U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the transition period from __________ to ____________.
Commission file number 0-27282
ATLANTIC TECHNOLOGY VENTURES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-3898269
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Fifth Avenue, Suite 5507, New York, New York 10118
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(Address of principal executive offices)
(212) 267-2503
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(Issuer's telephone number)
150 Broadway, Suite 1110, New York, New York 10038
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 |_|
Number of shares of common stock outstanding as of November 14, 2001: 7,201,480
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
INDEX
Page
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (unaudited)
as of September 30, 2001 and December 31, 2000 3
Consolidated Statements of Operations (unaudited) for
the three and nine months ended September 30, 2001
and 2000, and the period from July 13, 1993
(inception) to September 30, 2001 4
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended September 30, 2001 and 2000,
and the period from July 13, 1993 (inception) to
September 30, 2001 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II-- OTHER INFORMATION
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 23
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
Assets 2001 2000
- ---------------------------------------------------------------------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 440,558 2,663,583
Accounts receivable -- 192,997
Prepaid expenses 27,194 22,599
------------ ------------
Total current assets 467,752 2,879,179
Property and equipment, net 116,364 227,088
Investment in affiliate 8,351 67,344
Other assets 22,838 2,901
------------ ------------
Total assets $ 615,305 3,176,512
============ ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 748,359 785,838
Deferred revenue -- 1,294,615
------------ ------------
Total current liabilities $ 748,359 2,080,453
Redeemable Series B convertible preferred stock
Authorized 1,647,312 shares; 0 and 206,898 shares issued and
outstanding at September 30, 2001 and December 31, 2000 respectively -- 600,000
Stockholders' equity (deficit):
Preferred stock, $.001 par value. Authorized 10,000,000
shares; 1,375,000 shares designated as Series A
convertible preferred stock -- --
Series A convertible preferred stock, $.001 par value
Authorized 1,375,000 shares; 350,606 and 359,711 shares issued and
outstanding at September 30, 2001 and December 31, 2000, respectively
(liquidation preference aggregating $4,557,878 and $4,676,243 at
September 30, 2001
and December 31, 2000, respectively) 351 360
Convertible preferred stock warrants, 112,896
issued and outstanding at September 30, 2001 and
December 31, 2000 520,263 520,263
Common stock, $.001 par value. Authorized 50,000,000
shares; 7,201,480 and 6,122,135 shares issued and outstanding
at September 30, 2001 and December 31, 2000, respectively 7,201 6,122
Common stock subscribed. 182 shares at September 30, 2001
and December, 31, 2000 -- --
Additional paid-in capital 25,502,927 24,796,190
Deficit accumulated during development stage (26,163,254) (24,826,334)
------------ ------------
(132,512) 496,601
Less common stock subscriptions receivable (218) (218)
Less treasury stock, at cost (324) (324)
------------ ------------
Total stockholders' equity (deficit) (133,054) 496,059
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 615,305 3,176,512
============ ============
See accompanying notes to unaudited consolidated financial statements.
3
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Cumulative
period from
July 13, 1993
Three months ended Nine months ended (inception) to
September 30, September 30, September 30,
-------------------------- -------------------------- -------------
2001 2000 2001 2000 2001
----------- ----------- ----------- ----------- -----------
Revenues:
Development revenue $ -- $ 1,072,716 $ 2,461,922 $ 3,419,831 $ 8,713,720
License revenue -- -- -- -- 2,500,000
Grant revenue -- -- 250,000 13,009 616,659
----------- ----------- ----------- ----------- -----------
Total revenues -- 1,072,716 2,711,922 3,432,840 11,830,379
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of development revenue -- 858,173 2,082,568 2,735,865 7,084,006
Research and development 172,257 424,829 774,340 854,297 10,279,250
Acquired in-process research and development -- 263,359 -- 2,653,382 2,653,382
General and administrative 496,294 477,949 2,333,567 1,595,463 18,236,793
Compensation expense relating to stock warrants, net
(general and administrative) 35,968 11,857 70,634 1,073,511 1,091,499
License fees -- -- -- -- 173,500
----------- ----------- ----------- ----------- -----------
Total operating expenses 704,519 2,036,167 5,261,109 8,912,518 39,518,430
----------- ----------- ----------- ----------- -----------
Operating loss (704,519) (963,451) (2,549,187) (5,479,678) (27,688,051)
Other (income) expense:
Interest and other income (6,266) (22,940) (40,618) (97,267) (1,291,754)
Gain on sale of Optex assets -- -- (2,569,451) -- (2,569,451)
Loss on sale of Gemini assets -- -- 334,408 -- 334,408
Interest expense -- -- -- -- 625,575
Equity in (earnings) loss of affiliate 37,309 31,915 58,993 55,615 138,267
Distribution to minority shareholders -- -- 837,274 -- 837,274
----------- ----------- ----------- ----------- -----------
Total other (income) expense 31,043 8,975 (1,379,394) (41,652) (1,925,681)
----------- ----------- ----------- ----------- -----------
Net loss $ (735,562) $ (972,426) $(1,169,793) $(5,438,026) $(25,762,370)
=========== =========== =========== =========== ============
Imputed convertible preferred stock dividend -- -- 600,000 -- 5,931,555
Dividend paid upon repurchase of Series B -- -- 167,127 -- 400,884
Preferred stock dividend issued in preferred shares 43,305 152,195 107,449 811,514 1,390,512
----------- ----------- ----------- ----------- -----------
Net loss applicable to common shares $ (778,867) $(1,124,621) $(2,044,369) $(6,249,540) $(33,485,321)
=========== =========== =========== =========== ============
Net loss per common share:
Basic and diluted $ (0.11) $ (0.19) $ (0.30) $ (1.14)
=========== =========== =========== ===========
Weighted average shares of common stock outstanding,
basic and diluted: 7,166,090 6,033,257 6,734,788 5,504,144
=========== =========== =========== ===========
See accompanying notes to unaudited consolidated financial statements.
4
ATLANTIC TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Cumulative
period from
Nine months ended July 13, 1993
September 30, (inception) to
---------------------------- September 30,
2001 2000 2001
----------- ----------- -------------
Cash flows from operating activities:
Net loss (1,169,793) (5,438,026) (25,762,370)
Adjustments to reconcile net loss to
net cash used in operating activities:
Acquired in-process research and development -- 1,800,000 1,800,000
Expense relating to issuance of common stock and warrants 488,100 -- 786,302
Expense relating to the issuance of options -- -- 81,952
Expense related to Channel merger -- -- 657,900
Change in equity of affiliate 58,993 55,615 138,267
Compensation expense relating to stock options and warrants 70,634 1,073,511 1,299,544
Discount on notes payable - bridge financing -- -- 300,000
Depreciation 55,015 51,529 561,520
Gain on sale of Optex assets (2,569,451) -- (2,569,451)
Distribution to Optex minority shareholders 837,274 -- 837,274
Loss on sale of Gemini assets 334,408 -- 334,408
Loss on disposal of furniture and equipment -- -- 73,387
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 192,997 (700,188) --
Increase in prepaid expenses (4,595) (20,185) (27,194)
Decrease in deferred revenue (1,294,615) -- --
Increase (decrease) in accrued expenses (664,637) 519,025 121,201
Increase (decrease) in accrued interest -- -- 172,305
Increase in other assets (19,937) (2,901) (22,838)
----------- ----------- -----------
Net cash used in operating activities (3,685,607) (2,661,620) (21,217,793)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment (108,250) (137,869) (921,331)
Investment in affiliate -- (146,618) (146,618)
Proceeds from sale of Optex assets 3,000,000 -- 3,000,000
Proceeds from sale of furniture and equipment -- -- 6,100
----------- ----------- -----------
Net cash provided by (used in) investing activities 2,891,750 (284,487) 1,938,151
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from exercise of warrants -- -- 5,500
Proceeds from exercise of stock options -- 344,597 397,098
Proceeds from issuance of demand notes payable -- -- 2,395,000
Repayment of demand notes payable -- -- (125,000)
Proceeds from the issuance of notes payable - bridge financing -- -- 1,200,000
Proceeds from issuance of warrants -- -- 300,000
Repayment of notes payable - bridge financing -- -- (1,500,000)
Repurchase of common stock -- -- (324)
Preferred stock dividend paid (987) -- (1,305)
Proceeds from the issuance of common stock -- -- 7,547,548
Proceeds from issuance of convertible preferred stock -- 828,489 11,441,672
Repurchase of convertible preferred stock (617,067) -- (1,128,875)
Distribution to Optex minority shareholders (811,114) -- (811,114)
----------- ----------- -----------
Net cash provided (used in) by financing activities (1,429,168) 1,173,086 19,720,200
----------- ----------- -----------
Net decrease in cash and cash equivalents (2,223,025) (1,773,021) 440,558
Cash and cash equivalents at beginning of period 2,663,583 3,473,321 --
----------- ----------- -----------
Cash and cash equivalents at end of period 440,558 1,700,300 440,558
=========== =========== ===========
Supplemental disclosure of noncash financing activities:
Issuance of common stock in exchange for common stock subscriptions -- -- 7,027
Conversion of demand notes payable and the related accrued
interest to common stock -- -- 2,442,304
Cashless exercise of preferred warrants -- 19,811 49,880
Conversion of preferred to common stock 409 289 2,835
Preferred stock dividend issued in shares 107,449 811,514 1,233,329
=========== =========== ===========
See accompanying notes to unaudited consolidated financial statements.
5
ATLANTIC TECHNOLOGY VENTURES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2001
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly, the
financial statements do not include all information and footnotes required by
accounting principles generally accepted in the United States of America for
complete annual financial statements. In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal recurring adjustments, considered necessary for fair presentation.
Interim operating results are not necessarily indicative of results that may be
expected for the year ending December 31, 2001 or for any subsequent period.
These consolidated financial statements should be read in conjunction with
Atlantic Technology Ventures, Inc., and Subsidiaries' ("Atlantic") Annual Report
on Form 10-KSB/A as of and for the year ended December 31, 2000.
(2) LIQUIDITY
On November 6, 2001, Atlantic entered into an agreement with Joseph
Stevens & Company, Inc. in which Joseph Stevens agreed to act as placement agent
for a private placement of shares of Atlantic common stock. In that private
placement, the proposed purchase price of each share of Atlantic common stock
will be $0.24 and the minimum and maximum aggregate subscription amounts will be
$2,000,000 and $3,000,000, respectively. In addition, each investor will receive
a warrant to purchase one share of Atlantic common stock for every share of
Atlantic common stock purchased by that investor. The warrants will have an
exercise price of $0.29 and will be exercisable for five years from the closing
date. In connection with the offering, Atlantic will pay to Joseph Stevens a
placement fee equal to 7% of the aggregate subscription amount plus 10% of the
number of shares and warrants issued to the investors. Joseph Stevens has
informed Atlantic that as of the end of November 19, 2001, investors had placed
in escrow over $1,000,000 towards the aggregate subscription price of this
private placement, and Atlantic expects that by November 30, 2001, it will have
received commitments for at least the minimum aggregate subscription amount and
will be able to close this financing. There can, however, be no assurances that
the closing will take place by then, or at all.
Atlantic anticipates that their liquid resources, before any
proceeds from the proposed private placement, will be sufficient to finance
their anticipated needs for operating and capital expenditures at their current
level of operations for at least the next several weeks. Atlantic will attempt
to generate additional capital through a combination of collaborative
agreements, strategic alliances and equity and debt financing, and Atlantic
anticipates that the proceeds it expects to receive from the private placement
conducted through Joseph Stevens & Company, Inc. would be sufficient to finance
its anticipated needs for operating and capital expenditures at their current
level of operations for at least the next year. However, Atlantic can give no
assurance that they will receive any proceeds from the proposed private
placement or obtain funds through other sources on terms acceptable to them.
On May 7, 2001, Atlantic entered into a common stock purchase
agreement with Fusion Capital Fund II, LLC pursuant to which Fusion Capital
agreed to purchase up to $6.0 million of our common stock. This agreement
replaced an earlier common stock purchase agreement between Atlantic and Fusion
Capital dated March 16, 2001. Fusion's obligation to purchase Atlantic shares is
subject to certain conditions, including the effectiveness of a registration
statement covering the shares to be purchased. That registration statement was
declared effective on July 6, 2001. A material contingency that may affect
Atlantic's operating plans and ability to raise funds under this agreement is
its stock price. Currently, Atlantic's stock price is below the floor price of
$0.68 specified in the Fusion Capital agreement and as a result Atlantic is
currently unable to draw funds pursuant to the Fusion Capital agreement. As the
Fusion Capital agreement is currently structured, Atlantic cannot guarantee that
it will be able to draw any funds. To date, Atlantic has not drawn funds
pursuant to this agreement. See note 11 below and see the liquidity discussion
within "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Subsequent to an oral hearing before a Nasdaq Listing Qualifications
Panel, on August 23, 2001, Atlantic's securities were delisted from the Nasdaq
Stock Market for failing to meet the minimum bid price requirements set forth in
the NASD Marketplace Rules, as Atlantic's common stock had traded for less than
$1.00 for more than 30
6
consecutive business days. Atlantic's common stock now trades on the OTC
Bulletin Board under the symbol "ATLC.OB". Delisting of Atlantic's common stock
from Nasdaq could have a material adverse effect on its ability to raise
additional capital, its stockholders' liquidity and the price of its common
stock.
(3) COMPUTATION OF NET LOSS PER COMMON SHARE
Basic net loss per common share is calculated by dividing net loss
applicable to common shares by the weighted-average number of common shares
outstanding for the period. Diluted net loss per common share is the same as
basic net loss per common share, as common equivalent shares from stock options,
stock warrants, stock subscriptions, and convertible preferred stock would have
an antidilutive effect because Atlantic incurred a net loss during each period
presented.
(4) RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 2001, Atlantic adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of SFAS No.
133" and SFAS No. 133, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." SFAS No. 138 amends the accounting and reporting
standards of SFAS No. 133 for certain derivative instruments and certain hedging
activities. SFAS No. 133 requires a company to recognize all derivative
instruments as assets and liabilities in its balance sheet and measure them at
fair value. The adoption of these statements did not have a material impact on
Atlantic's consolidated financial position, results of operations or cash flows,
as Atlantic is currently not party to any derivative instruments.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
that all business combinations be accounted for under a single method--the
purchase method. Use of the pooling-of-interests method is no longer permitted.
SFAS No. 141 requires that the purchase method be used for business combinations
initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be
amortized to earnings, but instead be reviewed for impairment. The amortization
of goodwill ceases upon adoption of the Statement, which for calendar year-end
companies, will be January 1, 2002. SFAS No. 142 has no financial impact on
Atlantic since Atlantic does not have any goodwill or intangible assets which
resulted from any previous business combinations.
(5) INCOME TAXES
Atlantic incurred a net loss for the three and nine months ended
September 30, 2001. In addition, Atlantic does not expect to generated book
income for the year ended December 31, 2001; therefore, no income taxes have
been reflected for the three and nine months ended September 30, 2001.
(6) PREFERRED STOCK DIVIDEND
On January 16, 2001 and August 7, 2001, Atlantic's board of
directors declared payment-in-kind dividends of 0.065 of a share of Series A
convertible preferred stock for each share of Series A convertible preferred
stock held as of the record dates of February 7, 2001 and August 7, 2001
respectively. The estimated fair value of these dividends in the aggregate of
$43,305 and $107,449 were included in Atlantic's calculation of net loss per
common share for the three-and nine-month periods ended September 30, 2001,
respectively. The equivalent dividends for the three-and nine-month periods
ended September 30, 2000 had an estimated fair value of $152,195 and $811,514,
respectively and are recorded in the same manner.
(7) ISSUANCE OF STOCK WARRANTS
As more fully described in Note 9 to Atlantic's Annual Report on
Form 10-KSB/A as of and for the year ended December 31, 2000, on January 4,
2000, Atlantic entered into a financial advisory and consulting agreement with
Joseph Stevens & Company, Inc. pursuant to which Atlantic issued to Joseph
Stevens & Company, Inc. three warrants to purchase an aggregate of 450,000
shares of its common stock. Atlantic recorded compensation expense relating to
these stock warrants in the amounts of $11,857 and $1,073,511 for the three-and
nine-month periods
7
ended September 30, 2000, respectively. No such compensation expense exists
subsequent to December 31, 2000 as the warrants are fully vested. These warrants
were still outstanding as of September 30, 2001.
On March 8, 2001, Atlantic entered into an agreement with The
Investor Relations Group, Inc. ("IRG") under which IRG will provide Atlantic
investor relations services. Pursuant to this agreement, Atlantic issued to Dian
Griesel, the principal of IRG, warrants to purchase 120,000 shares of its common
stock at an exercise price of $0.875 per share. These warrants will vest monthly
in 5,000 share increments over a 24-month period. In addition, should Atlantic's
stock price reach $2.50, Atlantic will grant Dian Griesel warrants to purchase
an additional 50,000 shares of its common stock, and should Atlantic's stock
price reach $5.00, Atlantic will grant Dian Griesel warrants to purchase a
further 50,000 shares of its common stock. As a result, Atlantic recorded
compensation expense relating to the issuance of the stock warrants to purchase
120,000 shares of $38,200 for the nine-month period ended September 30, 2001
pursuant to EITF Issue No. 96-18. As a result of a decline in Atlantic's common
stock price during the three months ended September 30, 2001, the cumulative
expense associated with these warrants was reduced. The depreciation in the
estimated fair value of the warrants previously recorded and the current quarter
expense resulted in a net reversal of compensation expense of $9,387 which is
recorded during the three months ended September 30, 2001. Atlantic will
remeasure the compensation expense at the end of each reporting period until the
final measurement date is reached 24 months after issuance. These warrants are
outstanding as of September 30, 2001.
On August 9, 2001, Atlantic entered into an agreement with Proteus
Capital Corp. ("Proteus") in which Proteus agreed to assist Atlantic with
raising additional funds. Pursuant to this agreement, Atlantic granted Proteus
warrants to purchase 100,000 shares of its common stock at $0.59 per share,
which was the average closing stock price for the two weeks ending August 17,
2001. The warrants were fully vested on the date of the agreement and were
outstanding at September 30, 2001. The term of the warrants is five years.
Atlantic recorded compensation expense relating to these stock warrants of
$45,355 for the three and nine months ended September 30, 2001, pursuant to EITF
Issue No. 96-18.
Compensation for these warrants relates to fundraising and investor
relations services and represents a general and administrative expense.
(8) REDEEMABLE SERIES B PREFERRED SHARES
On September 28, 2000, pursuant to a convertible preferred stock and
warrants purchase agreement (the "Purchase Agreement") Atlantic issued to BH
Capital Investments, L.P. and Excalibur Limited Partnership (together, the
"Investors") for a purchase price of $2,000,000, 689,656 shares of Atlantic's
Series B convertible preferred stock and warrants to purchase 134,000 shares of
Atlantic's common stock. Half of the shares of the Series B preferred stock
(344,828 shares) and warrants to purchase half of the shares of common stock
(67,000 shares) were held in escrow, along with half of the purchase price.
On December 4, 2000, Atlantic and the Investors entered into a stock
repurchase agreement (the "Repurchase Agreement") pursuant to which Atlantic
repurchased from the investors a portion of the outstanding shares.
Pursuant to Atlantic's subsequent renegotiations with the Investors,
Atlantic was required, among other things, to redeem on March 28, 2002, all
outstanding shares of Series B preferred stock for (A) 125% of the original
issue price per share or (B) the market price of the shares of common stock into
which they are convertible, whichever is greater (the "Redemption Price").
Atlantic would have been able to at any time redeem all outstanding shares of
Series B preferred stock at the Redemption Price. As a result of the
renegotiations discussed in this paragraph, the Series B preferred stock was
considered redeemable and the remaining outstanding shares at December 31, 2000
were classified outside of permanent equity in the accompanying consolidated
balance sheet. At December 31, 2000, of the shares of Series B preferred stock
issued to the Investors, there were 206,898 shares outstanding at a carrying
amount of $2.90 per share.
Holders of shares of Atlantic's outstanding Series B preferred stock
could convert each share into shares of common stock without paying Atlantic any
cash. The conversion price per share of the Series B preferred stock was also
amended by the second amendment to the Purchase Agreement. The conversion price
per share of Series B
8
preferred stock on any given day is the lower of (1) $1.00 or (2) 90% of the
average of the two lowest closing bid prices on the principal market of the
common stock out of the fifteen trading days immediately prior to conversion.
