SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
MAY 11, 1998
------------
Date of Report (Date of earliest event reported)
ATLANTIC PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 0-27282 36-3898269
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1017 MAIN CAMPUS DRIVE, SUITE 3900, RALEIGH, NORTH CAROLINA 27606
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (919) 513-7020
--------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Item 5. Other Events.
On May 14, 1998, the Registrant's majority-owned subsidiary,
Optex Ophthalmologics, Inc. ("Optex"), entered into a worldwide licensing
agreement with Bausch & Lomb Surgical (comprised of Chiron Vision
Corporation and Storz Instrument Company), a division of Bausch & Lomb
Incorporated, to complete the development of Catarex-TM-, a cataract-removal
technology invented by Optex. Under the terms of the agreement, Bausch & Lomb
Surgical and Optex intend to jointly complete the final design and
development of the Catarex system. Bausch & Lomb Surgical will assume
responsibility for commercializing Catarex globally. Optex received up-front
payments and is to receive certain milestone payments from Bausch & Lomb
Surgical. In addition, Bausch & Lomb has committed to pay ongoing royalties
on sales of Catarex products.
On May 11, 1998, the Registrant adjourned its
regularly-scheduled annual meeting of shareholders, at which no shareholder
action was taken. The meeting is scheduled to re-convene on June 15, 1998.
Item 7. Exhibits.
A copy of the Development & License Agreement, dated May 14,
1998, by and between Optex Ophthalmologics, Inc. and Bausch & Lomb Surgical
(comprised of Chiron Vision Corporation and Storz Instrument Company), a
division of Bausch & Lomb Incorporated, is attached hereto as Exhibit 99.1
and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
(Registrant)
Date: May 22, 1998 By /s/ Shimshon Mizrachi
-----------------------
Name: Shimshon Mizrachi
Title: Chief Financial Officer
INDEX TO EXHIBITS
Exhibit No. Description Page
- ----------- ----------- ----
99.1 Development & License Agreement, dated May
14, 1998, by and between Optex
Ophthalmologics, Inc. and Bausch & Lomb
Surgical (comprised of Chiron Vision
Corporation and Storz Instrument Company), a
division of Bausch & Lomb Incorporated.
DEVELOPMENT & LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT is entered into this 14th day
of May 1998, (the "EFFECTIVE DATE") by and between Optex Ophthalmologics, Inc.
("OPTEX") and Bausch & Lomb Incorporated's surgical unit (comprised of Storz
Instrument Company and Chiron Vision Corporation) doing business as Bausch &
Lomb Surgical ("B&L" and together, the "PARTIES").
RECITALS
WHEREAS, Optex has developed a proprietary surgical instrument
system designed to improve the removal of human cataracts, which instrument is
generally referred to as "Catarex-TM-"; and
WHEREAS, B&L desires to acquire certain rights to make, use and sell
Catarex for use in human ophthalmic indications on a worldwide basis; and
WHEREAS, the Parties desire hereby to set forth the terms and
conditions under which Optex will license to B&L and B&L will complete the
commercial development, clinical testing, manufacturing and commercial sale of
Catarex on a worldwide basis.
NOW, THEREFORE, in consideration of the promises, mutual covenants
and agreements set forth in this Agreement, the Parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" of a specified Person means any other Person which
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person. For purposes of this definition "control"
of a Person means beneficial ownership of securities or other interests in such
Person constituting fifty percent (50%) (or, if lower, any applicable maximum
foreign ownership percentage allowed under the laws of any jurisdiction) or more
of the Voting Power in such Person. "Beneficial ownership" shall be determined
in compliance with Rule 13d-3 of the Securities Exchange Act of 1934.
1.2 "B&L FIELD" means all applications of Catarex Products for human
ophthalmic surgery.
1.3 "B&L INVENTIONS" means all inventions relating to Catarex Products
in the Field made or discovered solely by employees or agents of B&L in the
course of the conduct of the development of Catarex Products under this
Agreement.
1.4 "B&L PATENTS" means all United States patent applications and their
foreign
counterparts claiming any B&L Inventions and all patents issued pursuant to
any such patent applications, and all substitutions, divisionals, reissues,
renewals, continuations, continuations-in-part, or extensions thereof.
1.5 "CATAREX COMBINATION PRODUCT" means a Catarex Consumable offered for
commercial sale in combination with other consumables that are not used in the
operation of the Catarex Unit, the combination of which would be part of a
package or kit. Examples of other consumables are sponges, drapes, and
disposable knives.
1.6 "CATAREX CONSUMABLES" means those single use disposables or reusable
components used in the operation of the Catarex Units. Examples are: (1) the
Catarex handpiece and tip, (2) the device connecting the tip to the console,
(3) a drive unit, (4) the tubes and collection container for collecting fluids
generated by the Catarex probe, and (5) the capsulorhexis probe.
1.7 "CATAREX UNIT" means the Catarex rotary vortex device including the
Catarex Plugin, drive unit, a collection system, a control system and, and
related capsulorhexis probe, each as further described in Exhibit C attached
hereto, including any improvements thereof during the term of this Agreement.
1.8 "CATAREX/MILLENNIUM UNIT" means a Millennium-TM- system, initially
built with a Catarex Unit as a subunit assembly.
1.9 "CATAREX MODULE" means a Catarex Unit configured as a subunit
assembly for use in an installed Millennium-TM- system.
1.10 "CATAREX PLUGIN" means the component portion of a Catarex Unit which
is physically incorporated in the Catarex/Millennium Unit and which may include
the drive unit and control system for a Catarex Unit.
1.11 "CATAREX PRODUCTS" means any product whose manufacture, use,
importation, or sale would infringe Optex Patents, but including without
limitation, the Catarex Unit, Catarex Combination Product, Catarex Consumables,
Catarex Standalone Unit, Catarex/Millennium Unit, Catarex Modules, and Catarex
Plugin, and any improvements thereto.
