Product Development Agreement Dated July 28, 1997

PRODUCT DEVELOPMENT AGREEMENT


AGREEMENT made July 28, 1997 between CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation ("Crystal") and SRC, INC., a California corporation ("SRC") and W. BRIAN GREGER ("Greger"). SRC and Greger are referred to herein as "Developer."


WHEREAS, Crystal is in the business of developing and marketing products to detect various pathogens in food products for use by the food manufacturing industry; and


WHEREAS, Developer has submitted to Crystal a proposal dated March 22, 1997 (the "Proposal"), a copy of which is attached hereto as Exhibit A and incorporated herein by reference, for the development and pre-production manufacturing of certain pathogen detection equipment (the "Equipment"); and


WHEREAS, Crystal wishes to engage Developer to develop the Equipment (the "Project"), and Developer wishes to develop the Equipment for Crystal.


NOW, THEREFORE, the parties hereto, in consideration of the mutual promises contained herein, agree as follows:


1. The Project and Delivery. Crystal hereby engages Developer as an independent contractor to develop specifications for the Equipment described in the Proposal and to deliver to Crystal 10 complete prototypes, a plastic injection molded tool and 2,000 cartridges, and manufacturing transferrable documentation, all as more fully described in the Proposal and in accordance with the Final specifications. Developer shall also deliver all tools or fixtures for assembly, Source Codes, and Validation of source.


2. Specifications. Developer shall commence work upon execution of this Agreement and shall within 45 days submit draft specifications for the Equipment for review and revision by Crystal. Within 30 days after submission of the draft, Developer shall submit final specifications reflecting Crystal's comments. Upon approval by Crystal of the final specifications, Developer shall proceed with the balance of the Project as described in the Proposal. 2
3. Term. The first prototype shall be delivered to Crystal within seven months of the date hereof, and the balance of the Equipment shall be delivered within eight months of the date hereof. Crystal may terminate the Agreement at any time on 30 days' prior written notice, and Developer shall be paid the portion of their fee that has accrued through the date of termination.


4. Reports. Developer shall submit to Crystal a detailed monthly report of its progress, which report shall be due prior to each monthly fee payment.


5. Fees. Crystal shall pay Developer an initial deposit of $282,520.38 upon execution of this Agreement, receipt of which is hereby acknowledged by Developer, which deposit shall cover fees through August 20, 1997. Thereafter, fees will be due in advance on the first day of each month, commencing August 21, 1997, in six monthly payments in the amount of $105,945.14. A seventh and final payment of $211,890.28 shall be due upon completion of the Project and delivery in accordance with paragraph 1 hereof.


6. Expenses. Developer shall pay all expenses required to complete the Project, except as follows:


a. Crystal shall reimburse Developer for reasonable travel expenses incurred in connection with ...