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TERMINATION AGREEMENT
THIS AGREEMENT, dated as of this 13th day of August, 1999, which shall
be effective the 15th day of August, 1999 (the "Effective Date"), by and between
Bausch & Lomb Surgical, Inc., a corporation organized and existing under the
laws of the State of Delaware, having an office at 3365 Tree Court Industrial
Boulevard, St. Louis, Missouri 63122 and Escalon Medical Corp., a corporation
organized and existing under the laws of the State of California, having an
office at 351 E. Conestoga Road, Wayne, Pennsylvania 19087 (hereinafter referred
to as "Escalon").
RECITALS
WHEREAS, Escalon Ophthalmics, Inc., a predecessor to Escalon, and
Adatomed GmbH, a wholly owned subsidiary of Bausch & Lomb Surgical, Inc., are
parties to a Distribution and Development Agreement dated January 1,1990, as
amended on January 26, 1993 (the "Distribution and Development Agreement"); and
WHEREAS, pursuant to the Distribution and Development Agreement,
Escalon was appointed as Adatomed GmbH's exclusive distributor in the United
States, Canada and Mexico of certain ophthalmic products developed and
manufactured by Adatomed GmbH, including certain silicone oil products; and
WHEREAS, by this Agreement, Escalon consents to the assignment of the
Distribution and Development Agreement by Adatomed GmbH to Bausch & Lomb
Surgical, Inc. (hereinafter collectively or individually, as the context
requires, referred to as "BLS"); and
WHEREAS, the parties now desire to terminate the Distribution and
Development Agreement, and all rights and obligations of the parties thereto.
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NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall be deemed to have
the following meanings:
1(a) "Products" shall mean 5000 weight silicone oil marketed by Escalon
under BLS's AdatoSil 5000 trademark.
1(b) "Net Sales" shall mean the total or gross billings for sales or
other transfers of Products by BLS and/or any Related Company, as hereinafter
defined, in any arm's-length transactions to unrelated third-party distributors,
retailers or end users in the Territory, less the following deductions where
factually applicable: (i) discounts and rebates allowed and taken, in amounts
customary to the trade; (ii) outbound transportation, special outbound packing
and insurance charges billed to the customer or prepaid; (iii) sales, excise,
use, turnover, inventory, value-added and similar taxes and/or duties imposed
upon and with specific reference to the particular sales of Products; and (iv)
free replacements or amounts refunded or credited upon purchase price on
returned or defective Products. Sales shall be accounted for when invoiced and
credits and refunds shall be accounted for when allowed.
1(c) "Related Company", singular or plural, shall mean any parent,
subsidiary or affiliate company of BLS, or any subsidiary or affiliate of any
parent or subsidiary of BLS.
1(d) "Twelve Month Period" shall mean continuous periods of twelve (12)
months, with the first Twelve Month Period commencing on the Effective Date of
this Agreement and successive Twelve Month Periods each extending for a
continuous twelve (12) month period thereafter.
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1(e) "Payment Amount" shall mean the dollar amount calculated according
to the following formula:
[(0.95 x A) - ($132.59 x B)]
where: A is the Net Sales of the Product during each
Twelve Month Period; and
B is the number of units of the Product sold
during each corresponding Twelve Month Period.
1(f) "Territory" shall mean the United States of America, Canada and
Mexico.
SECTION 2. TERMINATION
The Distribution and Development Agreement is hereby terminated,
together with all rights and obligations of the parties thereto and hereto.
