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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1996
Commission file number 1-11700
HEMAGEN DIAGNOSTICS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2869857
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification No.)
34-40 Bear Hill Road, Waltham, Massachusetts 02154
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(Address of principal executive offices) (Zip Code)
(617) 890-3766
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered ---------------------
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Common Stock Boston Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 60 days. Yes X No .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
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The registrant had revenues of $10,219,335 in its most recent fiscal
year. The aggregate market value of the voting stock held by non-affiliates
of the registrant on December 18, 1996 was $16,947,662. As of December 18,
1996, 7,626,890 shares of Common Stock, $.01 par value per share, were
outstanding.
Certain items of Part III of this Form 10-KSB incorporate by reference
certain portions of the registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission in connection with the
registrant's 1997 Annual Meeting of Stockholders.
PART I
This report contains certain forward-looking statements that are
subject to risks and uncertainties, including without limitation those
discussed herein in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and those
discussed in the section entitled "Risk Factors" in the Prospectus contained
in the registrant's Registration Statement on Form S-3, File No. 333-6147
(which section in hereby incorporated by reference herein). These risks and
uncertainties could cause the registrant's actual results in future periods
to differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-
looking statements speak only as of the date of this report, and the
registrant cautions readers not to place undue reliance on such statements.
Item 1. Business.
General
Hemagen Diagnostics, Inc. (the "Company") develops, manufactures and
markets proprietary medical diagnostic test kits, or "assays," used to aid
in the diagnosis of autoimmune and infectious diseases, in general health
assessment and for research purposes. The Company also develops,
manufactures and markets materials for the manufacture of such diagnostic
test kits. Autoimmune diseases are diseases in which the immune system
mistakenly identifies the body's cells and tissues as foreign and attempts
to destroy them. Rheumatoid arthritis is an example of an autoimmune
disease. The Company generally focuses on markets which it believes offer
significant growth potential and limited competition.
Until July 1995, the Company's products were based primarily on two
diagnostic technologies, hemagglutination and enzyme-linked immunosorbence
("ELISA" or "EIA"). In July 1995, the Company completed the acquisition of
a line of similar but complementary test kits using a third technology,
immunofluorescence, from Schiapparelli Biosystems, Inc. (The "VIRGO
Acquisition"). These acquired assays are sold under the registered
trademark VIRGO[registered trademark].
On March 1, 1996, the Company acquired Reagents Applications, Inc.
("RAI") from Kone Holdings, Inc. RAI manufactures and markets a complete
line of clinical chemistry reagents and diagnostic products for in vitro
diagnostic use in hospitals, clinics and laboratories. These products are
sold under the RAICHEM label directly and through a network of over 30
distributors in the United States and international markets. RAI also
produces private label reagents for domestic and international customers.
Most RAI reagents can be used in both automated and manual analyzers. RAI's
leading product lines include blood chemistry assays used to aid the
monitoring and measurement of health profiles, such as cholesterol, blood
urea nitrogen (BUN), triglycerides, glucose and uric acid.
On November 1, 1996, the Company completed the purchase of
substantially all the assets of Cellular Products, Inc., now known as 872
Main Street Corporation. 872 Main Street Corporation was operating under
the provisions of Chapter 11 of the United States Bankruptcy Code. The
Company continues to operate the facility located in Buffalo, New York
through its wholly owned subsidiary, Cellular Products, Inc. ("CPI"). CPI
manufactures biotechnology materials and assays for research and for the
manufacture of clinical diagnostic test kits.
The Company offers over 90 test kits that have been cleared by the
United States Food and Drug Administration (the "FDA') for sale in the
United States. Several additional test kits are sold in foreign markets.
The Company markets and sells its brand name products worldwide, directly
and through national and international distributors and manufacturers'
representatives. The Company markets its products in South America through
its majority owned subsidiary, Hemagen Diagnosticos Comercio, Importacao e
Exportacao, Ltd., a Brazilian limited liability company ("HDC"). In
addition, the Company sells certain of its products on a private-label
basis to multinational distributors of medical diagnostics.
In December 1994 the Company entered into a five-year agreement (the
"Carter-Wallace Agreement") with Carter-Wallace, Inc. ("Carter-Wallace") to
manufacture approximately 14 diagnostic test kits for the Wampole division
of Carter-Wallace. The test kits, which had previously been manufactured by
Carter-Wallace, are used to aid the diagnosis of common diseases such as
rheumatoid arthritis, mononucleosis, strep throat and rubella, as well as to
detect pregnancy. Carter-Wallace has agreed to purchase its requirements for
these test kits from the Company during the term of the Agreement, subject
to the Company maintaining certain quality standards. The test kits are
sold by Carter-Wallace to clinical laboratories and physicians' office
laboratories both domestically and abroad.
From December 1994 through May 1995, the Company remodeled its
manufacturing facility and developed certain technical capabilities in
preparation for producing test kits under the Carter-Wallace Agreement.
Initial shipments of finished goods under the Carter-Wallace Agreement began
during the Company's third quarter of fiscal 1995 and full scale production
commenced in the Company's second quarter of fiscal 1996. The Carter-
Wallace Agreement contains provisions for two-year extensions and may be
expanded to include additional products.
The Company owns a proprietary technique for preserving red blood
cells, a key component of the Company's hemagglutination assays. This
technology enables the Company to manufacture products which have a shelf
life of up to 24 months (compared to a typical shelf life of 30 to 60 days
for traditional hemagglutination processes), provide quick and accurate
results, require no special laboratory equipment to perform and are more
reliable than previously available hemagglutination assays. The extended
shelf life and improvements in the consistency of these assays substantially
eliminate limitations previously encountered in the use of hemagglutination
assays.
The Company markets and sells certain of its products through third
parties, including Olympus America, Inc. ("Olympus"), an affiliate of
Olympus Optical Co., Ltd. of Japan, Sigma Diagnostics, Inc. ("Sigma"), a
subsidiary of Sigma-Aldrich Corp and Boehringer Mannheim, GmbH. Olympus is
the world's largest supplier of automated blood-typing equipment to blood
banks and large commercial laboratories and Boehringer Mannheim is one of
the world's largest diagnostic manufacturer and marketer. Since 1989, the
Company has been the exclusive provider to Olympus of an assay to detect
cytomegalovirus ("CMV") antibodies for use with Olympus' automated blood-
typing equipment. In September 1992 the Company entered into an agreement
with Olympus to become the exclusive distributor of Olympus' automated
blood-typing equipment for all of South America. In February, 1995 this
agreement was terminated with no further obligation on either party.
In May 1992, the Company entered into a five-year agreement with
Sigma, pursuant to which the Company manufactures certain of its ELISA
assays for distribution and sale by Sigma under the Sigma label. In October
1992, the Company entered into a product development agreement with Sigma
for the development of 11 ELISA assays during the year ending December 31,
1993. The Company completed the development of these assays in September
1993. See "Business--Distribution and Marketing."
In November, 1993 the Company entered into a product development
agreement with Boehringer Mannheim, GmbH ("Boehringer" or "BM") to develop
and manufacture certain products for BM. In July, 1995 the Company and BM
signed an OEM Agreement relating to one of the products developed under this
agreement relating to a test for Chagas' disease.
The Company owns a 51% interest in HDC, a Brazilian limited liability
company. The Company and HDC have signed an agreement in principal for the
Company to acquire substantially all of the remaining interest in HDC by
issuing stock options to the minority stockholders of HDC with an exercise
price at or above the fair market value of the Company's Common Stock. The
Company and minority stockholders of HDC are discussing whether this
arrangement should be consummated or not. Unless the context otherwise
requires, the term "Company" includes HDC, RAI, CPI and the Virgo
Acquisition.
Recent Developments
Cellular Products, Inc.
On November 1, 1996, the Company, through its wholly owned subsidiary,
CPI, acquired substantially all the assets of 872 Main Street Corporation
(formally Cellular Products, Inc.) for $400,000 in cash and a $200,000
promissory note payable November 1, 1997. CPI is based in Buffalo, New York
and is a manufacturer of biotechnology materials and assays for research and
for the manufacture of clinical diagnostic test kits. CPI's principal focus
is on infectious diseases, particularly retro viruses such as HIV and HTLV.
Its products are used in the growth and testing of these viruses and as raw
materials by manufacturers of clinical diagnostic assays for HIV and HTLV.
The product mix includes enzyme oligonucleotide assays, monoclonal
antibodies, recombinant growth factors, viral lysates and bulk raw
materials.
872 Main Street Corporation, originally founded in 1982, as Cellular
Products, Inc. has been operating under the provisions of Chapter 11 of the
federal bankruptcy code since November 1994. The Company believes the
acquisition will enable the Company to produce several key raw materials for
its tests, allow for the better control of manufacturing costs and enhance
the Company's research programs.
Reagents Applications, Inc.
On March 1, 1996, the Company acquired all of the capital stock of RAI
for a total purchase price of approximately $4.9 million in cash. RAI,
based in San Diego, California, manufactures and markets clinical reagents
and assays used in hospitals and private laboratories. The Company sells
these products worldwide directly and through distributors and original
equipment manufacturers. RAI had revenues of approximately $5,807,000 for
the year ended December 31, 1995 and $2,661,000 for the seven months ending
September 30, 1996.
VIRGO[registered trademark] Acquisition
On July 1, 1995, the Company completed the VIRGO[registered trademark]
Acquisition from Schiapparelli BioSystems, Inc. ("SBI"). In connection with
this acquisition, the Company paid $1,000,000 in cash and issued a
promissory note for $380,000 that was paid December 15, 1995. The Company
manufactures the VIRGO[registered trademark] products at a portion of the
facility previously used by SBI in Columbia, Maryland.
The VIRGO[registered trademark] products consist primarily of assays
that aid in the diagnosis of infectious and autoimmune diseases using
immunofluorescence technology. VIRGO[registered trademark] test kits are
used by over 300 clinical laboratories in the United States and Europe,
including certain existing customers of the Company. The Company sells the
VIRGO[registered trademark] products through some of its existing
distribution channels and to former customers and distributors of SBI.
Schiapparelli Biosystems B.V.
The Company and Schiapparelli Biosystems B.V. ("Schiapparelli")
entered into a distribution agreement whereby Schiapparelli will exclusively
purchase certain diagnostic test kits from the Company for resale in various
European countries. Schiapparelli must meet minimum annual purchases in
order to retain its rights under the agreement.
Olympus America, Inc.
In July, 1996, the Company signed an agreement with Olympus under
which Olympus will continue to purchase an assay to detect CMV for use with
Olympus' automated blood-typing equipment exclusively from the Company.
The Company retained the right to sell the CMV test anywhere in the world
other than North America and Hawaii. The Company may not sell the test in
North America or Hawaii so long as Olympus meets certain minimum annual
purchase requirements.
Agreement with Sheffield Medical Technologies, Inc.
In December 1995, the Company entered into an agreement with Sheffield
Medical Technologies, Inc. to develop a test for an antibody believed to be
responsible for nonprogression of the HIV virus into Acquired Immune
Deficiency Syndrome ("AIDS") in HIV positive individuals. The agreement
calls for the Company to develop a blood test for the antibody which is
believed to be present in virtually all of the HIV positive individuals who
survive at least ten years following diagnosis of the HIV infection. The
assay, if developed, could be useful in monitoring a vaccine that may one
day be developed to generate the antibody.
Technology
The presence and concentration of certain antibodies in the blood of
an individual can assist physicians in the diagnosis of certain diseases.
The Company's assays are in vitro (outside of a patient's body) diagnostic
tests that are used to measure specific substances, either antigens or
antibodies, in blood or other body fluids. An antigen is a substance that
reacts with a particular antibody in a manner which, in the proper
environment, is detectable either by the naked eye or with the aid of a
laboratory technique which amplifies the reaction so that it is rendered
visible. The Company's hemagglutination, ELISA and immunofluorescence
assays are three examples of such an amplification. The Company's blood
chemistry assays are used to aid the monitoring and measurement of health
profiles, such as cholesterol, blood urea nitrogen (BUN), triglycerides,
glucose and uric acid.
The Company relies upon proprietary technologies in the manufacture of
its kits. These technologies include a lyophilization (freeze drying)
technique which substantially extends the shelf life of the Company's
hemagglutination assays, and proprietary methods to prepare antigens for its
ELISA assays.
Hemagglutination
Hemagglutination is the agglutination or "clumping" of red blood cells
("RBCs"). Many substances, including certain antibodies, when placed in
contact with RBCs, will cause agglutination.
Under the appropriate conditions, human RBCs may be modified or
sensitized by binding specific foreign antigens to their surface. These
sensitized RBCs will agglutinate when placed in contact with a specific
antibody to the foreign antigen. The presence of certain antibodies in an
individual's serum (blood from which clotted red blood cells have been
removed) can indicate certain diseases. By sensitizing RBCs with an antigen
that specifically reacts with a particular antibody, the simple visible
observation of the agglutination reaction will indicate the presence of the
disease-produced antibody. The use of RBCs instead of other particles can
allow for simple visual observation of the agglutination reaction in the
proper environment, and reduces the non-specific reactions seen in
artificial systems such as those that utilize latex particles.
To perform the Company's hemagglutination test, a technician combines
the Company's sensitized RBCs with a patient's serum in a small well with a
V-shaped bottom according to a set of directions included with the Company's
test kits. If no agglutination takes place, the RBCs will settle to the
bottom of the well, resulting in a clearly visible red dot which indicates
that the test is negative.
In contrast, if the particular antibody is present in the patient's
blood, the RBCs will agglutinate, which prevents the RBCs from settling to
the bottom of the well. Instead of the small red dot, the substance will
appear diffuse, which indicates a positive reaction.
ELISA
ELISA (or EIA) tests employ small plastic vessels coated with
particular antigens. The test process involves introducing the patient's
serum into the vessel to allow a reaction to occur. If the antibody being
tested for is present, it will bind to the antigens on the inner surface of
the vessel. After the vessel is rinsed, the specifically bound antibody
will remain while any non-specific antibodies will be washed away. To
detect the quantity of the specific antibody, other compounds are added
which will cause a color change in the vessel, the intensity of which is
proportionate to the quantity of the specific antibody bound. If no color
is noted, this indicates that the patient's serum did not contain detectable
quantities of the specific antibody.
Immunofluorescence
The Company's immunofluorescence tests utilize a fluorescent
microscope. Mammalian cells grown on microscope slides are treated with
disease-producing organisms (viral or bacterial). Serum from a patient is
placed in contact with the infected cells. If a patient has antibodies to
the organism causing the disease, the antibodies will bind to the organism.
A chemical is added to the slide which binds to the organism and the
antibody, if present. When the slide is illuminated with light at a
specific wavelength in the microscope, the chemically-treated cells will
appear fluorescent, indicating a positive test result. If the patient did
not have the appropriate antibody, no fluorescence will appear and the test
result will be deemed negative.
Clinical Chemistries
The Company produces a line of general clinical chemistry reagents
utilizing colorimetric, turbometric and enzymatic procedures. These
chemistry reagents are those most commonly performed in clinical
laboratories as general health screening tests and in the identifications of
diseases. These tests can be performed using a broad range of automated
and semi-automated instruments typically used by clinical laboratories.
Acute Phase Reactants and Apolipoproteins
The Company has developed a new application for its ELISA technology
to detect cardiovascular risk factors (apolipoproteins) and inflammatory
signals (acute phase reactants), the latter of which are present in a
patient's blood prior to the clinical manifestation of infection or
inflammation. If successful, these technologies could lead to earlier
detection and treatment of cardiovascular disease, the imminent rejection of
transplanted organs, or the onset of infections, than is possible with
techniques now commercially available. Such earlier detection could enable
physicians to better plan appropriate treatment of patients with these
conditions. The Company currently markets two test kits to detect
inflammatory signals. Product sales for these tests were not material in
fiscal 1996, 1995 or 1994.
Current Products
Hemagglutination Assays
The Company believes that it manufactures and markets the only
commercially available hemagglutination kits which test for antibodies to
antigens present in the nucleus of a cell ("extractable nuclear antigens,"
or "ENAs") which are markers of certain autoimmune diseases. Each of the
Company's hemagglutination assays is based on the Company's proprietary
technique to lyophilize, or "freeze dry," the RBCs which form the central
component of a hemagglutination assay. The Company's proprietary
lyophilization technique for the preservation of RBCs permits the production
of standardized, easy-to-use and accurate hemagglutination tests with an
extended shelf life, all of which are attributes previously unavailable
using hemagglutination assays. The shelf-life of the lyophilized RBCs before
reconstitution may be up to 24 months. A technician reconstitutes the
powdered cells in a water-based solution prior to introducing the patient's
serum.
Each hemagglutination test also requires a specific formula to
sensitize the RBCs prior to lyophilization such that they will react to a
specific antibody. For each of its tests, the Company uses a proprietary
formula to combine antigens and other reagents with RBCs in a manner that
allows for standard, sensitive and specific agglutination reactions. Results
from the Company's test kits are generally available within two hours. The
Company's hemagglutination test kits aid in the diagnosis of the following
diseases:
SLE (lupus) dermatomyositis
mixed connective tissue disease polymyositis
Sjogren's syndrome rheumatoid arthritis
scleroderma (systemic sclerosis) Chagas' disease
cytomegalovirus (cmv)
ELISA Assays
The Company develops and markets ELISA tests for the detection of
disease markers. As with corresponding hemagglutination tests produced by
the Company, most of the Company's ELISA assays test for elevated levels of
antibodies, which are useful indicators of certain diseases. ELISA tests are
widely used by large laboratories because these tests adapt easily to
automated diagnostic testing equipment. The Company's FDA cleared ELISA
test kits aid in the diagnosis of the following diseases:
SLE (lupus) polymyositis
mixed connective tissue disease dermatomyositis
Sjogren's syndrome connective tissue diseases
scleroderma (systemic sclerosis) dermatomyositis
Chagas' disease
Certain of the Company's ELISA tests are also used to monitor the
acute phase response to infection and inflammation in diseases such as lupus
and rheumatoid arthritis.
The Company's ELISA and hemagglutination kits include screen tests in
which up to six different diagnostic indices are monitored at the same time,
which is useful in the rapid initial screening of patients. If the screen
test is positive, individual kits are available to identify which of these
six indices is present.
VIRGO[registered trademark] Products
The Company's immunofluorescence ("IFA") products, sold under the
trade name VIRGO[registered trademark], consist primarily of diagnostic
assays for infectious diseases. VIRGO[registered trademark] test kits are
used as primary or confirmatory tests in many large clinical laboratories in
the United States. There are currently 15 kits in the VIRGO[registered
trademark] product line.
The Company's VIRGO[registered trademark] products are used to aid in
the diagnosis of the following:
cytomegalovirus herpes simplex
SLE (lupus) german measles
connective tissue diseases chicken pox
primary bilary cirrhosis infections with Epstein-Barr virus
toxoplasmosis chlamydial infections
syphilis measles
primary RSV infections mumps infections
RAI Products
The Company's general chemistry products, sold under the trade name
RAICHEM[trademark], consist of a broad range of assays used on automated
and semi-automated clinical chemistry analysis systems. Many of the RAICHEM
assays are used in profiling general health conditions and as specific
indications of possible disease states. The most widely recognized general
chemistry tests made by the Company include those for blood levels of
glucose, cholesterol, triglycerides, uric acid, urea nitrogen and total
protein. In all, more than 60 of the Company's clinical chemistry products
have been cleared by the FDA for sale in the United States.
CPI Products
The Company's wholly owned subsidiary, CPI, manufactures and markets
biotechnology materials and assays for research and for the manufacture of
clinical diagnostic test kits. CPI's product line focuses on two target
markets within the bioreagents marketplace. The first is the research
product market which includes T Cell Growth Factors, Retro-Tek Antigen EIA
kits, Gene Detective EOA kits, monoclonal antibodies, Lymphocyte Isolation
Adjuncts, and Recombinant Growth Factors. The second market is the
industrial raw materials market. Major products in this area include
purified viral lysates, monoclonal antibodies, polyclonal antibodies and
conjugates. CPI also services a number of smaller markets with products
such as the Retro-Tek IFA kits and is the exclusive distributor for a
product line manufactured by Genelabs Diagnostics U.S.A. Inc.
South American Activities
In 1991, the Company began to market its product line in South America
through HDC. In Fiscal 1994, HDC completed the renovation of a new
manufacturing and office facility in Sao Paulo, Brazil, which allows HDC to
complete light manufacturing of test kits in South America.
The Company markets its full product line to the South American
market, including three proprietary assays for Chagas' disease. Chagas'
disease (American Trypanosomiasis) is an insect and blood transfusion
transmitted parasitic infection which eventually attacks the victim's
cardiovascular system. Due to poor sanitation and other factors, insects
have transmitted Chagas' disease widely throughout Central and South
America, with substantial encroachment into Mexico. In response to the need
for efficient and accurate testing for Chagas' disease, the Company has
developed three diagnostic tests: an instrument-free hemagglutination assay,
an ELISA assay, and a hemagglutination assay prepared specifically for use
with certain automated blood-typing instruments. The ELISA assay has
recently received FDA clearance for sale in the United States.
The sales office in Sao Paulo is presently staffed by five full-time
salespeople administrators who receive and process orders, and four people
in production, shipping and technical support. In addition, Dr. de
Oliveira, the Company's Vice President of Research and Development, spends
time in Brazil attending to business of the Company. In fiscal 1996, 1995
and 1994 the Company derived product sales through HDC of approximately
$956,000, $973,000, and $268,000 respectively. See "Business - Facilities."
Distribution and Marketing
General
In the United States, the Company sells its products directly to
clinical laboratories and blood banks and on a private-label basis through
multinational distributors of medical supplies. Internationally, the
Company sells its products primarily through distributors. The Company
grants exclusive and non-exclusive distributorships, which generally cover
limited geographic areas and specific test kits. The Company's exclusive
distributorship arrangements generally condition exclusivity on the
distributor maintaining minimum purchases from the Company. The Company has
relationships with approximately 35 distributors and its products have been
sold in over 20 countries. The Company also engages four independent sales
representatives, who market the Company's products to blood banks and
clinical laboratories.
Since 1989 the Company has been the exclusive provider of test kits to
detect CMV antibodies for use with the Olympus' PK Series Pre-Transfusion
instruments, the world's most widely used automated blood-typing instruments
in blood banks and large commercial laboratories. Pursuant to the terms of
the Company's agreement with Olympus, the Company provides CMV test kits for
sale by Olympus worldwide to users of the PK Series Pre-Transfusion
instruments. The agreement provides that Olympus must purchase a minimum
number of hemagglutination CMV test kits annually from the Company through
February, 1998, subject to the Company meeting certain requirements. The
agreement specifies that during its term, the Company will not sell its CMV
assays to any customers in North America or Hawaii which use Olympus
instruments or use competing laboratory analysis equipment in blood banks.
Sales of CMV assays to Olympus were approximately $395,000, $674,000 and
$592,000 during fiscal 1996, 1995 and 1994, respectively.
The Company also manufactures products on a private label basis for
Sigma Diagnostics, Boehringer Mannheim GmbH ("Boehringer"), and Carter-
Wallace pursuant to supply agreements. Some of these agreements provide for
minimum purchases, however, the Company cannot predict the level of revenues
it will derive from these agreements.
Carter-Wallace accounted for approximately 18% of the Company's
revenue for the fiscal year ended September 30, 1996. Although the Company
expects that its relationship Carter Wallace to continue, if it were to
cease doing business with the Company it would have a material adverse
effect on the Company's business.
Products Under Development
The Company is presently developing new products in areas described
below. The Company spent a total of approximately $778,000, $562,000 and
$727,000 on Company-sponsored research and development for the fiscal years
ended September 30, 1996, 1995 and 1994, respectively. The Company spent a
total of approximately $36,000, $11,000 and $0 on externally-sponsored
research and development for the years ended September 30, 1996, 1995 and
1994, respectively.
Autoimmune Diseases
The Company intends to continue its development of products to aid in
the diagnosis of autoimmune diseases. Hemagglutination and ELISA kits for
the detection of antibodies associated with chronic autoimmune active
hepatitis, primary biliary cirrhosis and thyroiditis are currently under
development. The Company believes that it will have commercially available
assays for these purposes in fiscal 1997, subject to obtaining appropriate
regulatory clearances.
Acute Phase Reactants and Apolipoproteins
The Company continues to develop an application for its ELISA
technology which would detect cardiovascular risk factors (apolipoproteins)
and inflammatory signals (acute phase reactants) that are present in a
patient's blood prior to the manifestation of disease. In addition, this
assay could lead to earlier detection of organ transplant rejection or
infection than is possible with techniques now commercially available. See
"Business - Relationship with Boston University."
The Company is developing a unique modification of its ELISA
technology to test for acute phase reactants, proteins which the human liver
produces when the body's tissues are damaged by a wound or infection. This
technology is licensed by the Company from Boston University, which has a
patent for the technology. See "Business - Relationship with Boston
University." The Company is using its new technology of detecting levels of
acute phase reactants to produce a number of new test kits. The Company's
first product utilizing this technology, a new assay for acute infection and
chronic inflammation, is currently in clinical studies.
The Company's acute phase reactant technology has a number of
potential applications, including:
Transplantation
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The key to successful organ transplantation is to ensure that
the new organ is not rejected by the recipient's body. This can be
aided in part by administering appropriate drugs prior to the time
when the recipient's body rejects the transplant. It has been reported
that during the early phase of the rejection process, the body will
produce increased levels of certain acute phase reactants. Using the
Company's serum amyloid A ("SAA") assay, physicians may be able to
detect the point at which a body is rejecting a transplanted organ
earlier than current techniques allow.
Cardiovascular Diseases
-----------------------
The Company is developing a test to measure two blood
lipoproteins, which are indicators of risk of cardiovascular
disease. High levels of these two lipoproteins have been cited in a
study supported by the National Institutes of Health as more
reliable indices of cardiovascular risk than cholesterol levels.
Together with SAA, these technologies could detect high risk levels in
patients with chronic autoimmune disease.
Rheumatoid Arthritis
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In connection with the Company's development program, the
Company has sold test kits utilizing its acute phase reactant
technology to Pfizer for use in the evaluation of Pfizer's
experimental drug Tenidap[registered trademark] for the treatment of
rheumatoid arthritis.
