Exhibit 10.3
AGREEMENT
August 11, 1995
Recitals:
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A. The Parties
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CompuMed, Inc., a California corporation ("CompuMed") having its
principal place of business at 0000 Xxxxxxxxxx Xxxxxx, xxxxx 0000,
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, purchased certain Assets from Skeletal
Assessment Services Corporation, an Ohio corporation ("SASCo") having its
principal place of business in Yellow Springs, Ohio, pursuant to an
Agreement for Sale of Assets dated May 23, 1991 (the "Agreement").
Capitalized terms used herein without definition have the meanings ascribed
to them in the Agreement.
Under a June 3, 1991 security agreement between SASCo and CompuMed
(the "Security Agreement"), SASCo retained a security interest in the
Assets to secure CompuMed's payment of Percentage Amounts.
B. The Merck License
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CompuMed is currently negotiating a transaction with Merck & Co., Inc.
("Merck") concerning a transaction in which, pursuant to a Technology
License Agreement between Merck and CompuMed (the "License Agreement"),
Merck would be granted a perpetual, exclusive license of the RA and
purchase the equipment, and copyright and the OsteoGram tradename from
CompuMed. CompuMed would retain the right to make major enhancements to
the RA, and use or license that enhancement, subject to providing Merck
with the first opportunity to license or acquire the enhancement.
C. Description of License Agreement
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Under the License Agreement:
(a) Merck will pay CompuMed a one-time license fee of $250,000;
(b) Merck will pay CompuMed per-test royalties for the years 1996-
2000, based upon the following schedule:
Year
1996 1997 1998 1999 2000
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Per Test Royalty Payment $2.00 $2.50 $3.00 $3.50
$4.00
The royalty payments will be capped at the lesser of 10% of Merck's
total collected revenues and $3 million during 1999; at the lesser of 10%
of Merck's total collected revenues and $4 million during 2000. Royalties
are due only on tests for which an invoice with an amount payable is
rendered.
(c) For the hardware, Merck will pay CompuMed's book value, subject
to a limit of $175,000.
(d) Merck will commit to spending $750,000 on the product for product
development, regulatory compliance and clinical studies. Merck will be
allowed to count monies it has already spent on these items towards the
fulfillment of that obligation.
(e) CompuMed will be obligated to spend $250,000 on marketing the
product during the first year of the agreement.
(f) Merck will enter into a transition operating agreement with
CompuMed wherein Merck will agree to pay a flat rate of $1,000 per month
for access to certain CompuMed software, $660 per month to keep the Yellow
Springs, Ohio facility operating, and various hourly or monthly rates for
the services of certain personnel. This agreement will be terminable in
whole or in part by Merck at any time.
Merck retains a right of offset against CompuMed to cover any breaches of
CompuMed's representations, warranties and covenants. Merck requires as a
condition of closing that SASCo release its security interest in the
Assets.
Agreement:
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Now therefore, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereby agree as follows:
ARTICLE I. Amendment of 1991 Agreements
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Section 1.1 Payment at Closing
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At the closing called for in the License Agreement (the "Closing"),
CompuMed shall pay SASCo one hundred thousand dollars ($100,000) by wire
transfer or by certified check.
Section 1.2 Change in Payment Rate
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At the Closing, section 5 of the Agreement shall be amended, effective
as of the Closing, by deleting the words "the sum of $900,000 from the
gross revenues generated from the testing and analyzing of tests for
osteoporosis" and the remaining text of the paragraph in which those words
appear, and substituting in their place the following:
eight percent (8%) (the "Royalty Payment") of all amounts paid by
Merck & Co., Inc. to CompuMed under the License Agreement dated as of
August __, 1995 (the "License Agreement") (including any amounts paid by
Merck to CompuMed in order to discharge, prepay, settle, eliminate or
compromise any such amounts), other than:
1) a one-time license fee of $250,000,
2) the amount (not to exceed $175,000) payable for equipment,
furniture and fixtures, and
3) the amounts payable under the transition operating agreement
between CompuMed and Merck, as defined in the License Agreement.