SECTION 3. MUTUAL RELEASE
Except as otherwise set forth in this Agreement, the parties, and each
of them, hereby release and forever discharge each other and each of them, and
each of their respective owners, partners, investors, predecessors, successors,
heirs, assigns, employees, shareholders, officers, directors, agents, attorneys,
insurance carriers, subsidiaries, divisions or Related Company, whether
previously or hereinafter affiliated in any manner (hereinafter collectively
"Released Parties"), from any and all claims, demands, causes of action, rights,
obligations, damages, attorneys' fees, costs and liabilities of any nature
whatsoever, whether or not now known, suspected or claimed, which the parties,
or either of them, ever had, now has, or may claim to have against the Released
Parties (whether directly or indirectly), or any of them, including, without
limiting the generality of the foregoing, any rights and claims, including but
not limited to civil, statutory, administrative and contractual, related to or
arising out of the Distribution and Development Agreement and the termination
thereof pursuant to this Agreement.
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SECTION 4. PAYMENTS TO ESCALON
4(a) BLS shall pay the following amounts to Escalon during each of the
first six (6) Twelve Month Periods following the effective date of this
Agreement:
(i) for the first Twelve Month Period, the sum of $2,117,180.00,
payable in equal quarterly installments with the initial
installment due and payable on the Effective Date;
(ii) for the second through the sixth Twelve Month Period, the
Payment Amount multiplied by the following:
A. For the second Twelve Month Period - 1.00
B. For the third Twelve Month Period - 0.82
C. For the fourth Twelve Month Period - 0.72
D. For the fifth Twelve Month Period - 0.64
E. For the sixth Twelve Month Period - 0.45.
4(b) BLS agrees to keep true and accurate records adequate to establish
any amounts payable under Section 4(a)(ii) hereof, and to permit an independent
certified public accountant selected by Escalon and reasonably acceptable to BLS
to inspect, on a confidential basis and at Escalon's expense, said records once
annually at reasonable times upon reasonable notice, but only within a period of
two (2) years after the Twelve Month Period to which such records relate. BLS
shall provide to Escalon quarterly reports of payments due and payable for the
immediately preceding calendar quarter during each Twelve Month Period set forth
above, to be mailed to Escalon within sixty (60) days after the end of each such
calendar quarter, together with payment of any amounts then due and payable.
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SECTION 5. THE SUPPLY AGREEMENT
Simultaneously with the execution of this Agreement, the parties will
execute and enter into the Supply Agreement attached hereto as Exhibit A for the
private label supply by Escalon of certain viscous fluid systems to BLS.
SECTION 6. TRANSFER OF APPROVALS AND OTHER DOCUMENTS
6(a) Promptly after execution of this Agreement, Escalon shall take
whatever steps are reasonably necessary to transfer any and all regulatory
approvals and registrations for the Products in the Territory to BLS. The cost
of such transfers, if any, shall be borne by BLS.
6(b) Escalon shall, upon execution of this Agreement, provide to BLS a
customer list for the Products showing all sales by customer and selling price
for the preceding two (2) year period. Escalon will also transfer to BLS all
available clinical data, studies and other information relating to safety or
effectiveness of the Products, and all available inventory of marketing
materials for the Products, including all brochures, price lists, catalog
sheets, videos, etc.
6(c) Escalon hereby grants to BLS the right and license to continue to
use any Escalon tradename and trademarks in the Territory used by Escalon in
connection with the Products for a period not to exceed one (1) year from the
date of this Agreement. BLS shall provide to Escalon for Escalon's review and
approval, not to be unreasonably withheld, copies of any labeling or promotional
materials using the tradename or trademarks of Escalon in a manner different
from that as used by Escalon on or for the Products.
6(d) BLS shall purchase from Escalon, at Escalon's landed cost, all
usable inventory of the Products (having at least six (6) months remaining shelf
life) as of the Effective Date. Escalon shall ship such inventory to a BLS
facility as requested by BLS.