1.12 "CATAREX STANDALONE UNIT" means a Catarex Unit configured as a
standalone product which may be used independent of a Millennium-TM- system.
1.13 "CLINICAL DEMONSTRATION" has the meaning given in Exhibit A.
1.14 "DEVELOPMENT" means both preclinical and clinical research on,
engineering development work on, manufacturing scale-up of, and obtaining
regulatory approvals for the sale of Catarex Products for any indication within
the B&L Field.
1.15 "FIELD" means all applications of Catarex Products for ophthalmic
surgery.
1.16 "FIRST COMMERCIAL USE" means the first commercial sale of a Catarex
Product in a Key Market.
1.17 "JOINT INVENTIONS" means all inventions relating to Catarex Products
in the Field which are made or jointly discovered by employees or agents of B&L
and Optex.
1.18 "JOINT REVIEW COMMITTEE" means the Committee established pursuant to
Section 4.2 to review the development and commercialization of the Catarex
Products.
1.19 "KEY MARKETS" means the United States, the United Kingdom, Germany,
France, Spain, Italy, Canada, Australia, and Japan.
1.20 "KNOW-HOW" means all technology, inventions, methods, formulas,
trade secrets, technical data, preclinical and clinical data, toxicological and
any other information or experience owned, controlled or in the possession of
Optex as of the Effective Date relating to or useful in connection with the
development, manufacture, use or sale of Catarex Products in the B&L Field, as
well as any improvements or modifications to such Know-how developed by Optex in
the B&L Field during the term of this Agreement.
1.21 "LIQUID POLYMER LENS" means a synthetic and injectable liquid or
gellular lens that substitutes for the traditional intraocular lens, provides
for accommodation, and is used to refill the functionally intact human lens
capsule following cataract removal using a Catarex Product.
1.22 "MILLENNIUM-TM- SYSTEM" means the modular cataract removal system
currently marketed under the Millennium-TM- trademark and any improvements or
new versions thereof or substitutions therefor.
1.23 "NET SALES" means the gross sales price invoiced by B&L and its
Affiliates or sublicensees to unaffiliated third parties for the sale or other
transfer for value of Catarex Products, less the following: (i) customary, usual
and reasonable trade or quantity discounts actually taken by the customer; (ii)
sales, use, value-added, or excise taxes, imposed and paid directly with respect
to the sale, and included within the invoice price; and (iii) actual refunds for
customer returns, and (iv) charges for freight and insurance billed to the
customer.
1.24 "OPTEX CRITICAL TECHNOLOGY" means the following portion of the
Catarex Products: the tip, as shown in Exhibit D(i), containing a rotating lens-
reducing head, as shown in Exhibit D(ii), which is used by insertion of such tip
into the lens capsule of a cataract-affected human eye such that the subsequent
rotation of such lens-reducing head, without concurrent ultrasonic vibration of
the tip, induces a flow pattern within the lens capsule, which (a) causes the
cataract-affected lens to be drawn into contact with such rotating lens-reducing
head without substantial axial manipulation of the probe and (b) results in
reduction of the cataract-affected lens to a flowable consistency.
1.25 "OPTEX FIELD" means all applications of Catarex Products for other
than human
3.
ophthalmic surgery, e.g. for commercial applications in animals.
1.26 "OPTEX PATENTS" means all United States patent applications and
their foreign counterparts owned or controlled by Optex and its Affiliates
claiming any Catarex Products including, without limitation, the patents and
patent applications listed in Exhibit B attached hereto, and all patents issued
pursuant to any such patent applications, and all substitutions, divisionals,
reissues, renewals, continuations, continuations-in-part, or extensions thereof.
Optex Patents shall include patents and patent applications based upon Optex
Inventions and Joint Inventions. The Parties shall reasonably agree to amend
Exhibit B from time to time to reflect material new patent properties.
1.27 "OPTEX INVENTIONS" means all inventions relating to Catarex Products
in the Field made or discovered solely by employees or agents of Optex in the
course of the conduct of the development of Catarex Products under this
Agreement.
1.28 "PERSON" means an individual, partnership, limited liability
company, business association, trust, corporation or other entity, whether
DEJURE or DEFACTO.
1.29 "STATUS REPORT" has the meaning given in Section 4.2.
1.30 "VOTING POWER" with respect to a specified Person means (i) if the
Person is a corporation, the right to vote in the election of directors of the
corporation in the ordinary course, (ii) if the Person is a trust, the right to
appoint trustees of the trust, (iii) if the Person is a limited liability
company, the right to name managing members of the limited liability company and
(iv) if the Person is any other type of entity, any concepts similar to the
foregoing relating to the power to control the business and affairs of such
Person.
2. GRANT
2.1 LICENSE GRANT. Subject to the terms and conditions of this
Agreement, Optex grants to B&L an exclusive, worldwide, license, with the right
to grant sublicenses, under Optex Patents and Know-how to make, have made, use,
import, offer for sale and sell the Catarex Products in the B&L Field. The
Parties acknowledge and agree that no rights outside the B&L Field are granted
herein to B&L by Optex, including, without limitation, any rights under Optex
Patents or Optex Know-how within the Optex Field.
2.2 SUBLICENSE RIGHTS. B&L shall have the right to sublicense the
license granted in Section 2.1 subject to the prior written approval of Optex,
which approval shall not be unreasonably withheld or delayed, so long as each
sublicensee agrees to be bound by all of the terms and conditions of this
Agreement, except that no consent of Optex shall be required for sublicenses to
Affiliates of B&L. Further, B&L shall have the right to appoint the
distributor(s) of its choice pursuant to its normal distribution channels,
without the approval of Optex provided such distributor agrees to be bound by
all of the terms and conditions of this Agreement which are relevant to the
activities of such distributor.
3. FEES AND ROYALTIES
4.
