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Exhibit 10.3

 
INVENTORY PURCHASE AGREEMENT
 
THIS INVENTORY PURCHASE AGREEMENT (this “Agreement”) is entered into on October
8, 2007 between Reagents Applications, Inc., a Delaware corporation (“RAI”)
located at 8225 Mercury Court, San Diego, CA 92121 and Cliniqa Corporation, a
California corporation (“Cliniqa”) located at 774 Twin Oaks Valley Road, San
Marcos, CA 92069.
 
RECITAL
 
A.           RAI and Cliniqa have entered into an Asset Purchase Agreement
(“Purchase Agreement”) dated October 8, 2007 whereby Cliniqa has agreed to buy
specified assets of Reagents Applications, Inc., a wholly owned subsidiary of
Hemagen Diagnostics, Inc (“Hemagen”).
 
B.           Cliniqa desires to purchase inventory from RAI.
 
C.           RAI has agreed to supply such inventory to Cliniqa on the terms and
conditions set forth in this Agreement.
 
NOW THEREFORE, in consideration of the mutual covenants and consideration set
forth herein, and intending to be legally bound hereby, the parties hereto agree
as follows:
 
1.           DEFINITIONS.
 
1.1            “Effective Date” shall mean the date first set forth in the first
paragraph of this
 
Agreement.
 
1.2            “Party” or “Parties” shall mean, respectively, RAI or Cliniqa,
and RAI and Cliniqa.
 
1.3            “Purchase Price” shall have the meaning assigned to such term in
Section 3.1.
 
1.4           “Inventory” shall mean the products listed on Exhibit A.
 
1.5           “Term” shall have the meaning assigned to such term in Section
6.1.
 
1.6           “Minimum Purchase Commitment” shall have the meaning assigned to
such term in Section 2.2.
 
2.           INVENTORY
 
2.1           Inventory Selection.  During the term of this Agreement, RAI shall
sell to Cliniqa, and Cliniqa will purchase from RAI, free and clear of any
charges, encumbrances, security interests and claims, Inventory which has been
selected by Cliniqa, from Exhibit A, as Cliniqa wishes to acquire from RAI.
 

 
 

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2.2           Supply.  Cliniqa shall purchase Inventory pursuant to this
Agreement and be obligated to purchase a minimum of $500,000 of Inventory (the
“Minimum Purchase Commitment”) during the 18 month period after the effective
date.  Pursuant to the Purchase Agreement, Cliniqa’s Purchase Price includes
$100,000 of Inventory and thus the Minimum Purchase Commitment shall begin after
Cliniqa receives $100,000 of Inventory.
 
2.3           Acceptance of Purchase Orders.  Cliniqa shall issue purchase
orders under this Agreement.  RAI shall accept all purchase orders that are
issued in conformance with the terms and conditions of this Agreement.  Upon
acceptance of a purchase order, this Agreement and such accepted purchase order
shall constitute a contract between Cliniqa and RAI.  If there is a conflict of
terms between the terms of this Agreement and any such accepted purchase order,
the terms of this Agreement shall prevail.
 
2.4           Delivery.  RAI shall maintain its Inventory on a consignment basis
to Cliniqa at the Raichem facility, located at 8225 Mercury Court, San Diego, CA
92121, or at another facility if Cliniqa moves its operations out of the Raichem
facility.  Cliniqa shall ensure that the Inventory is segregated physically from
its own inventory.  Cliniqa acknowledges that it shall be responsible for
maintaining and safeguarding the Inventory, including maintaining all risk
property damage insurance on such inventory at the replacement value, naming
Hemagen as additional insured and loss payee.  Cliniqa shall provide a
certificate of insurance identifying such coverages on the date hereof, and
Hemagen shall be provided thirty (30) days notice of cancellation.
 
2.5           Title, Risk of Loss.  Title and risk of loss, delay or damage to
the Inventory shall pass to Cliniqa upon delivery.
 