SECTION 7. CONFIDENTIALITY AND COVENANT NOT TO COMPETE
7(a) Each party acknowledges that it has or will have access to
valuable proprietary information of the other party, including but not limited
to technical data and customer and
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marketing information, all of which are the property of the other party, have
been maintained confidential, and are used in the course of such other party's
business (the "Information"). Each party shall not, during the six (6) Twelve
Month Periods of this Agreement and for a period of five (5) years thereafter,
disclose the other party's Information to anyone other than those of its
employees having a need to know and shall refrain from use of such Information
other than as set forth in or in furtherance of this Agreement. In addition, the
receiving party shall take all reasonable precautions to protect the value and
confidentiality of such information of the originating party. All Information of
the originating party and all copies made from such documents shall remain the
sole and exclusive property of the originating party and shall be returned to
the originating party immediately upon written request thereby, except that the
parties may retain a copy of any Information that has been disclosed in their
legal records for the sole purpose of making a record that the Information is
subject to confidentiality hereunder.
7(b) Neither party shall be obligated or required to maintain in
confidence any Information that (i) it is required to disclose as part of a
regulatory submission or by order or regulation of a governmental agency or a
court of competent jurisdiction, provided that such party shall not make any
such disclosure without first notifying the other party and allowing the other
party a reasonable opportunity to seek injunction relief from (or protective
order with respect to) the obligation to make such disclosure; or (ii) it can
demonstrate with written records is in public domain or known to the receiving
party prior to disclosure by the originating party other than through breach of
this Agreement, or becomes known to the receiving party from a source other than
the disclosing party without breach of any obligation of confidence, or is or
has been furnished to a third party by the originating party without restriction
on the third party's right to disclose.
7(c) For a period ending two (2) years after the end of the six (6)
Twelve Month Periods, Escalon shall not engage in the manufacture, sale or
promotion of any products that
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compete with the Products, or any of the other products acquired by Escalon from
BLS pursuant to the Distribution and Development Agreement, in the Territory.
7(d) During the six (6) Twelve Month Periods, BLS shall use reasonable
commercial efforts to market the Products and shall not supply any other 5000
weight silicone oil to the customer base which currently purchases the Products.
Further, during each of the second through fourth Twelve Month Periods, should
BLS fail to sell the Applicable Minimum Units (as hereinafter defined), BLS
shall pay to Escalon, within 30 days after the end of the respective Twelve
Month Period, the balance of the amount that would have been payable to Escalon
had the Applicable Minimum Units of the Product been sold during such Twelve
Month Period (a "Minimum Payment") unless the failure of BLS to sell the
Applicable Minimum Units results from BLS's compliance with directives or
recommendations of the U.S. Food and Drug Administration During each of the
fifth and sixth Twelve Month Periods, should BLS fail to sell the Applicable
Minimum Units, BLS shall have the right to pay to Escalon, within 30 days after
the end of the respective Twelve Month Period, the balance of the amount that
would have been payable had the Applicable Minimum Units of the Product been
sold during such Twelve Month Period. In the event that BLS shall fail to pay
all amounts payable to Escalon in accordance with the proceding sentence within
30 days after the end of the fifth Twelve Month Period, Escalon, as its sole and
exclusive remedy, shall have the right, during the sixth Twelve Month period, to
market the Products on a co-exclusive basis with BLS, and BLS hereby grants to
Escalon all rights and licenses to market, distribute and sell the Products
under such circumstances. For the second Twelve Month Period, the "Applicable
Minimum Units" shall mean 50% of the units of the Products actually sold during
the first Twelve Month Period; and for each of the third through sixth Twelve
Month Periods, the "Applicable Minimum Units" shall mean 50% of the units of the
Products actually sold during the preceding Twelve Month Period unless a Minimum
Payment was payable with respect to the preceding Twelve Month Period, in which
event the "Applicable
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Minimum Units" with respect to such Twelve Month Period shall mean the number of
units of the Products that would have been sold to provide payments to Escalon
under Section 4(a) of this Agreement with respect to the preceding Twelve Month
Period equal to the Minimum Payment payable with respect to such Twelve Month
Period.
SECTION 8. NOTICES
All notices specified in this Agreement shall be given in writing and
shall be effective when either served by personal delivery or facsimile
transmission, or five (5) days after being addressed to the other party at the
address specified below and deposited first class mail. Unless otherwise
specified in accordance with the provisions of this section, the addresses of
the parties shall be:
Escalon Medical Corp.