The change in conversion price upon the renegotiations on January 9, 2001
resulted in a difference between the conversion price of the Series B preferred
stock and the market price of the common stock on the effective date of the
renegotiation. This amount, estimated at $600,000, was recorded as an imputed
preferred stock dividend within equity and is deducted from net loss to arrive
at net loss applicable to common shares during the nine months ended September
30, 2001.
On January 19, 2001, 41,380 shares of Series B preferred stock were
converted by the Investors into 236,422 shares of Atlantic's common stock. On
March 9, 2001, Atlantic and the Investors entered into a second stock repurchase
agreement pursuant to which Atlantic repurchased from the Investors, for an
aggregate purchase price of $617,067, all 165,518 shares of Atlantic's Series B
preferred stock held by the Investors on March 9, 2001. The carrying amount of
the 165,518 shares is equal to $480,000; therefore the amount in excess of the
carrying amount, which equals $167,127, was recorded as a dividend upon
repurchase of shares of Series B preferred stock and is deducted from net loss
to arrive at net loss applicable to common shares.
(9) DEVELOPMENT REVENUE
In accordance with an amended license and development agreement,
which was subsequently terminated as described below in note 10, Bausch & Lomb
Surgical reimbursed Atlantic's subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for costs Optex incurred in developing its Catarex technology, plus a
profit component. For the nine months ended September 30, 2001, this agreement
provided $2,461,922 of development revenue, and related cost of development
revenue of $2,082,568. This agreement provided $1,072,716 and $3,419,831 of
development revenue, and related cost of development revenue of $858,173 and
$2,735,865 for the three-and nine-month periods ended September 30, 2000
respectively. The agreement was terminated in March 2001 (see note 10 below).
Accordingly, there was no development revenue or related expense for the
three-month period ended September 30, 2001.
(10) SALE OF OPTEX ASSETS
Pursuant to an asset purchase agreement dated January 31, 2001,
among Bausch & Lomb, a Bausch & Lomb affiliate, Atlantic, and Optex, on March 2,
2001, Optex sold to Bausch & Lomb substantially all of its assets (mostly
intangible assets with no book value), including all those related to the
Catarex technology. The purchase price was $3 million paid at closing (of which
approximately $564,000 has been distributed to Optex's minority shareholders).
In addition, Optex is entitled to receive additional consideration, namely $1
million once Bausch & Lomb receives regulatory approval to market the Catarex
device in Japan, royalties on net sales on the terms stated in the original
development agreement dated May 14, 1998, between Bausch & Lomb and Optex, as
amended, and minimum royalties of $90,000, $350,000, and $750,000 for the first,
second, and third years, respectively, starting on first commercial use of the
Catarex device or January 1, 2004, whichever is earlier. Optex also has the
option to repurchase the acquired assets from Bausch & Lomb at fair value if it
ceases developing the Catarex technology.
Upon the sale of Optex assets, Bausch & Lomb's development agreement
with Optex was terminated and Optex has no further involvement with Bausch &
Lomb. As a result of this transaction, Atlantic recorded a net gain on the sale
of Optex assets of $2,569,451 for the nine-month period ended September 30,
2001, net of severance payments to former Optex employees in the amount of
$240,000 as described below. The purchase price of $3,000,000 is nonrefundable
and upon the closing of the asset purchase agreement in March 2001, Optex had no
further obligation to Bausch & Lomb or with regard to the assets sold. In the
asset purchase agreement, Optex agreed to forgo future contingent payments
provided for in the earlier development agreement. Pursuant to Atlantic's
agreement with the minority shareholders of Optex, Optex has recorded a profit
distribution for the nine months ended September 30, 2001 of $837,274
representing the minority shareholders' percentage of the cumulative profit from
the Bausch & Lomb development and asset purchase agreements up to and including
proceeds from the sale of Optex' assets.
On May 9, 2001, Atlantic's board of directors, after consideration
of all the relevant facts and circumstances, including recommendation of
counsel, agreed to authorize an aggregate payment of $240,000 to three former
employees of Optex (who are now employed by Bausch & Lomb). The payments were
made on May 11, 2001, and represented the settlement of claims made by the
employees subsequent to the asset purchase agreement referred to above for
severance monies allegedly due under their employment agreement. Atlantic did
9
not believe these monies were due pursuant to the terms of the transaction
itself and the respective employment agreements. The board of directors elected
to acquiesce to the demands of the former employees and resolve the matter in
light of the potential future royalties from Bausch & Lomb and the importance of
these individuals to the ongoing development activities. The payment was
recorded as an expense netted against the gain on sale of Optex assets in the
September 30, 2001 consolidated statement of operations.
(11) PRIVATE PLACEMENT OF COMMON SHARES
On May 7, 2001, Atlantic entered into a common stock purchase
agreement with Fusion Capital Fund II, LLC, pursuant to which Fusion Capital
agreed to purchase up to $6.0 million of Atlantic's common stock over a 30-month
period, subject to a six-month extension or earlier termination at Atlantic's
discretion. This agreement replaced an earlier common stock purchase agreement
between Atlantic and Fusion Capital dated March 16, 2001. Fusion's obligation to
purchase Atlantic shares is subject to certain conditions, including the
effectiveness of a registration statement covering the shares to be purchased.
That registration statement was declared effective on July 6, 2001. The selling
price of the shares will be equal to the lesser of (1) $20.00 or (2) a price
based upon the future market price of the common stock, without any fixed
discount to the market price. A material contingency that may affect Atlantic's
operating plans and ability to raise funds under this agreement is its stock
price. Currently, Atlantic's stock price is below the floor price of $0.68
specified in the Fusion Capital agreement and as a result Atlantic is currently
unable to draw funds pursuant to the Fusion Capital agreement. As the Fusion
Capital agreement is currently structured, Atlantic cannot guarantee that it
will be able to draw any funds. To date, Atlantic has not drawn funds pursuant
to this agreement. Atlantic paid a finder's fee of $120,000 in connection with
signing this agreement and subsequently was required to issue 600,000 commitment
shares to Fusion Capital; those shares had an estimated fair value of $444,000.
General and administrative expense for the nine-month period ended September 30,
2001, include amounts relating to the finder's fee and issuance of stock in the
aggregate amount of $564,000.
On August 1, 2001, Atlantic agreed to issue 35,000 shares of its
common stock to each of BH Capital Investments, L.P. and Excalibur Limited
Partnership in return for their commitment to provide Atlantic with $3.5 million
of financing in connection with an asset purchase for which Atlantic had
submitted a bid. Atlantic subsequently issued those shares, but Atlantic did not
ultimately purchase those assets. Those shares had an estimated fair value of
$44,100, which is included as a general and administrative expense for the
three-and nine-month periods ended September 30, 2001.
(12) SALE OF GEMINI ASSETS
Pursuant to an asset purchase agreement dated April 23, 2001, among
Atlantic, Atlantic's majority-owned subsidiary Gemini Technologies, Inc., the
Cleveland Clinic Foundation ("CCF") and CCF's affiliate IFN, Inc., Gemini sold
to IFN substantially all its assets, including all those related to the 2-5A
antisense enhancing technology, for future contingent royalty payments and
withdrawal of CCF's arbitration demand against Atlantic and Gemini. The
transaction closed on May 5, 2001. This transaction was beneficial to Atlantic
since it permitted Atlantic to avoid terminating the Cleveland sublicense with
no compensation to Gemini and spared Atlantic from having to pay the substantial
shutdown costs that Gemini would likely have incurred without this asset
purchase agreement. In connection with this sale, Atlantic recorded a loss of
$334,408. This loss results from net assets sold to IFN of $136,408 and a
liability related to SBIR grant funds for research on the 2-5A antisense
technology, of approximately $198,000. Of the $198,000 accrual established upon
closing, $194,500 remains accrued at September 30, 2001.
(13) SUBSEQUENT EVENTS
In October 2001, Atlantic stopped work on CryoComm, a wholly-owned
subsidiary of Atlantic that had been developing superconducting electronics for
Internet packet switching and transport products. Discontinuing work on CryoComm
will allow Atlantic to focus on its core life-sciences technologies, although
Atlantic will continue to prosecute the patents on this technology. As part of
this restructuring, Walter Glomb's position was eliminated effective October 16,
2001, although Mr. Glomb will receive a 7% success fee if he is able to secure
funding to further develop this technology. As stated in his employment
agreement, Mr. Glomb will also receive a total of $62,500 in severance payments
due under his employment agreement over six months following his termination.
Such amounts will be recorded in the fourth quarter of 2001.
10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
You should read the following discussion of our results of
operations and financial condition in conjunction with our Annual Report on Form
10-KSB/A for the year ended December 31, 2000. This discussion includes
"forward-looking" statements that reflect our current views with respect to
future events and financial performance. We use words such as we "expect,"
"anticipate," "believe," and "intend" and similar expressions to identify
forward-looking statements. Investors should be aware that actual results may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events, particularly those risks identified in
the "Risk Factors" section of our most recent Annual Report on Form 10-KSB/A,
and should not unduly rely on these forward looking statements.
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2001 VS. 2000
In accordance with a license and development agreement, as amended,
Bausch & Lomb Surgical has paid our subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for developing its Catarex technology. With the termination of this
agreement at the conclusion of the sale of substantially all of Optex's assets
(mostly intangible assets with no book value) in March 2001, as described
further below, we no longer have the revenues or profits associated with that
agreement available to us. As a result, for the three months ended September 30,
2001, this agreement provided no development revenue, and no related cost of
development revenue. For the three months ended September 30, 2000, this
agreement provided $1,072,716 of development revenue, and related cost of
development revenue of $858,173.
For the quarter ended September 30, 2001, research and development
expense was $172,257 as compared to $424,829 in the third quarter of 2000. This
decrease is primarily due to the cessation of research and development
activities on the antisense technology as a result of the sale of the assets of
Gemini.
Through September 30, 2000, we made an investment in TeraComm, Inc.
of $1,000,000 in cash and common stock and warrants valued at $1.8 million.
During the quarter ended September 30, 2000, we expensed $263,359 ($2,653,382
has been expensed through September 30, 2000) of this payment as acquired
in-process research and development since TeraComm's product development
activity was in its very early stages. As a result of TeraComm's not meeting a
technical milestone at December 31, 2000, no further investments were made in
TeraComm.
For the quarter ended September 30, 2001, general and administrative
expense was $496,294 as compared to $477,949 in the quarter ended September 30,
2000. This increase is principally due to an increase in payroll expenses of
approximately $38,000 and an increase in expenses associated with the issuance
of 35,000 shares of our common stock to each of BH Capital Investments, L.P. and
Excalibur Limited Partnership in August 2001 in return for their commitment to
provide us with $3.5 million of financing in connection with an asset purchase
for which we had submitted a bid. We subsequently issued those shares, but we
did not ultimately purchase those assets. Those shares had an estimated fair
value of $44,100, which was recorded as a general and administrative expense for
the three months ended September 30, 2001. These expense increases are offset by
a reduction in legal expenses of approximately $33,000, a reduction in travel
and entertainment expenses of about $17,000 and a reduction in other expenses of
$14,000 as a result of our efforts to reduce costs.
For the quarter ended September 30, 2001, we had compensation
expense relating to stock warrants of $35,968 as compared to $11,857 in the
prior year. The current quarter expense consists of $45,355 associated with
fully-vested warrants issued to Proteus Capital Corp. in August 2001 as partial
compensation for fundraising services, offset by a reduction in expense of
$9,387 associated with warrants issued to Dian Griesel as partial compensation
for investor-relations services. The reduction of compensation expense
associated with the warrants issued to Dian Griesel is a result of a decrease in
our stock price during the quarter. Additional expense associated with these
warrants will continue to be incurred over the remainder of the two-year term of
the agreement. As long as these warrants continue to vest, that expense will be
directly affected by the movement in the price of our common stock. For the
quarter ended September 30, 2000, the expense was associated with warrants
issued to
11
Joseph Stevens & Company as partial compensation for investment banking
services. Compensation expense relating to these investor relations and
investment banking services represent a general and administrative expense.
For the third quarter of 2001, interest and other income was $6,266,
compared to $22,940 in the third quarter of 2000. The decrease in interest
income is primarily due to the decline in our cash reserves.
Net loss applicable to common shares for the quarter ended September
30, 2001, was $735,562 as compared to $972,426 for the quarter ended September
30, 2000. This decrease in net loss applicable to common shares is attributable
to the recording of acquired in-process research and development expense in
conjunction with our investment in TeraComm Research, Inc. of $263,359 in the
third quarter of 2000, as well as a reduction of research and development
expenses of $252,572 from the quarter ended September 30, 2000, as compared to
2001. The net loss continues to include our share of TeraComm's losses. This
will cease when our investment in TeraComm of $8,351 included in our
consolidated balance sheet at September 30, 2001, is reduced to zero. The loss
differential is partially reduced by the termination of our agreement with
Bausch & Lomb. Since we no longer have the revenue or profits associated with
that agreement available to us, we had no profit resulting from this agreement
in the third quarter of 2001 as compared with $214,543 in the third quarter of
2000.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2001 VS. 2000
In accordance with a license and development agreement, as amended,
Bausch & Lomb Surgical has paid our subsidiary, Optex Ophthalmologics, Inc.
("Optex"), for developing its Catarex technology. For the nine months ended
September 30, 2001, this agreement provided $2,461,922 of development revenue
and related cost of development revenue of $2,082,568. For the nine months ended
September 30, 2000, this agreement provided $3,419,831 of development revenue
and related cost of development revenue of $2,735,865. The decrease in revenues
and related expenses over last year was due to the fact that there were no
revenues and related expenses since the termination of the agreement in March
2001. The decrease is offset by the recognition of a project completion bonus of
$1,067,345 paid out and recognized at the completion of the project in March
2001. With the termination of the above agreement at the conclusion of the sale
of substantially all of Optex's assets (mostly intangible assets with no book
value) in March 2001, as described further below, we will no longer have the
revenues or profits associated with that agreement available to us.
For the nine months ended September 30, 2001, research and
development expense was $774,340 as compared to $854,927 for the nine months
ended September 30, 2000. This decrease is due mainly to the cessation of
research and development activities on the antisense technology as a result of
the sale of the assets of Gemini. This decrease is offset somewhat by increased
expenditures on certain development projects, including CT-3 during the first
part of the year.
Through September 30, 2000, we made an investment in TeraComm, Inc.
of $1,000,000 in cash and common stock and warrants valued at $1.8 million. For
the nine months ended September 30, 2000, we expensed $2,653,382 of this payment
as acquired in-process research and development since TeraComm's product
development activity was in its very early stages. As a result of TeraComm's not
meeting a technical milestone at December 31, 2000, no further investments were
made in TeraComm.
For the nine months ended September 30, 2001, general and
administrative expense was $2,333,567 as compared to $1,595,463 for the nine
months ended September 30, 2000. This increase is largely due to an increase in
payroll costs over last year of approximately $130,000, and an increase in
expenses incurred in conjunction with a common stock purchase agreement entered
into during the second quarter of 2001 with Fusion Capital Fund II, LLC. These
expenses include the cost of our issuing 600,000 commitment shares to Fusion
Capital of $444,000 and a finders fee of $120,000. Fusion's obligation to
purchase our shares is subject to certain conditions, including the
effectiveness of a registration statement covering the shares to be purchased.
That registration statement was declared effective on July 6, 2001. A material
contingency that may affect our operating plans and ability to raise funds under
this agreement is our stock price. Currently, our stock price is below the floor
price of $0.68 specified in the Fusion Capital agreement and as a result we are
currently unable to draw funds pursuant to the Fusion Capital agreement. As the
Fusion Capital agreement is currently structured, we cannot guarantee that we
will be able to draw any funds. To date, we have not drawn funds pursuant to
this agreement. See "Liquidity and Capital Resources" for further details on
this agreement. In addition, we incurred expenses associated with the issuance
of 35,000 shares of our common stock to each of BH Capital Investments, L.P. and
Excalibur Limited Partnership in
12
August 2001 in return for their commitment to provide us with $3.5 million of
financing in connection with an asset purchase for which we had submitted a bid.
We did not ultimately purchase those assets. Those shares had an estimated fair
value of $44,100 which was recorded as a general and administrative expense for
the nine months ended September 30, 2001.
For the nine months ended September 30, 2001, we had compensation
expense relating to stock warrants of $70,634 as compared to $1,073,511 in the
prior year. The current year expense consists of $25,279 associated with
warrants issued to Dian Griesel during March 2001 as partial compensation for
investor relations services and $45,355 associated with fully vested warrants
issued to Proteus Capital Corp in August 2001 as partial compensation for fund
raising services. Additional expense associated with the warrants issued to Dian
Griesel will continue to be incurred over the remainder of the two-year term of
the agreement. As long as these warrants continue to vest, that expense will be
directly affected by the movement in the price of our common stock. For the nine
months ended September 30, 2000, we had $1,073,511 of expense associated with
warrants issued to Joseph Stevens & Company as partial compensation for
investment banking services. Compensation expense relating to these investor
relations and investment banking services represent a general and administrative
expense.
For the nine months ended September 30, 2001, interest and other
income was $40,618, compared to $97,267 in the nine months ended September 30,
2000. The decrease in interest income is primarily due to the decline in our
cash reserves.
Net loss applicable to common shares for the nine months ended
September 30, 2001, was $2,044,369 as compared to $6,249,540 for the nine months
ended September 30, 2000. This decrease in net loss applicable to common shares
is attributable in part to a gain on the sale of the assets of our subsidiary,
Optex, recognized during the nine months ended September 30, 2001 in the amount
of $2,569,451, partially offset by a distribution to the minority shareholders
of Optex of $837,274 (see further discussion of this sale below). In addition,
the decrease in net loss applicable to common shares is compounded by the
recording of acquired in-process research and development expense in conjunction
with our investment in TeraComm, Inc. of $2,653,382 in the nine months ended
September 30, 2000. In the nine months ended September 30, 2000, we recorded
compensation expense of $1,073,511 relating to stock warrants issued to Joseph
Stevens & Company compared with compensation expense of $70,634 relating to
stock warrants issued to the Dian Griesel and Proteus Capital Corp. during the
current year. The loss differential is partially reduced by a loss recorded on
the sale of the assets of Gemini of $334,408 in the nine months ended September
30, 2001 and the cost of our issuing 600,000 commitment shares to Fusion Capital
Fund II, LLC of $444,000 incurred in the nine months ended September 30, 2001.
In addition, with the termination of our agreement with Bausch & Lomb, we no
longer have the revenue or profits associated with that agreement available to
us. As a result, we had a reduction in profit from this agreement of $304,612
from the nine months ended September 30, 2000 as compared to 2001.
Net loss applicable to common shares for the nine months ended
September 30, 2001 also included a beneficial conversion on shares of our Series
B preferred stock in the amount of $600,000 and a dividend of $167,127 paid upon
the repurchase of the outstanding shares of Series B preferred stock recorded
during the nine months ended September 30, 2001. We also issued preferred stock
dividends on our Series A preferred stock for which the estimated fair value of
$107,449 and $811,514 was included in the net loss applicable to common shares
for the nine months ended September 30, 2001 and 2000, respectively. The
decrease in the estimated fair value of these dividends as compared to the prior
year is primarily a reflection of the decline in our stock price and a reduction
of the number of preferred shares issued.
LIQUIDITY AND CAPITAL RESOURCES
From inception to September 30, 2001, we incurred an accumulated
deficit of $26,163,254, and we expect to continue to incur additional losses
through the year ending December 31, 2001 and for the foreseeable future. The
loss has been incurred through primarily research and development activities
related to the various technologies under our control.
Pursuant to an asset purchase agreement dated January 31, 2001,
among Bausch & Lomb, a Bausch & Lomb affiliate, Atlantic, and Optex, on March 2,
2001, Optex sold to Bausch & Lomb substantially all its assets (mostly
intangible assets with no book value), including all those related to the
Catarex technology. As a result of this sale, Atlantic and Optex no longer have
any obligations to Bausch & Lomb in connection with development of
13
the Catarex technology. The purchase price was $3 million paid at closing
(approximately $564,000 of which was distributed to the minority shareholders).