2.6           Reports, Audits.  RAI shall provide Cliniqa with an inventory
report, not later than 10 days after the end of each month, showing the
beginning balance of the Inventory, usage of inventory during the month from
issued purchase orders and the balance at the end of the month.  Cliniqa agrees
that it will perform spot inventory checks for certain inventory items
identified by Hemagen on a monthly basis.  Cliniqa also agrees that Hemagen, at
its own expense, may perform a physical inventory audit at the end of each
month.  Hemagen shall inform Cliniqa no less than five days in advance of
performing the audit.  Cliniqa shall use its best efforts to aid Hemagen in its
audit.
 
2.7           Inventory Shortfall.  Cliniqa agrees that any shortfall in the
monthly inventory report shall constitute a purchase of Inventory and Cliniqa
shall promptly issue a purchase order for Hemagen for the Inventory.
 
2.8           Preferred Supplier.  For the Term of the Agreement, Cliniqa agrees
that it shall purchase Inventory solely from RAI, prior to purchasing any like
inventory from a third party.  If RAI desires to use any of the Inventory, it
shall provide Cliniqa with a ten day written notice.  If Cliniqa desires to
purchase the specific Inventory, it must promptly issue a purchase order to
RAI.  RAI acknowledges that it will provide Cliniqa with sufficient notice on
products that are scheduled for production or for which there are long lead
times with other vendors.  If Cliniqa does not desire to purchase the specific
inventory, RAI shall issue an inventory transfer order to Cliniqa for such
quantity of Inventory desired to Hemagen’s facility, and the parties shall
adjust
 

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consigned inventory balances accordingly.  Cliniqa shall ship the product to
Hemagen, or to another party, at Hemagen’s option and charge Hemagen reasonable
shipping costs.  Any products purchased by RAI pursuant to this Section 2.9
shall reduce the Minimum Purchase Commitment by the value of the Inventory
agreed upon under this agreement.
 
2.9           Cliniqa will have the opportunity to review the most recently
completed physical inventory reports to verify that sufficient inventory exists
that would be purchasable under this agreement.  Should there be insufficient
inventory acceptable to Cliniqa, such Minimum Purchase Commitment will be
adjusted through negotiations with both Parties.
 
3.           PURCHASE PRICE; PAYMENT TERMS.
 
3.1           Purchase Price; Payment Terms.  In consideration of the delivery
of Inventory pursuant to Article 2, Cliniqa shall pay to RAI the price for each
Inventory item as set forth at Exhibit A (the “Purchase Price”).
 
3.2           Taxes.  The prices stated are exclusive of any taxes, fees,
duties, licenses or levies (“Taxes”) now or hereinafter imposed upon the
Inventory, or use of the Inventory.  Any Sales and Use Taxes related to the
Reagents used by Cliniqa shall be paid by Cliniqa or in lieu thereof, Cliniqa
shall provide an exemption certificate acceptable to the taxing
authorities.  Property taxes on the consigned inventory remain the
responsibility of RAI.
 
3.3           Payment Terms.  On the 15th and the last day of each month, RAI
shall invoice Cliniqa for the Inventory purchased.  Payment terms are net thirty
(30) days from the date of Hemagen’s invoice to Cliniqa.
 
3.4           Final Payment.  Cliniqa acknowledges that if it has not met its
obligation to purchase the Minimum Purchase Commitment, net of the Inventory
Credit, during the 18 months period from the effective date, Cliniqa will issue
a PO for the Minimum Purchase Commitment due 18 months from the effective date
and it may designate specific inventory to be transferred at the prices agreed
upon under this agreement.
 
3.5           Non-saleable Material.  All material in consigned inventory
reaching its expiration date or otherwise considered as outdated, spoiled,
expired or for any reason unsaleable, is to be removed from inventory and not
charged to Cliniqa, unless such damage to the inventory is caused as a direct
result of Cliniqa’s negligence in maintaining and storing the inventory under
proper storage conditions at Cliniqa’s facility.  The Minimum Purchase
Commitment will be reduced by the value of such inventory considered
non-saleable.
 
