-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfYeutw+0xN+TqhHJzuYTBvwnNFIzXhWmuaIzst7e1vGIchsGvuse/KA0ZQQYOqF kWWV2DdQjNdqR1/TerDsag== 0000950137-97-003057.txt : 19970918 0000950137-97-003057.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950137-97-003057 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970912 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCUMED INTERNATIONAL INC CENTRAL INDEX KEY: 0000888335 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 364054899 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-20652 FILM NUMBER: 97679795 BUSINESS ADDRESS: STREET 1: 920 N FRANKLIN ST STREET 2: STE 402 CITY: CHICAGO STATE: IL ZIP: 60610 BUSINESS PHONE: 3126429200 MAIL ADDRESS: STREET 1: 920 N FRANKLIN STREET STREET 2: SUITE 402 CITY: CHICAGO STATE: IL ZIP: 60610 FORMER COMPANY: FORMER CONFORMED NAME: ALAMAR BIOSCIENCES INC DATE OF NAME CHANGE: 19950504 10QSB/A 1 AMEND. NO. 1 TO FORM 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB Amendment #1 to Form 10-QSB (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT - --- For the transition period from _____ to _____. Commission file number 0-20652 ACCUMED INTERNATIONAL, INC. --------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 36-4054899 - --------------------------------- ------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 900 N. Franklin St., Suite 401, Chicago, IL 60610 -------------------------------------------------- (Address of principal executive offices) (312) 642-9200 -------------- (Issuer's telephone number including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Common Stock outstanding as of August 5, 1997: 22,519,236 Transitional Small Business Disclosure Format (check one): Yes No X --- --- 2 ACCUMED INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited) June 30, December 31, ASSETS 1997 1996 ----------- ----------- Current Assets Cash and cash equivalents $ 1,000,580 $ 2,801,359 Restricted cash 100,000 100,000 Accounts receivable 5,293,534 2,143,596 Prepaid expenses and deposits 544,387 217,198 Production inventory 3,339,721 1,772,127 ----------- ----------- Total current assets 10,278,222 7,034,280 ----------- ----------- Fixed assets, net 6,223,000 1,696,071 ----------- ----------- Notes receivable 111,631 214,273 Deferred financing costs 1,494,525 0 Intangible assets 4,786,567 5,340,411 Other assets 361,944 194,507 ----------- ----------- $23,255,889 $14,479,542 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 4,159,237 $ 2,340,769 Other current liabilities 1,427,744 879,808 Deferred revenue 136,362 146,968 Notes payable 721,191 198,555 Capital lease obligation due within one year 82,122 89,810 ----------- ----------- Total current liabilities 6,526,656 3,655,910 ----------- ----------- Warranty reserves 1,158,193 0 Long term debt 9,376,295 230,795 Minority interest 268,977 456,841 ----------- ----------- 10,803,465 687,636 ----------- ----------- Stockholders' equity Common stock, $0.01 par value, 50,000,000 shares authorized, 22,387,097 shares issued and outstanding at June 30, 1997, 20,854,157 at December 31, 1996 223,871 208,542 Additional paid-in capital 51,218,753 44,424,646 Cumulative translation adjustment 32,586 32,586 Accumulated deficit (45,332,705) (34,335,313) Less treasury stock, 37,956 shares at June 30, 1997, and 31,812 shares at December 31, 1996, respectively (216,737) (194,465) ----------- ----------- Total stockholders' equity 5,925,768 10,135,996 ----------- ----------- $23,255,889 $14,479,542 =========== ===========
See accompanying notes to the consolidated financial statements. - 1 - 3 ACCUMED INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, Three Months Ended June 30, ----------------------------- ------------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Sales $ 9,243,302 $ 2,312,094 $ 6,193,888 $ 1,124,393 Less cost of sales (5,573,855) (1,465,457) (4,082,255) (870,247) ----------- ----------- ----------- ------------ Gross profit (loss) 3,669,447 846,637 2,111,633 254,146 ----------- ----------- ----------- ------------ Operating expenses: General and administrative 4,446,983 1,791,534 2,586,988 877,477 Research and development 2,299,275 4,789,412 1,145,491 714,626 Goodwill writeoff 3,582,068 0 0 0 Sales and marketing 2,090,423 841,565 1,115,206 448,388 ----------- ----------- ----------- ------------ Total operating expenses 12,418,749 7,422,511 4,847,685 2,040,491 ----------- ----------- ----------- ------------ Operating income (loss) (8,749,302) (6,575,874) (2,736,052) (1,786,345) ----------- ----------- ----------- ------------ Other income (expense): Interest income 11,967 11,460 369 5,623 Interest expense (2,488,042) (437,986) (2,288,144) (111,155) Other income (expense), net 40,769 2,544,513 40,339 82,261 Minority interest 187,216 0 149,493 0 ----------- ----------- ----------- ------------ Total other income (expense) (2,248,090) 2,117,987 (2,097,993) (23,271) ----------- ----------- ----------- ------------ Loss before income taxes (10,997,392) (4,457,887) (4,833,995) (1,809,616) Income tax expense 0 850 0 0 ----------- ----------- ----------- ------------ Net loss $(10,997,392) $(4,458,737) $(4,833,995) $ (1,809,616) =========== =========== =========== ============ Net loss per share $ (0.52) $ (0.27) $ (0.22) $ (0.11) =========== =========== =========== ============ Weighted average common shares outstanding 21,323,771 16,319,105 22,076,818 16,843,050 =========== =========== =========== ============
See accompanying notes to the consolidated financial statements. - 2 - 4 ACCUMED INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Six Months Ended June 30, Ended June 30, 1997 1996 -------------- -------------- Cash flows from operating activities: Net income (loss) $(9,070,552) $(4,458,737) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,235,592 704,465 Write-off of in-process research and development 0 3,499,727 Write-off of impaired goodwill 3,582,068 0 Minority interest (187,216) 0 Expenses paid with issuance of stock and warrants 0 1,285,484 Non-cash gain on settlement (22,272) (159,957) Loss on disposal of assets 0 74,706 Changes in assets and liabilities: Decrease in restricted cash 0 363,000 (Increase) in accounts receivable (939,273) (531,403) (Increase) in prepaid expenses and deposits (327,189) (106,358) (Increase) in production inventory (556,818) (371,877) Decrease (Increase) in other and intangible assets 150,988 (57,584) Increase in accounts payable 1,846,948 237,548 (Increase) in deferred financing costs (784,625) 0 Increase (Decrease) in other current liabilities 249,973 (94,588) (Decrease) in warranty reserves (341,807) 0 (Decrease) in deferred revenue (10,606) (1,419,092) ----------- ----------- Net cash used in operating activities (5,174,789) (1,034,666) ----------- ----------- Cash used in investing activities: Purchase of fixed assets (624,926) (202,010) Acquisition of business, net (6,000,000) 0 ----------- ----------- Net cash used in investment activities (6,624,926) (202,010) ----------- ----------- Cash flows from financing activities: Proceeds from issuances of common stock, net 261,028 2,338,711 Notes receivable (issued) collected (55,767) 0 Payment of capital lease obligation (32,870) (46,770) Proceeds from issuance of notes payable 10,015,000 250,000 Proceeds from bridge loan 6,000,000 0 Payment of notes payable and bridge loan (6,188,455) (889,017) ----------- ----------- Net cash provided by financing activities 9,998,936 1,652,924 ----------- ----------- Effect of exchange rates on cash 0 (1,491) ----------- ----------- Net increase (decrease) in cash and cash equivalents (1,800,779) 414,757 Cash and cash equivalents at beginning of period 2,801,359 180,508 ----------- ----------- Cash and cash equivalents at end of period $ 1,000,580 $ 595,265 =========== ===========
See accompanying notes to consolidated financial statements. - 3 - 5 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. ACCUMED INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Preparation of Interim Financial Statements: The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, such consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the results of operations and financial position for the interim periods presented. Operating results for the three month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. 2. Basis of Presentation: The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances, transactions and stockholdings have been eliminated. 3. Merger Transaction: On December 29, 1995, the Company acquired all of the common stock of AccuMed, Inc. and its wholly owned subsidiary. Pursuant to the terms of the merger agreement, 1,881,910 shares of Common Stock and 126,945 warrants were issued to AccuMed, Inc. stockholders and warrantholders, respectively, which were contingent and subject to forfeiture if specified performance goals were not achieved by the merged entity. The contingency associated with 940,955 shares of Common Stock and 63,473 warrants was resolved (performance goal achieved) in March 1996 resulting in contingent consideration of $5,430,326. Such amount has been allocated to identifiable intangibles of acquired proprietary technology ($1,930,599) and in-process research and development ($3,499,727). The acquired proprietary technology is being amortized over the expected period to be benefited of ten years, with the in-process research and development charged to operations during the three months ended March 31, 1996. The contingency associated with the remaining 940,955 shares of Common Stock and 63,472 warrants was resolved (performance goal achieved) in March 1997 resulting in contingent consideration of $3,582,068. Such amount has been recorded as goodwill associated with the merger and charged off in its entirety to operations during the three months ended March 31, 1997 as an impaired asset. 4. Notes Payable: The Company received proceeds of $1,250,000 in the second quarter under two installment loan agreements. Terms of the loans call for 24 equal monthly principal payments plus interest at 11.5% commencing in August 1997, and are secured by equipment and receivables under certain rental agreements with customers. On March 14, 1997, the Company consummated a private placement. (the "Private Placement") of 85 Units each consisting of $100,000 in principal amount of 12% Convertible Promissory Notes (the "Notes") and Warrants (the "Warrants") to purchase 10,000 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"). The Company received net proceeds of approximately $7.8 million from the Private Placement after deducting commissions and related expenses. The Notes bear interest at the rate of 12% per annum, payable semi-annually in arrears on August 15 and February 15 of each year during the term of the Notes. Principal under the Notes is due March 14, 2000. Commencing three months following the date of issuance, and subject to shareholder approval of an amendment to the Certificate of Incorporation (the "Charter Amendment") to increase the authorized shares of Common Stock by an amount sufficient to permit the Company to reserve for issuance a sufficient number of shares to allow for the conversion of the Notes, the Notes will become convertible at the option of the holder into shares of Common Stock at a conversion price price equal to $3.125 (the "Conversion Price"). If the Company does not have sufficient authorized shares to accommodate conversion of the Notes by May 31, 1997, (i) the Notes will become due and payable 30 days thereafter at an amount equal to 150% of the outstanding principal amount, and (ii) the Conversion Price will be reduced by 20%. At the Company's annual stockholders meeting on May 23, 1997 the stockholders approved an amendment to the Company's Certificate of Incorporation increasing the number of authorized shares of Common Stock to 50,000,000 shares. This increase provides sufficient shares to accomodate conversion of the notes. At the date of issuance the conversion feature of the notes was "in the money", with the intrinsic value of such feature calculated as approximately $1,900,000. Such amount has been reflected as additional paid-in capital with an offset in deferred financing costs in the consolidated balance sheet as of March 31, 1997. The deferred financing costs were written off in the current quarter, the period in which the notes became convertible. The Warrants are exercisable to purchase Common Stock at an exercise price of $3.125 per share. Of the 10,000 Warrants included in each Unit, 8,823 are immediately exercisable for a period of six months following March 14, 1997, and 1,177 Warrants will become immediately exercisable upon effectiveness of the Charter Amendment and will remain exercisable for six months thereafter. The Company has agreed to register the resale of the Common Stock underlying the Notes and the Warrants under the Securities Act of 1933, as amended. If the company fails to file with the Securities and Exchange Commission a registration statement covering such underlying Common Stock on or prior to May 31, 1997, (i) the interest reate on the Notes will increase to 16% per annum until such registration statement is filed, and (ii) the Conversion Price will be reduced by 20%. The Company filed the required registration statement on May 30, 1997 The total proceeds received of $8,500,000 were allocated to the notes payable and warrants based on the estimated fair value of $7,934,500 and $565,500, respectively. The original issue discount of $565,500 relating to the notes payable has been recorded in Deferred Finance Costs on the March 31, 1997 Balance Sheet, and will be amortized over the term of the notes. The placement agent, a shareholder of the Company, received fees estimated at $961,500 representing out of pocket expenses of $56,500, a placement fee equal to $595,000 or 7% of the proceeds of the offering and five year warrants to purchase 200,000 shares of the Company's Common Stock with a fair value of $310,000. Of the loan proceeds, $6,130,000 (including $130,000 of interest) was used to repay a $6,000,000 bridge loan used for the ESP Culture System II product line acquisiton on March 3, 1997 (see note 5), $651,500 was used for issuance costs, and the remaining $1,718,500 was retained to cover transition costs of the acquired business. Of the total of $3,517,000 of costs associated with the issuance of these notes, $1,617,000 will be amortized over the three year term of the notes and $1,900,000 related to the "in the money" conversion feature was written off in the current quarter. The company utilized the Black-Scholes pricing model to determine the fair value of the warrants granted. The following assumptions were incorporated into the model: 850,000 warrants - risk free rate 7%, expected life 6 months, expected volatility 20%, and expected dividend zero; 200,000 warrants - risk free rate 7%, expected life 5 years, expected volatility 20%, and expected dividend zero. 4 6 5. Acquisition: On March 3, 1997, the Company acquired certain assets and liabilities (the "ESP Product Line") from Difco Microbiology Systems, Inc. ("Difco") for a total purchase price of $6,000,000 in cash. The acquisition was accounted for using the purchase method of accounting with the purchase price allocated to the net assets acquired based on their estimated fair values. This treatment resulted in no excess purchase price over the fair value of tangible assets acquired. The operations associated with this acquisition have been included in the consolidated statement of operations since the date of acquisition. The pro-forma consolidated results of operations giving effect to the acquisition of Difco as if it had occurred as of January 1, 1996 follows:
For the Six Months Ended ----------------------------- June 30, 1997 June 30, 1996 ------------- ------------- Sales $ 11,882,424 $ 11,028,591 Net loss $ (12,139,925) $ (9,214,565) Net loss per share ($0.57) ($0.55)