Infectious Diseases
The Company continues to develop additional assays to aid in the
diagnosis of infectious diseases. The Company recently completed the
development of products known as a "ToRCH panel" which include assays for
toxoplasmosis, rubella, CMV, and herpes. The Company is also developing test
kits for Lyme disease and for Epstein-Barr virus. As with all of the
Company's products under development, these products will have to undergo
FDA review before they can be marketed and sold in the United States. The
Company cannot predict when it will receive FDA clearance for these
products, if at all. See "Business - Government Regulation."
Clinical Chemistry Reagents
The Company continues to develop additional assays and reagents to
fill in its clinical chemistry reagent product line sold under the RAICHEM
label.
Relationship with Boston University
Dr. Carl Franzblau, the Chairman of the Board, Chief Executive Officer
and President of the Company, serves as a Professor and Chairman of the
Department of Biochemistry and as Associate Dean for Graduate Affairs at
Boston University School of Medicine. Dr. Alan Cohen, a Director of the
Company, serves as a Professor of Medicine and Pharmacology at Boston
University School of Medicine. Lawrence Gilbert, a Director of the Company,
was also the Director of the Patent and Technology Administration at Boston
University through December, 1994. Dr. John I. Sandson, a Director of the
Company, is Dean Emeritus of Boston University School of Medicine. Charles
W. Smith, a Director of the Company, served as Senior Vice President of
Boston University from 1984 through 1989 and as its Treasurer from 1983
through June 1992. The Company believes that the continuing relationship
between Boston University and these individuals, particularly Dr. Franzblau,
is beneficial to the Company, particularly with respect to providing the
Company with access to new developments in scientific areas related to the
Company's business.
License Agreements
In March 1992, the Company entered into a license agreement (the "B.
U. License Agreement") with Boston University (the "University") pursuant to
which the Company has obtained the exclusive right to use certain of the
University's patented technology to manufacture and market assays for the
detection of acute phase reactants. See "Business - Products under
Development." Pursuant to the B. U. License Agreement, the Company is
obligated to pay an annual royalty of 5% of the first $50,000 of the
Company's net sales of these assays, and 10% of the Company's net sales of
these assays in excess of $50,000 until the Company has paid the University
a license fee of $10,000 and reimbursed it for certain patent expenses.
Thereafter, the Company will pay a 5% royalty on its net sales of these
assays. Sales under the B.U. License Agreement have been immaterial to
date.
In July 1994, the Company entered into a second license agreement with
the University under which the Company obtained the exclusive right to use
additional patented and patent-pending technology of the University to
manufacture and market certain products. The royalties due under the terms
of the agreement are the same as the B.U. License Agreement and will be
applied to a license fee of $15,000. No royalties were paid in the years
ended September 30, 1996, 1995 or 1994 and no amounts were accrued for
royalties at September 30, 1996, 1995 or 1994. The agreement terminates
upon the termination of the patents.
Product Development Agreement
On February 14, 1992 the Company entered into a product development
agreement with the University to develop a urine-based assay to measure
levels of desmosine, which can indicate certain diseases such as cystic
fibrosis and emphysema. This agreement was terminated in 1993. The parties
are currently in discussions concerning the desirability of commercializing
this technology.
Manufacturing and Sources of Supply
The Company manufactures its hemagglutination and ELISA test kits
primarily at its facility in Waltham, Massachusetts, and its
VIRGO[registered trademark] products based on immunofluorescence technology
at its facility in Columbia, Maryland. The RAICHEM line is produced at the
Company's facility in San Diego, California and the CPI line is produced in
Buffalo, New York. It purchases RBCs and some of the antigens and other
reagents used in the kits from outside vendors. Most reagents used in the
Company's test kits are manufactured at the Company's facilities. The
Company uses lyophilization equipment to preserve sensitized RBCs for its
hemagglutination test kits.
All components used in the Company's products are available from
multiple sources, except for an antigen called SSA, which the Company uses
in two of its ELISA and two of its hemagglutination test kits. The Company
believes that the supplier of this antigen produces this antigen for many
customers. Management believes that if necessary, the Company could produce
sufficient quantities of this antigen itself. Therefore, if the supply of
this antigen were to cease, the Company believes it would not have a long-
term material adverse impact on the Company's business taken as a whole.
Government Regulation
The Company's manufacturing and marketing of diagnostic test kits are
subject to government regulation in the United States and in other countries
in which the Company's products are sought to be marketed. The process of
obtaining regulatory clearance involves lengthy and detailed laboratory and
clinical testing, and other costly and time consuming procedures. This
regulatory process may delay marketing of new products for lengthy periods
and impose costly procedures, thereby furnishing an advantage to competitors
with greater resources. Although over 90 of the Company's current products
have been cleared by the FDA through the 510(k) review process, described
below, there can be no assurance that regulatory clearance will be granted
on a timely basis in the future, if at all. The extent of government
regulation which may arise from future legislative or administrative action
cannot be predicted.
In vitro monitoring products, such as those employing antibodies for
the detection of autoimmune diseases in humans, are generally classified as
medical devices by the FDA. For some in vitro products, the United States
Food, Drug, and Cosmetic Act provides a process known as a "510(k) review"
to enable the manufacturer to demonstrate that the proposed product is
"substantially equivalent" to another product in commercial distribution in
the United States before May 28, 1976 or which has subsequently been
classified as a Class I or Class II medical device. When a 510(k) review is
used, a sponsor is required to submit a Pre-Market Notification to the FDA.
In the absence of a response from the FDA, the Company would not be able to
proceed with sales of its in vitro product for diagnostic use unless and
until it received notification from the FDA. In the event that the FDA
requests additional information for the Pre-market Notification, there could
be multiple cycles of submissions until clearance is obtained. The FDA has
statutory authority to also require clinical studies data to support a Pre-
Market Notification 510(k) application.
In cases where there are no existing FDA approved products
"substantially equivalent" to the new product, an approved pre-market
approval application ("PMA"), which involves a lengthier and more burdensome
process, would be required before the FDA would allow commercial
distribution. No assurance can be given that any in vitro blood test the
Company develops in the future will be found to have an intended use that
would qualify the new test for 510(k) clearance. Accordingly, a PMA may be
required for any new application of the Company's proposed in vitro blood
tests.
The FDA invariably requires clinical data for a PMA and, although the
FDA may grant 510(k) clearance without supporting clinical data, such data
may be required if the FDA determines that technical differences from
existing products suggest the need for additional evidence of safety or
effectiveness of the new product. If clinical studies are necessary, the FDA
may require the Company to obtain an investigational device exemption
("IDE"). An IDE normally restricts the distribution of an investigational
device to a limited number of institutions, and use by a limited number of
investigators, for the purpose of performing studies to be submitted to the
FDA in a 510(k) Pre-Market Notification or a PMA. The amount that can be
charged for use of an investigational device in a clinical study is
generally limited to recovery of costs until a 510(k) notification is
cleared or PMA approval is granted by the FDA. Accordingly, no significant
return can be expected during the study of investigational devices.
Although certain diagnostic products are exempt from IDE requirements,
the exemption applies only to tests which do not require an invasive
sampling procedure that presents significant risk, do not introduce energy
(such as X-rays) into a subject, and are not used as diagnostics without a
confirmatory diagnosis by a medically established diagnostic product or
procedure. The Company's products would not be used as diagnostics without
such a confirmatory diagnosis while an investigational device.
Medical devices may be exported before receiving IDE, 510(k) or PMA
clearance under certain conditions, providing FDA approval of the proposed
exportation is obtained. The receiving country must certify that the device
is not in conflict with the laws of that country and that the foreign
government is aware of the device's import. In addition, the FDA may require
safety data similar to that required for approval of an IDE before approving
the exportation of a new device. In foreign countries, the Company's
distributors are generally responsible for obtaining any required government
consents.
The Company is also required to register with the FDA as a device
manufacturer and list its devices. As such, the Company is subject to
inspection on a routine basis for compliance with the FDA's Good
Manufacturing Practice ("GMP") regulations. These regulations require that
the Company manufacture its products and maintain its documents in a
prescribed manner with respect to manufacturing, testing and control
activities. Failure to comply with applicable GMP or other regulatory
requirements can result in, among other things, sanctions, fines, delays or
suspensions of approvals, injunctions against further distribution, seizures
or recalls of products, operating restrictions and criminal prosecutions. In
addition, the Company is required to comply with various FDA requirements
for labeling. Pursuant to the Medical Device Reporting Act regulations, the
Company is also required to notify the FDA of any deaths or serious injuries
alleged to have been associated with the use of its diagnostic test kits as
well as product malfunctions that would likely cause or contribute to death
or serious injury if the malfunction were to recur. Finally, the FDA
prohibits an approved device from being marketed for unapproved
applications. Failure to comply with regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Competition
The clinical diagnostic industry is highly competitive. There are many
companies, both public and private, engaged in diagnostics-related research
and development, including a number of well-known pharmaceutical and
chemical companies. Competition is based primarily on product reliability,
customer service and price. Some of these companies have substantially
greater capital resources and have marketing and business organizations of
substantially greater size than the Company. Many companies have been
working on immunodiagnostic reagents and products, including some products
believed to be similar to those currently marketed or under development by
the Company, for a longer period of time than has the Company. The Company
believes that its primary competitors in the diagnostics market include
Abbott Laboratories, Sigma Diagnostics, Trace-America, Inc., Gull
Laboratories, Inc., Inova, Sanofi Diagnostics Pasteur, Inc. and Diamedix
Corporation. The Company expects competition within this industry to
intensify.
Product Liability
The testing, marketing and sale of clinical diagnostic products entail
an inherent risk of allegations of product liability, and there can be no
assurance that product liability claims will not be asserted against the
Company. The Company may incur product liability due to product failure or
improper use of products by the user. Inaccurate detection may result in the
failure to administer necessary therapeutic drugs or administration of
unnecessary and potentially toxic drugs. Even with proper use of a product,
there may be specific instances in which the results obtained from the
Company's test kits could lead a physician to incorrectly predict the
appropriate therapy for a particular patient. The Company maintains product
liability insurance in the amount of up to $5,000,000 per incident and in
the aggregate which, based on the Company's experience and industry
practice, the Company believes to be adequate for its present operations. No
assurance can be given that the amount of the Company's insurance is
sufficient to fully insure against claims which may be made against the
Company.
Patents and Proprietary Rights
The Company protects its technology primarily as trade secrets rather
than by relying on patents, either because patent protection is not possible
or, in management's opinion, would be less effective than maintaining
secrecy. In addition, the Company relies upon confidentiality agreements
with its employees. To the extent that it relies on confidentiality
agreements and trade secret protection, there can be no assurance that the
Company's efforts to maintain secrecy will be successful or that third
parties will not be able to develop the technology independently. The
Company may in the future apply for patent protection for certain of its
technology when management believes such protection would be beneficial to
the Company. The protection afforded by patents depends upon a variety of
factors which may severely limit the value of the patent protection,
particularly in foreign countries, and no assurance can be given that
patents, if granted, will provide meaningful protection for the Company's
technology.
Royalty Obligations
The Company is required to pay royalties to third parties on sales of
some of its products and proposed products. See "Business - Relationship
with Boston University"
Employees
As of September 30, 1996, the Company had 96 full-time employees, of
which five are executive officers, 26 are employed in sales, marketing,
general and administrative activities and 65 are involved in production and
research and development. After the CPI acquisition, the Company had 110
full-time employees.
Item 2. Description of Property.
The Company maintains its principal executive offices, laboratory and
production operations in Waltham, Massachusetts in two adjacent buildings;
one a 4,000 sq. ft. facility which houses the Company's research and
development laboratories, and the other a 15,000 sq. ft. facility which
accommodates the laboratory and production operations and the executive
offices of the Company. The Company pays rent in the amount of $36,000 per
annum for the 4,000 square foot facility on a month-to-month basis. The
Company pays rent in the amount of $82,500 per annum for the 15,000 square
foot facility pursuant to the terms of that lease which ends May 30, 1997.
The Company also leases 29,000 square feet in a production facility in
Columbia, Maryland where it manufactures the VIRGO[registered trademark]
product line. Under the Columbia lease, which has a five-year term through
June 30, 2000, the Company pays $100,000 per annum in rent. The Company also
leases 20,100 square feet in San Diego, California, where it manufactures
the RAICHEM products. Under the San Diego lease, which extends through
September 30, 1997, the Company pays $225,084 per annum. In addition, the
Company leases a 1,900 square foot warehouse facility near its production
site for which it pays $13,080 per annum on an annual lease which may be
renewed each April 1. The Company believes that its facilities are adequate
for its present and foreseeable needs.
The Company's 51%-owned subsidiary leases approximately 4,500 square
feet in Sao Paulo, Brazil pursuant to a lease which expires in September 30,
1997. This subsidiary pays rent in an amount of approximately $5,500 per
month for this space. The Company believes that its facilities in Sao Paulo
are adequate for its present and foreseeable needs.
As part of the purchase of substantially all the assets of 872 Main
Street Corporation in November, 1996, the Company acquired the land and
building located at 872 Main Street in Buffalo, New York. CPI operates out
of this facility which consists of approximately 15,000 square feet of
space. The Company believes that its facilities in Buffalo, New York are
adequate for its present and foreseeable needs.
Item 3. Legal Proceedings.
The Company is not presently involved in any material pending
litigation.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Stock has been traded on the over-the-counter
market through the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") since February 4, 1993. The Company's Common
Stock is also traded on the Boston Stock Exchange. On December 18, 1996,
the closing bid and ask prices for the Common Stock as reported by NASDAQ
were $2.69 and $2.88, respectively, per share.
For the periods indicated, the following table sets for the range of
high and low bid prices for the Common Stock as reported by NASDAQ during
Fiscal 1996. These prices reflect inter-dealer prices, without retail mark-
up, mark-down or commission, and may not represent actual transactions.
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High Low
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1995
First Fiscal Quarter.......................... $3.50 $1.88
Second Fiscal Quarter......................... $2.25 $1.13
Third Fiscal Quarter.......................... $2.13 $1.09
Fourth Fiscal Quarter......................... $4.50 $1.75
1996
First Fiscal Quarter.......................... $3.50 $1.75
Second Fiscal Quarter......................... $4.13 $2.50
Third Fiscal Quarter.......................... $4.13 $2.63
Fourth Fiscal Quarter......................... $3.13 $2.00
1997
First Quarter (through December 18, 1996)..... $2.94 $2.13
</TABLE>
As of December 18, 1996, there were approximately 236 holders of
record of the Company's Common Stock.
Dividends
The Company has never paid cash dividends. The Company currently
intends to retain all future earnings, if any, for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This section contains certain forward-looking statements that are
subject to risks and uncertainties including without limitation those
discussed in the section entitled "Risk Factors" in the Prospectus contained
in the registrant's Registration Statement on Form S-3, File No. 333-6147
(which section is hereby incorporated by reference herein). These risks and
uncertainties could cause the registrant's actual results in future periods
to differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-
looking statements speak only as of the date of this report, and the
registrant cautions readers not to place undue reliance on such statements.
Overview
Since its inception, the Company has concentrated its efforts on
developing, manufacturing and marketing medical diagnostic test kits used to
aid in the diagnosis of certain diseases. During the fiscal years ending
1996 and 1995 the Company has also concentrated its expansion efforts on
synergistic acquisitions of companies, product lines and assets. The
Company presently has more than 100 different test kits available for
general sale, over 90 of which have received FDA clearance for sale in the
United States.
Results of Operations
Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September
30, 1995
Revenues increased to approximately $10,219,000 from approximately
$3,955,000 (158%), primarily as a result of (i) sales from the Company's
March 1, 1996 acquisition of RAI, (ii) sales from the VIRGO[registered
trademark] product line and (iii) contract manufacturing sales to Carter-
Wallace. Approximately $2,667,000 (43%) of the increase is directly
attributable the RAI acquisition.
Cost of product sales increased to approximately $6,213,000 from
approximately $2,173,000 (186%), and increased as a percentage of product
sales to 61% from 55% due to lower gross margin Carter Wallace and Virgo
[registered trademark] sales and the effect of purchase accounting
adjustments for the acquisition of the RAI subsidiary of approximately
$400,000. Of the total increase approximately $2,154,000 (53%) is directly
attributable to the RAI acquisition.
Research and development expenses increased to approximately $814,000
from approximately $573,000 (42%), primarily due to the addition of RAI and
Virgo[registered trademark] related research and development expenses. Of
the total increase approximately $91,000 (38%) is attributable to the
acquisition of RAI. The Company is currently developing and completing
studies related to FDA 510(k) submissions for several new products.
Selling, general and administrative expenses increased to
approximately $3,237,000 from approximately $2,055,000 (58%), primarily due
to expenses at RAI and increased payroll and payroll benefits. RAI
expenses accouted for approximately $764,000 (65%) of this increase. SG&A
expenses decreased as a percentage of revenues from 52% to 32% due to the
Company's utilization of its present infrastructure to manage additional
operations.
Net other expense increased to approximately $419,000 from
approximately $139,000 due to an increase in interest expense due to
financing activities which included a private placement offering of
$2,000,000 completed in September, 1995 (see Liquidity and Capital
Resources), capital lease agreements used to acquire machinery and equipment
and expenses related to the issuance of warrants.
Net loss decreased to approximately $464,000 from approximately
$985,000, primarily due to higher VIRGO[registered trademark] and
Carter-Wallace sales and the acquisition of RAI. This was partially offset
by higher cost of product sales, research and development costs, selling,
general and administrative expenses and an increase in net other expense.
Fiscal Year Ended September 30, 1995 Compared to Fiscal Year Ended
September 30, 1994
Revenues increased to approximately $3,955,000 from approximately
$2,361,000 (67%), primarily as a result of (i) increased sales by the
Company's foreign subsidiary, HDC, (ii) sales arising subsequent to July 1,
1995 in connection with the VIRGO[registered trademark] acquisition, (iii)
increased revenue from the rental of automated blood-typing systems, and
(iv) contract manufacturing sales to Carter-Wallace.
Cost of product sales increased to approximately $2,173,000 from
approximately $1,185,000 (83%), and increased as a percentage of product
sales to 55% from 50% primarily due to increased costs of depreciation and
costs associated with the startup of the manufacturing contract with Carter-
Wallace, which included material, payroll, depreciation and facility
expenses.
Research and development expenses decreased to approximately $573,000
from approximately $727,000 (21%), primarily due to a decrease in lab
supplies and raw materials used for research conducted in connection with
the Company's new product development activities. The Company is currently
developing and completing studies related to FDA 510(k) submissions for
several new products.
Selling, general and administrative expenses increased to
approximately $2,055,000 from approximately $1,579,000 (30%), primarily due
to increased expenses at HDC relating to staffing and operating its
manufacturing facility in Sao Paulo, Brazil and increased bad debt expense.
Net other expense increased to approximately $139,000 from
approximately $4,000 due to an increase in interest expense and a decrease
in interest income. The increase in interest expense primarily relates to
financing activities which the Company has entered into to acquire machinery
and equipment. Interest income decreased due to a reduction in the average
balance of interest bearing accounts held by the Company and lower rates of
interest.
Net loss decreased to approximately $985,000 from approximately
$1,108,000, primarily due to higher HDC and Carter-Wallace sales, the
addition of VIRGO[registered trademark] sales in the fourth quarter and
lower research and development costs. This was partially offset by an
increase in selling, general and administrative expenses and a decrease in
the gross margin percentage.
Liquidity and Capital Resources
The Company has financed its capital expenditures, operating
requirements and growth primarily from the initial public offering of its
common stock, a bridge loan, lease financing arrangements, borrowings from
nonaffiliates and related parties, cash flow from operations and private
placements completed in September 1995 and March, 1996.
On November 1, 1996 the Company, through its wholly owned subsidiary,
CPI, completed the purchase of substantially all the assets of 872 Main
Street Corporation (formally Cellular Products, Inc.) for $400,000 in cash
and a $200,000 promissory note payable on November 1, 1997. CPI is based in
Buffalo, New York and is a manufacturer of biotechnology materials and
assays for research and for the manufacture of clinical diagnostic test
kits. It's products are used in the growth and testing of retro viruses and
as raw materials by manufacturers of clinical diagnostic assays. The
product mix includes enzyme oligonucleotide assays, monoclonal antibodies,
recombinant growth factors, viral lysates and bulk raw materials. The
Company believes the acquisition will enable the Company to produce several
key raw materials for its test, allow for better control of manufacturing
costs and enhance the Company's research programs.
On March 19, 1996 the Company completed a private placement equity
offering which provided net proceeds of $6,410,000. In connection with the
offering the Company issued 2,695,255 units at a price of $2.75 per unit.
Each unit consisted of one share of common stock and one common stock
purchase warrant. The warrant became tradable upon the completion of a
November 14, 1996 amended registration statement, expires in five years, and
provides the option to purchase one share of common stock for $2.75. The
proceeds from the offering were used to purchase RAI, reduce corporate debt
and to provide additional working capital for the Company.
On March 1, 1996 the Company acquired 100% of the outstanding stock of
RAI from Kone Holdings, Inc. for $4,979,195 in cash. RAI is a manufacturer
of diagnostic test kits which focus in the areas of clinical chemistry and
serum proteins. RAI has approximately 60 test kits which have received FDA
clearance for sale in the United States. Management believes that the
addition of this subsidiary complements the Company's existing businesses.
In September and October 1995, the Company completed a private
placement, resulting in net proceeds of approximately $1,949,000 which was
raised through the issuance of unsecured promissory notes ("Notes"), which
were scheduled to mature August 1997 and bore interest at the rate of 13%
per annum. In January, 1996 the Company retired $450,000 of the Notes for
$450,000 in cash and 100,000 warrants. These warrants allow the holder to
purchase common stock at $1.00 per share. The remaining Notes have been
converted into 1,550,000 shares of common stock. As of the completion of a
registration statement as amended on November 11, 1996, these warrants can
be traded pursuant to the terms of the prospectus.
On July 1, 1995 the Company acquired assets relating to a line of
diagnostic test kits from Schiapparelli Biosystems, Inc. for $1,380,000
consisting of $1 million which was paid on July 1, 1995 and a note to
Schiapparelli of approximately $380,000 which was paid on December 15, 1995.
The VIRGO[registered trademark] line of test kits, based on
immunofluorescence technology, is used in the detection of infectious and
autoimmune disease and complement the Company's existing product line.
In December, 1994 the Company entered into a five-year agreement with
Carter-Wallace, Inc. to manufacture a broad range of diagnostic test kits
for its Wampole Division. The transfer of technology from Carter-Wallace to
the Company was completed during the quarter ended March 31, 1996.
At September 30, 1996, the Company's working capital was approximately
$5,417,000 compared to approximately $2,518,000 at September 30, 1995. This
increase was principally due to the Company's private placement equity
offering and the acquisition of net working capital from RAI. The increase
was partially offset by the cash payment used to acquire RAI and by the year
to date operating losses.
Inventory balances increased from approximately $1,085,000 on
September 30, 1995 to approximately $3,178,000 on September 30, 1996 due to
the purchase of RAI inventory and the purchase of approximately $496,000
worth of raw material inventory from Carter Wallace. Accounts payable and
accrued expenses increased from approximately $773,000 to approximately
$1,429,000 primarily due to the assumption of RAI payables and the Carter
Wallace inventory purchases. The Carter Wallace purchases will be paid for
over a two year period. Accounts Receivable balances increased from
approximately $949,000 to approximately $1,674,000 primarily due to the RAI
acquisition.
Long term debt decreased from approximately $4,266,000 on September
30, 1995 to approximately $958,000 on September 30, 1996, due to the
conversion of $1,550,000 in Notes (described above) into common stock, the
retiring of an additional $450,000 of these Notes and the prepayment of
approximately $848,000 of capital lease obligations following the private
placement equity offering of March 19, 1996. Notes payable of approximately
$380,000 were repaid in December, 1995.
At September 30, 1996 the Company had capital finance arrangements
with two companies totaling approximately $958,000. The Company used this
financing to acquire blood typing machines and other equipment. The Company
is required to pay an average of $42,000 per month in the aggregate under
these arrangements during fiscal 1997. These arrangements run through 1998.
Management believes its cash and cash equivalents and short-term
investments, together with anticipated cash flow from operations, are
sufficient to meet the Company's cash needs for its ongoing business.
Impact of Inflation
Domestic inflation during the last three fiscal years has not had a
significant effect on the Company's business activities. Translation and
transaction gains and losses between the Company and its subsidiary in
Brazil are expensed each period.
New Accounting Pronouncements
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities", which requires that debt and
marketable equity securities be classified as trading, available-for-sale or
held-to-maturity. Available-for-sale securities are reported in the balance
sheet at fair value with unrealized gains or losses included in a separate
component of stockholders' equity. At September 30, 1996 and 1995, the
Company held certificates of deposit of $1,360,249 and $803,000,
respectively. All certificates held at September 30, 1996 mature within one
year. These certificates of deposit are classified as available-for-sale
and are recorded at cost at September 30, 1996 and 1995, which approximates
fair value.
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"). The new
standard establishes new guidelines regarding when impairment losses on
long-lived assets, which included property and equipment, certain identifiable
intangible assets and goodwill should be recognized and how impairment losses
should be measured. It is the opinion of the Company's management that the
effect of the implementation of FAS 121 is not material to the Company's
financial statements.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation." SFAS 123 allows the Company to
account for its stock-based employee compensation plans based upon either a
fair value method or the intrinsic value method currently followed by the
Company. If the current method is retained, SFAS 123 requires certain
additional disclosures regarding the impact which the fair value method
would have on the results of the Company's operations. The Company expects
to retain its current method of accounting for stock-based compensation
plans, and therefore, the adoption of SFAS 123 will have no impact on the
Company's financial position or results of operations. Adoption of SFAS 123
is required for financial statements of fiscal years beginning after
December 15, 1995. The Company will implement the disclosure requirements
of SFAS 123 as required.
Item 7. Financial Statements and Supplementary Data.
See Item 13 below and the Index therein for a listing of the financial
statements and supplementary data filed as part of this report.
Item 8. Change in Certifying Accountants.
On January 29, 1996, Price Waterhouse LLP declined to stand for
reelection as independent accountants for the Company.