4.           LIMITED WARRANTY.
 
4.1           Limited Warranty.  With respect to any Inventory purchased
pursuant to this Agreement, RAI makes those warranties expressly identified as
“warranties” as are set forth in RAI’s current operating manual, catalog, or
written guarantee covering such Inventory.  Any description of the Inventory
contained in this Agreement, is for the sole purpose of identifying them, and
any such description is not part of the basis of the bargain, and does not
constitute a warranty that the Inventory shall conform to that description.  Any
sample or model used in connection with this Agreement is for illustrative
purposes only, is not part of the basis of the
 

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bargain, and is not to be construed as a warranty that the Inventory will
conform to the sample or model.  No affirmation of fact or promise made by RAI,
whether or not in this Agreement, shall constitute a warranty that the Inventory
will conform to the affirmation or promise.  THE WARRANTY SET FORTH IN THIS
PARAGRAPH IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, EXCEPT WITH
RESPECT TO INTELLECTUAL PROPERTY.
 
5.           LIMITATION OF LIABILITY.
 
5.1           LIMITATION OF LIABILITY.  IN NO EVENT SHALL HEMAGEN BE LIABLE FOR
ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH ANY ASPECT OF THIS AGREEMENT OR THE USE OR PERFORMANCE OF
HEMAGEN’S PRODUCTS.
 
6.           TERM AND TERMINATION.
 
6.1           Term.  The initial term of this Agreement shall commence on the
Effective Date hereof and shall continue until the second anniversary of the
Effective Date, unless terminated sooner as provided in this Agreement (the
“Term”):
 
6.2           Termination for Default.  If Cliniqa breaches any material
provision of this Agreement and if such breach is not corrected within thirty
(30) days after Hemagen gives notice of the breach to Cliniqa, Hemagen may,
without prejudice to any of its other rights conferred on it by this Agreement,
in addition to any other remedies available to it by law or in equity, terminate
this Agreement immediately by giving notice of the termination, effective on the
date of the notice, and declare any of the Minimum Commitment amount outstanding
immediately due.  For any outstanding Minimum Commitment to be paid under this
Section 6.2, Cliniqa may designate specific inventory to be transferred at the
prices agreed upon under this agreement.  The right of Hemagen to terminate this
Agreement, as provided in this Section 6.2, shall not be affected in any way by
its waiver or failure to take action with respect to any previous default.
 
6.3           Termination for Insolvency.  Subject to applicable bankruptcy
laws, RAI may terminate this Agreement if, at any time, Cliniqa shall file in
any court or agency pursuant to any statute or regulation of any state or
country, a petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of it or of its
assets, or if Cliniqa proposes a written agreement of composition or extension
of its debts, or if Cliniqa shall be served with an involuntary petition against
it, filed in any insolvency proceeding, and such petition shall not be dismissed
within sixty (60) days after the filing thereof.
 
6.4           Survival of Rights.  In the event of the termination of this
Agreement prior to its expiration, the obligations of the Parties theretofore
accrued under this Agreement shall survive, and the rights and obligations of
the Parties under Sections 2.5, 3.3, 4, 5, 6, 7.5 and 8 shall survive in
accordance with the terms of such Sections.
 
6.5           Rights Not Exclusive.  All rights to terminate, and rights upon
termination, provided in this Agreement are in addition to other remedies in law
or equity which may be available.
 

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7.    MISCELLANEOUS.
 
7.1           Severability.  In the event that any provision of this Agreement
shall be held illegal, void or ineffective, the remaining portions hereof shall
remain in full force and effect so long as such remaining portions do not
materially change the intent of this Agreement or the right or obligations of
the Parties hereunder.  If any provision of this Agreement is in conflict with
any applicable statute or law in any jurisdiction, then such provision shall be
deemed inoperative in such jurisdiction to the extent of such conflict and the
Parties will renegotiate the affected provisions of this Agreement to resolve
any inequities.  It is the intention of the Parties that, if any court or other
tribunal construes any provision or clause of this Agreement, or any portion
thereof, to be illegal, void or unenforceable because of the duration of such
provision or the area or matter covered thereby, such court shall reduce the
duration, area or matter of such provision and enforce such provision in its
reduced form.
 