6. Warranty reserve: The warranty reserve has been classified as a non-current liability because, in management's estimation, no materially significant claims will be paid in the next twelve months. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company is engaged in the development and manufacturing of cost effective screening instruments and systems for clinical diagnostic laboratories. The Company markets products in two laboratory market segments: 1) Microbiology - proprietary disposable products and automated instruments used to identify infectious organisms and determine susceptibility to antimicrobial agents, and 2) Cytopathology - systems made up of multiple instruments networked via proprietary software that support the review and analysis of Pap smears. Effective March 3, 1997, the Company acquired certain assets and liabilities of Difco Microbiology Systems, Inc. relating to the ESP Culture System II product line (the "ESP Product Line"). The results of operations reflected in the Company's consolidated statement of operations for the quarter and six months ended June 30, 1997 include the results of operations of the ESP Product Line from the date of the acquisition, whereas results of operations from prior periods reflect the operations of the Company's microbiology and cytopathology product lines only. Revenues from sales for the quarter ended June 30, 1997 increased to $6,194,000 compared to $1,124,000 for the quarter ended June 30, 1996, due primarily to the increase in sales in the microbiology product line and the addition of the ESP product line. Cost of sales increased from $870,000 in the second quarter of 1996 to $4,082,000 in the second quarter of 1997, reflecting the increased sales volume in the microbiology product line and the addition of the ESP product line. 5 7 General and administrative expenses increased from $877,000 in the second quarter of 1996 to $2,587,000 in the comparable 1997 quarter primarily due to increases in staffing, office, professional fees, and investor relations efforts. Interest expense of $2,288,000 in the second quarter of 1997 reflected amounts accrued on the three year notes issued in March of 1997 and a write-off of $1.9 million related to the "in the money" conversion feature of these notes. The write-off was recorded in the second quarter of 1997 because that is the period in which the notes became convertible. The interest expense for the second quarter of 1996 of $111,000 reflected non-cash interest incurred for issuance of warrants connected with notes payable repaid in 1996. Research and development expenses increased from $715,000 in the second quarter of 1996 to $1,145,000 in the second quarter of 1997 due primarily to increased spending in the cytopathology area. Sales and marketing expenses increased from $448,000 in the second quarter of 1996 to $1,115,000 in the second quarter of 1997 due to increased marketing efforts for the cytopathology product line. Net loss increased from $1,810,000 for the second quarter of 1996 to $4,834,000 for the second quarter of 1997 due to increased sales volume and related gross margins offset by increases in all operating expense categories. In addition, a write-off of $1.9 million related to the "in the money" conversion feature of notes issued in March 1997 increased interest expense as compared to 1996. Net loss per share for the quarter ended June 30, 1997 was $0.22 compared to $0.11 for the quarter ending June 30, 1996. Weighted average shares outstanding for the periods 1997 and 1996 were 22,077,000 and 16,843,000, respectively. For the six month period ended June 30, 1997, net loss was $10,997,000 and $4,459,000 for the comparable 1996 period. The increase in the loss for 1997 as compared to 1996 was primarily attributed to higher spending in the administrative area and increased sales and marketing efforts. Also, the Company received no other income from licensing agreements in 1997, while $3,500,000 of such other income was received in 1996. The "in the money" write-off of $1.9 million, as discussed above, for the six months ending June 30, 1997 also contributed to the increased loss as compared to the first six months of 1996. The net loss per share for the first six months of 1997 was $0.52 compared to $0.27 for the 1996 period. The loss per share for the current six month period was about $0.10 per share less due to the increase in the weighted average shares outstanding for 1997. The Company's increase in net current assets of $374,000 as of June 30, 1997 as compared to December 31, 1996 is due primarily to the Company's acquisition at March 3, 1997 of the ESP Product Line, offset by an decrease in net current assets of the cytopathology product line. LIQUIDITY AND CAPITAL RESOURCES The Company has been substantially dependent on the private placements of its debt and equity securities and the proceeds of its public offerings of securities to fund its cash requirements. From the initial public offering in October 1992 through June 30, 1997, the Company has raised approximately $43,000,000 in aggregate net proceeds from public offerings and private placements of securities. The Company's most recent private placement was closed in March 1997, resulting in the issuance of $8,500,000 of three year convertible notes bearing interest at a rate of 12% per annum. Investors also received 850,000 warrants to purchase shares of the Company's common stock at a price of $3.125 per share. Of this total, 750,000 warrants expire September 15, 1997 and 100,000 warrants expire November 23, 1997. If all of these warrants were exercised, of which there can be no assurance, the Company would receive about $2,656,000 in gross proceeds. During the second quarter of 1997, the Company received 6 8 an aggregate of $223,000 upon the exercise of certain stock options and warrants. In addition, the Company received $1,250,000 in June 1997 from installment debt to be repaid in 24 monthly-payments, including interest at 11.5%, beginning in August 1997. During the six months ended June 30, 1997, the Company has expended substantial funds for research and product development, scale-up of manufacturing capacity, sales and marketing efforts and other general corporate purposes. Management believes that existing cash balances and internally generated funds may not be sufficient to finance the Company's projected operations through at least the next 12 months. In order to obtain the additional financing needed, management is seeking to raise additional funds through various means, including private financings, collaborative relationships and other arrangements. The Company's future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of expansion of manufacturing capacity, the costs, timing and success of the Company's product development efforts, the costs and timing of acceptance of the Company's products, competing technological and market developments, the progress of commercialization efforts of the Company and its distributors, the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent claims and other intellectual property rights, developments related to regulatory and third-party reimbursement matters, and other factors. The Company currently has no commitments with respect to sources of additional financing, and there can be no assurance that any such financing sources will be available to the Company or that adequate funds for the Company's operations, whether from the Company's revenues, financial markets, collaborative or other arrangements with corporate partners or from other sources, will be available when needed or on terms satisfactory to management. The failure to obtain adequate additional financing may require management to delay, curtail or scale back some or all of its studies and regulatory activities and, potentially, to cease all operations. Any additional equity financing may involve substantial dilution to the Company's then-existing stockholders. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Management expects that the Company's operating results will fluctuate significantly from quarter to quarter and will depend on various factors, many of which are outside of management's control. These factors include the success of the marketing efforts for the Company's products, obtaining necessary regulatory clearances or approvals for the Company's products, the timing and level of expenditures associated with expansion of sales and marketing activities and overall operations, the Company's ability to cost effectively expand manufacturing capacity and maintain consistently acceptable yields, the timing of establishment of strategic distribution arrangements and the success of the activities conducted under such changes in government regulation and other factors, the timing of significant orders from and shipments to customers, and general economic conditions. These or other factors could have a material adverse effect Company's business, financial condition and results of operations. 7 9 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. A combined Annual and Special Meeting of Stockholders was held on May 23, 1997. At such meeting the following maters were approved. The persons named below were elected to serve one year terms as directors:
Voting Results (No. of Shares) ------------------------------------------- Director For Against Withheld -------------------- ----------- --------------- --------------- J. Donald Gaines 18,051,794 - 0 - 23,462 Peter P. Gombrich 18,051,794 - 0 - 23,462 Jack H. Halperin 18,051,794 - 0 - 23,462 Paul F. Lavallee 18,051,794 - 0 - 23,462 Joseph W. Plandowski 18,051,794 - 0 - 23,462 Robert L. Priddy 18,050,644 - 0 - 24,612 Leonard M. Schiller 18,051,794 - 0 - 23,462
Stockholders also approved a proposal to amend the Company's Certificate of Incorporation to increase the authorized Common Stock from 30,000,000 shares to 50,000,000 shares. The vote was as follows: 17,678,077 for, 385,219 against, 11,960 abstain and zero broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. The following exhibits are filed herewith: 4.1 Certificate of Amendment to Registrant's Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-3 (Regis. No. 333-28125) filed with the Commission on May 30, 1997). 10.1 Employment Agreement between the Registrant and Michael D. Burke dated as of May 23, 1997. 10.2 O.E.M. Supply Agreement between the Registrant and Leica Microscopie und Systems GmbH dated as of May 26, 1997. 10.3 Manufacturing and Supply Agreement between the Registrant and RELA, Inc. dated as of May 22 , 1997. 27.1 Financial Data Schedule (b) Reports on Form 8-K. The following Current Report on Form 8-K was filed by the Company with the Securities and Exchange Commission during the quarter ended June 30, 1997: 8 10 On May 15, 1997, Amendment No. 1 to Current Report on Form 8-K dated March 18, 1997: Item 2 - Acquisition or Disposal of Assets - reporting the acquisition of the ESP Culture System II product line, and Item 7 - Financial Statements and Exhibits, including the following financial statements: (a) Financial Statements of Business Acquired: Net Assets Sold of Difco Microbiology Systems, Inc. 1. Independent Auditors' Report 2. Statement of Net Assets Sold as of December 31, 1996 and December 31, 1995. 3. Statement of Revenues and Expenses for the 12 months ended December 31, 1996 and December 31, 1995. 4. Notes to Financial Statements (b) Pro Forma Financial Information: AccuMed International, Inc.: 1. Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1996. 2. Pro Forma Condensed Consolidated Statement of Operations for the 12 months ended December 31, 1996. 3. Notes to the Pro Forma Condensed Consolidated Financial Statements. 9 11 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. ACCUMED INTERNATIONAL, INC. /s/ Leonard R. Prange --------------------------- Leonard R. Prange Chief Financial Officer and Chief Operating Officer Date: September 12, 1997 10 12 Index to Exhibits Exhibit No. Description of Exhibit 4.1 Certificate of Amendment to Registrant's Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-3 (Regis. No. 333-28125) filed with the Commission on May 30, 1997). 10.1 Employment Agreement between the Registrant and Michael D. Burke dated as of May 23, 1997. 10.2 O.E.M. Supply agreement between the Registrant and Leica Microscopie and Systems GmbH dated as of May 26, 1997. 10.3 Manufacturing and Supply Agreement between the registrant and RELA, Inc. dated as of May 22, 1997. 11 EX-10.1 2 EMPLOYMENT AGREEMENT 1 Exhibit 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made this 23rd day of May 1997, by and between AccuMed International, Inc., a Delaware corporation (the "Employer"), and Michael D. Burke (the "Executive"). WHEREAS, Executive has served as Senior Vice President of Employer and President, Microbiology Division of Employer since December 29, 1995 pursuant to the offer of Employment letter dated April 21, 1995 between Employee and AccuMed, Inc. (which was merged with and into the Company on December 29, 1995) (the "Original Employment Letter"); and WHEREAS , Employer desires to reorganize its corporate structure and revise Executive's duties, responsibilities and position and Executive is willing to accept such employment, and this Agreement contains the parties' entire agreement and understanding as to the matters contemplated herein, and supersedes any and all prior oral or written agreements, including the Original Employment Letter. WHEREAS, Employer desires to employ Executive and Executive is willing to accept such employment, all upon the terms and conditions hereinafter set forth and those terms and conditions set forth in the Employer's letter Offer to the Executive which is superseded by the terms and conditions herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto agree as follows: 1. Employment and Duties. Employer hereby employs Executive and Executive accepts employment with Employer as Corporate Vice President and Group President, reporting to the Chairman/CEO of the Employer, and Executive shall perform those duties as usual and customary as a Corporate Vice President (i.e., to include but not be limited to Financial and Administrative duties). Executive shall perform such other or additional duties as shall be assigned to Executive from time to time by the Chairman/CEO consistent with his position. 2. Compensation and Benefits. During the term of this Agreement, Employer shall pay Executive the following compensation: a. Salary Executive shall receive an annual salary which shall be no less than $175,000.00 payable semi-monthly in accordance with Employer's regular payroll procedures. Executive shall also receive annual performance and compensation reviews which will be conducted by the Chairman/CEO and the Compensation Committee of the Board of Directors, or its designee. b. Bonus Executive shall be eligible to receive bonuses which shall be up to twenty-five percent (25%) of Executive's annual salary, based upon performance of mutually agreed upon goals/objectives. Two thirds (2/3) of said bonus shall be based on quarterly objectives and shall be paid quarterly. One third (1/3) of said bonus shall be based upon annual objectives and shall be paid annually. The bonus year shall be the calendar year. The Employer, at its sole and absolute discretion may pay Executive a bonus in excess of twenty-five percent (25%) of his annual salary. c. Stock Options 2 (1) Subject to approval of the Compensation Committee of the Board, Executive will be granted, options to purchase 100,000 shares of the Employer's Common Stock, pursuant to the terms of the Employer's 1997 Stock Option Plan which options, subject to Compensation Committee approval and approval of the Plan by stockholders, shall be exercisable in accordance with the following schedule:
Date Amount ---- ------ Date of stockholder approval of Plan 20,000 shares 7/5/98 20,000 shares 7/5/99 20,000 shares 7/5/00 20,000 shares 7/5/01 20,000 shares
The price of the options will be set at Fair Market Value (as defined in the Plan) on the grant date. If there is a change of control of the Company (as described in the Plan), or if Peter P. Gombrich cease to hold the office of Chairman and CEO, the right to acquire shares pursuant to any of such 100,000 options outstanding on the date on which such Change of Control occurs shall accelerate and become fully vested and immediately exercisable. (2) Subject to Compensation Committee approval, Executive shall also be granted options to purchase an aggregate of 50,000 shares of Common Stock, which the Compensation Committee intended to have granted to Executive in 1996 but for the lack of available options. The exercise price shall be the Fair Market Value on the Date of Grant. Such Options shall be exercisable in accordance with the following schedule: Date Amount ---- ------ Date of stockholder approval of Plan 10,000 shares 7/5/98 10,000 shares 7/5/99 10,000 shares 5/5/00 10,000 shares 7/5/01 10,000 shares
The right to acquire shares pursuant to any such 50,000 options that are outstanding on the date on which a Change of Control occurs shall be accelerated and become fully vested and immediately exercisable. d. Benefits The Executive shall be eligible for such Employer benefits as exist for senior executives of Employer and subject to the terms and conditions of third party policies. Should Executive not be eligible to receive any of the Employer's benefits or should any carrier decline to cover Executive, Employer will use commercially reasonable efforts to obtain pay for and retain a comparable replacement policy on an 2 3 individual basis. (1) Medical Insurance with $15,000 Life/AD&D fully paid by Employer. Dependent medical insurance at the option of the employee. (2) Excess Life and AD&D Benefit 1 1/2 times base salary (less $15,000) up to $150,000 cap, fully paid by Employer (3) Short Term Disability $500/wk benefit for 26 weeks fully paid by Employer (4) Long Term Disability 60% of monthly salary ($6000/mo. cap) to age 65 (5) Dental Insurance for Employee and Dependents at own expense c. Expenses Reimbursement of normal business expenses with submission of expense reports and receipts. The Company will reimburse up to $4,000 a year of reasonable travel expenses for Executive's daughter to visit Executive. d. Auto The Company will maintain the Executive's current company auto and pay or reimburse to Executive related expenses, and will upgrade the auto when reasonable permitted under the lease terms. e. Relocation Expenses Other compensation shall be provided as set forth in Exhibit A, hereto. g. Other Compensation Nothing herein shall preclude Executive from receiving any additional compensation or from participating in the present or future life, major medical, hospitalization, profit sharing, pension or retirement, sickness or disability or other plan for the benefit of the employees of Employer. In each case, Executive will participate to the extent and in the manner approved or determined by the Board of Directors or otherwise determined. 3. Extent of Services. Executive shall devote his entire attention and energy to the business and affairs of Employer on a full-time basis and shall not be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, unless Employer otherwise consents prior thereto; Executive shall not be prohibited from investing Executive's assets in such form part of the Executive in the operation of the affairs of the companies in which such investments are made, 4. Term. The term of this Agreement shall be five years, commencing May 23, 1997, subject to the following: a. Illness or Disability If Executive is absent from employment by reason of illness or other incapacity for more than 180 consecutive days', Employer may, after such 180 days but only if Executive has not returned to active employment with Employer, terminate Executive's employment by furnishing him with at least 30 days written notice of such intention to termination. Employer shall be obligated to pay Executive's salary to the date of termination , less that amount equal to the weekly Short Term Disability Benefit, which date shall be for all purposes of this Agreement, the date of termination of his employment. b. Death. If Executive shall die, thereupon his employment shall terminate, and Employer shall be only obligated to pay Executive's salary to the end of the month during which Executive dies. c. Termination by Employer. Upon written notice, Employer may terminate this Agreement at any time: 3 4 (i) For Cause. As used herein, "Cause" is defined to mean (1) any act of fraud, misappropriation, embezzlement, or like act of dishonesty; (2) conviction of a felony; (3) other behavior which adversely reflects on the reputation of Employer including without limitation, substance abuse, public intoxication, etc.; or (4) material failure to perform the services and duties described herein, (5) material violation of any other provisions set forth herein, or material breach of any fiduciary duty to Employer, if the material failure, violation, or breach unreasonably continues after written notice thereof is given to the Executive by the Employer and further provided that Executive is given a fair and reasonable opportunity to cure. If Employer shall terminate Executive's employment without Cause, Employer shall pay Executive's salary up to the date of the delivery of such notice of termination, which date shall be for all purposes of this Agreement, the date of termination of his employment. (ii) Without Cause, to terminate the Executive without cause, the Executive is to be terminated without cause he shall be given six (6) months notice in writing. d. Termination by Executive Executive may terminate this Agreement for any reason after providing six (6) months written notice. If Employer is in breach of this Agreement, Executive may, in addition and without prejudice to any other remedies for a breach hereof, terminate this Agreement, after providing written notice to the Employer and providing Employer with a reasonable opportunity to cure. If the Employer thereafter fails to cure, all of Executive's further obligations hereunder shall terminate, except for the requirements of Sections 8 and 10 hereof. 