), including related information as to the unit and
dollar volume of such sales,
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<PAGE> 53
the type of Products so sold or furnished and other relevant marketing
and product information for each Customer;
(i) Supplier List. Any lists of Persons from whom or from which
Seller has purchased or otherwise received supplies, ingredients,
equipment, materials or components ("Materials") used in the development
or production of Products, directly or indirectly (individually, a
"Supplier" and collectively, the "Suppliers," such terms to include any
assignee or successor of any such Person, whether by consolidation,
merger, sale of assets or otherwise), including related information as
to the unit and dollar volume of such purchases, the type of Materials
so purchased or received and other relevant product information for such
Supplier;
(j) Catalogs and Advertising Materials. All promotional and
advertising materials relating to the Business or to the Products,
including, without limitation, all catalogs, brochures, plans, supplier
lists, manuals, handbooks, equipment and parts lists, dealer and
distributor lists, and labels and packaging materials;
(k) Contracts. All rights, benefits and interests of Seller in
and to all licenses, leases, purchase orders, contracts, agreements
(including, without limitation, marketing, distribution and supply
agreements), commitments and undertakings (collectively, "Contracts")
identified on Schedule 1.1(k) attached hereto (the "U.S. Contracts");
(l) Permits. All licenses, permits, approvals, clearances,
variances, waivers or consents (collectively, "Permits"), to the extent
assignable, issued by any foreign, United States, state or local
governmental entity or municipality or subdivision thereof or any
authority, department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities") and related
to the Business, including, without limitation, the Permits identified
on Schedule 1.1(l) attached hereto;
(m) Insurance. All rights, claims and benefits of Seller in, to
or under all insurance policies maintained by Seller for the Business or
the Acquired Assets (as defined in Section 1.1(s));
(n) Goodwill. The goodwill of the Business;
(o) Real Property. All real property rights and interests of any
kind whatsoever owned by Seller and relating to the Business, including
the rights and interests identified under the heading "Seller Real
Property" on Schedule 5.1(g)(i), which consist of (i) the land more
particularly described under such heading, which descriptions are
incorporated herein by reference, (ii) all buildings, structures and
leasehold improvements located thereon and all appurtenances relating
thereto, and (iii) all fixtures, machinery, apparatus or equipment
attached to such premises, including, without limitation, all of the
electrical, heating, plumbing, air conditioning, air compression and all
other systems located on said premises, and all other structures, fences
and improvements (collectively, "Real Property");
3
<PAGE> 54
(p) Leased Property. All rights and interests under the leases
(the "Leases") described under the heading "Seller Leased Property" on
Schedule 5.1(g)(i), which descriptions are incorporated herein by
reference;
(q) AccuMed UK. 2,000,000 ordinary shares of pound sterling 1
each (the "Shares"), comprising the entire issued share capital of
AccuMed International, Limited, a limited liability company organized
under the laws of England and Wales with company number 2038515
("AccuMed UK"), and all tax loss carry-forwards relating to AccuMed UK,
to the extent transferable; and
(r) Shared Tools and Equipment. All of the tools and equipment
set forth on Schedule 1.1(r).
(s) Miscellaneous. All other assets, properties, rights and
interests of Seller otherwise relating to the Business, of every kind,
nature and description, whether tangible or intangible, real, personal
or mixed, and wherever situated, including, without limitation, those
assets, properties, rights and interests set forth on the Unaudited
Balance Sheet (as defined in Section 5.1(i)), all of which are to be
sold, transferred, conveyed, assigned and delivered to Buyer at the
Closing pursuant to this Agreement, except as otherwise specifically set
forth in this Agreement.
All of the assets, properties, rights and interests of Seller relating to the
Business that are to be sold, transferred, conveyed, assigned and delivered by
Seller to Buyer at the Closing as contemplated herein, including without
limitation, those described in clauses (a) through (s) above are referred to
herein collectively as the "Acquired Assets."
1.2 Retained Assets. Anything in Section 1.1 to the contrary
notwithstanding, the following assets (collectively, the "Retained Assets")
shall be retained by Seller, and Buyer shall in no way be construed to have
purchased or acquired (or to be obligated to purchase or to acquire) any
interest whatsoever in any of the following:
(a) Non-Assigned Contracts. All of the rights and interests, and
all of the liabilities and obligations, of Seller in, under or pursuant
to any Contract (i) that is listed on Schedule 1.2(a), or (ii) that
Buyer, in a writing or writings delivered to Seller prior to the Closing
Date, identifies as not desired by Buyer to be included within, or to
constitute a part of, the Acquired Assets (collectively, the
"Non-Assigned Contracts");
(b) Retained Names. The name "AccuMed" (the "Retained Name"),
except to the extent otherwise contemplated by Section 7.6 of this
Agreement;
(c) Corporate Records. Seller's minute books, stock books, stock
ledger and corporate seal and all books, records and other data that
relate primarily to (i) the Retained Assets, (ii) the Retained
Liabilities (as defined in Section 2.2), or (iii) Seller's businesses
other than the Business;
4
<PAGE> 55
(d) Rights Under G&G Collaboration Agreement. All of the rights
and interests, and all of the liabilities, debts and obligations, of
Seller in, under or pursuant to, the Collaboration Agreement and
Worldwide Exclusive License, between Seller and G&G Dispensing, Inc.,
dated March 22, 1994 (the "G&G Collaboration Agreement"); and
(e) Rights Under BioKit License Agreement. All of the rights and
interests, and all of the liabilities, debts and obligations, of Seller
in, under or pursuant to, the License & Distribution Agreement, dated as
of February 20, 1996, between Seller and BioKit, S.A. (the "BioKit
License").
1.3 Assignability and Consents.
(a) Required Consents. Schedule 5.1(x) sets forth a list of all
Acquired Assets, including Contracts and Permits, that are
non-assignable or non-transferable or cannot be subleased to Buyer
without the Consent (as defined below) of some other individual,
partnership, corporation, association, joint stock company, trust, joint
venture, limited liability company or Governmental Authority
(collectively, a "Person"). Seller has commenced and shall continue to
take, or cause to be taken by others, all necessary actions required to
obtain or satisfy, at the earliest practicable date, all consents,
novations, approvals, authorizations, requirements (including filing and
registration requirements), waivers and agreements ("Consents") from any
Persons necessary to authorize, approve or permit the full and complete
sale, conveyance, assignment, sublease or transfer of the Acquired
Assets, and to consummate and make effective the transactions
contemplated by this Agreement and to continue such efforts as may be
required after the Closing Date to facilitate the full and expeditious
transfer of legal title, or the sublease, as the case may be, of the
Acquired Assets. Seller has executed or will execute letters in a form
acceptable to Buyer that notify the Food and Drug Administration ("FDA")
of the transfers of 510(k) Pre-Market Notifications ("510(k)s"),
Pre-Market Approval Applications ("PMAs") and Investigative Device
Exemptions ("IDEs") for the Products.
(b) Nonassignable Items. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an
agreement to sell, convey, assign, sublease or transfer any Acquired
Assets, including Contracts and Permits, if an attempted sale,
conveyance, assignment, sublease or transfer thereof, without the
Consent of another party thereto or a Governmental Authority, would
constitute a breach of, or in any way affect the rights of Seller or
Buyer with respect to, such Acquired Asset ("Nonassignable Items").
Seller shall use commercially reasonable efforts and Buyer shall
cooperate in all reasonable respects with Seller to obtain and satisfy
all Consents and to resolve all impracticalities of sale, conveyance,
assignment, sublease or transfer necessary to convey to Buyer all
Nonassignable Items. If any such Consents are not obtained and satisfied
or if an attempted sale, conveyance, assignment, sublease or transfer
would be ineffective, Seller and its appropriate Affiliates (as defined
in Section 12.12(a)) shall at the Closing enter into such arrangements
(including related written agreements) as Buyer may reasonably request
in order to fairly compensate Buyer for the loss of, or to provide to
Buyer the benefit of, any such Nonassignable Items (it being
acknowledged that such arrangement may include obligations imposed on
Seller and such Affiliates promptly to
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pay to Buyer when received all monies and other items of value received
by Seller and such Affiliates under any such Nonassignable Item).
ARTICLE 2. LIABILITIES
2.1 Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, Buyer shall assume, at the Closing and
effective as of the Closing Date, and shall thereafter pay, perform and
discharge as and when due, the following, and only the following, liabilities
and obligations of Seller or AccuMed UK (collectively, the "Assumed
Liabilities"):
(a) Certain Balance Sheet Liabilities. All liabilities and
obligations of Seller or AccuMed UK existing on the Closing Date (i)
that constitute non-interest bearing trade accounts payables due to
Suppliers incurred by Seller solely on account of the Business and in
the ordinary course of business of the Business consistent with past
practice ("Trade Payables"); provided, that, "Trade Payables" shall not
include any intercompany accounts payable owed to or from Seller's
Chicago and Westlake facilities, (ii) on account of current accrued
liabilities and deferred revenues as reflected on the books and records
of Seller as of the Closing Date in the categories listed on Schedule
2.1(a) relating solely to the Business and of the type reflected on the
Unaudited Balance Sheet, (iii) on account of Product warranty claims
(but not Product liability claims or recall claims) arising from
Products manufactured or sold by the Business prior to the Closing;
provided, that, Buyer shall not assume any liabilities or obligations of
Seller or AccuMed UK on account of such Product warranty claims in
excess of (y) in the case of ESP blood culture Products (the "ESP
Products"), $967,299 (which includes $600,000 reclassified as a reserve
against the Fixed Assets), and (z) in the case of all other Products of
the Business, $25,000 and (iv) payables owed by AccuMed UK to Seller
(the obligations and liabilities described in Section 2.1(a)(i) and (ii)
are hereinafter referred to as the "Balance Sheet Liabilities");
(b) Contracts and Permits. All liabilities and obligations of
Seller and AccuMed UK arising under the terms of the Contracts and
Permits included in the Acquired Assets, other than contracts that
constitute Non-Assigned Contracts or Nonassignable Contracts, but only
to the extent such liabilities and obligations relate solely to the
Business and arise or accrue after the Closing Date in the ordinary
course of business of the Business and consistent with the
representations, warranties, covenants, obligations and agreements set
forth in this Agreement; provided, however, that Buyer shall not assume
or be responsible for any such liabilities or obligations that arise
from breaches thereof or defaults thereunder by Seller or AccuMed UK,
all of which liabilities and obligations shall constitute Retained
Liabilities; and
(c) Certain Other Liabilities. Up to an aggregate of $10,000 in
other liabilities or obligations of Seller and/or AccuMed UK not
otherwise provided for in this Section 2.1, provided that such
liabilities and obligations relate solely to the Business.
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2.2 Retained Liabilities. Except as provided in Section 2.1,
Seller shall assume or retain, and Buyer and AccuMed UK shall not assume, or be
responsible or liable with respect to, any liabilities, debts or obligations of
Seller or AccuMed UK relating to the Business or otherwise or any present or
former owner, operator or manufacturer thereof, whether or not of, associated
with, or arising from, any of the Acquired Assets, and whether fixed, contingent
or otherwise, known or unknown (collectively, the "Retained Liabilities"),
including, without limitation, the following:
(a) Pre-Closing. All liabilities and obligations relating to,
based in whole or in part on, events or conditions occurring or existing
in connection with, or arising out of, the Business operated by Seller
or AccuMed UK, prior to the Closing Date, or Seller's or AccuMed UK's
ownership, possession, use, operation or sale or other disposition prior
to the Closing Date of any Products or any of the Acquired Assets (or
any other assets, properties, rights or interests associated, at any
time prior to the Closing Date, with the Business operated by Seller or
AccuMed UK);
(b) Liabilities Relating to this Agreement. All liabilities and
obligations of Seller arising out of, or relating to, this Agreement or
the transactions contemplated hereby, whether incurred prior to, at, or
subsequent to the Closing Date, including, without limitation, all
finder's or broker's fees and expenses, and any and all fees and
expenses of any attorneys, accountants or other professionals retained
by or on behalf of Seller or any of its Affiliates;
(c) Employee-Related Liabilities. Except to the extent reflected
as an accrual on the books and records of Seller as of the Closing Date,
all liabilities and obligations to any persons at any time employed by
Seller, AccuMed UK, their respective Affiliates or their respective
predecessors-in-interest in the Business or otherwise, at any time, or
to any such person's spouse, children, other dependents or
beneficiaries, with respect to incidents, events, exposures or
circumstances occurring at any time during the period or periods of any
such persons' employment by Seller, AccuMed UK, their respective
Affiliates or their respective predecessors-in-interest, whenever such
claims mature or are asserted, including, without limitation, all
liabilities and obligations arising (i) under any Employee Plans (as
defined in Section 5.1(s)), (ii) under any employment, wage and hour
restriction, equal opportunity, discrimination, plant closing or
immigration and naturalization statutes, laws, rules, regulations,
orders, ordinances, codes, judgments and decrees of Governmental
Authorities (collectively, "Laws"), (iii) under any collective
bargaining Laws, agreements or arrangements, or (iv) in connection with
any workers' compensation or any other employee health, accident,
disability or safety claims;
(d) Litigation. All liabilities and obligations relating to any
litigation, action, suit, claim, investigation or proceeding pending or
threatened on the date of this Agreement, or constituted hereafter,
based in whole or in part on events or conditions occurring or existing
in connection with, or arising out of, or otherwise relating to, the
Business as operated by Seller or any of its Affiliates (including,
without limitation, AccuMed UK) (or any of their respective
predecessors-in-interest), or Seller's or any of its Affiliate's
(including, without limitation, AccuMed UK) ownership, possession, use,
operation, sale
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or other disposition prior to the Closing Date of any Products
(including Product recalls) or any of the Acquired Assets (or any other
assets, properties, rights or interests of Seller or its Affiliates
(including, without limitation, AccuMed UK) associated, at any time
prior to the Closing Date, with the Business, the Products or the
Acquired Assets);
(e) Product and Safety Liability. All liabilities and obligations
relating to the Business operated by Seller or AccuMed UK, any Products
or the Acquired Assets (or any other assets, properties, rights or
interests of Seller or its Affiliates (including, without limitation,
AccuMed UK) associated, at any time prior to the Closing Date, with the
Business, Products or the Acquired Assets), based in whole or in part on
events or conditions occurring or existing prior to the Closing Date and
connected with, arising out of or relating to (i) any dispute for
services rendered or goods manufactured, including, without limitation,
Product warranty claims, Product liability claims and Product recalls,
and claims for refunds, returns, personal injury and property damage,
(ii) claims relating to employee health and safety, including claims for
injury, sickness, disease or death of any Person, or (iii) compliance
with any Laws relating to any of the foregoing;
(f) Taxes. All liabilities and obligations of Seller or AccuMed
UK or any of their respective Affiliates (or any of their respective
predecessors-in-interest) for any Taxes (as defined in Section 5.1(v))
for any taxable period or portion thereof, ending on or before the
Closing Date due or becoming due by reason of (i) the conduct of the
Business, or (ii) the ownership, possession, use, operation, purchase,
acquisition, sale or disposition, of any Products or any of the Acquired
Assets, including, without limitation, (A) Taxes attributable to the
sale of inventory and employee withholding tax obligations; (B) Taxes
imposed on, or accruing as a result of the purchase and sale of the
Acquired Assets; and (C) Taxes attributable to, or resulting from,
recapture of depreciation, other tax benefit items, or otherwise arising
from the transactions contemplated by this Agreement;
(g) Breach of Agreement. All liabilities and obligations, known
or unknown, fixed, contingent or otherwise, the existence of which is a
breach of, or inconsistent with, any representation, warranty, covenant,
obligation or agreement of Seller set forth in this Agreement or in any
of the other documents or agreements contemplated hereby;
(h) Liabilities Relating to Retained Assets. All liabilities and
obligations relating to, based in whole or in part on events or
conditions occurring or existing in connection with, or arising out of,
any and all assets, properties, rights and interests that are not being
acquired by Buyer hereunder, including, without limitation, the Retained
Assets;
(i) Post-Closing Liabilities. All liabilities and obligations
incurred by Seller or its Affiliates or their respective directors,
officers, shareholders, agents or employees after the Closing;
(j) Shutdown Costs. Any liabilities or obligations relating to,
based in whole or in part on events or conditions occurring or existing
in connection with, or arising out of, the shutdown of any of the
operations and facilities utilized by Seller or AccuMed UK in connection
with the Business, including, without limitation, any action that could
be
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construed as a "plant closing" or "mass layoff," as those terms are
defined in the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Sections 2101-2109 ("WARN"), or any "employment loss," as
defined in WARN, that any employee of Seller or any of its Affiliates
(including, without limitation, AccuMed UK) may suffer or may be deemed
to suffer;
(k) Indebtedness. Any liabilities and obligations of Seller or
AccuMed UK on account of any indebtedness or accrued interest thereon
(i) in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments, (ii) representing the balance
deferred and unpaid of the purchase price of any property, including
capital leases (other than those capital leases listed on Schedule
2.2(k)), (iii) obligations under interest rate and foreign exchange
swaps, futures or similar agreements, or (iv) guarantees, direct or
indirect, in any manner (including, without limitation, reimbursement
agreements in respect to letters of credit), of all or any part of the
indebtedness of any third party (collectively, "Indebtedness"), of
Seller or AccuMed UK, whether or not relating to the Business;
(l) Liabilities Relating to the G&G Collaboration Agreement. All
of the liabilities, debts and obligations of Seller in, under or
pursuant to, the G&G Collaboration Agreement;
(m) Liabilities Relating to the BioKit License Agreement. All of
the liabilities, debts and obligations of Seller in, under or pursuant
to, the BioKit License;
(n) MDRs. Any and all liabilities and obligations associated with
all Medical Device Reports ("MDRs") received by Seller from the FDA
following the Closing for any Products manufactured or sold by Seller or
AccuMed UK prior to the Closing; and
(o) Miscellaneous. The liabilities set forth on Schedule 2.2(o).