3.1 GENERALLY. As consideration for the exclusive license granted to
B&L under Section 2.1 hereof, B&L shall pay the following fees and royalties.
3.1.1 FEES. B&L shall pay Optex an aggregate of Nine Million
Five Hundred Thousand Dollars ($9,500,000) in fees payable as indicated in this
Section 3.1.1. All payments due to Optex under this Section 3.1.1 shall be paid
within ten (10) days following the occurrence of Milestones I, II, III, or IV,
respectively. Milestone III shall be creditable in full against royalties
payable under Sections 3.1.3 and 3.1.4 at a rate of thirty percent (30%) of the
royalties as due and payable thereunder.
3.1.1.1 On the Effective Date of this Agreement B&L shall pay
Optex a non-refundable license fee of $2,500,000 ("MILESTONE I").
3.1.1.2 Upon a determination by B&L that the Clinical
Demonstration has been successfully completed, but in no event later than First
Commercial Use), B&L shall pay Optex a fee of $4,000,000 ("MILESTONE II").
3.1.1.3 Upon the later of regulatory approval to market a
Catarex Product in the United States by the United States Food & Drug
Administration ("REGULATORY APPROVAL") or, upon a determination by B&L that the
Clinical Demonstration has been successfully completed (if B&L has committed to
complete such Clinical Demonstration, but in no event later than First
Commercial Use, B&L shall pay Optex a fee of $2,000,000 (MILESTONE III").
3.1.1.4 Upon receipt of regulatory approval to market a
Catarex Product in Japan by the Japanese Kosheisho ("JAPANESE REGULATORY
APPROVAL"), B&L shall pay Optex a fee of $1,000,000 ("MILESTONE IV").
3.1.2 MINIMUM CATAREX PRODUCT ROYALTIES. B&L shall pay Optex
minimum Catarex Product royalties of the following amounts in the three year
period immediately following First Commercial Use:
First twelve months $ 90,000
Second twelve months $350,000
Third twelve months $750,000
If, during the periods set forth above, actual Catarex Product
royalties to Optex are less than the required minimums amounts set forth above,
then B&L shall have sixty (60) days from the date of notice by Optex to pay the
shortfall to maintain exclusivity of the license. If B&L fails to make any such
payment within sixty (60) days of the notice by Optex then the license shall at
Optex's option immediately become non-exclusive to B&L.
3.1.3 CATAREX PRODUCT ROYALTIES. During the term of this
Agreement, B&L shall pay Optex an earned royalty of seven percent (7%) of Net
Sales of Catarex Products. For the purpose of royalty calculations, the Net
Sales price of the Catarex/Millennium Unit shall be deemed to be $25,000 for
markets where B&L has direct sales and $20,000 where B&L sells
5.
through unaffiliated distributors. For purposes of determining the Net Sales
of Catarex Consumables the Parties shall, on an annual basis in advance of
the year for which prices are to apply, agree in good faith on the percentage
of the Net Sales prices for Catarex Combination Products to be allocated to
the Catarex Consumables included therein, which percentage(s) shall reflect
an appropriate allocation of the Net Sales price of the Catarex Combination
Product based upon the costs of and profit margins for each product item
contained in a Catarex Combination Product.
3.1.4 ADDITIONAL LIQUID POLYMER LENS ROYALTY. B&L shall pay
Optex an additional royalty of three percent (3%) on the product of (A) Net
Sales of Catarex Consumables in Key Markets, times (B) the then fractional
market share of Liquid Polymer Lenses in the United States intraocular lens
market; which royalty shall be paid for any calendar quarter during which Liquid
Polymer Lenses achieve a 10% market share of the United States intraocular lens
market, as measured by published Deloitte & Touche (or similar third party
surveys if unavailable) surveys of such market; UNLESS during such calendar
quarter an alternative cataract removal system which enables the use of
accommodating liquid polymer lens implantation has achieved greater than 10%
market share of sales of cataract removal systems in the United States as
measured by published surveys of such market. Should a published survey not be
available to the Parties, market share shall be determined by other published
and mutually agreeable market share data, or in the absence of such market share
data then as reasonably determined by the Parties in good faith.
3.1.5 TIMING OF ROYALTY PAYMENTS. Within forty-five (45) days
after the end of each calendar quarter, B&L, B&L Affiliates and/or B&L
sublicensee(s) as the case may be, shall pay to Optex the royalty payment due
for such quarter in U.S. dollars.
3.1.6 ROYALTY PAYMENT CONVERSION. For any sales made in
currencies other than the U.S. dollar, such royalty shall be converted from the
currency in which the sale was made into U.S. dollars at the exchange rate
published in the WALL STREET JOURNAL for the last business day of the calendar
quarter during which such sale occurs.
3.1.7 QUARTERLY ACCOUNTING. Together with the delivery of each
such royalty payment, B&L, B&L Affiliates and/or B&L sublicensees, as the case
may be, shall deliver to Optex a written accounting showing its computation of
royalties due under this Agreement for such quarter. Such accounting shall set
forth gross sales, Net Sales, an accounting of the calculation of Net Sales, the
exchange rate applied, if any, and the total royalties due for the quarter in
question.
3.1.8 LATE PAYMENTS. Any amount not paid when due under this
Agreement shall bear interest at one and one-half percent (1.5%) per month,
compounded monthly or, if less, the highest amount permissible under applicable
law; PROVIDED, HOWEVER, that no such interest shall be payable with respect to
any amounts subject to a BONA FIDE dispute between the Parties.