Seller shall have a first security interest in the royalties payable
by Merck to Purchaser under the License Agreement to secure payment of the
Royalty Payments until Merck has no further obligation to make royalty
payments to CompuMed under the License Agreement. Royalty Payments shall
not be computed to include amounts, if any, paid by Merck to CompuMed for
research and development work that is later requested by Merck or that
relates to enhancements to the RA that are developed after the date hereof
by CompuMed.
Section 1.3 Substitution of Collateral.
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At the Closing, SASCo and CompuMed will execute and deliver (i) a
termination of the Security Agreement, and (ii) a new security agreement
identifying the payments to be made by Merck pursuant to the License
Agreement as the collateral; and (iii) appropriate statements on Forms UCC-
3 and UCC-1 reflecting this termination and new security agreement.
Section 1.4 Forgiveness of $30,000 Obligation
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At the Closing, CompuMed shall forgive the $30,000 obligation of SASCo
to CompuMed described in section 5(b) of the Agreement.
Section 1.5 Extension of Warrant; Issuance of Additional Warrants
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At the Closing, CompuMed shall execute and deliver to SASCo an amended
and restated stock warrant in substantially the form of the warrant
delivered pursuant to the Agreement (with appropriate adjustments to
reflect a subsequent 1.10 reverse stock split) but with a term extending to
a date five years from the Closing (as such, the "Amended Warrant"). In
addition, CompuMed shall issue a new warrant (collectively with the Amended
Warrants, the "Warrants") to SASCo in a form substantially similar to the
Amended Warrant for an additional 83,000 shares of CompuMed common stock,
with an exercise price of $2.50 per share.
Section 1.6 Registration of Warrant Shares
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(a) CompuMed shall use reasonable efforts to register the sale of the
shares underlying the Warrants (the "Warrant Shares")in an S-3 registration
statement with the Securities and Exchange Commission within 180 days of
the Closing (other than shares the sale of which has previously been
registered under CompuMed's August 1992 registration statement). CompuMed
shall, to the extent permissible, take the position that the 1992
registration statement covers 25,000 Warrant Shares. If CompuMed has not
effected a registration of the sale of all of the Warrant Shares within 180
days of the Closing, then at any time thereafter,but only once, SASCo may
request that CompuMed so register the sale of the Warrant Shares, in which
case CompuMed shall use its best efforts to so register the sale of the
Warrant Shares at its sole cost and expense, and shall "blue sky" such sale
in Ohio, California and such other States as SASCo may reasonably request;
provided, however, that CompuMed shall not be required to incur the expense
of a special audit of its books to effect such registration, and provided
further that CompuMed shall not be required to endeavor to register such
sale if within three weeks of SASCo's request CompuMed shall deliver to
SASCo (i) an opinion of its counsel that the transaction or transactions
with respect to which such registration is requested constitutes a
transaction or transactions as to which registration is not required under
the Securities Act of 1933, and (ii) there is simultaneously delivered to
SASCo a letter from the transfer agent of CompuMed assuring the
transferability of the Warrant Shares. CompuMed shall not be required to
include in any registration statement any Warrant Shares unless SASCo shall
have at its expense provided CompuMed with a written statement of all
material facts required to be stated in such registration statement
concerning SASCo, its officers, directors and shareholders, the Warrant
Shares and the sale of same, and agreed to defend, indemnify and hold
harmless the underwriters participating in such offering and CompuMed and
each of its directors and officers against any loss, cost or expense that
may arise because of any untrue or allegedly untrue statements or omission
or alleged omission of a material fact made by SASCo in a written statement
to CompuMed for inclusion in such registration statement; provided that
CompuMed agrees to defend, indemnify and hold SASCo, and each of its
directors and officers against any loss, cost or expense that may arise
because of any untrue or allegedly untrue statements or omission or alleged
omission of a material fact made in the registration statement other than
any untrue or allegedly untrue statements or omission or alleged omission
of a material fact made by CompuMed in reliance upon a written statement of
SASCo to CompuMed provided for inclusion in such registration statement.