ARTICLE 3. PURCHASE PRICE
3.1 Payment.
(a) Closing Payment. In addition to assuming the Assumed
Liabilities, and in full consideration for the transfer of the Acquired
Assets by Seller free and clear of all Liens, but subject to (i) the
escrow described in Section 3.1(b) and (ii) the adjustment, if any,
required by Section 3.2, at the Closing, Buyer shall deliver and pay to
Seller a total purchase price of Fifteen Million Seven Hundred Fifty
Thousand Dollars ($15,750,000) (the "Purchase Price"), comprised as set
forth in this Section 3.1(a) and in Section 3.1(b). At the Closing,
Buyer shall pay to Seller Fifteen Million One Hundred Fifty Thousand
Dollars ($15,150,000) (the "Closing Payment") in immediately available
funds by bank wire transfer to an account designated in writing for this
purpose by Seller to Buyer at least two business days prior to the
Closing. At the Closing, Seller shall deliver evidence of the then
existing intercompany account balance (net to reflect the payables and
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receivables due thereunder) between AccuMed UK and Seller. If such
evidence indicates that there is a payable due Seller from AccuMed UK,
then the Purchase Price shall be reduced by the amount of such payable,
and Buyer will cause such payable to be paid as of the Closing. If such
evidence indicates that there is a payable due AccuMed UK from Seller,
then the Purchase Price shall be increased by the amount of such
payable, and Seller will cause such payable to be paid at the Closing.
(b) Escrow Funds. At the Closing, Buyer shall deliver to National
City Bank, Cleveland, Ohio (the "Escrow Agent"), into escrow, $600,000
(the "Escrow Funds") to secure the Minimum Net Working Capital
obligation described in Section 3.2. The Escrow Funds shall be held by
the Escrow Agent pursuant to the terms of an Escrow Agreement in
substantially the form of Exhibit A (it being understood that the
parties intend that the Escrow Funds will be released within 90 days
after the Closing Date absent a dispute (the "Escrow Period")). The
Escrow Funds will be disbursed to the parties after the adjustment
described in, and in accordance with the procedures set forth in,
Section 3.2.
3.2 Adjustment of Purchase Price.
(a) Closing Statement. At the Closing, Seller shall submit to
Buyer an estimated statement of the Current Assets (as defined below)
and the Current Liabilities of the Business as of the Closing Date (the
"Closing Statement"). The Closing Statement shall be prepared (i) from
the books and records maintained by Seller in connection with the
Business, (ii) in accordance with generally accepted accounting
principles consistently applied ("GAAP"), (iii) on a basis consistent
with the audited consolidated balance sheet of Seller dated as of
December 31, 1997 (the "Audited Balance Sheet"), and (iv) in accordance
with the matters reflected on Schedule 3.2(a), and shall fairly present
the Current Assets and the Current Liabilities of the Business as of the
Closing Date. For purposes of this Section 3.2, "Current Assets" means
current assets of the Business determined in accordance with GAAP,
except that such current assets shall exclude (i) any intercompany
accounts receivable and (ii) any value for used ESP instrumentation and
inventory with less than four months expiration dating.
(b) Closing Net Working Capital. On the basis of the Closing
Statement, and within 60 days of the Closing Date, Ernst & Young, LLP
(the "Buyer's Auditor") shall (i) confirm the inventory of the Business
by means of a physical inventory as of the Closing Date and (ii) prepare
a statement (the "Auditor Statement") containing a computation of the
Closing Net Working Capital as of the Closing Date (as defined below)
determined in accordance with, and to reflect such adjustments (if any)
as may be required by, GAAP, and in accordance with the matters
reflected on Schedule 3.2(a). The Closing Net Working Capital shall
reflect terms consistent with the ordinary course of business of the
Business and the Business's historical experience with respect to
collection of accounts receivable, and payment of amounts due to
employees, consultants, vendors, licensors and others. Other current
accounts, as well the value of the inventory, shall be consistent with
the Business's prior operations. Liabilities shall be adequately
accrued, and deferred revenues from the normal course of business shall
be recorded. The fees and expenses of
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Buyer's Auditors will be borne solely by Buyer. For purposes of this
Section 3.2, "Closing Net Working Capital" shall equal the excess of the
Current Assets of the Business over Current Liabilities of the Business,
each as determined in accordance with GAAP, as of the Closing Date. For
purposes of this calculation, any change in the Balance Sheet
Liabilities since December 31, 1997 due to changes in reserves
established as a result of purchase accounting will be excluded.
(c) Cooperation. Seller shall cooperate fully and completely in
responding to questions and requests for information submitted by Buyer
or its representatives in connection with the preparation of the Auditor
Statement, and shall, with reasonable prior notice, provide them with
full access to the facilities and inventory of the Business and to all
books and records of Seller and its Affiliates to the extent related to
the Business or the calculation of the Closing Net Working Capital, as
well as to the personnel and work papers of Seller's accountants, in any
way relating to the preparation, review and audit of the Closing
Statement.
(d) Review of Auditor Statement. Seller shall have 15 days from
the date of the submission of the Auditor Statement in which to review
the Auditor Statement, and if, in Seller's reasonable judgment, the
Auditor Statement does not fairly present the items set forth in Section
3.2(b), Seller shall have the right to propose any adjustment thereto
within such 15-day period. Any such proposed adjustment shall be in
writing (the "Adjustment Request"), shall be submitted to Buyer within
the 15-day period referred to in the first sentence of this Section
3.2(d), and shall specify (i) the amount of the proposed adjustment,
(ii) the item to which such proposed adjustment relates, and (iii) the
facts and circumstances supporting the reasonableness and propriety of
such adjustment under the standards set forth in this Section 3.2.
Unless Seller notifies Buyer within such 15-day period that it objects
to the findings contained in the Auditor Statement, the Auditor
Statement shall be binding upon Seller and Buyer. Buyer and Seller shall
use their reasonable efforts for 15 days after the submission of any
Adjustment Request to agree upon any proposed adjustments to the Auditor
Statement. Any dispute as to the content or preparation of the Auditor
Statement which is not resolved by Buyer and Seller during such 15-day
period shall be submitted for resolution to a mutually acceptable
independent "Big Five" public accounting firm (except the Auditor and
KPMG Peat Marwick LLP). One-half of the fees, costs and expenses of such
firm shall be paid by Buyer, and one-half of such fees, costs and
expenses shall be paid by Seller. The decision of such firm shall be
final and binding on Buyer and Seller.
(e) Adjustment and Payment Procedures. (i) If the amount of the
Closing Net Working Capital is greater than $4,500,000 (the "Minimum Net
Working Capital"), the Purchase Price shall be adjusted, dollar for
dollar, upward by the amount of such surplus, and the Escrow Agent
shall, on the expiration date of the Escrow Period, disburse to Seller
the full amount of the Escrow Funds.
(ii) If the amount of the Closing Net Working Capital is less
than the Minimum Net Working Capital, the Purchase Price shall be
adjusted, dollar for dollar, downward by such difference, and the Escrow
Agent shall, on the expiration of the Escrow Period, (A)
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disburse to Buyer out of the Escrow Funds the amount of such difference
and (B) disburse to Seller the remaining Escrow Funds, if any. If the
Minimum Net Working Capital exceeds the Closing Net Working Capital by
more than $600,000, Seller shall remit to Buyer the excess amount in
immediately available funds by bank wire transfer on the expiration date
of the Escrow Period.
(iii) Interest earned on the Escrow Funds during the Escrow
Period shall be paid to Buyer and Seller in proportion to the respective
disbursements made to the parties pursuant to Sections 3.2(e)(i) and
3.2(e)(ii).
3.3 Purchase Price Allocation. The Purchase Price, as adjusted
pursuant to Section 3.2, represents the amount agreed upon by the parties to be
the aggregate value of the Acquired Assets, and shall be allocated among the
Acquired Assets in accordance with the fair market values of the Acquired
Assets, which the parties have agreed are or shall be as set forth on Schedule
3.3, which shall be prepared by Buyer, submitted to Seller for Seller's approval
(which shall not be unreasonably withheld) and attached to this Agreement as a
Schedule on or prior to the Closing Date. Any excess of the Purchase Price, as
so adjusted, over the fair market value of such assets shall be allocated to
goodwill. Each of the parties shall report the purchase and sale of the Acquired
Assets, including, without limitation, in all Federal, foreign, state, local and
other Tax returns and reports prepared and filed by or for either of Seller and
Buyer, in accordance with the basis of allocation described in this Section 3.3.
ARTICLE 4. CLOSING
4.1 General. As used in this Agreement, the "Closing" shall mean
the time at which Seller consummates the sale, assignment, transfer and delivery
of the Acquired Assets to Buyer as provided herein by the execution and delivery
by Seller of the documents and instruments referred to in Section 4.2 against
delivery by Buyer of the payments and documents provided in Sections 3.1 and
4.3. In the absence of a prior termination of this Agreement by one of the
parties in accordance with Article 10, the Closing shall take place at the
offices of Jones, Day, Reavis & Pogue, North Point, 901 Lakeside Avenue,
Cleveland, Ohio 44114 at 10:00 A.M. not later than the third business day after
all the conditions to the Closing set forth in Article 6 are satisfied or waived
or at such other time and place and on such other day as shall be mutually
agreed upon in writing by the parties hereto (the "Closing Date"). Legal title,
equitable title and risk of loss with respect to the Acquired Assets shall not
pass to Buyer until the Acquired Assets are transferred at the Closing, which
transfer, once it has occurred, shall be deemed effective for tax, accounting
and other computational purposes as of 11:59 P.M. (Eastern Time) on the Closing
Date.
4.2 Documents to be Delivered by Seller. At the Closing, Seller
shall deliver to Buyer:
(a) A bill of sale, in the form of Exhibit B, transferring the
personal property included in the Acquired Assets and deeds for the
transfer of the Seller Real Property to Buyer, free and clear of any and
all liens, equities, claims (including any "adverse claim" as
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such term is defined in the Uniform Commercial Code), prior assignments,
mortgages, charges, options, calls, security interests, pledges, trusts,
conditional sales contracts, collateral security arrangements and other
title retention arrangements, restrictions or encumbrances and any other
commitments, agreements or arrangements whatsoever (collectively,
"Liens"), other than Permitted Liens;
(b) Copies of all Consents to the transfer, assignment or
sublease to Buyer of each Acquired Asset, including Contracts and
Permits, as contemplated by Sections 1.3(a) and 5.1(x);
(c) Instruments of assignment, in the forms of Exhibits C and D,
to Buyer of all Intellectual Property, including all trademarks, trade
names, service marks, patents, licenses and copyrights (and all
applications for, and extensions and reissuances of, any of the
foregoing and rights therein) identified on Schedule 5.1(p);
(d) Duly executed transfer of the Shares in favor of Buyer,
together with all share certificates and any waivers and consents as are
required to enable Buyer to be registered as the holder of the Shares;
(e) Releases, including, without limitation, termination
statements under the Uniform Commercial Code of any financing statements
filed against any Acquired Assets, evidencing discharge, removal and
termination of all Liens, other than Permitted Liens;
(f) Such other deeds, bills of sale, endorsements, assignments,
affidavits, and other good and sufficient instruments of sale,
assignment, conveyance and transfer in form and substance satisfactory
to Buyer and its counsel, as are required to effectively vest in Buyer
good and marketable title in and to all of the Acquired Assets, free and
clear of any and all Liens;
(g) The certificates and documents to be delivered pursuant to
Section 6.2 and such other documents, certificates or instruments
reasonably requested to be furnished to Buyer pursuant to the terms of
this Agreement;
(h) Written resignations of all the directors and secretary of
AccuMed UK, together with an acknowledgment under seal from each of them
that he or she has no claim against AccuMed UK in respect of
compensation for loss of office, breach of contract, redundancy, unfair
dismissal or otherwise;
(i) Written resignation without compensation (except for fees for
services performed prior to the Closing Date to the extent accrued on
the Auditor Statement) of KPMG Peat Marwick LLP, as statutory auditors
to AccuMed UK;
(j) The Certificate of Incorporation, the certificates of
incorporation on change of name, the common seal and the statutory books
and registers (all entered up to date) of AccuMed UK; and
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(k) All deeds and documents relating to the title of AccuMed UK
to any real property, and all cheque books, papers, books, records,
keys, credit cards and other property of AccuMed UK which are in the
possession of or under the control of the Seller or any person who
resigns as an officer of AccuMed UK in accordance with this Section
4.2(k).