3.1.9 RECORDS. B&L shall keep full and accurate books and
records reflecting the royalties on Net Sales and the data used in arriving at
Net Sales and the amount of royalties
6.
payable to Optex hereunder for no less than one year after the end of each
such quarter. B&L shall permit Optex, once within any 12 month period, at
Optex's expense, to have such books and records examined by independent
certified public accountants retained by Optex and reasonably acceptable to
B&L, during regular business hours upon reasonable advance notice, but not
later than one year following the rendering of any such reports, accounting
and payments. Such independent accountants shall keep confidential any
information obtained during such examination. If such examination discloses
a discrepancy of 5% or more in any amount due Optex under this Agreement, B&L
shall reimburse Optex for the out-of-pocket cost of such examination,
including without limitation any reasonable professional fees and expenses
incurred by Optex.
4. DEVELOPMENT
4.1 COLLABORATIVE DEVELOPMENT. The Parties acknowledge that all
development of the Catarex Products, for all indications within the B&L Field
shall be conducted in collaboration as provided in this Article 4. The role of
each Party and the funding obligations of each Party with respect to such
collaborative development shall be as set forth in this Article 4.
4.2 JOINT REVIEW COMMITTEE. Promptly following the execution of this
Agreement, the Parties shall form a Joint Review Committee consisting of two (2)
representatives from each Party, to update each other upon the respective
development efforts for Catarex Products. While the Catarex Products are in
development, the JRC will meet at least on a quarterly basis, alternating
between Optex's offices and B&L's offices and will otherwise communicate
regularly by all reasonable means. Thereafter, the JRC will meet at such times
and places as may be agreed to by the Parties. A Party may change any of its
appointments to the JRC at any time upon giving written notice to the other
Party. At least one (1) week prior to any regularly scheduled meeting of the
JRC, each Party shall provide the other Party with a report summarizing its
efforts under this Agreement (the "STATUS REPORT").
4.3 RESPONSIBILITIES OF THE JRC. The JRC will be responsible for
reviewing and commenting upon all aspects of the collaborative development of
the Catarex Products in the Field. In particular, the JRC will monitor the
development of Catarex Products, including the regulatory approval process.
4.4 RESPONSIBILITIES OF OPTEX; DEVELOPMENT PLAN AND BUDGET FOR OPTEX
DEVELOPMENT WORK. Optex shall be responsible for the development of the tip of
the Catarex Unit, and the portion of the Catarex Unit between the tip and
Catarex Plugin. The development work to be conducted by Optex shall be governed
by a specific and comprehensive development plan and budget (the "DEVELOPMENT
PLAN AND BUDGET"), proposed by Optex and approved by B&L and consistent, to the
maximum extent possible, with recommendations of the JRC. No development work
by Optex under this Agreement shall be conducted other than pursuant to the
Development Plan and Budget. The Development Plan and Budget shall outline
fully the proposed work to be conducted by Optex and time-line for completion of
the Optex duties, which are expected to include process development, manufacture
of prototypes, quality assurance, manufacturing, and other key elements needed
to obtain regulatory approval. The Development Plan and Budget shall be divided
by Optex into up to ten discrete components. If at any time, Optex foresees
that
7.
completion of its development responsibilities shall not be possible without
one or more of such discrete budgetary components exceeding the budgeted
amount therefor by more than ten percent (10%), Optex shall immediately
notify B&L. Optex shall not exceed the budgeted amount of any such discrete
component of the Development Plan and Budget without prior approval of B&L,
which shall not be unreasonably withheld. To the extent that additional
expenditures are reasonably required, B&L shall fund such additional
expenditures; provided, however, that B&L shall have no funding obligations
in excess of $2,500,000.
4.5 RESPONSIBILITIES OF B&L. B&L shall be responsible for, and shall
use all commercially reasonable efforts to do the following as expeditiously as
possible and in accordance with the time lines set forth in Section 8.1.3:
4.5.1 develop all elements of Catarex Products other than
those to be developed by Optex pursuant to Section 4.4;
4.5.2 obtain regulatory approval of Catarex Products in the United
States and outside the United States; and
4.5.3 manufacture and market the Catarex Products.
4.6 ALLOCATION OF DEVELOPMENT EXPENSES.
4.6.1 B&L will bear one hundred percent (100%) of all
development expenses for B&L's Responsibilities in Section 4.5.
4.6.2 Optex shall initially incur the development expenses as
defined in the Development Plan and Budget for Optex's Responsibilities in
Section 4.4; PROVIDED, HOWEVER, that B&L shall, on a quarterly basis, reimburse
all such development expenses incurred by Optex consistent with the Development
Plan and Budget, including, without limitation, labor, out-of-pocket expenses,
professional services, materials, and capital expenses. Within thirty (30) days
following the end of each calendar quarter, Optex will provide B&L with a report
of its development expenses actually incurred during such quarter. Within
thirty (30) days following the commencement of the calendar quarter, B&L shall
pay to Optex the amount of reimbursement required in accordance with the
approved Development Plan and Budget. Any funds received by Optex from NEI
Phase II SBIR grant No. 2R44EY11673-02 will be credited against B&L's
reimbursement obligations under this Section 4.6.2 to the extent permissible
under the terms of such grant.
4.7 MAXIMUM DEVELOPMENT COSTS. If the aggregate amount of expense
incurred by Optex pursuant to the Development Plan and Budget (and permitted
increases thereto) shall exceed $2,500,000, the Parties shall in good faith
discuss whether any modifications to the terms of payment of Milestones II
and/or III would be appropriate.
5. INTELLECTUAL PROPERTY
5.1 JOINT INVENTIONS
8.
5.1.1 Any Joint Invention shall be owned by and assigned to
Optex. Optex hereby grants to B&L a permanent, exclusive license to practice
any Joint Invention owned by Optex within the B&L Field on a royalty-free basis.
