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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 13, 1999
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Escalon Medical Corp.
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(Exact name of registrant as specified in its charter)
California 0-20127 33-0272839
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
351 East Conestoga Road, Wayne, Pennsylvania 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 688-6830
N/A
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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Effective August 13, 1999, Escalon Medical Corp. (the "Registrant")
entered into a Termination Agreement (the "Termination Agreement") between the
Registrant and Bausch & Lomb Surgical, Inc. ("BLS") and a Supply Agreement (the
"Supply Agreement") between the Registrant and BLS.
Pursuant to the Termination Agreement, the Distribution and Development
Agreement dated January 1, 1990, as amended, between the Registrant and Adatomed
GmbH, a wholly owned subsidiary of BLS, was terminated, and the Registrant
transferred its license and distribution rights for Adatosil(R)5000 Silicone
Oil, as well as related inventory, back to BLS. In consideration of the
transfer, BLS agreed to pay to the Registrant cash in the amount of $2,117,180,
payable in quarterly installments, with the initial installment paid on August
14, 1999, and additional cash consideration based on future sales of
Adatosil(R)5000 Silicone Oil over the next six years. Adatosil(R)5000 Silicone
Oil represented approximately 56% of the Registrant's sales in the fiscal year
ended June 30, 1999. For additional information, see the Registrant's news
release dated August 13, 1999 attached to this Form 8-K Report as Exhibit 2.3.
Pursuant to the Supply Agreement, BLS agreed to purchase from the
Registrant, and the Registrant agreed to manufacture and sell to BLS, certain
viscous fluid systems for a period of six years.
No material relationship exists between (i) the Registrant and BLS,
(ii) any director or officer of the Registrant and any director or officer of
BLS or (iii) any associate of any director or officer of the Registrant and any
associate of any director or officer of BLS. The consideration under the
Termination Agreement was determined by arms' length negotiations between the
Registrant and BLS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(b) Pro forma financial information.
The pro forma financial information required by Article 11 of
Regulation S-X is not yet available. Pursuant to Item 7(b)(2) of Form 8-K, such
pro forma financial information will be filed as soon as practicable, but in no
event later than November 1, 1999.
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(c) Exhibits.
Exhibit No. Document
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2.1 Termination Agreement effective as of August 13, 1999
between Escalon Medical Corp. and Bausch & Lomb
Surgical, Inc.
2.2 Supply Agreement effective as of August 13, 1999 between
Escalon Medical Corp. and Bausch & Lomb Surgical, Inc.
2.3 News Release of the Registrant dated August 13, 1999.
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SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCALON MEDICAL CORP.
Date: August 25, 1999 By: /s/ Richard J. DePiano
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Richard J. DePiano,
Chief Executive Officer
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EXHIBIT INDEX
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Exhibit No. Document
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2.1 Termination Agreement effective as of August 13, 1999
between Escalon Medical Corp. and Bausch & Lomb
Surgical, Inc.
2.2 Supply Agreement effective as of August 13, 1999
between Escalon Medical Corp. and Bausch & Lomb
Surgical, Inc.
2.3 News Release of the Registrant dated August 13, 1999.
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EXHIBIT 2.1
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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
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EXHIBIT 2.2
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SUPPLY AGREEMENT
THIS AGREEMENT, made effective this 15th day of August 1999, 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 (hereinafter referred to as
"BLS") 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 and BLS are parties to a Termination Agreement dated
as of the date hereof (the "Termination Agreement"); and
WHEREAS, pursuant to the Termination Agreement, the parties terminated
a Distribution and Development Agreement dated January 1, 1990 as amended on
January 26, 1993; and
WHEREAS, in accordance with the Termination Agreement, BLS agreed to
purchase from Escalon, and Escalon agreed to manufacture and sell to BLS,
certain viscous fluid systems.