There were no disagreements between the Company and Price Waterhouse LLP
regarding any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedures in connection with the
audit of each of the Company's fiscal years in the period October 1, 1994
through September 30, 1995, or at any time through January 29, 1996 which,
if not resolved to the satisfaction of Price Waterhouse LLP would have caused
Price Waterhouse LLP to make reference to the subject matter of such
disagreement in connection with its report. There have been no reportable
events (as defined by Regulation S-B Item 304(a)(1)(iv)(B)) during the
period from October 1, 1994 through September 30, 1995, and during the
period through January 29, 1996. In addition, during this period, the
Company has not consulted another accountant regarding the application of
accounting principles to a specified transaction.
The report of Price Waterhouse LLP upon the Company's financial statement
for the fiscal year ending September 30, 1995 contained neither an adverse
opinion nor a disclaimer of opinion nor was such report qualified or
modified as to uncertainty, audit scope or accounting principles.
Price Waterhouse LLP has furnished the Company with a letter addressed to
the SEC stating that it agrees with the above statements. A copy of the
letter, dated February 2, 1996, was filed as an exhibit to the Company's
report on Form 8-K filed with the Commission on February 3, 1996 and is
incorporated herein by reference.
On May 20, 1996 the Board of Directors of the Company approved the
engagement of BDO Seidman, LLP as the independent accountants for the
Company.
PART III
Items 9 to 12 are incorporated herein by reference to the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission.
PART IV
Item 13. Exhibits, List and Reports on Form 8-K.
(a)(1) Financial Statements. The financial statements required to be
filed by Item 7 herewith are as follows:
<TABLE>
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Page
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Report of Independent Certified Public Accountants - BDO Seidman, LLP F-2
Report of Independent Accountants - Price Waterhouse LLP F-3
Consolidated Balance Sheets at September 30, 1996
and 1995 F-4 to F-5
Consolidated Statements of Operations for the years
ended September 30, 1996, 1995 and 1994 F-6
Consolidated Statements of Stockholders' Equity
for the years ended September 30, 1996, 1995 and 1994 F-7
Consolidated Statements of Cash Flows for the years
ended September 30, 1996, 1995 and 1994 F-8 to F-9
Notes to Consolidated Financial Statements F-10 to F-33
</TABLE>
(a)(2) Exhibits.
(i) The following exhibits, required by Item 601 of Regulation
S-B, are filed herewith:
None.
(ii) The following exhibits were filed as part of the Company's
Form SB-2 Registration Statement (33-52686-B) declared
effective by the Securities and Exchange Commission (the
"Commission") on February 4, 1993 and are herein
incorporated by reference:
<TABLE>
<CAPTION>
Exhibit No. Title
- ----------- -----
<C> <S>
3a Certificate of Incorporation.
3b Bylaws.
3c Certificate of Agreement of Merger between Hemagen Diagnostics
Inc., a Massachusetts corporation, and the Company, dated May 1, 1992.
3d Articles of Merger between Hemagen Diagnostics Inc., a
Massachusetts corporation, and the Company, dated May 1, 1992.
4a Rights of security holders (included in Exhibits 3a and 3b).
4b Specimen Stock Certificate.
10a Technology Purchase Agreement between Dr. de Oliveira and Dr.
Lazzari and Seragen, Inc., dated April 15, 1983.
10b Assignment and Assumption Agreement between the Company and
Seragen, Inc., dated September 12, 1985.
10c Product Development Agreement between the Company and Boston
University, dated February 14, 1992.
10d License Agreement between the Company and Boston University, dated
March 1992.
10e Distributorship Agreement between the Company and Eurobio
Laboratories, dated June 11, 1991.
10f Distributorship Agreement between the Company and International
Reagents Corporation, dated February 1, 1990.
10g Financial Assistance Agreement between the Company and Hemagen
Diagnosticos, Comercio, Importacao e Exportacao Ltd., dated July 31, 1991.
10h Distribution Agreement between the Company and Hemagen
Diagnosticos, Comercio, Importacao e Exportacao Ltd., dated July 31, 1991.
*10i Form of Employment Agreement between the Company and Dr.
Franzblau.
*10j Form of Employment Agreement between the Company and Dr. de
Oliveira.
*10k 1992 Stock Option Plan.
10l Distributorship Agreement between the Company and Labor
Diagnostika GmbH, dated July 1, 1990.
10m Product Purchase Agreement between the Company and Olympus
Corporation, dated February 24, 1989.
10n OEM Agreement between the Company and Sigma Diagnostics, Inc.,
dated May 11, 1992.
10o Note issued by the Company to Boston University, dated December
15, 1985.
10p Letter Agreement between the Company and Antonio Lazzari, M.D.,
dated April 28, 1985.
10q Lease between the Company and Philip Pagliazzo and Rose Pagliazzo,
dated May 15, 1992.
10r Distribution Agreement between the Company and Olympus
Corporation, dated September 1, 1992.
*10s Form of Employment Agreement between the Company and Mr. von
Stein.
10t Product Development Agreement between the Company and Sigma
Diagnostics, Inc., dated October 16, 1992.
*10u Revised Employment Agreement between the Company and Dr. de
Oliveira.
*10v Revised Employment Agreement between the Company and Dr.
Franzblau.
10w Description of the Company's lease for certain premises located in
Waltham, Massachusetts.
10x Lease for office space of Hemagen Diagnosticos, Comercio,
Importaceo e Exportaceo, Ltd. ("HDC") in Sao Paulo, Brazil.
10x Description of the Lease for office space of HDC in Sao Paulo,
Brazil.
10y Equity Purchase Agreement between the Company and HDC, dated as of
October 1, 1992.
10aa Form of Warrant issued in connection with the Bridge Loan and
Statement of Registration Rights.
10cc Form of Subscription Agreement used in connection with the Bridge
Loan.
21 List of the Company's Subsidiaries.
<F*> These exhibits relate to a management contract or compensatory plan or
arrangement.
</TABLE>
(iii) The following exhibit was filed as part of the Company's
Form 10-QSB for the quarter ended March 30, 1993.
Exhibit No. Title
- ----------- -----
10a Master Lease Agreement between the Company and Aberlyn
Capital Management Limited Partnership, dated April 1, 1993.
(iv) The following exhibit was filed as part of the Company's
Form 10-KSB for the Fiscal Year ending September 30, 1994.
Exhibit No. Title
- ----------- -----
10a Product Development Agreement between the Company and Boehringher
Mannheim GmbH, dated November 25, 1993.
10b Option Agreement between the Company and Boston University, dated
October 15, 1993.
(v) The following exhibits were filed as part of the Company's
Form 10QSB for the quarter ending December 31, 1994
10dd Distributorship Agreement between the Company and Labor
Diagnostika GmbH dated October 1, 1994.
10ee Agreement between the Company and Carter-Wallace, Inc. dated
December 22, 1994.
10ff License Assignment and License Agreement between the Company and
Aberlyn Capital Management Limited Partnership dated December
30, 1994.
(vi) The following exhibits were filed as part of the Company's
Form 10-KSB for the year ending September 30, 1996.
Exhibit No. Title
- ----------- -----
10gg Distributorship Agreement between the Company and Schiapparelli
Biosystems. B.V.
10hh Distributorship Agreement between the Company and Olympus
America, Inc.
23a Consent of Independent Certified Public Accountants--BDO
Seidman, LLP
23b Consent of Independent Accountants--Price Waterhouse LLP
27 Financial Data Schedule
(b) Reports on Form 8-K. (i) On July 13, 1995 the Company filed a
form 8-K related to the purchase VIRGO[registered trademark]
product line.
The Following financial statements were filed with the form 8K.
Report of KPMG Peat Marwick.
Statement of Inventory and Equipment and Leasehold Improvements
of Immunofluorescent Assay and IL-2 Product Lines of
Schiapparelli Biosystems, Inc. for the year ended December 31,
1994.
Statement of Operations before Administrative, Interest and
Income Tax Expenses of Immunofluorescent Assay and IL-2 Product
Line for the six month ended June 30, 1995 (unaudited).
Pro forma Condensed and Combined Statement of Operations of the
Company and certain assets acquired from Schiapparelli for the
nine months ended June 30, 1995 and the year ended September 30,
1994 (unaudited).
(ii) On December 27, 1995 the Company filed a form 8-K
announcing the intention of purchasing RAI.
(iii) On February 3, 1996 the Company filed a form 8-K announcing
that Price Waterhouse had declined to stand for reelection
as independent accountants for the Company.
(iv) On March 4, 1996 the Company filed a form 8-K related to
the purchase of RAI.
The following financial statements were filed with the form 8-K.
Audited Financial Statements for Reagents Applications, Inc. as
of December 31, 1994 and 1993.
Pro Forma Financial Information for the Registrant and RAI for
the year ended September 30, 1995 and for the three months ended
December 31, 1995 and December 31, 1994.
(v) On May 22, 1996 the Company filed a form 8-K related to the
approval of BDO Seidman, LLP as the independent
accountants for the Company.
(vi) On November 14, 1996 the Company filed a form 8-K related
to the purchase of the assets of 872 Main Street
Corporation (formerly Cellular Products, Inc.).
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HEMAGEN DIAGNOSTICS, INC.
Date: December 26, 1996 By:/s/ Dr. Carl Franzblau
-----------------------------
Dr. Carl Franzblau, President
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Capacity Date
- ---- -------- ----
<S> <C> <C>
/s/Carl Franzblau President and Chairman of December 26, 1996
- --------------------- of the Board of Directors
Carl Franzblau, Ph.D. (Principal Executive Officer)
/s/William Franzblau Chief Financial Officer December 26, 1996
- -------------------- (Principal Financial
William Franzblau Officer)
/s/Myrna Franzblau Treasurer (Principal December 26, 1996
- ------------------ Accounting Officer)
Myrna Franzblau
/s/Alan S. Cohen Director December 26, 1996
- -------------------
Alan S. Cohen, M.D.
/s/Lawrence Gilbert Director December 26, 1996
- -------------------
Lawrence Gilbert
- ---------------------------- Director
Ricardo M. de Oliveira, M.D.
/s/John I. Sandson Director December 26, 1996
- ---------------------
John I. Sandson, M.D.
/s/Charles W. Smith Director December 26, 1996
- -------------------
Charles W. Smith
</TABLE>
HEMAGEN DIAGNOSTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants - BDO Seidman...................... F-2
Report of Independent Accountants - Price Waterhouse................. F-3
Consolidated Balance Sheet as of September 30, 1996 and 1995......... F-4
Consolidated Statement of Operations for the years ended September
30, 1996, 1995 and 1994............................................. F-5
Consolidated Statement of Stockholders' Equity for the years ended
September 30, 1996, 1995 and 1994................................... F-6
Consolidated Statement of Cash Flows for the years ended September
30, 1996, 1995 and 1994............................................. F-7
Notes to Consolidated Financial Statements........................... F-8
HEMAGEN DIAGNOSTICS, INC.
INDEX TO EXHIBITS
Hemagen Diagnostics, Inc.
and Subsidiaries
Index to Consolidated Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants - BDO Seidman, LLP F-2
Report of Independent Accountants - Price Waterhouse LLP F-3
Consolidated financial statements:
Balance sheets F-4 to F-5
Statements of operations F-6
Statements of stockholders' equity F-7
Statements of cash flows F-8 to F-9
Notes to consolidated financial statements F-10 to F-33
</TABLE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Hemagen Diagnostics, Inc.
We have audited the accompanying consolidated balance sheet of Hemagen
Diagnostics, Inc. and subsidiaries as of September 30, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hemagen
Diagnostics, Inc. and subsidiaries at September 30, 1996, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
Boston, Massachusetts
November 12, 1996
Report of Independent Accountants
To the Board of Directors and
Stockholders of Hemagen Diagnostics, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Hemagen Diagnostics, Inc. and its subsidiary at September 30, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended September 30, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Hemagen Diagnostics, Inc. for any period
subsequent to September 30, 1995.
Price Waterhouse LLP
Boston, Massachusetts
November 30, 1995
Hemagen Diagnostics, Inc.
and Subsidiaries
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1996 1995
- --------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current:
Cash and cash equivalents $ 756 919 $ 1 333 067
Short-term investments 1 360 249 803 000
Accounts receivable, less allowance for
doubtful accounts of $53,800 and $26,900
at September 30, 1996 and 1995, respectively 1 673 791 949 254
Inventories 3 178 180 1 084 926
Prepaid expenses and other current assets 271 800 195 140
- ---------------------------------------------------------------------------------------------
Total current assets 7 240 939 4 365 387
Property and equipment, net of accumulated depreciation 2 931 879 2 538 282
Other assets 1 636 412 401 414
- ---------------------------------------------------------------------------------------------
$11 809 230 $ 7 305 083
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
September 30, 1996 1995
- ---------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 1 428 790 $ 772 574
Notes payable - 382 584
Current maturities of long-term debt 395 034 672 073
Deferred revenue - 20 000
- ---------------------------------------------------------------------------------------------
Total current liabilities 1 823 824 1 847 231
Long-term debt payable to related parties - 350 000
Long-term debt, less current maturities 562 672 3 243 566
- ---------------------------------------------------------------------------------------------
Total liabilities 2 386 496 5 440 797
- ---------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary - -
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, no par value - 1,000,000 shares
authorized; none issued - -
Common stock, $.01 par value - 30,000,000 shares
authorized; 7,620,890 and 3,162,000 shares issued
and outstanding at September 30, 1996 and 1995, respectively 76 209 31 620
Additional paid-in capital 13 132 757 5 154 912
Accumulated deficit (3 780 232) (3 316 246)
- ---------------------------------------------------------------------------------------------
9 428 734 1 870 286
Less - receivable from stockholders (6 000) (6 000)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 9 422 734 1 864 286
- ---------------------------------------------------------------------------------------------
$11 809 230 $ 7 305 083
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Hemagen Diagnostics, Inc.
and Subsidiaries
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Product sales $10 161 335 $3 935 195 $ 2 360 541
Research and development contracts 58 000 20 000 -
- -------------------------------------------------------------------------------------------
10 219 335 3 955 195 2 360 541
- -------------------------------------------------------------------------------------------
Cost and expenses:
Cost of product sales 6 213 398 2 173 087 1 185 022
Cost of research and development revenue 36 040 10 814 -
Research and development 777 718 562 497 727 149
Selling, general and administrative 3 237 045 2 054 908 1 579 376
- -------------------------------------------------------------------------------------------
10 264 201 4 801 306 3 491 547
- -------------------------------------------------------------------------------------------
Operating loss (44 866) (846 111) (1 131 006)
- -------------------------------------------------------------------------------------------
Other income (expenses):
Interest income 106 566 108 961 129 743
Interest expense (517 052) (265 696) (87 833)
Foreign exchange gain (loss) (21 179) 17 903 (46 001)
Other 12 545 - -
- -------------------------------------------------------------------------------------------
(419 120) (138 832) (4 091)
- -------------------------------------------------------------------------------------------
Loss before provision for income tax
benefit and minority interest in net loss
of consolidated subsidiary (463 986) (984 943) (1 135 097)
Income tax benefit - - (17 661)
- -------------------------------------------------------------------------------------------
Loss before minority interest (463 986) (984 943) (1 117 436)
Minority interest in net loss of
consolidated subsidiary - - (9 314)
- -------------------------------------------------------------------------------------------
Net loss $ (463 986) $ (984 943) $(1 108 122)
===========================================================================================
Net loss per share $ (.08) $ (.31) $ (.35)
===========================================================================================
Weighted average shares outstanding 5 666 357 3 157 759 3 150 000
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Hemagen Diagnostics, Inc.
And Subsidiaries
Consolidated Statements of Stockholders' Equity
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Receivable
-------------------- Paid-in Accumulated from Stockholders'
Shares Par Value Capital Deficit Stockholders Equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 3 150 000 $31 500 $ 4 960 032 $(1 223 181) $(6 000) $ 3 762 351
Net loss - - - (1 108 122) - (1 108 122)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 3 150 000 31 500 4 960 032 (2 331 303) (6 000) 2 654 229
Issuance of common stock to Board of Directors
in lieu of compensation 12 000 120 23 880 - - 24 000
Issuance of stock purchase warrants - - 171 000 - - 171 000
Net loss - - - (984 943) - (984 943)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 3 162 000 31 620 5 154 912 (3 316 246) (6 000) 1 864 286
Issuance of common stock upon conversion
of subordinated debt 1 550 000 15 500 1 502 565 - - 1 518 065
Issuance of common stock, net of expenses,
in connection with private placement offering 2 695 255 26 953 6 383 216 - - 6 410 169
Exercise of common stock purchase warrants 90 517 905 (905) - - -
Exercise of common stock purchase warrants 45 259 453 (453) - - -
Exercise of common stock purchase warrants 45 259 452 (452) - - -
Issuance of common stock to employees under
stock option plan 5 100 51 8 899 - - 8 950
Issuance of common stock to Board of Directors
under stock option plan 7 500 75 11 175 - - 11 250
Issuance of common stock purchase warrants - - 50 000 - - 50 000
Issuance of common stock to Board of Directors
in lieu of compensation 20 000 200 23 800 - - 24 000
Net loss - - - (463 986) - (463 986)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 7 620 890 $76 209 $13 132 757 $(3 780 232) $(6 000) $ 9 422 734
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Hemagen Diagnostics, Inc.
and Subsidiaries
Statements of Cash Flows
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss $ (463 986) $ (984 943) $(1 108 122)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 763 041 415 803 231 281
Compensation relating to the issuance of
warrants and common stock 74 000 - -
Amortization of deferred financing costs and
debt discount - 37 530 -
Foreign exchange (gain) loss 21 179 (17 903) 46 001
Minority interest in net income (loss) of
consolidated subsidiary - - (9 314)
Loss on sale of fixed assets - - 3 866
Changes in operating assets and liabilities,
net of effects of purchase of RAI in 1996
and Virgo[registered trademark] in 1995:
Restricted cash - 53 000 (53 000)
Accounts receivable 135 435 (437 744) (192 007)
Amounts due from related party - - 20 000
Refundable income taxes - 17 661 (7 993)
Inventories (306 967) (141 728) (135 347)
Prepaid expenses and other current assets (471) (42 394) 25 065
Accounts payable and accrued expenses 329 871 479 128 830 356
Deferred revenue (20 000) 20 000 -
- -----------------------------------------------------------------------------------------------
Net cash provided (used) by
operating activities 532 102 (601 590) (349 214)
- -----------------------------------------------------------------------------------------------
Cash flow from investing activities:
Payment for acquisition, net of cash acquired (4 920 548) (1 034 670) -
Purchases of short-term investments (1 360 249) (303 000) -
Proceeds from maturity of short-term investments 803 000 650 000 850 000
Purchases of property and equipment (234 343) (330 636) (957 489)
Proceeds from sale of fixed assets - - 14 575
Other assets 345 973 (255 346) (8 678)
- -----------------------------------------------------------------------------------------------
Net cash used by investing activities (5 366 167) (1 273 652) (101 592)
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from notes payable to related party - 350 000 -
Repayments of notes payable to related party (350 000) - -
Proceeds from issuance of long-term debt 108 392 3 007 052 -
Repayments of long-term debt (1 930 844) (355 942) (220 306)
Proceeds from issuance of common stock, net 6 410 169 - -
Deferred financing costs - (51 095) -
Exercise of stock options and warrants 20 200 - -
- -----------------------------------------------------------------------------------------------
Net cash provided (used) by
financing activities 4 257 917 2 950 015 (220 306)
- -----------------------------------------------------------------------------------------------
Effect of exchange rates on
cash and cash equivalents - (10 383) (54 541)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (576 148) 1 064 390 (725 653)
Cash and cash equivalents at
beginning of year 1 333 067 268 677 994 330
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 756 919 $ 1 333 067 $ 268 677
===============================================================================================
Cash payments of interest $ 507 849 $ 242 930 $ 87 833
===============================================================================================
Cash payments (refunds) of taxes $ - $ (17 661) $ -
===============================================================================================
</TABLE>
Supplemental disclosure of non-cash financing and investing activities, see
Note 2.
See accompanying notes to consolidated financial statements.
1. Nature of Business and Organization
Hemagen Diagnostics, Inc. ("Hemagen" or the "Company") is a biotechnology
company which develops, manufactures and markets laboratory medical diagnostic
kits used to aid in the diagnosis of certain autoimmune and infectious
diseases. In the United States, the Company sells its products directly to
clinical laboratories and blood banks and on a private-label basis through
multinational distributors of medical supplies. Internationally, the Company
sells its products primarily through distributors. The Company was
incorporated in the Commonwealth of Massachusetts in 1985 and reincorporated in
the state of Delaware in 1992.
2. Significant Accounting Policies
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and Hemagen Diagnostics Commercio, Importaco & Exporataco, Ltd.
("HDC") for the three years ended September 30, 1996 and the accounts of
Reagents Applications, Inc. ("RAI") from March 1, 1996, the effective date of
the acquisition as described in Note 3. All significant intercompany balances
and transactions have been eliminated in consolidation.
The Company has a 51% interest in HDC. Minority interest in consolidated
subsidiary represents the minority shareholders' proportionate share of the
earnings of HDC. All losses of HDC in excess of the minority shareholders'
investment have been allocated to the Company.
Foreign Currency Translation
The functional currency of HDC is the U.S. dollar. Certain assets
(primarily inventories and property and equipment) and liabilities and related
income and expenses of HDC are remeasured into U.S. dollars at exchange rates
in effect when the assets were acquired or the liabilities were incurred. All
other assets and liabilities are translated at the exchange rates in effect as
of the balance sheet date, and income and expense items are translated at
average exchange rates for the period. Remeasurement gains and losses are
included in operations as they occur.
Cash Equivalents and Short-Term Investments
The Company considers all investments with an original maturity of three
months or less to be cash equivalents. The Company invests its excess cash in
certificates of deposit.
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities", which requires that debt and marketable equity
securities be classified as trading, available--for--sale or held--to--
maturity. Available--for--sale securities are reported in the balance sheet at
fair value with unrealized gains or losses included in a separate component of
stockholders' equity. At September 30, 1996 and 1995, the Company held
certificates of deposit of $1,360,249 and $803,000, respectively. All
certificates held at September 30, 1996 mature within one year. These
certificates of deposit are classified as available--for--sale and are recorded
at cost at September 30, 1996 and 1995, which approximates fair value.
Inventories
Inventories are stated at the lower of cost, determined on a first--in,
first--out basis, or market.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on a
straight--line basis over the estimated useful lives of the related assets.
Expenditures for repairs and maintenance are expensed as incurred.
Goodwill
Goodwill resulting from the excess of cost over fair value of net assets
acquired is being amortized on a straight-line basis over 15 years. The
Company evaluates the recoverability and remaining life of its goodwill and
determines whether the goodwill should be completely or partially written-off
or the amortization period accelerated. The Company will recognize an
impairment of goodwill if undiscounted estimated future operating cash flows of
the acquired business are determined to be less than the carrying amount of the
goodwill. If the Company determines that the goodwill has been impaired, the
measurement of the impairment will be equal to the excess of the carrying
amount of the goodwill over the amount of the undiscounted estimated future
operating cash flows. If an impairment of goodwill were to occur, the Company
would reflect the impairment through a reduction in the carrying value of
goodwill.
Income Taxes
The Company utilizes the liability method of accounting for income taxes,
as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes". Under this method, deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary
differences between the carrying amount and the tax basis of assets and
liabilities.
Revenue Recognition
Revenue from the sale of products is recognized when the product is
shipped. Revenue from contracts to conduct research and development is
recognized using the percentage--of--completion method. Losses are provided
for at the time that management determines that contract costs will exceed
related revenues. The portion of contract billings related to research and
development not complete at the balance sheet date is included in deferred
revenue.
Advertising
The Company expenses advertising costs as incurred. Advertising expense
was approximately $48,000, $32,000 and $23,000 in fiscal 1996, 1995 and 1994,
respectively.
Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period, and shares obtainable through conversion of convertible debt.
Convertible debt and common stock equivalents, consisting of outstanding stock
options and warrants, are excluded from the computation in loss periods as
their effect is antidilutive.
Statement of Cash Flows - Disclosure of Non-Cash Financing and Investing
Activities
During 1996, the Company forced the conversion of $1,550,000 of notes
payable into 1,550,000 shares of common stock. Also in connection with the
conversion, common stock purchase warrants with a total estimated value of
$50,000 were issued.
Common stock with a value of $24,000 was issued to non-employee members
of the Board of Directors in lieu of compensation during 1996.
During 1996, 181,035 warrants were exercised in a non-monetary
transaction whereby the Company forgo its rights to the cash consideration upon
exercise of these warrants in return for the warrant holder's forfeiture of
their right to exercise the remaining 68,965 warrants.
An instrument with a net book value of $157,319 was transferred from
fixed assets to inventory during 1996.
Capital lease obligations of $400,802 and $643,564 related to sale and
leaseback transactions, were incurred in fiscal 1995 and 1994, respectively,
when the Company entered into capital lease agreements for fixed assets. An
additional capital lease obligation for fixed assets of $117,650 was entered
into in 1995. The capital lease obligations entered into in 1994 include an
asset of $174,750 acquired by the Company in 1993 and recorded in accounts
payable at September 30, 1993. In fiscal 1994, this liability was paid
directly by the leasing company and the lease liability was recorded by the
Company (see Note 6).
An instrument with a cost of $174,750 was transferred from inventory to
fixed assets in 1994.
Long term debt of $3,994 was forgiven in conjunction with the sale of
fixed assets in 1994.
Fixed assets with a book value of $799,500, recorded in accounts payable
at September 30, 1994, were returned in 1995 prior to being paid for.
In conjunction with the purchase of certain assets and liabilities of
Schiapparelli, a note payable for $382,584 was issued (see Note 3).
Common stock purchase warrants with a total estimated value of $116,000
were issued in 1995 to outside consultants for services to be rendered (see
Note 11).
Common stock purchase warrants with a total estimated value of $55,000
were issued in 1995 to a leasing company in conjunction with financing
agreements (see Note 11).
Common stock with a value of $24,000 was issued to non--employee members
of the Board of Directors in lieu of compensation during 1995 (see Note 11).