4.3 Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to Seller:
(a) An Instrument of Assumption of the Assumed Liabilities, in
the form of Exhibit E; and
(b) The certificates and documents to be delivered pursuant to
Section 6.3, and such other documents, certificates or instruments
reasonably requested to be furnished to Seller pursuant to the terms of
this Agreement.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller. Subject only to
those exceptions and qualifications listed and described (including an
identification by section reference to the representations and warranties to
which such exceptions and qualifications relate) on the Schedules, Seller hereby
represents and warrants on behalf of itself and, as applicable, AccuMed UK, to
Buyer that:
(a) Organization; Standing and Authorization. Seller is a
corporation, and AccuMed UK is a limited liability company, in each case
duly organized, validly existing and, to the extent that the concept of
good standing exists in the relevant jurisdiction, in good standing,
under the laws of the jurisdiction of its organization, having full
corporate power and authority to operate the Business, to own or lease
the Acquired Assets, to carry on the Business as now being conducted,
and, subject, with respect to the sale of the Acquired Assets, to
approval of this Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of the common stock, par value $0.01,
of Seller entitled to vote thereon (such approval, the "Seller
Stockholder Vote"), to enter into and perform this Agreement and the
transactions and other agreements and instruments contemplated by this
Agreement. Except for the Seller Stockholder Vote, the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporation action. Except as disclosed on Schedule 5.1(a),
Seller and AccuMed UK are the only business enterprises, firms or
corporations through which the Business is conducted, or that owns,
leases, holds or uses assets related to the Business. Seller and AccuMed
UK are duly qualified or licensed to do business as foreign corporations
and are, to the extent that the concept of good standing exists in the
relevant jurisdiction, in good standing, in each jurisdiction in which
the ownership or lease of the Acquired Assets or the operation of the
Business requires such qualification.
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(b) Effect of Agreement. This Agreement and all other agreements
and instruments executed and delivered or to be executed and delivered
by Seller in connection herewith (collectively, the "Transaction
Documents") have been, or upon execution thereof will be, duly executed
and delivered by Seller. This Agreement and the transactions and other
agreements and instruments contemplated hereby have been duly approved
by the Board of Directors of Seller, and, subject to the Seller
Stockholder Vote, constitute the valid and binding obligations of
Seller, enforceable in accordance with their respective terms.
(c) Articles and By-Laws. The Certificate of Incorporation of
Seller, certified by the Secretary of State of Delaware, and the By-Laws
of Seller (together, the "Seller Charter"), copies of which have
previously been provided to Buyer, are true, correct and complete. The
Certificate of Incorporation, all certificates of incorporation on
change of name and the Memorandum and Articles of Association of AccuMed
UK (the "AccuMed UK Charter"), copies of which have previously been
provided to Buyer, are true, correct and complete.
(d) Capitalization of AccuMed UK. Schedule 5.1(d) sets forth the
authorized equity interests of AccuMed UK, the equity interests
outstanding and the owners thereof. The Shares are in issue fully paid
and are beneficially owned and, except as set forth on Schedule 5.1(d),
registered in the name of Seller free and clear of all Liens. There are
no outstanding options, warrants or other rights of any kind relating to
the sale, issuance or voting of any equity interests or partnership
interests of AccuMed UK that have been issued, granted or entered into
by Seller or AccuMed UK, or any securities convertible into or
evidencing the right to purchase any such equity interests or
partnership interests. AccuMed UK does not have any ownership or other
equity or partnership interest in any Person.
(e) Conflicts; Defaults. Except as set forth on Schedule 5.1(x),
neither the execution and delivery of this Agreement or the Transaction
Documents executed or to be executed in connection herewith by Seller or
AccuMed UK, nor the performance by Seller or AccuMed UK of the
transactions contemplated hereby or thereby, will (i) violate, conflict
with, or constitute a default under, any of the terms of the Seller
Charter or the AccuMed UK Charter or any provisions of, or result in the
acceleration of any obligation under, any contract, sales commitment,
license, purchase order, security agreement, mortgage, note, deed, lien,
lease, agreement or instrument, including, without limitation, the
Contracts, or any order, judgment or decree, relating to the Business or
the Acquired Assets, or by which any of Seller, AccuMed UK or the
Acquired Assets are bound, (ii) result in the creation or imposition of
any Liens in favor of any third Person upon any of the Acquired Assets,
(iii) violate any Law, (iv) constitute an event that, after notice or
lapse of time or both, would result in such violation, conflict,
default, acceleration, or creation or imposition of Liens, (v)
constitute an event that, after notice or lapse of time or otherwise
would create, or cause to be exercisable or enforceable, any option,
agreement or right of any kind to purchase any of the Acquired Assets.
No consent, novation, approval, filing or authorization will be required
to be obtained or satisfied for the continued performance by Buyer
following the Closing of any contract, agreement,
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commitment or undertaking included in the Acquired Assets. Seller and
AccuMed UK are not in violation of or in default under the Seller
Charter or the AccuMed UK Charter, respectively, or any material
provision (including, without limitation, any provision imposing a
financial obligation on Seller or AccuMed UK) of any Contract relating
to the Business, including, without limitation, (i) the U.S. Contracts
and (ii) the Contracts to which AccuMed UK is a party ("AccuMed U.K.
Contracts," (a true and correct copy of each having been previously made
available to Buyer) and together with the U.S. Contracts, the "Business
Contracts"), or any order, judgment or decree, relating to the Business
or the Acquired Assets, or by which any of Seller, AccuMed UK, or the
Acquired Assets is bound, or in the payment of any of Seller's or
AccuMed UK's monetary obligations or debts relating to the Business, and
there exists no condition or event that, after notice or lapse of time
or both, would result in any such violation or default.
(f) Acquired Assets; Title to the Acquired Assets. The Acquired
Assets are the only assets, properties, rights or interests owned or
used by Seller in connection with the Business. The Acquired Assets to
be conveyed to Buyer under this Agreement constitute all of the assets,
properties, rights and interests necessary to conduct the Business in
substantially the same manner as conducted by Seller and AccuMed UK
prior to the date of this Agreement. All of the Acquired Assets used in
connection with the operation of the Business (including, without
limitation, the assets reflected on the Unaudited Balance Sheet) are in
good operating condition and repair and are adequate and sufficient for
the uses to which they are put in the Business. None of the Acquired
Assets have any material defects or are in need of maintenance or
repair, except for ordinary, routine maintenance and repairs that are
not material in nature or cost. Seller or AccuMed UK have good,
marketable and exclusive title to, and the valid and enforceable power
and unqualified right to use and transfer to Buyer, each of the Acquired
Assets used in the Business, whether located at Seller's facilities,
AccuMed UK's facilities, or at the facilities of their respective
customers or suppliers, and, except as set forth on Schedule 5.1(f)(i),
the Acquired Assets are free and clear of all Liens of any kind or
nature whatsoever, except for Permitted Liens. The consummation of the
transactions contemplated by this Agreement (including, without
limitation, the transfer or assignment of the Acquired Assets, and all
rights and interests therein, to Buyer as contemplated herein) will not
adversely affect such title or rights, or any terms of the applicable
agreements (whether written or oral) evidencing, creating or granting
such title or rights. None of the Acquired Assets are subject to, or
held under, any lease, mortgage, security agreement, conditional sales
contract or other title retention agreement, or are other than in the
sole possession and under the sole control of (i) Seller or AccuMed UK
or (ii) a vendor under the direction of Seller or AccuMed UK. Seller or
AccuMed UK have the right under valid and existing leases to occupy, use
or control all properties and assets leased by it and included in the
Acquired Assets. The delivery to Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good, marketable and
exclusive title to (as to all Acquired Assets owned by Seller or AccuMed
UK) or full right to possess and use (as to all Acquired Assets not
owned by Seller or AccuMed UK) the Acquired Assets in Buyer, free and
clear of all Liens of any kind or nature whatsoever, except for (i)
current real estate Taxes or governmental charges or levies that are a
Lien but not yet due and payable, and (ii) Liens disclosed on Schedule
5.1(f)(i)(ii) (the Liens described in
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clauses (i) and (ii), collectively, "Permitted Liens"). Schedule
5.1(f)(iii) contains true, correct and complete lists of all Fixed
Assets relating to the Business as of the dates specified therein.
(g) Real Property. (i) The real property listed under the heading
"Seller Real Property" on Schedule 5.1(g)(i) constitutes all of the Real
Property used by Seller in the Business, including all buildings,
improvements and fixtures thereon and other appurtenances thereto.
Seller has title to the Seller Real Property indicated on Schedule
5.1(g)(i) as owned by Seller and a binding leasehold interest in the
Seller Real Property indicated on Schedule 5.1(g)(i) as leased by Seller
(subject to the terms of the applicable instruments governing Seller's
interests therein, as listed on Schedule 5.1(g)(i)), free and clear of
all Liens, other than Permitted Liens.
(ii) (A) The real property listed under the heading "AccuMed UK
Real Property" on Schedule 5.1(g)(ii) constitutes all of the Real
Property owned, used or held for use by AccuMed UK, including all
buildings, improvements and fixtures thereon and other
appurtenances thereto (collectively, the "AccuMed UK Real
Property"; and together with the Seller Real Property, the
"Business Real Property"). AccuMed UK has title to the AccuMed UK
Real Property indicated on Schedule 5.1(g)(ii) as owned by
AccuMed UK and a binding leasehold interest in the AccuMed UK
Real Property indicated on Schedule 5.1(g)(ii) as leased by
AccuMed UK (subject to the terms of the applicable instruments
governing AccuMed UK's interests therein, as listed on Schedule
5.1(g)(ii)), free and clear of all Liens other than Permitted
Liens and there are appurtenant to all AccuMed UK Real Property
all rights and easements necessary for its use and enjoyment.
(B) No Person is in adverse possession of the AccuMed UK
Real Property. All payments of rent and other payments due in
respect of all AccuMed UK Real Property are paid up to date and
there are no notices, negotiations or proceedings pending in
relation to rent reviews. All licenses, consents and approvals
required from any lessor have been obtained and the lessor has
performed its covenants and obligations under any relevant lease
by which such AccuMed UK Real Property is held. No notice to
terminate the term of the lease by which the AccuMed UK Real
Property is held has been served or received by AccuMed UK.
(C) AccuMed UK does not have any actual or potential
continuing liability in respect of any other property formerly
owned, leased or occupied by AccuMed UK either as original
contracting party or by virtue of any direct covenant having been
given on a sale or assignment to AccuMed UK or under an
authorized guarantee agreement or as surety for the obligations
of any other person in relation to any property.
(iii) No condemnation proceedings are pending, or to the
Knowledge of Seller, threatened, with respect to any of the Business
Real Property, nor has any such property been condemned.
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(h) Contracts. The Business Contracts, together with the
Non-Assigned Contracts, are all of the Contracts of Seller and AccuMed
UK related to the Business. Except as disclosed on Schedule 5.1(h),
Seller or AccuMed UK have performed (i) all financial obligations and
(ii) all other material obligations, required to be performed by them to
date under the Business Contracts, and none of Seller, AccuMed UK, nor
any other party to any Business Contract has breached or improperly
terminated any Business Contract or is in default under any Business
Contract by which it is bound, and there exists no condition or event
that after notice or lapse of time or both, would constitute any such
breach, termination or default. Each of the Business Contracts is in
full force and effect, and is a legal, binding and enforceable
obligation of or against the parties thereto. At the Closing, each
Business Contract of AccuMed UK will be legal, binding and enforceable
by Buyer in accordance with its terms. Upon Buyer's assumption of
Seller's liability thereunder, each Business Contract of Seller as is
assigned at the Closing will be legal, binding and enforceable by Buyer
in accordance with its terms.
(i) Financial Statements; SEC Filings. (i) Seller has heretofore
delivered to Buyer the following financial statements (collectively,
together with the notes thereto and the financial statements to be
delivered pursuant to Section 7.2(b), the "Financial Statements"):
(A) the unaudited Balance Sheet of the Business (the
"Unaudited Balance Sheet") as of September 30, 1998 (the
"Balance Sheet Date"), and the unaudited Statement of
Income and Statement of Cash Flows of the Business for the
nine-month period ended September 30, 1998 (collectively,
the "Unaudited Business Financial Statements");
(B) the consolidated unaudited balance sheets of Seller as of
September 30, 1998 and the consolidated unaudited
Statements of Income and Statements of Cash Flows for the
nine-month period ended September 30, 1998 (collectively,
the "Unaudited Consolidated Financial Statements");
(C) the consolidated audited balance sheets of Seller as of
December 31, 1997, 1996 and 1995 and the audited
Statements of Income and Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995, together
with the footnotes thereto and the report thereon by KPMG
Peat Marwick LLP, certified public accountants.
To be best of Seller's knowledge, each of the Financial Statements is
true, complete and correct in all material respects. Each of the
Financial Statements was prepared from the books and records maintained
by Seller, and fairly presents, as applicable, the (i) consolidated
financial position of Seller as of such dates, and the results of
Seller's operations and Seller's cash flows for the periods then ended
in accordance with GAAP, and (ii) financial position of the Business as
of such dates, and the results of the Business' operations and the
Business' cash flows for the periods then ended, in accordance with
GAAP. Since December 31, 1997, there has been no material adverse change
in the condition (financial or otherwise), results of operations,
properties, assets, liabilities,
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business or prospects of the Business, nor has there been any event or
condition of any character that has materially and adversely affected,
or that is likely to materially and adversely affect, the condition
(financial or otherwise), results of operations, properties, assets,
liabilities, business or prospects of the Business. The Unaudited
Balance Sheet reflects all properties and assets, real, personal or
mixed, that are currently used in connection with the Business, except
for (x) inventory purchased or sold consistent with past practice and in
the ordinary and normal course of business since the Balance Sheet Date,
(y) other properties and assets (other than capital assets) not in
excess of $10,000 (in the aggregate) purchased or sold since the Balance
Sheet Date consistent with past practice and in the ordinary and normal
course of business, and (z) capital assets purchased since the Balance
Sheet Date in an amount not in excess of $10,000 (in the aggregate).