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:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall be deemed to have
the following meanings:
Escalon Supply Agreement
Exhibit A to Termination Agreement
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1.1 "Products" shall mean the Escalon TR8100-11 Viscous Fluid System
for use with BLS's AdatoSil 5000 silicone oil, described in Exhibit A attached
hereto, and shall include any improvements made by Escalon during the term of
this Agreement.
1.2 "Specifications" shall mean the product, material, packaging,
manufacturing processes, protocols and other specifications for the Products set
forth in Exhibit B attached hereto, which may be amended in writing by mutual
agreement of the parties.
1.3 "Quality System Audit" shall mean an assessment of Escalon's
compliance with the Quality System Requirements for Medical Devices as set forth
in Title 21, United States Code of Federal Regulations, Part 820, and in MDD
93/42 EEC, the European Medical Device Directive.
ARTICLE II
PURCHASE AND SALE OF PRODUCTS
2.1 Subject to the terms and conditions of this Agreement, Escalon
agrees to manufacture and sell the Products to BLS, and BLS agrees to purchase
the Products from Escalon when and as ordered, from time to time during the term
of this Agreement.
2.2 BLS may place its orders on BLS's purchase order forms, specifying
shipping instructions and destinations. In the event that any of the terms and
conditions included in such purchase order form of BLS are inconsistent or
conflict with the terms of this Agreement, the terms of this Agreement shall
prevail. Any terms and conditions in any order acknowledgement or other form of
Escalon shall be of no force and effect and shall form no part of the agreement
between the parties hereto. Delivery shall be within sixty (60) days from
receipt of order by Escalon if the Product is labeled as an Escalon product but
ninety (90) days if labeled as a BLS product. BLS shall provide Escalon with a
six (6) month, non-binding forecast of purchases of the Products sixty (60) days
in advance of each six (6) month period throughout the term of this Agreement.
2.3 The Products shall be labeled and packaged using labels and
supplies approved by BLS prior to use. The Products shall be labeled as required
by applicable law, and to identify the trademark used on the Products as the
property of BLS.
2.4 Escalon shall furnish a written certificate for each lot of
Products shipped to BLS, stating that the Products in that lot, identified by
lot number, meet the Specifications. BLS, within
Escalon Supply Agreement
Exhibit A to Termination Agreement
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thirty (30) days of receipt, shall have the right to reject any lots or units
which, by inspection, fail to meet the Specifications, and to receive credit
therefor. Rejected lots of Products will be shipped to Escalon's manufacturing
facility with an identified rejection criteria, freight collect.
ARTICLE III
TERM OF AGREEMENT
3.1 This Agreement shall commence on the effective date first written
above and shall continue until the end of the sixth Twelve Month Period set
forth in the Termination Agreement (the "Initial Term"). The Agreement shall
automatically renew thereafter from year to year unless terminated by either
party on at least six (6) months written notice prior to the expiration of the
Initial Term or any renewal thereof.
ARTICLE IV
PRICE AND PAYMENT TERMS
4.1 For all Products ordered from Escalon by BLS prior to December 31,
2000, BLS shall pay to Escalon the price for each of the Products set forth in
Exhibit A (hereinafter referred to as the "Product Purchase Price"). Such prices
shall include all private label packaging of the Products, and shall be FOB
Escalon's manufacturing facility in New Berlin, Wisconsin. BLS shall designate
the freight carrier for delivery of Products. All prices are exclusive of sales,
use and other taxes. All export, import and other duties, tariffs and customs
shall be paid by BLS. If exemption is claimed by BLS from any of the foregoing,
BLS shall furnish to Escalon satisfactory proof of such exemption. Payment terms
are net thirty (30) days from date of invoice.
4.2 Escalon shall have the right to revise the prices set forth in
Exhibit A on an annual basis, commencing January 1, 2001, by giving BLS sixty
(60) days prior written notice. Such revisions in price shall not exceed the
actual changes in the direct cost to Escalon for parts, materials and labor in
the production of the Products, utilizing generally accepted accounting
principles consistently applied. BLS may, at its option, request verification of
such increases by independent certified public accountants, reasonably
acceptable to Escalon. Should Escalon's costs to manufacture the Products
decrease during calendar year 2000 or any calendar year thereafter, the Product
Purchase Price will be reduced by fifty percent (50%) of such decrease for the
following calendar year.