In addition, Optex is entitled to receive additional consideration, namely $1
million once Bausch & Lomb receives regulatory approval to market the Catarex
device in Japan, royalties on net sales on the terms stated in the original
development agreement dated May 14, 1998, between Bausch & Lomb and Optex, as
amended, and minimum royalties of $90,000, $350,000, and $750,000 for the first,
second, and third years, respectively, starting on first commercial use of the
Catarex device or January 1, 2004, whichever is earlier. Optex also has the
option to repurchase the acquired assets from Bausch & Lomb if it ceases
developing the Catarex technology at fair value. Upon the sale of Optex assets,
Bausch & Lomb's development agreement with Optex was terminated. In the asset
purchase agreement Optex agreed to forgo future contingent payments provided for
in the earlier development agreement. As a result of this transaction, we
recorded a gain on the sale of Optex assets of $2,569,451. We made a profit
distribution of $837,274 to Optex's minority shareholders, representing their
share of the cumulative profit from the development agreement with Bausch & Lomb
and the proceeds from the sale of Optex' assets.
On September 28, 2000, pursuant to a convertible preferred stock and
warrants purchase agreement (the "Purchase Agreement"), we issued to BH Capital
Investments, L.P. and Excalibur Limited Partnership (together, the "Investors")
for a purchase price of $2,000,000, 689,656 shares of our Series B convertible
preferred stock and warrants to purchase 134,000 shares of our common stock.
Half of the shares of Series B preferred stock (344,828 shares) and warrants to
purchase half of the shares of common stock (67,000 shares) were held in escrow,
along with half of the purchase price.
On December 4, 2000, Atlantic and the Investors entered into a stock
repurchase agreement (the stock "Repurchase Agreement") pursuant to which we
repurchased from the Investors for $500,000 137,930 shares of Series B preferred
stock, and agreed to the release from escrow to the Investors of the $1,000,000
purchase price of the 344,828 shares of Series B preferred stock held in escrow.
We also allowed the Investors to keep all of the warrants issued under the
purchase agreement and issued to the Investors warrants to purchase a further
20,000 shares of our common stock at the same exercise price. On January 19,
2001, 41,380 shares of Series B preferred stock were converted by the Investors
into 236,422 shares of our common stock. On March 9, 2001, Atlantic and the
Investors entered into a second stock repurchase agreement pursuant to which we
repurchased from the Investors, for an aggregate purchase price of $617,067, all
165,518 shares of our Series B preferred stock held by the Investors. The
repurchase price represented 125% of the purchase price originally paid by the
investors for the repurchased shares, as well as an amount equal to the annual
dividend on the Series B preferred stock at a rate per share of 8% of the
original purchase price. The repurchased shares constitute all remaining
outstanding shares of Series B preferred stock; we have cancelled those shares.
On May 7, 2001, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC pursuant to which Fusion Capital agreed to
purchase up to $6.0 million of our common stock over a 30-month period, subject
to a 6-month extension or earlier termination at our discretion. This agreement
replaced an earlier common stock purchase agreement between Atlantic and Fusion
Capital dated March 16, 2001. Fusion's obligation to purchase shares of our
common stock is subject to certain conditions, including the effectiveness of a
registration statement covering the shares to be purchased. That registration
statement was declared effective on July 6, 2001. The selling price of the
shares will be equal to the lesser of (1) $20.00 or (2) a price based upon the
future market price of the common stock, without any fixed discount to the
market price. A material contingency that may affect our operating plans and
ability to raise funds under this agreement is our stock price. Currently, our
stock price is below the floor price of $0.68 specified in the Fusion Capital
agreement and as a result we are currently unable to draw funds pursuant to the
Fusion Capital agreement. As the Fusion Capital agreement is currently
structured, we cannot guarantee that we will be able to draw any funds. To date,
we have not drawn funds pursuant to this agreement. We paid a $120,000 finder's
fee relating to this transaction to Gardner Resources, Ltd. and issued to Fusion
Capital Fund II, LLC 600,000 common shares as a commitment fee. Those shares had
an estimated fair value of $444,000. We have amended our agreement with Fusion
Capital to allow Atlantic to draw funds pursuant to the agreement regardless of
its listing status on the Nasdaq SmallCap Market.
On November 6, 2001, we entered into an agreement with Joseph
Stevens & Company, Inc. in which Joseph Stevens agreed to act as placement agent
for a private placement of shares of our common stock. In that private
placement, the price of each share of our common stock will be $0.24 and the
minimum and maximum subscription amounts will be $2,000,000 and $3,000,000,
respectively. In addition, each investor will receive a warrant to purchase one
share of our common stock for every share of our common stock purchased by that
investor.
14
The warrants will have an exercise price of $0.29 and will be exercisable for
five years from the closing date. In connection with the offering, we will pay
to Joseph Stevens a placement fee equal to 7% of the aggregate subscription
amount plus 10% of the number of shares and warrants issued to the investors.
Joseph Stevens has informed us that as of the end of November 19, 2001,
investors had placed in escrow over $1,000,000 towards the aggregate
subscription price of this private placement, and we expect that by November 30,
2001, we will have received commitments for at least the minimum aggregate
subscription amount and will be able to close this financing. There can,
however, be no assurances that the closing will take place by then, or at all.
Our available working capital and capital requirements will depend
upon numerous factors, including progress of our research and development
programs; our progress in and the cost of ongoing and planned preclinical and
clinical testing; the timing and cost of obtaining regulatory approvals; the
cost of filing, prosecuting, defending, and enforcing patent claims and other
intellectual property rights; competing technological and market developments;
changes in our existing collaborative and licensing relationships; the resources
that we devote to developing manufacturing and commercializing capabilities;
technological advances; the status of our competitors; our ability to establish
collaborative arrangements with other organizations; and our need to purchase
additional capital equipment.
At September 30, 2001, we had $440,558 in cash and cash equivalents.
As of September 30, 2001, our current liabilities exceeded our current assets
and we had a working capital deficit of $280,607. We anticipate that our
resources, before any proceeds from the proposed private placement, will be
sufficient to finance our anticipated needs for operating and capital
expenditures at our current level of operations for at least the next several
weeks. We anticipate, however, that the proceeds we expect to receive from the
private placement conducted through Joseph Steven & Company, Inc. would be
sufficient to finance our anticipated needs for operating and capital
expenditures at our current level of operations for at least the next year. In
addition, we will attempt to generate capital through a combination of
collaborative agreements, strategic alliances, and debt financing. However, we
can give no assurance that we will be able to obtain additional capital through
these sources or upon terms acceptable to us.
We have the following short term and long term liquidity needs. Our
cash utilized for operations for the next year is expected to be approximately
$150,000 per month. Currently, these expected operating expenses include
approximately $40,000 per month for research and preclinical development
expenses and approximately $110,000 for general and administrative expenses.
Based on our cash position of $440,558 at September 30, 2001, we will have to
raise additional funds within the next month to fund our current spending
requirements. At present, we have reduced or eliminated planned levels of
development activities.
On August 9, 2001, we retained Proteus Capital Corp. on a
non-exclusive basis as our investment bankers to assist us with raising
additional funds. Pursuant to our agreement with Proteus, we granted Proteus
warrants to purchase 100,000 shares of our common stock at $0.59 per share,
which was the average closing stock price for the two weeks ending August 17,
2001. The warrants were fully vested on the date of the agreement and the term
of the warrants is five years.
Subsequent to an oral hearing before a Nasdaq Listing Qualifications
Panel, on August 23, 2001, our securities were delisted from the Nasdaq Stock
Market for failing to meet the minimum bid price requirements set forth in the
NASD Marketplace Rules, as our common stock had traded for less than $1.00 for
more than 30 consecutive business days. Our common stock trades now on the OTC
Bulletin Board under the symbol "ATLC.OB". Delisting our common stock from
Nasdaq could have a material adverse effect on our ability to raise additional
capital, our stockholders' liquidity and the price of our common stock.
RESEARCH AND DEVELOPMENT ACTIVITIES
Optex and the Catarex(TM) Technology
Our majority-owned (81.2%) subsidiary, Optex, is entitled to
royalties and other revenues in connection with commercialization of the Catarex
technology. Bausch & Lomb, a multinational ophthalmics company, is developing
this technology to overcome the limitations and deficiencies of traditional
cataract extraction techniques. Optex had been the owner of this technology and
was developing it pursuant to a development agreement with Bausch & Lomb, but on
March 2, 2001, Optex sold to Bausch & Lomb substantially all of its assets
(mostly
15
intangible assets with no book value), including those related to the Catarex
technology, and delivered 2,400 "First-Generation" Catarex handpieces to Bausch
& Lomb for use in Human Feasibility Studies and Clinical Trials.
Bausch & Lomb, which has committed over $15 million on the project
to date, has assumed full responsibility for development and marketing of the
technology, and will pay Optex royalties on sales of the device and associated
system.
Bausch & Lomb planned to conduct a Human Feasibility Study on the
First Generation Catarex handpiece at a location outside the United States in
mid- September 2001, but cancelled it due to several factors including the
immediate concern surrounding extended travel as a result the September 11, 2001
terrorist tragedy.
Accordingly, Bausch & Lomb informed us that, in an effort to
accelerate the project, it will combine the Feasibility Study and Clinical
Trials on the First-Generation Catarex handpiece into one study under an FDA
approved Investigational Device Exemption (IDE). Bausch & Lomb considers that
the risk of combining the two studies is minimal since all the studies to date
indicate that the system operates as intended.
Bausch & Lomb informed us that it plans to submit the IDE to the FDA
in the fourth quarter of 2001. Once received, the FDA requires 30 days for
review and approval. This would allow Bausch & Lomb to begin the trials as early
as the first quarter of 2002, depending on the speed of patient registration.
Once the Clinical Trails are completed there will be a 90 day follow-up period,
and then the data will be submitted in a report to the FDA along with a 510(k)
application for the First-Generation Catarex handpiece.
Bausch & Lomb has also informed us that it is continuing to develop
the Second-Generation Catarex handpiece that better integrates the "back-end"
plumbing of the Catarex handpiece with its Millenium Surgical platform, but
retains unchanged the "front-end" surgical instrument of the Catarex handpiece
that enters the human eye during surgery. Since the front-end of the
Second-Generation handpiece is unchanged from the First-Generation handpiece,
Bausch & Lomb believes that FDA 510(k)/IDE approval of the First-Generation
Catarex handpiece should streamline FDA approval of the Second-Generation
Catarex handpiece by allowing it to be filed under a straight 510(k) application
scheduled to follow shortly thereafter.
CT-3 Anti-inflammatory/Analgesic Compound
We are developing our proprietary compound CT-3, a patented
synthetic derivative of carboxylic tetrahydrocannabinol (THC-7C), as an
alternative to nonsteroidal anti-inflammatory drugs, or "NSAIDs," such as
aspirin and ibuprofen. Over 130 million Americans suffer from chronic pain and
40 million suffer from arthritis. Worldwide prescription sales of
analgesic/anti-inflammatory drugs exceeded $9 billion in 1999. Preliminary
studies have shown that CT-3 demonstrates analgesic/anti-inflammatory properties
at microgram doses without central nervous system or gastrointestinal side
effects and also reduces joint damage caused by rheumatoid arthritis.
Since CT-3 appears to possess a wide range of therapeutic activity,
we are carefully choosing an indication that we feel CT-3 would be most
efficacious for and one that will strategically allow us to increase the
licensing value of CT-3 in the most timely and cost effective manner. We are
continuing our efforts by conducting additional preclinical tests to study the
analgesic activity of CT-3, particularly with reference to neuropathic pain.
Preliminary results show that CT-3 intraperitoneally dramatically reduces
allodynia in neuropathic rats (with a partial sciatic nerve ligation). We are
planning to initiate shortly a Phase I/II clinical trial of safety,
tolerability, and efficacy to determine the upper limits of safe dosing with
CT-3 and to measure the potential for CT-3 to act as a pain reliever in patients
with neuropathic pain. In addition, we have recently initiated a development
plan for CT-3 to test its efficacy in multiple sclerosis. In an animal model for
multiple sclerosis, CT-3 induced a significant decrease in spasticity,
demonstrated a rapid inhibition of limb stiffness and the effect was relatively
long-lived. The results of the study validated spasticity as a potential
indication for CT-3 use. We are also preparing to conduct Phase II clinical
trials to evaluate the efficacy of CT-3 in multiple sclerosis-associated tremors
and spasticity.
We are continuing to develop CT-3 for use in the treatment of a
variety of indications. In order to significantly increase the potential value
of a sublicensing deal, we have determined to delay sublicensing CT-3, to
suitable strategic partners to assist in clinical development, regulatory
approval filing, manufacturing and marketing of CT-3 until after successful
completion of the Phase II Clinical Trials.
16
CryoComm
In October 2001, we stopped work on CryoComm, a wholly-owned
subsidiary of Atlantic that had been developing superconducting electronics for
Internet packet switching and transport products. CryoComm had developed and
identified all the elements required to demonstrate an ultrafast fiber-optic
packet switch based in superconducting electronics and had been seeking directed
investment of $5 million to fund this demonstration. We have presented this plan
to major global long-haul telecommunications carriers, and although their
responses have been uniformly positive, and although they have encouraged us to
proceed with this development, we have not be able to secure a directed
investment from them or from other private funding sources. Moreover, we
determined that we would be unlikely to secure financing for the foreseeable
future, given the recent dramatic slowdown in planned telecommunication
infrastructure spending, a slowdown that is partially the result of current
overcapacity and an especially harsh economic downward correction in the
telecommunications equipment sector.
Discontinuing work on CryoComm will allow us to focus on our core
life-sciences technologies, although we will continue to prosecute the patents
on this technology. As part of this restructuring, Walter Glomb's position was
eliminated effective October 16, 2001, although Mr. Glomb will receive a 7%
success fee if he is able to secure funding to further develop this technology.
He will also receive a total of $62,500 in severance payments due under his
employment agreement over six months following his termination.
RECENT DEVELOPMENTS
On November 6, 2001, we entered into an agreement with Joseph
Stevens & Company, Inc. in which Joseph Stevens agreed to act as placement agent
for a private placement of shares of our common stock. In that private
placement, the price of each share of our common stock will be $0.24 and the
minimum and maximum subscription amounts will be $2,000,000 and $3,000,000,
respectively. In addition, each investor will receive a warrant to purchase one
share of our common stock for every share of our common stock purchased by that
investor. The warrants will have an exercise price of $0.29 and will be
exercisable for five years from the closing date. In connection with the
offering, we will pay to Joseph Stevens a placement fee equal to 7% of the
aggregate subscription amount plus 10% of the number of shares and warrants
issued to the investors.
We anticipate that proceeds from this private placement will be
sufficient to finance our anticipated needs for operating and capital
expenditures at our current level of operations for at least the next year. We
expect that by November 30, 2001, we will have received commitments for the
minimum aggregate subscription amount and will be able to close this financing.
17
PART II -- OTHER INFORMATION
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
Shares of common stock issued to BH Capital Investments, L.P.
and Excalibur Limited Partnership
On August 1, 2001, we agreed to issue 35,000 shares of our common
stock to each of BH Capital Investments, L.P. and Excalibur Limited Partnership
in return for their commitment to provide us with $3.5 million of financing in
connection with an asset purchase for which we had submitted a bid. We
subsequently issued those shares but ultimately did not purchase those assets.
In issuing these shares, we relied on the exemption from registration provided
by Regulation D of the Securities Act.
Warrants issued to Proteus Capital Corp. for the purchase
of shares of common stock.
On August 9, 2001, we entered into an agreement with Proteus Capital Corp
("Proteus") in which Proteus agreed to assist us with raising additional funds.
Pursuant to this agreement, we granted Proteus warrants to purchase 100,000
shares of our common stock at $0.59 per share, which was the average closing
stock price for the two weeks ending August 17, 2001. The warrants were fully
vested on the date of the agreement and were outstanding at September 30, 2001.
The term of the warrants is five years. In issuing these shares, we relied on
the exemption from registration provided by Regulation D of the Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders
On July 17, 2001, we filed with the Securities and Exchange
Commission a definitive proxy statement seeking stockholder approval of the
following three proposals at the annual meeting of stockholders held on August
8, 2001:
1. RESOLVED, that Frederic P. Zotos, Steve H. Kanzer, Peter O. Kliem
and A. Joseph Rudick be and hereby are re-elected as directors of Atlantic, to
serve until their respective successors are duly elected and qualified.
2. RESOLVED, that the board of directors' selection of KPMG LLP to
serve as Atlantic's independent auditors for the year ending December 31, 2001,
hereby is ratified.
3. RESOLVED, that Atlantic may transact such other business as may
be properly come before the Annual Meeting and any adjournment or adjournments
thereof.
All three proposals were approved by our stockholders. Having
received more than 98% of the 6,187,435 votes cast, Dr. Rudick, Mr. Zotos, Mr.
Kanzer and Mr. Kliem were duly elected. The appointment of KPMG as our auditor
was approved by 6,177,595 votes (or 99.8%) of the 6,187,435 votes cast. The
resolution authorizing us to transact such other business as may properly come
before the annual meeting and any adjournments thereof was approved by 6,022,611
(or 97.3%) of the 6,187,435 votes cast.
Item 5. Other Information
Delisting of Our Securities
As of March 20, 2001, the minimum bid price of our common stock had
been less than $1.00 for 30 consecutive business days. This constituted a
failure on our part to meet Nasdaq's continued inclusion requirement for minimum
bid price.
On March 22, 2001, Nasdaq notified us of this failure, and we had a
period of 90 calendar days from that notice to comply with the continued
inclusion standard for minimum bid price. To do so, we would have had to meet
that standard for a minimum of 10 consecutive business days during the 90-day
compliance period. We failed
18
to do so, and on June 21, 2001, Nasdaq notified us that we would be delisted on
June 29, 2001, unless by June 28, 2001, we requested a hearing before Nasdaq's
Listing Qualifications Panel.
On June 28, 2001, we requested a hearing, and that hearing was held
on August 9, 2001. On August 23, 2001, our securities were delisted from the
Nasdaq Stock Market for failing to meet the minimum bid price requirements set
forth in the NASD Marketplace Rules. Our common stock now trades on the OTC
Bulletin Board under the symbol "ATLC.OB". Delisting of our common stock from
Nasdaq could have a material adverse effect on our ability to raise additional
capital, our stockholders' liquidity and the price of our common stock.
Item 6: Exhibits and Reports on Form 8-K
Exhibits
The following documents are referenced or included in this report.
Exhibit No. Description
- ----------- -----------
3.1(1) Certificate of incorporation of Atlantic, as amended to date.
3.2(1) Bylaws of Atlantic, as amended to date.
3.3(5) Certificate of designations of Series A Convertible Preferred
Stock.
3.4(6) Certificate of increase of Series A Convertible Preferred Stock.
3.5(9) Certificate of designations, preferences and rights of Series B
convertible preferred stock of Atlantic, filed on September 28,
2000.
3. 6(9) Certificate of amendment of the certificate of
designations, preferences and rights of Series B convertible
preferred stock of Atlantic, filed on November 17, 2000.
3.7(10) Certificate of amendment of the certificate of designations,
preferences and rights of Series B convertible preferred stock
of Atlantic, filed on January 9, 2001.
3.8(10) Certificate of amendment of the certificate of designations,
preferences and rights of Series B convertible preferred stock
of Atlantic, filed on January 19, 2001.
4.2(1) Form of unit certificate.
4.3(1) Specimen common stock certificate.
4.4(1) Form of redeemable warrant certificate.
4.5(1) Form of redeemable warrant agreement by and between Atlantic and
Continental Stock Transfer & Trust Company.
4.6(1) Form of underwriter's warrant certificate.
4.7(1) Form of underwriter's warrant agreement by and between Atlantic
and Joseph Stevens & Company, L.P.
4.8(1) Form of subscription agreement by and between Atlantic and the
Selling Stockholders.
4.9(1) Form of bridge note.
4.10(1) Form of bridge warrant.
19
4.11(2) Investors' rights agreement by and among Atlantic, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund.
4.12(2) Common stock purchase agreement by and among Atlantic, Dreyfus
Growth and Value Funds, Inc. and Premier Strategic Growth Fund.
10.2(1) Employment agreement dated July 7, 1995, between Atlantic and
Jon D. Lindjord.
10.3(1) Employment agreement dated September 21, 1995, between Atlantic
and Dr. Stephen R. Miller.