5.2 PATENT PROSECUTION AND MAINTENANCE.
5.2.1 Optex has the sole right to continue prosecution and
maintenance of the Optex Patents. Optex shall provide B&L with copies of all
patent applications, prosecution documents, correspondence with government
entities, and other information that B&L may request with respect to the Optex
Patents and Optex shall keep B&L informed of patent prosecution and maintenance
matters. B&L shall reimburse Optex for all documented expenses incurred after
the Effective Date in connection with the filing, prosecution, and maintenance
of the Optex Patents upon receipt of invoices for such expenses; PROVIDED,
HOWEVER, that B&L shall not be obligated to reimburse Optex for any appellate
proceedings commenced and pursued outside the United States Patent and Trademark
Office or the equivalent administrative body in the other Key Markets unless
Optex is successful in such proceedings. If Optex, prior or subsequent to
filing any Optex Patents, elects not to file, prosecute, or maintain the Optex
Patents or certain claims encompassed by such Optex Patents, Optex shall give
B&L notice thereof within a reasonable period prior to allowing such Optex
Patents or certain claims encompassed by such Optex Patents to lapse or become
abandoned or unenforceable, and B&L shall thereafter have the right and option,
at its sole expense, to prepare, file, prosecute and maintain such Optex Patents
or certain claims encompassed by such Optex Patents in countries of its choice
throughout the world. Such option shall be exercisable by B&L only within an
option period of sixty (60) days of receipt of such notice.
5.2.2 Optex shall have the right, at its option, to prepare,
file and prosecute any patent applications with respect to any Optex Inventions
owned solely by Optex. In connection therewith, B&L agrees to cooperate with
Optex, at Optex's expense, in the preparation and prosecution of all such patent
applications and in the maintenance of any patents issued therefrom (together
"Optex Invention Patents"). If Optex, prior or subsequent to filing any
Invention Patents, elects not to file, prosecute, or maintain such Optex
Invention Patents or certain claims encompassed by such Optex Invention Patents,
Optex shall give B&L notice thereof within a reasonable period prior to allowing
such Optex Invention Patents or certain claims encompassed by such Optex
Invention Patents to lapse or become abandoned or unenforceable, and B&L shall
thereafter have the right, at its sole expense, to prepare, file, prosecute and
maintain such Optex Invention Patents or certain claims encompassed by such
Optex Invention Patents in countries of its choice throughout the world. Such
option shall be exercisable by B&L only within an option period of sixty (60)
days of receipt of such notice.
5.2.3 The Parties shall mutually determine which Party shall
file, prosecute and maintain patent applications with respect to inventions
jointly owned by Optex and B&L (the "Filing Party"). B&L shall pay for all out-
of-pocket costs of such patent filings and applications. Each Party shall have
the right to review and comment on any joint patent application prior to its
filing, and to consult with the Filing Party with respect to prosecution of such
application. If the Filing Party, prior or subsequent to filing any such
applications elects not to file, prosecute, or
9.
maintain such applications or certain claims encompassed by such
applications, the Filing Party shall give the other Party notice thereof
within a reasonable period prior to allowing such patent applications or
certain claims encompassed by such applications to lapse or become abandoned
or unenforceable, and the other Party shall thereafter have the right, at its
sole expense, to prepare, file, prosecute and maintain patents or certain
claims encompassed by such applications in countries of its choice throughout
the world. Such option shall be exercisable by the other Party only within
an option period of sixty (60) days of receipt of such notice.
5.2.4 B&L shall have the right, at its option, to prepare,
file, prosecute and maintain any B&L Patents. With respect to the B&L Patents,
and in connection therewith, Optex agrees to cooperate with B&L in the
preparation and prosecution of all such patent applications and in the
maintenance of any patents issued. B&L shall provide Optex with copies of all
patent applications, prosecution documents, correspondence with government
entities, and other information that Optex may request with respect to the B&L
Patents. B&L shall provide Optex with a quarterly report of the status of such
patents as part of the Status Report. If B&L, prior or subsequent to filing B&L
Patents, elects not to file, prosecute or maintain such B&L Patents or certain
claims encompassed by such B&L Patents, B&L shall give Optex notice thereof
within a reasonable period prior to allowing such B&L Patents or certain claims
encompassed by such Patents to lapse or become abandoned or unenforceable, and
Optex shall thereafter have the right, at its sole expense, to prepare, file
prosecute and maintain such B&L Patents or certain claims encompassed by such
B&L Patents in countries of its choice throughout the world. Such option shall
be exercisable by Optex only within an option period of sixty (60) days of
receipt of such notice.
5.2.5 B&L shall grant to Optex an option to a worldwide,
royalty-bearing, nonexclusive license (including the right to grant
sublicenses), under any B&L Inventions or B&L Patents to develop, have
developed, make, have made, use, distribute for sale, offer for sale, sell, and
import any product, and to practice any process, for all uses in the Optex
Field. The other customary terms of such license shall be negotiated in good
faith between the Parties. In addition, B&L shall provide Optex with reasonable
access to such other information and B&L personnel as may be required in order
for Optex to reasonable utilize the information licensed to it under this
section.
5.3 INFRINGEMENT OF THIRD PARTY PATENTS. If a third party asserts that
a patent or other proprietary right owned by it is infringed by the manufacture,
use, importation, offer for sale or sale of a Catarex Product, the Party against
whom such a claim is asserted shall immediately provide the other Party notice
of such claim and the related facts in reasonable detail. Optex shall have the
first right, but not the obligation, to defend such action, and B&L shall
cooperate in connection therewith, and shall have the right to be represented
separately by counsel of its own choice, at its own expense. In the event a
claim is asserted against B&L and Optex does not assume such defense, B&L shall
have the right to defend such action. Optex shall cooperate in connection
therewith, and shall have the right to be represented separately by counsel of
its own choice, at its own expense. The entity (whether Optex or B&L) that
controls the defense of a given claim with respect to the Catarex Product in the
Field shall also have the right to control settlement of such claim; PROVIDED,
HOWEVER, that no settlement shall be entered into without the consent of the
other Party if such settlement would adversely affect the interests of such
other
10.
Party.