Escalon Supply Agreement
Exhibit A to Termination Agreement
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ARTICLE V
WARRANTIES, COVENANTS AND INDEMNIFICATION
5.1 Escalon warrants that it has title to all Products sold to BLS
hereunder free of all liens and encumbrances of any kind or nature. Escalon
further warrants and guarantees that at the time of shipment of Products to BLS
pursuant to BLS's purchase orders, the Products shall conform to the
Specifications and shall have been manufactured in accordance with all
applicable federal, state and local laws and regulations, including the Federal
Food, Drug and Cosmetic Act, as amended, and in accordance with all
environmental, occupational health and safety laws and regulations.
5.2 The parties represent and warrant that they have the full right to
enter into this Agreement and that this Agreement does not conflict with any
other agreements so long as the other terms of this Agreement are met.
5.3 The Products shall carry Escalon's standard limited warranty.
5.4 Escalon, its successors and assigns shall defend, indemnify and
save harmless BLS, its customers, employees, officers, subsidiaries and
affiliated companies, their successors and assigns from and against any and all
claims, suits, actions, damages, liability, costs and expenses, including
reasonable attorneys' fees, that are suffered, incurred or allowed against BLS
by reason of or on account of: (i) failure of the Products manufactured by
Escalon to meet the Specifications; (ii) any breach by Escalon of its warranties
or covenants under this Agreement; (iii) any negligent or willful acts or
omissions of Escalon, its employees, agents or subcontractors. Escalon shall
maintain comprehensive General Liability Insurance, including contractual and
product liability, in amounts not less than $1,000,000 per occurrence and
$2,000,000 annual aggregate on a date of occurrence basis (not a date of claim
basis). Upon request, Escalon shall submit a certificate evidencing such
insurance to BLS, which certificate shall provide that it may not be canceled or
reduced in amount without thirty (30) days prior notification to BLS. In the
event of any claim or suit arising under this indemnity, prompt notice thereof
shall be given to Escalon, which shall have the right to conduct and control the
defense in respect thereto, but BLS may have counsel present at its own expense
and shall be entitled to participate in the defense. BLS shall cooperate with
Escalon in such defense as required by Escalon, at the expense of Escalon.
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 6
Page 5
08/10/99
5.5 BLS, its successors and assigns shall defend, indemnify and save
harmless Escalon, its employees, officers, subsidiaries and affiliated
companies, their successors and assigns, from and against any and all claims,
suits, actions, damages, liability, costs and expenses, including reasonable
attorneys' fees, that are suffered, incurred or allowed against Escalon by
reason of or on account of: (i) any labeling, trade name or trademark usage,
advertising or promotional materials or other products used by BLS in connection
with the Products; (ii) any breach by BLS of its warranties or covenants under
this Agreement; (iii) any negligent or willful acts or omissions of BLS, its
employees or agents. In the event of any claim or suit arising under this
indemnity, prompt notice thereof shall be given to BLS, which shall have the
right to conduct and control the defense in respect thereto, but Escalon may
have counsel present at its own expense and shall be entitled to participate in
the defense. Escalon shall cooperate with BLS in such defense as required by
BLS, at the expense of BLS.
5.6 Escalon, its successors and assigns, shall forever defend,
indemnify and save harmless BLS, its employees, officers, subsidiaries and
affiliated companies, their successors and assigns from and against all damages,
claims, demands, suits, actions, seizures, injunctions, judgments, third party
attorneys' fees and costs of any kind for any actual or alleged infringement,
including willful infringement, of any tradename, trademark, tradedress, patent,
registered design, copyright or other industrial property right, including
rights arising from confidential disclosures or relationships, because of the
manufacture and/or sale of the Products by Escalon or the purchase, possession,
use or sale of the Products by BLS or by any customer of BLS, unless the actual
or alleged infringing aspects of such Product relate to the use of BLS's
tradename or trademark on the Products. In any of the latter events, BLS, its
successors, assigns and legal representatives, shall forever defend, indemnify
and save harmless Escalon, its employees and officers, their successors and
assigns, in the same manner as set forth herein.