10.4(1) Employment agreement dated September 21, 1995, between Atlantic
and Margaret A. Schalk.
10.5(1) Letter agreement dated August 31, 1995, between Atlantic and Dr.
H. Lawrence Shaw.
10.6(1) Consulting agreement dated January 1, 1994, between Atlantic and
John K. A. Prendergast.
10.8(1) Investors' Rights agreement dated July 1995, between Atlantic,
Dr. Lindsay A. Rosenwald and VentureTek, L.P.
10.9(1) License and assignment agreement dated March 25, 1994, between
Optex Ophthalmologics, Inc., certain inventors and NeoMedix
Corporation, as amended.
10.10(1) License agreement dated May 5, 1994, between Gemini Gene
Therapies, Inc. and the Cleveland Clinic Foundation.
10.11(1)+ License agreement dated June 16, 1994, between Channel
Therapeutics, Inc., the University of Pennsylvania and certain
inventors, as amended.
10.12(1)+ License agreement dated March 28, 1994, between Channel
Therapeutics, Inc. and Dr. Sumner Burstein.
10.13(1) Form of financial advisory and consulting agreement by and
between Atlantic and Joseph Stevens & Company, L.P.
10.14(1) Employment agreement dated November 3, 1995, between Atlantic
and Shimshon Mizrachi.
10.15(3) Financial advisory agreement between Atlantic and Paramount
dated September 4, 1996 (effective date of April 15, 1996).
10.16(3) Financial agreement between Atlantic, Paramount and UI USA dated
June 23, 1996.
10.17(3) Consultancy agreement between Atlantic and Dr. Yuichi Iwaki
dated July 31, 1996.
10.18(3) 1995 stock option plan, as amended.
10.19(3) Warrant issued to an employee of Paramount Capital, LLC to
purchase 25,000 shares of Common Stock of Atlantic.
10.20(3) Warrant issued to an employee of Paramount Capital, LLC to
purchase 25,000 shares of Common Stock of Atlantic.
10.21(3) Warrant issued to an employee of Paramount Capital, LLC to
purchase 12,500 shares of Common Stock of Atlantic.
10.22(4) Letter agreement between Atlantic and Paramount Capital, Inc.
dated February 26,1997.
20
10.23(4) agreement and plan of reorganization by and among Atlantic,
Channel Therapeutics, Inc. and New Channel, Inc. dated February
20, 1997.
10.24(4) Warrant issued to John Prendergast to purchase 37,500 shares of
Atlantic's Common Stock.
10.25(4) Warrant issued to Dian Griesel to purchase 24,000 shares of
Atlantic's Common Stock.
10.26(7) Amendment No. 1 to development & license agreement by and
between Optex and Bausch & Lomb Surgical, Inc. dated September
16, 1999.
10.27(8) Financial advisory and consulting agreement by and between
Atlantic and Joseph Stevens & Company, Inc. dated January 4,
2000.
10.28(8) Warrant No. 1 issued to Joseph Stevens & Company, Inc. to
purchase 150,000 shares of Atlantic's Common Stock exercisable
January 4, 2000.
10.29(8) Warrant No. 2 issued to Joseph Stevens & Company, Inc. to
purchase 150,000 shares of Atlantic's Common Stock exercisable
January 4, 2001.
10.30(8) Warrant No. 3 issued to Joseph Stevens & Company, Inc. to
purchase 150,000 shares of Atlantic's Common Stock exercisable
January 4, 2002.
10.31(9) Preferred stock purchase agreement dated May 12, 2000, between
Atlantic and TeraComm Research, Inc.
10.32(9) Warrant certificate issued May 12, 2000, by Atlantic to TeraComm
Research, Inc.
10.33(9) Stockholders agreement dated May 12, 2000, among TeraComm
Research, Inc., the common stockholders of TeraComm, and
Atlantic.
10.34(9) Registration rights agreement dated May 12, 2000, between
Atlantic and TeraComm Research, Inc. with respect to shares of
TeraComm preferred stock issued to Atlantic.
10.35(9) Registration rights agreement dated May 12, 2000, between
Atlantic and TeraComm Research, Inc. with respect to shares of
Atlantic common stock issued to TeraComm.
10.36(9) Employment agreement dated as of April 10, 2000, between
Atlantic and A. Joseph Rudick.
10.37(9) Employment agreement dated as of April 3, 2000, between Atlantic
and Frederic P. Zotos.
10.38(9) Employment agreement dated as of April 10, 2000, between
Atlantic and Nicholas J. Rossettos, as amended.
10.39(9) Employment agreement dated as of May 15, 2000, between Atlantic
and Walter Glomb.
10.40(9) Employment agreement dated as of April 18, 2000, between
Atlantic and Kelly Harris.
10.41(10) Amendment dated as of July 18, 2000, to the Preferred Stock
Purchase agreement dated May 12, 2000, between Atlantic and
TeraComm Research, Inc.
10.42(10) Convertible preferred stock and warrants purchase agreement
dated September 28, 2000, among Atlantic, BH Capital
Investments, L.P. and Excalibur Limited Partnership.
10.43(10) Registration rights agreement dated September 28, 2000, among
Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
21
10.44(10) Escrow agreement dated September 28, 2000, among Atlantic, BH
Capital Investments, L.P., and Excalibur Limited Partnership.
10.45(10) Form of stock purchase warrants issued on September 28, 2000, to
BH Capital Investments, L.P., exercisable for shares of common
stock of Atlantic.
10.46(10) Form of stock purchase warrants issued on September 28, 2000, to
Excalibur Limited Partnership, exercisable for shares of common
stock of Atlantic.
10.47(10) Amendment No. 1 dated October 31, 2000, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur
Limited Partnership.
10.48(12) Stock repurchase agreement dated December 4, 2000, among
Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.49(14) Letter agreement dated December 28, 2000, among Atlantic and BH
Capital Investments, L.P., and Excalibur Limited Partnership.
10.50(11) Amendment No. 2 dated January 9, 2001, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur
Limited Partnership.
10.51(14) Amendment No. 1 dated January 9, 2001, to registration rights
agreement dated September 28, 2000, among Atlantic and BH
Capital Investments, L.P. and Excalibur Limited Partnership.
10.52(11) Amendment No. 3 dated January 19, 2001, to convertible preferred
stock and warrants purchase agreement dated September 28, 2000,
among Atlantic, BH Capital Investments, L.P., and Excalibur
Limited Partnership.
10.53(14) Letter agreement dated January 25, 2001, among Atlantic and BH
Capital Investments, L.P., and Excalibur Limited Partnership.
10.54(13) Stock repurchase agreement No. 2 dated March 9, 2001, among
Atlantic, BH Capital Investments, L.P., and Excalibur Limited
Partnership.
10.55(15) Common stock purchase agreement dated March 16, 2001, between
Atlantic and Fusion Capital Fund II, LLC.
10.56(15) Warrant certificate issued March 8, 2001 by Atlantic to Dian
Griesel.
10.57(16) Common stock purchase agreement dated as of May 7, 2001, between
Atlantic and Fusion Capital Fund II, LLC.
10.58(16) Form of registration rights agreement between Atlantic and
Fusion Capital Fund II, LLC.
10.59* Asset purchase agreement dated as of January 31, 2001, between
Bausch & Lomb Incorporated, Bausch & Lomb Surgical, Inc., Optex
Ophthalmologics, Inc. and Atlantic (the "January 31 Asset
Purchase Agreement).
10.60* Amendment No. 1 dated March 2, 2001, to the January 31 Asset
Purchase Agreement.
10.61* Asset purchase agreement dated as of April 23, 2001, between
Atlantic, Gemini Technologies, Inc., and IFN, Inc.
21.1(1) Subsidiaries of Atlantic.
22
- ------
+ Confidential treatment has been granted as to certain portions
of these exhibits.
* Filed herewith.
(1) Incorporated by reference to exhibits of Atlantic's registration
statement on Form SB-2, Registration #33-98478, as filed with
the Securities and Exchange Commission (the "SEC") on October
24, 1995 and as amended by Amendment No. 1, Amendment No. 2,
Amendment No.3, Amendment No. 4 and Amendment No. 5, as filed
with the SEC on November 9, 1995, December 5, 1995, December 12,
1995, December 13, 1995 and December 14, 1995, respectively.
(2) Incorporated by reference to exhibits of Atlantic's Current
Report on Form 8-K, as filed with the SEC on August 30, 1996.
(3) Incorporated by reference to exhibits of Atlantic's Form 10-QSB
for the period ended September 30, 1996.
(4) Incorporated by reference to exhibits of Atlantic's Form 10-QSB
for the period ended March 31, 1996.
(5) Incorporated by reference to exhibits of Atlantic's Current
Report on Form 8-KSB, as filed with the SEC on June 9, 1997.
(6) Incorporated by reference to exhibits of Atlantic's Registration
Statement on Form S-3 (Registration No. 333-34379), as filed
with the Commission on August 26, 1997, and as amended by
Amendment No. 1 as filed with the SEC on August 28, 1997.
(7) Incorporated by reference to exhibits of Atlantic Form 10-QSB
for the period ended September 30, 1999.
(8) Incorporated by reference to exhibits of Atlantic's Form 10-KSB
for the period ended December 31, 1999.
(9) Incorporated by reference to exhibits of Atlantic's Form 10-QSB
for the period ended June 30, 2000.
(10) Incorporated by reference to exhibits of Atlantic's Form 10-QSB
for the period ended September 30, 2000.
(11) Incorporated by reference to exhibits of Atlantic's Form 8-K
filed on January 24, 2001.
(12) Incorporated by reference to exhibits of Atlantic's Form 8-K
filed on December 11, 2000.
(13) Incorporated by reference to exhibits of Atlantic's Form 8-K
filed on March 14, 2001.
(14) Incorporated by reference to exhibits of Atlantic's Form 10-KSB
filed on April 17, 2001.
(15) Incorporated by reference to exhibits of Atlantic's Form 10-QSB
for the period ended March 31, 2001.
(6) Incorporated by reference to exhibits of Atlantic's Registration
Statement on Form SB-2 (Registration No. 333-61974), as filed
with the Commission on May 31, 2001, and as amended by Amendment
No. 1 as filed with the SEC on June 29, 2001.
23
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
24
SIGNATURES
In accordance with the requirements of the Exchange Act, Atlantic
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ATLANTIC TECHNOLOGY VENTURES, INC.
Date: November 19, 2001 /s/ Fredric P. Zotos
-----------------------------------
Frederic P. Zotos
President, Chief Executive Officer,
and Director
Date: November 19, 2001 /s/ Nicholas J. Rossettos
-----------------------------------
Nicholas J. Rossettos
Chief Financial Officer
Exhibit 10.59
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of January 31, 2001
(this "Agreement"), by and among BAUSCH & LOMB INCORPORATED, a New York
corporation ("Buyer"), BAUSCH & LOMB SURGICAL, INC., a Delaware corporation and
wholly-owned subsidiary of Buyer ("BLS"), OPTEX OPHTHALMOLOGICS, INC., a
Delaware corporation ("Seller"), and ATLANTIC TECHNOLOGY VENTURES, INC., a
Delaware corporation ("Atlantic").
WHEREAS, Seller, a majority-owned subsidiary of Atlantic, and BLS are
parties to a Development and License Agreement entered into on May 14, 1998, as
amended by Amendment No. 1 to Development and License Agreement dated September
16, 1999 (collectively, the "Development Agreement"), a copy of which is
attached hereto as Exhibit A, pursuant to which the parties reached agreement
relating to the joint development and commercialization by BLS and Seller of the
Catarex Products (as defined in the Development Agreement) on a world wide basis
(the "Project"); and
WHEREAS, Seller, Buyer and BLS wish to terminate the Development
Agreement, and Seller wishes to sell and transfer to B&L, and B&L wishes to
purchase, substantially all of the assets related to the Project, subject to the
terms and conditions of this Agreement
NOW THEREFORE, in consideration of the foregoing premises, the parties
hereto intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, capitalized terms used herein, and not
otherwise defined in this Article 1 or elsewhere herein shall have the meanings
specified in the Development Agreement:
1.1 "Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
1.2 "Affiliate" means any person, group of persons, company or other
enterprise (collectively a "Person") that is controlled by, controls, or is
under common control with, such Person for so long as such control relationship
continues to exist. "Control" as used in this definition means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management of a Person, whether through ownership of voting securities, by
contract or otherwise.
1.3 "Clinical Demonstration" means the clinical trial described in Exhibit
B attached hereto.
1.4 "Encumbrances" means all claims, security interests, liens, pledges,
charges, escrows, options, proxies, rights of first refusal, preemptive rights,
mortgages, hypothecations, prior assignments, title retention agreements,
indentures, security agreements, leases, easements, encumbrances or restrictions
(whether on voting, sale, transfer, disposition or otherwise), whether imposed
by agreement, law, equity or otherwise.
1.5 "Field" means the research and development, manufacture, use,
importation, offer to sell or sale of any product or service related to the
removal of the human lens in connection with cataract surgery.
1.6 "Governmental Entity" means any government or any department,
commission, board, bureau, agency, court, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
1.7 "Indemnified Party" means the party entitled to indemnity
hereunder.
1.8 "Indemnifying Party" means the party obligated to provide
indemnification hereunder.
1.9 "Laws" means all laws, statutes, regulations, constitutional
provisions, ordinances, interpretations, decrees, injunctions, judgments,
orders, rulings, assessments or writs of any Governmental Entity in effect at or
prior to Closing.
1.10 "Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty, fine,
assessment or settlement of any kind or nature, whether foreseeable or
unforeseeable, including, but not limited to, reasonable and documented interest
or other carrying costs, penalties, legal, accounting and other professional
fees and expenses incurred in the investigation, collection, prosecution and
defense of claims, actual or threatened, inquiries, hearings or other legal or
administrative proceedings, and amounts paid in settlement, that may be imposed
on or otherwise incurred or suffered by the specified Person; provided, however,
that "Loss" shall not include any amount that is received by such specified
Person under a valid and collectible insurance policy.
1.11 "Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
1.12 "Permit" means any waiver, exemption, variance, franchise,
certificate of authority, order, permit, authorization, license or similar
approval.
1.13 "Permitted Encumbrances" means (a) liens for Taxes, assessments and
other governmental charges not yet due and payable, (b) immaterial mechanics',
workmen's, repairmen's, warehousemen's, carriers' or other like liens arising or
incurred in the ordinary course of the Project, and (c) other Encumbrances
which, individually or in the aggregate, are not material.
1.14 "Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
2
1.15 "Principal Employees" means John Sorensen, Michael Mittelstein
and Soheila Mirhashami.
1.16 "Royalty Term" means the period commencing with the date of First
Commercial Use and ending upon the expiration of the last to expire United
States Optex Patent.
1.17 "Taxes" means all taxes of any kind imposed by a Governmental Entity
of the United States, and any payments made to another party pursuant to a tax
sharing arrangement, indemnity or other similar arrangement, including, without
limitation, those on, or measured by or referred to as, income, gross receipts,
financial operation, sales, transfer, use, ad valorem, valued added, franchise,
profits, license, withholding, payroll (including all contributions or premiums
pursuant to industry or governmental social security laws or pursuant to other
tax laws and regulations), employment, excise, severance, stamp, occupation,
premium, property, transfer or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
such Governmental Entity with respect to such amounts.
ARTICLE 2
TRANSFER OF THE PROJECT
2.1 Sale and Purchase of Assets. Upon the terms and subject to the
conditions of this Agreement, Buyer shall purchase from Seller and Seller shall
sell, transfer, assign and deliver to Buyer at Closing, all of Seller's interest
in and to the following assets and properties (the "Assets"), free and clear of
any Encumbrances, other than Permitted Encumbrances:
(a) the rights of Seller under contracts and agreements listed on Schedule
2.1(a) attached hereto (the "Assumed Contracts");
(b) all machinery, apparatus, furniture, materials, tools, dies, molds,
supplies and other equipment listed on Schedule 2.1(b) attached hereto
(the "Equipment");
(c) all inventory relating to Catarex Handpieces including, without
limitation, raw materials, work in process, and component parts of Catarex
Handpieces, wherever located (the "Inventory");
(d) all credits, prepaid expenses, advance payments, deposits, deferred
charges, and other current and non-current assets owned by Seller which
relate to the Project, as listed on Schedule 2.1.(d) attached hereto
("Other Current Assets");
(e) all of the intangible property owned by Seller and all of Seller's
interest in any intangible property licensed to Seller that in each case
relates to the Project, including (i) the Optex Patents and other patents
and trademarks (and patent and trademark applications) together with all
divisions, continuations, continuations-in-part, substitutions, reissues,
extensions and foreign counterparts, all as listed on Schedule 2.1(e)
attached hereto (the "Patents and Trademarks"); (ii) all trade names,
trade name licenses and applications, copyrights, copyright licenses and
applications, Know-how, trade secrets, formulae, computer software,
processes, technology, innovations,
3
inventions, (including Optex Inventions) manufacturing drawings,
engineering drawings, product designs and product patterns used or to be
used in connection with the Project and/or necessary or desirable to
complete the Project; (iii) all Permits and other governmental
authorizations necessary to carry on the Project (to the extent such
Permits and authorizations are assignable); and (iv) other intangible
property rights owned by Seller on the Closing Date, to the extent the
foregoing are related to the Project and/or are necessary or desirable to
complete the Project (collectively, the "Intangible Property"); and
(f) all catalogs, product literature, manuals, advertising materials,
promotional materials, supplier lists and other books and records (except
Seller's corporate records) owned by Seller on the Closing Date and which
relate, primarily, to the Project, except to the extent Seller is required
by law to retain the same.
2.2 Excluded Assets. Buyer expressly understands and agrees that all
assets and properties of Seller other than the Assets shall be excluded from
the transactions contemplated hereby.
2.3 Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the time of Closing, to
assume the liabilities and obligations of Seller arising from and after the
Closing Date under the Assumed Contracts (the "Assumed Liabilities"). Except for
the Assumed Liabilities, Buyer is not assuming and shall have no obligation to
discharge, pay, perform or be liable for, any debts, liabilities, claims or
obligations of Seller of any nature whatsoever (including, without limitation,
severance obligations to any employees of Seller), whether absolute or
contingent, known or unknown, direct or indirect, asserted or unasserted on or
after the date hereof.
2.4 Passage of Title and Risk of Loss. Title and risk of Loss with respect
to the Assets shall pass to Buyer at Closing except for those Assets in the
physical possession of Seller which are not located at 27452 Calle Arroyo, San
Juan Capistrano, CA 92675, in which case the risk of Loss shall transfer upon
delivery thereof to Buyer.
ARTICLE 3
PURCHASE PRICE AND PAYMENT
3.1 Purchase Price. The total purchase price for the Assets to be paid to
Seller by Buyer shall be Three Million Dollars ($3,000,000), subject to Section
3.3 below (the "Purchase Price"). All payments by Buyer hereunder shall be made
by electronic transfer to a bank account designated by Seller. One Million
Dollars ($1,000,000) of the Purchase Price shall be creditable against Buyer's
obligation to pay Royalties and Minimum Royalties (as hereinafter defined at
Sections 3.3.2 and 7.4, respectively), at the rate of thirty percent (30%) of
any such Royalties and Minimum Royalties when due.
3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets as determined by Buyer and provided to Seller on
or before Closing.
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3.3 Additional Purchase Price. In addition to the Purchase Price
payable at Closing, Buyer shall pay Seller additional consideration for the
Assets, as follows:
3.3.1 Japanese Regulatory Approval. One Million Dollars
($1,000,000) if and only if Buyer or any Affiliate of Buyer receives Japanese
Regulatory Approval.
3.3.2 Royalties. Buyer shall pay Seller royalties ("Royalties")
during the Royalty Term as follows:
(a) Buyer shall pay Seller 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 Buyer has direct sales and $20,000 where Buyer
sells 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.
(b) Buyer shall pay Seller an additional royalty of three percent
(3%) of 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, as measured by
published Deloitte & Touche (or similar third party surveys if
unavailable) survey 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 ten percent
(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.
(c) Within forty-five (45) days after the end of each calendar
quarter, Buyer, Buyer's Affiliates and/or Buyer's sublicensee(s) as the
case may be, shall pay to Seller the Royalty payment due for such quarter
in U.S. dollars.
(d) 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.