New Accounting Pronouncements
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). The new
standard establishes new guidelines regarding when impairment losses on long-
lived assets, which include property and equipment, certain identifiable
intangible assets and goodwill, should be recognized and how impairment losses
should be measured. It is of the opinion of the Company's management that the
effect of the implementation of SFAS 121 is not material to the Company's
financial statements.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 123 ("SFAS 123"), "Accounting
for Stock--Based Compensation." SFAS 123 allows the Company to account for its
stock--based employee compensation plans based upon either a fair value method
or the intrinsic value method currently followed by the Company. If the
current method is retained, SFAS 123 requires certain additional disclosures
regarding the impact which the fair value method would have on the results of
the Company's operations. The Company expects to retain its current method of
accounting for stock--based compensation plans, and therefore, the adoption of
SFAS 123 will have no impact on the Company's financial position or results of
operations. Adoption of SFAS 123 is required for financial statements of
fiscal years beginning after December 15, 1995. The Company will implement the
disclosure requirements of SFAS 123 as required in fiscal 1997.
3. Acquisitions
Effective March 1, 1996, the Company acquired 100% of the outstanding
common stock of Reagents Applications, Inc., a manufacturer of diagnostic test
kits for a cash purchase price of $4,979,195.
The acquisition was recorded using the purchase method of accounting,
whereby the net assets acquired were recorded at their estimated fair values
and the excess of cost over the fair value of the net assets acquired of
approximately $1,635,487 was allocated to goodwill and is being amortized over
15 years.
The Company acquired certain assets, primarily inventory and fixed
assets, and assumed certain liabilities, related to the Virgo[registered
trademark] product line of Schiapparelli Biosystems, Inc. ("Schiapparelli") on
July 1, 1995 for total consideration and related costs of $1,417,254. The
purchase price was paid in three installments: $1,000,000 upon closing and
notes payable of $250,000 due on December 31, 1995 and $132,584 due on June 30,
1996. Both parties subsequently agreed to accelerate the payment of these
notes to December 15, 1995. The notes payable to Schiapparelli were secured by
a first priority security interest in the accounts receivable and inventory of
the Virgo[registered trademark] business. At September 30, 1995, the accounts
receivable and inventory balance of the Virgo[registered trademark] business
exceeded the amount of the note. The acquisition was funded by the issuance of
$2,000,000 13% convertible notes through a private placement offering (see
Note 10). The acquisition was accounted for under the purchase method of
accounting, and accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based upon their fair values at the date of
acquisition. The excess of the fair value of net assets acquired over the
purchase price was recorded as a reduction of the value of fixed assets
acquired, in accordance with the provisions of Accounting Principles Board
Opinion No. 16, "Business Combinations". The Virgo[registered trademark]
products consist primarily of assays that aid in the diagnosis of infectious
and autoimmune diseases using immunofluorescence technology.
The consolidated statements of operations and cash flows for the year
ended September 30, 1996 include the results of operations and cash flows for
RAI from March 1, 1996 through September 30, 1996 and for Virgo[registered
trademark] for the entire year.
The consolidated statements of operations and cash flows for the year
ended September 30, 1995 include the results of operations and cash flows for
Virgo[registered trademark] from July 1, 1995 through September 30, 1995.
The unaudited pro forma combined results of operations of the Company and
the businesses acquired in fiscal 1996 and 1995 for the years ended September
30, 1996 and 1995, assuming that the acquisitions had occurred at October 1,
1994 and after giving effect to certain pro forma adjustments are as follows:
<TABLE>
<CAPTION>
September 30, 1996 1995
------------------------------------------------
<S> <C> <C>
Revenue $12 334 000 $11 664 000
Net loss (855 000) (428 000)
Net loss per share (.14) (.08)
</TABLE>
4. Related Party Transactions
Related Parties
The Company's Chairman of the Board, Chief Executive Officer, President
and principal stockholder is the Chairman of Boston University's (the
"University") Biochemistry Department and a Professor and Associate Dean for
Graduate Affairs of the University's School of Medicine. Certain other
directors and stockholders of the Company are also employed by the University.
The Company has entered into certain product development and license
agreements with the University as further described below.
Product Development Agreement
In February 1992, the Company entered into a product development
agreement with the University to develop, on a best efforts basis, a product
which can indicate certain diseases. Under this agreement, the Company is
obligated to provide facilities, personnel, supplies and services totaling
$100,000, which are recorded as research and development contract support costs
as incurred. No such costs were incurred in the years ended September 30,
1996, 1995 or 1994. The Company retains a 50% interest in all intellectual
property developed. The University is obligated to provide $100,000 in cash to
the Company over the term of the agreement to pay for the services of two
employees of the Company and certain equipment and other costs which are
recorded as costs of research and development revenues as incurred. The
Company recorded $10,814 of such costs in the year ended September 30, 1995.
No such costs were incurred in the years ended September 30, 1996 or 1994. The
Company received $40,000 from the University under this agreement in the year
ended September 30, 1995, of which $20,000 of revenue was recognized in 1995
and the remaining $20,000 was recognized in 1996. No revenue was recognized
under this product development agreement in the year ended September 30, 1994.
No amounts were due to the Company at September 30, 1996 or 1995 under this
agreement.
If the technology developed is licensed to a third party, royalties will
be distributed in proportion to the number of patents and patent applications
licensed to the Company and the University, respectively. License fees will be
distributed equally up to a maximum of $215,000; thereafter, the fees will be
allocated in the same manner as royalties.
The agreement terminated in September 1993. The agreement provided that
following its termination (i) if the Company and the University both desire to
further develop and market the technology, that they enter into a joint venture
for that purpose, (ii) if only the Company desires to further develop the
technology, it may purchase the rights to the technology and reimburse the
University for its initial $100,000 investment, (iii) if only the University
desires to pursue the technology, then the University will repay the Company
for its initial investment, (iv) if neither party desires to pursue the
technology, neither party will have any obligation to the other. The rights to
the technology will be assigned in accordance with patent law and the
University shall own any equipment purchased with University funds. If neither
party desires to pursue the technology, the Company has agreed to assign its
rights to the technology to the University. The Company intends to further
develop the technology and is discussing the alternatives with the University.
License Agreements
In March 1992, the Company entered into a license agreement with the
University under which the Company obtained the exclusive right to use the
University's patented and patent -pending technology to manufacture and market
certain products. Under the agreement, the Company is obligated to pay an
annual royalty of 5% of the first $50,000 of the Company's net sales of these
products and 10% of net sales of these products in excess of $50,000 until the
Company has paid the University a license fee of $10,000 in total and
reimbursed it for certain patent expenses. All royalties to be paid thereafter
will equal 5% of the Company's net sales of these products. Sales of products
using technology obtained under the agreement, but not specifically covered
under the patent application, and sales which occur if no patents are granted,
are subject to a 3% royalty for a period of ten years. The Company also agreed
to pay the University 27.5% of royalties the Company receives if it sublicenses
the technology and 25% of the license fees resulting from any sublicense
agreement. There were no royalties paid in the years ended September 30, 1996
or 1995. Royalties of $2,873 were paid in the year ended September 30, 1994
and $618 was accrued at September 30, 1995. The agreement terminates upon the
termination of the patents.
In July 1994, the Company entered into a license agreement with the
University under which the Company obtained the exclusive right to use
additional patented and patent--pending technology of the University to
manufacture and market certain products. The royalties due under the terms of
the agreement are the same as the initial license agreement and will be applied
to the license fee of $15,000. No royalties were paid in the years ended
September 30, 1996, 1995 or 1994 and no amounts were accrued for royalties at
September 30, 1996 or 1995. The agreement terminates upon the termination of
the patents.
Convertible Notes
In fiscal 1995, the Company issued approximately $350,000 of the
$1,956,250 private placement offering of convertible notes (see Note 10) to
related parties. The related parties consist primarily of board members,
officers, and management of the Company and their family members. At September
30, 1995, the Company had accrued interest of approximately $7,000 relating to
these notes and the same amount of interest expense had been incurred for
fiscal 1995. The Company recognized $30,000 of interest expense relating to
these notes in fiscal 1996.
The Company forced the conversion of these notes into shares of common
stock as further described in Note 11.
5. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
---------------------------------------------------------
<S> <C> <C>
Raw materials $1 278 021 $ 382 578
Work-in-process 274 181 346 517
Finished goods 1 625 978 355 831
---------------------------------------------------------
$3 178 180 $1 084 926
=========================================================
</TABLE>
6. Property and Equipment
Property and equipment include the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
---------------------------------------------------------
<S> <C> <C>
Furniture and equipment $3 950 300 $2 893 063
Leasehold improvements 523 113 481 734
---------------------------------------------------------
4 473 413 3 374 797
Less accumulated depreciation
and amortization 1 541 534 836 515
---------------------------------------------------------
$2 931 879 $2 538 282
=========================================================
</TABLE>
Depreciation and amortization expense relating to property and equipment
was $708,525, $404,522 and $219,766 for the years ended September 30, 1996,
1995 and 1994, respectively.
Included in the above amounts is equipment of $174,750 which was not in
service at September 30, 1995. Depreciation on this equipment began in 1996
when the equipment was placed in service. Included in the above amounts is
property and equipment acquired under capital leases of $534,114 and $1,927,004
at September 30, 1996 and 1995, respectively. Accumulated depreciation and
amortization on property and equipment under capital leases totaled $321,671
and $338,988 at September 30, 1996 and 1995, respectively.
In fiscal 1996, the Company retired lease obligations amounting to
$1,337,044 and acquired the ownership of the assets under these leases.
7. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------
<S> <C> <C>
Goodwill, net of accumulated
amortization of $54,516 $1 580 971 $ -
Other 55 441 401 414
-------------------------------------------------------
$1 636 412 $401 414
=======================================================
</TABLE>
8. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
---------------------------------------------------
<S> <C> <C>
Accounts payable - trade $ 645 068 $556 739
Accrued professional fees 144 149 60 100
Accrued vacation 155 163 46 000
Accrued other 484 410 109 735
----------------------
$1 428 790 $772 574
===================================================
</TABLE>
9. Development and License Agreements
In October 1992, the Company entered into a product development agreement
with a customer, under which the customer and the Company would each contribute
$93,500, subject to the Company meeting specified goals in connection with the
development of a product line by December 31, 1993. The Company completed the
development in the year ended September 30, 1993, and all amounts due under the
terms of the agreement were paid in full. Under this agreement, the customer
received a perpetual, non--exclusive license to manufacture the product. The
customer and the Company agreed to pay royalties to each other, ranging from 2%
to 6%, on net sales of the product sold by the other during the first ten years
after development. In addition, the selling party shall pay a royalty equal to
6% of net sales of the product to the other party until a total amount of
$93,500 has been paid to the other party. After the Company has been
reimbursed its $93,500 contribution, the balance of the customer's contribution
not already repaid by the Company shall be repaid in eight quarters by
offsetting any royalty payments due to the customer. If the customer elects
not to manufacture the product itself, then Hemagen shall have the right of
first refusal to manufacture the product for sale by the customer. Hemagen
retains ownership rights in all technology developed under this agreement.
There were no sales of this product in the years ended September 30, 1996,
1995 or 1994. The Company and the customer are in the process of filing for
FDA clearance for sale of such products in the U.S.
In November 1993, the Company entered into a product development
agreement with a customer under which the Company would develop a product which
would work in conjunction with the customer's blood analyzer. Under the terms
of the agreement, the Company would provide facilities and personnel and the
customer would provide the use of its blood analyzer and materials. The
Company completed the development in the year ended September 30, 1994. Under
this agreement, the Company maintains exclusive rights to manufacture and sell
the product and may enter into an OEM agreement with the customer. The Company
may grant the customer the right to manufacture the product on its own under
mutually agreeable terms but
neither party has the right to license or assign the right to manufacture the
product to a third party without the permission of the other party. As of
September 30, 1996, no OEM or license agreements have been entered into by the
Company and the customer. There were no sales of this product in the years
ended September 30, 1996, 1995 or 1994.
10. Financing Arrangements
Long-Term Debt
Borrowings classified as long-term debt consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
--------------------------------------------------------------------
<S> <C> <C>
Term loan at an effective interest rate of
approximately 13%, monthly principal and
interest payments of $31,309 from January
1996 through December 1998 $789 340 $1 000 000
Obligations under capital leases (Note 15) 168 366 1 309 389
Convertible 13% notes, converted into
common stock during fiscal 1996 - 1 956 250
--------------------------------------------------------------------
957 706 4 265 639
Less current portion 395 034 672 073
--------------------------------------------------------------------
$562 672 $3 593 566
====================================================================
</TABLE>
Term Loan
In December 1994, the Company borrowed $1,000,000 from a leasing company,
using certain patents as collateral, to fund working capital requirements. The
Company's first year of interest was netted from the proceeds of the loan and
recorded as prepaid interest. Principal and interest payments are due in
monthly installments of $31,309 beginning in January 1996 through December
1998, with a balloon payment of $100,000 due at the end of the term. At the
Company's option, the amount due at the end of the term may be paid in four
additional monthly installments of $25,437. Principal repayments for the
fiscal years ending September 30, 1997, 1998 and 1999 will be $268,281,
$331,778 and $189,281, respectively.
Convertible 13% Notes
In the fourth quarter of fiscal 1995, the Company completed a private
placement offering of $1,956,250 in notes to fund the acquisition of the
Virgo[registered trademark] product line (see Note 3). An additional $43,750
of notes were issued in October 1995. The notes bore interest at 13%, payable
August 1 and February 1, and were scheduled to mature on August 1, 1997. The
notes, including any accrued interest thereon, were convertible into shares of
the Company's common stock at a conversion price of $1.00. The Company was
allowed to force conversion at any time after the registration of the shares of
the underlying common stock was declared effective if the quoted market price
of the Company's common stock was greater than or equal to $3.00 for 5
consecutive days. The Company was obligated to register the shares of common
stock issuable upon conversion of the notes by February 29, 1996 with the
Securities and Exchange Commission (the "SEC"). If the shares were not
registered by that date, the Company was obligated to issue upon conversion an
additional 10% of the shares underlying the notes for each 30 day period or
portion thereof that the securities remained unregistered. The notes were
unsecured and were subordinate to all of the Company's other indebtedness. In
conjunction with this offering, the Company incurred debt issuance costs of
$51,095, which was being amortized over the life of the debt. Of these debt
issuance costs, $19,160 was amortized during 1996 while the remaining $31,935
was offset against additional paid-in capital upon the conversion of the notes
into common stock.
During fiscal 1996, the Company repaid $450,000 of these notes and forced
the conversion of the remaining $1,550,000 as further described in Note 11.
11. Stockholders' Equity
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of preferred
stock, $.01 par value per share. The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by
the Board of Directors and may include voting rights, preferences as to
dividends and liquidation, conversion and redemption rights and sinking fund
provisions.
Common Stock
During 1996, and as discussed in Note 10, the Company forced the
conversion of the unpaid principal balance of the 13% Subordinated Convertible
Notes into 1,550,000 shares of common stock at a rate of $1.00 per share. All
of these shares were registered with the SEC under the Securities Act of 1933
with the filing of a Form SB-2, registration statement, which, as amended, was
declared effective on November 11, 1996.
Also during 1996, the Company filed a Form SB-2, registration statement,
under the Securities Act of 1933 with the SEC in order to register 2,695,255
shares of common stock which were issued in a private placement offering (the
"Private Placement Offering"). This registration statement, as amended, was
declared effective on November 14, 1996. The Company received net proceeds
after expenses of approximately $6,410,000 in connection with the Private
Placement Offering.
In connection with the exercise of certain common stock purchase warrants
and options, the Company issued 193,635 shares of common stock during 1996.
Board of Directors Common Stock
During 1996 and 1995, the Company issued 20,000 and 12,000 shares,
respectively, of common stock to non--employee members of the Board of
Directors in lieu of cash compensation. The related compensation expense is
amortized over the one year service period.
Common Stock Purchase Warrants
In connection with certain bridge financing which was repaid in 1993, the
Company issued warrants to purchase 360,000 shares of common stock at $3.00 per
share and a warrant to purchase 36,000 shares of common stock at $3.60 per
share exercisable through December 31, 1997. During 1995, the Company repriced
90,000 warrants to individuals who participated in both the 1992 bridge
financing and the 1995 private placement. The warrants were repriced from
$3.00 per share to $1.50 per share. During 1996, 7,500 of these warrants were
exercised. The incremental value of the repriced warrants over the original
warrants at the time of repricing was estimated by management and determined
not to be material to the Company's results of operations or financial
position. Upon the effective date of the registration statement filed in
connection with the initial public offering, the warrant to purchase 36,000
shares was cancelled. This was replaced with warrants to purchase 100,000
shares of common stock at $8.00 per share exercisable through February 3, 1998.
During 1995, 70,000 of these warrants were forfeited.
In conjunction with sale and leaseback transactions (see Notes 2, 6, 10
and 15), the Company issued warrants to purchase 50,000 and 20,000 shares of
common stock at $3.25 per share exercisable through April 1, 1998 and April 29,
1999 in fiscal 1993 and 1994, respectively. The value of the warrants at the
time of issuance was estimated by management and determined not to be material
to the Company's results of operations and financial position.
In conjunction with the $1,000,000 term loan and a sale and leaseback
transaction with a leasing company (see Notes 10 and 15) in fiscal 1995, the
Company issued warrants to purchase 52,000 and 35,000 shares of common stock at
$2.50 and $2.00 per share, respectively, exercisable through December 30, 1999
and June 30, 2000, respectively. The value of the warrants at the time of
issuance was estimated by management to be $35,000 and $20,000, respectively.
In 1995, the Company issued 250,000 warrants to purchase common stock at
$1.00 per share exercisable through August 10, 2000 to three consultants for
services provided to the Company during the period July 1, 1995 through June
30, 1996. The value of the warrants at the time of issuance was estimated by
management to be $116,000. The value was amortized over the period the
services were provided. During fiscal 1996, 181,035 warrants were exercised in
a non-monetary transaction whereby the Company relinquished its rights to the
cash consideration upon exercise of these warrants in return for the warrant
holder's forfeiture of their right to exercise the remaining warrants.
In October 1995, the Company issued 10,000 warrants to purchase common
stock at $2.37 per share exercisable through October 16, 1997 to an investor.
The value of the warrants at the time of issuance was estimated by management
and determined not to be material to the Company's results of operations and
financial position.
In connection with the Private Placement Offering, the Company issued
2,695,255 common stock purchase warrants exercisable at $2.75 per share and
expiring on February 28, 2001.
Also in connection with the Private Placement Offering, the Company
issued Placement Agent Warrants allowing for the purchase of 269,526 units at a
price of $2.75 per unit. Each unit consists of one share of the Company's
common stock and one common stock Purchase Warrant which entitles the holder to
purchase one share of the Company's common stock for $2.75 per share, expiring
February 28, 2001. The Placement Agent Warrants expire February 28, 1999.
In January 1996, the Company issued 100,000 warrants to purchase common
stock at $1.00 per share exercisable through January 8, 1999. The value of the
warrants at the time of issuance was estimated by management to be $50,000.
Reserved Shares
At September 30, 1996, the Company has reserved 4,737,896 shares of
common stock for issuance upon the exercise of outstanding common stock options
and warrants. During March 1996, the Company's Board of Directors voted to
increase the number of authorized shares of common stock from 10,000,000 to
30,000,000.
1992 Stock Option Plan
The 1992 Stock Option Plan (the "Plan") provides for the grant of
incentive and nonqualified stock options for the purchase of up to an aggregate
of 200,000 shares of the Company's common stock by employees, directors and
consultants of the Company. In 1994, the stock option plan was amended to
provide for the purchase of up to an aggregate of 500,000 shares of the
Company's common stock. The Board of Directors is responsible for the
administration of the Plan. The Board determines the term of each option,
number of shares for which each option is granted and the rate at which each
option is exercisable. The Company may not grant an employee incentive stock
options with a fair market value in excess of $100,000 that is exercisable
during any one calendar year. The term of incentive stock options granted
cannot exceed ten years (five years for options granted to holders of more than
10% of the voting stock of the Company). The exercise price for incentive
stock options granted may not be less than 100% of the fair market value per
share of the underlying common stock (110% for options granted to holders of
more than 10% of the voting stock of the Company). The Board, at the request
of any optionee, may convert incentive stock options that have not been
exercised at the date of conversion into non-qualified stock options.
In the years ended September 30, 1996, 1995 and 1994, 11,000, 128,100 and
8,000 options were granted, respectively, at exercise prices ranging from
$1.75--$5.50. During 1995, the Board of Directors approved the repricing of
53,250 stock options from $5.50 to $1.75. The exercise price of the repriced
options approximated the fair market value of the Company's common stock on the
date of repricing. During 1996, 5,100 shares were exercised. In the years
ended September 30, 1996 and 1995, 5,025 and 750 options were forfeited,
respectively. At September 30, 1996, 1995 and 1994, 228,225, 227,350 and
100,000 options were outstanding, respectively. At September 30, 1996 and
1995, 213,225 and 181,850 options, respectively, were exercisable and 266,675
and 272,650 options, respectively, were available for future grant.
12. Income Taxes
Domestic and foreign income (loss) before income taxes and minority
interest in net income (loss) of consolidated subsidiary are as follows:
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(342 997) $(886 947) $ (972 337)
Foreign (120 989) (97 996) (162 760)
------------------------------------------------------------------
$(463 986) $(984 943) $(1 135 097)
==================================================================
</TABLE>
The following summarizes the provision (benefit) for income taxes:
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ - $ - $ (17 661)
------------------------------------------------------------------
- - (17 661)
Deferred:
Federal $ - - -
------------------------------------------------------------------
$ - $ - $ (17 661)
==================================================================
</TABLE>
The difference between income taxes provided at the Company's effective
tax rate and the Federal statutory rate is as follows
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax (benefit) at
statutory rate $(157 755) $(334 881) $(385 933)
Losses without tax benefit 157 755 334 881 368 272
------------------------------------------------------------------
$ - $ - $ (17 661)
==================================================================
</TABLE>
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 950 000 $ 1 026 000
Amortization of intangible assets 579 000 -
Research and development and
investment tax credit carryforwards 65 000 95 000
Other 80 000 131 000
------------------------------------------------------------------
Gross deferred tax assets 1 674 000 1 252 000
Deferred tax asset valuation
allowance (1 285 000) (1 252 000)
------------------------------------------------------------------
Net deferred tax assets $ 389 000 $ -
==================================================================
Deferred tax liability:
Basis difference of property
and equipment $ 389 000 $ -
==================================================================
</TABLE>
The change in the valuation allowance for deferred tax assets was an
increase of $33,000 primarily related to carryforwards for net operating loss
and research and development tax credits, since the realization of these future
benefits is not sufficiently assured as of September 30, 1996. If the Company
achieves profitability, these deferred tax assets may be available to offset
future income tax liabilities.
At September 30, 1996, the Company has approximately $2,376,000,
$2,628,000, and $388,000 of federal, state and foreign net operating losses,
respectively, available to offset future taxable income, which expire on
various dates through 2011. At September 30, 1996, the Company has $99,000 of
federal research and development tax credit carryforwards and $63,000 of state
research and development and investment tax credit carryforwards available to
offset future income taxes payable, which expire on various dates through 2011.
Ownership changes as defined in the Internal Revenue Code may limit the amount
of net operating loss and tax credit carryforwards that may be utilized
annually.
13. Significant Sales and Concentration of Credit Risk
In 1996, the Company derived revenues from a single customer totalling
$1,832,000. The Company derived revenues from another customer amounting to
$646,000, $827,000, and $748,000 for the years ended 1996, 1995 and 1994,
respectively. In 1994, the Company derived revenues from two additional
customers totalling $499,000 and $277,000. Revenues derived from export sales,
which include revenues from certain of the customers disclosed above, amounted
to $3,484,000 in 1996, $1,601,000 in 1995, and $759,000 in 1994. Export sales
to Europe were approximately $2,383,000 in 1996, $477,000 in 1995, and $607,000
in 1994. Export sales to South America were approximately $1,100,000 in 1996
and $1,029,000 in 1995. Export sales to South America were less than 10% of
consolidated revenues in 1994.
14. International Operations
The following is a summary of certain selected financial information as
of September 30, 1996, 1995 and 1994 and for the years then ended of the
Company's 51% owned subsidiary, excluding the applicable intercompany balances.
<TABLE>
<CAPTION>
September 30, 1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C>
Assets $933 718 $950 826 $352 284
Liabilities $ 71 802 $ 77 158 $ 23 223
Revenues $955 944 $972 730 $268 094
</TABLE>
15. Commitments
Leases
The Company leases an office and manufacturing facility under a
cancelable operating lease, under which it has no future minimum rental
commitments. In May 1992, the Company entered into a five year noncancelable
operating lease for a second office and manufacturing facility. During 1995,
in connection with the acquisition of the Virgo[registered trademark] product
line (see Note 3), the Company leased an office and manufacturing facility
under a five year noncancelable term. During 1996, in connection with the
acquisition of RAI (see Note 3), the Company leased an office and manufacturing
facility under a five year, noncancelable term. Future minimum lease
commitments under the noncancelable operating leases and capital leases (see
Note 6) are as follows:
<TABLE>
<CAPTION>
Operating Capital
Year ending September 30, Leases Leases
----------------------------------------------------------
<S> <C> <C>
1997 $ 441 000 $169 278
1998 429 000 44 997
1999 442 000 -
2000 421 000 -
2001 336 000 -
Thereafter 301 000 -
----------------------------------------------------------
$2 370 000 214 275
==========
Less amount representing interest 45 909
--------
$168 366
========
</TABLE>
Rent expense approximated $344,000, $174,000, and $155,000 in 1996, 1995
and 1994, respectively.
16. Subsequent Event
On November 1, 1996, the Company acquired substantially all of the assets
of 872 Main Street Corporation (formerly Cellular Products, Inc.) for $400,000
in cash and a $200,000 promissory note payable November 1, 1997. The acquired
company is a manufacturer of biotechnology materials and assays for research
and for the manufacture of clinical diagnostic test kits.
Exhibit 10gg
DISTRIBUTORSHIP AGREEMENT
This Agreement is entered into this 20th day of November, 1996, by and
between HEMAGEN DIAGNOSTICS, INC., a corporation organized and existing
under the laws of the State of Delaware, U.S.A. and having its principal
place of business at 40 Bear Hill Road, Waltham, Massachusetts, U.S.A.