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 7
Page 6
08/10/99
ARTICLE VI
REGULATORY MATTERS
6.1 Escalon has applied for and obtained such regulatory approval as is
necessary to market, sell and distribute the Products for use within the United
States.
6.2 In the event that BLS shall elect to market, sell and distribute
the Products for use in countries other than the United States, Escalon agrees
to support BLS's efforts to register the Products, if not previously approved,
by making available all such information which it may have on the Products which
any regulatory body may request from BLS. BLS shall apply for any such
registration in its own name and, unless otherwise agreed, at its expense.
6.3 BLS shall handle all initial questions, complaints and inquiries
with respect to the Products. Escalon shall provide all reasonable assistance,
at Escalon's expense, with respect to the handling of the questions, complaints
and inquiries as may be requested by BLS.
6.4 Escalon shall maintain, and make available to BLS upon its written
request, any technical documentation which it may have including, but not
limited to, the device master record and design history file for the Product.
BLS shall be responsible for the filing of any reports under the European
Medical Device Vigilance System with respect to the Product. BLS will report any
problems with the Products in the United States in its capacity as distributor.
6.5 BLS shall provide Escalon with electronic artwork for the labeling
and packaging of the Products at least seventy-five (75) days prior to Escalon's
first shipment of Products.
ARTICLE VII
TERMINATION
7.1 Either party may terminate this Agreement by giving written notice
to the other party in the following circumstances:
(i) following thirty (30) days notice in the event the other
party commits any material breach of any obligation of this Agreement
which is not cured within said thirty (30) day period; or
(ii) immediately upon giving notice in the event the other
party becomes insolvent, or a petition of bankruptcy is filed by the
other party, or in the event the other party makes a general assignment
for the benefit of creditors, or
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 8
Page 7
08/10/99
a receiver is appointed for the other party, or in the event a petition
of bankruptcy is filed against the other party and is not dismissed
within thirty (30) days of filing.
7.2 BLS shall have the right to terminate this Agreement on ninety (90)
days prior notice to Escalon if, in BLS's reasonable business judgment, the
Product no longer represents a viable commercial opportunity for it.
7.3 Termination of this Agreement shall not affect any rights or
obligations accrued prior to the effective date of such termination and,
specifically, Escalon's obligation to deliver Products ordered or BLS's
obligation to pay for Products ordered and/or shipped to BLS. The rights
provided in this Paragraph shall be in addition and without prejudice to any
other rights which the parties may have with respect to any breach or violation
of the provisions of this Agreement.
7.4 Waiver by either party of a single default or breach or of a
succession of defaults or breaches shall not deprive such party of any right to
terminate this Agreement pursuant to the terms hereof upon the occasion of any
subsequent default or breach.
7.5 In the event of termination by either party in accordance with any
of the provisions of this Agreement, neither party shall be liable to the other
because of such termination, for compensation, reimbursement or damages on
account of the loss of prospective profits or anticipated sales or on account of
expenditures, inventory, investments, lease or commitments in connection with
the business or goodwill of Escalon or BLS.
7.6 Other than as set forth herein, after termination of this
Agreement, neither party shall use any trademark, tradename, intellectual
property, advertising or material which refers to or is related to the other and
shall refrain from acts and omissions that suggest such relationship.
7.7 Neither party shall be liable to the other for any indirect,
special, incidental or consequential damages on account of the termination or
expiration of this Agreement. The parties acknowledge that this Section 7.7 has
been included as a material inducement for both parties to enter into this
Agreement and that neither party would have entered into this Agreement but for
the limitations of liability as set forth herein.