351 E. Conestoga Road
Wayne, Pennsylvania 19087
Attention: Richard J. DePiano, CEO
Facsimile No.: 610/688-3641
and Bausch & Lomb Surgical, Inc.
3365 Tree Court Industrial Boulevard
St. Louis, Missouri 63122
Attention: Vice President, Operations
Facsimile No.: 314/225-7365
with a copy to: Bausch & Lomb Surgical, Inc.
555 West Arrow Highway
Claremont, California 91711
Attention: Mark Tomaino, General Counsel
Facsimile No.: 909/399-1376
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SECTION 9. MISCELLANEOUS PROVISIONS
9(a) This Agreement constitutes the entire agreement between the
parties, there being no warranties, representations or conditions of any kind or
nature between the parties except as set forth herein. This Agreement supersedes
all prior agreements, whether oral or written, with respect to the subject
matter hereof. This Agreement shall not be modified or changed except by
subsequent written agreement signed by both parties.
9(b) This Agreement may not be assigned by either party without the
prior written consent of the other, which consent shall not be unreasonably
withheld; provided, however, that either party may assign its rights and
obligations to a subsidiary, provided that the assignor guarantees the
obligations of its subsidiary, or to a successor in the case of a sale or
transfer of all or substantially all of its business by way of acquisition,
consolidation or merger, provided that the successor provides reasonable
assurance to the other party of its ability to honor the terms of this
Agreement. Notwithstanding the foregoing, this Agreement shall be binding upon
the respective successors and assigns of either party hereto.
9(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without resort to any case
law or statutes which might require or suggest the application of the laws of
another state.
9(d) Nothing contained in this Agreement shall permit either party to
incur any debts or liabilities on behalf of the other party except as
specifically provided in this Agreement. The parties are and will remain at all
times independent contractors, and no agency or employment relationship exists
between them.
9(e) The headings and captions contained herein are for reference only
and shall not constitute a substantive part of this Agreement.
9(f) If any part of this Agreement is rendered void, invalid or
unenforceable by a court of last resort or by any court from which an appeal of
its decision is not taken within the time
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provided by law, such shall not affect the validity or enforceability of any
other provisions of this Agreement except those where the invalid or
unenforceable provisions comprise an integral part of or are otherwise clearly
inseparable from the intent and purpose of this Agreement. In the event any
provision is held invalid or unenforceable, the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the intent of this
Agreement and, upon so agreeing, shall incorporate such substitute provision in
this Agreement.
9(g) The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party. None of the terms,
covenants and conditions of this Agreement may be waived, except by written
consent of the party waiving compliance.
9(h) This Agreement may be executed in counterparts, all of which taken
together shall be regarded as one and the same instrument.
9(i) In the event that a party or both parties shall want to make any
public statement announcing this Agreement, except as may be required by law,
judicial order or any listing agreement with a national securities exchange or
over-the-counter trading system to which either is a party, such voluntary
announcement shall be subject to review and approval by both parties prior to
release. Approval shall not be unreasonably withheld.
9(j) If any action or proceeding shall be commenced to enforce this
Agreement or any right arising in connection with this Agreement, the prevailing
party in such action or proceeding shall be entitled to recover from the other
party the reasonable attorneys' fees,
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costs and expenses incurred by such prevailing party in connection with such
action or proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their duly authorized representatives.
BAUSCH & LOMB SURGICAL, INC. ESCALON MEDICAL CORP.
By: /s/ HAKAN EDSTROM By: /s/ R.J. DePIANO
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(Signature) (Signature)
HAKAN EDSTROM R.J. DePIANO
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(Print Name) (Print Name)
Title: PRESIDENT Title: R.J. DePIANO CEO
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Date: 8/11/99 Date: AUG. 11, 1999
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Escalon Termination Agreement