5. Severance. a. If Executive terminates this Agreement within eighteen months of its execution, except if Employer is in breach of this Agreement, as provided in Section 4(d) above housing and moving related expenditures incurred by Employer on Executive's behalf shall be reimbursed and returned by Executive to Employer. b. If Employer terminates this Agreement without Cause within sixty (60) months of its execution, in addition to the notice requirement provided in Section 4(c)(ii) above, Employer will pay Executive his then current annual salary for twelve (12) months, semi-monthly, in accordance with Employer's regular payroll procedures. If Employer terminates this Agreement, without Cause, after sixty (60) months of its execution, Employer will have no severance obligation. 6. Vacation. During the first, second and third calendar years of this Agreement, Executive shall be entitled to four weeks of vacation with pay. During the fourth and fifth calendar years of continuous service and during each subsequent calendar year of continuous service thereafter, the Executive shall be entitled to six weeks vacation with pay. In the event that the full vacation is not taken by Executive within 60 days of the end of any calendar year, no vacation time shall accrue for use in future years, without mutual agreement between Executive and Employer. 7. Restrictive Covenant. Executive shall not in any manner engage in any business directly competitive with Employer, for a period of one year from the date of the termination of this Agreement under the following circumstances: a. If this Agreement is terminated for "Cause" by the Employer, pursuant to Section 4(c)(i) above; or b. If this Agreement is terminated by Executive, pursuant to Section 4(d) above, for reasons other 4 5 than a breach by Employer. 8. Confidential Information and Discoveries. Executive agrees that all information of a technical or business nature such as know-how, trade secrets, secret business information, plans, data, processes, techniques, customer information, inventions, discoveries, formulae, patterns, devices, etc. (the "Confidential Information"), acquired by Executive in the course of his employment under this Agreement, is a valuable business property right of the Employer. Executive agrees that such Confidential Information, whether in written, verbal or model form, shall not be disclosed to anyone outside the employment of Employer without the express written authorization of Employer, unless said individual is subject to the Employer's non-disclosure agreement or other appropriate contractual arrangement. This disclosure restriction shall be limited to (a) disclosures for use in any market in which the Employer may then be doing business or may have taken any steps toward entering, and (b) for that period of time until the Confidential Information is generally available to the trade. Any and all improvements, inventions, discoveries, formulae or processes in any way related to Employer's business which Executive may conceive or make during his regular working hours or otherwise shall be the sole and exclusive property of Employer and Executive will disclose the same to Employer and will, whenever requested by Employer to do so (either during the term of this Agreement or thereafter), execute and assign any and all applications, assignments and/or other instruments and do all things which Employer may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents, copyrights, trademarks or other forms or protection, or in order to assign and convey or otherwise make available to Employer the sole and exclusive right, title and interest in and to said improvements, inventions, discoveries, formulae, processes, applications or patents. After the termination of this Agreement, Employer will compensate Employee for his time and effort to comply with the terms of this paragraph 7 and the Employee may not decline to comply with any reasonable request. No provision in this Agreement is intended to require assignment of any of Executive's rights in an invention if no equipment, supplies, facilities, or trade secret information of Employer was used, and the invention was developed entirely on Executive's own time; and the invention does not relate to the business of Employer or to Employer's actual or demonstrably anticipated research or development; and does not result from any work performed by Executive for Employer. 9. Enforcement. Both parties recognize that the services to be rendered under this Agreement by Executive are special, unique and of extraordinary character and that in the event of the breach by Executive of any of the terms and conditions of this Agreement to be performed by Executive, then Employer shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any breach hereof, or to enforce the specific performance hereof by Executive or to enjoin Executive from performing acts prohibited above during the period herein covered, but nothing herein contained shall be construed to prevent such other remedy in the courts as Employer may elect to invoke. 10. Return of Documents. Upon the termination of this Agreement for any reason, Executive shall forthwith return and deliver to Employer and shall not retain any original or copies of any books, papers, price lists or customer contacts, bids or customer lists, files, books of account, notebooks and other documents and data relating to the performance of services rendered by Executive hereunder, which were provided to or made available to Executive by Employer, all of which materials are hereby agreed to be the property of Employer. 11. Miscellaneous. a. Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by registered or certified mail to Executive or Employer at the address set forth 5 6 below their signatures at the end of this Agreement or to such other address as they shall notify each other in writing. b. Assignment This Agreement shall be binding upon and inure to the benefit of Employer and its successors and assigns and Executive and his personal representatives, heirs, legatees and beneficiaries, but shall not be assignable by Executive. c. Applicable Law This Agreement shall be deemed to have been made in Illinois, regardless of the order in which the signatures of the parties shall be affixed hereto, and shall be interpreted, and the rights and liabilities of the parties determined, in accordance with the laws of the State of Illinois. As part of the consideration for the execution of this Agreement, it is hereby agreed that all actions or proceedings arising directly or indirectly from this Agreement shall be litigated only in the courts of the State of Illinois or United States courts located therein, and all parties to this Agreement hereby consent to the jurisdiction of any local, state or federal court located within the State of Illinois. d. Headings Sections headings and numbers herein are included for convenience of reference only and this Agreement is not to be construed with reference thereto. If there be any conflict between such numbers and headings and the text hereof, the text shall control. e. Severability If for any reason any portion of this Agreement shall be held invalid or unenforceable, it is agreed that the same shall not affect the validity or enforceability of the remainder hereof. f. Entire Agreement This Agreement, and its attachments, contains the entire agreement of the parties with respect to its subject matter and supersedes all previous agreements between the parties pertaining to the subject. No officer, employee or representative of Employer has any authority to make any representation or promise in connection with this Agreement or the subject matter hereof that is not contained herein, and Employer represents and warrants he has not executed this Agreement in reliance upon any such representation or promise. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. g. Waiver of Breach The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. h. Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one agreement. 6 7 IN WITNESS WHEREOF, The parties have caused this Agreement to be duly executed on the date first above written. ACCUMED INTERNATIONAL, INC. EXECUTIVE: By: \s\ Peter P. Gombrich By: \s\ Michael D. Burke ----------------------------------- ---------------------------------- Peter P. Gombrich Michael D. Burke CHAIRMAN & CEO Address: 900 N. Franklin, Suite 401 Address: 225 Manor Brook Road Chicago, IL 60610 South Russell, OH 44022 7 EX-10.2 3 O.E.M. SUPPLY AGREEMENT 1 Exhibit 10.2 O.E.M. SUPPLY AGREEMENT BETWEEN LEICA MIKROSKOPIE UND SYSTEME GMBH AND ACCUMED INTERNATIONAL, INC. MAY 26, 1997 2 O.E.M. SUPPLY AGREEMENT THIS O.E.M. SUPPLY AGREEMENT is made as of the 26th day of May 1997, by and between ACCUMED INTERNATIONAL, INC., a company organized and existing under the laws of Delaware and having its principal office at 900 N. Franklin Street, Suite 401, Chicago, Illinois 60610, U.S.A. ("VENDOR"), and LEICA MIKROSKOPIE und SYSTEME GmbH, a company organized and existing under the laws of Germany and having its principal office at Ernst-Leitz Strasse, D- 35578, Wetzlar, Germany ("LEICA"). ARTICLE 1 DEFINITIONS 1.1 "Accessories" shall mean the accessories to the Systems, a list and description of which is contained in Schedule 1.19 attached hereto (which Schedule may be amended from time to time and at any time upon mutual written agreement). 1.2 "Affiliate" shall mean a corporation or other entity that controls, is controlled by, or is under common control with, the designated party. "Control" shall mean the ownership, directly or indirectly, through one or more intermediaries, of at least 49% of the shares of stock entitled to vote for the election of directors in the case of a corporation (or comparable officers or representatives of the particular entity), or at least 49% of the interest in profits in the case of a business entity other than a corporation. Notwithstanding the foregoing, if laws of the country of incorporation, registration, or organization of the designated entity limit one or both of the percentages set forth in the foregoing sentence to a percentage less than 49%, such lower maximum permitted percentage shall be substituted for the applicable 49% in the foregoing sentence. 1.3 "Agreement" shall mean this O.E.M. Supply Agreement, including the Schedules and Exhibits hereto, as it may be amended or supplemented from time to time in accordance with its terms. 1.4 "Agreement Term" shall have the meaning set forth in Section 7.1. 1.5 "Annual Sales Target" shall mean a specified number of Systems targeted to be sold in the Territory by LEICA and VENDOR collectively, during a specified 12-month period during the Agreement Term: (i) there shall be no Annual Sales Target initial for the initial 12-month period of the Agreement Term, and (ii) with respect to each subsequent 12-month period of the Agreement Term, the Annual Sales Target shall be such number of Systems to be mutually agreed upon by the parties at least 90 days prior to the beginning of the immediately following 12-month period. - 1 - 3 1.6 "Authorized Trademarks" shall have the meaning set forth in Section 3.2.1. 1.7 "Breaching Party" shall have the meaning set forth in Section 7.2.1. 1.8 "Business Day" shall mean any day that is not a Saturday, Sunday, or bank holiday in the State of Illinois. 1.9 "Confidential Information" shall have the meaning set forth in Section 9.1. 1.10 "Consequential Damages" shall have the meaning set forth in Section 10.13. 1.11 "Consumables" shall mean the consumables of the Systems, a list and description of which are contained in Schedule 1.19 attached hereto (which Schedule may be amended from time to time and at any time upon mutual written agreement). 1.12 "Effective Date" shall mean the date first above written. 1.13 "Effective Date PO" shall have the meaning set forth in Section 2.3.2. 1.14 "Intellectual Property" shall have the meaning set forth in Section 5.1.5. 1.15 "Maintenance Fee" shall have the meaning set forth in Section 3.11. 1.16 "Products" shall mean, collectively, the Systems, the Accessories, and the Consumables; the user and calibration instruction manuals, user and field service guides and the like; and any Product Changes. 1.17 "Product Changes" shall mean any material changes, improvements, alterations, modifications, upgrades, new generations, and substitutions to or of the Products or the Products' labeling relating to the form, fit, function, or appearance of the Products. Product Changes shall be deemed to (a) include Product software fixes, updates, and upgrades which, when incorporated, result in variations from the original operational specifications and designs; and (b) exclude Product software fixes, updates, and minor upgrades (as set forth in Section 3.9) that merely affect the speed or efficiency of the Products or constitute minor error or "bug" fixes. 1.18 "Product Enhancements" shall have the meaning set forth in Section 3.4. 1.19 "Quarterly Minimums" shall have the meaning set forth in Section 4.1.1. 1.20 "Systems" shall mean the AcCell(TM) systems, a list and description of which is contained in Schedule 1.19 attached hereto (which Schedule may be amended from time to time and at any time upon mutual written agreement). - 2 - 4 1.21 "TAB" shall have the meaning set forth in Section 3.13. 1.22 "Terminating Party" shall have the meaning set forth in Section 7.2.1. 1.23 "Territory" shall mean world-wide except the United States of America, Canada, Mexico, the Caribbean, the Commonwealth of Puerto Rico, the countries in Central America and the countries in South America. 1.24 "Test Period" shall have the meaning set forth in Section 2.4. 1.25 The term "sale" or "resale" (in any tense or form), in reference to software that is a Product shall not be construed to transfer or convey ownership of such software but merely a license to use such software. ARTICLE 2 PURCHASE AND SALE 2.1 Exclusivity. During the Agreement Term, VENDOR shall sell the Products exclusively to LEICA, and LEICA may purchase the Products from VENDOR in accordance with and subject to the terms and conditions of this Agreement by submitting to VENDOR a purchase order therefor, for LEICA's use, marketing, sales, rental, leasing, or other disposal or distribution in the Territory, provided that VENDOR reserves the right to (a) use, market, sell, rent, lease, or otherwise dispose of or distribute the Products on its own directly to customers within the Territory, and/or (b) cooperate with LEICA to do the same. The parties shall cooperate with and notify each other (in accordance with the reporting procedures set forth in Sections 4.3.4 and 4.5) regarding their respective direct sales activities in the Territory. LEICA shall not directly (by itself or with any third party) use, market, sell, rent, lease, or otherwise dispose of or distribute products in the Territory that are competitive in functionality with the Products. 2.2 License. VENDOR hereby grants to LEICA and its Affiliates a nonexclusive license to access and use VENDOR's Intellectual Property as necessary to enable LEICA to use, market, sell, rent, lease, and/or otherwise dispose of or distribute (or have others do any of the foregoing on LEICA's behalf in accordance with the terms of this Agreement) the Products within the Territory; provided that VENDOR shall not grant to any other distributor or dealer any similar license to access and use VENDOR's Intellectual Property in the Territory. LEICA shall determine (in its sole discretion) all terms and conditions of sale to its end-users, distributors, and dealers, including but not limited to prices. LEICA and its Affiliates shall not sell the Products outside of the Territory or authorize any of their respective distributors or dealers to sell the Products outside of the Territory. Notwithstanding anything to the contrary contained in this Agreement, if any of LEICA's distributors or dealers sells the Products outside of the Territory and refuses to cease such activity, LEICA shall (a) if legally permitted, terminate any and all agreements as necessary to terminate such distributor's or - 3 - 5 dealer's right to sell the Products, and (b) defend, indemnify, and hold harmless VENDOR from and against any claims against VENDOR arising in connection with any distributor's or dealer's activities outside the Territory. 2.3 Product Delivery. 2.3.1 The parties acknowledge that a completed purchase order substantially in the form of Exhibit E was submitted by LEICA to VENDOR and accepted by VENDOR for Systems shipped to LEICA prior to the Effective Date. LEICA shall pay to VENDOR the amounts due under invoices for such Products upon execution hereof. Systems purchased by LEICA pursuant to such completed purchase order shall be credited toward the Annual Sales Target for the initial 12-month period. 