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 9
Page 8
08/10/99
ARTICLE VIII
FACILITY AND RECORD AUDIT
8.1 Upon reasonable notice to Escalon, BLS, any representative of BLS
and/or of any United States or foreign regulatory agency shall have the rights
to inspect, during normal business hours, the manufacturing facility of Escalon
and that of any third-party supplier which is involved in the production of
Products, to conduct Quality System Audits from time to time, and to review
records of Escalon or of any third-party supplier to assure compliance with any
terms of this Agreement. The right to review records relating to the manufacture
of the Products shall be limited to a period of three (3) years after the
manufacture and sale of the Products to BLS, unless such review is necessitated
by any governmental regulations or demands. Upon request, Escalon agrees to
provide BLS with copies of any manufacturing and quality control records
associated with the Products being manufactured for BLS.
ARTICLE IX
FORCE MAJEURE
9.1 If either party is prevented from performing any of its obligations
hereunder (other than the payment of money) for unforeseeable and unavoidable
causes beyond its control and without its fault or negligence, which wholly or
partially prevent the manufacture, delivery, transportation, receipt, sale or
use of the Products, including but not limited to fire, strike, explosion, flood
or other acts of God, the inability of a vendor to supply approved raw materials
or any act or order of any governmental agency, such party shall not be liable
to the other party for breach of this Agreement, provided the party so affected
gives prompt notice of such cause to the other party and exercises due diligence
to remove the cause as soon as reasonably practical.
ARTICLE X
CONFIDENTIALITY
10.1 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
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 10
Page 9
08/10/99
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. Each party shall not, either during the term of this Agreement and for
a period of five (5) years thereafter, disclose the other party's proprietary
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 this
Agreement. In addition, the receiving party shall take all reasonable
precautions to protect the value and confidentiality of such information to the
originating party. All records, files, notes, drawings, prints, samples,
advertising material and the like relating to the business, products or projects
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 confidential information that has been
disclosed in their legal records for the sole purpose of making a record that
the information is subject to confidentiality and may not be disclosed.
10.2 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.
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 11
Page 10
08/10/99
ARTICLE XI
NOTICES
11.1 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 provision of this Section, the addresses of the
parties shall be:
Escalon Medical Corp. Corporation
2440 S. 179th Street
New Berlin, Wisconsin 53146-2149
Attention: Ronald Hueneke, President & COO
Facsimile No.: 414/821-9927
With a copy to:
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, CA 91711
Attention: Mark Tomaino, General Counsel
Facsimile No.: 909/399-1376
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 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 and supersedes all prior
agreements, whether oral or written, with
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 12
Page 11
08/10/99
respect to the subject matter hereof. This Agreement shall not be modified or
changed except by subsequent written agreement signed by both parties.
12.2 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 or transfer its right
and obligations to a 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. Notwithstanding the foregoing, this Agreement shall be
binding upon the respective successors and assigns of either party hereto.
12.3 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.
12.4 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.
12.5 The headings and captions contained herein are for reference only
and shall not constitute a substantive part of this Agreement.
12.6 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 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.
12.7 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.
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 13
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12.8 This Agreement may be executed in counterparts, all of which taken
together shall be regarded as one and the same instrument.
12.9 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.