5.4 THIRD PARTY INFRINGEMENT/MISAPPROPRIATION
5.4.1 If either Party becomes aware of any infringement of the
Optex Patents or misappropriation of the Optex Know-How or the B&L Patents or
misappropriation of the B&L Know-How by a third party in the Field, such Party
shall promptly give notice thereof to the other Party and shall provide the
other Party with any evidence or other information in its possession relating to
such infringement or misappropriation. The Parties shall thereupon consult
together as to the action to be taken.
5.4.2 Optex shall have the first right, but not the
obligation, to commence legal proceedings against any infringer of any Optex
Patent or misappropriation of Optex Know-How in the Field and in this case
(subject to the provisions of the next two sentences) any damages recovered
shall belong to Optex. In the event Optex commences such legal proceedings, B&L
may join in such proceedings within sixty (60) days after its receipt of notice
from Optex of the commencement of such proceedings if B&L agrees to pay an
amount equal to fifty percent (50%) of the cost of such proceedings. In such
event, any damages, settlement fees or other consideration for past infringement
in the Field received as a result of such proceedings shall be shared by Optex
and B&L equally. If Optex is not willing to undertake legal proceedings against
the infringement or misappropriation in the B&L Field, B&L may at its own cost
and expense in its own name commence such legal proceedings and in such case any
damages recovered shall first be used to repay B&L its out-of-pocket costs
incurred in bringing such action. Any amounts remaining shall be shared in the
same proportion as if the sales represented by such amounts were Net Sales
accruing during the year in which such recovery was obtained, as set forth in
Section [ ]. Further, in such event, and subject to Optex's right of approval,
B&L shall be free to settle such disputes, and Optex shall cooperate with B&L as
reasonably requested by B&L.
6. SUBLICENSE
B&L shall have the right, at its discretion, to sublicense the
Catarex technology; PROVIDED, that the sales by any such sub-licensee shall
constitute Net Sales hereunder for which royalties are payable.
7. PRE-MARKET APPROVAL
If the FDA requires a pre-market approval ("PMA") of the Catarex Products,
then the Parties agree that they shall meet in good faith to discuss whether any
modifications to Milestones II and/or III are appropriate in order to reflect
the incremental regulatory expenses associated with obtaining such pre-market
approval.
8. TERM AND TERMINATION
8.1 TERMINATION. This Agreement shall remain in full force and effect
from the Effective Date until the expiration of the last to expire United States
Optex Patent on Exhibit B (upon such expiration, B&L shall be granted a fully
paid nonexclusive license to Know-how and
11.
other Optex Patents), unless earlier terminated as follows:
8.1.1 By mutual consent of Optex and B&L;
8.1.2 By B&L at any time upon six (6) months written notice;
8.1.3 By Optex, if (i) Optex becomes insecure with respect to
B&L's diligent pursuit and timely achievement of the tasks set forth in the
timetable below, (ii) Optex requests reasonable assurances from B&L as to such
matters, (iii) B&L fails to provide such reasonable assurances and Optex
notifies B&L of such failure, and (iv) B&L shall not have cured the situation
within thirty (30) days of the notification provided for under phrase (iii) or
commenced a cure and diligently pursued such cure if it is reasonably likely to
eliminate Optex's insecurity;
MONTHS BEYOND COMPLETION OF HANDPIECE AND PROBE DESIGN
510(K) ONLY 510(K) WITH CLINICALS
----------- ---------------------
Module Design 1 1
Software Design 1 1
Sterility Validation 4 1/2 4 1/2
Pilot Production 8 1/2 8 1/2
510(k) Approval 2 --
IDE Approval -- 11 1/2
Clinical Demonstration 14 1/2 19 1/2
Clinical Approval -- 19 1/2
Design Transfer/Order Parts 18 1/2 23 1/2
Production 18 1/2 23 1/2
Production Launch 18 1/2 23 1/2
8.1.4 By either Party, if B&L has declared the Clinical
Demonstration to be a "complete failure"; and
8.1.5 By B&L, if B&L has declared the Clinical Demonstration to be
a "partial success"; PROVIDED, HOWEVER that B&L shall have the option upon such
declaration to request good faith negotiations toward an appropriate amendment
to this Agreement in which case both Parties agree to use good faith efforts to
negotiate a reasonable amendment to this Agreement; PROVIDED, FURTHER, HOWEVER,
that if, after six (6) months from the date of such request for negotiations,
the Parties have been unable to reach agreement on the terms of an amendment to
this Agreement, either Party may terminate this Agreement.
8.2 EFFECT OF TERMINATION. Upon early termination, all data generated,
all FDA and other regulatory approvals, and all developmental improvements that
are specific to the Catarex Unit but are not specific to the Millennium-TM-
system will revert to Optex. To the extent necessary to allow Optex and Optex
licensees to commercialize Catarex Products, B&L shall
12.
grant to Optex a worldwide sub-licensable license to B&L Patents, B&L
Inventions and Know-how. Such license shall contain a royalty provision which
reasonably compensates B&L for its expenses in developing the technologies
granted back to Optex, as well as taking into consideration the royalties
paid or to have been paid by B&L to Optex for the technology licensed by
Optex to B&L.Sections 9.1 (Confidentiality), 12.2 (General Indemnification)
and 12.3 (Patent Indemnification) of this Agreement shall survive any
termination hereof.
9. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
9.1 CONFIDENTIALITY. Each Party shall keep confidential and shall not
publish or otherwise disclose or use for any purpose, other than as provided for
in this Agreement, any Know-how or business information provided or made
available by the other Party or its Affiliates hereunder (collectively
"CONFIDENTIAL INFORMATION"), and neither Party shall, without the prior written
consent of the other Party or its Affiliates, as the case may be, use (except as
expressly permitted by this Agreement or for the purposes of this Agreement), or
disclose to any third Party, any Confidential Information; PROVIDED, HOWEVER,
that the foregoing shall not apply to information which the party receiving such
information can establish by written documentation to (i) have been publicly
known at the time of disclosure by the other party or its Affiliates, as the
case may be, (ii) have become publicly known, without fault on its part,
subsequent to such disclosure, (iii) have been otherwise known by it from a
source (other than the other party or its agents or Affiliates), lawfully having
possession of such information, or (v) have been developed by it or its
Affiliates independently of the disclosure by the other party or its Affiliates.