(j) SEC Filings. Seller has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission (the "SEC") since January 1, 1995 (collectively, the
"Seller SEC Documents"). As of their respective dates, or if amended, as
of the date of the last such amendment, the Seller SEC Documents
complied, and all documents required to be filed by Seller with the SEC
after the date hereof and prior to the Closing (the "Subsequent Seller
SEC Documents") will comply, in all material respects with the
requirements of the 1933 Act or the 1934 Act, as the case may be, and
the applicable rules and regulations promulgated thereunder, and none of
the Seller SEC Documents contained, and the Subsequent Seller SEC
Documents will not contain, any untrue statements of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
(k) Disclosure Documents. (i) Each document required to be filed
by Seller with the SEC in connection with the transactions contemplated
by this Agreement (the "Seller Disclosure Documents"), including,
without limitation, the Proxy Statement (as defined in Section 9.2), to
be filed with the SEC in connection with the adoption of this Agreement
by the Stockholder Vote, and any amendments or supplements thereto,
will, when filed, comply as to form in all material respects with the
applicable requirements of the 1934 Act.
(ii) At the time the Proxy Statements or any amendment or
supplement thereto is first mailed to stockholders of Seller, and at the
time such shareholders vote on the adoption of this Agreement, the Proxy
Statement, as supplemented or amended, if applicable, will not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
At the time of the filing of any Seller Disclosure Document other than
the Proxy Statement and at the time of any distribution thereof, such
Seller Disclosure Document will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and
warranties contained in this Section 5.1(k) will
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not apply to statements included in or omissions from the Seller
Disclosure Documents based upon information furnished to Seller in
writing by Buyer specifically for use therein.
(l) Liabilities. Except (i) as and to the extent disclosed in the
Balance Sheet, (ii) for liabilities incurred in the ordinary course of
business subsequent to the date thereof in accordance with Section 7.1
and (iii) for liabilities not assumed by Buyer under this Agreement,
none of the Business, Seller (with respect to the Business) or AccuMed
UK has any liabilities (accrued, contingent or otherwise and whether or
not reflected, accrued or provided for, or required to be reflected,
accrued or provided for on a balance sheet of the Business prepared in
accordance with GAAP) that relate to or arise out of the Business or any
of its operations as heretofore or presently conducted, or any of the
Acquired Assets or the past or present operation, condition or use of
any of the Acquired Assets.
(m) Accounts Receivable; Collection; Trade Payables. All Accounts
Receivable (i) of Seller relating to the Business and (ii) AccuMed UK,
that are outstanding as of the Closing Date will represent sales
actually made in the ordinary and normal course of business of the
Business. Except as provided for in reserves reflected on the books and
records of Seller, there are no counterclaims or setoffs against (or any
basis therefor), or any other matter or condition likely to interfere
with full and timely collection of, any of such outstanding Accounts
Receivable. Schedule 5.1(m) sets forth an aged listing by customer of
the Accounts Receivable that are outstanding as of the Balance Sheet
Date. Neither Seller nor AccuMed UK has experienced or suffered undue
delay in its payment of its liabilities and obligations to its trade
creditors (including suppliers) or trade debt.
(n) Litigation. Except as set forth on Schedule 5.1(n), neither
Seller nor AccuMed UK is subject to any order of, or written agreement
or memorandum or understanding with, any Governmental Authority relating
to the Business, and there exists no litigation, action, suit, claim or
proceeding pending, or, to the best of Seller's knowledge, any
litigation, action, suit, investigation, claim or proceeding threatened
against or affecting Seller (with respect to the Business), AccuMed UK,
the Business or the Acquired Assets, or any employee associated with the
Business or the Acquired Assets (other than relating solely to the G&G
Collaboration Agreement or the BioKit License), or that would affect the
transactions contemplated by this Agreement, at law or in equity or
before any Governmental Authority, including, without limitation, claims
for product warranty, product liability, antitrust, unfair competition,
price discrimination, Product legality, patent or trademark
infringement, environmental issues, FDA issues or other liability or
obligation relating to Products, whether manufactured or sold by Seller,
AccuMed UK, any of their respective Affiliates or any of their
respective predecessors-in-interest in respect of the Business, or that
would adversely affect the transactions contemplated by this Agreement,
and, to Seller's knowledge, no Person has grounds to assert any such
litigation, action, suit, claim or proceeding. Set forth on Schedule
5.1(n) is a description of (i) all litigation, actions, suits,
investigations, claims and proceedings asserted or brought against
Seller or its Affiliates or predecessors-in-interest in respect of the
Business since December 31, 1995, together with a description of the
outcome or
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present status thereof, and (ii) all judgments, orders, decrees, writs
or injunctions entered into by or against Seller (with respect to the
Business) or AccuMed UK.
(o) Regulatory Compliance. Except as set forth on Schedule
5.1(o), the Business has been conducted, the Acquired Assets have been
maintained and Seller (with respect to the Business) and AccuMed UK are
currently in compliance with all applicable Laws, and no material
expenditures are or will be required to comply with any Laws. Neither
Seller (with respect to the Business) nor AccuMed UK is in default
under, and no event has occurred that, with the lapse of time or action
by a third party, could result in default under, the terms of any
judgment, decree, order, writ or injunction of any Governmental
Authority, whether at law or in equity. Seller has obtained all
necessary approvals, clearances and authorizations from Governmental
Authorities required by applicable Laws to engage in its current
activities pertaining to the Products, including, without limitation,
investigation, manufacturing, marketing, exporting and importing the
Products.
(p) Intellectual Property. Schedule 5.1(p) sets forth a complete
and correct list of all patents, trademarks, trade names, service marks,
copyrights and registrations and applications therefor used in the
conduct of the Business. Except as set forth on Schedule 5.1(p), Seller
or AccuMed UK is the sole owner and has the exclusive right to use, free
and clear of any payment, restrictions or encumbrance, all Intellectual
Property. Except as set forth on Schedule 5.1(p), no Intellectual
Property that is or has been used in the conduct of, or that relates to,
the Business is owned otherwise than by Seller or AccuMed UK. Except as
set forth on Schedule 5.1(p), neither Seller nor AccuMed UK has received
any notice of any conflict with the asserted rights of others in
connection with the conduct of the Business and, to the best of Seller's
knowledge, the conduct of the Business as presently conducted does not
conflict with or infringe upon any intellectual property rights of
others. Except as set forth on Schedule 5.1(p), no Person has been
granted any rights, title or interest in or to any of the Intellectual
Property. Seller and AccuMed UK have taken reasonable actions to
preserve and maintain its Intellectual Property relating to the
Business.
(q) Permits. Schedule 5.1(q) contains a true, correct and
complete list of all Permits issued to Seller or AccuMed UK that are
currently used by Seller or AccuMed UK in connection with the Business.
Seller and AccuMed UK have, and are in full compliance with, all Permits
that are necessary or required for the operation of the Business as it
is currently being operated and its present activities on its properties
and facilities, all of which Permits are in full force and effect.
(r) Employee Relations; Collective Bargaining Agreements. There
are no material controversies, including strikes, disputes, slowdowns or
work stoppages, pending, or to the best of Seller's knowledge,
threatened that involve any employees employed in connection with the
Business. Seller and AccuMed UK have complied and are complying with all
Laws relating to the employment of labor, including, without limitation,
any provision thereof relating to wages, hours, collective bargaining,
employee health, safety and welfare, and the payment of social security
and similar taxes. Neither Seller nor AccuMed UK has experienced any
material labor difficulties, including, without limitation,
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strikes, slowdowns, or work stoppages, since December 31, 1995. Neither
Seller nor AccuMed UK is a party to any collective bargaining or union
contract, and to the best of Seller's knowledge, there exists no current
union organizational effort with respect to any of the Employees.
(s) Employees and Employee Plans. (i) For purposes of this
Agreement, (A) the term "Employee Plan" means each employee benefit plan
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and each other material plan,
program, agreement or arrangement, whether or not subject to ERISA, that
(1) provides benefits for Employees and (2) is maintained by Seller,
AccuMed UK or any of their respective Affiliates or to which Seller,
AccuMed UK or any of their respective Affiliates contributes or is
obligated to contribute, or under which Seller, AccuMed UK or any of
their respective Affiliates is liable in respect of Employees and (B)
the term "Employee" means each Person employed by Seller, AccuMed UK or
their respective Affiliates in the Business, as listed on Schedule
5.1(s)(i), and each Person employed in the Business as of or at any time
prior to the Closing, including by any predecessors-in-interest of
Seller, AccuMed UK or their respective Affiliates. (The term "Employee"
will include, where an Employee Plan provides benefits for beneficiaries
or dependents, the beneficiaries and dependents of an Employee.)
Schedule 5.1(s)(i) lists or describes all Employee Plans currently in
effect other than Employee Plans mandated or implied by Law and usual
and customary for a business such as the Business. None of the Employee
Plans is a multiemployer plan within the meaning of Section 3(37) of
ERISA or multiple employer plan within the meaning of Section 413(c) of
the Internal Revenue Code of 1986, as amended (the "Code").
(ii) With respect to each Employee Plan listed or described on
Schedule 5.1(s)(i), Seller has delivered or made available to Buyer, to
the extent applicable, a copy of (i) the plan document for each Employee
Plan as currently in effect (or a description of any Employee Plan for
which there is no written plan document), including any agreements
entered into in connection with such Employee Plan, (ii) the most recent
annual report (Form 5500 Series) filed with the Internal Revenue
Service, (iii) the most recent actuarial report, and (iv) the most
recent summary plan description, together with each summary of material
modifications that has been distributed to Employees. Except as set
forth on Schedule 5.1(s)(i), each Employee Plan that is intended to be
qualified under Section 401(a) of the Code, and the trust (if any)
forming a part thereof, has received a favorable determination from the
Internal Revenue Service as to the qualification under the Code of each
such Employee Plan. Seller has delivered to Buyer a copy of the most
recent determination letter with respect to each such Employee Plan, and
to Seller's knowledge nothing has occurred since the date of such
determination letter that would adversely affect such qualification that
cannot be corrected within the remedial amendment period provided under
Section 401(b) of the Code.
(iii) Neither Seller nor any of its Affiliates has engaged in a
transaction with respect to any Employee Plan that would reasonably be
expected to subject any Employee Plan or Buyer to a material civil
penalty under ERISA or a material tax under the Code. Each of the
Employee Plans has been operated and administered in all material
respects in
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accordance with applicable Laws, including without limitation, to the
extent applicable, ERISA. Neither Seller nor any of its Affiliates has
incurred any liability under Title IV of ERISA that would reasonably be
expected to result in material liability to Buyer. With respect to each
Employee Plan that is a group health plan benefitting any current or
former employee of Seller, any of Seller's Affiliates or any other trade
or business which, together with Seller, is treated as a single employer
under Section 414(t) of the Code, that is subject to Section 4980B of
the Code, or was subject to Section 162(k) of the Code, Seller, any of
Seller's Affiliates and each other trade or business which, together
with Seller, is treated as a single employer under Section 414(t) of the
Code, have complied with (i) the continuation coverage requirements of
Section 4980B of the Code and Section 162(k) of the Code, as applicable,
and Part 6 of Subtitle B of Title I of ERISA and (ii) the Health
Insurance Portability and Accountability Act of 1996. There is not
pending or, to Seller's knowledge, threatened, any material claim by or
on behalf of any Employee Plan, by any Employee covered under any
Employee Plan or otherwise involving any Employee Plan (other than
routine claims for benefits).
(iv) Except as set forth on Schedule 5.1(s)(iv), all contracts of
employment between AccuMed UK and its directors and Employees are
terminable by AccuMed UK without compensation (except under the
Employment Rights Act of 1996 ("ERA")) by giving the applicable minimum
period of notice specified in Section 86 ERA. No director or Employee of
AccuMed UK has given notice terminating his contract of employment or is
under notice of dismissal. There are no arrears of remuneration due to
any director or Employee of AccuMed UK. AccuMed UK has complied in all
material respects with all obligations imposed on it by all UK statutes
and regulations relating to employment. AccuMed UK has not introduced
any share incentive scheme, share option scheme or any other scheme or
arrangement relating to the acquisition of any interest in shares of
AccuMed UK or the Seller or profit related pay scheme for any of its
directors or Employees. AccuMed UK is under no obligation, nor is
AccuMed UK a party to an ex-gratia arrangement or promise, to pay, nor
is AccuMed UK accustomed to paying gratuities, superannuation allowances
or the like, or otherwise to provide "relevant benefits" within the
meaning of Section 612(l) Income and Corporate Taxes Act 1988, to or for
any of its past or present officers or Employees, or their dependents.
(v) True and accurate copies of the trust deeds, rules and
memoranda and booklet relating to the AccuMed UK retirement and death
benefit scheme ("AccuMed UK Pension Scheme") have been delivered to
Buyer. The AccuMed UK Pension Scheme is an exempt approved scheme within
the meaning of Chapter I of part XIV of the Income and Corporation Taxes
Act 1988 and there are no circumstances which will result in the
withdrawal of the scheme's exempt approved status. A current
contracting-out certificate under part III of the Pensions Act 1993 is
in force in respect of the employment of the Employees and officers of
AccuMed UK. Since the date of the last actuarial valuation of the
AccuMed UK Pension Scheme, contributions have been paid at the rate
recommended in that valuation. All contributions due to the AccuMed UK
Pension Scheme have been promptly paid and duly accounted for by AccuMed
UK. The AccuMed UK Pension Scheme has been administered and operated in
accordance with the requirements of the Pensions Act 1995.
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(t) Environmental Matters. (i) The Business Real Property and all
activities thereon comply in all material respects with all applicable
statutes, ordinances, regulations, rules, orders and requirements of
common law concerning the protection of human health, safety or the
environment (collectively, "Environmental Laws").
(ii) No Contamination is present in, on or under any of the
Business Real Property. "Contamination" shall mean the presence of
Hazardous Substances that may require remediation under any
Environmental Law. "Hazardous Substances" shall mean materials that are
or contain substances regulated pursuant to any Environmental Law.