12.10 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, 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
- ---------------------------- ---------------------------
(Signature) (Signature)
HAKAN EDSTROM R.J. DePIANO
- ---------------------------- ---------------------------
(Print Name) (Print Name)
Title: PRESIDENT Title: CEO
---------------------- ---------------------
Date: 8/11/99 Date: AUG. 11, 1999
---------------------- ----------------------
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 14
Page 13
08/10/99
EXHIBIT A
THE PRODUCTS AND PRODUCT PURCHASE PRICES
Products Purchase Price
- -------- --------------
TR8100-11 Viscous Fluid System $2,600.00/each
T8170-11 10cc Disposable Syringe $273.00/Box of 10
Escalon Supply Agreement
Exhibit A to Termination Agreement
<PAGE> 15
EXHIBIT B Page 1 of 3
[ESCALON LOGO] Page 7 of 8
SPECIFICATIONS
(Contains one Viscous Fluid System with foot pedal and power cord)
<TABLE>
<S> <C>
PRESSURE: MIN - MAX settings 0-70 PSI +/- 2 PSI
Percentage display within 8 PSI
VACUUM: MIN - MAX settings 0-600mm Hg +/- 5 mm Hg
Percentage display within 20 mm Hg
DIMENSIONS: Height: 4.0 inches (10.2mm)
Weight: 12.0 inches (30.5mm)
Depth: 11.25 inches (28.6mm)
WEIGHT: Unpacked: Approx. 13 pounds
ENVIRONMENTAL: Temperature: 40 degrees F-100 degrees F
Relative Humidity: 10% to 70% without condensation
ELECTRICAL: The system accepts the following input commercial power
voltages and frequencies and meets the leakage currents
specified in IEC 60 601-1-1
85VAC to 26OVAC, 50/60 Hz
FUSE: 2A/250V @ 110V AC, Fast Acting, 5x20
IA/250V @ 220V AC, Fast Acting, 5x20
PROTECTION AGAINST Class I, Type B
ELECTRICAL SHOCK:
WARNING: Do not use the Viscous Fluid System near flammable
anesthetics.
NOTE: If at any time a power fails in any mode, the Viscous
Fluid System will revert to a safe mode". All functions
will cease immediately. When power is restored, the
unit will resume operation at power up level.
</TABLE>
Escalon will make available upon request circuit diagrams, component parts, and
other pertinent information.
<PAGE> 16
EXHIBIT B Page 2 of 3
[ESCALON LOGO] Page 2 of 8
FRONT PANEL (see Figure 1)
- ------------------------------------------------------------------------------
The following list is a brief description of the front panel controls.
POWER------------ Red button to switch power on and off.
PRESSURE:
PRESET WINDOW-- Provides the two-digit display of preset pressure, which is
shown in pounds per square inch (psi).
Bar graph display indicating % of output based on preset
level setting.
PRESET--------- The adjustment knob which regulates preset pressure from 0 to
70 psi, as viewed in the pressure preset display window.
VACUUM:
PRESET WINDOW-- Provides the three-digit display of preset vacuum, which is
shown in millimeters of mercury (mm Hg).
Bar graph display indicating % of vacuum based on preset
level setting.
PRESET--------- The adjustment knob which regulates preset vacuum from 0 to
600mm Hg, as viewed in the vacuum preset display window.
SELECTOR SWITCH-- Selects desired function. Pressure/Vacuum.
CPC CONNECTOR---- Connector used to attach the VFS disposable pack to the
system.
[VISCOUS FLUID SYSTEM I GRAPHIC]
Figure 1
<PAGE> 17
EXHIBIT B Page 3 of 3
[ESCALON LOGO] Page 3 of 8
REAR PANEL (see Figure 2)
- -----------------------------------------------------------------------------
The following is a brief description of the back panel components:
FAN--------------- Cools internal components.
POWER CORD-------- Supplied with system. Use only "Medical Grade" power cord.
FUSE RECEPTACLE--- Always replace with same type fuse described in
specifications.
FOOT PEDAL-------- Pressure and Vacuum linear control.
POWER RECEPTACLE-- Accepts 85VAC to 26OVAC, 50/60 Hz (no need to select voltage
input).
[graphic]
Figure 2
<PAGE> 1
EXHIBIT 2.3
<PAGE> 2
NEWS BULLETIN RE:
FROM: ESCALON MEDICAL CORP.