The foregoing shall not preclude the disclosure of Confidential Information
by either Party:
(a) to its legal representatives, Affiliates, consultants, outside
contractors and (if it has the right to grant the license or sublicense) its
licensees and sublicensees, under like confidentiality obligations on the part
of the recipients, or
(b) to the extent required by law or regulation, provided that, to
the extent reasonably possible, it shall give prompt written notice of the
proposed disclosure to the other party or its Affiliates, as the case may be, so
as to allow the other party or its Affiliates, as the case may be, an
opportunity to object to such requirement and, if applicable, assure that
confidential treatment will be accorded to such information, or
(c) to the extent that such information is reasonably required to
be disclosed for the purpose of securing necessary governmental authorization
for the clinical testing or marketing of products or for the purpose of
conducting clinical testing or marketing of products, or of prosecuting or
defending litigation.
(d) to the extent that Optex licenses Know-how to third parties
outside the Field and disclosure of such Confidential Information is reasonably
required in connection therewith; PROVIDED, that such third parties are bound by
written confidentiality provisions at least as restrictive as this one.
13.
Additionally, the foregoing shall not preclude the disclosure of
Confidential Information by Optex to third parties for use outside the Field
provided such third parties are bound by written confidentiality obligations at
lease as restrictive as those contained herein.
10. PUBLICITY
10.1 INITIAL PRESS RELEASE. The Parties shall issue a mutually
acceptable press release upon execution of this agreement.
10.2 FUTURE PUBLICITY. Each Party shall have an opportunity to review
and comment on any future press releases of the other Party relating to the
subject matter of this Agreement.
11. TRADEMARKS AND TRADE NAMES
11.1 Optex shall assign to B&L the Catarex name and any associated
trademark rights in connection with the Catarex Products. B&L agrees to fully
protect such property, including by way of prosecution and maintenance of any
trademark rights. Such property shall be assigned back to Optex upon
termination of this Agreement.
12. WARRANTIES, REPRESENTATIONS, AND INDEMNIFICATION
12.1 Optex represents and warrants that:
12.1.1 it is the owner of the Optex Patents and Know-How and has the
right to license the Optex Patents and Know-How free of any lien or encumbrance;
12.1.2 it has not assigned or conveyed any interest in the Patent
Rights or Know-How which may be inconsistent with the rights granted hereunder;
12.1.3 it has no actual knowledge that the manufacture, use, sale,
offering for sale or importation of Optex Critical Technology as practiced in
Catarex Products will infringe any valid and enforceable United States or
foreign patent.
12.1.4 it is not aware that any third party is infringing the Optex
Patents; and
12.1.5 it has prosecuted all patent applications within the Optex
Patents in good faith and has no reason to believe that any Optex Patents would
be invalid or would be held to be unenforceable by a court of competent
jurisdiction.
12.2 GENERAL INDEMNIFICATION
12.2.1 OPTEX INDEMNITY. Optex shall indemnify and hold harmless B&L
and each of its Affiliates, officers, directors, employees and agents from and
against any liability, loss, damage, cost and expense, including reasonable
attorneys' fees, and expenses ("INDEMNIFIED LOSSES") resulting from or arising
out of (i) any material breach of any warranty or material non-performance of
any obligation or covenant hereunder, and (ii) any actual or alleged defect in
any
14.
products developed by Optex under Section 4.4 (excluding any defect arising
out of B&L's failure to perform its responsibilities under Section 4.5).
12.2.2 B&L INDEMNITY. B&L shall indemnify and hold harmless Optex
and each of its Affiliates, officers, directors, employees and agents from and
against any Indemnified Losses resulting from or arising out of (i) a material
breach of any warranty or material non-performance by B&L of any covenant or
obligation hereunder; (ii) any actual or alleged defect in any products
developed by B&L under Section 4.5 hereof (excluding any defect arising out of
Optex's failure to perform its responsibilities under Section 4.4) and (iii)
B&L's acts relating to the promotion, marketing, labelling and distribution of
Catarex Products.
12.2.3 INDEMNIFICATION PROCEDURES. Upon the occurrence of an
event which requires indemnification under this Agreement (an
"INDEMNIFICATION EVENT"), the indemnified party shall give prompt written
notice to the indemnifying party providing reasonable details of the nature
of the event and the basis of the indemnity claim. The indemnifying party
shall then have the right, at its expense and with counsel of its choice, to
defend, contest or otherwise protect against any such action. The
indemnified party shall also have the right, but not the obligation, to
participate at its own expense in the defense thereof with counsel of its
choice. The indemnified party shall cooperate to the extent reasonably
necessary to assist the indemnifying party in defending, contesting or
otherwise protesting against any such action provided that the reasonable
out-of-pocket cost in doing so shall be paid by the indemnifying party. If
the indemnified party fails to promptly notify the indemnifying party of the
occurrence of an Indemnification Event and such failure has a material
adverse effect on the indemnifying party, the indemnified party shall not be
entitled to indemnification with respect to such Indemnification Event. If
the indemnifying party fails within thirty (30) days after receipt of such
notice (a) to notify the indemnified party of its intent to defend, or (b) to
defend, contest or otherwise protect against such suit, action,
investigation, claim or proceeding, or fails to diligently continue to
provide such defense after undertaking to do so, the indemnified party shall
have the right, upon ten (10) days' prior written notice to the indemnifying
party, to defend, settle and satisfy any such suit, action, claim,
investigation or proceeding and recover the reasonable costs of the same from
the indemnifying party.