(hereinafter referred to as "HEMAGEN"), and SCHIAPPARELLI BIOSYSTEMS B.V., a
corporation organized and existing under the laws of Holland and having its
principal place of business at Pompmolenlaan 24, 3447 GK Woerden, P.O. Box
497 - 3440 AL Woerden, The Netherlands (hereinafter referred to as
"DISTRIBUTOR").
RECITALS
WHEREAS, DISTRIBUTOR desires to distribute certain products offered
for sale by HEMAGEN; and
WHEREAS, HEMAGEN desires to engage DISTRIBUTOR to market and sell said
products in the territory defined below; and
WHEREAS, DISTRIBUTOR and HEMAGEN desire to enter into a business
relationship pursuant to the terms of this Agreement; and
WHEREAS, DISTRIBUTER has represented to HEMAGEN that it has the
necessary facilities, personnel to commercially market and sell the
products.
WHEREAS, HEMAGEN has represented to DISTRIBUTOR that it has the
necessary facilities, personnel, and technology to commercially manufacture
the products.
NOW, THEREFORE, in consideration of the above recitals, and in
consideration of the mutual covenants and agreements hereinafter set forth,
HEMAGEN and DISTRIBUTOR do hereby agree as follows:
AGREEMENT
Article 1. Definitions
1.1 "PRODUCT(s)" means and includes certain of HEMAGEN's complete test
kits, as set forth in Appendix A and as amended from time to time by
mutual written agreement of the parties.
1.2. "AFFILIATE" means any entity directly or indirectly controlling,
controlled by, or under common control with, a party hereto.
"Control", as used in this definition, means the ownership of fifty
percent or more of the party in question.
1.3. "TERRITORY" means the Countries listed in the Attached Appendix 1.3.
1.4. "NON-EXCLUSIVE TERRITORY" means France , Spain, Philippines, Russia
and Austria. Austria shall only include the VIRGO products and France
shall only include the ENA ELISA products.
Article 2. Term
2.1 The initial term of this Agreement shall be for a period of two (2)
years unless terminated as provided in Article 13. This Agreement
shall automatically continue to be in effect after the initial term
for successive twelve-month periods unless it is terminated by either
party as provided in Article 13 or written notice of non-renewal is
given by either party to the other at least three (3) months prior to
the expiration of the initial term or at least three (3) months prior
to the expiration of any successive twelve-month term.
Article 3. Exclusive Sale and Distribution Rights
3.1. Distribution Rights. Subject to the terms and conditions hereinafter
set forth, DISTRIBUTOR shall have the exclusive right to market, sell
and distribute the PRODUCTs in the TERRITORY under the HEMAGEN label
or under its own label and DISTRIBUTOR shall have the non-exclusive
right to market, sell and distribute the PRODUCTs in the NON-EXCLUSIVE
TERRITORY under the HEMAGEN label or under its own label, so long as
the PRODUCTs are identified as being manufactured by HEMAGEN.
DISTRIBUTOR shall not have the right to enter into any agreements or
contracts which are binding upon HEMAGEN unless prior written approval
is given by HEMAGEN.
3.2 Exclusivity. During the term of this Agreement and any extensions
thereto, HEMAGEN will not sell, offer to sell or distribute PRODUCTs
under HEMAGEN's label to any person or entity within the TERRITORY.
HEMAGEN shall have the right to sell, offer to sell or distribute
PRODUCTs under HEMAGEN's label to any person or entity within the NON-
EXCLUSIVE TERRITORY. DISTRIBUTOR's right to sell, offer to sell or
distribute PRODUCTS in the NON-EXCLUSIVE TERRITORY may be terminated
as provided in Paragraph 13.7. In addition, DISTRIBUTOR's exclusive
right to sell, offer to sell or distribute PRODUCTS in the EXCLUSIVE
TERRITORY may be terminated as provided in Paragraph 3.4.
3.3 Minimum Purchases. In order to retain its exclusive distribution
rights in the TERRITORY as stated in this Article 3, DISTRIBUTOR must
purchase the minimum annual quantities of PRODUCT set forth in
Appendix B.
3.4 Termination of Exclusive Rights. The parties acknowledge that
DISTRIBUTOR currently sells in the TERRITORY, competitive ELISA
products to those manufactured by HEMAGEN. HEMAGEN shall have the
right, in its sole discretion, terminate DISTRIBUTOR's exclusive
distribution rights when a third party distributor indicates a desire
to sell both the VIRGO IFA and VIRGO ELISA products. DISTRIBUTOR will
retain non-exclusive rights to sell in the country(ies) within the
TERRITORY for the remaining term of the Agreement, provided the
Agreement is not terminated for as set forth in the Agreement.
Article 4. Terms and Conditions of Sale
4.1. HEMAGEN's terms and conditions of sale (defined in Appendix B and in
other provisions of this Agreement) will apply to all purchases by
DISTRIBUTOR, notwithstanding any variation as may appear on any
purchase order submitted by DISTRIBUTOR. All purchase orders and
amendments thereto must be in writing, and should contain (I) quantity
of at least the Minimum PRODUCT Order per shipment stated in Appendix
B, (ii) date of requested delivery, and (iii) preferred shipping
instructions, if any.
4.2. Shipping date. HEMAGEN shall use its best efforts to ship all such
orders so that the PRODUCTs arrive on the requested delivery date.
HEMAGEN shall promptly notify DISTRIBUTOR of any anticipated delays in
shipping.
4.3. Deliveries. All deliveries shall be made F.O.B. HEMAGEN's plant in
Waltham, Massachusetts or F.O.B. HEMAGEN's plant in Columbia, Maryland
(depending upon where the PRODUCTs are manufactured). For purposes of
this Agreement, F.O.B. shall also mean E.X.W. when ocean shipping is
not utilized. Title and risk of loss will transfer from HEMAGEN to
DISTRIBUTOR upon delivery of the PRODUCT to the F.O.B. point. Freight
and insurance charges shall be borne by DISTRIBUTOR.
4.4. Purchase Price. A current price list is attached to this Agreement as
Appendix C. This price list shall remain in effect without change for
twelve (12) months after the date of this Agreement. HEMAGEN will
notify DISTRIBUTOR of changes to its price list at least sixty (60)
days prior to the effective date of any price changes. All prices
quoted by HEMAGEN are subject to the addition of all taxes and duties
which are now or may be levied or assessed relating to the shipment or
delivery of the PRODUCTs to the DISTRIBUTOR and shall be paid by
DISTRIBUTOR. Any taxes which HEMAGEN is obligated to collect shall be
paid by DISTRIBUTOR upon payment of the purchase price for the
PRODUCT, or in lieu of this, DISTRIBUTOR shall provide to HEMAGEN a
duty or tax exemption certificate acceptable to the appropriate taxing
authorities.
Article 5. Non-competition
5.1. Competing Products. DISTRIBUTOR agrees that during the term of this
Agreement and any extensions thereto, neither it nor any AFFILIATE
will market or sell any goods or diagnostic tests which is competitive
with a PRODUCT.
Article 6. Cooperation/Best Efforts
6.1. Best Efforts. DISTRIBUTOR will use its best efforts to sell the
PRODUCTs and will not perform any acts that might jeopardize the
reputation of the PRODUCTs or of HEMAGEN. HEMAGEN will not perform
any acts that might jeopardize the reputation of the PRODUCTs or of
DISTRIBUTOR.
6.2. Cooperation. The spirit of this Agreement is that the two parties
shall cooperate to the fullest extent possible.
Article 7 Performance Standards
7.1. PRODUCT Acceptance. DISTRIBUTOR shall have the right (at its own
cost) to take random samples of PRODUCTs delivered by HEMAGEN for
analyzing purposes. Should the result of an analysis of any such
sample deviate from the PRODUCT specifications or quality control
standards, HEMAGEN shall be notified and provided with samples of the
PRODUCTs tested. If, following a review of the test results and after
conducting its own tests of the sample, HEMAGEN agrees that such
sample does not conform to said specifications or quality control
standards, HEMAGEN shall provide DISTRIBUTOR, free of any additional
charge, with new deliveries of the same quantity of the PRODUCTs as
the one from which the random sample were taken. DISTRIBUTOR shall
return, at HEMAGEN's expense, the particular lot or shipment of the
PRODUCT which does not comply with the aforesaid specifications or
quality control standards. In the event HEMAGEN finds that the test
results of the PRODUCT in question comply with specifications and
quality control standards, then replacement, if deemed necessary by
DISTRIBUTOR, shall be at DISTRIBUTOR's expense. HEMAGEN further
warrants that all test results will be made available to DISTRIBUTOR.
7.2. PRODUCT Modification. Throughout the term of this Agreement, HEMAGEN
may desire to make certain changes in the performance or appearance of
the PRODUCTs. HEMAGEN shall notify DISTRIBUTOR of all such changes in
performance or appearance. In any event, best efforts shall be made
to deliver such notification at least ninety (90) days prior to the
desired or expected implementation date in the event that such change
requires a re-filing for FDA (U.S. Food and Drug Administration)
regulatory clearance or a similar re-filing with any other regulatory
agency.
Article 8. Duties of DISTRIBUTOR
8.1. Trade and Advertising Practices. DISTRIBUTOR agrees that it shall not
engage in any unfair trade practices or make any false or misleading
statements or representations in its advertising, printed material, or
otherwise with respect to HEMAGEN and/or the PRODUCTs and/or any
trademark and/or any other proprietary property of HEMAGEN.
DISTRIBUTOR, at DISTRIBUTOR's cost, agrees to correct and/or change
any such statements which HEMAGEN considers materially objectionable.
If DISTRIBUTOR advertises the PRODUCTs, such advertising shall be in
compliance with all applicable state, federal and international laws
and regulations.
8.2. Export Issues. DISTRIBUTOR shall assist HEMAGEN with various United
States export issues such as licensing.
8.3. Licenses and Permits. DISTRIBUTOR, at its own expense, shall be
responsible for obtaining all licenses and permits required by any
governmental authority, regulatory or otherwise, in order to import
the PRODUCTs into the TERRITORY and the NON-EXCLUSIVE TERRITORY or
sell the PRODUCTs in the TERRITORY and the NON-EXCLUSIVE TERRITORY.
DISTRIBUTOR agrees, at its own expense, to comply with all applicable
laws, regulations and orders governing the sale, disposition, shipment
and import of the PRODUCTs and to purchase and maintain in effect all
licenses, permits and authorizations from all government agencies as
may be necessary to perform its obligations hereunder. Unless such
information is proprietary, HEMAGEN will supply DISTRIBUTOR with any
required information which DISTRIBUTOR shall reasonably request for
the sole purpose of obtaining licenses and permits.
8.4. Regulatory Approval. To the extent required by applicable laws and
prior to shipment of the PRODUCTs, DISTRIBUTOR agrees to submit the
PRODUCTs for approval of the applicable regulatory authorities in the
TERRITORY and the NON-EXCLUSIVE TERRITORY. Unless such information is
proprietary HEMAGEN shall provide DISTRIBUTOR with all technical and
other data developed by HEMAGEN in support of DISTRIBUTOR's regulatory
submission as soon as such data is, or has been, developed by HEMAGEN.
8.5. Compliance with Laws. DISTRIBUTOR agrees to comply at all times with
all applicable laws of the United States, including but not limited to
the controls of re-exports of U.S.-Origin commodities and technical
data and the provisions of the Foreign Corrupt Practices Act, and
similar laws of the U.S. and/or any other country.
8.6. PRODUCT Record Keeping. DISTRIBUTOR agrees to maintain and when
required by law or any governmental agency, provide to HEMAGEN
information that lists DISTRIBUTOR's lot numbers of each PRODUCT with
corresponding HEMAGEN lot numbers (if different), where each lot was
shipped, who purchased it and the address of the customer.
8.7. Conditions For Resale. DISTRIBUTOR shall be free to determine all
terms and conditions of resale of the PRODUCTs purchased from HEMAGEN.
Any additional warranty offered by DISTRIBUTOR or any modification of
HEMAGEN's limited warranty without express written approval or
concurrence by HEMAGEN shall be the sole responsibility of
DISTRIBUTOR, and DISTRIBUTOR shall indemnify HEMAGEN for any costs,
losses or damage incurred by its as a result of any such additional
warranty or modification.
Article 9. Duties of HEMAGEN
9.1. Technical Assistance and Training. HEMAGEN shall provide training and
technical assistance to DISTRIBUTOR necessary for the marketing of the
PRODUCTs. Technical assistance and training shall be provided by
HEMAGEN at no charge to DISTRIBUTOR except that if the training is
performed at DISTRIBUTOR's premises, HEMAGEN's personnel shall be
reimbursed by DISTRIBUTOR for their reasonable expense of travel,
meals, and lodging. All technical assistance and training shall be
performed at times convenient to both parties.
9.2. Instructions. HEMAGEN shall, at HEMAGEN's expense, provide
DISTRIBUTOR with written instructions (in English) relating to the
PRODUCT(s) use, and with such amendments thereto as subsequently
become available. However, DISTRIBUTOR shall be responsible, at
DISTRIBUTOR's cost, for having such instructions translated into any
language necessary to complete its obligations hereunder.
9.3. Distributor Assistance. HEMAGEN shall promptly respond to
DISTRIBUTOR's inquiries and provide technical support to DISTRIBUTOR
regarding the sale, use or operation of PRODUCTs.
9.4. Promotional Materials. HEMAGEN shall furnish DISTRIBUTOR, free of
charge, with promotional materials, samples of PRODUCTs and technical
data, the selection and quantity of which shall be determined at
HEMAGEN's sole discretion.
9.5. Export Licenses. HEMAGEN shall be responsible for obtaining all
export licenses required by the United States Government to export
PRODUCTs to the TERRITORY and the NON-EXCLUSIVE TERRITORY.
9.6. Good Manufacturing Practices. HEMAGEN shall manufacture PRODUCTs in
accordance with good manufacturing practices required by the FDA.
Article 10 Trademarks, Patents, Intellectual Property, and Indemnification
10.1. Right of Use. DISTRIBUTOR may use any of DISTRIBUTOR's trademarks,
trade names, service marks, copyrights or logos of DISTRIBUTOR's
choice relating to the marketing or sale of the PRODUCTs. All such
use will be for the benefit of DISTRIBUTOR, and HEMAGEN will acquire
no ownership in such marks, or trade names, copyrights, logos or
labels by virtue of such use.
10.2. Patents and Trademarks. DISTRIBUTOR acknowledges and agrees that
nothing herein shall give DISTRIBUTOR any right, title or interest in
or license to use any HEMAGEN patent, trademark, service mark, trade
name, copyright, or know-how, except as expressly set forth herein.
DISTRIBUTOR may use HEMAGEN's trademarks, trade names or service marks
only in connection with the sale, advertising and promotion of the
PRODUCT. DISTRIBUTOR shall be entitled to use HEMAGEN's trademarks,
trade names or service marks only during the term of this Agreement.
10.3. Indemnification. DISTRIBUTOR agrees to defend, indemnify and hold
HEMAGEN harmless from and against all loss, liability and expense
(including attorney's fees, settlements, litigation costs, and costs
of appeal) resulting from the acts or omissions of DISTRIBUTOR or its
agents with respect to its handling, marketing or selling of the
PRODUCTs including, but not limited to, DISTRIBUTOR's sale of the
PRODUCTs for use in humans or clinical diagnosis or analysis,
DISTRIBUTOR's fraud or misrepresentation in the use, distribution, or
sale of the PRODUCTs, or DISTRIBUTOR's mishandling of the PRODUCTs or
DISTRIBUTOR's failure to comply with the PRODUCTs' registration
requirements in any jurisdiction in which DISTRIBUTOR sells the
PRODUCTs. Likewise, HEMAGEN agrees to defend, indemnify and hold
DISTRIBUTOR harmless from all and against all loss, liability and
expense (including attorney's fees, settlements, litigation costs, and
costs of appeal) resulting from the acts or omissions of HEMAGEN or
its agents with respect to its handling or manufacturing of the
PRODUCTs including but not limited to HEMAGEN's fraud or
misrepresentation in the manufacture or sale of the PRODUCTs, or
HEMAGEN's mishandling of the PRODUCTs.
10.4. Indemnification Notice. Each party shall give prompt notice of any
claim, loss or liability for which such party seeks defense and
indemnification. If either party wishes to enter the defense of a
suit brought pursuant to the indemnification sections of this
Agreement being defended by the other party, such party may do so at
its own cost. The control of such case shall remain with the
indemnifying party unless otherwise agreed to in writing.
10.5. Settlement Notice. If either party wishes to settle a case for which
the other party is liable for indemnification, the party wishing to
settle shall first obtain the written approval of the indemnifying
party.
10.6. Insurance. Each party will keep in force during the term of this
Agreement all customary forms of insurance, including but not limited
to product liability insurance, in such amounts as are prudently
required.
10.7. Infringement. HEMAGEN shall undertake at HEMAGEN's own expense the
defense of any suit or action for infringement of HEMAGEN's patents
brought against DISTRIBUTOR, which suit or action results from the
sale of any PRODUCTs, provided that DISTRIBUTOR shall have promptly
advised HEMAGEN in writing of each notice or claim of infringement
received by DISTRIBUTOR and of the commencement of the suit or action.
HEMAGEN shall hold DISTRIBUTOR harmless from damages or other sums
which may be assessed or may become payable under any final decree or
judgment in any such suit or action or under any settlement thereof.
HEMAGEN shall have sole charge and direction of the defense of any
such suit or action and of all negotiations for such settlement, but
shall use commercial reasonableness and shall consult with DISTRIBUTOR
with regard to the defense or settlement of any such suit or action.
DISTRIBUTOR shall be obligated to render all reasonable assistance
which may be required by HEMAGEN at HEMAGEN's expense. DISTRIBUTOR
may retain counsel of its own selection and at its own expense to
advise and consult with HEMAGEN's counsel. HEMAGEN may not settle any
suit or action without the consent of DISTRIBUTOR, if by such
settlement DISTRIBUTOR is obligated to make any monetary payment, to
part with any property or interest therein, to assume any obligation
or to be subject to any injunction. The parties agree that if the
PRODUCTs supplied by HEMAGEN are found to be infringing on a third-
party patent, HEMAGEN will negotiate in good faith with the third
party to obtain a license to use the third party's technology and, if
HEMAGEN fails to obtain such a license, or if HEMAGEN is subject to a
permanent injunction, then DISTRIBUTOR shall have the right to either
terminate this Agreement by giving written notice of termination to
HEMAGEN, and return for full credit all inventory on hand, or
negotiate with the infringed party for such a license. HEMAGEN's
indemnification resulting from any infringement on third party patent
shall exclude DISTRIBUTOR's costs involved in negotiation with any
infringed party for such a license.
Article 11 Limited Warranty
11.1. Shelf Life Warranty. The PRODUCT shall have a shelf life, at the time
of shipment by HEMAGEN, as specified in Appendix A. HEMAGEN shall not
be liable for any variance from specifications or any failure to
satisfy the shelf life requirement to the extent such variance is
caused by conditions or events occurring after shipment from HEMAGEN's
plant.
11.2. PRODUCT Specification, Defective PRODUCT Notice and PRODUCT
Complaints. HEMAGEN warrants that, at the time of delivery to
DISTRIBUTOR, all PRODUCTs supplied by HEMAGEN shall meet PRODUCT
specifications. Either party shall immediately notify the other party
in writing should it become aware of any defect or condition that may
render the PRODUCT(s) supplied by HEMAGEN in violation of the U.S.
Food, Drug and Cosmetic Act, or of a similar law of any jurisdiction
where the PRODUCT is sold. The parties shall share with each other
all data on the PRODUCT complaints including, but not limited to,
complaints or information regarding performance and/or allegations or
reports of any negative effect from the use or misuse of the PRODUCTs
as soon as such data is available. Each party will assist the other
in resolving DISTRIBUTOR's customers' complaints. However,
DISTRIBUTOR shall have sole responsibility and authority to interact
directly with DISTRIBUTOR's customers in the resolution of such
complaints, and HEMAGEN shall be responsible only for interacting with
DISTRIBUTOR in such matters.
11.3. Warranties. THE WRITTEN WARRANTIES OF HEMAGEN IN THIS ARTICLE 11 ARE
THE SOLE EXCLUSIVE WARRANTIES PROVIDED TO DISTRIBUTOR AND TO CONSUMERS
AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER WRITTEN OR ORAL,
IMPLIED OR STATUTORY. HEMAGEN WARRANTS THE PRODUCT AGAINST DEFECTS IN
MATERIAL AND WORKMANSHIP UNDER THE NORMAL USE AND SERVICE FOR WHICH IT
WAS DESIGNED, FOR THE SHELF LIFE PERIOD DEFINED IN APPENDIX A,
HEMAGEN'S OBLIGATION UNDER THIS WARRANTY BEING LIMITED TO THE
REPLACEMENT OF THE PRODUCT DETERMINED BY IT TO BE DEFECTIVE, PLUS
TRANSPORTATION COSTS FOR RETURN OF THE PRODUCT. ALL REPLACEMENTS WILL
BE SHIPPED F.O.B. DISTRIBUTOR'S RECEIVING FACILITY.
Article 12 Confidentiality
12.1 Confidentiality. For the purposes of this Agreement, the term
"Confidential Information" shall be any information embodying
concepts, ideas, techniques, know-how, formulations, market data,
customer lists, PRODUCT specifications and accounting data which:
(a) is disclosed by one party hereto to the other;
(b) is claimed by the disclosing party to be secret,
confidential and proprietary to the disclosing party; and
(c) if disclosed in writing, is marked by the disclosing party
to indicate its confidential nature or if disclosed
orally, is claimed in writing by the disclosing party to
be confidential within ten (10) days following disclosure.
During the period that this Agreement remains in effect and for a
period of three (3) years following termination hereof, each party
(except as is explicitly otherwise required hereby) shall keep
confidential, shall not use for itself or for the benefit of others
and shall not copy or allow to be copied in whole or in part any
Confidential Information disclosed to such party by the other.
The obligations of confidentiality imposed upon the parties by the
foregoing paragraph shall not apply with respect to any alleged
Confidential Information which:
(a) is known to the recipient thereof, as evidenced by said
recipient's written records, prior to receipt thereof from the
other party hereto;
(b) is disclosed to said recipient after the day hereof by a third
party who has the right to make such disclosure; or
(c) is or becomes a part of the public domain through no fault of
the said recipient.
Article 13. Termination
13.1. Termination For Cause. Either party will have the right to terminate
this Agreement if the other party (a) assigns this Agreement or any
of its rights hereunder in violation of the provisions of Section 16.3
of this Agreement, or (b) becomes bankrupt or insolvent, or (c) makes
an assignment for the benefit of creditors, or a receiver, trustee in
bankruptcy or similar officer appointed to take charge of all or part
of its property, and such event has not been cured within thirty (30)
days of written notice thereof by the non-breaching party. If either
party materially breaches this Agreement, including, but not limited
to, (a) DISTRIBUTOR's failure to adhere to the non-competition
requirements of Section 5.1, (b) DISTRIBUTOR's failure to meet its
obligation regarding minimum annual purchases of PRODUCT, and (c)
either party's failure to adhere to the confidentiality provisions and
restrictions on use of information set forth in Section 12.1, then
notwithstanding any other provision of this Agreement, no cure period
shall be allowed and the non-breaching party shall be entitled to
terminate this Agreement immediately.
13.2. Termination Without Cause. Either party shall have the right to
terminate this Agreement upon twelve (12) months written notice
without cause.
13.3. Rights and Obligations on Termination. Upon termination of this
Agreement, DISTRIBUTOR shall immediately discontinue any previously
authorized use of any of HEMAGEN's Proprietary Rights and shall
immediately cease all conduct that might cause anyone to believe that
DISTRIBUTOR is authorized to market or sell PRODUCTs or otherwise
connected with HEMAGEN, and HEMAGEN may itself or through others,
commence sale, distribution and service of PRODUCTs in the TERRITORY.
Upon termination or expiration of this Agreement, DISTRIBUTOR will
immediately turn over to HEMAGEN all promotional and other materials
relating to HEMAGEN's PRODUCTs and shall immediately cease to
represent itself as authorized to market or sell PRODUCTs.
13.4. Termination or Expiration Damages. Neither HEMAGEN nor DISTRIBUTOR
shall be liable to the other, or to any other business entity solely
by reason of the expiration or termination of this Agreement
regardless of the rationale for or propriety of any termination or
expiration. The exculpation from liability shall be for any losses or
damages of any kind whatsoever, including, but not limited to, direct,
indirect, special, consequential or incidental damages sustained by
reason of such termination, including but not limited to, any claim
for loss of compensation or profits or for loss of prospective
compensation or prospective profits in respect of sales of any of the
PRODUCTs or on account of any expenditures, investments, leases,
capital improvements or any other commitments made by either party in
connection with their respective business made in reliance upon or by
virtue of this Agreement or otherwise.
13.5. Acknowledgment of Parties. Each party hereto agrees that if this
Agreement is terminated rightfully and in good faith by the other
pursuant to the terms of this Agreement, the terminating party shall
not be liable to the other party for any termination compensation
whatsoever, whether based upon goodwill established, clientele
obtained, expenditures incurred, investments made, activities
undertaken or otherwise. Termination of this Agreement for any reason
whatsoever shall not relieve either of the parties hereto from making
payment of monies due to the other from fulfilling obligations
incurred up to the effective date of termination or as otherwise
expressly provided in this Agreement.
13.6 Transfer of Importation License. Upon termination of this Agreement,
DISTRIBUTOR shall transfer any government or regulatory license(s) or
permit(s), if any, which authorizes or approves the importation and
sale of PRODUCTs into the TERRITORY to HEMAGEN or its nominee.
13.7. Termination of Distribution Rights in NON-EXCLUSIVE TERRITORY Without
Cause. HEMAGEN shall have the right, upon three (3) months written
notice, without cause, to terminate DISTRIBUTOR's distribution rights
in the NON-EXCLUSIVE TERRITORY. Before exercising its right to
terminate DISTRIBUTOR's rights in the NON-EXCLUSIVE TERRITORY, HEMAGEN
must allow DISTRIBUTOR a thirty day (30) right to attempt to negotiate
with HEMAGEN for exclusive distribution rights in the NON-EXCLUSIVE
TERRITORY. During such thirty day period, HEMAGEN and DISTRIBUTOR
shall negotiate in good faith. Paragraphs 13.3, 13.4, 13.5 and 13.6
shall apply in the case that HEMAGEN exercises its rights to terminate
the NON-EXCLUSIVE TERRITORY.