THE FINANCIAL RELATIONS BOARD 351 East Conestoga Road
- ----------------------------- Wayne, PA 19087
BSMG WORLDWIDE (Nasdaq: ESMC)
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION:
AT ESCALON MEDICAL CORP.: AT THE FINANCIAL RELATIONS BOARD:
Richard J. DePiano Alison Ziegler - General Info.
Chairman and CEO Marty Gitlin - Media Info.
610/688-6830 212/661-8030
FOR IMMEDIATE RELEASE
August 13, 1999
ESCALON MEDICAL CORPORATION ANNOUNCES SALE OF
ADATOSIL(R)5000 SILICONE OIL DISTRIBUTION RIGHTS
EXPECTS TO REPORT CONTINUED PROFITABILITY IN FISCAL FOURTH QUARTER
WAYNE, PA -- AUGUST 13, 1999 -- Escalon Medical Corporation (Nasdaq: ESMC) today
announced the transfer of its license and distribution rights for
Adatosil(R)5000 Silicone Oil, as well as all related inventory, back to the
licensor, Bausch & Lomb Surgical, Inc.
Escalon will receive a cash payment of approximately $2.1 million for the
license, distribution rights and inventory of Adatosil(R) Silicone Oil, which
will be received in four equal payments over the next four quarters. Escalon
will also continue to receive additional consideration based on future sales of
Adatosil(R). Adatosil(R) Silicone Oil represented approximately 55% of Escalon
Medical's sales in fiscal 1999.
"The divestiture of Adatosil(R) Silicone Oil furthers Escalon Medical's strategy
to focus on products that it owns, such as the recently acquired vascular access
business, or controls the rights to, such as Ocufit SR(R) and povidone-iodine
2.5%," said Chairman and Chief Executive Officer, Richard J. DePiano.
Mr. DePiano continued, "Going forward, although the sale of Adatosil(R) will
initially result in a significant decline in our revenue base, at a minimum, it
should have a neutral effect on our bottom line and will produce a stream of
cash flow due to expected future cash payments from Bausch & Lomb as well as
lower inventory and receivable balances. More importantly, we expect to use the
cash we receive in the transaction to continue to invest in profitable niche
products and markets where
--MORE--
<PAGE> 3
Escalon Medical Corp.
Page 2
Escalon can become a leader. By diversifying our target markets and focusing
less on distributed products and more on products that we own, we should be able
to continue to grow our business and provide the necessary funding for our
promising R&D programs."
Mr. DePiano concluded, "Having recently completed our fiscal fourth quarter on
June 30, we expect to report that revenues for the full year increased in excess
of 25% to approximately $7.5 million. In the fourth quarter, revenues of
approximately $2.0 million benefited from our recently acquired vascular access
business, which more than replaced the decline in revenues due to the sale of
Betadine(R)5% earlier in the year. We look forward to reporting Escalon's
continued profitability in the weeks ahead."
Founded in 1987, Escalon develops, markets and distributes ophthalmic surgical
and pharmaceutical products as well as vascular access devices, which provide a
base of positive cash flow to fund a targeted research and development effort.
The Company utilizes strategic partnerships to help finance its development
programs and is also seeking acquisitions to further diversify its product line
to achieve critical mass in sales and take better advantage of the Company's
distribution capabilities. Escalon has headquarters in Wayne, Pennsylvania and
manufacturing operations near Milwaukee, Wisconsin.
Note: This press release contains statements that are forward-looking, including
statements about the Company's future prospects. They are based on the Company's
current expectations and are subject to a number of uncertainties and risks, and
actual results may differ materially. The uncertainties and risks include
whether the Company is able to improve upon the operations of the vascular
access business, continue to make gains in its research and development programs
as well as general economic conditions. Further information about these
and other relevant risks and uncertainties may be found in the Company's report
on Form 10-K, and its other filings with the Securities and Exchange Commission,
all of which are available from the Commission as well as other sources.
To receive additional information on ESCALON MEDICAL CORP.,
via fax, at no charge,
dial 1-800-PRO-INFO and enter code ESMC.
###