(e) Together with the delivery of each such Royalty payment, Buyer,
Buyer's Affiliates and/or Buyer's sublicensee(s), as the case may be,
shall deliver to Seller a written accounting showing its computation of
Royalties due under this Agreement for
5
such quarter. Such accounting shall set forth gross sales, Net Sales, an
account of the calculation of Net Sales, the exchange rate applied, if
any, and the total Royalties due for the quarter in question.
(f) Buyer 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 payable to Seller hereunder for no less than one
(1) year after the end of each such quarter. Buyer shall permit Seller,
once within any twelve (12) month period, at Seller's expense, to have
such books and records examined by independent certified public
accountants retained by Seller and reasonably acceptable to Buyer, during
regular business hours upon reasonable advance notice, but not later than
one (1) 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 five percent (5%) or more in any amount due to
Seller under this Agreement, Buyer shall reimburse Seller for the
out-of-pocket cost of such examination, including without limitation any
reasonable professional fees and expenses incurred by Seller.
(g) 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 Seller and Buyer.
3.4 Tax. All payments made to Seller by Buyer hereunder are expressed net
of any Taxes that may be payable, and Seller and Buyer shall be jointly
responsible for any Tax payable thereon.
ARTICLE 4
CLOSING
4.1 Closing Date. The closing of the transactions contemplated under
Section 2 (the "Closing") shall take place at such place as agreed between the
parties and as promptly as possible after Seller's performance of its
obligations under Section 8.3.5, subject to satisfaction or waiver of the other
conditions set forth in Article 8 below. The day of Closing shall be referred to
herein as the "Closing Date."
4.2 Closing Deliverables.
4.2.1 Items to be Delivered at the Closing by Seller. At the
Closing, Seller shall deliver or cause to be delivered to Buyer:
(a) Instruments of sale and assignment in form and substance
reasonably satisfactory to Buyer and its counsel evidencing and effecting
the sale and transfer to Buyer of the Assets.
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(b) Deliverables described in Section 8.3 to the extent that any
such deliverables have not been delivered to Buyer as of the Closing Date.
4.2.2 Items to be Delivered at the Closing by Buyer. At the
Closing, Buyer shall deliver to Seller:
(a) The Purchase Price.
(b) Instruments of Assumption in form and substance reasonably
satisfactory to Seller and its counsel evidencing and effecting the
assumption by Buyer of the Assumed Liabilities.
(c) Deliverables described in Section 8.2 to the extent that any
such deliverables have not been delivered to Seller as of the Closing
Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Seller and Atlantic. Seller and
Atlantic represent and warrant to Buyer as of the date hereof (except as
otherwise indicated) as follows:
(a) Organization and Related Matters. Seller is a corporation
duly organized and validly existing under the laws of Delaware. Seller
has all necessary corporate power and authority to execute, deliver and
perform this Agreement.
(b) Authorization; No Conflicts. The execution, delivery and
performance of this Agreement and any agreement related hereto has been
duly and validly authorized by Seller. This Agreement constitutes the
legal, valid and binding obligations of Seller and Atlantic, enforceable
against it in accordance with its terms, except as enforceability is
limited by (1) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally, or (2)
general principles of equity, whether considered in a proceeding in equity
or at law. The execution, delivery and performance by Seller and Atlantic
of this Agreement and transactions contemplated herein will not (i)
conflict with or result in a breach or violation of any term or provision
of, or (with or without notice or passage of time, or both) constitute a
breach or default under, the charter documents or bylaws of Seller or
Atlantic or any Assumed Contract, (ii) result in the imposition of any
Encumbrance against any of the Assets, (iii) violate any applicable Law,
or (iv) violate any Order of any Governmental Entity. The execution,
delivery and performance by Seller and Atlantic of this Agreement and the
transactions contemplated hereby will not require filing or registration
with, or the issuance of any Permit by, any third party or Governmental
Entity under the terms of any applicable Law or contracts to which Seller
is a party.
(c) Title to and Condition of the Assets. Seller has, and is
conveying to Buyer under this Agreement, good and marketable title to the
Assets, and such Assets are free and clear of all Encumbrances except
Permitted Encumbrances. Seller has all right, power and authority to sell,
convey, assign, transfer and deliver the Assets to Buyer in
7
accordance with the terms of this Agreement. The Equipment has been
regularly and appropriately maintained and repaired in accordance with the
manufacturers' specifications, except where failure to do so would not
reasonably be expected to have a material adverse effect on the Equipment,
and is in good condition and repair (normal wear and tear accepted). Any
machinery, apparatus, materials, tools, dies, molds or supplies of Seller
upon which successful completion of the Project depends is included in the
Equipment.
(d) No Other Liabilities or Contingencies. Except for the Assumed
Liabilities and the costs referred to in Section 6.5, Seller has no
liabilities of any nature, whether accrued, unmatured, absolute,
contingent or otherwise, and whether due or to become due, probable of
assertion or not, relating to the Project.
(e) Legal Proceedings. There is no Action pending or, to the
knowledge of Seller, threatened in writing, against or affecting Seller,
the Assets or any aspect of the Project that individually or when
aggregated with one or more other Actions has or might reasonably be
expected to have a material adverse effect on the Project, the Assets (or
the use, operation or value thereof), the Assumed Contracts, Seller's
ability to perform this Agreement or any aspect of the transactions
contemplated by this Agreement. There is no Order to which Seller is
subject that has or might reasonably be expected to have a material
adverse effect on the Project, the Assets (or the use, operation or value
thereof), the Assumed Contracts, Seller's ability to perform this
Agreement or any aspect of the transactions contemplated by this
Agreement.
(f) Compliance. Since January 1, 1998, the Seller has
conducted the Project in material compliance with applicable Laws.
(g) Permits. Seller holds all Permits that are required by any
applicable Law to permit it to conduct the Project as now conducted and
use the Assets as they are now used, except for Permits the absence of
which would not reasonably be expected to have a material adverse effect
on the Project, and all such Permits are valid and in full force and
effect and are listed on Schedule 5.1(g) attached hereto. No suspension,
cancellation or termination of any of such Permits is threatened or
imminent.
(h) Assumed Contracts. Each Assumed Contract was entered into in the
ordinary course of the Project and on an arms-length basis. Copies of the
Assumed Contracts, including all amendments and supplements, have been
delivered to Buyer. Each Assumed Contract is valid and binding and, except
as disclosed on Schedule 5.1(h) attached hereto, upon assignment by Seller
pursuant to this Agreement, will be enforceable by Buyer, without the
requirement of any third party consent, except as enforceability is
limited by (1) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally, or (2)
general principles of equity, whether considered in a proceeding in equity
or at law. Other than the Assumed Contracts, Seller is not a party to any
contracts or agreements that are material to the Project.
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(i) Intangible Property. Other than the Patents and Trademarks,
Seller has no interest in any patents and trademarks (or patent and
trademark applications) that relate to the Project. Seller has ownership
of, and the right to assign, free and clear of any Encumbrances, all the
Intangible Property, the absence of which would have a material adverse
effect on the Project. Seller does not use any of the Intangible Property
by consent of any Person and is not required to and does not make any
payments to others with respect thereto. Seller has in all material
respects performed all obligations required to be performed by it, and
Seller is not in default in any material respect under any Assumed
Contract relating to any of the Intangible Property. Seller has not
received any notice to the effect (or are not otherwise aware) that the
Intangible Property, or any use by Seller in connection with the Project
of any of the Intangible Property, conflicts with or infringes (or
allegedly conflicts with or infringes) the rights of any other Person.
Other than disclosure in connection with the prosecution of any patent
applications, Seller has maintained the Optex Inventions and Know-How in
confidence and has not disclosed the same to any third party without that
third party being under an obligation to maintain the confidential nature
of the Optex Inventions and Know-How.
(j) Inventory. All Inventory as of the Closing Date is set forth on
Schedule 5.1(j) attached hereto, and each item is in good condition,
conforms to applicable specifications and may be used for the purposes
intended.
(k) Corporate Opportunities. Other than in connection with the
Project, neither Seller, Atlantic nor, to the knowledge of Seller or
Atlantic, any of the Principal Employees is engaged, directly or
indirectly, through an ownership interest or in some other capacity, in
the research, development, production, marketing or selling of products or
services within the Field and/or utilizing Know-How or Optex Inventions.
5.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as of the date hereof (except as otherwise indicated) as follows:
(a) Organization and Related Matters. Buyer is a corporation duly
organized and validly existing under the laws of New York. Buyer has all
necessary corporate power and authority to conduct its business as now
conducted. Buyer has the necessary corporate power and authority to
execute, deliver and perform this Agreement and any agreement related
hereto. BLS is a corporation duly organized and validly existing under the
laws of Delaware. BLS has all necessary corporate power and authority to
conduct its business as now conducted. BLS has the necessary corporate
power and authority to execute, deliver and perform this Agreement and any
agreement related hereto.
(b) Authorization; No Conflicts. The execution, delivery and
performance of this Agreement and any agreement related hereto has been
duly and validly authorized by Buyer and BLS. This Agreement constitutes
the legal, valid and binding obligations of Buyer and BLS, enforceable
against each of them in accordance with its terms. The execution, delivery
and performance of this Agreement by Buyer and BLS will not (i) conflict
with or result in a breach or violation of any term or provision of, or
(with or without notice or passage of time, or both) constitute a breach
or default under, the respective charter documents or bylaws of Buyer and
BLS, (ii) any contract to which
9
Buyer or BLS is a party that is material to the financial condition,
results of operations or conduct of Buyer's or BLS's business,
respectively, (iii) violate any applicable Law, or (iv) violate any Order
of any Governmental Entity. The execution, delivery and performance by
Buyer and BLS of this Agreement and the transactions contemplated hereby
will not require filing or registration with, or the issuance of any
Permit by, any third party or Governmental Entity under the terms of any
applicable Law or contracts to which Buyer or BLS is a party.
(c) Legal Proceedings. There is no Action pending or, to the
knowledge of Buyer, threatened in writing, against or affecting Buyer or
BLS that individually or when aggregated with one or more other Actions
has or might be reasonably be expected to have a material adverse effect
on any aspect of the transactions contemplated by this Agreement, and
there is no Order to which Buyer or BLS is subject that has or might
reasonably be expected to have a material adverse effect on any aspect of
the transactions contemplated by this Agreement.
5.3 Survival of Representations and Warranties. The representations and
warranties contained in or made pursuant to this Agreement shall survive Closing
and expire on December 31, 2002.
ARTICLE 6
CONDUCT OF PROJECT
During the period from the date of this Agreement and continuing until the
Closing Date, Seller agrees as follows:
6.1 Regular Course of Business. Except as otherwise provided herein,
Seller agrees to carry on its business in its usual, regular and ordinary course
in substantially the same manner as heretofore conducted, and, to the extent
consistent with such business, use all reasonable efforts to preserve intact its
present business organization, keep available the services of the Principal
Employees, and preserve its relationships with others having business dealings
with Seller.
6.2 Insurance. Seller will maintain in effect all insurance currently
maintained or renew such insurance with reasonably comparable policies then
available.
6.3 No Defaults. Seller will not commit, omit or permit any act or
omission to act, that will cause a breach of any material contract or
commitment.
6.4 Compliance With Laws. Seller will comply with the requirements of all
applicable Laws, rules, regulations and orders of any Governmental Entity
noncompliance with which would have a material adverse effect on the business,
properties, assets, operations or condition (financial or otherwise) of Seller.
10
6.5 Catarex Handpieces.
(a) Seller agrees to exercise its best efforts to produce and
deliver to Buyer 2400 Catarex Handpieces conforming to the applicable
specifications as soon as commercially practicable. Seller agrees that,
notwithstanding anything contained in the Development Agreement to the
contrary, Buyer shall have no remaining obligation under the Development
Agreement other than (i) an obligation to pay Seller an amount equal to
the sum of 125% of (x) costs (as defined at Section 4.6.2 of the
Development Agreement) incurred by Seller since December 31, 2000 in
connection with the production of 2400 Catarex Handpieces and (y)
$36,153.43; provided, however, that in no event shall Buyer be responsible
for paying Seller an aggregate amount of such costs in excess of
$772,442.57, and (ii) subject to Seller's obligation to exercise diligent
efforts to cancel any open purchase orders pertaining to Phase II, those
costs (as defined at Section 4.6.2 of the Development Agreement) incurred
by Seller in connection therewith, but in no event shall Buyer be
responsible for paying Seller any amounts in excess of $381,375.22.
(b) Seller shall provide Buyer with a written report and invoice of
all costs (as defined at Section 4.6.2 of the Development Agreement)
incurred by Seller during the month of January, 2001 in connection with
the production of 2400 Catarex Handpieces along with any supporting
documentation Buyer reasonably requests. Subject to Section 4.6.3 of the
Development Agreement, Buyer agrees to pay to Seller within three (3)
business days of receipt from Seller of that written report and invoice an
amount equal to 125% of (x) such costs and (y) $36,153.43 (collectively,
the "January Invoice Amount"); provided, however, that Buyer shall not be
responsible for paying Seller any portion of the January Invoice Amount
which exceeds $610,879.39 (the "January Invoice Ceiling"), except as
provided for in Section 6.5(c).
(c) Subject to the limitation described in Section 6.5(a), following
Buyer's receipt of 2400 Catarex Handpieces which conform to the
specifications then in effect, Seller shall submit (i) monthly invoices to
Buyer for 125% of costs (as defined in Section 4.6.2 of the Development
Agreement) incurred after January 31, 2001 in connection with the
production of 2400 Catarex Handpieces and (ii) an invoice for an amount
equal to the January Invoice Amount minus the January Invoice Ceiling. All
such invoices shall be payable within three (3) business days of receipt
by Buyer, subject to all of the terms and conditions of Section 4.6.3 of
the Development Agreement;
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ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Access to Information. Seller will on reasonable advance notice afford
to Buyer and to Buyer's accountants, counsel and other representatives,
(provided that each such person shall sign a visitor's confidentiality agreement
in form and substance reasonably acceptable to Seller) reasonable access during
normal business hours during the period prior to the Closing Date to all
properties, books, documents and records relating to Seller and the Project, and
Seller will use their reasonable efforts to furnish promptly to Buyer all
information concerning the business, properties and personnel of Seller as Buyer
may reasonably request.
7.2 Additional Agreements; Further Actions. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals, to
give all notices and to effect all necessary registrations and filings. If at
any time after the Closing Date any further action is necessary or desirable to
carry out the purposes of this Agreement, Seller and Buyer will use their
reasonable efforts to take such action.
7.3 Notice of Developments. Seller will give prompt written notice to
Buyer, and Buyer will give prompt written notice to Seller, of any adverse
development causing a breach of any representations and warranties of Seller and
Buyer, respectively, hereunder.
7.4 Minimum Royalties. Buyer agrees that, notwithstanding anything
contained in Section 3.3.2 to the contrary, during the three (3) year period
commencing on the earlier to occur of January 1, 2004 or First Commercial Use,
Buyer shall pay to Seller Royalties in the following amounts, subject to the
credit described in Section 3.1 hereof (the "Minimum Royalties"); it being
understood and agreed that any Royalties that accrue upon Net Sales and are paid
under Section 3.3.2 during the following periods shall be credited to Buyer's
obligation to pay Minimum Royalties for such periods:
First 12 months $90,000.00
Second 12 months $350,000.00
Third 12 months $750,000.00
Notwithstanding the foregoing, in the event that Buyer fails in whole or in part
to satisfy its obligation to pay Seller the Minimum Royalties within the
forty-five (45) day period following each twelve (12) month period, and without
regard as to whether such Minimum Royalties accrued based upon Net Sales under
Section 3.3.2, Seller shall be entitled to receive, and Buyer shall grant to
Seller, a fully paid, nonexclusive, sub-licensable license of the Optex Patents
and Know-How. Seller agrees that Buyer's grant of such license shall fully
discharge and satisfy its obligations to pay Seller the Minimum Royalties, and
Seller agrees to accept such license as Seller's sole and exclusive remedy
against Buyer for its failure to satisfy the Minimum Royalties.
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7.5 Restrictive Covenant.
7.5.1 Restrictions on Activities. As an inducement to Buyer to enter
into this Agreement, Seller and Atlantic agree that for a period of two (2)
years after the Closing Date, Seller and Atlantic will not, directly or
indirectly, for their own benefit or as agent for another, carry on or
participate in any activities within the Field or otherwise render services to
any other business enterprise within the Field.
7.5.2 Special Remedies and Enforcement. Seller and Atlantic
recognize and agree that a breach by Seller and Atlantic of the covenant set
forth in Section 7.5.1 could cause irreparable harm to Buyer, that Buyer's
remedies at law in the event of such breach would be inadequate, and that,
accordingly, in the event of such breach a restraining order or injunction or
both may be issued against Seller and Atlantic, in addition to any other rights
and remedies which are available to Buyer. If the remedies provided for in this
Section 7.5.2 are not permitted by the Laws of any jurisdiction in which Buyer
seeks enforcement hereof, this Section 7.5.2 shall be limited to the extent
required to permit enforcement under such Laws.
7.6 Nondisclosure of Proprietary Data. Neither Buyer or BLS (prior to
Closing), Seller, Atlantic nor any of their respective representatives shall, at
any time, make use of, divulge or otherwise disclose, directly or indirectly,
any confidential Intangible Property.
7.7 Abandonment of the Project. If at any time prior to or following First
Commercial Use, Buyer provides written notice to Seller of its election to
abandon the Project ("Abandonment"), Seller shall have the option to re-acquire
the Assets (the "Re-Acquired Assets") from Buyer upon entering into a bona fide
agreement with an unaffiliated third party ("Third Party") under which a Third
Party agrees to commercialize a Catarex Product. In the event that Seller wishes
to exercise said option, Seller shall deliver to Buyer a written notice of
election and the parties shall agree on a time and place for a closing of the
transaction. In connection with such closing, Seller shall agree in writing to
pay Buyer a purchase price for the Re-Acquired Assets equal to the aggregate
payments received by Seller from Buyer under Sections 3.1, 3.3.1 and 7.4 hereof
(minus, in the case of Section 7.4, Royalties accrued and paid upon Net Sales
under Section 3.3.2); provided that Seller shall be entitled to pay Buyer at the
rate of fifty percent (50%) of any and all amounts received from such Third
Party as and when such amounts are received by Seller. Notwithstanding the
foregoing, an Abandonment shall be deemed to have occurred if (i) Buyer fails to
satisfy any of the following milestones or (ii) ceases selling Catarex Products
after First Commercial Use:
(a) Completion by March 31, 2002 of a clinical study designed by
Buyer to assess the functionality of the Catarex Handpiece in human
cataract surgery.
(b) Production by January 31, 2003 of a prototype Catarex Handpiece
(the "Redesigned Catarex Handpiece") that satisfies Buyer's manufacturing
cost specifications.
(c) Completion of a Clinical Demonstration using the Redesigned
Catarex Handpiece by June 30, 2003.
13
(d) Submission of 510(k) for the Redesigned Catarex Handpiece
by September 30, 2003.
In the event that Seller fails to satisfy the condition contained in Section
8.3.5 hereof by February 28, 2001 (the "Delivery Date"), the foregoing milestone
completion dates shall be extended by one (1) day for each day that passes after
the Delivery Date until the condition contained in Section 8.3.5 hereof is
satisfied.
7.8 Patent Prosecution and Maintenance. From and after Closing until the
earlier of (i) consummation of any purchase of the Re-Acquired Assets pursuant
to Section 7.7 or (ii) six (6) months following an Abandonment, Buyer shall, at
its expense, prosecute and maintain the Optex Patents in Key Markets. Schedule
7.8 attached hereto constitutes a restated and amended version of Exhibit B to
the Development Agreement.
7.9 Standstill. Atlantic and Seller agree not to offer for sale or
participate in negotiations, discussions or due diligence with respect to the
sale of Seller or the Assets for a period of ninety (90) days following December
28, 2000.