(iii) None of the following is present at any of the Business
Real Property: polychlorinated biphenyls ("PCBs") or substances
containing PCBs; asbestos or materials containing asbestos; radon
exceeding the action level established by the U.S. Environmental
Protection Agency ("EPA"); urea formaldehyde foam insulation; or
Hazardous Substances storage tanks.
(iv) Neither Seller nor AccuMed UK has been notified by any
Governmental Authority or third party of, or has knowledge of, any
violation by Seller or AccuMed UK of, or any liability of or any
condition that could give rise to any liability of Seller or AccuMed UK
under any Environmental Law. No civil, criminal or administrative
action, claim, or other legal proceeding pursuant to any Environmental
Law has been filed against Seller or AccuMed UK, or is anticipated or
threatened. Neither Seller nor AccuMed UK has entered into any consent
order, consent decree, administrative order, judicial order or
settlement pursuant to any Environmental Law.
(v) Schedule 5.1(t) includes a correct and complete list of all
of Consents and Permits relating to the Business pursuant to
Environmental Law (collectively, "Approvals"), copies of which have been
delivered to Buyer. The Approvals listed on Schedule 5.1(t) are all
Approvals that are necessary to conduct the Business in compliance with
Environmental Law, are in full force and effect, and all fees payable in
connection therewith have been paid. Neither the execution and delivery
of this Agreement nor any of the transactions contemplated herein will
cause any of the Approvals to be invalidated, violated or otherwise
adversely affected.
(vi) Seller has delivered to Buyer copies of all applications,
reports, records, manifests, records of analyses or tests, notices of
violation, summonses, orders, complaints, and any other documents
relating to compliance with or liability under Environmental Law, or the
environmental condition of the Business Real Property of which Seller or
AccuMed UK has knowledge or possession.
(vii) Schedule 5.1(t) discloses a correct and complete listing of
all facilities at which (i) Seller (with respect to the Business) or
AccuMed UK has generated, treated, stored or disposed of Hazardous
Substances; or (ii) any third party under contract with Seller (with
respect to the Business) or AccuMed UK has generated, treated, stored or
disposed of Hazardous Substances received from Seller (with respect to
the Business) or AccuMed UK.
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(viii) The generation, treatment, storage, transportation or
disposal by or on behalf of Seller or AccuMed UK of any Hazardous
Substance was and is in compliance with Environmental Law. Neither any
facility at which such Hazardous Substances were or are generated,
treated, stored or disposed of nor any of the Business Real Property,
has been or is the subject of any listing by any governmental body or
agency as a targeted hazardous site under any Environmental Law. No
legal action under any Environmental Law has been brought against Seller
or AccuMed UK by any governmental body, agency or third party.
(ix) Nothing has occurred prior to the date of this Agreement,
and nothing will occur prior to the Closing Date, that could give rise
to expenditures by, and/or the filing of any lien by any governmental
authority against Seller or AccuMed UK or any of the Business Real
Property pursuant to any Environmental Law.
(x) Except as set forth on Schedule 5.1(t), neither Seller nor
AccuMed UK is required to obtain any Consent or file or record any
environmental disclosure statement under any Environmental Law in
connection with the transactions contemplated by this Agreement for any
of the Business Real Property.
(u) Absence of Certain Changes. Except as disclosed in Schedule
5.1(u), since December 31, 1997, Seller and AccuMed UK (i) have
conducted the Business and operated the Acquired Assets only in the
ordinary and normal course consistent with past practice and (ii) have
not taken action that if taken after the date of this Agreement would
constitute a violation of Section 7.1.
(v) Taxes. Seller and AccuMed UK have prepared in good faith and
duly filed or caused to be duly filed all Tax returns and reports
relating to the Business and the Acquired Assets and required to be
filed by Seller or AccuMed UK with any Governmental Authority. All such
Tax returns were (or to the extent not yet filed will be) true, complete
and correct in all material respects and filed on a timely basis. All
Taxes owed to any Governmental Authority by Seller relating to the
Business or by AccuMed UK for periods covered by such returns and
reports, and all claims, demands, assessments, judgments, costs and
expenses connected therewith, have been paid in full. Neither Seller nor
AccuMed UK is a party to any action or proceeding, nor to the best of
Seller's knowledge, is any such action or proceeding contemplated or
threatened, for the assessment or collection of any Taxes relating to
the Business or the Acquired Assets, and no deficiency notices or
reports have been received by Seller or AccuMed UK in respect of any Tax
relating to the Business or the Acquired Assets. For the purposes of
this Agreement, "Tax" or "Taxes" means all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, customs duties,
value added, or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority (domestic or
foreign).
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(w) Insurance. Schedule 5.1(w) contains a list of all insurance
policies (specifying the location, insured, insurer, amount of coverage,
type of insurance and policy number) maintained by Seller or AccuMed UK
for the Business or the Acquired Assets. All such policies are in full
force and effect, all premiums with respect thereto have been paid, and
no notice of cancellation or termination has been received with respect
to any such policy.
(x) Approvals. Schedule 5.1(x) sets forth a list of all Consents
that must be obtained or satisfied by Seller or AccuMed UK for the
consummation of the transactions contemplated by this Agreement. All
Consents prescribed by any Law, or any contract, agreement, commitment
or undertaking, and that must be obtained or satisfied by Seller or
AccuMed UK for the consummation of the transactions contemplated by this
Agreement, or for the continued performance by them of their rights and
obligations thereunder, have been, or by the Closing shall have been,
made, obtained and satisfied.
(y) No Other Agreements to Sell the Acquired Assets or the
Business. Neither Seller nor AccuMed UK nor either of their respective
Affiliates has any legal obligation, absolute or contingent, to any
Person other than Buyer to sell any Acquired Assets, the Business, any
product line of the Business, or any other assets or properties of the
Business, except inventory and Products in the ordinary course of
business, consistent with past custom and practice.
(z) No Brokers. Neither Seller nor AccuMed UK has entered into
and will not enter into any agreement, arrangement or understanding with
any Person that will result in the obligation of Buyer to pay any
finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby or any other transaction.
(aa) Solvency. Immediately after the consummation of the
transactions contemplated by this Agreement, (i) Seller will be solvent
(in that both the fair value of its assets will not be less than the sum
of its debt and that the present fair saleable value of its assets will
not be less than the amount required to pay its probable liability on
its debts as they become absolute and matured), (ii) Seller will have
adequate capital with which to engage in its business, and (iii) Seller
will not have incurred and does not plan to incur debts beyond its
ability to pay as they become absolute and matured. The Purchase Price
(as adjusted pursuant to Section 3.2) is equal to or greater than the
fair value of the Acquired Assets.
(bb) Millennium Compliance. (i) Schedule 5.1(bb) contains the
material details of measures that have been implemented to determine the
extent to which the computer systems used in the Business (the "Computer
Systems") are not in Millennium Compliance, and the material details of
any program undertaken with a view toward causing the Computer Systems
to achieve Millennium Compliance.
(ii) As used herein, "Millennium Compliance" means that the
Computer Systems are capable of the following before, during and/or
after January 2000:
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(A) handling date information involving all and any dates
before, during and/or after January 1, 2000, including accepting
input, providing output and performing date calculations in whole
or in part;
(B) operating, accurately without interruption on and in
respect of any and all dates before, during and/or after January
1, 2000 and without any change in performance;
(C) responding to and processing two digit year input
without creating any ambiguity as to the century; and
(D) storing and providing date input information without
creating any ambiguity as to the century.
(cc) Confidential Information. On or prior to the date of this
Agreement, Seller delivered to all parties, other than Buyer, with whom
it discussed a potential sale of all or part of the Business, a letter
attaching a copy of the press release issued with respect to the letter
of intent by and between Seller, Key Equity Capital Corporation and
Michael D. Burke, dated June 11, 1998 (the "LOI"), and advising each
recipient that the confidentiality agreement between Seller and such
party remains in full force and effect.
5.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that:
(a) Organization and Standing; Corporate Power and Authority.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware, and has full corporate
power and authority to make and perform this Agreement, and to perform
the transactions contemplated by this Agreement. This Agreement and all
other agreements and instruments executed and delivered by Buyer in
connection herewith have been duly executed and delivered by Buyer. This
Agreement and the transactions and other agreements and instruments
contemplated by this Agreement have been duly authorized by all
necessary corporation action, including approval by the Directors of
Buyer, and constitute the valid and binding obligations of Buyer,
enforceable in accordance with their respective terms.
(b) Conflicts; Defaults. Neither the execution and delivery of
this Agreement by Buyer, nor the performance of their respective
obligations hereunder, will conflict with or constitute a default under
any of the terms of the Articles of Incorporation or By-Laws of Buyer.
(c) No Brokers. Buyer has not entered into and will not enter
into any agreement, arrangement or understanding with any Person that
will result in the obligation of Seller to pay any finder's fee,
brokerage commission or similar payment in connection with the
transactions contemplated hereby or any other transaction.
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5.3 General. The representations and warranties of the parties
hereto made in this Agreement, subject to the exceptions thereto, shall not be
affected by any information furnished to, or any investigation conducted by, any
of them or their representatives in connection with the subject matter of this
Agreement. The representations and warranties made in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing.
ARTICLE 6. CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Each Party. The respective
obligations of each party to consummate the transactions provided for by this
Agreement is subject to the satisfaction, on or before the Closing Date, of each
of the following conditions:
(a) Seller Stockholder Approval. This Agreement shall have been
approved by the Seller Stockholder Vote;
(b) No Injunction. No preliminary or permanent injunction,
temporary restraining order or other judicial or administrative order or
decree in any jurisdiction prohibiting the Closing shall have been
entered and be continuing in effect; and
(c) Governmental Consents. All Consents of Governmental
Authorities described in Section 9.5 shall have been obtained and
satisfied.
6.2 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions provided for by this Agreement is subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Buyer:
(a) Representations and Warranties. Each of the representations
and warranties of Seller made in Section 5.1 shall be true and correct
both on the date of this Agreement and as of the Closing Date as though
made at such time;
(b) Covenants. Seller shall have performed and complied with all
covenants and agreements required to be performed or complied with by it
at or prior to the Closing Date;
(c) Consents. All Consents of third parties (other than
Governmental Authorities) described in Section 5.1(x) shall have been
obtained and satisfied;
(d) Certificate of Seller. At the Closing, Seller shall have
delivered to Buyer a certificate signed by Seller's President, and
attested to by its Secretary or an Assistant Secretary, and dated the
Closing Date, to the effect that the conditions specified in Sections
6.1(a), (b) and (c) and 6.2(a), (b) and (c) have been fulfilled;
(e) Documents; Approvals. Seller shall have delivered the
documents required by Section 4.2 and evidence reasonably satisfactory
to Buyer to the satisfaction of the conditions set forth in Sections
6.1(a), (b) and (c);
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(f) Material Adverse Change. Since the date of the LOI, there
shall have been no material adverse change in the condition (financial
or otherwise), results of operations, properties, assets, liabilities,
business or prospects of the Business, nor has there been any event or
condition, whether or not discovered, of any character that has
materially and adversely affected, or that is likely to materially and
adversely affect, the condition (financial or otherwise), results of
operations, properties, assets, liabilities, business or prospects of
the Business;
(g) Agreement with Akzo Nobel. Seller and Akzo Nobel shall have
entered into a covenant not to sue, in form and substance satisfactory
to Buyer, in connection with the threatened litigation described on
Schedule 5.1(n);
(h) Sun Prairie Facility. With respect to the Sun Prairie,
Wisconsin facility (the "Sun Prairie Facility") owned by Becton
Dickinson & Company or an Affiliate thereof ("BD"), the following shall
have occurred: (i) Seller and BD shall have entered into the following
agreements, in form and substance reasonably satisfactory to Buyer, (a)
an Exchange Agreement and Amendment, (b) Manufacturing Agreement, (c)
Option to Purchase, and (d) Purchase and Sale Agreement, (ii) Buyer
shall have completed a due diligence investigation of the environmental
condition of the Sun Prairie Facility and shall be satisfied with the
results of such investigation, and (iii) BD shall not have expressed an
intention not to proceed with the consummation of the transactions
contemplated by clause (h)(i) above;
(i) Elimination of Certain Liens. At or prior to the Closing,
Seller shall take such actions as may be required to secure the release
as of the Closing of all Liens on the Acquired Assets and the assets of
AccuMed UK;
(j) Sublease. Seller and Buyer shall have executed and delivered
the Sublease (as defined in Section 7.13;
(k) UK Environmental Review. Buyer shall have completed such
environmental assessments and investigations of the AccuMed UK Real
Property and surrounding property as Buyer or its advisors and
consultants deem necessary or appropriate, including, without
limitation, sampling and analysis of environmental media to detect the
presence or confirm the absence of contamination, including any
contamination that may be present in groundwater, and the sources of any
such contamination;
(l) Solvency Letter. The Solvency Letter referred to in Section
7.16 shall have been reaffirmed in writing by the Appraiser as of the
Closing Date;
(m) Release. Seller shall have executed and delivered to Buyer a
release relating to AccuMed UK in substantially the form of Exhibit F
(the "Release");
(n) Closing Statement. The Closing Statement shall be reasonably
satisfactory to Buyer;
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(o) Return of Confidential Information. Seller shall have
delivered evidence reasonably satisfactory to Buyer that all parties,
other than Buyer, with whom Seller discussed a potential sale of all or
part of the Business, have returned to Seller or destroyed all
confidential information relating to the Business provided to such
parties by Seller or AccuMed UK or their respective representatives; and
(p) Concerning Intellectual Property. Seller shall have taken all
corrective action specified in Schedule 6.2(p) with respect to the
Intellectual Property identified therein.
6.3 Conditions to Seller's Obligations. The obligations of Seller
to consummate the transactions provided for by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Seller, except for the conditions set
forth in Section 6.3(c):
(a) Representations and Warranties. Each of the representations
and warranties of Buyer made in Section 5.2 of this Agreement shall be
true and correct both on the date hereof and as of the Closing Date as
though made at such time;
(b) Covenants. Buyer shall have performed and complied with all
covenants and agreements required to be performed or complied with by
them at or prior to the Closing Date;
(c) Certificates of Buyer. At the Closing, Buyer shall have
delivered to Seller a certificate signed by its President or a Vice
President, and attested to by its Secretary or an Assistant Secretary,
and dated the Closing Date, to the effect that the conditions specified
in Sections 6.3(a) and (b) have been fulfilled; and
(d) Certificates; Documents. Buyer shall have delivered the
documents required by Section 4.3.