Article 14 PRODUCT Recall and Regulatory Compliance
14.1. Data Base. HEMAGEN and DISTRIBUTOR shall maintain a data base to
support all claims made or to be made regarding PRODUCTs' performance.
14.2 Inquiries. Each party shall keep the other informed of any formal or
informal inquiry relating to PRODUCTs sold hereunder by any regulatory
agency of any state or national government.
14.3 PRODUCT Recall. Should PRODUCT performance or any governmental action
require the recall or withholding from market of PRODUCTs sold by
HEMAGEN to DISTRIBUTOR, DISTRIBUTOR shall bear the costs and expenses
of recall if such recall is the result of any fault or omission
attributable to DISTRIBUTOR and HEMAGEN shall bear the costs and
expenses of recall if such recall is the result of any fault or
omission attributable to HEMAGEN. Should such recall result from the
equal fault of both parties, or should it prove impossible to assign
fault to the satisfaction of both parties, the parties shall share the
said costs and expenses equally.
Article 15. Arbitration
15.1. Any controversy or claim arising under or in relation to this
Agreement, except as otherwise expressly provided below, shall be
settled exclusively by arbitration in accordance with the
International Arbitration Rules of the American Arbitration
Association (AAA). There shall be three arbitrators: one selected by
HEMAGEN, one selected by DISTRIBUTOR, and one selected by the parties
jointly or, failing their agreement, selected pursuant to the rules of
the AAA. The arbitration shall be conducted in English and shall be
held in Massachusetts. The prevailing party shall be entitled to
recover its costs and attorneys' fees. The decision of the
arbitrators shall be final and binding on the parties, and judgment
upon the award rendered by the arbitrators may be entered by any court
having jurisdiction thereof. The provisions of this arbitration
clause shall not be applied to the determination of questions
affecting the validity or scope of any trademarks or other
intellectual property rights.
Article 16. General Provisions
16.1 Antiboycott Compliance. DISTRIBUTOR will not require or request
HEMAGEN to take any action or to provide any information in the
fulfillment of this Agreement which would cause HEMAGEN to violate the
antiboycott laws of the United States.
16.2. Entire Agreement. This Agreement, including the Appendices,
constitutes the entire agreement between the parties with respect to
the subject matter hereof, and may not be modified (unless expressly
provided otherwise herein) except by a writing duly signed by both
parties.
16.3. Assignment, Waiver, Severability. Neither party may assign this
Agreement without the prior written consent of the other party.
Failure by either party to enforce any term hereof shall not be deemed
a waiver of future enforcement of that or any other term. If any
provision of this Agreement is declared void or unenforceable by any
judicial, administrative or arbitration authority, such action will
not nullify the remaining provisions of this Agreement.
16.4. Governing Law. This Agreement shall be governed and construed under
and according to the laws of the Commonwealth of Massachusetts,
U.S.A., excluding its choice of laws rules. The Vienna Convention on
the International Sale of Goods is expressly excluded from
application.
16.5. Relationship Created. The relationship of the parties is that of
independent contractors. Nothing in this Agreement shall be construed
as establishing an agency, joint venture or partnership between the
parties. Each party is an independent entity, and shall have sole
responsibility for its employees, even while such employees are on the
premises of the other party's facility(ies). Neither DISTRIBUTOR nor
HEMAGEN shall have the right to enter into any contracts or
commitments or to make any representations or warranties, whether
express or implied, in the name of or on behalf of any other party, or
to bind any other party in any respect whatsoever, unless agreed to in
writing or expressly permitted in this Agreement.
16.6. Authority. Each party hereby represents and warrants that it has full
power and authority to enter into and perform this Agreement, without
any governmental approvals, and that its entering into and performance
of this Agreement will not conflict with any other agreement to which
it is a party or by which it is bound.
16.7. Notice. Any written notice, or statement, necessary or appropriate
under this Agreement shall be deemed to be properly given if delivered
personally in writing or sent by registered or certified mail to the
party to be notified at the address set forth above or at such other
address as either party may hereafter designate in writing.
16.8. Captions. The captions or paragraph headings of this Agreement do not
constitute any substantive part of this Agreement and shall not be
considered in the construction or interpretation of this Agreement.
16.9. Force Majeure. Each party hereto shall be excused from the
performance of its obligations hereunder in the event such performance
is prevented by force majeure, and such excuse shall continue for so
long as the condition constituting such force majeure and any
consequences resulting from such condition continues. In addition, in
the event the condition constituting the force majeure causes a
substantial inability by either party hereto to meet its obligations
hereunder, the term of this Agreement may, upon written agreement of
both parties, be suspended for the period of such inability, but not
to exceed six (6) months. For the purposes of this Agreement, force
majeure shall mean causes beyond either party's control including,
without limitation, acts of God; regulations or laws of any
government; war, riot or civil commotion; damage to or destruction of
production facilities or materials by fire, earthquake, storm or other
disaster; manufacturing or transportation delay, strikes or other
labor disturbances, epidemic; and failure or default of public
utilities or common carriers.
IN CONSIDERATION OF the foregoing terms and conditions, DISTRIBUTOR and
HEMAGEN have executed this Agreement on the day and year first written
above.
HEMAGEN DIAGNOSTICS, INC. SCHIAPPARELLI BIOSYSTEMS B.V.
/s/ Carl Franzblau /s/ J. J. H. Korten
Carl Franzblau, President J. J. H. Korten
HEMAGEN DIAGNOSTICS, INC. SCHIAPPARELLI BIOSYSTEMS B.V.
Appendix 1.3 -- Territory
TERRITORY shall mean:
Bangladesh
Belgium
Brunei
Cyprus
Turkey
Czech Rep
Denmark
Egypt
Finland
Greece
Hong Kong
Iceland
Jordan
Korea
Kuwait
Lebanon
Malaysia
Malta
Netherlands
Norway
Oman
Pakistan
Portugal
Qatar
Saudi Arabia
Singapore
South Africa
Sweden
Switzerland
Syria
Taiwan
Thailand
Tunisia
Turkey
United Arab Emirates
Zimbabwe
Catalogue No. Description List Price
Appendix A -- Products
AUTOIMMUNE DISEASE
IMMUNOFLUORESCENCE ANTIBODY KITS
ANTINUCLEAR (ANA) KB-SUBSTRATE
902070 48 Determination Kit (IgG) 12 x 4-well slides
902075 200 Determination Kit (IgG) 25 x 8-well slides
902077 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902071 12 x 4-well slides
902078-S ANA Positive Control, 1 mL
902076 25 x 8-well slides
902079-S Conjugate: FITC labeled goat anti-human
IgG(heavy and light chains) with
counterstain, 2 mL
HEP-2 SUBSTRATE
902332 200 Determination Kit (IgG) 25 x 8-well slides
902360 600 Determination Kit (IgG) 50 x 12-well slides
902370 1200 Determination Kit (IgG) 100 x 12-well slides
ANTI-MITOCHONDRIAL (AMA)
902080 48 Determination Kit (IgG) 12 x 4-well slides
COMPONENTS AND SLIDES
902090 12 x 4-well slides
ANTI-nDNA (n-DNA)
902409 48 Determination Kit (IgG) 6 x 8-well slides
902420 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDE
902408 6 x 8-well slides
ELISA ANTIBODY KITS
6630 ENA SCREENING - 6
96 wells for the simultaneous detection of
RNP, Sm, SS-A, SS-B, Scl-70 and Jo-1
6601 ENA SCREENING - 4
96 wells for the simultaneous detection of
RNP, Sm, SS-A, and SS-B
6641 ENA COMBI - 6
96 well kit. Contains wells to test for
RNP, Sm, SS-A, SS-B, Scl-70 and Jo-1
6640 ENA COMB - 4
64 well kit. Contains wells to test for
RNP, Sm, SS-A and SS-B
6607 Scl-70, 96 wells
6608 Jo-1, 96 wells
6611 Sm/RNP, 96 wells
6612 Sm, 96 wells
6614 SS-A, 96 wells
6615 SS-B, 96 wells
6613 Rheumatoid Factor, 96 wells*
6621 dsDNA, 96 wells*
6606 Anti-Cardiolipin, IgG and IgM, 96 wells
6606A Anti-Cardiolipin IgA Calibrator - reagents
for up to 48 wells
(designed to be used with catalogue #6606)
HEMAGGLUTINATION KITS
6420 ENA SCREENING - 4
64 Tests for the simultaneous detection
of RNP, Sm, SS-A and SS-B
6401 RNP/Sm, 128 tests
6403 RNP/Sm, 64 tests
6415 SS-A/SS-B, 2x48 tests
6412 Scl-70, 64 tests
6417 Jo-1, 64 tests
6407 dsDNA, 96 tests
6413 RF, 192 tests
INFECTIOUS DISEASE
IMMUNOFLUORESCENCE ANTIBODY KITS
TOXOPLASMA (TOXO)
902010 120 Determination Kit (IgG) 15 x 8-well slides
902020 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902019-S Toxoplasma Negative Control (IgM), 0.5 mL
902021 25 x 8-well slides
902041 Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains) with Evans Blue
counterstain, 2 mL
902048 Conjugate: FITC labeled goat anti-human
IgM(mu-chain specific) with Evans Blue
counterstain 2.5 mL
902049-S Toxoplasma Positive Control (IgM), 0.5 mL
CYTOMEGALOVIRUS (CMV)
902111 96 Determination Kit (IgG) 12 x 8-well slides
902112 96 Determination Kit (IgM) 12 x 8-well slides
902113 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902114-S Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains) with counterstain, 2 mL
902115-S Conjugate: FITC labeled goat anti-human IgM
(mu-chain specific) with counterstain, 2 mL
902117-S CMV Positive Control (IgG), 1 mL
902118-S CMV Positive Control (IgM), 0.5 mL
902120-S CMV Negative Control (IgG), 1 mL
902121-S CMV Negative Control (IgM), 1 mL
902123 12 x 8-well slides
902124 25 x 8-well slides
FLUORESCENT TREPONEMAL ANTIBODY-ABSORPTION (FTA-ABS)
902300 60 Determination Kit (IgG) 15 x 4-well slides
902301 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902304 25 x 8-well slides
902309-S FTA-ABS Sorbent, 10 mL
HERPES SIMPLEX VIRUS TYPE I (HSV1)
902500 96 Determination Kit (IgG) 12 x 8-well slides
902506 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902501 12 x 8-well slides
902504-S Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains) with counterstain, 2 mL
902507 25 x 8-well slides
HERPES SIMPLEX VIRUS TYPE 2 (HSV2)
902600 96 Determination Kit (IgG) 12 x 8-well slides
902606 200 Determination Kit (IgG) 25 x 8-well slides
COMPONENTS AND SLIDES
902601 12 x 8-well slides
902607 25 x 8-well slides
RUBELLA
902700 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
902701 12 x 8-well slides
VARICELLA-ZOSTER (VZV)
902800 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
902801 12 x 8-well slides
902804-S Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains) with counterstain, 2 mL
EPSTEIN-BARR VIRUS (EBV) VCA
902900 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
902901 12 x 8-well slides
CHLAMYDIA TRACHOMATIS
903000 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
903001 12 x 8-well slides
903004-S Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains) with counterstain, 2 mL
MEASLES
903100 96 Determination Kit 12 x 8-well slides
COMPONENTS AND SLIDES
903101 12 x 8-well slides
903104-S Conjugate: FITC labeled goat anti-human IgG
(heavy and light chains), 2 mL
MUMPS
903200 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
903201 12 x 8-well slides
RESPIRATORY SYNCYTIAL VIRUS (RSV)
903300 96 Determination Kit (IgG) 12 x 8-well slides
COMPONENTS AND SLIDES
903301 12 x 8-well slides
6637 Herpes I 96 wells
6638 Herpes II 96 wells
UNIVERSAL IFA COMPONENTS
903405 IFA Buffer (5 packs - sufficient for 5 liters)
902083 Buffered Glycerol, 4 x 2 mL vials
902200-S Universal IgM Conjugate
ACUTE PHASE REACTANT KITS
6602 Serum Amyloid A (EIA), 96 wells*
6605 C-Reactive Protein (EIA), 96 wells
Human Interleukin-2
T-Cell Growth Factor
906011 50 mL Bottle
* Available For Export and/or Research Use Only. Call for availability.
Shelf Life
Minimum shelf life for PRODUCTs is 8 months from date of expiration.
Appendix B - Terms
1. HEMAGEN grants to DISTRIBUTOR marketing rights to sell PRODUCTs in the
TERRITORY.
2. Minimum orders for the initial term are listed below.
Purchase Minimums
Year 1 $250,000
Year 2 $350,000
Year 3 $450,000
3. Orders are shipped F.O.B. Waltham, Massachusetts or Columbia, Maryland
(depending on place of manufacture); payment terms are U.S. dollars net
60 days. Any cost or chargers for currency conversion shall be borne by
DISTRIBUTOR.
4. Should HEMAGEN and DISTRIBUTOR elect to extend the Agreement beyond the
initial term as provided in Article 2, new minimums, not lower than
those set for the previous year, will be established by mutual
agreement.
Catalog No. Description List Price
Appendix C - PRICES
AUTOIMMUNE DISEASE
IMMUNOFLUORESCENCE ANTIBODY KITS
ANTINUCLEAR (ANA) KB-SUBSTRATE
902070 48 Determination Kit (IgG) 12 x 4-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902075 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902077 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902071 12 x 4-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902078-S ANA Positive Control, 1 mL CONFIDENTIAL
TREATMENT
REQUESTED
902076 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902079-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
(heavy and light chains) with counterstain, TREATMENT
2 mL REQUESTED
HEP-2 SUBSTRATE
902332 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902360 600 Determination Kit (IgG) 50 x 12-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902370 1200 Determination Kit (IgG) 100 x 12-well CONFIDENTIAL
slides TREATMENT
REQUESTED
902330 48 Determination Kit (IgG) 12 x 4 well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902331 12 x 4 well Slides Hep-2 substrate CONFIDENTIAL
TREATMENT
REQUESTED
902333 25 x 8 well Slides Hep-2 Substrate CONFIDENTIAL
TREATMENT
REQUESTED
ANTI-MITOCHONDRIAL (AMA)
902080 48 Determination Kit (IgG) 12 x 4-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902090 12 x 4-well slides CONFIDENTIAL
TREATMENT
REQUESTED
ANTI-nDNA (n-DNA)
902409 48 Determination Kit (IgG) 6 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902420 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDE
902408 6 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
ELISA ANTIBODY KITS
6630 ENA SCREENING - 6 CONFIDENTIAL
96 wells for the simultaneous detection TREATMENT
of RNP, Sm, SS-A, SS-B, Scl-70 and Jo-1 REQUESTED
6601 ENA SCREENING - 4 CONFIDENTIAL
96 wells for the simultaneous detection TREATMENT
of RNP, Sm, SS-A, and SS-B REQUESTED
6641 ENA COMBI - 6 CONFIDENTIAL
96 well kit. Contains wells to test for TREATMENT
RNP, Sm, SS-A, SS-B, Scl-70 and Jo-1 REQUESTED
6640 ENA COMB - 4 CONFIDENTIAL
64 well kit. Contains wells to test for TREATMENT
RNP, Sm, SS-A and SS-B REQUESTED
6607 Scl-70, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6608 Jo-1, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6611 Sm/RNP, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6612 Sm, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6614 SS-A, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6615 SS-B, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6613 Rheumatoid Factor, 96 wells* CONFIDENTIAL
TREATMENT
REQUESTED
6621 dsDNA, 96 wells* CONFIDENTIAL
TREATMENT
REQUESTED
6606 Anti-Cardiolipin, IgG and IgM, 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
6606A Anti-Cardiolipin IgA Calibrator - reagents CONFIDENTIAL
for up to 48 wells TREATMENT
(designed to be used with catalogue #6606) REQUESTED
HEMAGGLUTINATION KITS
6420 ENA SCREENING - 4 CONFIDENTIAL
64 Tests for the simultaneous detection TREATMENT
of RNP, Sm, SS-A and SS-B REQUESTED
6401 RNP/Sm, 128 tests CONFIDENTIAL
TREATMENT
REQUESTED
6403 RNP/Sm, 64 tests CONFIDENTIAL
TREATMENT
REQUESTED
6415 SS-A/SS-B, 2x48 tests CONFIDENTIAL
TREATMENT
REQUESTED
6412 Scl-70, 64 tests CONFIDENTIAL
TREATMENT
REQUESTED
6417 Jo-1, 64 tests CONFIDENTIAL
TREATMENT
REQUESTED
6407 dsDNA, 96 tests CONFIDENTIAL
TREATMENT
REQUESTED
6413 RF, 192 tests CONFIDENTIAL
TREATMENT
REQUESTED
INFECTIOUS DISEASE
IMMUNOFLUORESCENCE ANTIBODY KITS
TOXOPLASMA (TOXO)
902010 120 Determination Kit (IgG) 15 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902020 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902019-S Toxoplasma Negative Control (IgM), 0.5 mL CONFIDENTIAL
TREATMENT
REQUESTED
902021 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902041 Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
TREATMENT
REQUESTED
(heavy and light chains) with Evans Blue counterstain, 2 mL
902048 Conjugate: FITC labeled goat anti-human CONFIDENTIAL
IgM(mu-chain specific) with Evans Blue TREATMENT
counterstain 2.5 mL REQUESTED
902049-S Toxoplasma Positive Control (IgM), 0.5 mL CONFIDENTIAL
TREATMENT
REQUESTED
CYTOMEGALOVIRUS (CMV)
902111 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902112 96 Determination Kit (IgM) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902113 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902114-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
(heavy and light chains) with counterstain, TREATMENT
2 mL REQUESTED
902115-S Conjugate: FITC labeled goat anti-human IgM CONFIDENTIAL
(mu-chain specific) with counterstain, 2 mL TREATMENT
REQUESTED
902117-S CMV Positive Control (IgG), 1 mL CONFIDENTIAL
TREATMENT
REQUESTED
902118-S CMV Positive Control (IgM), 0.5 mL CONFIDENTIAL
TREATMENT
REQUESTED
902123 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902124 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
FLUORESCENT TREPONEMAL ANTIBODY-ABSORPTION (FTA-ABS)
902300 60 Determination Kit (IgG) 15 x 4-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902301 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902304 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902309-S FTA-ABS Sorbent, 10 mL CONFIDENTIAL
TREATMENT
REQUESTED
HERPES SIMPLEX VIRUS TYPE I (HSV1)
902500 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902506 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902501 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902504-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
TREATMENT
REQUESTED
(heavy and light chains) with counterstain, 2 mL
902507 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
HERPES SIMPLEX VIRUS TYPE 2 (HSV2)
902600 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902606 200 Determination Kit (IgG) 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902601 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902607 25 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
RUBELLA
902700 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902701 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
VARICELLA-ZOSTER (VZV)
902800 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902801 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
902804-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
(heavy and light chains) with counterstain, TREATMENT
2 mL REQUESTED
EPSTEIN-BARR VIRUS (EBV) VCA
902900 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
902901 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
CHLAMYDIA TRACHOMATIS
903000 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
903001 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
903004-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
(heavy and light chains) with counterstain, TREATMENT
2 mL REQUESTED
MEASLES
903100 96 Determination Kit 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
903101 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
903104-S Conjugate: FITC labeled goat anti-human IgG CONFIDENTIAL
(heavy and light chains), 2 mL TREATMENT
REQUESTED
MUMPS
903200 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
903201 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
RESPIRATORY SYNCYTIAL VIRUS (RSV)
903300 96 Determination Kit (IgG) 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
COMPONENTS AND SLIDES
903301 12 x 8-well slides CONFIDENTIAL
TREATMENT
REQUESTED
UNIVERSAL IFA COMPONENTS
903405 IFA Buffer (5 packs - sufficient for 5 liters) CONFIDENTIAL
TREATMENT
REQUESTED
902083 Buffered Glycerol, 4 x 2 mL vials CONFIDENTIAL
TREATMENT
REQUESTED
902200-S Universal IgM Conjugate CONFIDENTIAL
TREATMENT
REQUESTED
ACUTE PHASE REACTANT KITS
6602 Serum Amyloid A (EIA), 96 wells* CONFIDENTIAL
TREATMENT
REQUESTED
6605 C-Reactive Protein (EIA), 96 wells CONFIDENTIAL
TREATMENT
REQUESTED
Human Interleukin-2
T-Cell Growth Factor
906011 50 mL Bottle CONFIDENTIAL
TREATMENT
REQUESTED
DISTRIBUTOR AGREEMENT
BETWEEN
OLYMPUS AMERICA INC.,
CLINICAL INSTRUMENT DIVISION
AND
HEMAGEN DIAGNOSTICS, INC.
March 1, 1996
DISTRIBUTOR AGREEMENT
AGREEMENT effective as of the 1st day of March, 1996, by and between
HEMAGEN DIAGNOSTICS, INC., a company organized and existing under the laws of
Delaware and having its principal office at 34-40 Bear Hill Road, Waltham, MA
02154 ("VENDOR"), and OLYMPUS AMERICA INC.-Clinical Instrument Division, a
company organized and existing under the laws of New York and having its
principal office at Two Corporate Center Drive, Melville, New York 11747-3157
("OLYMPUS").
W I T N E S S E T H:
WHEREAS, VENDOR manufactures and sells a wide variety of highly refined
and specialized in vitro diagnostic reagents; and
WHEREAS, OLYMPUS is a recognized distributor and supplier of clinical,
medical, and scientific products; and
WHEREAS, OLYMPUS desires to engage in the purchase of the Products (as
defined in Section 1.10) from VENDOR for the purpose of resale, under the
OLYMPUS label, within the Territory; and
WHEREAS, VENDOR is willing to manufacture and sell the Products for and
to OLYMPUS on an exclusive basis within and for resale in North America and
Hawaii (and on a non-exclusive basis in all other areas of the Territory) on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties agree as follows:
ARTICLE 1. DEFINITIONS.
1.1 "Affiliate" shall mean a corporation or other entity that controls,
is controlled by or is under common control with, the designated party.
"Control" shall mean the ownership, directly or indirectly, through one or more
intermediaries, of at least 49% of the shares of stock entitled to vote for the
election of directors in the case of a corporation (or comparable officers or
representatives of the particular entity), or at least 49% of the interest in
profits in the case of a business entity other than a corporation, except that
in any country of incorporation or registration where the maximum permitted by
law is less than 49%, such lower maximum permitted percent shall be
substituted.
1.2 "Agreement" shall mean this Distributor Agreement, including the
Recitals, Schedules, and Exhibits hereto, as it may be amended or supplemented
from time to time in accordance with its terms.
1.3 "Agreement Term" shall have the meaning set forth in Section 7.1.
1.4 "Business Day" shall mean any day which is not a Saturday, Sunday, or
bank holiday in the State of New York.
1.5 "Effective Date" shall mean the date first above written.
1.6 "FDA" shall mean the United States Food and Drug Administration.
1.7 "HPB" shall mean the Canadian Ministry of Health - Health Protection
Branch.
1.8 "Intellectual Property" shall have the meaning set forth in Section
6.6.
1.9 "OLYMPUS Analyzers" shall mean the OLYMPUS PK series of
immunohematology analyzers and all successor analyzers thereof.
1.10 "Products" shall mean, collectively, certain CMV (cytomegalovirus)
reagents to be used exclusively on the OLYMPUS Analyzers, a list of which
reagents is attached hereto as Schedule 1.10 (which Schedule may be amended
from time to time and at any time upon mutual written consent) and which shall
conform to the Specifications; documentation to accompany the Products as
reasonably required by OLYMPUS; and any Product Changes.
1.11 "Product Changes" shall mean any changes, improvements, alterations,
modifications, new generations, and substitutions to or of the Products or the
Products' labelling to include content, size, adhesive, ink, bottles or seals.
1.12 "Recall" shall have the meaning set forth in Section 3.9.
1.13 "Specifications" shall mean the specifications of the Products
attached hereto as part of Schedule 1.10.
1.14 "Territory" shall mean the entire world.
ARTICLE 2. PURCHASE AND SALE.
2.1 Territorial Exclusivity.
(a) During the Agreement Term, VENDOR agrees to sell the Products to
OLYMPUS and OLYMPUS shall purchase the Products from VENDOR (if OLYMPUS submits
a purchase order therefor) in accordance with and subject to the terms and
conditions of this Agreement. OLYMPUS shall be the exclusive distributor of the
Products within North America and Hawaii and the non-exclusive distributor of
the Products in all other areas of the Territory. VENDOR and VENDOR's
Affiliates shall not sell the Products, or CMV reagents based on similar
agglutination technology, directly or indirectly, or otherwise provide the
Products to any other entity for purposes of resale within North America and
Hawaii. During the Agreement Term, if VENDOR or a VENDOR Affiliate sells a
Product within North America and Hawaii directly or through a third party,
OLYMPUS shall receive from VENDOR a profit passover equal to the product of (a)
the difference between (i) the then-current Product price charged to OLYMPUS by
VENDOR and (ii) the then-current average sales price of such Product charged by
OLYMPUS to its customers, and (b) the number of units of such Product so sold
within North America and Hawaii by VENDOR, VENDOR's Affiliate or a third party.
Prior to conducting any marketing efforts or completing any sales in any area
of the Territory other than in North America and Hawaii, OLYMPUS shall notify
VENDOR in writing of its intent to begin such marketing efforts outside of
North America and Hawaii. In the event VENDOR appoints an exclusive distributor
of the Products in an area of the Territory other than North America and
Hawaii, OLYMPUS may no longer distribute the Products in such area of the
Territory, but OLYMPUS shall maintain its exclusivity in North America and
Hawaii. VENDOR shall give OLYMPUS 30 days' written notice prior to appointing
any such exclusive distributor in an area of the Territory other than North
America and Hawaii. Notwithstanding anything contained herein to the contrary,
in the event the Agreement Term is not extended in accordance with Section 7.1,
then, for the final 90 days of the Agreement Term, (i) OLYMPUS's distribution
rights in North America and Hawaii hereunder shall become non-exclusive, (ii)
OLYMPUS shall be entitled to purchase CMV reagents under OLYMPUS's name (but
not sell such CMV reagents) without any liability whatsoever, and (iii) VENDOR
shall have the right to market, but not sell, the Products in North America and
Hawaii.