7.10 Right of First Negotiation. Seller hereby grants to Buyer a first
right to negotiate ("First Right of Negotiation") an agreement to manufacture,
license, distribute and/or sell (collectively, to "Commercialize") any product
or service developed by Seller related to cataract surgery outside of the Field
(a "New Product"). If at anytime following Closing, Seller intends to
Commercialize any New Product, Seller shall first give written notice
("Negotiation Notice") to Buyer of its intention. Buyer will have a period of
ninety (90) days following the receipt of the Negotiation Notice to conduct a
due diligence investigation relating to any such New Product and to notify
Seller in writing of Buyer's election to exercise its First Right of Negotiation
("Notice of Election"). Upon timely delivery of the Notice of Election by Buyer,
the parties shall, for a period of not less than ninety (90) days (the
"Negotiation Period") negotiate in good faith the terms and conditions of a
definitive agreement, which agreement shall contain terms and conditions
generally contained in agreements of such type. If the parties are unable to
reach an agreement and execute such definitive agreement during the Negotiation
Period, Seller may negotiate and execute an agreement with any third party to
Commercialize such New Product; provided, however, that for a period of twelve
(12) months following the expiration of the Negotiation Period, Seller shall not
(except with the prior written consent of Buyer) enter into an agreement to
Commercialize such New Product on more favorable terms and conditions than those
last offered in writing to Seller by Buyer during the Negotiation Period. In the
event that Seller fails to enter into an agreement with a third party to
Commercialize such New Product within a period of twelve (12) months following
the expiration of the Negotiation Period, Seller shall be required to offer
Buyer another First Right of Negotiation with respect thereto, and the foregoing
process shall be repeated.
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ARTICLE 8
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation. The obligations of Seller and
Buyer to consummate the closing of the transactions contemplated hereby are
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions:
8.1.1 No Injunctions; Orders. No Order shall have been issued by any
Governmental Entity nor shall any Law be promulgated or enacted by any
Governmental Entity that prevents the consummation of the transactions
contemplated hereby.
8.1.2 No Litigation. No action or proceeding before any Governmental
Entity shall be pending against Seller or Buyer seeking to prevent or delay the
transactions contemplated hereby or challenging any of the terms or provisions
of this Agreement or seeking material damages in connection therewith.
8.2 Conditions to Seller's Obligations. The obligations of Seller to
consummate the closing of the transactions contemplated hereby are subject to
the satisfaction on or prior to the day of Closing, of the following conditions,
in addition to the other required deliveries:
8.2.1 Representations and Warranties True. The representations and
warranties of Buyer shall be in all material respects true and correct as of the
Closing Date as though such representations and warranties were made at and as
of such date, except for changes expressly permitted or contemplated by this
Agreement.
8.2.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
8.2.3 Rudick Consulting Agreement. Buyer shall have executed and
delivered a consulting and non-competition agreement with A. Joseph Rudick,
Jr., M.D., ("Rudick") which shall provide for a term that expires upon the
earlier to occur of (i) abandonment of the Project by Buyer, (ii) three (3)
years or (iii) First Commercial Use, at the rate of $5,000.00 per month.
8.3 Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the closing of the transactions contemplated hereby are subject to
the satisfaction on or prior to the date of Closing, of the following
conditions, in addition to the other required deliveries:
8.3.1 Representations and Warranties True. The representations and
warranties of Seller shall be in all material respects true and correct as of
the Closing Date as though such representations and warranties were made at and
as of such date, except for changes expressly permitted or contemplated by this
Agreement.
8.3.2 Performance. Seller shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by Seller on or prior to the
Closing Date.
15
8.3.3 Professional Services Agreement. Neomedix, Inc.
("Neomedix") shall have executed and delivered to Buyer a Professional
Services Agreement in form and substance reasonably satisfactory to Buyer
under which Neomedix shall (i) make available to Buyer the services of the
Principal Employees, (ii) grant to Buyer a First Right of Negotiation with
respect to New Products developed by Neomedix and (iii) agree to a covenant
of a non-competition in the Field for a period of two (2) years after the
Closing Date.
8.3.4 Assignment of Know-How and Inventions. Each of the Principal
Employees shall have assigned to Buyer any Optex Inventions or Know-How in their
possession or subject to their control pursuant to an Assignment of Know-How and
Inventions Agreement in form and substance reasonably satisfactory to Buyer and
its counsel.
8.3.5 Delivery of Catarex Handpieces. Seller shall have
delivered to Buyer 2400 Catarex Handpieces which conform to the
specifications then in effect.
8.3.6 Board Approval. The transactions contemplated hereby shall
have received approval of the Buyer's Board of Directors.
8.3.7 Consents. Any consents necessary to effect the transfer by
Seller to Buyer of any of the Assets shall have been obtained in writing.
8.3.8 Due Diligence. Buyer shall not, in the course of its on-going
due diligence investigation, have discovered information not previously
disclosed by Seller or Atlantic that Buyer reasonably believes has or is likely
to have a material adverse effect on the Assets and/or the viability of the
Project.
ARTICLE 9
TERMINATION
9.1 Grounds for Termination. This Agreement may be terminated at any time
prior to the Closing Date in accordance with the following provisions:
9.1.1 Mutual Consent. This Agreement may be terminated by the
written agreement of Buyer and Seller.
9.1.2 Breach of Warranties or Covenants; Misrepresentation. This
Agreement may be terminated as follows:
(a) by Buyer if any representation of Seller and Atlantic set forth
in this Agreement was materially inaccurate when made or becomes
inaccurate such that the condition set forth in Section 8.3.1 would not be
satisfied;
(b) by Seller if any representation of Buyer set forth in this
Agreement was materially inaccurate when made or becomes inaccurate such
that the condition set forth in Section 8.2.1 would not be satisfied;
16
(c) by Buyer if Seller, after written notice and reasonable
opportunity to cure, fails to perform or comply with any of the
obligations that it is required to perform or to comply with under this
Agreement such that the condition set forth in Section 8.3.2 would not be
satisfied; and
(d) by Seller if Buyer, after written notice and reasonable
opportunity to cure, fails to perform or comply with any of the
obligations that it is required to perform or to comply with under this
Agreement such that the condition set forth in Section 8.2.2 would not be
satisfied.
9.1.3 Expiration Date. This Agreement may be terminated by Buyer or
Seller if the Closing shall not have been consummated on or before March 30,
2001, except that the right to terminate this Agreement pursuant to this Section
9.1.3 will not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or prior to that date.
9.2 Waiver. Either party hereto may, to the extent legally allowed:
(i) extend the time for the performance of any of the obligations
or other acts of the other parties;
(ii) waive any inaccuracies in the representations and warranties
made by the other party; or
(iii) waive compliance with any of the agreements or conditions for
the benefit of such party. No such agreement shall be effective unless it is in
writing and it is signed by the parties to be bound.
9.3 Effective Termination. Upon the termination of this Agreement pursuant
to Section 9.1, all further obligations of the parties under this Agreement
shall terminate without further liability of any party to the other.
ARTICLE 10
INDEMNIFICATION
10.1 Obligations of Seller and Atlantic. Seller and Atlantic agree to
indemnify and hold harmless Buyer and its directors, officers, employees,
Affiliates, agents, representatives and assigns, from and against any and all
Losses of Buyer, directly or indirectly, as a result of, in connection with, or
based upon or arising from any of the following: (a) any inaccuracy in any of
the representations made by Atlantic and Seller in this Agreement or breach or
non-performance of any of the obligations of Seller and Atlantic pursuant to
this Agreement; and (b) any liabilities not expressly assumed by Buyer pursuant
to Section 2.3. Seller agrees to reimburse the Indemnified Party promptly upon
demand for any unreimbursed payment made or Loss suffered by such Indemnified
Party at any time after the Closing Date in respect of any Loss to which the
foregoing indemnity relates. Notwithstanding anything contained in this Section
10.1 to the contrary, Seller and Atlantic shall not be liable for any indemnity
amounts in respect of Losses under this Section 10.1 (excluding Losses resulting
from a breach of any monetary obligation, or any intentional breach of any
non-monetary obligation, to Buyer which, in the case of non-monetary
obligations, remains uncured after reasonable notice) unless the amount of such
Losses exceeds $100,000 in the aggregate, in which event Seller and Atlantic
shall indemnify and hold harmless Buyer and its directors, officers, employees,
Affiliates, agents, representatives and assigns from and against all Losses that
exceed $100,000. The obligations of Seller and Atlantic to indemnify Buyer for
Losses incurred pursuant to this Section 10.1 (excluding Losses resulting from a
breach of any
17
monetary obligation, or any intentional breach of any non-monetary obligation,
to Buyer which, in the case of non-monetary obligations, remains uncured after
reasonable notice) shall be limited to an aggregate maximum amount equal to the
Purchase Price, including the additional consideration described in Section 3.3.
10.2 Obligations of Buyer. Buyer agrees to indemnify and hold harmless
Seller and its directors, officers, employees, Affiliates, agents,
representatives and assigns from and against any and all Losses of Seller,
directly or indirectly, as a result of, in connection with, or based upon or
arising from any of the following: (a) any inaccuracy in any of the
representations made by Buyer in this Agreement or breach or non-performance of
any of the obligations made by Buyer in or pursuant to this Agreement; and (b)
any product liability actions relating to the Project which may arise following
Closing except to the extent attributable to the acts or omissions of Seller or
Atlantic. Buyer agrees to reimburse the Indemnified Party promptly upon demand
for any unreimbursed payment made or Loss suffered by the Indemnified Party at
any time after the Closing Date in respect of any Loss to which the foregoing
indemnity relates
10.3 Procedure.
(a) Notice of Loss. The Indemnified Party under Sections 10.1 and
10.2 above with respect to any Loss shall give prompt notice thereof to
the Indemnifying Party.
(b) Defense. In the event any Person not a party to this Agreement
shall make a demand or claim or file or threaten to file or continue any
lawsuit, which demand, claim or lawsuit may result in liability to an
Indemnified Party in respect of matters embraced by the indemnity under
this Agreement, or in the event that a potential Loss, damage or expense
comes to the attention of Buyer or Seller in respect of matters covered by
the indemnity under this Agreement, then the party receiving notice or
becoming aware of such event shall promptly notify the other party of the
demand, claim or lawsuit. Within ten days after notice by the Indemnified
Party (the "Notice") to the Indemnifying Party of such demand, claim or
lawsuit, except as provided in the next sentence, the Indemnifying Party
shall have the option, at its sole cost and expense, to retain counsel for
the Indemnified Party to defend any such demand, claim or lawsuit,
provided that counsel who will conduct the defense of such demand, claim
or lawsuit must be approved by the Indemnified Party, whose approval will
not be unreasonably withheld. The Indemnified Party shall have the right,
at its own expense, to participate in the defense of any suit, action or
proceeding brought against it with respect to which indemnification may be
sought hereunder; provided, however, if (i) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties by the
same counsel would be
18
inappropriate due to actual or potential differing interests between them,
(ii) the employment of counsel by such Indemnified Party has been
authorized in writing by the Indemnifying Party, or (iii) the Indemnifying
Party has not in fact employed counsel to assume the defense of such
action within a reasonable time; then, the Indemnified Party shall have
the right to retain its own counsel at the sole cost and expense of the
Indemnifying Party, which costs and expenses shall be paid by the
Indemnifying Party on a current basis. No Indemnified Party, in the
defense of any such demand, claim or lawsuit, will consent to entry of any
judgment or enter into any settlement without the consent of the
Indemnifying Party. If any Indemnified Party is advised by its chosen
counsel that there may be one or more legal defenses available to such
Indemnified Party which are different from or in addition to those which
have been asserted by the Indemnifying Party, at the election of the
Indemnified Party, the Indemnifying Party will have the right to continue
the defense of such demand, claim or lawsuit on behalf of such Indemnified
Party and will reimburse such Indemnified Party and any Person controlling
such Indemnified Party on a current basis for the reasonable fees and
expenses of any counsel retained by the Indemnified Party under this
subparagraph (b) to undertake the defense. In the event that the
Indemnifying Party shall fail to respond within ten days after receipt of
the Notice, the Indemnified Party may retain counsel and conduct the
defense of such demand, claim or lawsuit, as it may in its sole discretion
deem proper, at the sole cost and expense of the Indemnifying Party, which
costs and expenses shall be paid by the Indemnifying Party on a current
basis. Failure to provide Notice shall not limit the rights of such party
to indemnification, except to the extent the Indemnifying Party's defense
of the action is actually prejudiced by such failure.
10.4 Notice by the Parties. Buyer and Seller agree to notify the other of
any liabilities, claims or misrepresentations, breaches or other matters covered
by this Section 10 upon discovery or receipt of notice thereof (other than from
the other party).
10.5 Survival. This Section 10 shall survive Closing and shall remain in
effect until any matter as to which a claim has been asserted by notice to the
other party shall is finally terminated or otherwise resolved by the parties or
by a court of competent jurisdiction and any amounts payable hereunder are
finally determined and paid.
10.6 Time Limitations. If the Closing occurs, Seller and Atlantic will
have no liability with respect to any representation made by them in, or any
obligation to be performed or complied with by them prior to the Closing Date
pursuant to, this Agreement except to the extent that on or before December 31,
2002, Buyer notifies Seller and Atlantic of a claim with respect thereto,
specifying the factual basis of that claim in reasonable detail.
10.7 Exclusive Remedy. Each party agrees that its sole and exclusive
remedy with respect to any and all claims for monetary damages arising under
this Agreement is pursuant to the indemnification provisions set forth in this
Article 10.
19
ARTICLE 11
TERMINATION OF DEVELOPMENT AGREEMENT
Effective as of the Closing, the Development Agreement shall be
terminated, cancelled and released in all respects, and all of the respective
rights, duties, obligations and liabilities of the parties thereunder shall be
terminated, cancelled and released in all respects and shall be of no further
force of effect. From and after the Closing Date, no party to the Development
Agreement shall have any duty, liability or responsibility whatsoever for the
payment of any amount or the performance of any obligations thereunder.
ARTICLE 12
GENERAL PROVISIONS
12.1 Amendment and Waiver. Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by Buyer, Atlantic and Seller, or in the case of a
waiver, by the party or parties against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
any other right, power or privilege.
12.2 Headings. The headings in this Agreement are for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
12.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other parties hereto.
12.4 Parties in Interest. This Agreement will be binding upon and inure to
the benefit of each party, and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Nothing in this Agreement is
intended to relieve or discharge the obligation of any third person to any party
to this Agreement.
12.5 Notices. Any notice or other communication hereunder must be given in
writing and either (a) delivered in person, (b) transmitted by telefacsimile,
provided that any notice so given is also mailed as provided in clause (c), or
(c) mailed, postage prepaid, as follows:
20
If to Buyer Bausch & Lomb Surgical, Inc.
or BLS: 3365 Industrial Tree Court Blvd.
St. Louis, MO 63122
Attn: Ash Mahmood,
Vice President, Design and Development
Fax: 636-226-3150
With a copy to: Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, NY 14604
Attn: Senior Vice President and
General Counsel
Fax: 716-338-8706
If to Atlantic Atlantic Technology Ventures, Inc.
or Seller: 150 Broadway
Suite 1009
New York, New York 10038
Attn: Frederic P. Zotos, Esq.
President
With a copy to: Kramer Levin Naftalis & Frankel, LLP
919 3rd Ave
New York, NY 10022
Attn: Ezra G. Levin, Esq.
Fax: 212-715-8000
or to such other address or to such other person as any party shall have last
designated by notice to the other parties. Each such notice or other
communication shall be effective (i) if given by mail, three days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, (ii) if given by telefacsimile, when transmitted to the
applicable number so specified pursuant to this Section 12.5 provided that
appropriate confirmation of receipt is generated by the telefacsimile and a
duplicate copy is mailed, postage prepaid, or (iii) if given by any other means,
when actually delivered at such address.
12.6 Expenses. Each party shall each pay its own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby.
12.7 Assignments. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted
21
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party without the prior written consent of
the other parties, except that (i) Buyer may assign its rights and obligations
to any entity that controls, is controlled by or is under common control with
Buyer on condition that it remains liable for any failure of that entity to
perform any of its obligations under this Agreement, and (ii) any party may
assign its rights and obligations under this Agreement to any entity (other than
a competitor of Buyer within the Field) which acquires substantially all of the
assets of that party or survives any merger with that party. Nothing contained
herein, express or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
12.8 Remedies. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available
under applicable Laws.
12.9 Representation By Counsel; Interpretation. The parties each
acknowledge that each party to this Agreement has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party or
parties that drafted it has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of the parties.
12.10 Severability. If any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. It is the
intention of the parties that if any of the restrictions or covenants contained
herein in any way is construed to be too broad or to any extent invalid, if
legally possible such provision shall not be construed to be null, void and of
no effect but, to the extent such provision would be valid or enforceable under
applicable Laws, a court of competent jurisdiction shall construe and interpret
or reform such provision to the extent necessary to make it valid and
enforceable under such applicable Laws.
12.11 Publicity and Reports. The parties will coordinate all publicity
relating to the transactions contemplated by this Agreement, and the parties
will not issue any press release, publicity statement or other public notice
relating to this Agreement, or the transactions contemplated by this Agreement,
without consulting with the other parties except to the extent that independent
legal counsel to any party delivers a written opinion to the other parties to
the effect that a particular action may be required by applicable Law, in which
event the party taking the particular action will give reasonable notice to the
other parties and will consult with such other parties regarding such action.
12.12 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation, effect, construction and performance by
the laws of New York.
12.13 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated
herein.
22
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed as of the date first above written.
BAUSCH & LOMB INCORPORATED
By: /s/ Stephen C. Mcluski
-----------------------------------------
Name: Stephen C. Mcluski
Title: Senior Vice President and
Chief Financial Officer
BAUSCH & LOMB SURGICAL, INC.
By: /s/ Stephen C. Mcluski
-----------------------------------------
Name: Stephen C. Mcluski
Title: Senior Vice President and
Chief Financial Officer
OPTEX OPHTHALMOLOGICS, INC.
By: /s/ A. Joseph Rudick
-----------------------------------------
Name: A. Joseph Rudick
Title: President
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Frederic P. Zotos
-----------------------------------------
Name: Frederic P. Zotos
Title: President and Chief
Executive Officer
23
Exhibit A
Attach Development Agreement
Exhibit B
Clinical Demonstration
A clinical trial in patients with cataracts of hardness Grade 1-3 (as defined
below) and a separate clinical trial in patients with cataracts of hardness
Grade 4+ (as defined below) (together the "Clinical Trials"). The Clinical
Trials shall be designed by Buyer and funded by Buyer in order to evaluate the
Redesigned Catarex Handpiece relative to ultrasonic phacoemulsification.
The Clinical Trial in cataracts of hardness Grade 1-3 shall be designed to
evaluate the following expectations:
o The trial does not raise significant safety considerations or
unexpected adverse events.
o The total time the Catarex(TM) probe is activated inside the lens
capsule to remove the cataractous lens and cortex material during a
procedure is typically 2.5 minutes and, except in unusual
circumstances shall not be greater than four (4) minutes.
o The procedure is a single-step (i.e., single probe insertion)
procedure unlike phaco, which requires the removal of the phaco probe
once the cataract has been fragmented followed by the insertion of a
separate irrigation/aspiration probe to remove the lens contents.
o The procedure is a true endocapsular procedure in which the
Catarex(TM) probe is inserted into the lens capsule and held
relatively stationary.
o Enlargement (i.e., larger than the probe diameter) of the initial
capsulorhexis is not required for a successful cataract removal.
o Sculpting, such as is typically performed in phaco, is not required.
o When required, the initial capsulorhexis can be successfully enlarged
in order to insert an intraocular lens without requiring extraordinary
measures.
The Clinical Trial in cataracts of hardness Grade 4 or higher shall be designed
to evaluate the foregoing expectations, except that in a surgical procedure, the
cataract and associated cortex material is successfully removed without the
necessity for additional equipment in a time substantially equivalent to phaco.
Schedule 2.1(a)
Assumed Contracts
Schedule 2.1(b)
Equipment
Schedule 2.1(d)
Other Current Assets
Schedule 2.1(e)
Patents and Trademarks
Schedule 5.1(d)
Other Liabilities
Schedule 5.1(g)
Permits
Schedule 5.1(h)
Exceptions to Enforceability
of
Assumed Contracts
Schedule 5.1(j)
Inventory
Schedule 7.8
Optex Patents
Exhibit 10.60
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 (this "Amendment") is dated March 2, 2001, and is
between BAUSCH & LOMB INCORPORATED, a New York corporation ("Buyer"), BAUSCH &
LOMB SURGICAL, INC., a Delaware corporation ("BLS"), OPTEX OPHTHALMOLOGICS,
INC., a Delaware corporation ("Optex"), and ATLANTIC TECHNOLOGY VENTURES, INC.,
a Delaware corporation ("Atlantic"), and amends the Asset Purchase Agreement
dated January 31, 2001, between Buyer, BLS, Optex and Atlantic (the
"Agreement"). All terms used but not defined in this Agreement have the meanings
ascribed to those terms in the Agreement.