(b) If at the time a request is made for registration CompuMed is
engaged in any activities (including, without limitation, activities
related to an acquisition by or of CompuMed) which the Board of Directors
of CompuMed reasonably and in good faith determines would cause the
registration so requested to have a materially adverse effect on CompuMed
or its business (other than by reason of the expense of registration),
CompuMed may postpone such registration until its Board of Directors
determines that the circumstances no longer require such postponement;
provided, however, that no such postponement may extend for a period in
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excess of one hundred twenty (120) days.
(c) CompuMed will use its best efforts to maintain the effectiveness
for up to nine months, of any registration statement pursuant to which any
of its securities are being offered, and from time to time will amend or
supplement such registration statement and the prospectus contained therein
as and to the extent necessary to comply with the Securities Act of 1933
(the "1933 Act") and any applicable state statute or regulation. CompuMed
will also provide SASCo with as many copies of the prospectus contained in
any such registration statement as it may reasonably request.
ARTICLE II, Post-Closing Obligations
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Section 2.1 Financial Records
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CompuMed shall keep adequate and complete records showing all revenue
received from Merck under the License Agreement. Such records shall
include all information necessary to verify the total amount and
computation of Royalty Payments due, and shall be open to inspection on
behalf of SASCo upon reasonable notice during reasonable business hours to
the extent necessary to verify the amount thereof. Such inspection shall
be made not more than once each calendar year at the expense of SASCo by a
certified public account appointed by SASCo and to whom CompuMed has no
reasonable objection. CompuMed shall not be required to retain such
records for more than three (3) years after the close of any calendar
quarter.
Section 2.2 Reports.
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Within sixty days after the closing of each calendar quarter during
the years 1996-2000 inclusive, CompuMed shall furnish SASCo with a written
report, signed by an authorized representative of CompuMed, showing;
(a) the gross revenue received from Merck under the License Agreement
during the preceding calendar quarter;
(b) the number of tests that generated that revenue; and
(c) the Royalty Payments due to SASCo in connection therewith.
Section 2.3 Royalty Payment Payments.
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With each such quarterly report, CompuMed shall remit to SASCo the
total amount of Royalty Payments shown thereby to be due.
ARTICLE III. Miscellaneous
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Secton 3.1 Severability.
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If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 3.2 Successors and Assigns.
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This Agreement shall be binding upon and inure the benefit of the
parties hereto and their successors and assigns.
Section 3.3 Merger.
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This instrument and the Agreement contain the entire agreement between
the parties hereto with respect to the subject matter set forth herein and
therein. No verbal agreement, conversation or representation between any
officers, agents, or employees of the parties hereto either before or after
the execution of this Agreement shall affect or modify any of the terms or
obligations herein contained.
Section 3.4 Amendment and Waiver.
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No change, modification, extension, termination or waiver of this
Agreement, or any of the provisions herein contained, shall be valid unless
made in writing and signed by a duly authorized representative of each
party.
Section 3.5 Captions.
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The captions are provided for convenience and are not to be used in
construing this Agreement.
Secion 3.6 Counterparts.
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This Agreement may be signed in counterparts which collectively shall
constitute a single agreement.
Section 3.7 Force Majeure.
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Neither party shall be in breach hereof by reason of its delay in the
performance of or failure to perform any of its obligations hereunder, if
that delay or failure is caused by strikes, acts of God or the public
enemy, riots, incendiaries, interference by civil or military authorities,
compliance with governmental priorities for materials, or any fault beyond
its control or without its fault or negligence.
Section 3.8 Further Assurances.
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The parties each, at any time or from time to time, shall execute and
deliver or cause to be delivered such further assurances, instruments or
documents as may be reasonably necessary to fulfill the terms and
conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first
above written.
COMPUMED, INC.
By: /s/ Xxx Xxxxxxxxx
___________________________
Xxx Xxxxxxxxx, President
SKELETAL ASSESSMENT SERVICES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
__________________________
Xxxxxxx X. Xxxxxxxx, President