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ARTICLE 7. COVENANTS OF SELLER
7.1 Conduct of Business. During the period from the date of this
Agreement through the Closing Date, Seller shall, and shall cause AccuMed UK to,
(i) conduct the Business as a going concern and conduct the Business and
maintain and operate the Acquired Assets diligently and in the ordinary and
normal course and consistent with past custom and practice (including, without
limitation, using its commercially reasonable efforts to (A) preserve beneficial
relationships between Seller and AccuMed UK and their respective employees,
distributors, agents, lessors, suppliers and customers and (B) continue normal
maintenance, marketing, advertising, distributional and promotional expenditures
in connection with the Business) and (ii) consult with Buyer in relation to any
matters relating to the Business that are material or out of the ordinary course
of business. Without limiting the generality of the foregoing and except as
otherwise expressly provided in this Agreement, during the period from the date
of this Agreement through the Closing Date, neither Seller nor AccuMed UK shall:
(a) Obligations for Borrowed Money. In connection with the
Business or the Acquired Assets (i) create, incur or assume any debt
(including obligations in respect of capital leases) or any debt for
money borrowed (whether long- or short-term), except to the extent
permitted under credit facilities existing on the date hereof; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligation of any
other Person; or (iii) make any loans, advances or capital contributions
to any other Person, other than Trade Payables;
(b) Employee Matters. (i) Increase in any manner the rate of
compensation of any of their respective officers or other employees
employed or retained in connection with the Business, (ii) make or agree
to make any payment pursuant to any Employee Plan, including, without
limitation, any payment of any bonus, incentive compensation, deferred
compensation, pension, retirement allowance, severance or other employee
benefit, except as required by any existing Employee Plan disclosed on
the Schedules to this Agreement, to any such officers or employees,
whether past or present; (iii) enter into or modify any collective
bargaining agreement relating to the Business, except as required by
Law; or (iv) commit itself to any additional Employee Plan, or
employment or consulting agreement with a Person employed or retained in
connection with the Business, or to amend any of such plans or
agreements, except as required by Law;
(c) Sale of Assets. Sell, transfer, license or otherwise dispose
of or agree to sell, transfer, license or otherwise dispose of any
Acquired Assets, except inventory in the ordinary and normal course of
business consistent with past custom and practice;
(d) Failure to Maintain Assets. Fail to maintain the Acquired
Assets in good working condition, normal wear and tear excepted;
(e) Contracts. (i) Enter into any other agreements, commitments,
contracts or undertakings relating to the Business or the Acquired
Assets, except agreements, commitments, contracts or undertakings made
in the ordinary and normal course of
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business consistent with past practice and the representations and
warranties of Seller contained in this Agreement; or (ii) amend any
Contracts;
(f) Encumbrances. Encumber or grant or create a Lien on any of
the Acquired Assets;
(g) Insurance. Cause any of the policies of insurance referred to
in Section 5.1(w) to terminate, lapse or be canceled, unless equivalent
replacement policies, without lapse of coverage, shall be put in place;
(h) Litigation. Enter into any compromise or settlement of any
litigation, action, suit, claim, proceeding or investigation relating to
the Business or the Acquired Assets, except (i) settlements made in the
ordinary and normal course of business or by insurers, involving amounts
not in excess of $10,000 and (ii) settlements related solely to Retained
Liabilities;
(i) Representations and Warranties. Take any action the taking of
which, or omit to take any action the omission of which, would cause any
of the representations and warranties contained in Section 5.1 to fail
to be true and correct as of the Closing as though made at and as of the
Closing;
(j) Affiliate Transactions; Dividends. Engage in any transactions
in connection with the Business or the Acquired Assets, including
transactions relating to the purchase or sale of goods, raw materials,
inventories or other operating or production items, intracorporate or
otherwise, with any of their respective Affiliates from the date of this
Agreement until the Closing, except in the ordinary course of business
of the Business. Neither Seller nor AccuMed UK shall (i) declare or pay
any dividend, whether payable in cash or securities or (ii) authorize
for issuance, issue, sell or deliver any capital stock or split, combine
or subdivide its capital stock, except for shares of AccuMed common
stock upon exercise or conversion of options, warrants, preferred stock
or 12% Convertible Notes outstanding on the date of this Agreement;
(k) Charter Amendments. Make any amendment to the AccuMed UK
Charter;
(l) Accounting Methods. Make any change to its accounting
(including tax accounting) systems, policies, principles, practices or
methods, including, without limitation, any change in its method of
computing reserves, or fail to maintain its books, accounts and records
for the Business in accordance with GAAP;
(m) Permits. Terminate or fail to renew or preserve any existing
Permits other than those which are no longer required, or fail to
operate the Business under the terms of its existing Permits and in
compliance with all applicable Laws, or fail to file with the FDA any
application, registration, filing, report, including, without
limitation, any MDR or other document required to be filed in connection
with the operation of the Business;
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(n) Accounts Payable and Receivable. Delay or postpone the
payment of accounts payable and other liabilities or institute any
unusual or accelerated collection efforts with respect to its accounts
receivable, in each case, beyond its normal practice;
(o) Transfer of Employees. Permit any of Seller's employees who
are not employees of the Business to transfer employment to the
Business; or
(p) Commitments. Agree or commit to do any of the foregoing.
7.2 Disclosure Supplements.
(a) From time to time prior to the Closing, Seller shall promptly
supplement or amend the Schedules to this Agreement with respect to any
matter (i) that may arise hereafter and that, if existing or occurring
at or prior to the date of this Agreement, would have been required to
be set forth or described in the Schedules to this Agreement, or (ii)
that makes it necessary to correct any information in the Schedules to
this Agreement or in any representation and warranty of Seller that has
been rendered inaccurate thereby. No supplement or amendment to the
Schedules to this Agreement or any delivery of Schedules after the date
of this Agreement, unless expressly consented in writing by Buyer, shall
be deemed to (i) cure any breach of any representation or warranty made
in this Agreement, (ii) modify, affect or diminish Buyer's right to
terminate this Agreement pursuant to Section 10.1(c) of this Agreement
or (iii) limit the indemnity provided in Section 11.2.
(b) During the period from the date of this Agreement to the
Closing, Seller shall promptly (i) furnish or make available to Buyer
copies of all operating reports and monthly, quarterly and year-end
financial statements relating to the Business as soon as they become
available, all certified by Seller's chief financial officer that such
financial statements fairly present the financial position and results
of operations of the Business for the periods covered by such statements
in accordance with GAAP consistently applied (subject to normally
recurring year-end audit adjustments and without footnote disclosures),
and (ii) notify Buyer of (A) any material change in the condition
(financial or otherwise), business, assets, properties, operations or
prospects of the Business, and (B) the institution or settlement of any
litigation, action, suit, investigation, claim or proceeding involving
the Business (other than those relating solely to Retained Liabilities)
and of any developments therein.
7.3 Closing. Seller shall use its reasonable efforts to cause the
conditions set forth in Sections 6.1 and 6.2 to be satisfied by the Closing
Date.
7.4 Confidentiality.
(a) Seller shall, and shall cause its Affiliates, officers,
employees, representatives, consultants and advisors to, hold in
confidence and not use all confidential information that remains in the
possession of Seller or its Affiliates after the Closing concerning the
Business and the Acquired Assets. Seller shall not release or disclose
any such information
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to any Person other than Buyer and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this
Section shall not apply to information:
(b) that Seller is compelled to disclose by judicial or
administrative process (including arbitration or settlement
negotiations), or, in the opinion of counsel, by other mandatory
requirements of Law;
(c) that can be shown to have been generally available to the
public other than as a result of a breach of this Section; or
(d) that can be shown to have been provided to Seller by a third
party who obtained such information other than from Seller or other than
as a result of a breach of this Section.
(i) Seller shall, and shall cause its Affiliates to,
promptly notify Buyer if it learns of any unauthorized use of
disclosure of any confidential information concerning the
Business or the Acquired Assets by any Person that is subject to
a confidentiality agreement with Seller, whether such use or
Seller's discovery thereof occurs prior to or after the Closing
(such unauthorized use or disclosure, a "CA Breach").
(ii) In the event Seller or Buyer discover a CA Breach,
Seller shall, upon Buyer's request, take all commercially
reasonable actions necessary to enjoin such Person's use or
disclosure of the confidential information and to pursue all
other remedies available pursuant to the parties' confidentiality
agreement and at law; provided, however, that if Seller is
required to take such enforcement actions after the Closing,
Buyer shall reimburse Seller for its reasonable costs and
expenses, including attorneys' fees, in connection therewith.
7.5 Maintenance of Insurance. Seller shall after the Closing use
its reasonable efforts to maintain any policies of insurance that cover
liabilities associated with the operation of the Business prior to the Closing;
provided, that after the Closing Seller shall not be required to pay any
additional premiums in respect of such policies or maintain in effect any
insurance coverage other than coverage disclosed on the Schedules hereto.
7.6 Trade Names.
(a) License. To the extent the Retained Name appears on (i) any
plant, building or equipment, or (ii) any stationery, business form,
packaging, container, sign or other property (real or personal) included
in the Acquired Assets, Seller grants, and/or confirms the grant by its
Affiliates of, a royalty-free license to Buyer to use the Retained Name
with respect to and on such Acquired Assets until the later of (i)
December 31, 1999 or (ii) the exhaustion of such materials.
(b) Use of Tradenames by Seller. After the Closing Date, Seller
and its Affiliates shall not use any of the Tradenames for any reason,
including use of such names in
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connection with any product, business, subsidiary, division or other
affiliated entity of Seller.
(c) Remedies. If this Section 7.6 is breached or threatened to be
breached, Buyer and Seller expressly consent that in addition to any
other remedy the other may have, Buyer and Seller shall be entitled to
apply for and receive injunctive relief in order to prevent the
continuation of any existing breach or the occurrence of any threatened
breach.
7.7 Maintenance of, and Access to, Records. After the Closing
Date, Seller shall provide Buyer with access (with an opportunity to make
copies), during normal business hours, and upon reasonable notice, to any
records relating to the Business that are retained by Seller. Seller shall
preserve and maintain any books and records relating to the Business and
retained by Seller for at least five years after the Closing Date.
7.8 Non-Competition.
(a) Period and Conduct. As further consideration for the purchase
and sale of the Acquired Assets and the transactions contemplated by
this Agreement, during the period commencing on the Closing Date, and
ending on the third anniversary thereof, Seller shall not:
(i) enter into or engage in any business that currently
competes with the Business within the Restricted Territory (as
defined below);
(ii) solicit customers, active prospects, business or
patronage for any business wherever located, that competes with
the Business within the Restricted Territory or sell any products
or services for any business, wherever located, that competes
with the Business within the Restricted Territory;
(iii) solicit, divert, entice or otherwise take away any
customers, former customers, active prospects, business,
patronage or orders of the Business or attempt to do so; or
(iv) promote or assist, financially or otherwise, any
Person engaged in any business that competes with the Business
within the Restricted Territory.
(b) Restricted Territory. "Restricted Territory" means: (a) the
geographic area within a 100 mile radius of any and all of the locations
where the Business maintains an office or a manufacturing facility
during the two years prior to the date of this Agreement; and (b) all of
the specific customers, whether within or outside of the geographic area
described in (a) above, with which Seller (with respect to the Business)
or AccuMed UK conducted business during the two years prior to the date
of this Agreement.
(c) Tolling of Covenants. If it is judicially determined that
Seller has violated any of its obligations under Section 7.8(a), then
the period applicable to each obligation that
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Seller has been determined to have violated automatically will be
extended by a period of time equal in length to the period during which
such violation(s) occurred.
(d) Nonsolicitation. Seller shall not, and shall cause each of
its Affiliates not to, directly or indirectly, at any time solicit or
induce or attempt to solicit or induce any employee, representative or
agent of the Business to terminate his, her or its employment,
representation or other association with the Business.
(e) Non-Competition - Direct or Indirect. Seller will be in
violation of this Section if it engages in any or all of the activities
set forth in Section 7.8 directly on its own account, or indirectly for
any other Person and whether as partner, joint venturer, agent and/or
director of any Person or as an equity holder of any Person in which
Seller owns, directly or indirectly, any of the outstanding equity
interests; provided, however, that the direct or indirect ownership by
Seller of an interest constituting no more than five percent in the
aggregate of the outstanding voting capital stock in any Person whose
shares are traded on a recognized stock exchange or over the counter
market shall not, of itself, be a violation of this Section 7.8.
(f) Remedies. Inasmuch as a breach, or failure to comply with,
Section 7.8 will cause serious and substantial damage to Buyer, if
Seller or any of its Affiliates should in any way breach, or fail to
comply with, the terms of this Section 7.8, Buyer shall be entitled to
an injunction restraining Seller and such Affiliates from any such
breach or failure. All remedies expressly provided for in this Section
7.8(d) are cumulative of any and all other remedies now existing at law
or in equity. Buyer shall, in addition to the remedies provided in this
Agreement, be entitled to avail itself of all such other remedies as may
now or hereafter exist at law or in equity for compensation, and for the
specific enforcement of the covenants contained in this Agreement.
Resort to any remedy provided for hereunder or provided for by law shall
not preclude or bar the concurrent or subsequent employment of any other
appropriate remedy or remedies, or preclude the recovery by Buyer or
monetary damages and compensation.
(g) Subsidiaries, Division and Affiliates. For the purpose of
this Section 7.8, "Buyer" shall include its subsidiaries, divisions and
Affiliates as they may exist from time to time.
(h) Severability. Each subsection of this Section 7.8 constitutes
a separate and distinct provision hereof. In the event that any
provision of this Section 7.8 shall finally be judicially determined to
be invalid, ineffective or unenforceable, such determination shall apply
only in the jurisdiction in which such adjudication is made and every
other provision of this Section 7.8 shall remain in full force and
effect. The invalid, ineffective or unenforceable provision shall,
without further action by the parties, be automatically amended to
effect the original purpose and intent of the invalid, ineffective or
unenforceable provision; provided, however, that such amendment shall
apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made.
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7.9 Accounts Receivable. In the event that Seller or any of its
Affiliates receives any payment relating to any Account Receivable included in
the Acquired Assets outstanding on or after the Closing Date, such payment shall
be the property of, and shall be immediately forwarded and remitted to, Buyer.
Seller or such Affiliate will promptly endorse and deliver to Buyer any cash,
checks or other documents received by Seller on account of any such Accounts
Receivable. Seller or such Affiliate shall advise Buyer (promptly following
Seller's becoming aware thereof) of any counterclaims or set-offs that may arise
subsequent to the Closing Date with respect to any Account Receivable.