The parties agree as follows:
1. Amendment of Section 3.2. The text of Section 3.2 of the
Agreement is hereby deleted in its entirety and replaced with the following:
Buyer and Seller shall allocate the Purchase Price (and all other
capitalizable costs) among the Assets for all purposes (including
financial accounting and tax purposes) as follows:
Items Price
Patents, trademarks and other intangibles $1,895,185
Prepaid Royalties $1,000,000
Fixtures $32,562
Equipment $72,253
Molds $0
Inventory $0
2. Molds and Inventory. The parties acknowledge that Buyer has
previously purchased pursuant to the Development Agreement all of Optex's
molds and inventory.
3. Amendment of Section 7.7. Clauses (a) through (c) of Section 7.7
of the Agreement are hereby amended to read as follows:
(a) Completion by December 31, 2002, of a clinical study designed by
Buyer to assess the functionality of the Catarex Handpiece in human
cataract surgery.
(b) Production by June 30, 2003, of a prototype Catarex Handpiece
(the "Redesigned Catarex Handpiece") that satisfies Buyer's manufacturing
cost specifications.
(c) Completion of a Clinical Demonstration using the Redesigned
Catarex Handpiece by September 30, 2003.
4. Amendment of Schedules 2.1(a) and 2.1(b). Schedules 2.1(a) and 2.1(b)
of the Agreement are hereby deleted in their entirety and replaced with
Schedules 2.1(a) and 2.1(b) attached hereto.
5. Trademark. The parties acknowledge that all right, title, and interest
in and to the CATAREX trademark, together with the associated business goodwill,
was assigned by Seller to BLS prior to the execution of the Agreement, and that
accordingly, no assignment of the CATAREX trademark is necessary to satisfy the
terms of the Agreement.
Effective as of the Closing, all rights or licenses, if any granted by
Buyer or BLS to Seller pursuant to Section 11.1 of the Development Agreement, as
amended, shall be terminated, canceled, and released in all respects. All of the
rights, duties, obligations and liabilities of the parties under any such
license shall be terminated, canceled, and released in all respects and shall be
of no further force and effect, and neither party to such license shall any
duty, liability, or responsibility whatsoever for the payment of any amount or
the performance of any obligations thereunder.
6. Governing Law. This Amendment is governed by New York law
without giving effect to principles of conflict of laws.
7. Execution in Counterparts. This Amendment may be executed
simultaneously in two or more counterparts, each of which is an original but
all of which together constitute one and the same instrument.
[signature page follows]
The undersigned are signing this Amendment on March 2, 2001.
BAUSCH & LOMB INCORPORATED
By: /s/ Stephen C. McCluski
-----------------------------------------
Name: Stephen C. McCluski
Title: Senior Vice President
and Chief Financial Officer
BAUSCH & LOMB SURGICAL, INC.
By: /s/ Stephen C. McCluski
-----------------------------------------
Name: Stephen C. McCluski
Title: Senior Vice President
and Chief Financial Officer
OPTEX OPHTHALMOLOGICS, INC.
By: /s/ A. Joseph Rudick
-----------------------------------------
Name: A. Joseph Rudick
Title: President
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Frederic P. Zotos
-----------------------------------------
Name: Frederic P. Zotos
Title: Executive Officer
Exhibit 10.61
ASSET PURCHASE AGREEMENT
By and Among
ATLANTIC TECHNOLOGY VENTURES, INC.
and
GEMINI TECHNOLOGIES, INC.
as Sellers,
and
IFN, INC.
as Buyer
Dated as of April 23, 2001
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of April __, 2001, by and among Atlantic Technology Ventures, Inc., a
Delaware corporation ("Seller Parent"), Gemini Technologies, Inc., a Delaware
corporation ("Seller" and together with Seller Parent, the "Sellers"), and
IFN, Inc., an Ohio corporation ("Buyer").
Recitals
Seller is engaged in the business of developing and commercializing
early-stage biomedical and pharmaceutical technologies, specifically, a novel
antisense technology in the area of Functional Genomics that combines the
2'-5'oligoadenylate complex with standard antisense compounds to form a chimeric
molecule (the "Business").
Seller holds an exclusive worldwide license to the following U.S. patents
and patent applications: USSN #07/965,666 filed on October 21, 1992 (now
abandoned), USSN #08/123,449 (CIP of 07/965,666) (now U.S. Patent 5,583,032),
USSN 08/458,050 (divisional) (now U.S. Patent 5,677,289) and USSN 08/950,196
(divisional) (allowed), and any divisions, or continuations thereof, all foreign
counterpart applications, and any patents issued thereon, or reissues or
extensions thereof (the "Patent Rights"), pursuant to that certain License
Agreement by and between The Cleveland Clinic Foundation ("CCF") and
predecessor-in-interest to Seller, Protena, Inc., dated May 5, 1994 (the
"License Agreement").
Seller prepared, filed and prosecuted the following patent applications on
behalf of CCF and the National Institutes of Health in connection with its
performance of the License Agreement: USSN 08/801,898 (now U.S. Patent
5,998,602), USSN 08/962,690 (CIP of the foregoing) (allowed), and USSN
09/018,125, and foreign counterparts. These patents and applications and any
divisions, or continuations thereof, all foreign counterpart applications, and
any patents issued thereon, or reissues or extensions thereof are included in
the Patent Rights.
CCF and Sellers are engaged in arbitration proceedings pursuant to CCF's
demand for arbitration before the American Arbitration Association, pertaining
to a dispute with respect to Seller's performance under the License Agreement
(the "Arbitration Demand"). As part of the consideration for Sellers'
representations, warranties, covenants and agreements set forth herein, CCF has
agreed to withdraw, with prejudice, its Arbitration Demand.
The Seller is operating the Business with the support from the grant
2R44AI46079-02, awarded by the Public Health Services through the National
Institutes of Health, entitled "2-5 Antisense Inhibition of Respiratory Synctial
Virus," for period from August 15, 2000 to July 31, 2002 (the "PHS Research
Grant").
Sellers desire to sell and transfer to Buyer and Buyer desires to purchase
from Sellers substantially all of the business and operating assets of Seller
comprising, used or associated
with the Business, including the License Agreement and any and all of Seller's
interest in the PHS Research Grant, upon the terms and subject to the conditions
set forth in this Agreement.
Terms
In consideration of the mutual representations, warranties,
covenants, and agreements, and upon the terms and subject to the conditions
hereinafter set forth, and intending to be legally bound hereby, the parties do
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings:
(a) "Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such Person,
and includes any Person who is an officer, director or employee of such Person
and any Person that would be deemed to be an "affiliate" or an "associate" of
such Person, as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended. As used in
this definition, "controlling" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities, partnership or other ownership
interests, by contract or otherwise).
(b) "Buyer's Capital Expenditures" means the total cumulative value
of any capital and other expenditures incurred by Buyer, CCF or their Affiliates
in the course of the development and advancement of the Patent Rights, whether
in cash or in kind, including any funds awarded to Buyer pursuant to any
Federal, state, or local government or private grant, contribution or donation.
Notwithstanding the foregoing, Buyer's Capital Expenditures shall not include
any funds awarded pursuant to the PHS Research Grant. The value of any in kind
contribution shall be deemed to be equal to its fair market value.
(c) "Confidential Information" means all trade secrets, information,
data, know-how, systems and procedures of a technical, sensitive or confidential
nature in any form relating to Buyer or Seller.
(d) "Damages" means the aggregate amount of all damages, claims,
losses, obligations, liabilities (including any governmental penalty or fines),
deficiencies, interest, costs and expenses arising out of or relating to a
matter and any actions, judgments, costs and expenses (including reasonable
attorneys' fees and all other expenses incurred in investigating, preparing or
defending any litigation or proceeding, commenced or threatened) incident to
such matter or to the enforcement of this Agreement.
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(e) "Lien" means any lien, encumbrance, security interest, mortgage,
pledge, charge, conditional sale or other title retention agreement, preemptive
right, easement, covenant, license, option, right of first refusal, title
defect, or claim of any kind whatsoever.
(f) "Material Adverse Effect" means any change or circumstances (or
series of related changes or circumstances) which cause or is reasonably likely
to cause a material adverse change (i) in the assets, liabilities, operations,
business, results of operations, financial condition or prospects of Seller or
the Business, (ii) in the ability of Sellers to consummate the transactions
contemplated hereby or (iii) in the ability of Buyer to continue to operate the
Business immediately after the Closing in substantially the same manner as such
Business is conducted prior to the Closing.
(g) "Permitted Liens" means (i) liens for current taxes not yet due,
and (ii) with respect to the Real Estate, imperfections of title, easements and
zoning restrictions, if any, which do not affect the uses and purposes to which
the Real Estate is currently employed or materially impair the continuation of
the current operations of the Business.
(h) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
ARTICLE II
PURCHASE AND SALE
OF ASSETS
Section 2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, Seller hereby agrees to sell, transfer, assign,
convey and deliver to Buyer on the Closing Date, and Buyer hereby agrees to
purchase from Seller on the Closing Date, free and clear of all Liens, other
than Permitted Liens, all of the assets, properties and rights of Seller
constituting, or used in or otherwise material to the conduct of the Business,
except as specifically set forth in Section 2.2, wherever such assets and rights
are located including, but not limited to, all of the assets, properties and
rights of the Business set forth below (the "Purchased Assets"):
(a) the leases and other rights of Seller (collectively, the
"Leases") to occupy the real property listed on Schedule 2.1(a) (the "Real
Estate");
(b) all of the rights under all written contracts, contractual
rights, agreements, leases, purchase orders, sales orders, warranty rights,
instruments and arrangements, which relate to the Business, including the
License Agreement and those identified on Schedules 2.1(b) (the "Contracts");
(c) all of the scientific equipment and compounds, removable
fixtures, furniture and office equipment, communications equipment, computers
and office supplies, including those identified on Schedule 2.1(c), used, held
for use in, or related to the conduct of the Business (except the assets listed
in Schedule 2.2(d)) and any rights to the warranties and
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licenses received from the manufacturers and distributors of such equipment and
to any related claims, credits, causes of action, rights of recovery and set-off
arising with respect to such items;
(d) all of the governmental grants, permits, certificates of
inspection, certificates of occupancy, building permits, variances and other
licenses or permits, approvals or other authorizations currently issued to
Seller or Seller Parent with respect to the Business and which are used in, held
for use in, or necessary or material to, or which are otherwise required by law
for, the operation of the Business to be transferred to Buyer (the "Governmental
Permits"), including without limitation, the PHS Research Grant and those
Governmental Permits described and identified in Schedule 2.1(d);
(e) except to the extent set forth in Section 2.2(i), all patents,
trademarks, symbols, service marks, registrations, copyrights and applications
for any of the foregoing owned by, or licensed to Seller and used in the
Business, including the Patent Rights;
(f) all of the rights, claims or causes of action of Seller against
third Persons to the extent they relate to the Business or the Purchased Assets,
except for the claims listed in Schedule 2.2(f); and
(g) except to the extent provided in Section 2.2(a), all books, research
logs, notebooks, and records of Seller relating to the Business including
without limitation, those relating to the PHS Research Grant, any market studies
relating to 2-5A antisense for RSV or telomerase, including 2-5A Antisense
Development Plan for RSV prepared by Hoyle Consulting, and any software and
information management systems used or held for use in or related to the conduct
of the Business, including any documentation and manuals related thereto (the
"Business Records").
Section 2.2. Excluded Assets. It is hereby expressly acknowledged and
agreed that the Purchased Assets shall not include, and Seller shall not sell,
transfer or assign to Buyer, and Buyer shall not purchase or acquire from
Seller, the following assets (the "Excluded Assets"):
(a) the minute books, stock transfer books, corporate seal and other
books and records of Seller that Sellers or any of their Affiliates are required
by law to retain;
(b) all of Seller's bank accounts;
(c) any claim, right or interest of Seller in and to any refund for
Taxes, together with any interest due Seller thereon, for any periods prior to
the Closing Date;
(d) all assets located at the Real Estate owned by third
parties, which assets are listed on Schedule 2.2(d);
(e) all of Seller's rights under the contracts and agreements
listed on Schedule 2.2(e) (the "Excluded Contracts"");
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(f) all of Seller's rights in any contract or arrangement
representing an intercompany transaction between Seller and Seller Parent or any
Affiliate of Seller Parent, which contracts and arrangements are listed on
Schedule 2.2(f);
(g) all of the rights, claims or causes of action of Seller against
third Persons to the extent they relate to the Excluded Assets and are listed in
Schedule 2.2(g);
(h) all rights, title and interests in or to the names "Gemini" or
any derivation thereof, as well as any related or similar name, and any other
related trade names, trademarks, service marks, corporate names and logos or any
part, derivation, colorable imitation or combination thereof; and
(i) all of the items listed on Schedule 2.2(i).
Section 2.3. Non-Assumption of Liabilities. Buyer shall not
assume, and shall not become liable for, any debts, liabilities, or obligations
of Sellers whatsoever, except the liabilities and obligations of Seller under
the Contracts and the Leases to the extent such liabilities and obligations
arise after the Closing and relate to the performance of the Contracts or the
Leases after the Closing. For purposes hereof, the term "liabilities" shall mean
any liabilities, obligations, losses, consequential damages (including, without
limitation, punitive damages), claims, costs, expenses (including, without
limitation, reasonable legal costs and expenses), interest, awards, judgments,
fines and penalties.
Section 2.4. Closing Date, Time and Place. The closing of the
transactions contemplated by this Agreement (the "Closing"), shall take place at
the offices of Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public
Square, Cleveland, Ohio at 10:00 a.m., local time, on April 30, 2001 (the
"Closing Date"), or at such other time and location as Seller and Buyer shall
mutually agree in writing.
Section 2.5. Purchase Price. Buyer shall pay Seller for the
Purchased Assets and the other agreements of Seller stated herein, an amount
equal to twenty percent (20%) of all amounts to which CCF is entitled pursuant
to the License Agreement (the "Consideration"), paid on a quarterly basis,
subject to the adjustments described below (the "Purchase Price"). Buyer and CCF
agree that the Consideration shall not be reduced by any amendment to the
License Agreement and that they shall not terminate the License Agreement.
Section 2.6. Purchase Price Adjustment. The Purchase Price shall be
reduced by one percent (1%) of the Sublicense Fees for each One Hundred and
Fifty Thousand Dollars ($150,000) of the Buyer's Capital Expenditures. Any
reduction in the Purchase Price pursuant to this Section 2.6 shall be effective
retroactively from the beginning of the fiscal quarter of Buyer during which any
applicable increase of the Buyer's Capital Expenditures occurs. Notwithstanding
the foregoing, in no case shall the Purchase Price be reduced below five percent
(5%) of the Sublicense Fees.
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Section 2.7. Deliveries.
(a) At the Closing, Sellers will deliver to Buyer:
(i) A duly executed Bill of Sale and Conveyance for the
Purchased Assets, substantially in the form of Exhibit A hereto (the "Bill of
Sale and Conveyance");
(ii) All executed consents and approvals required to be
obtained in connection with the transactions contemplated hereby;
(iii) A certificate, dated the date hereof, in form and
substance satisfactory to Buyer, of the Secretary or an Assistant Secretary of
Seller, certifying (A) that attached thereto is a complete and correct copy of
the articles of incorporation of Seller, as amended to date, (B) that attached
thereto is a complete and correct copy of the bylaws of Seller, as amended to
date, (C) that attached thereto is a complete and correct copy of resolutions
adopted by the board of directors and the stockholders of Seller and Seller
Parent, as applicable, authorizing the execution, delivery and performance of
this Agreement and all other agreements executed in connection herewith by
Seller or Seller Parent, as applicable, and the transfer of the Purchased Assets
to Buyer hereunder, and that such resolutions, approvals and consents have not
been amended or modified in any respect and remain in full force and effect as
of the date thereof, and (D) that the persons named therein are duly elected,
qualified and acting officers of Seller or Seller Parent, as applicable, and
that set forth therein is a genuine signature or true facsimile thereof for each
such officer;
(iv) A certificate of an authorized officer of Seller, dated
as of the Closing Date, certifying that the conditions contained in Sections
6.1(a) and 6.1(b) have been fulfilled pursuant to Section 6.1(c);
(v) A fully executed assignment of the Leases, with
landlord consent, if required, (the "New Lease"); and
(vi) A fully executed mutual release among CCF, on the one
hand, and Atlantic and Gemini, on the other, acknowledging the full and complete
mutual release of each party thereto and their respective employees, agents and
affiliates from any and all claims, actions or proceedings, know or unknown,
arising from the beginning of time until the Closing Date (the "Mutual
Release"). The Mutual Release shall not release any party to this Agreement from
any obligations, duties, liabilities, claims, actions or proceedings pursuant to
the terms and conditions hereof or arising herefrom.
(b) Deliveries by Buyer. At the Closing, the Buyer will
deliver to Seller:
(i) The Bill of Sale and Conveyance;
(ii) A certificate, dated the date hereof, in form and
substance satisfactory to Sellers, of the Secretary or an Assistant Secretary of
Buyer certifying (A) that attached thereto is a complete and correct copy of
resolutions adopted by the board of directors
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of Buyer authorizing the execution, delivery and performance of this Agreement
and all other agreements executed in connection herewith by Buyer, and that such
resolutions, approvals and consents have not been amended or modified in any
respect and remain in full force and effect as of the date thereof, and (B) that
the persons named therein are duly elected, qualified and acting officers of
Buyer and that set forth therein is a genuine signature or true facsimile
thereof for each such officer;
(iii) A certificate of an authorized officer of Buyer, dated
as of the Closing Date, certifying that the conditions contained in Sections
6.2(a) and 6.2(b) have been fulfilled pursuant to Section 6.2(c);
(iv) The New Lease;
(v) Notice of withdrawal of the Arbitration Demand, with
prejudice, providing for each party thereto to pay its own costs and
attorney's fees; and
(vi) The Mutual Release.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, hereby represent and warrant to
Buyer as follows:
Section 3.1. Authorization; Binding Agreement. Each of Seller and
Seller Parent has full corporate power and authority to execute, deliver and
perform this Agreement and each other document or instrument contemplated
hereby, to perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement by each of Seller and Seller Parent have been duly
authorized by all necessary corporate action on the part of Seller or Seller
Parent, as applicable. This Agreement and each other document or instrument
executed by the Seller or Seller Parent in connection herewith, has been duly
executed and delivered by each of Seller and Seller Parent, and constitutes the
legal, valid and binding obligation of each of Seller and Seller Parent
enforceable in accordance with its terms.
Section 3.2. No Violation of Laws or Agreements. Except as set forth
in Schedule 3.2, the execution, delivery and performance by Sellers of this
Agreement and any other documents or instruments contemplated hereby, do not and
will not: (a) violate or conflict with or result in a breach of any provision of
the Certificate of Incorporation or Bylaws (or similar documents) of Sellers, as
such instruments are currently in effect; (b) require any consent, waiver,
approval, authorization or permit of, or filing with or notification to, or any
other action by, any public body or entity; (c) violate any provision of
applicable law, statute, rule or regulation, or any order, writ, judgment,
injunction, decree of any court or other tribunal applicable to Sellers; or (d)
result in a violation or breach of, or constitute (with or without the giving of
notice or the lapse of time or both) a default (or give rise to any right of
termination, modification, cancellation or acceleration or result in the
creation or imposition of any Lien upon
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the property of Seller) under any material agreement, note, bond or indenture by
which Sellers or any of their respective properties or assets is bound.
Section 3.3. Assets. Seller has good and marketable title to, or
leasehold interest in, all of the tangible Purchased Assets free and clear of
any Liens other than Permitted Liens, and has full power and authority to
transfer all right, title and interest in and to the Purchased Assets, and the
delivery to Buyer of the Assets in the manner contemplated by this Agreement
will transfer to Buyer valid title to the Assets, free and clear of all Liens,
except for Permitted Liens. The Purchased Assets and the Excluded Assets
constitute all of the properties and assets used in connection with the
Business, are sufficient to operate the Business as presently conducted and are
in sufficiently good condition and repair to operate the Business after the
Closing as it was operated prior to the Closing.