7.2           Waiver.  A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof.  All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either Party.
 
7.3           Notices.  Any notice or other communication required or permitted
under this Agreement shall be sent by certified mail or courier service, charges
prepaid, or by facsimile transmission (receipt confirmed), to the address or
facsimile number specified below:
 
(a)           If to Hemagen:
 
Hemagen Diagnostics, Inc.
                9033 Red Branch Road
                Columbia, MD 21045
                Fax:           (410) 992-9861
                Attn:         William P. Hales, Chairman, President and CEO
 
(b)           If to Cliniqa:
 
Cliniqa Corporation
                774 Twin Oaks Valley Road
                San Marcos, CA 92069
                Fax:           760-744-4128
                Attn:        Kevin Gould, President
 
or to such other address or facsimile number as a Party may specify in a notice
duly given to the sender as provided herein.  A notice will be deemed to have
been given five (5) days after the date deposited in the United States mail, or
two (2) days after the date deposited with a courier service or, in the case of
facsimile transmission, when received.
 
7.4           Assignment; Binding Effect.  This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Parties
hereto.  Neither Party may assign any of its rights, or delegate any of its
obligations, under this Agreement without the written consent of the other
Party.
 

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Notwithstanding the foregoing, either Party may, without obtaining the consent
of the other Party, assign this Agreement to any Affiliate or to any entity with
which it may merge or consolidate, or to which it may transfer all or
substantially of its assets to which this Agreement relates.
 
7.5           Headings and References.  All section headings contained in this
Agreement are for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.  Unless the context requires otherwise, all
references in this Agreement to any section, exhibit or appendix shall be deemed
and construed as references to a section of, or an exhibit or appendix to, this
Agreement, and any such exhibits and appendices are hereby incorporated in this
Agreement by such reference.
 
7.6           No Agency.  It is understood and agreed that each Party shall have
the status of an independent contractor under this Agreement and that nothing in
this Agreement shall be construed as authorization for either Party to act as
agent for the other.
 
7.7           No Strict Construction.  This Agreement has been prepared jointly
and shall not be strictly construed against either Party.
 
7.8           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any Party whose
signature appears thereon but all of which together shall constitute but one and
the same instrument.
 
7.9           Inconsistencies.  Notwithstanding the content of Cliniqa’s
purchase order, the terms of this Agreement shall take precedence over such
purchase order, and any conflicting or inconsistent terms of Cliniqa’s purchase
order shall be null and void.
 
7.10           Choice of Law and Jurisdiction.  This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware,
U.S.A.  Any litigation or other dispute resolution between the Parties relating
to this Agreement shall take place in the San Diego District of California.  The
Parties consent to the personal jurisdiction of and venue in the state and
federal courts within that District.
 
7.11           Complete Understanding.  This Agreement, including all exhibits,
constitutes the entire understanding between the Parties with respect to the
subject matter hereof, and supersedes and replaces all prior or contemporaneous
understandings or agreements, written or oral, regarding such subject
matter.  No amendment to .or modification of this Agreement shall be binding
unless in writing and signed by a duly authorized representative of both
Parties.
 
IN WITNESS WHEREOF, the Parties, through their authorized officers, have duly
executed this Agreement as of the date first written above.
 

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Hemagen Diagnostics, Inc.
 

 
By:    /s/William P.
Hales                                                                       
Name:  William P. Hales
Title:  Chairman, President and CEO
 
Cliniqa Corporation

By:    /s/Granger
Haugh                                                               
Name:  Granger Haugh
Title:  President
 

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