7.10 No Solicitation. From the date of this Agreement through and
until the earlier of termination of this Agreement pursuant to Article 10 or
Closing, except to the extent contemplated by the letter agreement, dated
September 25, 1998, between Seller and BD, none of Seller nor any of its
Affiliates, employees, officers, agents or advisors shall, directly or
indirectly, (a) solicit, initiate or encourage any inquiries, proposals or
offers from any Person relating to any acquisition (or sublease as the case may
be) of the Acquired Assets or the Business, or any securities of, or any merger,
consolidation or business combination with, Seller or AccuMed UK, or (b) with
respect to any effort or attempt by any other Person to do or seek any of the
foregoing, (i) participate in any discussions or negotiations, (ii) furnish to
any other Person any information with respect to, or afford access to the
properties, books or records of or relating to, Seller, AccuMed UK, the Acquired
Assets or the Business, or (iii) otherwise cooperate in any way with, or assist
or participate in, or facilitate or encourage any such effort. Seller shall
promptly notify Buyer if any such proposal or offer or any inquiry or contact
with any Person with respect thereto is made.
7.11 Plant Closing Obligations. If Seller, AccuMed UK or any of
their respective Affiliates takes any action that could be construed as a "plant
closing" or "mass layoff," or that results in any employee retained or employed
in connection with the Business suffering or deeming to have suffered any
"employment loss," as those terms are defined in WARN or any similar Law, Seller
or AccuMed UK, as the case may be, and such Affiliates shall be solely
responsible for providing any notice required by WARN or any similar Law and for
making payments, if any, that may be required under WARN or any similar Law for
failure to provide appropriate notice.
7.12 No Interference. From the date of this Agreement through and
until the earlier of termination of this Agreement pursuant to Article 10 or
Closing, Seller and its Affiliates, employees, officers, agents or advisors
shall (a) not interfere, directly or indirectly, with Buyer's efforts to secure
the employment of, the individuals listed on Schedule 7.12 (the "Protected
Employees"), and (b) shall use commercially reasonable efforts to retain the
Protected Employees as Employees.
7.13 Sublease. Prior to the Closing, Seller and Buyer shall enter
into an agreement (the "Sublease") by which Seller shall lease to Buyer a
portion of Seller's Chicago, Illinois facility, substantially on the terms set
forth in Exhibit G.
7.14 Further Assurances; Customer and Supplier Relationships;
Assertion of Claims.
(a) Seller shall use its reasonable efforts to implement the
provisions of this
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Agreement, and for such purpose Seller, at the request of Buyer, at or
after the Closing, shall, without further consideration, promptly
execute and deliver, or cause to be executed and delivered, to Buyer
such deeds, assignments, bills of sale, Consents and other instruments
in addition to those required by this Agreement, in form and substance
satisfactory to Buyer, and take all such other actions, as Buyer may
reasonably deem necessary or desirable to implement any provision of
this Agreement or to more effectively transfer, convey and assign to
Buyer good and marketable title to, and to put Buyer in actual
possession and operating control of, all of the Acquired Assets, free
and clear of all Liens, other than Permitted Liens.
(b) From and after the Closing, Seller shall use its reasonable
efforts to assist in the transfer to Buyer of the goodwill and
reputation associated with the Business.
(c) Seller covenants and agrees with Buyer that after the Closing
Date, Seller shall give Buyer 10 days' prior written notice of any
intent on the part of Seller or any of its Affiliates to assert any
claim against any former customer (including the Customers) or supplier
(including the Suppliers) of Seller or such Affiliate relating to the
Business or the Acquired Assets.
7.15 Confidential Information.
(a) Within three business days following the date of this
Agreement, Seller shall deliver to Buyer copies of all written
correspondence sent by Seller to any party with whom Seller discussed a
potential sale of all or part of the Business informing such party that
the LOI had been executed.
(b) Prior to Closing, Seller shall use its best efforts to cause
all parties, other than Buyer, with whom Seller discussed a potential
sale of all or part of the Business, to return to Seller or destroy all
confidential information relating to the Business provided to such
parties by Seller or AccuMed UK or their respective representatives.
7.16 Solvency Letter. Seller shall have delivered to Buyer no
later than 30 days after the execution of this Agreement a letter (the "Solvency
Letter") from an independent third party selected by Seller and reasonably
satisfactory to Buyer (the "Appraiser") attesting that, immediately after the
Closing Date: (i) Seller will be solvent (in that both the fair value of its
assets will not be less than the sum of its debts and that the present fair
saleable value of its assets will not be less than the amount required to pay
its probable liability on its debts as they become absolute and matured); (ii)
Seller will have adequate capital with which to engage in its business; and
(iii) Seller will not have incurred and does not plan to incur debts beyond its
ability to pay as they become absolute and matured.
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ARTICLE 8. COVENANTS OF BUYER
8.1 Maintenance of, and Access to, Records. From and after the
Closing, Buyer shall, whenever reasonably requested by Seller, permit Seller to
have access to such business records turned over to Buyer pursuant to this
Agreement as may be required by Seller in connection with any audit or
investigation by any Governmental Authority, or any matter relating to insurance
coverage or third party claims, in each such case to the extent relating to the
operation of the Business by Seller and AccuMed UK prior to the Closing. Buyer
shall preserve and maintain the records relating to the Business that are part
of the Acquired Assets for at least six years after the Closing Date.
8.2 Closing. Buyer shall use its reasonable efforts to cause the
conditions set forth in Sections 6.1(c) and 6.3 to be satisfied by the Closing
Date.
ARTICLE 9. CERTAIN ADDITIONAL COVENANTS
9.1 Due Diligence Investigation.
(a) Access to Records and Properties. Prior to the Closing, (a)
Buyer shall be entitled, and Seller shall permit Buyer, to conduct such
investigation of the condition (financial or otherwise), business,
assets, properties, operations or prospects of the Business as Buyer
shall reasonably deem appropriate, and (b) Seller shall (i) provide
Buyer and its agents and representatives, including its independent
accountants, internal auditors and attorneys, full and complete access
to all the facilities, offices and personnel of Seller, and to all of
the books and records of Seller with respect to the Business and the
Acquired Assets (including, without limitation, access to records
related to the Business dating from January 1, 1995 to the Closing Date
as necessary for tax and accounting purposes and work papers of any
independent accountant), (ii) cause Seller's officers, employees and
advisors to furnish Buyer with such financial and operating data
(including the data described in Section 7.2(b)) and other information
with respect to the condition (financial or otherwise), business,
assets, properties, operations or prospects of Seller with respect to
the Business as Buyer shall reasonably request, and (iii) permit Buyer
to make such inspections and copies thereof as Buyer may reasonably
require. In addition, Buyer shall be provided with full and complete
access to the customers, suppliers and employees of the Business and the
opportunity to make cooperative and investigative sales calls on
purchasers of Products, for the purpose of both due diligence
investigation of the Business and to seek confirmation of their intent
to maintain an employment or business relationship with Buyer after the
Closing.
(b) Confidentiality. Buyer shall maintain, and will cause its
Affiliates and representatives to maintain, the confidentiality of
proprietary information it learns as a result of its and their
investigation in accordance with the terms of that Confidentiality
Agreement, between Michael D. Burke and Seller, dated March 2, 1998 (the
"Confidentiality Agreement"). Buyer and Seller agree that as of the date
of this
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Agreement, the Confidentiality Agreement shall be deemed to be amended
to add Buyer and its Affiliates as parties thereto.
9.2 Proxy Material; Stockholder Meeting.
(a) Preparation of Proxy Statement. Seller and Buyer shall as
promptly as practicable prepare and file with the SEC a proxy statement
in definitive form relating to the meeting of Seller's stockholders to
be held in connection with the approval of this Agreement, as amended or
supplemented (such definitive proxy statement, as it may be amended or
supplemented from time to time, the "Proxy Statement"). Seller shall use
all reasonable efforts, and Buyer shall cooperate with Seller, to have
the Proxy Statement cleared by the SEC as promptly as practicable.
Seller shall, as promptly as practicable, provide copies of any written
comments received from the SEC with respect to the Proxy Statement to
Buyer and advise Buyer of any verbal comments with respect to the Proxy
Statement received from the SEC. Seller shall use all reasonable efforts
to cause the Proxy Statement to be mailed to its stockholders at the
earliest practicable date and to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby.
If at any time prior to Closing, any event with respect to Seller of any
of its subsidiaries or with respect to other information supplied by
Seller or for inclusion in the Proxy Statement shall occur which is
required to be described in an amendment of, or a supplement to, the
Proxy Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Seller, with a copy to Buyer.
(b) Stockholder Meeting. Seller shall cause a meeting of its
stockholders (the "Seller Stockholder Meeting") to be duly called and
held as soon as reasonably practicable for the purpose of voting on the
approval of the sale of the Acquired Assets and the Assumed Liabilities
as contemplated by this Agreement, and the Directors of Seller shall
recommend adoption of this Agreement by Seller's stockholders. Seller
will comply with all legal requirements applicable to such meeting.
9.3 Bulk Transfer Laws. Buyer hereby waives compliance by Seller
with the laws of any jurisdiction relating to bulk transfers that may be
applicable in connection with the transfer of the Acquired Assets to Buyer. This
provision shall not be deemed in any way to limit the indemnity provided in
Section 11.2.
9.4 Press Releases and Disclosure. Except (i) as otherwise
expressly provided in this Agreement and (ii) as required by Law or the rules
and regulations of the National Association of Securities Dealers, Inc., no
party hereto and none of their respective Affiliates shall issue or cause
publication of any press release or other announcement or public communication
with respect to this Agreement or the transactions contemplated hereby or
otherwise disclose this Agreement or the transactions contemplated hereby to any
third party (other than attorneys, advisors and accountants to Seller or Buyer)
without (i) the prior written consent of the other party hereto and (ii) the
prior written approval of the other party hereto on the timing and content of
such press release, announcement or communication, which consent and approval
shall not be unreasonably withheld.
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9.5 Regulatory Approvals. Seller will, and will cause its
appropriate Affiliates to, and Buyer will, use, in each case, commercially
reasonable efforts (which shall not be construed to require Buyer to divest any
businesses or assets or enter into any hold separate agreement, consent decree
or similar order) to obtain any authorizations, consents, orders and approvals
of any Governmental Authority necessary for the performance of its respective
obligations pursuant to this Agreement and any of the other Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby, and will cooperate fully with each other in all reasonable respects in
promptly seeking to obtain such authorizations, consents, orders and approvals.
Neither Seller, on the one hand, nor Buyer, on the other hand, will take any
action that will have the effect of delaying, impairing or impeding the receipt
of any required regulatory approvals (which shall not be construed to require
Buyer to divest any businesses or assets or enter into any hold separate
agreement, consent decree or similar order). Seller will supply Buyer with
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between Seller or its representatives, on the one
hand, and any Governmental Authority or members of their respective staffs, on
the other hand, with respect to this Agreement or the transactions contemplated
hereby.
9.6 Employee Matters.
(a) Employee Benefits. Seller shall retain all liabilities and
obligations in respect of its past, present and future employees under
the Employee Plans and applicable Laws. Without limiting the generality
of the foregoing or of Section 2.2(c), Buyer shall have no liability or
obligation whatsoever under the Employee Plans, nor shall Buyer have any
obligation to provide any employee benefits to any Employees. Seller
shall offer to all employees of the Business at the time of the Closing
the right to continue their coverage under Seller's group health plan(s)
(as defined in Section 5000(b)(1) of the Code), such offers to be made
in accordance with the continuation coverage requirements of Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code.
(b) Future Employment. Except as set forth on Schedule 9.6, Buyer
shall offer employment from and after the Closing to all Employees who
are actively employed on the Closing Date, on such terms and conditions
as Buyer may, in its sole discretion, determine, and will recognize for
seniority purposes the past services of such Employees. Prior to the
Closing, upon reasonable prior notice to Seller, Buyer may communicate
with any of the Employees currently employed in the Business.
(c) No Employment by Seller. After the Closing, Seller shall not
solicit or hire any Employee listed on Schedule 5.1(s)(i) that does not
accept employment with Buyer.
(d) Employee Information. (i) Subject to applicable legal
restrictions, Buyer and Seller shall provide each other, in a timely
manner, with any information that the other may reasonably request with
respect to any Employee of Seller or, after the Closing, any Person
employed by Buyer in the Business, his employment with and compensation
from Seller or Buyer, or rights or benefits under any Employee Plan or
any personnel policy of Seller or Buyer relating to the Business.
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(ii) Without in any way limiting the generality of Section
9.6(d)(i), and to the extent they may legally do so, Seller shall
afford Buyer and its representatives such access to the medical,
workers' compensation and other health-related records of the
Employees (the "Employee Health Records") as are maintained by or
available to Seller and as Buyer shall, in its sole discretion,
deem reasonably necessary or desirable, and Buyer shall be
permitted, to the extent Seller may legally give such permission,
to make copies of such Employee Health Records as it may deem
reasonably necessary or desirable. Promptly after the date of
this Agreement, Seller shall use its reasonable efforts to obtain
or cause to be obtained any consent of any Employee, health care
provider, workers' compensation authority or other Person as may
be necessary in order to permit Seller to afford Buyer and its
representatives with access to and permission to copy Employee
Health Records as provided in this Section 9.6(c).
ARTICLE 10. TERMINATION
10.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) Mutual Consent. By mutual written consent of Seller and
Buyer;
(b) Closing Date. By Seller or Buyer if the Closing shall not
have occurred on or before March 31, 1999 (the "Termination Date");
(c) Seller Misrepresentation or Breach. By Buyer if there has
been a material breach by Seller of any of its representations,
warranties, covenants, obligations or agreements set forth in this
Agreement or in any writing delivered pursuant hereto by Seller;
(d) Buyer Misrepresentation or Breach. By Seller, if there has
been a material breach by Buyer of any of its representations,
warranties, covenants, obligations or agreements set forth in this
Agreement or in any writing delivered pursuant hereto by Buyer;
(e) Court Order. By Seller or Buyer if consummation of the
transactions contemplated hereby shall violate any non-appealable final
order, decree or judgment of any court or Governmental Authority having
competent jurisdiction;
(f) Buyer's Conditions. By Buyer, if (i) any condition precedent
to Buyer's obligation to effect the Closing set forth in Section 6.1(c)
or 6.2 is not satisfied, or shall have become incapable of fulfillment,
and such condition is not waived, if waivable, by Buyer on or prior to
the Termination Date or (ii) any condition precedent to Buyer's
obligation to effect the Closing set forth in Section 6.1(a) is not
satisfied, or shall have become incapable of fulfillment, on or prior to
the Termination Date;
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(g) Seller's Conditions. By Seller, if (i) any condition
precedent to Seller's obligation to effect the Closing as set forth in
Section 6.1(c) or 6.3 is not satisfied, or shall have become incapable
of fulfillment, and such condition is not waived, if waivable, by Seller
on or prior to the Termination Date or (ii) any condition precedent to
Seller's obligation to effect the Closing set forth in Section 6.1(a) is
not satisfied, or shall have become incapable of fulfillment, on or
prior to the Termination Date; or
(h) Solvency Letter. By Buyer if Seller shall fail to deliver, or
cause to be delivered to Buyer, the Solvency Letter within 30 days after
the date of this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, written notice thereof shall forthwith be given to the
other party and this Agreement shall thereafter become void and have no further
force and effect and all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer, except
that (a) each party will return all documents, work papers and other material of
any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution of this Agreement, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the business of any other party shall be treated in
accordance with Section 7.4; (b) the obligations of Seller and Buyer under
Sections 7.4, 9.4, 12.4 and 12.13 shall survive such termination; and (c) such
termination shall not constitute a waiver by any party of any claim it may have
for damages caused by reason of, or relieve any party from liability for, any
breach of this Agreement prior to termination under Section 10.1.