2.3.2 On the Effective Date, LEICA shall submit to VENDOR a complete purchase order substantially in the form of Exhibit E for 50 Systems to be shipped to LEICA on or before June 30, 1997 (the "Effective Date PO"). LEICA shall pay to VENDOR the amounts due under the Effective Date PO in accordance with Section 2.5.2. If an agreement from Cerba Laboratories and LEICA for the purchase of 20 Systems and one TracCell is not executed and received by LEICA and VENDOR within 90 days from June 30, 1997, LEICA shall have the right to require VENDOR to repurchase (at the price paid by LEICA) 20 Systems ordered under the Effective Date PO. LEICA shall use its best efforts to execute and deliver the agreement with Cerba Laboratories within such 90-day period. Laboratories. 2.3.3 Except for the initial purchase order described in Section 2.3.1, at least 60 days prior to issuing a purchase order, LEICA shall provide written notice to VENDOR of LEICA's intent to issue a purchase order and shall specify the models and quantities to be set forth in such purchase order. Within ten Business Days after VENDOR's receipt of any purchase order, VENDOR shall provide written notice to LEICA of VENDOR's acceptance or rejection of such purchase order. If VENDOR fails to provide such notification, the purchase order shall be deemed accepted. Within 45 days after VENDOR's receipt of an accepted purchase order, VENDOR shall deliver the Products specified in such purchase order. VENDOR shall ship any Products to LEICA's facility in Wetzlar, Germany. Title and risk of loss for any Products shipped to LEICA shall pass to LEICA upon VENDOR's dispatch of such Products for shipment. Notwithstanding the foregoing, VENDOR shall deliver to a facility in the Territory (or another mutually agreeable location) complete Systems (excluding the microscope) in the form of an auto-focus kit and an AcCell unit, where applicable. At such facility, VENDOR shall incorporate each auto-focus kit into a LEICA microscope and mount such microscope onto an AcCell unit. LEICA may cancel a purchase order upon written notice to VENDOR if delivery of the applicable Products is more than 30 days past due. 2.3.4 Resolution of Technical Problems. Set forth on Schedule 2.3.4 is a description of technical problems with the Products identified by LEICA prior to the Effective - 4 - 6 Date and the actions that were taken to correct such problems. The parties agree that each such problem has been successfully resolved prior to the Effective Date. 2.4 Inspection and Testing. Within 30 days after the Effective Date, VENDOR and LEICA shall agree upon Product inspection and testing procedures to be performed by LEICA, and such inspection and testing procedures shall become a part of this Agreement as Exhibit A. For 30 days following receipt by LEICA of any Products from VENDOR (the "Test Period"), LEICA shall have the right, solely at LEICA's expense, to count, inspect, and test such Products in accordance with such agreed-upon inspection and testing procedures. If any Product fails such inspection and testing, and such failure is not, in whole or in part, the direct or indirect result of LEICA's negligence or misuse (including, without limitation, LEICA's failure to properly store the Product while in LEICA's possession), then LEICA shall immediately notify VENDOR of such failure, and VENDOR shall, at VENDOR's option after confirming such failure, either (a) promptly repair or replace any such Product without additional charge, or (b) refund the purchase price of such Product. In such event, VENDOR shall accept the return of such Product and pay the shipping costs for (i) the return to VENDOR of such Product, and (ii) the delivery to LEICA of the repaired or replacement Product, if any. If LEICA fails to notify VENDOR during the Test Period for any Product of a failure of such inspection and testing, such Product shall be deemed accepted by LEICA. Inspection, testing, acceptance, or use of the Products, or failure to do the same, on any occasion shall not affect VENDOR's obligation under any warranty contained herein or any other rights or remedies available to LEICA whether at law or in equity, and such warranties, rights, and remedies shall survive such inspection, testing, acceptance, and use. 2.5 Pricing and Payment. 2.5.1 Pricing. LEICA shall pay to VENDOR $8,500 and $9,100 (subject to adjustment as provided in this Section 2.5.1 for each AcCell 2000 and AcCell 2001, respectively, purchased by LEICA during the initial 12-month period of the Agreement Term. At the end of such initial 12-month period, an additional purchase price shall be calculated as follows: (i) if LEICA has purchased 200 or more Systems, no additional purchase price shall be paid, (ii) if LEICA has purchased between 151 and 199 Systems, $250 per System additional purchase price shall be paid, (iii) if LEICA has purchased between 101 and 150 Systems, $350 per System additional purchase price shall be paid, (iv) if LEICA has purchased between 51 and 100 Systems, $400 per System additional purchase price shall be paid, (v) if LEICA has purchased 50 or fewer Systems, $500 per System additional purchase price shall be paid. LEICA shall pay to VENDOR the applicable additional purchase price for each System purchased by LEICA during such initial 12-month period within 30 days following the last day of such period. No less frequently than once per 12-month period of the Agreement Term beginning during the second 12-month period of the Agreement Term, the parties shall jointly review such purchase prices and mutually agree upon any changes in such purchase prices not later than 90 days prior to the beginning of the immediately following 12-month period. Such price changes shall become effective the first day of the immediately following 12-month - 5 - 7 period. If the parties are unable to reach agreement with respect to pricing changes, either party may terminate this Agreement in accordance Section 7.2.4. During the second and subsequent 12-month periods of the Agreement Term, LEICA shall pay the lower of the purchase prices for Systems and if at the end of the respective period, the applicable Annual Sales Target shall not have been met, LEICA shall pay to VENDOR the price difference for each System purchased during such 12-month period within 30 days following the last day of such period. 2.5.2 Payment. VENDOR shall bill LEICA for all Products shipped to LEICA and for any additional amounts due hereunder. VENDOR shall not submit invoices for Products to LEICA until such Products have been shipped. LEICA's payment shall be due on or before 30 days after the date of VENDOR's invoice for such Products and additional amounts. If LEICA's payment is made on or before 30 days after the date of VENDOR's invoice, LEICA shall be entitled to a 2% discount therefor. LEICA shall pay such invoice via bank wire funds transfer in United States Dollars (US$) for immediate deposit to AccuMed International, Inc., Account No. 301-59838, Northern Trust Chicago (ABA No. 07100152), or such other account of VENDOR as specified by VENDOR in a written notice to LEICA. LEICA shall pay interest on late payments at a rate of 1-1/2% per month. 2.6 Right of First Negotiation and Refusal. LEICA shall have a right of first negotiation and refusal to be the exclusive OEM purchaser in the Territory for all new cytopathology products developed by VENDOR during the Agreement Term. Upon notice from VENDOR to LEICA of VENDOR's development of any such products, the parties shall commence negotiating in good faith regarding the terms and conditions upon which LEICA shall become the exclusive OEM purchaser in the Territory for such products. If the parties cannot agree upon the terms and conditions for such a relationship within 45 days after VENDOR's notice, VENDOR shall have the right to seek a third-party distributor for such Products in the Territory subject to no less favorable terms and conditions than those offered to LEICA. 2.7 Separate Agreement for TracCell(TM). Within three weeks after VENDOR receives from the United States Food and Drug Administration clearance for marketing of the TracCell system, the parties shall enter into an agreement for the distribution of TracCell systems in the Territory upon similar terms and conditions to those provided herein for AcCell, except that the prices and quotas will be specific to the TracCell system. ARTICLE 3 OBLIGATIONS OF VENDOR 3.1 Approvals and Clearances. VENDOR shall ensure that no Product is sold to LEICA or its end-users before all required governmental or private approvals and clearances have been obtained, including without limitation all EC (CE) and CB documents (through - 6 - 8 Underwriters Laboratories - UL). LEICA shall provide reasonable support and cooperation in connection therewith. LEICA shall cooperate with and assist VENDOR in determining which approvals and clearances are otherwise required in the Territory and shall assist in obtaining same. 3.2 Packaging and Labeling. 3.2.1 Within 45 days after the Effective Date, the parties shall agree upon the packaging and labeling for the Products. Except for Products shipped during the first 90-day period of the Agreement Term, all Products shipped to LEICA shall include such agreed-upon packaging and labeling. In connection therewith, VENDOR shall permanently affix LEICA's serial number, trade name, trademark, colors, and logo (the "Authorized Trademarks") on all Product packaging, printed materials, labels, and tags. Notwithstanding the foregoing, if LEICA requests nonstandard packaging or labeling, VENDOR shall accommodate such request (in VENDOR's reasonable discretion), provided that VENDOR may charge LEICA additional fees in connection with any such nonstandard packaging or labeling. 3.2.2 Upon termination or expiration of this Agreement, VENDOR shall (a) not sell any Product that is labeled with the Authorized Trademarks or otherwise packaged in materials containing the Authorized Trademarks and (b) immediately cease any use of the Authorized Trademarks. Except as expressly set forth herein, VENDOR shall not have any right to use nor shall VENDOR acquire any right, title, or license, or other interest in the Authorized Trademarks. Any use by VENDOR of the Authorized Trademarks shall inure to the benefit of LEICA. 3.3 Product Changes. VENDOR shall give LEICA 90 days' prior written notice of any proposed Product Changes, which LEICA may accept or reject, but acceptance may not be unreasonably withheld. Examples of issues that would be a reasonable basis for nonacceptance or rejection shall include, without limitation, Product marketability, performance, function, and pricing. If LEICA chooses to reject a Product Change and VENDOR nevertheless proceeds to implement such Product Change, LEICA may, in addition to all other rights and remedies at law or in equity or otherwise, with respect to the Product (as changed, modified, or added) pursuant to Section 7.2.3, terminate this Agreement with respect to such Product and all pending purchase orders therefor. If LEICA accepts a Product Change, VENDOR shall, prior to implementation, promptly (i) obtain all approvals and clearances required to manufacture the Product and sell the Product (as changed, modified, or added) in the Territory and (ii) document and validate such accepted Product Changes to the reasonable satisfaction of LEICA. No Product Change shall be effective unless and until it is accepted by LEICA pursuant to this Section 3.3. Upon request by LEICA, VENDOR shall, if possible, incorporate such accepted Product Change in any Systems in LEICA's inventory, and LEICA shall pay to VENDOR a reasonable fee for same including a handling and processing fee. - 7 - 9 3.4 Product Enhancements. VENDOR shall evaluate and use commercially reasonable efforts to incorporate LEICA's recommended design changes and/or enhancements to the Products ("Product Enhancements"); provided that if LEICA develops, by itself or in cooperation with VENDOR, any new products, subassembly or other separately patentable invention related to the Products, such product, subassembly or invention shall be subject to a separate agreement to be negotiated between the parties. Any increase or reduction in VENDOR's manufacturing costs (direct labor and/or materials) resulting from Product Enhancements shall be reflected in proportional adjustments to the affected Products' prices using substantially similar profit margin percentages to those in effect prior to such adjustment. Any engineering/design costs and delivery dates for Product Enhancements shall be quoted to LEICA for its approval and payment. LEICA shall pay such engineering/design costs plus fully-burdened overhead. Any and all Intellectual Property relating to Product Enhancements shall be owned by VENDOR. 3.5 Sales Support. 3.5.1 During the first two years of the Agreement Term, VENDOR shall engage in cooperative sales efforts with LEICA in the Territory. Specifically, VENDOR shall provide two people in Europe and one person in Japan primarily dedicated to the provision to LEICA of sales support and to assist LEICA in its sales efforts provided that commencing after the end of the second year of the Agreement Term and continuing through the Agreement Term, VENDOR shall continue to provide such personnel in the Territory, but such personnel may engage to a greater extent in efforts for direct sales of the Products on VENDOR's behalf. 3.5.2 Within ten Business Days following the end of each month during the Agreement Term, VENDOR shall submit to LEICA a written report summarizing; (i) VENDOR's direct sales activity in the Territory with respect to the Products, and (ii) deliveries by VENDOR of Products in the Territory during the immediately preceding month. 3.6 Audits. LEICA shall have the right to perform a complete audit of the development, manufacture, and packaging of the Products (including but not limited to the pertinent facilities and Quality Assurance System(s)) during normal business hours and upon seven days' prior notice to VENDOR. The parties will cooperate with each other to arrange such visits at mutually convenient times. 3.7 Complaints. If LEICA receives a complaint asserting that a Product does not comply with the specifications for such Product set forth on Schedule 5.1.7 (a) LEICA shall undertake commercially reasonable efforts to determine the validity of such complaint; (b) if LEICA validates such complaint and cannot solve it through commercially reasonable efforts, LEICA shall forward the complaint information to VENDOR; (c) with respect to each validated complaint received by VENDOR, VENDOR shall promptly take such action as it determines in its reasonable judgment and as required by applicable governmental regulations and guidelines, if any. VENDOR shall use commercially reasonable efforts, at its own - 8 - 10 expense, to determine the cause of any valid claims of noncompliance with the specifications, and LEICA shall have the right to participate as appropriate in any investigation to resolve such noncompliance. VENDOR reserves the right to remedy any claimed defect in the Products or to substitute other products therefor. If not replaced by VENDOR, VENDOR's sole and exclusive liability shall be limited to the price paid by LEICA to VENDOR for the defective Product. VENDOR shall in no way be liable for LEICA's lost profits or goodwill or any other special, incidental, or consequential damages. 3.8 Technical Assistance and Support. 3.8.1 Documentation. Without additional charge, beginning on the Effective Date and for the duration of the Agreement Term and for a period of three years thereafter (except as otherwise specified), VENDOR shall furnish to LEICA all technical information, manuals, schematics, parts lists, flow diagrams, and other documentation and data (in both printed and electronic media formats in the English language) that are (a) necessary to inventory, market, sell, and provide field service for the Products within the Territory and (b) furnished by VENDOR without additional charge to other distributors and dealers of the Products. Notwithstanding the foregoing, within 45 days after the Effective Date, VENDOR shall provide to LEICA a spare parts list (and pricing therefor) and any required service manuals. VENDOR hereby grants to LEICA a fully-paid license for the Agreement Term to translate, copy, or otherwise reproduce all or portions of VENDOR's brochures, or to incorporate portions of VENDOR's copyrighted material in Product brochures or advertising material composed by LEICA, provided that LEICA shall submit such materials composed by LEICA which incorporate such VENDOR material to VENDOR for prior approval in each instance, which approval shall not be unreasonably withheld or delayed. In addition to the foregoing, VENDOR shall furnish to LEICA master copies (in both printed and electronic media formats in the English language) of field service manuals and troubleshooting guides with respect to the Products which LEICA may print and use, and furnish to VENDOR for VENDOR's use in accordance with this Agreement. Alternatively, at LEICA's option, VENDOR may print such Product manuals and guides and sell them to LEICA, at VENDOR's cost, for LEICA's use. 3.8.2 Telephone Support. Without additional charge, beginning on or before July 1, 1997, and continuing through the Agreement Term, VENDOR shall furnish telephone support to LEICA via a toll-free telephone number on Business Days between 8 a.m. and 6 p.m. (local time in the United Kingdom). Such telephone support shall respond to all requests for information or other technical support regarding Product use, maintenance, repair, storage, handling, and shipping. 3.9 Special Investigations; Inquiries. If any government or other regulatory authority or private standards board in the Territory requires any investigations to be performed on or with respect to the Products, the parties shall cooperate with and assist each other in performing such investigations. VENDOR shall notify LEICA of any formal or - 9 - 11 informal inquiries relating to the Products by the Federal Communications Commission of the United States or any other regulatory agency, or any state, provincial, regional, district, and/or Federal government. 