12.3 PATENT INDEMNITY
12.3.1 If B&L must pay a royalty on Net Sales to one or more third
parties as a result of infringement of such third party's intellectual property
rights by Optex Critical Technology, then fifty percent (50%) of such royalty or
royalties shall be deducted by B&L from royalties payable pursuant to Section
3.1.3 of this Agreement for a period of five (5) years from the first such
payment by B&L to such third party, provided, however, that in no event shall
the royalty payable to Optex under this agreement be reduced to an amount less
than a five percent (5%) royalty on Net Sales.
12.3.2 If a permanent injunction against the sale of Catarex
Products in the United States is issued in the United States for the
infringement of third party intellectual property rights by Optex Critical
Technology, then Optex shall return to B&L any amounts paid to Optex as
Milestone II and Milestone III payments; PROVIDED, HOWEVER, that any such
repayment
15.
obligations of Optex shall be reduced by an amount equal to twenty-five
percent (25%) of Net Sales made prior to the issuance of such permanent
injunction. In the event of an award of damages for such infringement by
Optex Critical Technology, then fifty percent (50%) of such award of damages
shall be payable to B&L by Optex for a period of five (5) years from the
First Commercial Use, except that any such amount payable by Optex shall not
exceed the sum of (i) royalties actually received by Optex from B&L pursuant
to Section 3.1.3, and (ii) fifty percent (50%) of the difference between
Milestones received by Optex and Milestones returned by Optex to B&L under
this Agreement.
13. GOVERNING LAW, DISPUTE RESOLUTION
13.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with, the laws of the State of California without giving effect to
principles of conflict of laws.
13.2 DISPUTE RESOLUTION. Any dispute between the Parties will be
referred to the Chief Executive Officers of B&L and Optex (or their designees)
for good faith resolution, for a period of ninety (90) days. If such dispute is
not resolved by the end of such ninety (90) day period, the Parties shall be
free to pursue any legal or equitable remedy available to them.
14. MISCELLANEOUS
14.1 ASSIGNMENT. This Agreement and all rights and obligations hereunder
are personal to the parties, and may not be assigned except to an affiliate of a
Party without the express prior written consent of the other Party. Any
assignment or attempt at same in the absence of such prior written consent shall
be void and without effect.
14.2 FORCE MAJEURE. Neither Party shall be responsible or liable to the
other hereunder for failure or delay in performance of this Agreement due to any
war, fire, accident or other casualty, or any labor disturbance or act of God or
the public enemy, or any other contingency beyond such Party's reasonable
control. In addition, in the event of the applicability of this Section, the
Party affected by such force majeure shall use reasonable efforts, consistent
with good business judgment, to eliminate, cure and overcome any of such causes
and resume performance of its obligations.
14.3 SEPARABILITY. If any portion of this Agreement is determined to be
illegal or otherwise unenforceable by agreement of the Parties, by an
arbitrator, by a court of competent jurisdiction or by an administrative agency
of competent jurisdiction, such section, to the extent permitted by law, shall
be treated as deleted from this Agreement and the remaining portions of this
Agreement shall continue to be in full force and effect according to the terms
hereof.
14.4 ENTIRE AGREEMENT. This Agreement contains the entire and only
agreement between the Parties with respect to the manufacture and sale of the
Product and no oral statements or representations or written matter not
contained in this Agreement shall have any force or effect. This Agreement
shall not be amended or modified in any way except by a writing executed by
authorized representatives of both Parties.
16.
14.5 MODIFICATIONS. Any modification or addition to this Agreement shall
be valid only if it is confirmed in writing by the duly authorized officers of
both Parties.
14.6 NOTICES. Any notice, request, instruction or other communication
required or permitted to be given under this Agreement shall be in writing and
shall be given by sending such notice properly addressed to the other Party's
address shown below (or any other address as either Party may indicate by notice
in writing to the other from time to time) (i) by hand or by prepaid registered
or certified mail, return receipt requested, in either of such cases which
notice shall be deemed delivered upon receipt, (ii) via telecopy or telegram, in
either of such cases which notice shall be deemed delivered upon receipt, or
(iii) via nationally recognized overnight courier, in which case such notice
shall be deemed delivered upon receipt. All such notices shall be deemed given
when received.
If to Optex: Atlantic Pharmaceuticals, Inc.
1017 Main Campus
Suite 3900
Raleigh, North Carolina 27606
Attention: Chief Executive Officer
with a copy to: Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, California 94303
Attention: J. Stephan Dolezalek, Esq.
If to B&L: Bausch & Lomb Surgical
555 West Arrow Street
Claremont, California 91711
Attention: President
with a copy to: Bausch & Lomb Surgical
555 West Arrow Street
Claremont, California 91711
Attention: General Counsel
14.7 HEADINGS. The headings and captions used in this Agreement are for
the convenience of reference only and shall not be construed as part of this
Agreement or as a limitation on the scope of any provisions of this Agreement.
14.8 WAIVER. The failure of either Party to terminate or seek redress
for a breach of, or to insist upon strict performance of any term, covenant,
condition or provision contained in this Agreement shall not prevent a similar
subsequent act from constituting a breach of this Agreement.
14.9 NO AGENCY. Nothing herein shall be deemed to constitute either
Party as the
17.
agent or representative of the other Party, or both Parties as joint
venturers or partners for any purpose. Except as set forth herein, neither
Party shall be responsible for the acts or omissions of the other Party, and
neither Party will have authority to act on behalf of, represent or obligate
the other Party in any way without prior written authority from the other
Party.
OPTEX
By: /s/ J.D. Lindjord
------------------------------------
J.D. Lindjord
President and Chief Executive Officer
BAUSCH & LOMB SURGICAL
By: /s/ Robert H. Blankenmeyer
------------------------------------
Robert H. Blankenmeyer
Chief Operating Officer
18.