Section 3.4. PHS Research Grant. The Seller is in compliance with
all the requirements and conditions under the PHS Research Grant. The remaining
balance on the PHS Research Grant available to the Seller is no less than Five
Hundred Thousand Dollars ($500,000).
Section 3.5. Real Estate. Seller is the lessee under the Lease, and
no party other than Seller has any right to possession, occupancy or use of any
of the Real Estate. The Seller has a good and valid leasehold as to the Real
Estate, free and clear of all Liens. The Lease with respect to the Real Estate
is in full force and effect. All terms, conditions, and provisions of the Lease
to be performed have been duly and timely performed and complied with by the
Seller and the other parties thereto. No default has occurred and no event has
occurred or failed to occur which with the giving of notice, the passage of
time, or both, would constitute a material default with respect to such Lease.
Except as set forth in Schedule 3.5, there are no security deposits or prepaid
rent (including last month's rent in advance) with respect to the Real Estate.
True and complete copy of the Lease, including all amendments have been
delivered to Buyer, and no changes have been made to the Lease since the date of
such delivery. Except as set forth in Schedule 3.5, the rent and all other
charges and amounts currently due and payable under the Lease have been paid to
date.
Section 3.6. Personal Property. Except as set forth on Schedule 3.6,
the items of personal property included in the Purchased Assets are in good
operating condition, free of any defects except those resulting from normal wear
and operation, none of which defects, individually or in the aggregate,
reasonably could be expected to have a Material Adverse Effect.
Section 3.7. Compliance with Laws. The operations of Seller have
been conducted in compliance in all material respects with applicable laws and
regulations, other than such non-compliance which would not have a Material
Adverse Effect. Except as disclosed in Schedule 3.7, all Governmental Permits
have been obtained and are in full force and effect and are being complied with
in all material respects except for such which, individually or in the
aggregate, would not have a Material Adverse Effect. No proceeding which might
involve the revocation or termination of any Governmental Permit is pending or,
to the knowledge of Seller, threatened.
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Section 3.8. Litigation; Claims.
(a) Except as set forth in Schedule 3.8, there is no pending or, to
the knowledge of Sellers, threatened claim, arbitration proceeding, action,
suit, investigation or other proceeding against or involving Seller or its
assets, at law or in equity, by or before any court in respect of the Business
or the Purchased Assets.
(b) There are currently no outstanding judgments, decrees or orders
of any court or any governmental or administrative agency to which either Seller
is a party or is bound, that could adversely affect the right, title or interest
of Sellers to the Business or the Purchased Assets.
(c) The Sellers have no knowledge of any fact or circumstance which
could reasonably be expected to result in any other claim, action, cause of
action, suit, proceeding, inquiry, investigation or order being filed against
the Seller which might have a Material Adverse Effect.
(d) The Sellers have not received notice or information of any claim
or allegation of personal death or personal injury, property or economic damage,
any claim for punitive or exemplary damages, any claim for contribution or
indemnification, or any claim for injunctive relief in connection with any
service provided by the Seller.
(e) No claim, action, suit, proceeding, inquiry or investigation has
been instituted which threatens to restrain or prohibit or to otherwise
challenge the legality or validity of the transactions contemplated by this
Agreement or the other documents or agreements contemplated hereby.
(f) Except as set forth in Schedule 3.8, the operation of the
Business by the Sellers does not, to the knowledge of Sellers, infringe upon the
proprietary rights of others, including without limitation any intellectual
property rights such as trademarks, service marks, copyrights, patents, and
trade names and the Sellers have not received any notice alleging that the
Seller has infringed on any other party's intellectual property rights in the
conduct of the Business.
(g) In connection with the operation of the Business, the Sellers
have not given any indemnification for infringement of any other party's
intellectual property rights, except for standard clauses in software licensing
agreements.
(h) The Sellers have no knowledge of any limitation to the continued
and/or expanded use of any trademarks, service marks, trade names or other
intellectual property owned by the Sellers used in the Business.
Section 3.9. No Brokers or Finders. Neither Sellers nor any of their
respective Affiliates (a) has employed (or will employ) any broker or finder, or
(b) has incurred (or will incur) any liability for any brokerage fees,
commissions or finders' fees or expenses or indemnification or similar
obligations in connection with the transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller and Seller
Parent as follows:
Section 4.1. Authorization; Binding Agreement. Buyer has full
corporate power and authority to execute, deliver and perform this Agreement and
each other document or instrument contemplated hereby, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement by Buyer have been duly authorized by all necessary corporate action
on the part of the Buyer. This Agreement, and each other document or instrument
executed by the Buyer in connection herewith, has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms.
Section 4.2. No Violations. The execution, delivery and performance
of this Agreement by Buyer and the consummation of the transactions contemplated
hereby do not and will not (i) result in a breach or violation of any provision
of the Articles of Incorporation or Bylaws (or similar documents) of Buyer, as
such instruments are currently in effect; and (ii) will not result in a breach
of, or constitute a default under, any agreement or other document to which
Buyer is bound which would materially affect the ability of Buyer to perform its
obligations hereunder or to consummate the transactions contemplated hereby.
Section 4.3. No Brokers or Finders. Neither Buyer nor any of its
Affiliates (a) has employed (or will employ) any broker or finder, or (b) has
incurred (or will incur) any liability for any brokerage fees, commissions or
finders' fees or expenses or indemnification or similar obligations in
connection with the transactions contemplated by this Agreement.
article v
COVENANTS
Section 5.1. Access to Information. Prior to the Closing, Buyer may
make such investigation of the Business and properties of the Seller as Buyer
may determine is reasonably necessary, and upon reasonable notice, the Seller
shall give to Buyer and its representatives reasonable access, during normal
business hours throughout the period prior to the Closing, to the property,
books, commitments, agreements, records, files and personnel of the Seller or
Seller Parent (but only to the extent they relate to the Seller or the
Business), and the Seller shall furnish to Buyer during that period all copies
of documents and information concerning the Seller as Buyer may reasonably
request subject to applicable law.
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Section 5.2. Confidentiality.
(a) From and after the Closing, Seller and Seller Parent shall, and
shall cause their Affiliates and representatives to, keep confidential and not
disclose to any other Person or use for Seller's own benefit or the benefit of
any other Person any Confidential Information in its or their possession or
control regarding the Business. The obligations of Seller and Seller Parent
under this Section 5.2(a) shall not apply to information which (i) is or becomes
generally available to the public without breach of the commitment provided for
in this Section; (ii) was independently developed by Seller and Seller Parent;
or (iii) is required to be disclosed by law, order or regulation of a court or
tribunal or governmental authority; provided, however, in the case of clause
(iii), Seller or Seller Parent subject to such requirement shall notify Buyer as
early as practicable prior to disclosure to allow Buyer to take appropriate
measures to preserve the confidentiality of such information.
(b) Upon any termination of this Agreement, each party will promptly
either destroy or deliver to the other parties all written Confidential
Information held by such party or its representatives.
Section 5.3. Relocation of the PHS Research Grant. Within five (5)
days following the date of this Agreement, the Seller shall prepare and submit,
in accordance with the regulations of the Department of Health and Human
Services and the National Institutes of Health, and any other applicable agency
regulations or policies, the documentation meeting the requirements of the
National Institutes of Health, including Form PHS-3734, Form 269, Form HHS-568,
and any other information required by the National Institute of Health for the
relocation of the PHS Research Grant to the Buyer, to ensure that all of
Seller's right, title and interest in and to, and all of the Seller's
obligations and liabilities under the PHS Research Grant shall be validly
conveyed, transferred and assigned to the Buyer. The Seller shall provide to the
Buyer promptly any information regarding the Seller required in connection with
the relocation request. The Seller shall use all reasonable efforts to obtain
all consents and approvals required for the purpose of relocation of the PHS
Research Grant to the Buyer.
Section 5.4. Conduct of Business. Prior to the Closing, and except
as otherwise contemplated by this Agreement or consented to or approved by
Buyer, Sellers covenant and agree that Seller shall operate the Business only in
the ordinary course and consistent with past practice, shall maintain in full
force and effect all insurance currently maintained by the Seller and shall use
commercially reasonable efforts to preserve the properties, business,
relationships with its Employees, and shall not undertake any of the following
with respect to the Business:
(a) dispose of any Purchased Assets;
(b) create a Lien on any of the Purchased Assets;
(c) talk to, or entertain offers from other potential purchasers of
the Seller, and the Seller will notify the Buyer if there are any contacts from
third parties who express an interest in purchasing the Seller and identify any
such third parties; or
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(d) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
Section 5.5. Employment Matters. Sellers agree and acknowledge that
Buyer will offer employment to certain employees who are employed in connection
with the Business (the "Transferred Employees"). Sellers hereby waive any
confidentiality, non-competition, or any other restrictive agreements, covenants
or conditions with respect to Buyer's employment of any of the Transferred
Employees.
Section 5.6. Consent of Third Parties. Sellers agree that on and
after the Closing, Sellers will, at the request of Buyer, take all reasonable
actions, and do or cause to be done all such things as shall in the reasonable
opinion of Buyer or its counsel be necessary or proper (i) to assure that the
rights of Seller in any and all of the Purchased Assets shall be preserved for
the benefit of Buyer and (ii) to facilitate receipt of the consideration, if
any, to be received by Seller with respect to any and all of the Purchased
Assets, which consideration shall be held for the benefit of, and shall be
delivered to, Buyer.
Section 5.7. Audit Rights. At any time after Buyer enters into any
sublicense arrangement pursuant to the License Agreement but no more than twice
in any twelve (12) month period, Sellers may, at Sellers' sole expense, examine
and audit Buyer's books, financial records and accounts related to the License
Agreement and Buyer's Capital Expenditures. Notwithstanding the foregoing, any
such examination or audit shall take place (i) only upon three (3) business
days' prior written notice to Buyer, (ii) during Buyer's regular business hours;
and (iii) at a location determined by Buyer. Sellers shall keep all information
referred to in this Section 5.7. confidential in accordance with Section 5.2.
hereof.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
Section 6.1. Conditions to Closing Relating to Buyer. The obligation
of Buyer at the Closing to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver by Buyer on or prior to the Closing
Date of each of the following conditions:
(a) Each of the representations and warranties of Sellers contained
in this Agreement shall be true and correct in all material respects when made
and as of the Closing Date, with the same effect as though such representations
and warranties had been made on and as of the Closing Date.
(b) Each of the covenants of Seller to be performed on or prior to
the Closing Date shall have been duly performed.
(c) Buyer shall have been furnished with a certificate of an
authorized officer of Seller, dated as of the Closing Date, certifying that the
conditions contained in Sections 6.1(a) and 6.1(b) have been fulfilled.
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(d) The documents referred to in Section 2.7 shall have been
delivered to Buyer.
(e) All necessary consents or approvals from any third parties shall
have been received.
(f) Approval of the Buyer's Board of Directors of the
transactions contemplated by this Agreement.
(g) Between the date hereof and the Closing, there shall have been
no material damage or destruction to the Purchased Assets.
Section 6.2. Conditions to Closing Relating to Seller. The
obligation of Sellers at the Closing to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver by Seller on or prior to
the Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects when made and
as of the Closing Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date.
(b) Each of the covenants of Buyer to be performed on or prior to
the Closing Date shall have been duly performed.
(c) Seller shall have been furnished with a certificate of an
authorized officer of Buyer, dated as of the Closing Date, certifying to the
effect that the conditions contained in Sections 6.2(a) and 6.2(b) have been
fulfilled.
(d) The documents referred to in Section 2.7. shall have been
delivered to the Seller.
(e) All necessary consents or approvals from any third parties shall
have been received.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Indemnification.
(a) Seller and Seller Parent hereby, jointly and severaly, agree to
indemnify, defend and hold Buyer and its respective officers, directors and
other Affiliates harmless from and against and to reimburse such Persons with
respect to any one or more of the following:
(i) any and all Damages arising out of or resulting from a
misrepresentation or breach of warranty of Sellers contained in this
Agreement or
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in any exhibit or schedule hereto, or in any other certificate or
document furnished or to be furnished to Buyer pursuant hereto;
(ii) any and all Damages arising out of or resulting from
any breach of any obligation of Sellers contained in this
Agreement;
(iii) claims relating to operations of the Business by Sellers
prior to the Closing Date, including, but not limited to, claims
based on tort liability, warranty, negligence, strict liability and
workers' compensation liability;
(iv) claims for taxes with respect to the conduct of the
Business and operations of the Seller prior to the Closing Date;
and
(b) Buyer hereby agrees to indemnify, defend and hold Seller and
Seller Parent harmless from and against and to reimburse Seller and Seller
Parent with respect to any one or more of the following:
(i) any and all Damages arising out of or resulting from a
misrepresentation or breach of warranty of Buyer contained in this
Agreement or in any certificate or document furnished or to be
furnished to Sellers pursuant hereto;
(ii) any and all Damages arising out of or resulting from any
breach of any obligation of Buyer contained in this Agreement,
whether requiring performance before or after the Closing Date; and
(iii) any and all Damages arising from the operation of the
Business or the Purchased Assets after the Closing Date.
Section 7.2. General Indemnification Procedures.
(a) All claims by a party seeking indemnification pursuant to this
Article VII (an "Indemnified Party") shall be asserted and resolved as set forth
in this Section 7.2. In the event that any written claim or demand for which the
party from whom such indemnification is sought (the "Indemnifying Party") would
be liable to any Indemnified Party hereunder is asserted against or sought to be
collected from any Indemnified Party by a third party, such Indemnified Party
shall promptly, but in no event more than fifteen days following such
Indemnified Party's receipt of such claim or demand, notify the Indemnifying
Party of such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim and demand) (the "Claim Notice"). The Indemnifying Party
shall have thirty days from the personal delivery or mailing of the Claim Notice
(the "Notice Period") to notify the Indemnified Party whether or not it desires
to defend the Indemnified Party against such claim or demand. An election to
assume the defense of such claim or demand shall not be deemed to be an
admission that the Indemnifying Party is liable to the Indemnified Party in
respect of such claim or demand. The Indemnified Party shall use its best
efforts in the defense of all such claims. Any notice of a
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claim by reason of any of the representations, warranties or covenants contained
in this Agreement shall state specifically the representation, warranty, or
covenant with respect to which the claim is made, the facts giving rise to an
alleged basis for the claim, and the amount of the liability asserted against
the Indemnifying Party by reason of the claim.
(b) All costs and expenses incurred by the Indemnifying Party in
defending such claim or demand shall be a liability of, and shall be paid by,
the Indemnifying Party; provided, however, that the amount of such expenses
shall be a liability of the Indemnifying Party hereunder, subject to the
limitations set forth in this Article VII. In the event that it is ultimately
determined that the Indemnifying Party is not obligated to indemnify, defend or
hold the Indemnified Party harmless from and against any third-party claim, the
Indemnified Party shall reimburse the Indemnifying Party for any and all costs
and expenses (including without limitation, attorney's fees and court costs)
incurred by the Indemnify Party in its defense of the third-party claim. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand, except as hereinafter provided, the Indemnifying Party shall have the
right to defend the Indemnified Party by appropriate proceedings.
(c) If the Indemnified Party desires to participate in, but not
control, any such defense or settlement, it may do so at its sole cost and
expense. The Indemnified Party shall not settle a claim or demand without the
consent of the Indemnifying Party, which shall not be unreasonably withheld. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, settle, compromise
or offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree that would
restrict the future activity or conduct of the Indemnified Party or any
subsidiary or Affiliate thereof. If the Indemnifying Party elects not to defend
the Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand, or, if the same be contested by the Indemnified
Party, then that portion thereof as to which such defense is unsuccessful (and
the reasonable costs and expenses pertaining to such defense) shall be the
liability of the Indemnifying Party hereunder, subject to the limitations set
forth in this Article VII.
(d) To the extent the Indemnifying Party shall control or
participate in the defense or settlement of any third-party claim or demand, the
Indemnified Party will give the Indemnifying Party and its counsel access to,
during normal business hours, the relevant business records and other documents,
and shall permit them to consult with the employees and counsel of the
Indemnified Party.
(e) Whether or not the Indemnifying Party chooses to defend or
prosecute any third-party claim, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival. All representations, warranties,
covenants and agreements of Buyer and Sellers contained herein shall survive
until three years after the Closing.
Section 8.2. Amendment and Modification. This Agreement may
be amended, modified, supplemented or altered only by a written agreement
signed by the Buyer, Seller and the Seller Parent.
Section 8.3. Notices. All notices and other communications hereunder
shall be in writing (including by facsimile during business hours) and shall be
deemed to have been duly given when delivered in Person (including by overnight
courier), when faxed (with confirmation of transmission having been received),
in each case to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice).
If to the Sellers, to:
Atlantic Technology Ventures, Inc.
350 Fifth Avenue, Suite 5507
New York, New York 10018
Facsimile: (212) 267-2159
Attention: Frederic P. Zotos
with a copy sent contemporaneously to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 715-8000
Attention: Ezra G. Levin, Esq.
If to the Buyer, to:
IFN, Inc.
9500 Euclid Avenue
ND-40
Cleveland, Ohio 44195
Facsimile: (216) 445-6514
Attention: Christopher M. Coburn
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with a copy sent contemporaneously to:
David W. Rowan, Esq.
Squire, Sanders & Dempsey
4900 Key Tower
Cleveland, OH 44114
Facsimile: (216) 479-8780
Section 8.4. Expenses. Except as otherwise expressly provided
herein, each of the parties hereto will bear its own expenses in connection with
the negotiation, preparation, execution and delivery of this Agreement and the
documents and instruments contemplated hereby and in connection with and the
transactions contemplated hereby and thereby, including all fees and
disbursements of counsel, accountants, appraisers and other advisors retained by
such party, whether or not the transactions contemplated by this Agreement are
consummated.
Section 8.5. Governing Law. This Agreement, and all agreements,
documents and instruments delivered pursuant to hereto or incorporated herein,
unless otherwise expressly provided therein, shall be governed by, and construed
in accordance with, the internal laws of the State of Ohio without giving effect
to principles of conflicts of law.
Section 8.6. Counterparts. This Agreement may be executed
by the parties hereto individually or in any combination, in one or more
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
Section 8.7. Entire Agreement. This Agreement, including the
documents and instruments referred to herein or contemplated hereby, embodies
the entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof, in
connection with the transactions contemplated hereby).
Section 8.8. Severability. If any provision or provisions of this
Agreement or of any of the documents or instruments delivered pursuant hereto,
or any portion of any provision hereof or thereof, shall be deemed invalid or
unenforceable pursuant to a final determination of any court of competent
jurisdiction or as a result of future legislative action, such determination or
action shall be construed so as not to affect the validity or enforceability
hereof or thereof and shall not affect the validity or effect of any other
portion hereof or thereof.
Section 8.9. Headings. The headings of the various Articles and
Sections of this Agreement have been inserted for the purpose of convenience of
reference only, and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.
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Section 8.10. Exhibits and Schedules. All exhibits and
schedules attached hereto and referred to herein are hereby incorporated in
and made a part of this Agreement as set forth in full herein.
Section 8.11. Further Assurances. The Sellers shall, for no further
consideration, perform all such other reasonable actions and execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such further assignments, transfers, consents, permits, certificates and other
documents as Buyer or its counsel may reasonably request to vest in Buyer and
protect Buyer's rights, title and interest in and to the enjoyment of the
Business and the Purchased Assets conveyed, transferred and delivered to Buyer
under this Agreement and to affirm and protect Buyer's rights and interests
under this Agreement.
* * *
Balance of this page left intentionally blank.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
ATLANTIC TECHNOLOGY VENTURES, INC.
By: /s/ Frederic P. Zotos
----------------------------------
Name: Frederic P. Zotos
Title: President and Chief Executive Officer
GEMINI TECHNOLOGIES, INC.
By: /s/ A. Joseph Rudick
----------------------------------
Name: A. Joseph Rudick
Title: President
IFN, INC.
By: /s/ Frank Lordeman
----------------------------------
Name: Frank Lordeman
Title: Chief Executive Officer
And by:
------------------------------
Name:
Title:
THE CLEVELAND CLINIC FOUNDATION
By: /s/ Frank Lordeman
----------------------------------
Name: Frank Lordeman
Title: Chief Executive Officer
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