3.10 Replacements and Repair Parts; Accessories and Consumables. 3.10.1 During the Agreement Term and for a period of three years thereafter, VENDOR shall offer for sale to LEICA all Accessories and Consumables and all replacement and repair parts for the Systems in accordance with the pricing set forth in Exhibit C, subject to the terms of Section 2.5.1. 3.10.2 VENDOR shall perform all repair and warranty services within two weeks after receipt by VENDOR of the applicable Product (excluding any transit time). Any nonwarranty services shall be billed to LEICA at a fee of US$85 per hour. If any Product has been out of production for more than two years, at VENDOR's option, VENDOR may either repair the Product or provide to LEICA discounted pricing for upgrading to a current model. 3.11 Software Updates and Minor Upgrades. During the Agreement Term and thereafter (for System units then subject to the warranty obligations of VENDOR set forth in Section 5.2), VENDOR shall provide LEICA with Product software fixes, updates, and minor upgrades at no additional charge to LEICA. During the Agreement Term and for a period of five years thereafter, upon the expiration of the applicable warranty period for each System unit, LEICA shall pay to VENDOR a mutually agreed-upon annual software maintenance fee (the "Maintenance Fee") for each System unit for which the end-user elects to purchase software maintenance. The Maintenance Fee shall entitle the end-user to receive Product software fixes, updates, and minor upgrades. All updates and upgrades shall be validated to LEICA's reasonable satisfaction. 3.12 Training and Consulting. 3.12.1 During the first six months of the Agreement Term, VENDOR shall, upon reasonable prior request, provide LEICA and LEICA's distributors and dealers with training in the areas of sales, technical support, customer support, and implementation with respect to the Products. 3.12.2 In addition, twice per year for the remainder of the Agreement Term, VENDOR shall provide training to LEICA and LEICA's distributors and dealers in connection with Product Changes, Product software updates and upgrades, and new techniques related to the Products. 3.12.3 During the first six months of the Agreement Term, VENDOR shall, upon reasonable prior request, provide LEICA with implementation assistance in connection with the Products, and LEICA may participate in and/or observe VENDOR's activities. Such - 10 - 12 assistance shall be provided by VENDOR at no additional charge during the first 120 days after the Effective Date. For the remainder of the six-month period, LEICA shall pay VENDOR's out-of-pocket expenses if such services are required at any location that is not an end-user site. 3.12.4 LEICA shall have the right to request additional consulting services from VENDOR in accordance with prices and terms to be agreed upon at the time of the request. 3.13 Technical Advisory Board. VENDOR shall establish a technical advisory board (the "TAB") to assess the technology being developed, acquired, or licensed by VENDOR and the applications thereof to the markets in the Territory. LEICA shall designate either one or two representatives to be members of the TAB. The TAB shall meet at least once per year during the Agreement Term. ARTICLE 4 OBLIGATIONS OF LEICA 4.1 Forecasts. 4.1.1 It is LEICA's intention to purchase 200 Systems during the initial 12-month period of the Agreement Term. Prior to the establishment of Quarterly Minimums, LEICA shall submit to VENDOR within 30 days prior to the first day of a quarter, a forecast of the quantity of Products LEICA shall purchase from VENDOR during such quarter. LEICA shall purchase at least the quantity of Products specified in such forecasts. 4.2 Quarterly Minimums 4.2.1 During the 90 days prior to the first day of the immediately following 12-month period of the Agreement Term, the parties shall agree upon a minimum quantity ("Quarterly Minimums") of Products to be purchased by LEICA from VENDOR during each full and partial calendar quarter of the subsequent 12-month period of the Agreement Term. If the parties are unable to agree to Quarterly Minimums within the 90-day period prior to the first day of the immediately following 12-month period, either party may terminate this Agreement in accordance with Section 7.2.4. 4.2.2 Upon the establishment of Quarterly Minimums, any rights granted exclusively hereunder to LEICA for a given 12-month period shall become nonexclusive during the 12-month period immediately following such 12-month if LEICA fails to purchase Products in quantities equal to or exceeding the applicable aggregate of the Quarterly Minimums in such year. - 11 - 13 4.2.3 4.2.4 Upon the establishment of Quarterly Minimums, direct sales of System units by VENDOR in the Territory shall be included in the calculation of the Quarterly Minimums. 4.3 Sales and Assistance By VENDOR. 4.3.1 On or prior to the 30th day following the Effective Date, VENDOR and LEICA shall mutually agree to a list of potential target customers in the Territory. Such list shall be attached to this Agreement as Schedule 4.3.1 and shall become a part hereof. 4.3.2 During the 120-day period beginning on the Effective Date, VENDOR shall provide LEICA with training and support in connection with potential sales of Products, at no cost to LEICA. During such period, VENDOR shall provide sales support and assistance in a joint sales effort to any customer specified by LEICA upon LEICA's request. No fees shall be paid by LEICA to VENDOR or by VENDOR to LEICA with respect to any Products sold during such period as a result of joint sales activity. 4.3.3 During the 120-day period beginning on the Effective Date, VENDOR shall be entitled to pursue a customer contact independently if VENDOR has previously identified such potential customer to LEICA in writing and LEICA shall not have notified VENDOR of LEICA's desire to pursue such customer jointly with VENDOR or independently. With respect to any Systems sold as a result of independent efforts of AccuMed, the first System sold shall be shipped directly by VENDOR from its inventory and the second System sold shall be shipped from LEICA's inventory, and so on so that 50% of such sales shall be from VENDOR's inventory and 50% from LEICA's inventory. Neither party shall be required to pay the other party a fee in connection with any such sales. 4.3.4 On and after the 121st day of the Agreement Term, if VENDOR receives an unsolicited request from a potential customer to demonstrate a Product, VENDOR shall identify such potential customer to LEICA in writing. LEICA shall notify VENDOR in writing with four Business Days following the date on which such notice was made whether LEICA elects to pursue such customer independently or to allow VENDOR to pursue such customer independently. If LEICA elects to pursue such customer, LEICA shall make contact with such customer within 15 days following the date on which VENDOR's initial notice was given and shall deliver to VENDOR (within such 15-day period) a completed Laboratory Qualification Survey in the form attached hereto as Schedule 4.3.4. If LEICA reasonably requires more time to make an initial contact, LEICA may request an extension from VENDOR and VENDOR shall not unreasonably withhold its consent. With respect to any sales made directly by VENDOR as a result of its independent action during such period, VENDOR shall pay LEICA $4,500 with respect to each AcCell 20001 and $3,000 with respect to each AcCell 2001. - 12 - 14 4.3.5 LEICA and VENDOR shall use the same list prices for the Systems in the Territory, but shall each have the right, in its sole discretion, to provide other discounts, incentives, and services in connection with its sales. 4.4 Scope of Responsibility. 4.4.1 During the Agreement Term, LEICA shall, at its own cost and expense, use a high level of commercially reasonable efforts to sell, install, train on the use of, and provide field service for the Products within the Territory. Except as otherwise provided herein, LEICA shall be the sole contact with LEICA's end-users of the Products in the Territory. In connection therewith, LEICA shall be responsible for all marketing and advertising materials and activities including, without limitation, provision of brochures and appropriate advertising; participation as an exhibitor at conferences and trade shows; and qualification of potential customers and surveys of same regarding product needs and satisfaction and related market research. Without limiting the foregoing, LEICA shall be solely responsible for translation of all documentation provided by VENDOR hereunder and shall promptly undertake to perform such translation. LEICA shall be solely responsible for the expense and accuracy of all such translations hereunder. LEICA shall reproduce any applicable proprietary rights notices in all such materials. LEICA shall also be solely responsible for providing foreign language translations in hardcopy format of the software related to the Products; provided that VENDOR shall use such hardcopy translations to reprogram the software into its translated form. 4.4.2 The parties shall mutually develop and agree upon the list prices and the sales and marketing plans on a country-by-country basis. Within 90 days after the Effective Date, LEICA, at a minimum, shall commence sales and marketing of the Products in the following countries in the Territory; Germany, France, Italy, the United Kingdom, and Japan. LEICA shall emphasize its sales and marketing efforts particularly in Europe and Japan. 4.5 Monthly Laboratory Qualification Surveys and Reports. Within ten Business Days following the end of each month during the Agreement Term, LEICA shall submit to VENDOR (i) completed Laboratory Qualification Survey Reports in the form attached hereto as Schedule 4.3.4 with respect to each potential customer contacted by LEICA (other than potential customers with respect to whom LEICA has previously submitted a Survey pursuant to Section 4.3.4) during the immediately preceding month, and (ii) a written report of the number of Systems delivered to end-users by LEICA during the immediately preceding month. 4.6 LEICA Products. 4.6.1 During the Agreement Term, LEICA shall provide to VENDOR (at no additional charge to VENDOR) a reasonable amount of technical support with respect to LEICA's existing microscope products used in the Products. - 13 - 15 4.6.2 LEICA shall, within 45 days after the date of this Agreement and from time to time thereafter, provide to VENDOR a list of all of LEICA's microscope products by model and engineering specifications and dimensions. With respect to the use of such models in the Systems, VENDOR shall have the right to reject any such model for technical reasons. 4.7 AcCell(TM); Copyright and Trademark Notices. Promptly upon receipt by LEICA of relevant information, LEICA shall notify VENDOR of such information related to (a) any possible infringement of VENDOR's Intellectual Property, or (b) VENDOR's alleged infringement of a third party's Intellectual Property. In addition, LEICA shall incorporate into relevant Product documentation and materials, the appropriate and reasonable copyright and trademark notices provided to LEICA by VENDOR. ARTICLE 5 REPRESENTATIONS, COVENANTS, & WARRANTIES OF VENDOR 5.1 General. VENDOR hereby represents, covenants, and warrants to LEICA, its successors, and permitted assigns that: 5.1.1 Due Organization. VENDOR is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has the full power and authority to perform its obligations under this Agreement. 5.1.2 Authorization to Execute. The person executing this Agreement on behalf of VENDOR has been duly authorized to do so by all requisite corporate and other action of VENDOR, and this Agreement has been duly executed by such person and delivered to LEICA. 5.1.3 Validity of Agreement. This Agreement is the legal, valid, and binding obligation of VENDOR and is enforceable against VENDOR in accordance with its terms. 5.1.4 No Conflict. To VENDOR's knowledge: (a) VENDOR's execution, delivery and performance of this Agreement does not and will not conflict with or result in a breach of any agreement or instrument to which VENDOR is a party as in effect on the Effective Date; and (b) no litigation, arbitration, or administrative proceeding is pending or threatened seeking to prohibit the execution and delivery of this Agreement. 5.1.5 Warranty of Noninfringement. To VENDOR's knowledge, the Products do not incorporate or infringe upon any copyright, patent, trademark, service mark, trade name, trade secret, idea, process, know-how, development, invention, technology, or other form of intellectual property (collectively "Intellectual Property") not owned by or licensed to VENDOR. If VENDOR becomes aware of any alleged or actual infringement by VENDOR of any Intellectual Property relating to the Products or their manufacture, VENDOR will promptly notify LEICA thereof. - 14 - 16 5.1.6 Right to Sell for Resale; Obligation to Deliver. VENDOR has the right to sell the Products to LEICA for resale by LEICA in the Territory. VENDOR has and will have the ability to timely deliver all of the Products ordered by LEICA to meet the Quarterly Minimums and shall use commercially reasonable efforts to timely deliver all of the Products ordered by LEICA in excess of same. 5.1.7 Product Quality. The Products to be sold and delivered to LEICA and end-users hereunder shall (i) be merchantable and fit for their particular purpose, (ii) be new and free from defects in design, materials and workmanship, and (iii) meet the specifications attached hereto as Schedule 5.1.7, subject to Product Changes. 5.2 Product Warranty. 5.2.1 For a period of 12 months following the date that an end-user receives a Product from LEICA, if such Product does not substantially conform to the specifications set forth in Schedule 5.1.7, then, within two weeks after receipt by VENDOR of the applicable Product (excluding any transit time), VENDOR shall, at VENDOR's option and at no additional charge to LEICA, either (a) replace or repair such Product unit, or (b) fully refund to LEICA the purchase price paid to VENDOR by LEICA for such Product. Written notice of such nonconformance must be received by VENDOR within 12 months from the date the Product unit is received by LEICA's end-user. 5.2.2 Notwithstanding the foregoing, in the event of failure by VENDOR to meet its obligations set forth in Section 5.2.1, LEICA may, at its sole and absolute discretion, make such corrections or replace such Product units and charge VENDOR for the cost incurred by LEICA in doing so and VENDOR shall reimburse LEICA for any such costs. 5.2.3 Shipping costs incurred by LEICA and risk of loss upon return of Product units to VENDOR for in-warranty repair, replacement, or refund shall be borne by VENDOR. Shipping costs incurred by VENDOR and risk of loss upon delivery of the in-warranty repaired or replacement Product unit to LEICA or LEICA's designees shall be borne by VENDOR. 5.2.4 During the Agreement Term and for a period of three years thereafter, VENDOR shall provide all post-warranty repair service for the Products at the hourly rates set forth in Schedule 5.2.3. 5.3 Compliance. VENDOR shall use commercially reasonable efforts to ensure that, in manufacturing and selling the Products, it shall (i) comply with all applicable laws and regulations, (ii) not knowingly engage in any deceptive or misleading practices, and (iii) obtain and maintain all required governmental and private approvals and clearances (including without limitation compliance with CE marking regulations). - 15 - 17 ARTICLE 6 REPRESENTATIONS, COVENANTS, AND WARRANTIES OF LEICA 6.1 General. LEICA hereby represents, covenants, and warrants to VENDOR, its successors and permitted assigns that: 6.1.1 Due Organization. LEICA is a corporation duly organized and validly existing under the laws of Germany and has the full power and authority to perform its obligations under this Agreement. 6.1.2 Authorization to Execute. The person executing this Agreement on behalf of LEICA has been duly authorized to do so by all requisite corporate and other action of LEICA, and this Agreement has been duly executed by such person and delivered to VENDOR. 6.1.3 Validity of Agreement. This Agreement is the legal, valid, and binding obligation of LEICA and is enforceable against LEICA in accordance with its terms. 6.1.4 No Conflict. To LEICA's knowledge, LEICA's execution, delivery, and performance of this Agreement does not and will not conflict with or result in a breach of any agreement or instrument to which LEICA is a party as in effect on the Effective Date. 6.2 Compliance. In connection with its activities hereunder, LEICA shall use commercially reasonable efforts to ensure that LEICA complies with all applicable laws and regulations that are customarily the responsibility of the importer, distributor, or dealer in the countries in the Territory. ARTICLE 7 TERM AND TERMINATION 7.1 Term. Unless earlier terminated pursuant to Section 7.2, this Agreement shall remain in full force and effect for five years commencing on the Effective Date and shall automatically renew for additional one-year periods thereafter (collectively, the "Agreement Term") unless either party provides at least 60 days' prior written notice to the other party prior to the expiration of the then current term. Notwithstanding the foregoing, the Agreement Term may be suspended pursuant to the provisions of Section 10.1 of this Agreement. 7.2 Events of Termination. This Agreement may be terminated, without limiting any party's rights to any other remedies: 7.2.1 Immediately upon written notice by either party (the "Terminating Party") to the other party (the "Breaching Party") if: - 16 - 18 7.2.1.1 the Breaching Party has not performed or has otherwise breached a material obligation hereunder and such nonperformance or breach is incapable of cure; 7.2.1.2 any proceeding in bankruptcy, reorganization, or arrangement for the appointment of a receiver or a trustee to take possession of the Breaching Party's assets or any similar proceeding under the law for relief of creditors shall be instituted by or against the Breaching Party including an assignment for the benefit of its creditors. The Breaching Party immediately shall notify the Terminating Party in writing of the occurrence of any event of the type described in Section 7.2.1.2. 