ARTICLE 11. INDEMNIFICATION
11.1 Indemnification by Buyer. From and after the Closing, Buyer
shall indemnify, defend and hold Seller, its Affiliates, and their respective
directors, officers, representatives, employees and agents harmless from and
against any and all claims, actions, suits, demands, assessments, judgments,
losses, liabilities, damages, costs and expenses (including, without limitation,
interest, penalties, attorneys' fees and expenses, accounting fees and
investigation costs) (collectively, "Liabilities") that may be incurred by them
resulting or arising from or related to, or incurred in connection with: (a) the
failure of Buyer to assume, pay, perform and discharge the Assumed Liabilities,
(b) the failure of Buyer to report the purchase of the Acquired Assets in
accordance with the allocations required by Section 3.3, (c) any breach of any
representation, warranty, covenant, obligation or agreement of Buyer contained
in this Agreement or in any other Transaction Document and (d) the conduct of
the Business following the Closing.
11.2 Indemnification by Seller.
(a) From and after the Closing, Seller shall indemnify, defend
and hold Buyer and AccuMed UK and their respective Affiliates, and their
respective directors, officers, representatives, employees and agents
harmless from and against any and all Liabilities that may be incurred
by Buyer or AccuMed UK resulting or arising from, related to or incurred
in connection with: (a) the failure of Seller to assume, pay, perform
and
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discharge the Retained Liabilities, (b) the failure of Seller to report
the sale of the Acquired Assets in accordance with the allocations
required by Section 3.3, (c) any breach of any representation, warranty,
covenant, obligation or agreement of Seller contained in this Agreement
or in any other Transaction Document, (d) any failure to comply with the
laws of any jurisdiction relating to bulk transfers that may be
applicable in connection with the transfer of the Acquired Assets to
Buyer and (e) any liability or obligation described in Section 2.2(a).
(b) In addition to the provisions of Section 11.2(a) and without
limiting the generality of such provisions, Seller agrees to fully
indemnify and hold harmless Buyer and its respective parent corporations
and subsidiaries and all other members, if any, of any group of which
Buyer is a member for Tax purposes (any subsequent reference to "Buyer"
in this clause shall mean either Buyer individually or one or more of
its affiliates as described herein, as appropriate) against and in
respect of and, on demand, will reimburse Buyer for, any and all
liability whatsoever, and however imposed (including any claim asserted
or deficiency assessed against or collected from Buyer), in respect of
(1) any Taxes for any and all taxable periods (or portion thereof)
ending on or prior to the Closing Date, (2) any unpaid Taxes, whether
determined on a separate, consolidated, combined or unitary basis,
relating to Seller (or any member of a group for tax purposes in which
Seller is or was included) (A) imposed under Treasury Regulation Section
1.1502-6 or any comparable provision of state, local or foreign law with
respect to any taxable period beginning prior to the Closing Date or (B)
pursuant to any guaranty, indemnification, Tax sharing or similar
agreement made on or before the Closing Date relating to the sharing of
liability for, or payment of, Taxes or (3) any Taxes payable by Seller
pursuant to Section 12.4.
11.3 Notice of Claim; Right to Participate in and Defend Third
Party Claim.
(a) If any indemnified party receives notice of the assertion of
any claim, the commencement of any suit, action or proceeding, or the
imposition of any penalty or assessment by a third party in respect of
which indemnity may be sought hereunder (a "Third Party Claim"), and the
indemnified party intends to seek indemnity hereunder, then the
indemnified party shall provide the indemnifying party with prompt
written notice of the Third Party Claim, but in any event not later than
10 calendar days after receipt of such notice of Third Party Claim. The
failure by an indemnified party to notify an indemnifying party of a
Third Party Claim shall not relieve the indemnifying party of any
indemnification responsibility under this Article 11, unless such
failure materially prejudices the ability of the indemnifying party to
defend such Third Party Claim.
(b) The indemnifying party shall have the right to control the
defense, compromise or settlement of the Third Party Claim with its own
counsel (reasonably satisfactory to the indemnified party) if the
indemnifying party delivers written notice to the indemnified party,
within 10 days following the indemnifying party's receipt of notice of
the Third Party Claim from the indemnified party, acknowledging its
obligations to indemnify the indemnified party with respect to such
Third Party Claim in accordance with this Article 11, and, to the extent
litigation counsel to the indemnified party deems reasonable after
assessing the merits of such Third Party Claim, establishes security in
form and
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substance reasonably satisfactory to the indemnified party to secure the
indemnifying party's obligations under this Article 11 with respect to
such Third Party Claim; provided, however, that the indemnifying party
shall not enter into any settlement of any Third Party Claim (i) that
would impose or create any obligation or any financial or other
liability affecting the indemnified party if such liability or
obligation is not covered by the indemnification provided to the
indemnified party hereunder or (ii) that does not include as an
unconditional term thereof the giving to such indemnified party by each
claimant or plaintiff to such Third Party Claim of a release from all
liability with respect to such Third Party Claim. In its defense,
compromise or settlement of any Third Party Claim, the indemnifying
party shall timely provide the indemnified party with such information
with respect to such defense, compromise or settlement as the
indemnified party shall request, and shall not assume any position or
take any action that would impose an obligation of any kind on, or
restrict the actions of, the indemnified party.
(c) The indemnified party shall be entitled (at the indemnified
party's expense) to participate in the defense by the indemnifying party
of any Third Party Claim with its own counsel. In addition, in the event
that the indemnified party shall in good faith determine, based upon the
advice of counsel, that the indemnified party may have available to it
one or more defenses or counterclaims that are inconsistent with one or
more of those that may be available to the indemnifying party in respect
of such Third Party Claim, the indemnified party shall have the right to
participate in the defense thereof, in which case the indemnifying party
shall be responsible for the reasonable fees and expenses of one
separate counsel for all indemnified parties with respect to such Third
Party Claim. In the event that the indemnifying party does not undertake
the defense, compromise or settlement of a Third Party Claim in
accordance with Section 11.3(b), the indemnified party shall have the
right to control the defense or settlement of such Third Party Claim
with counsel of its choosing.
(d) Any indemnifiable claim hereunder that is not a Third Party
Claim shall be asserted by the indemnified party by promptly delivering
notice thereof to the indemnifying party. If the indemnifying party does
not respond to such notice within 30 days after its receipt, it shall
have no further right to contest the validity of such claim.
ARTICLE 12. MISCELLANEOUS
12.1 Amendments. This Agreement may be amended only by a writing
executed by all of the parties hereto.
12.2 Entire Agreement. This Agreement, the other agreements
expressly provided for in this Agreement and the Confidentiality Agreement set
forth the entire understanding of the parties hereto with respect to the subject
matter of this Agreement, and supersede all prior contracts, agreements,
arrangements, communications, discussions, representations and warranties,
whether oral or written, between the parties, including, without limitation, the
LOI.
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12.3 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Ohio,
without regard to its conflicts of law doctrine. Seller hereby agrees to submit
to the personal jurisdiction of the state or federal courts located in the State
of Ohio. Notwithstanding the foregoing, any party may initiate and prosecute any
legal proceeding or seek enforcement of any judgment in any proper court having
jurisdiction in the United States or elsewhere.
12.4 Expenses. All legal, accounting and other costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense. All sales, transfer, recordation and documentary Taxes and
fees that may be payable in connection with the transactions contemplated by
this Agreement shall be borne by Seller.
12.5 Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) when received if personally delivered or sent by registered or
certified mail, return receipt requested, postage prepaid, (c) within 12 hours
after being sent by telecopy, with confirmed answerback, or (d) within one
business day of being sent by priority delivery by established overnight
courier, to the parties at their respective addresses set forth below.
To Seller: AccuMed International, Inc.
900 N. Franklin Street, Suite 401
Chicago, Illinois 60610
Telephone: (312) 642-9200
Telecopy: (312) 642-3101
Attention: Paul F. Lavallee
Chairman, President and Chief
Executive Officer
With a copy to: AccuMed International, Inc.
1500 7th Avenue
Sacramento, California 95818
Telephone: (916) 443-6800
Telecopy: (916) 443-6850
Attention: Joyce L. Wallach
General Counsel
To Buyer: Key Equity Capital Corporation
127 Public Square
Cleveland, Ohio 44114
Telephone: (216) 689-5776
Telecopy: (216) 689-3204
Attention: Stephen R. Haynes
Vice President
46
<PAGE> 97
and Michael D. Burke
626 Blue Spruce Trail
Auburn Township, Ohio 44023
Telephone: (440) 708-0557
Telecopy: (440) 708-0558
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telephone: (216) 586-3939
Telecopy: (216) 579-0212
Attention: Charles W. Hardin, Jr.
Any party by written notice to the others given in accordance with this Section
12.5 may change the address or the Persons to whom notices or copies thereof
shall be directed.
12.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together will constitute one and the same instrument.
12.7 Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, but no rights, obligations or liabilities hereunder shall be assignable
by any party without the prior written consent of the other parties, except that
Buyer may effect any such assignment to (i) one or more of its Affiliates, (ii)
a purchaser of all or substantially all of the Acquired Assets or (iii) any
lender to the Buyer as collateral.
12.8 Waivers. Except as otherwise provided in this Agreement,
Buyer or Seller (acting on behalf of itself and its appropriate Affiliates), may
waive in writing compliance by any of the other parties hereto (to the extent
such compliance is for the benefit of the party giving such waiver) with any of
the terms, covenants or conditions contained in this Agreement or in any of the
other Transaction Documents (except such as may be imposed by law). Any waiver
by any party of any violation of, breach of, or default under, any provision of
this Agreement or any of the other Transaction Documents, by any other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement or any of the other Transaction Documents.
12.9 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
or entity other than Buyer or Seller any rights or remedies under or by reason
of this Agreement.
12.10 Schedules and Exhibits. The Schedules and Exhibits attached
to this Agreement are incorporated into, and shall be part of, this Agreement
for all purposes.
47
<PAGE> 98
12.11 Headings; References. The headings in this Agreement are
solely for convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement. Unless otherwise indicated,
all references to Articles, Sections and Schedules refer to the Articles and
Sections of this Agreement and the Schedules to this Agreement, respectively.
12.12 Certain Definitions.
(a) For purposes of this Agreement, the term "Affiliate" shall
mean any Person that directly, or indirectly through one or more
Persons, controls, is controlled by, or is under common control with,
the Person specified or, directly or indirectly, is related to or
otherwise associated with any such Person or entity; provided that the
term "Affiliate," when used with reference to Seller, shall not be
deemed to include AccuMed UK.
(b) For purposes of this Agreement and of any other Transaction
Document, the phrase, "to the best of Seller's knowledge" or "Seller's
knowledge" shall be deemed to include all information that is actually
known or, in the exercise of reasonable diligence in the normal course
of their employment and/or assigned duties, should be known, by each of
the following individuals: (i) the officers of Seller and all management
who are employed or retained by Seller or any of its Affiliates in
connection with the Business, whether or not such individuals were or
are also officers, directors of employees of Seller or any of its
Affiliates, and (ii) all other individuals employed or retained by
Seller or any of its Affiliates who have (or should have) exercised by
reason of their position, responsibilities or duties, the principal
supervisory, monitoring or compliance function with respect to any of
the particular subject matters addressed by the representations and
warranties set forth in Article 5.
12.13 Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or hereafter existing at law or in equity or by
statute or otherwise. No remedy shall be deemed to be a limitation on the amount
or measure of damages resulting from any breach of this Agreement. The election
of any one or more remedies shall not constitute a waiver of the right to pursue
other available remedies.
12.14 Gender and Number. The masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others
whenever the context so indicates.
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<PAGE> 99
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
ACCUMED INTERNATIONAL, INC.
By: /s/ PAUL F. LAVALLEE
-----------------------------------
Name: Paul F. Lavallee
Title: Chairman, President and
Chief Executive Officer
AMI ACQUISITION CORP.
By: /s/ STEPHEN R. HAYNES
-----------------------------------
Name: Stephen R. Haynes
Title: Vice President
49
<PAGE> 100
Accumed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
For the Special Meeting of
Stockholders to be held December 22, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul F. Lavallee and Leonard R. Prange and each
of them, Proxies, each with full power of substitution to vote all of the stock
of the undersigned at the Special Meeting of Stockholders of AccuMed
International, Inc. (the "Company") to be held on December 22, 1998 at 10:00
a.m. (Chicago time) at the Company's offices located at 900 North Franklin
Street, Suite 401, Chicago, Illinois, and at any adjournment thereof, in the
manner indicated and in their discretion on any other business which may
properly come before said meeting, all in accordance with and as more fully
described in the Notice and accompanying Proxy Statement for said meeting,
receipt of which is hereby acknowledged. THE SHARES REPRESENTED BY THIS PROXY
SHALL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR APPROVAL OF EACH OF THE PROPOSALS LISTED ON THE REVERSE SIDE.
<PAGE> 101
1. Approval of the sale of the Microbiology Business in accordance with
the terms of the Asset Purchase Agreement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly come before the meeting
or any adjournments thereof, if such business was not known to
the Board of Directors prior to the solicitation of this Proxy.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS
SET FORTH DESCRIBED ABOVE.
Dated: ______________________, 1998
________________________________________
Signature of Stockholder
________________________________________
Signature of Stockholder
Please sign exactly as your name appears
hereon. Please mark, date, sign and
return the Proxy promptly in the
enclosed envelope. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If the signature is for a
corporation, please sign full corporate
name by authorized officer. If the
shares are registered in more than one
name, all holders must sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