(b) In consideration for its exclusive rights hereunder, OLYMPUS agrees
to purchase a minimum of 800,000 PH2000 PK CMV System tests (there are 2,000
tests per kit) per Agreement Term year, provided that VENDOR is not in default
under this Agreement. OLYMPUS's liability for failure to purchase such minimum
shall be limited to the difference between the dollar amount of such minimum
(CONFIDENTIAL TREATMENT REQUESTED) and the dollar amount of PH2000 PK CMV
System tests actually purchased by OLYMPUS. OLYMPUS shall not be liable for any
other damages, including without limitation indirect, special, incidental, or
consequential damages of any kind, including but not limited to damages for
lost profits, lost investments, or lost business opportunities.
(c) Except as set forth in the last sentence of Section 2.1(a)(ii),
OLYMPUS shall be entitled to develop (by itself and/or with others) but shall
not market or sell CMV reagents based on agglutination technology similar to
that which is contained in the Products. However, OLYMPUS shall be entitled to
develop, market, and sell (by itself and/or with others) CMV reagents which are
not based on agglutination technology similar to that which is contained in the
Products.
2.2 License. VENDOR hereby unconditionally and irrevocably grants to
OLYMPUS and OLYMPUS's Affiliates a royalty-free, fully paid-up right to use,
market, sell, grant sublicenses to end-users, and/or otherwise dispose of (or
have others do any of the foregoing on OLYMPUS's behalf) the Products
(exclusively in North America and Hawaii and non-exclusively elsewhere in the
Territory). OLYMPUS shall determine all terms and conditions of resale of the
Products to its customers, including but not limited to prices.
2.3 Order Processing. All purchase orders and amendments thereto must be
in writing, and should contain (in addition to the information set forth below
in Section 2.5, preferred shipping instructions, if any.
2.4 Product Delivery. All OLYMPUS purchase orders shall be for delivery
in not less than 90 days and shall be deemed accepted by VENDOR unless OLYMPUS
is notified to the contrary in writing by VENDOR within ten Business Days of
VENDOR's receipt of a written purchase order from OLYMPUS. Delivery shall be
made by VENDOR to any OLYMPUS destination point within North America or Hawaii
designated by OLYMPUS. OLYMPUS may cancel any purchase order provided that such
cancellation is made in writing no later than 15 days after VENDOR's receipt of
such purchase order. In addition, OLYMPUS may cancel a purchase order if
delivery of such purchase order is more than 30 days past due.
2.5 Conditions of Sale. The order terms and conditions set forth in this
Agreement shall govern all orders made under this Agreement and any standard
printed forms or other documents of either party (such as those contained on a
quotation, proposal, purchase order, or invoice) shall have no force or effect
with respect to such orders unless such form or document specifically states
that it is an amendment to this Agreement and is signed by an authorized
signatory of each party. Title to and risk of loss for the Products sold to
OLYMPUS shall pass upon shipment of the Products to OLYMPUS. Except as
otherwise set forth in this Agreement to the contrary, (i) OLYMPUS shall
reimburse VENDOR for the shipping costs incurred by VENDOR in delivering the
Products to OLYMPUS, and (ii) OLYMPUS's purchase order shall fix Product
quantities, reference applicable pricing, and set destinations and delivery
schedules.
2.6 Inspection Rights.
(a) Procedure. OLYMPUS shall have the right, at OLYMPUS's expense, to
count and conduct an inspection of the shipped Products for a period of 15
Business Days following receipt of such Products at the designated incoming
delivery point or facility. If any Product fails such inspection, OLYMPUS shall
notify VENDOR in writing of such failure. OLYMPUS shall be entitled to reject
as defective those Product units with a remaining shelf life of twelve months
or less. If OLYMPUS fails to reject received Products within the aforementioned
15-Business Day inspection period, such Products shall be deemed accepted. If,
after conducting an investigation within 15 Business Days of such written
notice, VENDOR concurs that such Products failed to meet OLYMPUS's standards
for acceptance, then VENDOR agrees to accept and pay the shipping costs for (i)
the return of such defective Product and (ii) the delivery of the replacement
Product, provided that the defect is not the result of OLYMPUS negligence or
misuse such as the failure to properly store the Product while in OLYMPUS's
possession. If, after such investigation, VENDOR disagrees with OLYMPUS, then
the parties shall agree upon a mutually acceptable method to determine whether
or not the Products should be accepted by OLYMPUS. If the parties fail to agree
upon a method within ten Business Days, then the parties shall promptly agree
upon an independent quality control laboratory (the "Laboratory") to conduct an
inspection of the Products for purposes of determining if the Products should
be accepted by OLYMPUS or replaced, at no charge, by VENDOR. The determination
of the Laboratory shall be final and binding upon the parties and the party
that was proven incorrect in its inspection analysis shall bear the entire cost
of the Laboratory inspection. Upon delivery by VENDOR to OLYMPUS of replacement
Product, OLYMPUS and VENDOR will follow the inspection, (if necessary)
investigation, and (if necessary) resolution procedure set forth in this
Section 2.6(a) with respect to such replacement Product, except that, at this
point, in addition to the replacement remedy, OLYMPUS shall have the option of
receiving a full refund of the purchase proce paid for the original Product
delivered if the replacement Product is found by the Laboratory to be defective
or nonconforming. Inspection, testing, acceptance, or use of the Products, or
failure to do the same, on any occasion shall not affect VENDOR's obligation
under any warranty contained herein or any other rights or remedies available
to OLYMPUS whether at law or in equity, and such warranties, rights, and
remedies shall survive such inspection, testing, acceptance, and use.
(b) Certificates of Analysis. Certificates of analysis for each Product
will be provided to OLYMPUS at or prior to the time of final Product release
and with each shipment of Product. A form of certificate of analysis to be used
is attached hereto as Exhibit A. OLYMPUS has the right to reject any materials
for which certificates of analysis are not provided, after notification, within
two Business Days. VENDOR shall bear the costs and expenses associated with the
return of the Product to the VENDOR and will replace the Product at no charge
to OLYMPUS.
(c) Quantity Deficiency. If OLYMPUS finds any quantity deficiency in the
Product units received, OLYMPUS may, at its option, (i) require VENDOR to
immediately deliver the difference by air freight at VENDOR's expense, or (ii)
reduce the purchase price specified in the related purchase order accordingly.
If a Product shipment is incomplete (e.g., a kit is missing vials), OLYMPUS
may, at its option, (i) require VENDOR to ship an entirely new and complete
Product unit (e.g., new kit), rather than simply replace the incomplete aspect
of the Product unit, or (ii) reduce the purchase price specified in the related
purchase order accordingly.
(e) Over-shipment. If OLYMPUS finds an over-shipment of Product units,
OLYMPUS may store or return the excess Product units to VENDOR, both at
VENDOR's risk and expense. If OLYMPUS decides to retain such excess, OLYMPUS
shall increase the purchase amount specified in the related purchase order
accordingly .
2.7 Pricing & Payment.
(a) Pricing. The prices to be charged to OLYMPUS for the Products for the
duration of the Agreement Term shall be the prices set forth in Schedule 1.10
attached hereto. The prices to be charged to OLYMPUS for the Products do not
include package inserts (OLYMPUS shall provide its own package inserts to
VENDOR). OLYMPUS shall be free to set its own Product prices charged to its
(sub)distributors, dealers, and customers.
(b) Payment. OLYMPUS shall pay for all Products accepted by it no later
than 45 days from the date of shipment to OLYMPUS by VENDOR.
ARTICLE 3. OBLIGATIONS OF VENDOR.
3.1 Approvals and Clearances. VENDOR shall ensure that no Product is sold
to OLYMPUS before all required FDA pre-market approvals and clearances have
been obtained. VENDOR shall supply OLYMPUS with copies of all non-confidential
FDA submissions, questions, responses, acceptance letters, and other
communications and documentation regarding the Products. In addition, VENDOR
shall provide OLYMPUS with reasonable assistance in obtaining other
governmental or private approvals and clearances, including without limitation
those of the HPB.
3.2 Bottling, Packing and Labelling; Trademarks.
(a) All Product bottles, packages and labels shall (i) be designed by
OLYMPUS and/or its designees with the assistance of VENDOR, if requested, (ii)
be subsequently produced or purchased by VENDOR, and (iii) meet all
requirements specified by OLYMPUS in writing. Notwithstanding the foregoing, if
any bottling, packaging, or labels are to contain VENDOR's name or trademark,
then VENDOR must approve such bottling, packaging, package inserts, or labels,
which approval shall not be unreasonably withheld or delayed. The incremental
cost of any bottle, package or label changes requested by OLYMPUS (including
without limitation engineering and equipment costs) will be borne by OLYMPUS.
Such requested changes shall be in writing and shall be reasonable. OLYMPUS
shall select and incur the cost of the manufacture, design, text, and vendor of
the Product's package inserts, and shall provide such package inserts to VENDOR
for shipment along with the Products. VENDOR shall not be liable if shipment of
the Products is delayed solely due to OLYMPUS's late delivery or failure to
deliver the package inserts to VENDOR.
(b) VENDOR shall, at no additional charge to OLYMPUS, bottle, pack and
label the Products in accordance with OLYMPUS's instructions and the
Specifications. VENDOR shall permanently affix OLYMPUS's Product number, trade
name, trademark, colors, and logo (the "Authorized Trademarks") and lot numbers
on all Product bottling, packaging, labels and other printed materials in
accordance with OLYMPUS's instructions. Upon termination or expiration of this
Agreement, VENDOR shall not sell any Product which is bottled or packaged in
materials containing the Authorized Trademarks. Except as expressly set forth
herein, VENDOR shall not acquire any right, title, license or other interest in
the OLYMPUS name, or any trade name, trademark, or logo belonging to OLYMPUS.
All Product labelling shall comply with all applicable FDA rules and
regulations. In addition, VENDOR shall provide OLYMPUS with reasonable
assistance in complying with other applicable governmental rules and
regulations, including without limitation those of the HPB.
(c) Any use by VENDOR of the Authorized Trademarks or any trade name,
trademark, or logo which is similar to an Authorized Trademark, and the
goodwill of any business associated with such trade names, trademarks, or
logos, shall inure to the benefit of OLYMPUS.
(d) Except as set forth in Section 2.2, nothing herein shall give OLYMPUS
any right, title, or interest in or license to use any Intellectual Property of
VENDOR.
(e) During the Agreement Term, VENDOR shall not apply VENDOR's or any
third party's name, trademark, or logo to the Products or to any bottling,
packaging, labels, inserts, or other printed materials provided with the
Products, except (i) for an identifying reference stating "Manufactured for
Olympus America Inc. by Hemagen Diagnostics, Inc." in a font and location as
set forth in Schedule 3.2 attached hereto to the extent to which OLYMPUS may so
request and instruct, or if VENDOR may by law be required to identify itself as
the manufacturer or supplier thereof or (ii) with respect to Products to be
marketed and sold outside of North America and Hawaii under a name other than
that of OLYMPUS.
3.3 Product Changes. VENDOR shall give OLYMPUS 90 days' prior written
notice of any proposed Product Changes, which OLYMPUS may accept or reject in
its sole and absolute discretion unless such change is required by governmental
agency, law, rule or regulation. If a Product Change is not required by
governmental agency, law, rule or regulation and OLYMPUS chooses to reject a
Product Change, then VENDOR shall continue to manufacture and sell Products to
OLYMPUS without implementing such proposed Product Changes. However, if VENDOR
implements such Product Change without OLYMPUS's approval, OLYMPUS may, in
addition to all other rights and remedies at law or in equity or otherwise,
terminate this Agreement and all pending purchase orders pursuan to Section
7.2(c). If OLYMPUS accepts a Product Change, VENDOR shall, prior to
implementation, promptly obtain all FDA approvals and clearances required to
manufacture the Product and sell the Product (as changed, modified, or added)
within the United States, including without limitation validating the Product.
No Product Change shall be implemented and effective unless and until it is
accepted for sale by OLYMPUS except if such Product Change is required by
governmental agency, law, rule or regulation. All Product Changes (including
without limitation those required by governmental agency, law, rule or
regulation) shall require validation data and protocols that are acceptable to
OLYMPUS, which acceptance shall not be unreasonably withheld or delayed. A
change of a supplier by VENDOR shall not constitute a Product Change except
that OLYMPUS must receive reasonable prior written notice of VENDOR's use of a
supplier that had not been previously qualified by VENDOR. Notwithstanding
anything contained herein to the contrary, if a Product Change which is
required by a governmental agency, law, rule or regulation renders a Product
useless with respect to its intended purposes or in connection with the OLYMPUS
Analyzers, this Agreement shall be terminated immediately in accordance with
Section 7.2(c).
3.4 Technical Assistance & Support.
(a) VENDOR shall furnish to OLYMPUS, without additional charge and for
the duration of the Agreement Term and (unless otherwise stated) for a period
of one year thereafter, the following technical assistance and support:
(i) Documentation. All technical information, Material and Safety
Data Sheet (MSDS) information, documentation and test data necessary to market,
sell and otherwise distribute the Products within the Territory. Such materials
shall be consistent with similar information furnished to other distributors or
resellers of similar products manufactured by VENDOR. VENDOR hereby grants to
OLYMPUS a fully-paid license for the Agreement Term to copy or otherwise
reproduce all or portions of VENDOR's brochures, or to incorporate portions of
VENDOR-copyrighted material in Product brochures or advertising material
composed by OLYMPUS, provided that OLYMPUS shall submit such materials composed
by OLYMPUS which incorporate such VENDOR-copyrighted material to VENDOR for
prior approval, which approval shall not be unreasonably withheld or delayed.
Such license will survive the expiration or termination of this Agreement for a
period of time equal to the longest remaining shelf-life of a Product in
OLYMPUS's inventory (the "Longest Shelf-life") and such reproduction will be
subject to all applicable copyright laws. Notwithstanding anything contained
herein to the contrary, those materials which incorporate authorized
VENDOR-copyrighted material and which have been disseminated during the
Agreement Term and the Longest Shelf-life thereafter, may be used in perpetuity
by the recipients thereof.
(ii) Telephone Support. On-going telephone support, via a
non-exclusive toll-free telephone number, to OLYMPUS personnel and, upon
request of OLYMPUS, to OLYMPUS's customers. Such telephone support shall
respond to all reasonable requests for information or other technical support
regarding Product use, storage, handling, shipping, clean-up and disposal,
claims, efficacy, and regulatory clearance. Such telephone support shall be
available only during VENDOR's normal business hours of 9 a.m. to 5 p.m.
(Eastern).
(iii) On-Site Support. At OLYMPUS's request and at mutually
convenient times, VENDOR will provide on-site support at the OLYMPUS facility
or customer site to investigate performance problems. When such on-site support
is provided within North America and Hawaii, each party shall be responsible
for its own costs associated with such visits. If OLYMPUS requests on-site
support in an area of the Territory other than North America or Hawaii, OLYMPUS
shall be responsible for all of VENDOR's out-of-pocket costs and expenses
(including travel, food, and lodging) associated therewith.
(b) OLYMPUS Training. To assist VENDOR in better understanding the
OLYMPUS Analyzers, OLYMPUS will provide VENDOR, at OLYMPUS's sole and absolute
discretion, with training on the OLYMPUS Analyzers at no charge to VENDOR,
except that VENDOR will be responsible for its travel and lodging expenses in
connection therewith.
3.5 Insurance. Commencing on the first date of Product delivery until the
expiration of the most remote statute of limitations in the United States,
VENDOR shall maintain product liability insurance with an insurance company in
the amount of $1,000,000.00, naming OLYMPUS as an additional insured, for any
death or bodily injury or property damage resulting from the manufacture,
design, testing, sale, or use of the Products. Copies of all such policies and
any certificates or notices thereunder shall be forwarded to OLYMPUS along with
prior notice of termination or cancellation of such policies.
3.6 Audits. OLYMPUS shall have the right (at OLYMPUS's expense) to
perform a commercially reasonable audit of VENDOR's compliance with FDA rules
and regulations (including without limitation the then current published Good
Manufacturing Practices (21 C.F.R. Part 820) and any other applicable laws,
rules, or regulations with respect to the Products, during normal business
hours and upon prior notice to VENDOR and subject to Article 9-CONFIDENTIAL
INFORMATION). The VENDOR facility being audited must be operational during the
audit and producing the Product. Olympus shall also receive access to the batch
history records of the Products. The parties will cooperate with each other to
arrange such visits at mutually convenient times. In addition, OLYMPUS
personnel may periodically travel to VENDOR's facilities to observe testing and
validation activities, receive information with respect thereto (subject to
Article 9-CONFIDENTIAL INFORMATION), and ensure that the Products are being
tested in accordance with Good Laboratory Practices (21 C.F.R. Part 58). The
parties understand and agree that certain information and documentation may
contain certain highly confidential Product formulation trade secrets of
VENDOR. VENDOR, in its sole discretion, may give limited or no access to such
information or documentation during any OLYMPUS audit or inspection of VENDOR's
facilities. The withholding of any such information or documentation pursuant
to this Section shall not be deemed in breach of VENDORs obligations under this
Agreement. Notwithstanding the foregoing, OLYMPUS must , at a minimum, be
permitted to conduct audits of VENDOR (except certain highly confidential
Product formulation trade secrets of VENDOR) which comply with the then current
published Good Manufacturing Practices (21 C.F.R. Part 820) and any other
applicable laws, rules, and regulations.
3.7 Complaints. In the event OLYMPUS cannot resolve customer complaints
regarding the Products, OLYMPUS shall forward such complaints to VENDOR and
VENDOR shall conduct a complete and documented investigation and shall respond
to and use its best efforts to resolve such complaints in accordance with the
requirements for complaint handling as promulgated by the FDA in the then
current published Good Manufacturing Practices (21 C.F.R. Part 820) or any
other applicable laws, rules, or regulations. All such complaint investigations
shall be performed and completed promptly but in no event later than 30 days
from receipt of the complaint by VENDOR unless VENDOR is delayed due to
third-party circumstances beyond VENDORs control. If as a result of VENDOR's
investigation a Product Change is necessary, VENDOR will perform, validate, and
document such Product Change in accordance with this Agreement, to OLYMPUS's
sole and complete satisfaction and at no charge to OLYMPUS. OLYMPUS shall have
the right to review and approve (in writing) all changes or corrective actions
resulting from a complaint investigation prior to the implementation of such
changes or corrective actions. VENDOR shall notify OLYMPUS immediately of any
claims that it receives of Product defects. VENDOR shall maintain a reasonable
inventory (i.e., not less than one percent of the total lot) of retention
materials for complaint investigations. Retention materials shall be clearly
marked as to lot origin.
3.8 Special Investigations; Inquiries. If the FDA requires any clinical
or other investigations to be performed on or with respect to the Products, and
VENDOR has ot performed such investigations or if, for any reason, the FDA will
not accept the results of VENDOR's investigations, then VENDOR shall use its
best efforts in promptly undertaking and completing such investigations. VENDOR
agrees to notify OLYMPUS in writing of any formal or informal inquiries
relating to the Products by the FDA or HPB, or any other regulatory agency, or
any state or Federal government. Included in such notification shall be a copy
of the relevant portions of the Form 483 and/or warning letters (in the case of
an FDA inquiry) or other similar document left by or subsequently sent by the
inquirer to VENDOR.
3.9 Recalls. In the event that any Product defect or regulatory or
governmental action requires a Product's recall, destruction, withholding from
the market, or other action (a "Recall"), VENDOR shall bear all costs and
expenses of such Recall if such Recall is the result of any act or omission to
act attributable solely to VENDOR. OLYMPUS shall reasonably assist VENDOR, at
VENDOR's cost and expense, in carrying out any such Recall. OLYMPUS shall bear
all costs and expenses of a Recall if such Recall is the result of any act or
omission to act attributable solely to OLYMPUS. VENDOR shall reasonably assist
OLYMPUS, at OLYMPUS's cost and expense, in carrying out any such Recall. If a
Recall is the result of acts or omissions to act attributable to both VENDOR
and OLYMPUS, or should it prove impossible to assign fault for such Recall,
VENDOR and OLYMPUS shall share the costs and expenses of such Recall equally.
3.10 Sales Leads. VENDOR shall forward to OLYMPUS any and all inquiries
received from Product customers or potential Product customers within North
America and Hawaii.
ARTICLE 4 OBLIGATIONS OF OLYMPUS
4.1 Trade and Advertising Practices. OLYMPUS shall not engage in any
unfair trade practices or make any false or misleading statements or
representations in its advertising, printed material, or otherwise with respect
to the Products, VENDOR and/or the VENDOR's Intellectual Property. OLYMPUS
shall, at its cost, correct or change any materially objectionable false or
misleading statements or representations made by OLYMPUS. If OLYMPUS advertises
the Products, such advertising shall be in compliance with all applicable state
and federal laws and regulations of the particular area of the Territory.
4.2 Compliance. OLYMPUS, at its own expense shall comply with all
applicable laws, rules and regulations required of it in the areas of the
Territory in which it is distributing the Products, in order to market or sell
the Products in such areas. OLYMPUS agrees, at its own expense, to comply with
all applicable laws, regulations and orders governing the sale, disposition,
shipment and import of the Products and to purchase and maintain in effect all
licenses, permits and authorizations from all government agencies as may be
necessary to perform its obligations hereunder (other than those required by
the FDA). Unless such information is proprietary, VENDOR will supply OLYMPUS
with any required information (such as FDA 510(k) data) which OLYMPUS shall
reasonably request for the sole purpose of obtaining licenses and permits.
OLYMPUS will maintain and, when required by the FDA, provide to VENDOR, subject
to Article 9 (CONFIDENTIAL INFORMATION) a list of OLYMPUS's lot numbers for the
Products with VENDOR's corresponding Product lot numbers (if different).
Subject to Article 9 (CONFIDENTIAL INFORMATION), VENDOR shall provide OLYMPUS
with any and all information (except certain highly confidential Product
formulation trade secrets of VENDOR) which OLYMPUS may require in order to
comply with this Section 4.2.
4.3 Promotional Materials. OLYMPUS shall be responsible for the creation
and distribution of its own promotional and marketing materials regarding the
Products, and for the development and implementation of all Product marketing
and sales strategies. VENDOR shall provide OLYMPUS with reasonable assistance
in connection with the foregoing.
4.4 OLYMPUS Training. OLYMPUS will provide VENDOR, at OLYMPUS's sole and
aboslute discretion and at no charge to VENDOR, with training on the OLYMPUS
Analyzers at no charge to VENDOR, except that VENDOR shall be responsible for
its out-of-pocket costs and expenses (including without limiation travel, food
and lodging in connection therewith).
4.5 Insurance. Commencing on the first date of Product delivery until the
expiration of the most remote statute of limitations in the United States,
OLYMPUS shall maintain comprehensive general liability insurance (which
includes product liability insurance) with an insurance company in the amount
of $1,000,000.00 covering its activities hereunder as a distributor of the
Products. Evidence of such insurance shall be provided to VENDOR upon
reasonable request.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF OLYMPUS.
OLYMPUS hereby represents and warrants to VENDOR, its successors and permitted
assigns that:
5.1 Due Organization. OLYMPUS is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, and has
the full power and authority to conduct all activities conducted by it under
this Agreement.
5.2 Authorization to Execute. The person executing this Agreement on
behalf of OLYMPUS has been duly authorized to do so by all requisite corporate
and other action of OLYMPUS, and this Agreement has been duly executed and
delivered to VENDOR by such person.
5.3 Validity of Agreement. This Agreement is the legal, valid and binding
obligation of OLYMPUS, enforceable in accordance with its terms.
5.4 No Conflict. To the knowledge of OLYMPUS, the execution, delivery and
performance of this Agreement by OLYMPUS does not and will not conflict with or
result in a breach of any agreement, instrument or understanding, oral or
written, to which OLYMPUS is a party. There is no litigation, arbitration or
administrative proceeding pending or threatened which would, in any event,
conflict with or result in a breach of this Agreement or interfere with
OLYMPUS's obligations hereunder.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF VENDOR.
VENDOR hereby covenants, represents and warrants to OLYMPUS, its successors and
permitted assigns that:
6.1 Due Organization. VENDOR is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware, and has
the full power and authority to conduct all activities conducted by it under
this Agreement.
6.2 Authorization to Execute. The person executing this Agreement on
behalf of VENDOR has been duly authorized to do so by all requisite corporate
and other action of VENDOR, and this Agreement has been duly executed and
delivered to OLYMPUS by such person.
6.3 Validity of Agreement. This Agreement is the legal, valid and binding
obligation of VENDOR, enforceable in accordance with its terms.
6.4 No Conflict. To the knowledge of VENDOR, the execution, delivery and
performance of this Agreement by VENDOR does not and will not conflict with or
result in a breach of any agreement, instrument or understanding, oral or
written, to which VENDOR is a party. There is no litigation, arbitration or
administrative proceeding pending or threatened which would, in any event,
conflict with or result in a breach of this Agreement or interfere with
VENDOR's obligations hereunder.
6.5 Right to Use Technology. VENDOR has the legally enforceable right to
use all technology contained within or related to the Products, whether
patented or unpatented, and the use of such technology does not violate any
agreement, instrument or understanding, oral or written, to which VENDOR is a
party.
6.6 Warranty of Non-Infringement. VENDOR is, and for the Agreement Term
VENDOR will be, the sole and exclusive owner of all right, title and interest
in and to the Products. The Products do not incorporate or infringe upon any
copyright, patent, trademark, service mark, trade name, idea, process,
know-how, development, invention, technology, or any other form of intellectual
property (collectively "Intellectual Property") not owned by or licensed to
VENDOR. VENDOR will promptly notify OLYMPUS of any alleged or actual
infringement by VENDOR of any Intellectual Property relating to the Products or
their manufacture.
6.7 Right to Sell for Resale; Ability to Deliver. VENDOR has the right to
sell the Products to OLYMPUS for resale by OLYMPUS exclusively within North
America and Hawaii and non-exclusively elsewhere in the Territory. VENDOR has
and will have the ability to timely deliver, at a minimum, the minimum amount
of Products (as set forth in Section 2.1) ordered by OLYMPUS during the
Agreement Term.