7.2.2 By the Terminating Party upon the expiration of 60 days (or such additional period as the Terminating Party may authorize) after the Breaching Party's receipt of written notice of its breach or nonperformance of a material obligation hereunder provided that such breach or nonperformance is capable of cure and has not been cured during such 60-day period. 7.2.3 By LEICA with respect to the specific Product (as changed, modified, or added) upon 60 days' prior written notice to VENDOR of the rejection of a Product Change which VENDOR nevertheless proceeds to implement. 7.2.4 By either party as of the last day of the current 12-month period if the parties are unable to agree to (i) Quarterly Minimums pursuant to Section 4.1.1, (ii) pricing changes pursuant to Section 2.5.1, or (iii) the Annual Sales target pursuant to Section 1.5, within the 90-day period prior to the beginning of the following 12-month period. 7.3 Purchase Orders. Provided that LEICA is not the Breaching Party, any purchase order accepted by VENDOR but not shipped by VENDOR prior to the date that notice of termination is delivered hereunder (or in the case of expiration, the date that this Agreement expires) shall be filled by VENDOR in accordance with the terms hereof. 7.4 Rights and Obligations upon Termination or Expiration. Upon expiration or earlier termination of this Agreement, LEICA shall have the right to (i) sell all Products ordered or in inventory and (ii) provide ongoing support and service to its end-users. Notwithstanding anything herein to the contrary and without limiting LEICA's other remedies, if this Agreement is terminated within the initial 12-month period, LEICA shall have the right to require VENDOR to repurchase (at the price paid by LEICA) any or all Products ordered by LEICA hereunder, provided (i) LEICA furnishes VENDOR with the relevant open purchase orders (with respect to ordered Products not yet in LEICA inventory), (ii) the Products are in new condition and have not been used, and (iii) the Products are in their original packaging with all manuals and other materials. - 17 - 19 7.5 Survival. Sections 2.2, 2.3, 2.5, 3.8, 3.9, 4.5, 5.2, 7.3, 7.4, 7.5, and 10.13, and Articles 8 and 9 shall survive the termination or expiration of this Agreement. ARTICLE 8 INDEMNIFICATION 8.1 Infringement Indemnity. 8.1.1 If any aspect of any Product becomes the subject of any claim, action, or proceeding by a third party alleging Intellectual Property infringement, VENDOR shall, within 90 days, at VENDOR's option and expense (a) obtain a license permitting LEICA to exercise all rights granted to it under this Agreement or (b) modify the Product to render it noninfringing. In addition, LEICA may, without limiting its remedies, and without any liability to VENDOR whatsoever, and at its sole and absolute discretion, suspend purchases of the Products from VENDOR immediately. Notwithstanding the foregoing, should VENDOR fail to accomplish either one of the foregoing solutions (set forth in clauses (a) and (b) above) within such 90-day period with respect to any such Intellectual Property infringement claim, action, or proceeding, LEICA may terminate this Agreement without limiting its remedies, without any liability whatsoever, and in its sole and absolute discretion. In addition, LEICA shall have the right to require VENDOR to repurchase (at the price paid by LEICA) any or all Products ordered by LEICA hereunder, provided (i) LEICA furnishes VENDOR with the relevant open purchase orders (with respect to ordered Products not yet in LEICA inventory), (ii) the Products are in new condition and have not been used, and (iii) the Products are in their original packaging with all manuals and other materials. 8.1.2 Provided that VENDOR receives prompt written notice of any Intellectual Property infringement claim, action, or proceeding, VENDOR shall indemnify and hold harmless LEICA, its successors, and permitted assigns, and any of its officers, directors, employees, representatives, and/or agents, and each of them, from and against any and all claims, liabilities, losses, costs, damages, and expenses including, but not limited to (a) any damages, losses, costs, and expenses payable to the third party claiming Intellectual Property infringement, (b) all of LEICA's reasonable attorneys' fees and disbursements, settlement costs (provided that VENDOR has approved of such settlement in advance), judgments, court costs, and expenses incurred by LEICA in any action or proceeding between VENDOR and LEICA and/or between LEICA and any third party or otherwise, (c) reimbursement for the cost of Products that can no longer be sold, and (d) any other losses, costs, expenses, and damages incurred by LEICA arising out of or resulting from any Intellectual Property infringement claim, action, or proceeding between VENDOR and LEICA and/or between LEICA and any third party or otherwise. The failure of LEICA to give prompt notice shall not result in the loss of indemnification unless VENDOR shall have been materially prejudiced thereby. 8.1.3 LEICA shall not be entitled to the foregoing Intellectual Property infringement indemnity from VENDOR to the extent that the Intellectual Property infringement - 18 - 20 claim, action, or proceeding arises or results in whole or in part from changes to the Products made by LEICA or any third party without VENDOR's authorization. 8.2 VENDOR Product Liability and Other Damage Indemnity. 8.2.1 VENDOR shall at all times indemnify and hold harmless LEICA, its successors and permitted assigns, and any of its officers, directors, employees, representatives, and/or agents, and each of them, from and against any and all claims, liabilities, losses, costs, damages, and expenses, including but not limited to all of LEICA's reasonable attorneys' fees and disbursements court costs and expenses, incurred by LEICA in any action or proceeding between VENDOR and LEICA (if LEICA is the prevailing party) and/or between LEICA and any third party (attorneys' fees and disbursements only if LEICA fails to defend) or otherwise arising out of or resulting from (a) a defect or alleged defect in a Product, including without limitation defects relating to manufacturing, improper testing, or design, or any breach of warranty regarding such Product or any component thereof, (b) misrepresentations made in connection with the promotion, marketing, sale, distribution, use, safety, or efficacy of such Product based upon information supplied to LEICA by VENDOR, (c) the contents of any labeling, inserts, instruction manuals, or related documentation prepared by VENDOR or based upon information supplied to LEICA by VENDOR, or (d) Product recalls. VENDOR shall have the right to control the defense and settlement of any third-party claim, action, or proceeding. LEICA shall provide VENDOR with, at VENDOR's expense for all of LEICA's reasonable, documented out-of-pocket costs, reasonable assistance in connection with a third-party action or proceeding of the kind described in this Section 8.2.1. 8.2.2 LEICA shall not be entitled to the foregoing indemnity from VENDOR to the extent that the claim, action, or proceeding arises or results in whole or in part from (a) unauthorized representations made by LEICA regarding the Product which are different than or in addition to the representations made by VENDOR to LEICA, or (b) unauthorized changes to the Product made by LEICA. 8.3 LEICA Product Liability and Other Damage Indemnity. 8.3.1 LEICA shall at all times indemnify and hold harmless VENDOR, its successors and permitted assigns and any of its officers, directors, employees, representatives, and/or agents, and each of them, from and against any and all claims, liabilities, losses, costs, damages, and expenses, including but not limited to all of VENDOR's reasonable attorneys' fees and disbursements, court costs and expenses, incurred by VENDOR in any action or proceeding between VENDOR and LEICA (if VENDOR is the prevailing party) and/or between VENDOR and any third party (attorneys' fees and disbursements only if LEICA fails to defend) arising out of or resulting from (a) unauthorized representations made by LEICA regarding a Product which are different than or in addition to the representations made by VENDOR to LEICA or (b) unauthorized changes to a Product made by LEICA. LEICA shall have the right to control the defense and settlement of a third party claim, action, or - 19 - 21 proceeding. VENDOR shall provide LEICA with, at LEICA's expense for all of VENDOR's reasonable, documented out-of-pocket costs, reasonable assistance in connection with a third-party action or proceeding of the kind described in this Section 8.3.1. 8.3.2 VENDOR shall not be entitled to the foregoing indemnity from LEICA to the extent that the claim, action, or proceeding arises or results solely from (i) a defect or alleged defect in a Product, including without limitation defects relating to manufacturing, improper testing, or design, or any breach of warranty regarding such Product or any component thereof, (ii) misrepresentations made in connection with the promotion, marketing, sale, distribution, use, safety, or efficacy of such Product based upon information supplied to LEICA by VENDOR, or (iii) the contents of any labeling, inserts, instruction manuals, or related documentation prepared by VENDOR or based upon information supplied to LEICA by VENDOR. ARTICLE 9 CONFIDENTIALITY 9.1 Definition. For purposes of this Agreement, the term "Confidential Information" shall mean all documents, clearly marked as "PROPRIETARY" or "CONFIDENTIAL," relating to the respective products and/or business of the parties which (i) is disclosed by one party hereto to the other and (ii) is claimed by the disclosing party to be secret, confidential, and proprietary the disclosing party. 9.2 Obligation. During the Agreement Term and thereafter, each party (except as is explicitly otherwise required hereby) shall keep confidential, shall not use for the benefit of others, and shall not copy or allow to be copied, in whole or in part, any Confidential Information disclosed to such party by the other. 9.3 Exclusions. The obligations of confidentiality imposed upon the parties by the foregoing paragraph shall not apply with respect to any alleged Confidential Information that: 9.3.1 is known to the recipient thereof prior to receipt thereof from the other party hereto; 9.3.2 is disclosed to the recipient by a third party who has the right to make such disclosure; 9.3.3 is or becomes a part of the public domain or public knowledge through no breach of this Agreement by the recipient; 9.3.4 is independently developed by the recipient; or - 20 - 22 9.3.5 is required to be disclosed by applicable law or regulation including, without limitation, pursuant to a subpoena or request by a regulatory authority. ARTICLE 10 MISCELLANEOUS 10.1 Force Majeure. Each party hereto shall be excused from the performance of its obligations hereunder if such performance is prevented by force majeure, and such excuse shall continue for so long as the condition constituting such force majeure and any consequences resulting from such condition continue. In addition, if the condition constituting the force majeure causes a substantial inability by either party hereto to manufacture, deliver, sell, or otherwise distribute, as the case may be, the Products, the Agreement Term may be suspended for the period of such inability, but such suspension shall not exceed six months. For the purposes of this Agreement, "force majeure" shall mean causes beyond either party's control including, without limitation, acts of God; war, riot or civil commotion; damage to or destruction of production facilities or materials by fire, earthquake, storm or other disaster; strikes or other labor disturbances; epidemic; failure or default of public utilities or common carriers; and other similar acts. Noncompliance with laws or government regulations shall not constitute a force majeure event. 10.2 Relationship. The relationship created between VENDOR and LEICA by this Agreement shall be that of independent contractors. Neither LEICA nor VENDOR shall be deemed an agent, representative, partner, joint venturer, or employee of the other party. Neither VENDOR nor LEICA shall have the right to enter into any contracts or commitments or to make any representations or warranties, whether express or implied, in the name of or on behalf of the other party, or to bind the other party in any respect whatsoever, unless agreed to in writing or expressly permitted in this Agreement. 10.3 Assignment; Binding Effect. Neither party to this Agreement may assign all or any part of its rights and obligations under this Agreement, except to an Affiliate, without the prior written consent of the other party. LEICA shall not have the right to subcontract any of its obligations hereunder without VENDOR's prior written consent, not to be unreasonably withheld or delayed. For purposes of this Agreement, any material change in the control and/or ownership of LEICA (except for any such change in control occurring during the first six months after execution of this Agreement) shall be deemed an assignment by LEICA and shall be subject to all of the provisions of this Section. Notwithstanding the foregoing, material changes in the control and/or ownership of VENDOR shall not be deemed an assignment by VENDOR subject to the provisions of this Section. No permitted assignment by any party pursuant to this Section 10.3 shall result in any additional expense to the other party. Any purported assignment in contravention of this Section 10.3 shall, at the option of the nonassigning party, be null and void and of no effect. This Agreement will be binding upon and inure to the benefit of any permitted successors and assigns of the parties. - 21 - 23 10.4 Notices. Any notice or other communication required or permitted to be given to either party under this Agreement (including, without limitation, purchase orders from LEICA to VENDOR hereunder) shall be given in writing addressed to each party at the following address or such other address as may be designated by such party by notice pursuant to this Section and shall be delivered (a) by hand; (b) by registered or certified mail, postage prepaid and return receipt requested; (c) by confirmed facsimile transmission, or (d) by overnight courier guaranteeing delivery by the next Business Day. To VENDOR: AccuMed International, Inc. 920 N. Franklin Street, Suite 402 Chicago, Illinois 60610 Fax: 312-642-3101 Confirmation: 312-642-9200 Attention: Peter P. Gombrich, Chairman & CEO with a copy to: AccuMed International, Inc. 1500 7th Avenue Sacramento, California 95818 Fax: 916-493-6850 Confirmation: 916-443-6800 Attention: Joyce L. Wallach, General Counsel To LEICA: Leica Mikroskopie und Systeme GmbH P.O. Box 2040 D - 35530 Wetzlar Germany Fax: 011-49-64-41-29-24-64 Confirmation: 011-49-64-41-29-24-40 Attention: Dr. Anita Rohm with a copy to: -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- Any notice, consent, or other communication given in conformity with this Section shall be deemed effective (i) when received by the addressee if delivered by hand or mail, (ii) upon confirmation of receipt if delivered by facsimile transmission, or (iii) the next Business Day if delivered by overnight courier. 10.5 Governing Law; Submission to Jurisdiction. This Agreement and any other documents or instruments related hereto and all transactions hereunder shall be deemed to have - 22 - 24 been made within and under the laws of the State of Illinois, including the Uniform Commercial Code as adopted by the State of Illinois, and for all purposes shall be governed by and construed in accordance with the laws of the State of Illinois without regard to choice of law rules or conflicts of law principles. The parties expressly agree that any controversy, dispute or claim with respect to any provision of this Agreement shall be adjudicated exclusively by a court of competent jurisdiction within Cook County, the State of Illinois, or the Federal District Court sitting therein, and VENDOR and LEICA irrevocably waive any objections either may have and consent to the personal jurisdiction or the designation of a forum or venue of the courts set forth herein including, without limitation, waiver of any motion to change or transfer venue or that the forum is not convenient. As an alternative method to personal service, LEICA hereby appoints the Ambassador to the United States of Germany and/or any consul or vice-consul of Germany as LEICA's agent for the receipt of process hereunder. Notwithstanding the foregoing, either party may, in any jurisdiction, seek to enforce, collect, or take any other action to effectuate a judgment, order, or decree obtained from a court in Cook County, State of Illinois or the Federal District Court sitting therein. 10.6 Execution of Additional Documents. Each party hereto agrees to execute and deliver such documents as may be necessary or desirable to carry out the provisions of this Agreement. 10.7 Entire Agreement. This Agreement constitutes the entire agreement between VENDOR and LEICA with respect to the subject matter hereof. All prior or contemporaneous agreements, proposals, understandings, representations, and communications with respect to the subject matter hereof, whether written or oral, between or involving VENDOR and LEICA hereby are canceled and superseded. This Agreement may be amended or modified only in a writing executed by both parties, which states that it is an amendment or modification to this Agreement. 10.8 Severability. If any provision or part thereof of this Agreement is held to be invalid, void or unenforceable, the remaining provisions or parts of this Agreement shall continue in full force without being impaired or invalidated in any way, to the maximum extent possible consistent with the intent of the parties in entering into this Agreement unless the result thereof would be unreasonable, in which case the parties shall negotiate in good faith to enter into appropriate amendments hereto. 10.9 Taxes. Each party shall be responsible for payment of its own taxes and tariffs. 10.10 Counterparts. This Agreement may be executed in duplicate counterparts, each of which when so executed shall be deemed to be an original and both of which when taken together shall constitute one and the same agreement. 10.11 No Waiver. No waiver of any right under this Agreement shall be deemed effective unless contained in a writing signed by the party charged with such waiver and - 23 - 25 specifically stating that it waives a provision of this Agreement, and no waiver of any breach or failure to perform shall be deemed to be a waiver of any future breach or failure to perform or of any other provisions of this Agreement. 10.12 Headings. The headings contained herein are for reference only and are not a part of this Agreement and shall not be used in connection with the interpretation of this Agreement. 10.13 Rights and Remedies Cumulative; Damages. All rights and remedies hereunder are cumulative and may be enforced separately or concurrently and from time to time, unless otherwise specifically stated herein. The enforcement of any particular remedy shall not constitute an election of remedies, and no remedy is exclusive unless specifically stated herein. Each party's sole remedies for the breach by the other party of any obligations contained in this Agreement shall be recovery of direct damages, if any, and/or termination of this Agreement in accordance with Section 7.2. In no event shall either party be liable to the other party under this Agreement for indirect, special, incidental, or consequential damages of any kind, including but not limited to damages for lost profits, lost investments, or lost business opportunities (collectively, "Consequential Damages"). LEICA and VENDOR hereby agree that direct damages shall not include or contain Consequential Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, ANY LIABILITY OF VENDOR TO LEICA HEREUNDER SHALL BE LIMITED TO THE TOTAL PRICE PAID BY LEICA FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY LEICA WITH RESPECT TO SUCH PRODUCTS. 10.14 Contract Interpretation. Each party hereto acknowledges that it has had ample opportunity to review and comment on this Agreement. This Agreement shall be read and interpreted according to its plain meaning and an ambiguity shall not be construed against either party. It is expressly agreed by the parties that the judicial rule of construction that a document should be more strictly construed against the draftsperson thereof shall not apply to any provision of this Agreement. - 24 - 26 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. ACCUMED INTERNATIONAL, INC. By: \s\ PETER P. GOMBRICH ----------------------------------------- Name: Peter P. Gombrich Title: Chairman and Chief Executive Officer LEICA MIKROSKOPIE und SYSTEME GmbH By: \s\ HORST KIRSTEIN ----------------------------------------- Name: Horst Kirstein Title: General Manager By: \s\ ARMIN HOPF* ----------------------------------------- Name: Armin Hopf Title: Finance and controlling LMG Group * On behalf of Armin Hopf by /s/ Dr. Jorg Reinschmidt ------------------------ - 25 - EX-10.3 4 MANUFACTURING AND SUPPLY AGREEMENT 1 Exhibit 10.3 MANUFACTURING AND SUPPLY AGREEMENT This Manufacturing and Supply Agreement ("Agreement") is entered into and effective this 22nd day of May, 1997 by and between AccuMed International, Inc., 900 North Franklin, Suite 401, Chicago, Illinois 60610, (hereinafter AccuMed) and RELA, Inc., 6175 Longbow Drive, Boulder, Colorado 80301, (hereinafter "RELA"). 1. AccuMed owns and markets an ESP Blood Culture System (hereinafter "ESP") which consists of Septicemia Instrument Models 128, 256 and 384 and related components and spare parts, and has developed and acquired design data, marketing and business information, specifications, know-how and equipment relating to said systems and their structure, packaging, marketing and use ("AccuMed Confidential Information"). 2. RELA is in the business of designing, developing, and manufacturing electromechanical instruments, medical instruments, and electronic products and has developed and acquired design data, know-how, and equipment relating to the design process for electronic instruments and their manufacture and packaging ("RELA Confidential Information"). 3. The parties now desire to enter into an exclusive agreement under which RELA will manufacture and supply the ESP to AccuMed. AGREEMENT In consideration of the foregoing and of the mutual covenants, promises, and conditions set forth below, the parties intending to be bound, agree as follows: ARTICLE I MANUFACTURE Section 1.1 Supply RELA shall exclusively manufacture the ESP in accordance with the terms and conditions set forth in this Agreement and specified in the Product Requirements for ESP (Exhibit C attached) and shall supply the ESP to AccuMed, and AccuMed shall pay RELA upon receipt of the ESP, as provided in Articles III through VI, inclusive. RELA will manufacture this device under the GMP controls appropriate for the manufacture of a Class II device. Any additional controls to be applied to the manufacture of this device will be called out contractually. Any deviation from these 2 controls will be approved in advance by AccuMed and RELA. Section 1.2 Facility Inspection AccuMed shall have the right during reasonable business hours to inspect all phases of the ESP manufacturing activities at RELA in order to verify RELA's compliance with specifications and applicable regulatory requirements. The cost of conducting such audits shall be borne by AccuMed. RELA agrees to give AccuMed access during normal working hours to such records as are reasonably necessary including quality control records, test records, manufacturing records and design records, and to permit AccuMed to review and copy such records. AccuMed right of access to RELA Confidential Information and to inspect and copy RELA Confidential Information shall be restricted to those matters necessary to verify RELA's compliance with the specifications and regulatory requirements. AccuMed agrees to preserve the confidentiality of such records in accordance with Article II. Section 1.3 Audit Support The costs associated with product related audits by regulatory agencies, if any, are yet to be determined. These costs will be borne by AccuMed and negotiated with RELA when such audits are identified. ARTICLE II CONFIDENTIAL INFORMATION Section 2.1 Preserving Confidential Information In order to facilitate performance of the obligations set forth in the Agreement, it will be necessary for AccuMed to disclose to RELA, AccuMed Confidential Information, and for RELA to disclose to AccuMed, RELA Confidential Information. In consideration of such mutual disclosures, the parties agree that they shall mutually negotiate the terms of non-disclosure and that they will record those terms in a formal Mutual Non-Disclosure Agreement document. The Mutual Non-Disclosure Agreement document is attached as Exhibit A. ARTICLE III PLACEMENT OF ORDERS Section 3.1 Production Schedules and Purchase Orders AccuMed purchase of the ESP shall be governed by non-cancelable purchase orders issued for a period of at least one (1) year for a minimum of one hundred (100) ESPs. Firm releases will be authorized by AccuMed against the purchase order as indicated in Section 3.12. The terms and conditions of this Agreement supersede the terms and conditions contained on the AccuMed purchase order form. Every other week, AccuMed shall issue a Requirements Plan to RELA. It shall contain plans to purchase instruments and components adding two weeks demand for the subsequent six (6) months. The plan will contain two levels of order commitment, firm 3 releases and planned requirements. For the benefit of cost reductions to both RELA and AccuMed, a committed instrument volume can be negotiated. 3.10 Firm Releases Firm releases are requirements which have a release number assigned. These are commitments by AccuMed for both quantity and date. RELA shall schedule manufacturing to meet the specified delivery or completion date. Shipments will be firmed weekly. 3.11 Planned Requirements Planned requirements reflect current AccuMed plans to purchase. They are not firm and both quantity and date may be adjusted. They are offered for RELA's planning purposes. They should be placed into RELA's production schedule. 3.12 First Ninety (90) Days This period contains firm releases. RELA is authorized to produce these items, and AccuMed is committed to purchase them as planned. AccuMed may reschedule firm delivery dates with RELA's agreement when necessary. 3.13 Second Ninety (90) Days This period contains the current planned requirements for the demand for products. RELA is authorized to purchase materials needed to fill these requirements. AccuMed commits to purchase all of the materials but bears no responsibility for conversion costs other than inspection, materials and the direct/incremental costs of procuring necessary materials. AccuMed will also be responsible for any non-cancelable or non-returnable materials, including any restocking charges. 3.14 Beyond One-Hundred Eighty (180) Days This period contains the current estimate of the demand for the product and is offered only for planning purposes. AccuMed makes no commitment except that this is the best estimate at the time of the Requirements Plan and commits to purchase committed minimums per the contract minimums. Section 3.2 Inventory RELA shall procure, receive, inspect and store raw materials in a fashion which assures conformance to product requirements and applicable regulatory requirements. RELA shall maintain sufficient component inventory to assure timely delivery of all instruments which shall be scheduled pursuant to section 3.1, Production Schedules and Purchase Orders, herein. RELA will not maintain a finished goods inventory unless a specific Finished Goods Inventory Agreement is negotiated between RELA and AccuMed. Section 3.3 Accessories RELA will supply accessories (e.g., power supply, transformer, carrying case, manuals, etc.) as required for AccuMed to support overseas field service. However, RELA will not maintain stock of these items. It will be AccuMed's responsibility to place orders in advance of need and to maintain this inventory. 4 Section 3.4 Delivery RELA shall ship the ESP in accordance with AccuMed's instructions for method of shipment as designated by AccuMed in the Purchase Order. Upon shipment, RELA must inform AccuMed of AccuMed pick number, SKU number, product serial number, quantity shipped, product destination, carrier, bill to and ship to address, package weight and freight cost. ARTICLE IV BILLING, PAYMENT AND PRICING Section 4.1 Price The unit price charged to AccuMed by RELA for the ESP delivered and accepted by AccuMed under this Agreement will be per the ESP Instrument Price List (attached as Exhibit B). Section 4.2 Deposits Upon placement of the Purchase Order, AccuMed will pay a $300,000 deposit to RELA. This deposit will be retained for the purpose of covering a portion of the materials costs. Upon completion or termination of this Agreement and the payment by AccuMed of all outstanding invoices, RELA shall refund any remaining deposit amount, in full, to AccuMed. A letter of credit with acceptable terms may be utilized in place of a cash deposit. If AccuMed is in compliance with all aspects of this Agreement, the level of deposit referred to above will be reduced to $250,000 six (6) months from the commencement of the Agreement and $200,000 nine (9) months from the commencement of the Agreement. Section 4.3 Invoices RELA shall invoice AccuMed upon successful completion of final testing criteria for the ESP. Such invoices shall state the number of units completed, the per unit price and total price. AccuMed shall make payment to RELA for the ESP completed within ten (10) days following receipt of the RELA invoice. AccuMed agrees to pay RELA a late penalty of 1.5% per month on any unpaid balance. ARTICLE V QUALITY STANDARDS AND INSPECTION Section 5.1 Quality Standards The ESP manufactured and supplied by RELA hereunder shall be made in strict compliance with AccuMed's product and performance specifications. "Specifications" as used in this Agreement, shall mean those manufacturing, design, inspection, governmental compliance, testing, quality control and assurance requirements, record retention and other requirements identified in the RELA Product Specific Quality Plan (Exhibit D attached), and any documents and drawings incorporated thereby. It is understood that such Specifications may be amended as reasonably necessary, during the term of this Agreement, subject to written approval from AccuMed and upon receipt by RELA of reasonable advance notice. 5 Section 5.2 Product Inspection AccuMed shall have the right to inspect all ESP units. "Inspection" shall mean the right of AccuMed, including its affiliates and dealers, to inspect and analyze finished goods at any time during normal business hours to determine compliance with the specifications and to determine whether any manufacturing deficiency exists, and shall include the right to reject product at any time upon discovery of any manufacturing defect. AccuMed shall have thirty (30) days upon receipt of product to perform the initial incoming quality assurance inspection. AccuMed's right to reject the ESP is limited to this period unless the defect is latent and not discovered until later. Section 5.3 Rejected Goods RELA shall promptly repair or replace, at RELA discretion and at no cost to AccuMed, any ESP that is defective in workmanship or materials, or which fails to meet the Specifications and is rejected upon inspection. AccuMed will comply with RELA's Return Material Authorization procedures. RELA shall not be responsible for products damaged in shipment, unless not packaged per Section 6.1 contained herein. Section 5.4 Configuration and Process Control RELA will immediately advise AccuMed's Quality Assurance Manager at the address set forth in Section 13.1 of all known changes in or to the design, configuration, or performance characteristics of the ESP, or to any component thereof supplied by RELA regardless of whether such changes affect the specifications, or to the materials or manufacturing processes utilized in production. No changes in process or design will be made by RELA unless expressly agreed to in writing by AccuMed in advance of such change. AccuMed may, at any time in its discretion and by written order, make additional changes to designs or product specifications. If said changes cause either an increase or decrease in the engineering or manufacturing costs or the time required to manufacture, a mutually agreeable adjustment shall be made in the product price or delivery schedule or both. Where inventory and/or materials have been made obsolete or excess as a result of said change, AccuMed shall have the right to determine the disposition of such property, but AccuMed shall in any event be responsible to purchase said obsolete inventory and materials at RELA's incurred cost thereof. RELA shall use reasonable efforts to minimize the levels of obsolete or excess materials within procurement parameters described in Section 3.2 (a) and (b). Section 5.5 Manufacturing Process RELA shall establish and maintain manufacturing process documentation that assure uniform products which meet product requirements and conform to applicable regulatory and safety requirements. This documentation will include but not necessarily be limited to assembly procedures, costed bills of materials, costed labor routings, testing procedures, product quality documentation, electronic files and configuration control. AccuMed has the right of inspection in accordance with Section 1.2, Facility Inspection, and will receive formal revision notices to assure currency of parallel files. The entire library of the above, and similar documentation is considered owned by AccuMed. 