6.8 Product Quality.
(a) The Products to be sold and delivered to OLYMPUS hereunder shall (i)
conform to the Specifications, (ii) be merchantable and fit for their
particular purpose, (iii) be fully compatible with and suitable for the OLYMPUS
Analyzers provided that a modification to the OLYMPUS Analyzers by OLYMPUS or
OLYMPUS's Affiliates do not cause the incompatibility or unsuitability, and
(iv) be new and free from defects in design, materials and workmanship.
(b) VENDOR shall possess a Quality Assurance System that adheres to all
applicable laws, rules and regulations, including without limitation the
practices and regulations of the FDA (including but not limited to current Good
Manufacturing Practices as expressed in 21 C.F.R. Part 820). OLYMPUS have the
right to inspect VENDOR's manufacturing facility for such compliance in
accordance with Section 3.6 (Audits).
6.9 Product Warranty.
(a) With respect to each Product unit sold and delivered to OLYMPUS,
VENDOR shall, at no charge to OLYMPUS, replace any defective or non-conforming
Product unit by reason of breach of any warranty by VENDOR hereunder, within 45
days after receipt by VENDOR of the defective or non-conforming Product unit.
If any replacement Product is found by OLYMPUS to be defective or
non-conforming, VENDOR shall, at OLYMPUS's option and at no charge to OLYMPUS,
replace or fully refund the purchase price paid for the original defective or
non-conforming Product delivered, within 15 days after receipt by VENDOR of the
defective or non-conforming replacement Product unit.
(b) The warranty period for replacement or refund (as the case may be)
shall be the useful life of the Product as indicated on the Product bottle.
Written notice of non-conforming Product must be received by VENDOR within
three months from the end of the Product's useful life. At the time of their
receipt by OLYMPUS, the Products shall have a shelf life of at least 12 months.
VENDOR shall not be responsible for any variation from the specifications or
any failure to satisfy the shelf life requirement to the extent such variation
or failure is caused by misuse or improper storage or handling of the Products.
(c) Shipping costs incurred by OLYMPUS and risk of loss upon return of
Product units to VENDOR for replacement or refund (as the case may be) shall be
borne by VENDOR. Shipping costs incurred by VENDOR and risk of loss upon
delivery of the replacement Product unit to OLYMPUS shall be borne by VENDOR.
(d) The foregoing warranty shall not limit or exclude OLYMPUS's other
remedies hereunder, at law, or in equity.
6.10 Compliance. VENDOR has ensured and shall continue to ensure that, in
manufacturing and selling the Products, it shall (i) comply with all applicable
laws and regulations, (ii) not engage in any deceptive or misleading practices,
and (iii) obtain and maintain all required pre-market FDA approvals and
clearances.
6.11 Price Warranty. VENDOR warrants that the prices listed on Schedule
1.10 shall include without limitation, bottling, packaging, labeling, storage,
boxing, and crating. Additional charges shall be added for insurance and
shipping (except as otherwise provided herein), sales taxes and (if OLYMPUS
requests) package
6.12 OLYMPUS Warranties. Any additional warranty offered by OLYMPUS or
any modification of VENDOR's warranties without the prior written approval of
VENDOR shall be the sole responsiblity of OLYMPUS.
6.13 Disclaimer. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE
WARRANTIES OF VENDOR IN THIS ARTICLE 6 ARE THE SOLE AND EXCLUSIVE WARRANTIES
PROVIDED TO OLYMPUS AND TO CONSUMERS AND ARE IN LIEU OF ALL OTHER WARRANTIES,
WHETHER WRITTEN OR ORAL, IMPLIED OR STATUTORY. ALL WARRANTIES OF VENDOR WITH
RESPECT TO THE PRODUCTS ARE SUBJECT TO COMPLIANCE WITH VENDOR'S USE, STORAGE,
AND HANDLING INSTRUCTIONS, AND ARE LIMITED TO THE SPECIFIED SHELF LIFE OF THE
PRODUCTS.
ARTICLE 7. TERM AND TERMINATION.
7.1 Term. This Agreement shall remain in full force and effect commencing
on the Effective Date and expiring on the second anniversary of such date (the
"Agreement Term") unless earlier terminated pursuant to Section 7.2.
Notwithstanding the foregoing, (i) the parties may, upon mutual written
agreement at least 90 days prior to the end of the second year of the Agreement
Term, extend the Agreement Term by one additional year and (ii) the Agreement
Term may be suspended pursuant to the provisions of Section 10.1 (Force
Majeure) of this Agreement.
7.2 Events of Termination. This Agreement may be terminated without
limiting any party's rights to any other remedies:
(a) Immediately upon written notice by either party (the "Terminating
Party") to the other party (the "Breaching Party") if:
(i) the Breaching Party has not materially performed or has
otherwise materially breached its obligations hereunder and
if such nonperformance or breach is incapable of cure; or
(ii) any proceeding in bankruptcy, reorganization or arrangement
for the appointment of a receiver or a trustee to take
possession of the Breaching Party's assets or any similar
proceeding under the law for relief of creditors shall be
instituted by or against the Breaching Party; or
(iii) the Breaching Party shall make an assignment for the benefit
of its creditors.
The Breaching Party immediately shall notify the Terminating
Party in writing of the occurrence of any event of the type
described in clauses (a)(ii) and (iii).
(b) By the Terminating Party upon the expiration of 30 days (or such
additional period as the Terminating Party may authorize) after the
Breaching Party's receipt of written notice of its breach or
non-performance of its material obligations hereunder and if such
breach or non-performance is capable of cure and has not been cured
within such 30 day period.
(c) By OLYMPUS upon 30 days' prior written notice to VENDOR of a
Product Change rejection pursuant to Seciton 3.3
7.3 Purchase Orders. Unless OLYMPUS decides that it does not wish to have
a purchase order filled, any purchase order placed by OLYMPUS (i) prior to the
date that notice of termination is delivered hereunder or the date that this
Agreement otherwise expires and (ii) for shipment no later than 90 days after
such termination or expiration date; shall be timely delivered to the
destination points designated by OLYMPUS, provided that (a) such termination
did not arise from OLYMPUS's default and (b) OLYMPUS remits a 50% deposit for
those deliveries to be made after the termination or expiration date. Such
deposit(s) must be segregated by VENDOR in a separate bank account not
intermingled with VENDOR's funds, and shall remain the property of OLMPUS until
such time as delivery of the corresponding Products have been made.
7.4 Rights and Obligations upon Termination. Upon termination of this
Agreement, OLYMPUS shall have the right to (i) sell all Products ordered or in
inventory and (ii) provide on-going support and service to its customers.
Notwithstanding anything contained herein to the contrary and without limiting
OLYMPUS's other remedies, in the event this Agreement is terminated and VENDOR
is the Breaching Party, OLYMPUS shall have the right to require VENDOR to
repurchase (at the price paid by OLYMPUS) any portion of or all ordered
Products and OLYMPUS's inventory of Products provided such Products are in
their original packaging and suitable for resale by VENDOR. For purposes of
this Section, if a Product has at least three months of shelf-life remaining,
it can still be considered "suitable for resale" hereunder. In the event this
Agreement is terminated and OLYMPUS is the Breaching Party (as defined in
Section 7.2), OLYMPUS shall immediately discontinue any previously authorized
use of any of VENDOR's intellectual property and shall immediately cease all
conduct that might cause anyone to believe that OLYMPUS is authorized to market
or sell Products or is otherwise connected with VENDOR, and VENDOR may itself
or through others, commence sale, distribution and service of Products in North
America and Hawaii.
7.5 Termination or Expiration Damages. Each party hereto agrees that if
this Agreement is terminated rightfully and in good faith by the other pursuant
to the terms of this Agreement, the Terminating Party (as defined in Section
7.2) shall not be liable to the other party for any termination compensation
whatsoever, whether based upon goodwill established, clientele obtained,
expenditures incurred, investments made, activities undertaken or otherwise.
Termination of this Agreement for any reason whatsoever shall not relieve
either of the parties hereto from making payment of monies due to the other,
from fulfilling obligations incurred up to the effective date of termination,
or as otherwise expressly provided in this Agreement.
7.6 Survival. Sections 2.1(b) (last sentence only), 2.1(c), 2.2, 2.4,
2.5, 2.6, 2.7, 3.1, 3.2(b), 3.2(c), 3.2(d), 3.3, 3.4(a), 3.5, 3.7, 3.8, 3.9,
4.1, 4.5, 5.3, 5.4, 6.3, 6.4, 6.5, 6.6, 6.7 (first sentence only), 6.8(a), 6.9,
6.10, 6.11, 6.12, 6.13, 7.3, 7.4, 7.5, and Articles 8, 9, and 10 (except
Section 10.6) shall survive the execution, and termination or expiration of
this Agreement.
ARTICLE 8. INDEMNIFICATION.
8.1 Vendor Infringement Indemnity.
(a) Should any aspect of any Product become the subject of any
Intellectual Property infringement claim, action, or proceeding, VENDOR shall
either (i) obtain a license that would permit OLYMPUS to exercise all rights
granted to it under this Agreement or (ii) modify the Product to render it
non-infringing. VENDOR shall bear the cost of such license or modification.
Notwithstanding the foregoing, should any aspect of the Product become the
subject of any actual Intellectual Property infringement claim, action, or
proceeding, OLYMPUS may, without limiting its remedies and at its sole and
absolute discretion, either (i) suspend purchases of the Products from VENDOR
or (ii) terminate this Agreement, both without any liability whatsoever. In
addition, if such Intellectual Property infringement claim, action, or
proceeding is found to be meritorious (in the opinion of qualified independent
counsel reasonably acceptable to OLYMPUS and VENDOR), OLYMPUS shall have the
right to require VENDOR to repurchase (at the price paid by OLYMPUS) any
portion of or all ordered Products and OLYMPUS's inventory of Products.
(b) In addition to its obligations under subsection 8.1(a) above and
provided that VENDOR receives prompt written notice of any Intellectual
Property infringement claim, action, or proceeding covered by this Section 8.1,
VENDOR shall at all times indemnify and hold harmless OLYMPUS, its successors,
and permitted assigns, and any of its officers, directors, employees,
representatives, and/or agents, or each of them, from and against any and all
claims, liabilities, losses, costs, damages, and expenses, including but not
limited to (i) the damages, costs, and expenses payable to the third party
claiming Intellectual Property infringement, (ii) all of OLYMPUS's reasonable
attorneys' fees and disbursements, settlement costs, judgments, court costs and
expenses, incurred by OLYMPUS in any action or proceeding between VENDOR and
OLYMPUS and/or between OLYMPUS and any third party or otherwise, (iii)
reimbursement for the cost of Products that can no longer be sold, and (iv) any
other losses, costs, expenses, and damages incurred by OLYMPUS arising out of
or resulting from any Intellectual Property infringement claim, action or
proceeding between VENDOR and OLYMPUS and/or between OLYMPUS and any third
party or otherwise. The failure of OLYMPUS to give prompt notice shall not
result in the loss of indemnification unless VENDOR shall have been materially
prejudiced thereby.
(c) OLYMPUS shall not be entitled to the foregoing Intellectual Property
infringement indemnity from VENDOR to the extent that the Intellectual Property
infringement claim, action, or proceeding arises or results from any changes to
the Products made by OLYMPUS without VENDOR's written authorization, provided
the Products have not been modified by VENDOR without OLYMPUS's knowledge and
prior written consent.
8.2 VENDOR Product Liability and Other Damage Indemnity.
(a) VENDOR shall at all times indemnify and hold harmless OLYMPUS, its
successors and permitted assigns, and any of its officers, directors,
employees, representatives, and/or agents, or each of them, from and against
any and all claims, liabilities, losses, costs, damages, and expenses,
including but not limited to all of OLYMPUS's reasonable attorneys' fees and
disbursements, court costs and expenses, incurred by OLYMPUS in any action or
proceeding between VENDOR and OLYMPUS (if OLYMPUS is the prevailing party)
and/or between OLYMPUS and any third party (attorneys' fees and disbursements
only to the extent VENDOR fails to defend) arising out of or resulting from (i)
a defect or alleged defect in a Product, including without limitation defects
relating to manufacturing, improper testing, or design, or any breach of
warranty regarding such Product or any component thereof, (ii)
misrepresentations made in connection with the promotion, marketing, sale,
distribution, use, safety, or efficacy of such Product based upon information
supplied to OLYMPUS by VENDOR, (iii) the contents of any labelling, inserts,
instruction manuals, or related documentation prepared by VENDOR or based upon
information supplied to OLYMPUS by VENDOR, or (iv) a Product Recall. VENDOR
shall have the right to control the defense and settlement of a third party
claim, action, or proceeding which is the subject of this indemnity, provided
that VENDOR shall not voluntarily make any payment, assume any obligation, or
settle or compromise an third party claim, action, or proceeding without the
express written approval of OLYMPUS (unless such settlement and/or compromise
releases OLYMPUS from all liability relating to such third party claim, action,
or proceeding).
(b) OLYMPUS shall not be entitled to the foregoing indemnity from VENDOR
to the extent that the claim, action, or proceeding arises or results from (i)
representations made by OLYMPUS regarding the Product which are different than
or in addition to the representations made by VENDOR to OLYMPUS, or (ii)
changes to the Product made by OLYMPUS, provided the Product is not defective
and has not been modified by VENDOR without OLYMPUS's knowledge and prior
written consent.
8.3 OLYMPUS Product Liability and Other Damage Indemnity.
(a)OLYMPUS shall at all times indemnify and hold harmless VENDOR, its
successors and permitted assigns, and any of its officers, directors,
employees, representatives, and/or agents, or each of them, from and against
any and all claims, liabilities, losses, costs, damages, and expenses,
including but not limited to all of VENDOR's reasonable attorneys' fees and
disbursements, court costs and expenses, incurred by VENDOR in any action or
proceeding between VENDOR and OLYMPUS (if VENDOR is the prevailing party)
and/or between VENDOR and any third party (attorneys' fees and disbursements
only to the extent OLYMPUS fails to defend) arising out of or resulting from
(I) representations (unless approved by VENDOR) made by OLYMPUS regarding a
Product which representations are different than or in addition to the
representations made by VENDOR to OLYMPUS, (ii) changes to a Product made by
OLYMPUS (provided the Product is not defective and has not been modified by
VENDOR without OLYMPUS's knowledge and prior written consent), or (iii) failure
of OLYMPUS to follow use, handling, or storage instructions with respect to the
Products. OLYMPUS shall have the right to control the defense and settlement of
a third party claim, action, or proceeding which is the subject of this
indemnity, provided that OLYMPUS shall not voluntarily make any payment, assume
any obligation, or settle or compromise an third party claim, action, or
proceeding without the express written approval of VENDOR (unless such
settlement and/or compromise releases OLYMPUS from all liability relating to
such third party claim, action, or proceeding).
(b) Notwithstanding the foregoing, VENDOR shall not be entitled to the
foregoing indemnity from OLYMPUS to the extent that the claim, action, or
proceeding arises or results from (i) a defect or alleged defect in a Product,
including without limitation defects relating to manufacturing, improper
testing, or design, or any breach of warranty regarding such Product or any
component thereof, (ii) misrepresentations made in connection with the
promotion, marketing, sale, distribution, use, safety, or efficacy of such
Product based upon information supplied to OLYMPUS by VENDOR, (iii) the
contents of any labelling, inserts, instruction manuals, or related
documentation prepared by VENDOR or based upon information supplied to OLYMPUS
by VENDOR, or (iv) a Product Recall.
8.4 Notices. Each party shall give prompt written notice to the other of
any claim, liability, loss, cost, damage, or expense for which such party seeks
indemnification under this Article 8. If the indemnified party wishes to enter
the defense of a claim, action, or proceeding being defended by the
indemnifying party, the indemnified party may do so at its own cost, with
control of the defense of the claim, action, or proceeding remaining with the
indemnifying party. If the indemnified party wishes to settle a claim, action,
or proceeding for which it is being indemnified under this Article 8, the
indemnified party must first obtain the written approval of the indemnifying
party.
ARTICLE 9. CONFIDENTIAL INFORMATION.
For purposes of this Agreement, the term "Confidential Information" shall mean
all documents, clearly marked as "PROPRIETARY" or "CONFIDENTIAL" , relating to
the respective products and businesses of the parties which (i) is disclosed,
upon request, by one party hereto to the other and (ii) is claimed by the
disclosing party to be secret, confidential and proprietary to the disclosing
party.
During the Agreement Term and for a period of one year thereafter, each party
(except as is explicitly otherwise required hereby) shall keep confidential,
shall not use itself or for the benefit of others and shall not copy or allow
to be copied, in whole or in part , any Confidential Information disclosed to
such party by the other.
The obligations of confidentiality imposed upon the parties by the foregoing
paragraph shall not apply with respect to any alleged Confidential Information
which:
(a) is known to the recipient thereof prior to receipt thereof from the
other party hereto (as evidenced by said recipient's written or
other recorded records);
(b) is disclosed to said recipient by a third party who has the right
to make such disclosure;
(c) is or becomes a part of the public domain or public knowledge
through no fault of the said recipient;
(d) is independently developed by the recipient (as evidenced by said
recipient's written or other recorded records); and
(e) is required to be disclosed under operation of law.
ARTICLE 10. MISCELLANEOUS.
10.1 Force Majeure. Each party hereto shall be excused from the
performance of its obligations hereunder in the event such performance is
prevented by force majeure, and such excuse shall continue for so long as the
condition constituting such force majeure and any consequences resulting from
such condition continues. In addition, in the event the condition constituting
the force majeure causes a substantial inability by either party hereto to
manufacture, deliver, sell, or otherwise distribute, as the case may be, the
Products, the term of this Agreement may be suspended for the period of such
inability, but not to exceed six months. For the purposes of this Agreement,
force majeure shall mean causes beyond either party's control including,
without limitation, acts of God; war, riot or civil commotion; damage to or
destruction of production facilities or materials by fire, earthquake, storm or
other disaster; strikes or other labor disturbances; epidemic; failure or
default of public utilities or common carriers; and other similar acts.
(Non)Compliance with laws or government regulations shall not constitute a
force majeure event.
10.2 Relationship. The relationship created between VENDOR and OLYMPUS by
this Agreement shall be that of independent contractors. Neither OLYMPUS nor
VENDOR shall be deemed an agent, representative, partner, joint venturer, or
employee of the other party. Neither VENDOR nor OLYMPUS shall have the right to
enter into any contracts or commitments or to make any representations or
warranties, whether express or implied, in the name of or on behalf of the
other party, or to bind the other party in any respect whatsoever, unless
agreed to in writing or expressly permitted in this Agreement.
10.3 Assignment; Binding Effect.
(a) Neither party to this Agreement may assign all or any part of its
rights and obligations under this Agreement except to an Affiliate without the
prior written consent of the other party. No permitted assignment by any party
pursuant to this subsection (a) shall result in any additional expense to the
other party. Any purported assignment in contravention of this subsection (a)
shall, at the option of the non-assigning party, be null and void and of no
effect.
(b) Except as otherwise provided above, this Agreement will be binding
upon and inure to the benefit of the successors and assigns of the parties.
10.4 Notices. Any notice or other communication required or permitted to
be given to either party under this Agreement shall be given in writing and
shall be delivered (i) by hand, or (ii) by registered or certified mail,
postage prepaid and return receipt requested, or (iii) by confirmed facsimile
transmission; addressed to each party at the following address or such other
address as may be designated by such party by notice pursuant to this Section:
To VENDOR: Hemagen Diagnostics, Inc.
34-40 Bear Hill Road
Waltham, MA 02154
Fax: 617-890-3748
Attention: General Counsel
To OLYMPUS: Olympus America Inc.
Clinical Instrument Division
Two Corporate Center Drive
Melville, New York 11747-3157
Fax: 516-844-5692
Attention: Division Manager
with a copy to OLYMPUS's General Counsel at the same address (Fax:
516-844-5296).
Any notice, consent, or other communication given in conformity with this
Section shall be deemed effective when received by the addressee, if delivered
by hand or facsimile transmission, and seven days after mailing, if mailed.
10.5 Governing Law Submission to Jurisdiction. This Agreement and any
other documents or instruments related hereto and all transactions hereunder
shall be deemed to have been made within and under the laws of the State of New
York, including the Uniform Commercial Code of the State of New York, and for
all purposes shall be governed by and construed in accordance with the laws of
the State of New York without regard to the conflict of laws rules thereof. Any
controversy, dispute or claim instituted by VENDOR with respect to any
provision of this Agreement shall be adjudicated exclusively by a court of
competent jurisdiction within Suffolk County, the State of New York, or the
Federal District Court for the Eastern District of New York. Any controversy,
dispute or claim instituted by OLYMPUS with respect to any provision of this
Agreement shall be adjudicated exclusively by a court of competent jurisdiction
within Middlesex County, the Commonwealth of Massachusetts, or the Federal
District Court in the Commonwealth of Massachusetts.
10.6 Execution of Additional Documents. Each party hereto agrees to
execute and deliver such documents as may be necessary or desirable to carry
out the provisions of this Agreement.
10.7 Entire Agreement. Except for OLYMPUS purchase orders pending as of
the Effective Date, this Agreement constitutes the entire agreement between
VENDOR and OLYMPUS with respect to the subject matter hereof. All prior or
contemporaneous agreements, proposals, understandings, representations, and
communications, whether written or oral, between or involving VENDOR and
OLYMPUS concerning this subject matter, including without limitation the
Exclusive Product Agreement between the parties dated as of February 28, 1989
and any amendments thereto (the "Exclusive Product Agreement") are hereby
cancelled and superseded. This Agreement may be amended or modified only in a
writing executed by both parties, which states that it is an amendment or
modification to this Agreement.
10.8 Severability. If any provision or part thereof of this Agreement is
held to be invalid, void or unenforceable, the remaining provisions or parts
thereof of this Agreement shall continue in full force without being impaired
or invalidated in any way, to the maximum extent possible consistent with the
intent of the parties in entering into this Agreement.
10.9 Taxes. Except as otherwise expressly provided in this Agreement,
each party shall be responsible for payment of its own taxes.
10.10 Counterparts. This Agreement may be executed in duplicate
counterparts, each of which when so executed shall be deemed to be an original
and both of which when taken together shall constitute one and the same
instrument.
10.11 No Waiver. No waiver of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged with
such waiver, and no waiver of any breach or failure to perform shall be deemed
to be a waiver of any future breach or failure to perform or of any other
provisions of this Agreement.
10.12 Headings. The headings contained herein are for reference only and
are not a part of this Agreement and shall not be used in connection with the
interpretation of this Agreement.
10.13 Rights and Remedies Cumulative; Damages. All rights and remedies
hereunder are cumulative and may be enforced separately or concurrently and
from time to time, unless otherwise specifically stated herein. The enforcement
of any particular remedy shall not constitute an election of remedies, and no
remedy is exclusive unless specifically stated herein. Each party's sole remedy
for the breach by the otehr party of any obligations contained in this
Agreement shall be recovery of direct damages, if any, and/or termination of
this Agreement in accordance with Section 7.2. Except with respect to Section
8.1, in no event shall either pafty be liable to the other party under this
Agreement for indirect, special, incidental, or consequential damages of any
ind, including but not limited to damages for lost profits, lost investments,
or lost business opportunities (collectively "Consequential Damages"). OLYMPUS
and VENDOR hereby agree that direct damages shall not include or contain
Consequential Damages.
10.14 Contract Interpretation. Each party hereto acknowledges that it has
had ample opportunity to review and comment on this Agreement. This Agreement
shall be read and interpreted according to its plain meaning and an ambiguity
shall not be construed against either party. It is expressly agreed by the
parties that the judicial rule of construction that a document should be more
strictly construed against the draftsperson thereof shall not apply to any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
HEMAGEN DIAGNOSTICS, INC.
By: /s/ Carl Franzblau
Name: Carl Franzblau
Title: President
OLYMPUS AMERICA INC.-Clinical Instrument Division
By: /s/ Stephen Weiss
Name: Stephen Weiss
Title: Vice President & Division Manager
SCHEDULE 1.10
PRODUCTS, PRICING AND SPECIFICATIONS
CONFIDENTIAL TREATMENT REQUESTED
ALSO SEE ATTACHED FOR SPECIFICATIONS
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 3.2
MANUFACTURER IDENTIFICATION
1. Package Inserts
In the next scheduled revision or printing of the package inserts for the
PK CMV System and PK CMV System Controls, the following manufacturer
identification will be incorporated:
Manfactured by: Manufactured for:
HEMAGEN DIAGNOSTICS INC. OLYMPUS AMERICA, INC.
Waltham, MA 02154 Melville, NY 11747
This information will be on the last page of the package inserts for PK CMV
System and PK CMV System contorls, in a font and type size equivalent to that
used in the text of the body of the package insert.
2. PK CMV System Kit
In the next scheduled revision or printing of the artwork for the PK CMV
System, the following manufacturer identification will be incorporated:
Manfactured by: Manufactured for:
HEMAGEN DIAGNOSTICS INC. OLYMPUS AMERICA, INC.
Waltham, MA 02154 Melville, NY 11747
This information will be incorporated on the back panel of the Kit, in an
equivalent font and type size equivalent to that used for the components,
active ingredients, and distributor information.
Exhibit 23a
Consent of Independent Certified Public Accountants
Hemagen Diagnostics, Inc.
Waltham, Massachusetts
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statements on Form S-3 (Nos. 33-
80009 and 333-06147) and in the Registration Statement on Form S-8 (No. 33-
3333718) of our report dated November 12, 1996, relating to the consolidated
financial statements of Hemagen Diagnostics, Inc. appearing in the Company's
Annual Report on Form 10-KSB for the year ended September 30, 1996.
BDO Seidman, LLP
Boston Massachusetts
December 26, 1996
Exhibit 23b
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statements on Form S-3 (Nos. 33-
80009 and 333-06147) and in the Registration Statement on Form S-8 (No. 33-
3333718) of our report dated November 30, 1995, relating to the consolidated
financial statements of Hemagen Diagnostics, Inc. appearing on page F-3 of
this Annual Report on Form 10-KSB.
Price Waterhouse LLP
Boston Massachusetts
December 26, 1996
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