6 Section 5.6 Implementing Modifications The action documents for implementing modifications to product and process are the RELA Engineering Change Order Procedure #00000-01249, or the RELA Temporary Deviation Authorization Procedure #00000-13776. The appropriate AccuMed designate (Mechanical Engineering Manager) must approve the TDA or ECO before implementation. Adherence to production schedules in Section 3.1 Production Schedules and Purchase Orders, is contingent upon timely response to proposed changes. These assignments are not intended to restrict routine exchanges of information between the operations groups of RELA and AccuMed. ARTICLE VI ESP PACKAGING Section 6.1 Packaging Unless otherwise specified in the Purchase Order all items to be delivered hereunder shall be boxed, crated, or stored without additional charge and shall be placed and packaged: (i) To ensure safe arrival at their ultimate destination, (ii) To secure the lowest transportation costs, and (iii) To comply with the requirements of common carriers. AccuMed's Purchase Order numbers must be plainly marked on all invoices, packages, bills of lading, and shipping orders. Shipping memos or packing lists must accompany materials. RELA shall identify items delivered to AccuMed by Purchase Order number, revision, description, and quantity per carton. AccuMed's count or weight shall be final and conclusive on shipments not accompanied with a packing list. Material must be routed in accordance with AccuMed's instructions for method of shipment. AccuMed reserves the right to designate a specific carrier and, in such case, will advise RELA in writing. Section 6.2 Transportation Transportation insurance for loss and damage will not be purchased unless specifically directed. Excess transportation costs resulting from failure to comply with the provisions in Article 6 of this Agreement will be debited from the RELA account. Section 6.3 Consolidation of Shipments Shipments made on the same day and consigned to one destination via the same carrier must be consolidated on one bill of lading. Failure to comply will result in a debit for excess cost incurred. Section 6.4 Costs All prices are F.O.B., Boulder, Colorado, unless otherwise agreed to in writing. AccuMed will pay all transportation charges from Boulder, Colorado, to destination. Section 6.5 Risk of Loss Risk of loss or damage shall pass to AccuMed upon delivery by RELA to the possession of the carrier unless otherwise agreed upon in writing 7 by RELA. Any claims for loss or damage after risk of loss has passed shall be filed by AccuMed with the carrier. ARTICLE VII PATENTS, INVENTIONS, RIGHTS Section 7.1 Grant of Rights Each party grants to the other a non-exclusive license under its respective AccuMed Confidential Information and RELA Confidential Information and its respective patent rights and patent applications covering the ESP and components thereof as necessary in order to carry out the intent and purpose of this Agreement and for no other purpose. RELA reserves the right to include the name of AccuMed in its list of clients and to show or display the ESP after the ESP has been placed in the market for sale, for purposes of demonstrating RELA's capabilities. Section 7.2 Design Ownership The parties agree that title to goods, inventions, and copyrights in works developed and delivered by RELA under the DIFCO Agreement are owned by AccuMed. RELA will at AccuMed's request transfer to AccuMed title to the following items: (1) goods, design drawings, software, the Device Master Record and documentation that have been produced by RELA under the DIFCO Agreement; (2) patentable inventions that are first actually reduced to practice by RELA in work performed under the DIFCO Agreement; and (3) copyrights in works that are created by RELA under the DIFCO Agreement. It is understood that future know-how, techniques, and other technology utilized by RELA under this Agreement will not become the property of AccuMed, although AccuMed can use them as necessary to utilize and enjoy the items for which AccuMed may obtain title as described in this paragraph. RELA shall not be responsible for any third party patent infringement resultant of AccuMed's patent application or ownership. ARTICLE VIII TERM AND TERMINATION Section 8.1 Term The term of this Agreement shall be one (1) year unless sooner terminated as provided hereafter or by operation of law. Section 8.2 Renewal Unless written notice of termination is provided by RELA or AccuMed ninety (90) days prior to the termination date of this Agreement, the Agreement will automatically renew for an additional one (1) year term. 8 Section 8.3 Failure to Perform If RELA or AccuMed fail to perform any material obligation hereunder, the other party may, in addition to any other remedy it may have at law or in equity, give notice of its intent to terminate this Agreement for material breach, specifying the act or omission upon which such notice is based. If the specified default is not cured within sixty (60) days of the date of such notice, the non-defaulting party shall be entitled to terminate this Agreement forthwith upon written notice effective on the date of such notice. Section 8.4 Termination Upon Notice Either AccuMed or RELA may terminate this Agreement by giving the other party at least ninety (90) days advance notice in writing prior to the termination date. Section 8.5 Cancellation Liability Cancellation of this Agreement by AccuMed shall result in AccuMed's liability for all ESPs scheduled for delivery per Section 3.1, for the cost of all materials ordered as reflected by all open purchase orders, for component price adjustments caused by AccuMed's purchase order cancellations, and for non-cancelable and non-returnable materials in support of Section 3.1. RELA shall use reasonable efforts to minimize any and all purchase order cancellation charges, bill-backs, and/or re-stocking charges. Upon settlement of all accounts, RELA shall refund to AccuMed the initial deposit as per Section 4.2 of this Agreement or cancel the Letter of Credit. Cancellation of this Agreement by RELA, for other than AccuMed breach, shall result in no material or production liability by AccuMed. Section 8.6 Bankruptcy If either party is adjudged bankrupt, or becomes insolvent, or makes an assignment for the benefit of creditors, or if its business is placed in the hands of a trustee, whether by voluntary action or otherwise, the other party may, if permitted under applicable law, terminate this Agreement immediately upon notice effective on the date of such notice. ARTICLE IX WARRANTY AND LIMITATIONS Section 9.1 Material and Workmanship RELA warrants that all products (instruments, components and subassemblies) provided by RELA (the "Product" or "Products") shall be free from defects in material and workmanship under normal use and service for a period of twelve (12) months following the date the Product is installed but in no event longer than eighteen (18) months following the date the Product is delivered to AccuMed (the "Warranty Period"). During the Warranty Period, RELA shall reimburse AccuMed monthly for costs incurred inclusive of labor, parts and zone charge for service calls provided the service call was due to a failed component or subassembly manufactured and provided by RELA during the warranty period of the instrument. Rates for warranty charges including labor rates, zone charges, and spare parts costs will be defined in Exhibit F, Warranty Rates. 9 AccuMed will invoice RELA for warranty service on a monthly basis referencing the service call numbers, instrument serial numbers, and charges for labor, parts and zone charge for each incident. A listing of parts and assemblies which RELA desires returned for failure analysis will be maintained by AccuMed. See Exhibit G, Warranty Parts Return Listing. This list may change from time to time since it will be reflective of the current operating environment. All other failed warranty parts will be disposed of by the AccuMed Field Service Engineers. Warranty parts will be supplied to the AccuMed Field Service Engineer from AccuMed inventory. Parts and assemblies returned to RELA can be remanufactured to meet current specifications and made available for subsequent use. This warranty applies to Products that, after shipment from RELA, have not been damaged, altered, or repaired whether negligent or not, by other than authorized representatives of RELA or AccuMed. This warranty does not extent to equipment not produced by RELA even though such may be sold or operated with the Product. In addition, the warranty does not cover design or component related failures for non-RELA designed sub-assemblies. Section 9.2 Limitation of Liability RELA MAKES NO OTHER GUARANTEES OR WARRANTIES WHATSOEVER, AND THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL RELA BE LIABLE FOR ANY LOST PROFITS OR INCIDENTAL OR CONSEQUENTIAL DAMAGES REGARDLESS OF WHETHER RELA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, NOR ANY CLAIM AGAINST ACCUMED BY ANY OTHER PARTY. RELA'S MAXIMUM LIABILITY ARISING OUT OF ITS PERFORMANCE UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, IS LIMITED TO THE LESSER OF $1,000,000 OR REFUND OF THE COMPENSATION RECEIVED BY RELA UNDER THIS AGREEMENT. ARTICLE X TOOLING Section 10.1 Ownership of Tooling RELA shall procure and/or produce, upon mutual pre-approvals, all tools, dies, jigs, and fixtures required to manufacture the ESP. RELA shall invoice AccuMed for all labor and materials required to procure or produce all such tooling, jigs, fixtures, and the like, and upon payment AccuMed shall obtain unrestricted ownership thereof and to the detailed assembly drawings for such tooling. 10 All replacement tools required shall also be owned by AccuMed upon payment by AccuMed of the cost thereof. Termination of this agreement shall result in the surrender by RELA of all tools, drawings for tools, replacement tools, fixtures and jigs, paid for and owned by AccuMed. Section 10.2 Tooling Maintenance At all times under this Agreement during which RELA has possession of AccuMed tooling, RELA shall have the responsibility of performing normal, expected maintenance and repairs. The cost of modifying or replacing or rebuilding AccuMed owned tooling worn through usage or in need of major repair for reasons other than lack of periodic maintenance shall be borne by AccuMed. RELA shall be responsible for such costs if such costs are incurred due to a failure to perform proper maintenance. Payment for the cost of any other required tooling changes shall be negotiated by the parties prior to any change. All modifications and major repairs to tooling must be approved in advance by AccuMed. RELA will obtain a warranty on all tooling purchased by RELA for AccuMed that warrants the tooling against defect during its normal useful life and that obligates the supplier to replace without cost any defective tooling. AccuMed shall have the right to inspect all tooling during normal business hours. RELA agrees that it will obtain agreement from any third parties that will be given possession of AccuMed owned tooling that such third parties will permit AccuMed to inspect tooling during normal business hours. Section 10.3 Tooling Removal AccuMed shall have the right to take possession of and remove from the RELA facility or from the facility of any third party, all tooling owned by AccuMed and all confidential information owned by AccuMed upon request and upon any expiration, cancellation, or termination of this agreement. The right to take possession of such tooling shall be subject only to AccuMed providing to RELA forty-eight (48) hours advance notice. The cost of removing and transferring such tooling shall be borne by AccuMed. In addition to jigs, fixtures, and tooling, AccuMed may take possession of a detailed assembly drawing for such tooling subject to the conditions stated. RELA assumes no patent responsibility and gives no express warranty whatsoever on tooling and equipment removed and, other than warranty of title, such tooling is removed "as is". Upon removal of the AccuMed owned tooling prior to expiration, cancellation, or termination of this agreement, RELA shall have no further obligation to supply the ESP to AccuMed other than the ESP in inventory as set forth in Section 3.3. Section 10.4 Tooling Inventory RELA will maintain inventory (see Exhibit E attached) of AccuMed's tooling, fixtures, etc., and will be available to AccuMed upon request. ARTICLE XI COST REDUCTIONS Section 11.1 Sharing Cost Reductions Cost reductions will be shared equally by 11 RELA and AccuMed. Expenses will also be shared equally. AccuMed will pay for tooling and RELA will maintain tooling purchased by AccuMed based on Section 10.2 Tooling Maintenance. If for any reason RELA declines to participate in a cost reduction project or if AccuMed chooses to undertake a cost reduction project on its own or with other suppliers, AccuMed reserves the right to implement the project, cover all investment, and reap all savings. It is recognized that projects should not cause an adverse cost increase to RELA. All cost savings projects and related expenditures require advance approval by AccuMed prior to implementation. ARTICLE XII REGULATORY ASSURANCE MATTERS Section 12.1 Documentation RELA shall retain a file for all RELA generated documentation. This will include all final drawings specifications, calculation, manuals and appropriate correspondence for a period of not less than seven (7) years after this contract is terminated. Said data is considered owned by AccuMed and shall be available only to AccuMed and such regulatory agencies as AccuMed may designate, or as required by law. Section 12.2 Documentation Inquiries Each party shall keep the other promptly informed in writing of any inquiry by a customer, a state or a national government regulatory agency relating to ESP or any part thereof. Section 12.3 FDA Regulations Sale of AccuMed products including ESP is subject to FDA regulation. Notwithstanding any other provision hereunder, all work performed by RELA under this Agreement shall be performed in accordance with all FDA rules, regulations and statutes including but not limited to Good Manufacturing Practices in force at the time such work is performed. Section 12.4 Inspection AccuMed shall have the right during normal business hours to inspect all phases of RELA's manufacturing activities in order to verify RELA's compliance with specifications and applicable regulatory requirements. The cost of such audits shall be borne by AccuMed. RELA may designate a representative to be present during such audits. RELA agrees to give AccuMed access during normal business hours to such records as are reasonably necessary including quality control records, test records, manufacturing records and design records and to permit AccuMed to review and copy such records. AccuMed's right of access to RELA confidential information and to inspect and copy RELA confidential information shall be restricted to those matters necessary to verify RELA's compliance with the specifications and regulatory requirements. AccuMed agrees to preserve the confidentiality of such records in accordance with Section 2.1 of this Agreement. AccuMed shall have no right to inspect areas or records which in no way pertain to RELA's performance under this Agreement. 12 ARTICLE XIII INDEPENDENT CONTRACTOR MISCELLANEOUS PROVISIONS Section 13.1 Notices Any notice given under this Agreement shall be mailed by first class registered or certified airmail, postage prepaid, and return receipt requested, or sent by telecopy, to the receiving party at the address set forth below, or at such other address as the party may from time to time designate: AccuMed , 900 North Franklin, Suite 401, Chicago, Illinois 60610 Attention: Chief Financial Officer/Corporate Vice President RELA, Inc., 6175 Longbow Drive, Boulder, Colorado 80301 Attention: Chief Financial Officer Notices shall be deemed given upon receipt if personally delivered or mailed, upon acknowledgement of receipt if telecopied, the next business day, if sent by overnight courier. Section 13.2 Governing Law and Jurisdiction This Agreement shall be deemed to have been executed and delivered in Boulder, Colorado, and all questions arising out of or under this Agreement shall be governed by the laws of the State of Colorado. Section 13.3 Entire Agreement This Agreement together with the Mutual Nondisclosure Agreement, in Exhibit A, between the parties of even date herewith and understanding between the parties and supersedes and merges all prior agreements and understandings, oral or written as to the subject matter described herein. No modifications, representation, promise or agreement in connection with the subject matter of this Agreement shall be binding on AccuMed or RELA unless made in writing and signed by an officer or authorized representative of the party to be bound, such as by the issuance of an AccuMed "Change Order". Section 13.4 Waiver No term, covenant, or written condition of this Agreement shall be deemed waived except by the written agreement of the parties. Forbearance or indulgence by either party in any regard whatsoever shall not constitute a waiver of the term, covenant or condition to be performed by the other to which the same may apply, and until complete performance by the other party of such term, covenant and condition, the performing party shall be entitled to invoke any remedy available to it under this Agreement or otherwise available to it as law or in equity despite such forbearance or indulgence. Section 13.5 Savings Clause If any provision of this Agreement shall be held by a court of competent jurisdiction to be contrary to law, such provision shall be deemed to 13 be null and void, and the remainder of this Agreement shall be in full force and effect. The parties specifically declare that they would have entered into this Agreement if such void provision (or provisions), if any, had been entirely omitted. Section 13.6 Remedies No right or remedy conferred or reserved by the Agreement shall be exclusive of any other right or remedy herein or provided by law or in equity. To the extent any provision of this Agreement may be inconsistent with any remedy provided by law, this Agreement shall be controlling. Section 13.7 Assignability Neither party shall delegate or assign its duties under this Agreement without the other party's prior written consent, and any purported delegation or assignment without such consent shall be void. Subject to the foregoing, this Agreement shall be binding on the parties hereto and their respective successors and assigns. Section 13.8 Force Majeure Neither party shall be liable for failure to perform or for any delay in performing any of its obligations hereunder other than as provided for in hereof, when such failure or delay is caused, directly or indirectly, by fire, flood, earthquake, riot, accident, explosion, strike or other labor disturbances (regardless of the unreasonableness of the degree of the demand of labor), war, seizure under legal process orders or acts of any government or branch or agency thereof, or acts of God. Section 13.9 Independent Contractors During the term thereof, the relationship of each of the parties hereto the other is that of an independent contractor. Nothing herein contained shall be deemed to authorize or empower either party, its agents or employees to act as agent for the other party or conduct business in the name, or for the account of, the other party or any of the other party's affiliates or otherwise bind it or then in any manner. IN WITNESS WHEREOF, AccuMed and RELA executed this Agreement on the respective dates indicated. AccuMed International, Inc. RELA, Inc. 14 By: \s\ MICHAEL BURKE By: \s\ JOHN V. ATANASOFF - ----------------------- ----------------------------------- Printed: Michael Burke Printed: John V. Atanasoff - ----------------------- ----------------------------------- Title: President Title: President - ----------------------- ----------------------------------- Date: 6/12/97 Date: 6/10/97 - ----------------------- ----------------------------------- EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1,001 0 5,294 0 3,340 10,278 6,223 0 23,256 6,527 9,376 0 0 224 5,702 23,256 9,243 9,243 5,574 5,574 12,419 0 2,488 (10,997) 0 (10,997) 0 0 0 (10,997) (0.52) (0.52)
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